Henderson Institutional UK Enhanced Equity Trust

Transcription

1 ANNUAL REPORT & ACCOUNTS For the year ended 31 August 2015 Henderson Institutional UK Enhanced Equity Trust

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3 Who are Henderson Global Investors? 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 900 employees worldwide and assets under management of 82.1bn (30 June 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, Milwaukee, Philadelphia, Edinburgh, Paris, Madrid, Zurich, Luxembourg, Amsterdam, Frankfurt, Milan, Singapore, Beijing, Hong Kong, Tokyo and Sydney. The main Asia/Pacific operations are conducted out of Singapore and the US operations out of Chicago and Milwaukee. Equity investment professionals are also located in Edinburgh and Singapore and additional fixed income investment professionals are located in Philadelphia and Milwaukee. 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 strategy Henderson 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. Acquisitions Henderson 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. During 2014, 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 April 2015, Henderson decided to sell 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 decision to sell the stake gives 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. In June 2015, Henderson announced the acquisition of two Australian-based fund management boutiques, Perennial Fixed Interest and Perennial Growth Management. In a separate transaction, Henderson increased its ownership of 90 West Asset Management to 100%. 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

4 Contents Authorised Fund Manager s report* Page 1 Authorised status* Page 1 Comparative tables Page 5 Ongoing charge figure Page 7 Risk and reward profile* Page 8 Portfolio statement* Page 9 Statement of Authorised Fund Manager s responsibilities Page 21 Statement of Trustee s responsibilities and report of the Trustee to the unitholders Page 21 Independent Auditors report to the unitholders Page 22 Financial statements Statement of total return Page 24 Statement of change in net assets attributable to unitholders Page 24 Balance sheet Page 25 Certification of financial statements by Directors of the Authorised Fund Manager Page 25 Notes to the financial statements Page 26 Distribution tables Page 38 Further information Page 39 * These collectively comprise the Authorised Fund Manager s report.

5 Henderson Institutional UK Enhanced Equity Trust Authorised Fund Manager s report We are pleased to present the Annual Report and Accounts for Henderson Institutional UK Enhanced Equity Trust (the fund ) for the year ended 31 August Authorised status This fund is an authorised unit trust scheme under Section 243 of the Financial Services and Markets Act It is a UCITS Scheme governed by Chapter 5 (Investment and Borrowing Powers) of the Collective Investment Scheme sourcebook (COLL). The fund was established by a Trust Deed dated 27 August It was authorised by the Financial Conduct Authority (FCA) on 29 August 2003 and launched on 10 June Other information Please note with effect from 24 September 2015, Martin Skinner was appointed as Director of the Manager. Advisers Authorised Fund Manager Investment Manager Unitholder Administrator Trustee Name Address Regulator Henderson Investment Funds Limited Member of The Investment Association (formerly Investment Management Association) The Ultimate Holding Company is Henderson Group plc Henderson Global Investors Limited The Ultimate Holding Company is Henderson Group plc International Financial Data Services (UK) Limited National Westminster Bank plc The Ultimate Holding Company is the Royal Bank of Scotland Group plc Registered Office: 201 Bishopsgate London EC2M 3AE Registered in England No Telephone Dealing Enquiries Bishopsgate London EC2M 3AE IFDS House St Nicholas Lane Basildon Essex SS15 5FS 135 Bishopsgate London EC2M 3UR Authorised and regulated by the Financial Conduct Authority Authorised and regulated by the Financial Conduct Authority Authorised and regulated by the Financial Conduct Authority Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority Independent Auditors PricewaterhouseCoopers LLP 141 Bothwell Street Glasgow G2 7EQ Legal Advisers Eversheds LLP One Wood Street London EC2V 7WS Institute of Chartered Accountants in England and Wales The Law Society Henderson Institutional UK Enhanced Equity Trust 1

6 Authorised Fund Manager s report Fund Managers Henderson Multi Strategy Equities Team Investment objective and policy The fund aims to provide consistent capital growth relative to the FTSE All Share Index. The fund will invest primarily in UK companies and it will not be restricted to the size of companies in which it can invest. The fund may invest in other transferable securities, money market instruments, derivatives and forward transactions, deposits and units in collective investment schemes. The fund aims to provide an annual return above that of the FTSE All Share Index, whilst minimising risk. The fund may invest primarily in UK companies included within the FTSE All Share Index, or additionally, the Scheme may seek to provide this return by investing in companies listed on other exchanges but which are associated with FTSE All Share Index listed shares. The fund s objective is not to attempt to replicate the share composition of the FTSE All Share Index. The fund manager will actively review the shares within the portfolio and effect any necessary adjustments. Performance summary 31 Aug Aug Aug Aug Aug Aug Aug Aug Aug Aug 11 % % % % % Henderson Institutional UK Enhanced Equity Trust (2.1) FTSE All Share Index (2.3) Source: Henderson Global Investors, close of business, gross figure net of fees, based on performance of Class Y accumulation. Figures in brackets are negative. 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 31 August 2015 Largest purchases 000 Largest sales 000 British Land 2,800 HSBC Holdings 6,140 HSBC Holdings 2,725 Royal Dutch Shell A (Dutch Listing) 4,015 Glencore Xstrata 2,444 BP 3,644 Lloyds Banking 1,683 British American Tobacco 3,013 Royal Bank of Scotland+ 1,657 British Land 2,841 Auto Trader 1,387 GlaxoSmithKline 2,449 Hammerson REIT 1,283 Reckitt Benckiser 2,239 Royal Dutch Shell A (Dutch Listing) 1,268 AstraZeneca 1,950 GlaxoSmithKline 1,253 Vodafone 1,657 British American Tobacco 1,210 Glencore Xstrata 1,635 Total purchases 55,163 Total sales 90,295 + Related party to the fund 2 Henderson Institutional UK Enhanced Equity Trust

7 Authorised Fund Manager s report (continued) Investment review During the period under review, the UK market was weak, generating negative returns and lagging most other equity and fixed income markets; only the Asia Pacific region performed more poorly. This result came despite positive domestic economic data, with stronger UK GDP growth and companies reporting a generally positive results year. Indeed the largely domestic mid cap 250 index provided healthy positive returns outperforming its larger FTSE 100 peers by 15%. Politics also provided a welcome tailwind, with the more pro-business Conservative Party achieving an unexpected majority in May s general election; this nicely complemented the earlier relief felt after a no vote was returned in the Scottish referendum. However, external challenges gradually caused the market to fall away. The January election of the radical left Syriza Party in Greece reignited fears over the sustainability of the eurozone and the consequential financial chaos if it were to collapse. This unfortunately went some way to offset the market-friendly announcement, in the same month, that the European Central Bank (ECB) would be embarking on a programme of quantitative easing (central bank liquidity measures) come March. However, it was ultimately the turmoil in the emerging markets, especially the slowdown in China that took the UK equity market into the red. The Asian country, arguably the main driver of world growth for the last decade, suffered a stock market crash in the summer. Increasing signs of the global economy slowing led to steep falls in many commodity prices, including oil, which dropped to approximately $40 a barrel, exacerbated by OPEC s decision not to curtail supply. Although lower input costs can be beneficial to the economy from the consumer s perspective, it did return the spectre of deflation to the financial community and thereby heavily impacted the earnings of many mega-cap companies, including the oil majors, which have a large weighting in the FTSE 100. This took the FTSE All Share index into negative territory over the review year. Fund performance During the 12 months to the end of August 2015, the fund outperformed the FTSE All Share index, returning -2.1% versus -2.3% for the benchmark (Y share class). By investment strategy, Fundamentals were good, Events positive, Liquidity mildly positive, and Relative Value was a negative contributor to fund performance. Fund activity The Fundamentals strategy had a good year. Exposure to domestic housing-related stocks, especially following an encouraging general election result, was particularly positive for the fund s holdings in Crest Nicholson Houses, Countrywide Estate Agents and Howden Joinery. Other mid-cap stocks performed well, especially the media-related Informa and United Business Media. The fund also benefited from its holding in Friends Life, which was bid for at a 15% premium by fellow Insurer Aviva. Our positions in Brit Insurance and HellermannTyton Cables also benefited from takeovers. Despite being exposed to commodities, timely purchases in out of favour mining stocks benefited the fund, as good results and dividend declarations from miners such as Rio Tinto and BHP Billiton were well received. The bid for BG Group from Royal Dutch Shell proved positive, though the latter fell on the bid premium it was offering amid the weak commodity background. On the negative side, our positions in companies with emerging markets exposure hurt overall returns. We suffered profit warnings from chemical company Elementis, Far East-focused asset manager Ashmore and Oxford Instruments, which has a sizeable exposure to Russia. Even Prudential, despite excellent numbers, fell back due to its life insurance business in the Far East. The fund also suffered further profit warnings from Rolls-Royce and Tate & Lyle. The Liquidity strategy had a mildly positive year with a steady flow of placings during the year. Primary placings to fund acquisitions were generally well received, especially the CRH placing to fund purchases emanating from disposals following the merger between rivals Holcim and Lafarge. Another positive was distribution company DCC, whose funding for its acquisition provided a 10% relative return. Also beneficial were those from UBM, Pennon Water and Unite Properties. However, the exception was poor performance from BT s placing to fund its EE acquisition, which was unfortunately hit by news of increased competition from Virgin and Liberty just the day after the placing. Secondary placings were generally disappointing as the market weakened. There was lacklustre performance in the second round of private equity placings from recent IPOs eg Just Eat and Foxtons Estate Agents and Lloyds Bank s sell-down of TSB. The retail sector was also poor, particularly the placings in Sports Direct and Poundland. Also of note was the first sale of a small part of the government s stake in Royal Bank of Scotland, which generated a small profit. Our Relative Value strategy had a negative year, with the main detractor coming from the capital structure sub strategy. The position in Vedanta continued to be volatile as the GDR (global depository receipt) leg started to catch up the more general sell-off in the mining sector, which caused the spread to widen out again. Given the depressed level of the ordinary shares, we decided to close out the underweight position and transfer the GDR position to the Event Driven strategy, as this is now more akin to a Special Situation requiring corporate action. Within the convertible bond sub-strategy, the UK primary market was very quiet. We participated in only one new issue when British Land brought 350 million in new bonds to market. We received a good allocation and took profits as the bond quickly became expensive in the days after it was issued. This performance mitigated the loss incurred on a long held, fully credit hedged position in Vedanta bonds, where 2015 saw a divergence in valuation between the bond and the credit protection, which will converge as the bond approaches maturity in July The overweight position in Reed Elsevier (listed in the Netherlands) and underweight position in Reed Elsevier (listed in the UK) benefited, as the company simplified the corporate structure, which caused the spread to narrow from relatively stressed levels. Henderson Institutional UK Enhanced Equity Trust 3

8 Authorised Fund Manager s report (continued) On the other hand, the Event Driven strategy had a positive year. Within the special situations sub-strategy, a position in insurance companies Aviva and Friends Life benefited, as the market started to price in synergistic benefits of their proposed merger. CSR, who had been in talks with Microchip Technology, benefited as Qualcomm stepped in to acquire the connectivity chip maker for 9 per share, a 55% premium on the share price prior to the deal. The transaction received clearance from MOFCOM, the Chinese anti-trust commission, which allowed the deal to complete in August. In the merger arbitrage sub-strategy, we saw a large 40 billion transaction as Royal Dutch Shell looked to acquire BG Group in a cash and stock deal. Given the volatile oil price and lengthy but surmountable regulatory process the discount to the offer terms has been as wide as 16.5% and we have been building a position into this. Less positively, our position in pharmaceutical company Shire suffered as the recommended takeover by US suitor AbbVie collapsed. AbbVie s board surprisingly changed their recommendation on the transaction, citing the unfavourable changes to tax legislation around tax inversion deals. Despite the bid failure, we retained our position in Shire, given the initial heavy fall in the share price, the large break fee Shire received and its strong balance sheet; these factors enabled Shire to turn predator and purchase earnings-accretive NPS Pharmaceuticals. We eventually closed the position following a strong rally for an overall small loss. Outlook External pressures are likely to remain given the slowdown in China, the eurozone, and geopolitical concerns, and could worsen with US rates likely to rise in due course. Sentiment is perhaps overly depressed, and following this summer s market fall, valuations are now more attractive. The negative sentiment in a number of sectors presents an opportunity to judge whether share prices are correctly reflecting increased risks or whether they have been over-exaggerated. Most companies, even in challenged areas, have been able to maintain healthy cashflows and balance sheets, unlike in With increasing volatility, we will use our value range process to alight on opportunities as they arise and utilise our four uncorrelated strategies to decide when risk versus reward is in the fund s favour. 4 Henderson Institutional UK Enhanced Equity Trust

9 Comparative tables as at 31 August 2015 Net asset value per share Net asset Net asset Number of Net asset value value of units in value per of fund units issue unit ( ) ( ) (pence) Class I accumulation 31/08/ ,011,792 2,077 1, /08/ ,790,646 2,286 1, /08/ ,695,683 2,227 1, Class Y accumulation 31/08/ ,011, ,133,685 63,819, /08/ ,790, ,482,730 62,643, /08/ ,695, ,184,696 66,416, Class Z accumulation 31/08/ ,011, ,876, ,714, /08/ ,790, ,305, ,518, /08/ ,695, ,508, ,976, Henderson Institutional UK Enhanced Equity Trust 5

10 Comparative tables as at 31 August 2015 Performance record Calendar year Net revenue Highest price Lowest price (pence per unit) (pence per unit) (pence per unit) Class I accumulation * Class Y accumulation * Class Z accumulation * * to 30 October + to 31 August 6 Henderson Institutional UK Enhanced Equity Trust

11 Ongoing charge figure The annualised ongoing charge figure (OCF) of the fund is calculated as the ratio of the total ongoing charges to the average net asset value for twelve months. Ongoing charges are all expenses deducted from the assets of the fund during the year, except for expenses that are explicitly excluded by regulation % % Class I Class Y Class Z The OCF is calculated in accordance with guidelines issued by the European Securities and Markets Authority (ESMA). Henderson Institutional UK Enhanced Equity Trust 7

12 Risk and reward profile The fund currently has 3 types of unit class in issue; I accumulation, Y accumulation and Z accumulation. The risk and reward profile is as follows: Typically Lower potential risk/reward Typically Higher potential risk/reward Lower Risk Higher Risk 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 shares are, in general, more volatile than either bonds or money market instruments. The fund focuses on a single country. 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. There have been no changes to the risk rating in the year. The SRRI conforms to the ESMA guidelines for the calculation of the SRRI. 8 Henderson Institutional UK Enhanced Equity Trust

13 Portfolio statement as at 31 August 2015 Holding Investment Market Percentage value of total 000 net assets % Equities 96.79% (2014: 97.24%) Canada 0.06% (2014: 0.06%) Consumer Services 0.06% (2014: 0.06%) 146,553 Entertainment One Germany 0.23% (2014: 0.09%) Consumer Services 0.23% (2014: 0.09%) 153,987 TUI 1, Gibraltar 0.05% (2014: 0.04%) Consumer Services 0.05% (2014: 0.04%) 345,975 Bwin.Party Digital Entertainment Guam 0.07% (2014: 0.06%) Financials 0.07% (2014: 0.06%) 406,375 International Public Partnership Ireland 2.32% (2014: 1.90%) Basic Materials 0.00% (2014: 0.01%) 979,491 Kenmare Resources 28 - Consumer Goods 0.06% (2014: 0.05%) 162,889 Greencore Health Care 1.50% (2014: 1.36%) 222,535 Shire 11, ,835 UDG Healthcare , Industrials 0.76% (2014: 0.48%) 307,448 CRH 5, Luxembourg 0.17% (2014: 0.05%) Consumer Services 0.11% (2014: 0.00%) 267,685 B&M European Value Retail Financials 0.06% (2014: 0.05%) 289,520 Fidelity European Values Mexico 0.05% (2014: 0.08%) Basic Materials 0.05% (2014: 0.08%) 67,739 Fresnillo Netherlands 5.16% (2014: 7.28%) Industrials 0.05% (2014: 0.00%) 180,000 Eurocell Oil & Gas 5.11% (2014: 7.28%) 1,430,121 Royal Dutch Shell A (Dutch Listing) 24, ,079 Royal Dutch Shell 'B' (Dutch Listing) ,950 Royal Dutch Shell 'B' (UK Listing) 15, , Henderson Institutional UK Enhanced Equity Trust 9

14 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Russian Federation 0.04% (2014: 0.08%) Basic Materials 0.04% (2014: 0.08%) 59,815 Polymetal International Singapore 0.00% (2014: 0.07%) Consumer Goods 0.00% (2014: 0.03%) Technology 0.00% (2014: 0.04%) South Africa 0.03% (2014: 0.03%) Basic Materials 0.03% (2014: 0.03%) 168,210 Petra Diamonds Switzerland 1.50% (2014: 2.27%) Basic Materials 0.87% (2014: 1.75%) 144,462 Antofagasta Holdings ,003,409 Glencore Xstrata 5, , Consumer Goods 0.63% (2014: 0.52%) 79,283 Coca-Cola HBC 1, ,759 Wolseley 3, , United Arab Emirates 0.02% (2014: 0.00%) Health Care 0.02% (2014: 0.00%) 21,133 Al Noor Hospitals United Kingdom 86.63% (2014: 84.83%) Basic Materials 4.43% (2014: 6.16%) 134,678 Alent ,572 Anglo American 3, ,098 BHP Billiton 8, ,135 Croda International 1, ,044 Elementis ,698 Evraz ,981 Johnson Matthey 2, ,325 Kazakhmys ,412 Lonmin ,264 Mondi 2, ,486 Randgold Resources 1, ,821 Rio Tinto (UK Listing) 11, ,041 Vedanta Resources GDR 1, ,342 Victrex ,903 Yule Catto , Henderson Institutional UK Enhanced Equity Trust

15 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Consumer Goods 14.64% (2014: 13.48%) 128,640 Associated British Foods 4, ,127 Barratt Developments 2, ,180 Bellway 1, ,741 Berkeley Holdings 1, ,378 Bovis Homes ,979 British American Tobacco 24, ,942 Britvic ,893 Burberry 2, ,103 Cranswick ,360 Crest Nicholson Holding ,219 Dairy Crest ,393 Diageo 16, ,600 Focusrite ,202 Galliford Try ,134 GKN 1, ,000 Hilton Food ,011 Imperial Tobacco 11, ,730 Mar City* ,321 Persimmon 2, ,636 Produce Investments ,242 PZ Cussons ,768 Reckitt Benckiser 13, ,241 Redrow ,649 SABMiller 10, ,217 Tate & Lyle 1, ,250,333 Taylor Wimpey 2, ,000 Ted Baker 1, ,815 Unilever 11, ,248 Wynnstay , Consumer Services 11.53% (2014: 9.52%) 351,723 AA 1, ,433 Auto Trader 1, ,152 Betfair 1, ,492 boohoo.com ,771 Booker 1, ,006 British Sky Broadcasting 4, ,573 Card Factory ,035 Carphone Warehouse 1, ,500 Chime Communications ,337 Cineworld ,489 Compass 6, ,849 Debenhams ,998 Dignity ,221 Domino's Pizza ,707 Dunelm ,504 easyjet 1, ,049 FirstGroup ,005 Flybe ,582 Go-Ahead ,460 Greene King ,160 Greggs Henderson Institutional UK Enhanced Equity Trust 11

16 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Consumer Services (continued) 78,759 Halfords ,906 Home Retail ,310 Inchcape 1, ,285 Informa 1, ,742 International Consolidated Airlines 3, ,446 Interncontinental Hotels 2, ,453 ITE ,336,366 ITV 3, ,484 J Sainsbury 1, ,119 Just Eat ,177 Kingfisher 3, ,166 Koovs ,243 Ladbrokes ,009 Marks & Spencer 3, ,713 Marshall Motor ,172 Marston's ,063 Merlin Entertainments ,961 Millennium & Copthorne Hotels ,921 Mitchells & Butlers ,679 MoneySupermarket.Com ,575 National Express ,955 Next 4, ,182 Ocado ,162 Pearson 3, ,818 Pets At Home ,314 Playtech ,968 Reed Elsevier (UK Listing) 4, ,449 Restaurant ,282 RightMove 1, ,918 Saga ,531,650 Snoozebox ,000 Sportech ,726 Sports Direct ,030 SSP ,117 Stagecoach ,704 Tarsus ,072,482 Tesco 5, ,817 Thomas Cook ,162,500 ULS Technology ,152 United Business Media ,601 UTV Media ,000 Wetherspoon (JD) ,932 Whitbread 3, ,894 WHSmith ,983 William Hill 1, ,242 WM Morrison Supermarkets 1, ,533 WPP 6, , Henderson Institutional UK Enhanced Equity Trust

17 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Financials 24.82% (2014: 23.48%) 402,862 Aberdeen Asset Management 1, ,532 Aberdeen UK Tracker Trust ,031 Aberforth Smaller Companies Trust ,830 Admiral 1, ,791 Advance Developing Market ,892 Alliance Trust 1, ,532 Amlin 1, ,794 Ashmore ,952 Asian Total Return Investment Company ,471,473 Aviva 7, ,519 BACIT ,764 Bankers Investment Trust ,206,574 Barclays Bank 16, ,000 BBGI SICAV ,547 Beazley ,272 BH Global GBP ,476 BH Macro GBP ,257 Big Yellow ,425 BlackRock Smaller Companies ,274 Bluecrest Allblue ,411 Brewin Dolphin ,462 British Empire Securities & General Trust ,611 British Land 3, ,308 Caledonia Investments ,059 Capital & Counties Properties 1, ,404,615 China Food Company* 14-63,079 Close Brothers ,151 Countrywide ,098 Derwent London 1, ,463 Dexion Absolute ,764 Direct Line Insurance 1, ,601 Dunedin Income Growth Investment Trust ,993 Edinburgh Dragon Investment Trust ,701 Edinburgh Investment Trust ,865 Electra Private Equity ,019 Esure ,450 European Investment Trust ,772 F&C Commercial Property Trust ,564 F&C Global Smaller Companies ,573 F&C Investment Trust 1, ,435 Fidelity Special Values Investment Trust ,954 Finsbury Growth & Income Investment Trust ,451 Genesis Emerging Markets Fund ,168 Grainger Trust ,834 Graphite Enterprise Investment Trust ,467 Great Portland Estates 1, ,658 Hammerson REIT 1, ,401 Hansteen Holdings ,537 Hargreaves Lansdown ,525 Henderson EuroTrust ,802 Henderson Global Investors+ 1, ,633 Henderson Smaller Companies Investment Trust ,790 Herald Investment Trust ,113 HICL Infrastructure Henderson Institutional UK Enhanced Equity Trust 13

18 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Financials (continued) 117,903 Hiscox Insurance 1, ,289,755 HSBC Holdings 37, ,937 ICAP 1, ,115 IG Holdings 1, ,856 Impax Environmental Markets ,649 Intermediate Capital ,288 International Personal Finance ,219 INTU Properties ,641 Invesco Income Growth Investment Trust ,374 Investec 1, ,633 IP ,633 Jardine Lloyd Thompson ,215 John Laing Infrastructure ,320 JP Morgan European Smaller Companies Trust ,811 JP Morgan Fleming Asian Investment Trust ,311 JP Morgan Indian Investment Trust ,096 JP Morgan Japanese Investment Trust 16-46,888 JP Morgan Mercantile Investment Trust ,103 JP Morgan Russian Securities Investment Trust ,527 Jupiter European Opportunites Investment Trust ,513 Jupiter Fund Management ,351 Kennedy Wilson Europe Real Estate ,095 Lancashire Holdings ,675 Land Securities REIT 3, ,473 Law Debenture ,203,906 Legal & General 5, ,517,413 Lloyds Banking 16, ,076 London & Stamford Property ,740 London (City of) Investment Trust ,811 London Stock Exchange 2, ,779 Lowland Investment Trust ,902 LSL Property Services ,906 Man ,452 Merchants Investment Trust ,700 Monks Investment Trust ,860 Murray Income Trust ,946 Murray International Trust ,000 NB Global Floating Rate Income Fund ,117 North American Income Trust ,659,129 Old Mutual 3, ,284 Old Mutual (Post Conversion) ,220 Pacific Assets Investment Trust ,522 Paragon ,600 Perpetual Income & Growth Investment Trust Personal Assets Investment Trust ,150 Phoenix Holdings ,890 Polar Capital Technology Trust ,482 Provident Financial 1, ,908 Prudential 13, ,433 Rathbone Brothers ,542 RIT Capital Partners ,176,462 Royal Bank of Scotland+ 3, ,848 RSA Insurance 1, ,000 Safestore Holdings Henderson Institutional UK Enhanced Equity Trust

19 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Financials (continued) 51,438 Savills ,821 Schroder Asia Pacific Investment Trust ,033 Schroder Income Growth Fund ,374 Schroders 1, ,939 Scottish Investment Trust ,320 Scottish Mortgage Investment Trust 1, ,849 Segro 1, ,354 Shaftesbury REIT ,686 St James's Place 1, ,455 St. Modwen Properties ,430 Standard Chartered 5, ,753 Standard Life 3, ,574 SVG Capital ,273 Temple Bar Investment Trust ,298 Templeton Emerging Markets Investment Trust ,873 Throgmorton Investment Trust 33-39,550 TR European Growth Trust ,709 TR Property Investment Trust ,217 Tritax Big Box REIT ,627 Tullett Prebon ,793 Unite ,126 Value & Income Investment Trust ,222 Virgin Money ,648 Witan Investment Trust ,042 Woodford Patient Capital Trust ,619 Workspace REIT ,592 Worldwide Healthcare Trust ,333 1PM ,776 3i 1, ,332 3i Infrastructure (Post Conversion) , Health Care 6.80% (2014: 6.94%) 465,123 AstraZeneca 19, ,889 BTG ,769 Dechra Pharmaceuticals ,500 Ergomed ,785 Genus ,874,054 GlaxoSmithKline 25, ,908 Hikma Pharmaceuticals 1, ,000 Horizon Discovery ,371 Indivior ,354 Smith & Nephew 3, ,091 Spire Healthcare ,312 Synergy Healthcare ,200 Vectura , Industrials 8.81% (2014: 8.51%) 90,733 Aggreko ,372 Ashtead 1, ,126 Atkins (WS) ,000 Avingtrans ,655 Babcock International 1, Henderson Institutional UK Enhanced Equity Trust 15

20 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Industrials (continued) 1,203,791 BAE Systems 5, ,451 Balfour Beatty ,114 BBA Aviation ,022 Berendsen ,203 Bodycote ,891 Bunzl 2, ,619 Capita 2, ,036 Carillion ,943 Cobham 1, ,151 DCC 1, ,047 Digital Barrier ,614 Diploma ,313 DS Smith 1, ,750 DX ,381 Electrocomponents ,498 Experian 3, ,000 E2V Technologies ,414 Filtrona ,000 Gama Aviation ,904 Grafton ,228 Group 4 Securicor Lambert 1, ,810 Halma 1, ,588 Hays ,776 HellermannTyton ,655 Henlys* ,018 Homeserve ,226 Howden Joinery 1, ,542 IMI 1, ,559 Interserve ,527 Intertek Testing Services 1, ,224 James Fisher & Sons ,861 Keller ,828 Kier ,798 Lakehouse ,281,250 Learning Technologies 1, ,428 Meggitt 1, ,045 Melrose ,505 Michael Page International ,330,232 Microsaic Systems ,873 Mitie ,229 Morgan Advanced Materials ,000 Northgate ,610 Oxford Instruments ,938 Paypoint ,994 Premier Farnell ,935 QuinetiQ ,213 Regus ,892 Renishaw ,209 Rentokil Initial ,656 Rexam 1, ,149 Ricardo ,415 Rolls-Royce 5, ,890 Rotork ,072 Royal Mail 1, Henderson Institutional UK Enhanced Equity Trust

21 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Industrials (continued) 113,096 RPC ,394 Senior ,184 Serco ,515 SIG ,074 Smiths 1, ,743 Spectris ,000 Speedy Hire ,890 Spirax-Sarco Engineering ,516 Travis Perkins 1, ,655 Ultra Electronics Holdings ,800 Vesuvius ,399 Weir 1, ,019 Xaar , Oil & Gas 5.47% (2014: 7.26%) 146,710 Amec 1, ,269,048 BG 12, ,795,064 BP 24, ,972 Cairn Energy ,358 Faroe Petroleum ,159,740 Fastnet Oil & Gas ,838 Hunting ,555,555 Hydrodec ,440 John Wood ,395 Ophir Energy ,408 Petrofac ,376 Premier Oil ,890 Tullow Oil , Technology 1.51% (2014: 1.51%) 523,698 ARM Holdings 4, ,960 Aveva ,946 Fidessa ,295 Laird ,106 Micro Focus International ,582 Pace ,064 Quixant ,726 Sage 2, ,644 SDL International ,443 Telecity ,970 Ubisense ,000 Wandisco , Telecommunications 5.05% (2014: 4.26%) 3,158,081 BT 13, ,375,139 Cable & Wireless Communications ,786 Inmarsat Ventures 1, ,211 TalkTalk Telecom ,182 Telecom Plus Henderson Institutional UK Enhanced Equity Trust 17

22 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % 9,923,300 Vodafone 22, , Utilities 3.57% (2014: 3.71%) 1,865,902 Centrica 4, ,691 Drax ,412,339 National Grid 12, ,979 Pennon 1, ,575 Scottish & Southern Energy 5, ,929 Severn Trent 1, ,907 United Utilities 2, , United States 0.46% (2014: 0.40%) Consumer Services 0.28% (2014: 0.20%) 65,902 Carnival (UK Listing) 2, Financials 0.18% (2014: 0.20%) 31,487 Baring Emerging Europe ,780 BlackRock World Mining Investment Trust ,725 Fidelity China Special Situations ,955 JPMorgan American Investment Trust ,889 JPMorgan Emerging Markets Investment Trust , Bonds 1.05% (2014: 1.16%) United Kingdom 1.05% (2014: 1.16%) Fixed Rate Bond 1.05% (2014: 1.16%) GBP 6,347,000 ITV 6.125% 05/01/2017 6, USD 2,600,000 Vedanta Reources Jersey 5.5% 13/07/2016* 1, , Derivatives (0.18%) (2014: 0.06%) Contracts for Difference (0.09%) (2014: 0.19%) Cross Currency Contracts for Difference 0.05% (2014: 0.08%) 17,400 AstraZeneca ADR (64) (0.01) (13,174) Ball (14) - 77,869 Carnival (3,636) Equinix (22) - 190,152 Reed Elsevier Equity Contracts for Difference (0.15%) (2014: 0.12%) 21,106 AA (8) - 70,593 Antofagasta (25) - 48,761 ARM Holdings (8) - 58,423 Ashmore (12) - 38,199 Ashtead (36) - 23,792 AstraZeneca (77) (0.01) 79,374 Aviva 12-29,127 Babcock International (6) - 63,659 BAE Systems (6) - 135,811 Balfour Beatty ,984 Barclays Bank 26-8,393 Bellway (5) - 18 Henderson Institutional UK Enhanced Equity Trust

23 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Equity Contracts for Difference (continued) 342,506 BG (392) (0.04) 50,038 BHP Biliton (62) (0.01) 13,551 Bovis Homes ,802 BP (114) (0.01) 24,453 British American Tobacco 4-8,213 Britvic (3) - 82,487 BT (15) - (21,939) Bunzl (50) (0.01) 52,420 Burberry (18) - (65,900) Carnival (180) (0.02) 125,705 Centrica (10) - 146,732 Cobham (3) - 34,867 Compass (19) - 66,949 Countrywide 2-27,746 Crest Nicholson ,288 De La Rue (29) - 28,302 Diageo (11) - 92,697 Direct Line Insurance ,694 Drax (5) - 179,328 Elementis (47) (0.01) 57,811 Entertainment One (17) - 268,098 GKN (84) (0.01) 16,704 GlaxoSmithKline (5) - 37,338 Great Portland Estates ,601 Greene King (18) - (40,578) Halma (42) (0.01) 100,884 Howden Joinery ,033 HSBC Holdings (198) (0.03) 13,786 Imperial Tobacco 29-98,591 Informa ,591 Intermediate Capital 4-86,283 Interserve ,258 ITV ,915 Johnson Matthey (36) - 227,635 Legal & General ,864 Lloyds Banking (9) - 8,417 London Stock Exchange 14-99,612 Merlin Entertainments (45) (0.01) 73,235 Morgan Advanced Materials 16-44,951 National Grid 1-21,969 Oxford Instruments (57) (0.01) (21,957) Persimmon (207) (0.03) 67,599 Phoenix Holdings ,609 Prudential (53) (0.01) (181,112) Reed Elsevier (226) (0.03) 288,270 Rexam (7) - 29,565 Rio Tinto 17-35,558 Rolls-Royce (85) (0.01) 34,141 Royal Dutch Shell 'A' (235) (0.02) (51,598) Royal Dutch Shell 'B' ,079 RSA Insurance (12) - 12,450 SABMiller (5) - 25,041 Saga (1) - (87,937) Sainsbury's (1) - Henderson Institutional UK Enhanced Equity Trust 19

24 Portfolio statement (continued) Holding Investment Market Percentage value of total 000 net assets % Equity Contracts for Difference (continued) (37,484) Scottish & Southern Energy ,780 Senior 16-20,673 Severn Trent 9-96,132 Smith & Nephew ,810 Smiths (53) (0.01) 111,211 Telecity ,033 Tesco (67) (0.01) 51,652 United Business Media ,957 United Utilities ,253 Vodafone (282) (0.03) (18,182) WH Smith (2) - (124,947) WM Morrison Supermarkets 15-5,156 Wolseley 18-29,778 WPP 8 - (1,180) (0.15) Index Contracts for Difference 0.01% (2014: (0.01%)) (125) G4S Futures 0.00% (2014: 0.00%) (5) CBT US 2 Year Note December (14) ICE FTSE 100 Index September 2015 (27) - (9) ICE Long Gilt December (13) - Swaps (0.08%) (2014: (0.13%)) Credit Default Swaps (0.08%) (2014: (0.13%)) 2,625,000 CDS 5%20/06/2016 Vedanta Resources Pay USD 34-6,347,000 CDS 6.9% 20/03/2017 ITV Pay GBP AG5E (650) (0.08) (616) (0.08) Forward Foreign Exchange Contracts (0.01%) (2014: 0.00%) Buy GBP 3,322,048 : Sell USD 5,191,500 September 2015 (54) (0.01) ^ Due to rounding to nearest 1,000 + Related party to the fund * Suspended, delisted or unquoted security Investments assets including liabilities 761, Other net assets 18, Total net assets 779, Prior year comparative percentages have been restated for some sectors due to a new sector presentation basis implemented in these financial statements. This classification is based on country of risk and a relevant industry classification standard. 20 Henderson Institutional UK Enhanced Equity Trust

25 Statement of Authorised Fund Manager s responsibilities of Henderson Institutional UK Enhanced Equity Trust (the fund ) for the year ended 31 August 2015 The Financial Conduct Authority s Collective Investment Schemes sourcebook requires the Authorised Fund 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 Authorised Fund Manager is required to: select suitable accounting policies and then apply them consistently; comply with the requirements of the Statement of Recommended Practice for Authorised Funds issued by the Investment Management Association (IMA) in October 2010; follow generally accepted accounting principles and applicable accounting standards; keep proper accounting records which enable it to demonstrate that the financial statements, as prepared, 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 Trustee s responsibilities and report of the Trustee to the unitholders of the Henderson UK Enhanced Equity Trust (the Scheme ) for the year ended 31 August 2015 The Trustee is responsible for the safekeeping of all the property of the Scheme (other than tangible moveable property) which is entrusted to it and for all the collection of income that arises from that property. It is the duty of the Trustee to take reasonable care to ensure that the Scheme is managed in accordance with the Financial Conduct Authority s Collective Investment Schemes sourcebook ( the Regulations ), the Scheme s Trust Deed and Prospectus, in relation to the pricing of, and dealings in, units in the Scheme; the application of income of the Scheme; and the investment and borrowing powers applicable to the Scheme. Having carried out such procedures as we considered necessary to discharge our responsibilities as Trustee of the Scheme, it is our opinion, based on the information available to us and the explanations provided, that, in all material aspects, the Scheme, acting through the Manager: (i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Scheme s units and the application of the Scheme s income in accordance with the COLL, the Trust Deed and Prospectus, and (ii) has observed the investment and borrowing powers and restrictions applicable to the Scheme. National Westminster Bank Plc London 3 November 2015 Henderson Institutional UK Enhanced Equity Trust 21

26 Independent Auditors report to the unitholders of Henderson Institutional UK Enhanced Equity Trust (the fund ) for the year ended 31 August 2015 Our opinion In our opinion the financial statements, defined below: give a true and fair view of the financial position of the fund as at 31 August 2015 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 Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. This opinion is to be read in the context of what we say in the remainder of this report. What we have audited The financial statements of Henderson Institutional UK Enhanced Equity Trust (the fund ), which are prepared by Henderson Investment Funds Limited (the Authorised Fund Manager ), comprise: the balance sheet of the fund as at 31 August 2015; the statement of total return of the fund for the year then ended; the statement of change in net assets attributable to unitholders of the fund 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 Authorised Funds issued by the Investment Management Association (the Statement of Recommended Practice for 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. What an audit of financial statements involves We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ( ISAs (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. In addition, we read all the financial and non-financial information in the Henderson Institutional UK Enhanced Equity Trust Annual Report & 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. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinions on matters prescribed by the Collective Investment Schemes sourcebook In 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. 22 Henderson Institutional UK Enhanced Equity Trust

27 Independent Auditors report to the unitholders of Henderson Institutional UK Enhanced Equity Trust (the fund ) (continued) Other matters on which we are required to report by exception Propriety of accounting records and information and explanations received Under 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 audit Our responsibilities and those of the Authorised Fund Manager As explained more fully in the Statement of Authorised Fund Manager s responsibilities set out on page 21, 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 ISAs (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 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. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Glasgow 3 November 2015 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. Henderson Institutional UK Enhanced Equity Trust 23

28 Statement of total return for the year ended 31 August Notes Income Net capital (losses)/gains 4 (49,135) 56,009 Revenue 6 31,294 30,274 Expenses 7 (692) (660) Finance costs: Interest 9 (324) (391) Net revenue before taxation 30,278 29,223 Taxation 8 (444) (176) Net revenue after taxation 29,834 29,047 Total return before distributions (19,301) 85,056 Finance costs: Distributions 9 (29,833) (29,047) Change in net assets attributable to unitholders from investment activities (49,134) 56,009 Statement of change in net assets attributable to unitholders for the year ended 31 August Opening net assets attributable to unitholders 858, ,012 Amounts receivable on issue of units 42,576 15,956 Amounts receivable on in specie transfers - 2,320 Amounts payable on cancellation of units (101,983) (83,981) (59,407) (65,705) Stamp duty reserve tax - (28) Change in net assets attributable to unitholders from investment activities (see above) (49,134) 56,009 Retained distribution on accumulation units 29,446 28,503 Closing net assets attributable to unitholders 779, , Henderson Institutional UK Enhanced Equity Trust

29 Balance sheet for the year ended 31 August 2015 Assets Notes Investment assets 765, ,806 Debtors 10 6,161 6,337 Cash and bank balances 11 21,953 18,483 Total other assets 28,114 24,820 Total assets 793, ,626 Liabilities Investment liabilities 3,719 3,257 Creditors 12 1,348 1,050 Bank overdrafts 8,541 10,528 Total other liabilities 9,889 11,578 Total liabilities 13,608 14,835 Net assets attributable to unitholders 779, ,791 Certification of financial statements by Directors of the Authorised Fund Manager In accordance with the requirements of the Financial Conduct Authority s Collective Investment Schemes sourcebook, we hereby certify the investment report and financial statements on behalf of the Directors of Henderson Investment Funds Limited. Lesley Cairney (Director) Martin Skinner (Director) 3 November 2015 Henderson Institutional UK Enhanced Equity Trust 25

30 Notes to the financial statements for the year ended 31 August Accounting policies (a) Basis of accounting The financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with the Statement of Recommended Practice for Authorised Funds (SORP) issued by the IMA in October 2010, United Kingdom Generally Accepted Accounting Practice (UK GAAP) on a going concern basis, the Collective Investment Schemes sourcebook (COLL) and the Trust Deed. (b) Basis of valuation of investments The 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 fixed interest securities, at close of business on the last valuation day of the accounting period in accordance with the provisions of the scheme particulars. Investments in Collective Investment Schemes have been valued at bid prices, adjusted to take account if the discounts (bid/offer spread) available to the Manager from the charges in the underlying portfolio, for those collective investment schemes funds that are not dual priced, single price are used. Delisted, suspended, written down or manually priced securities are valued by the 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. Where applicable, investment valuations exclude any element of accrued revenue. (c) Revenue recognition 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. Distributions from Collective Investment Schemes are recognised as revenue and included in the amount for distribution. Accumulation of revenue relating to accumulation units or units held in underlying funds is recognised as revenue and included in the amount available for distribution. Equalisation received and accrued from distributions or accumulations on units or shares in underlying investments is treated as capital and deducted from the cost of the investment. Management fee rebates received from management companies are recognised when the entitlement arises, and are recognised as either income or capital in accordance with the treatment of the management fee charged on the underlying collective investment scheme. Overseas dividends are grossed up at the appropriate rate of withholding tax and the tax consequences are shown within the tax charge. 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 a security. Bank interest, interest on margin and revenue earned on other securities is recognised on an accruals basis. Underwriting commission is taken to revenue and recognised when the issue takes place, except where the fund is required to take up all or some of the shares underwritten in which case an appropriate proportion of the commission received is deducted from the cost of the relevant shares. Dividend equivalent values on Contracts for Differences are recognised when the securities are quoted ex-dividend and are included in revenue as Income from derivative contracts as the net of dividends received/(paid) on long/(short) positions. Income can be earned or paid on the financing costs and/or the interest on any realised profit/loss of Contracts for Difference. This is accounted for net of short and long positions in Income under Revenue from Contracts for Difference. Revenue distributions from Real Estate Investment Trusts (UK REITs) is split into two parts, a Property Income Distribution (PID) made up of rental revenue and a Non-PID element, consisting of non-rental revenue. The PID element is subject to Corporation Tax as schedule A revenue, while the UK dividend will be treated as franked revenue. If any revenue receivable at the balance sheet date is not considered recoverable, a provision is made for the relevant amount. (d) Treatment of expenses (including Manager s expenses) All expenses (other than those relating to the purchase and sale of investments and stamp duty reserve tax (up to 30 March 2014) arising on sales and repurchases of units) are charged against revenue on an accruals basis. The Manager s periodic charge is accrued on a daily basis by reference to the net asset value of the fund on the previous dealing day and the amount due for each month is payable on the last working day of the month. 26 Henderson Institutional UK Enhanced Equity Trust

31 Notes to the financial statements (continued) 1 Accounting policies (continued) (d) Treatment of expenses (including Manager s expenses) (continued) General Administration Charge All fees with the exception of the Manager s periodic charge, Trustee fees, Safe Custody fees, Legal fees and Dividend collection charges, are included within a single as valorem charge, the General Administration Charge (GAC). The Manager believes that this creates more efficiency around the charging process than more traditional methods. Allocation of revenue and expenses to unit classes With the exception of the Manager s periodic 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 expense is incurred. For further details please refer to the Prospectus. (e) Treatment of stock dividends Dividends received as shares (scrip/stock dividends), to the extent that the value of such dividends is equal to the cash dividends, are treated as revenue. This revenue forms part of any distribution. In the case of enhanced scrip dividends, the amount by which such dividends exceed the cash dividends is treated as capital and does not form part of the distribution. (f) Treatment of special dividends These are recognised as either revenue or capital depending on the nature and circumstances of the dividend receivable. (g) Treatment of derivatives In pursuing its investment objectives, the fund may hold a number of derivative instruments. Futures contracts Open 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. Contracts for difference Contracts for difference (CFD) 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. Revenue received on CFDs is included in the revenue account on an accrual basis. Forward currency contracts Open forward currency contracts which are all covered are shown in the Portfolio statement at fair value and the net capital gains/ (losses) are reflected in net capital gains/(losses) on investments. Credit default swaps Open credit default swaps (CDS) are shown in the Portfolio statement at fair value and the net gains/(losses) are reflected within Derivative contracts in net gains/(losses) on investments. Premiums receivable or payable on CDS are treated as revenue on an accruals basis. Cash held at future brokers as margin is reflected separately within cash and bank balances. 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 accrual basis. Where such transactions are used to protect or enhance capital, the gains and losses derived therefore are included in Net capital gains/(losses) in the Statement of total return. (h) Exchange rates Assets and liabilities denominated in foreign currencies are translated into sterling at the exchange rates prevailing at close of business on the last business day of the accounting period. Revenue and expenditure transactions are translated at the rates of exchange ruling on the dates of the transactions. Exchange differences on such transactions follow the same treatment as the principal amounts. Henderson Institutional UK Enhanced Equity Trust 27

32 Notes to the financial statements (continued) 1 Accounting policies (continued) (i) Taxation 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. 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 reversal of underlying timing differences can be offset. Stamp Duty Reserve Tax (SDRT), if any, suffered on surrender of shares is deducted from capital. Please note that since 30 March 2014 SDRT Part 2 of Schedule 19 has been abolished. (j) Stock lending revenue Revenue from stock lending is accounted for net of bank and agent fees is recognised on an accrual basis. (k) Cash flow statement After analysis of the fund, there is no requirement to produce a cash flow statement. 2 Distribution policy The distribution policy of the fund is to accumulate all available revenue, after deduction of expenses properly chargeable against revenue. For the purpose of calculating the distribution, interest on debt securities is computed on an effective yield basis, the same basis on which it is reflected in the financial statements as modified by the revaluation of investments. Revenue attributed to accumulation unitholders is retained at the end of each distribution period and represents a reinvestment of income. Gains and losses on investments and currencies, whether realised or unrealised, are taken to capital and are not 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 to the fund. The policy of the fund is to make annual (pay date being 31 October) and interim (pay date being 30 April) distributions to unitholders. Equalisation Income equalisation ensures that part of the price on purchase of a unit reflects the relevant share of accrued income received or to be received by the fund. This capital sum is returned to a unitholder (or where accumulation units are held, it will be accumulated) with the first allocation of income in respect of a unit issued during an accounting period. The amount representing the income equalisation in the unit s price is a return of capital, and is not itself taxable in the hands of unitholders but must be deducted by them from the price of the units for the purpose of calculating any liability to capital gains tax. 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 that arise directly from the fund s operations, for example, in respect of sales and purchases awaiting settlement, amounts receivable for creations and payable for redemptions and debtors for accrued revenue. The fund may also enter into derivative transactions. The purpose of these financial instruments is efficient portfolio management and for meeting the fund s investment objectives. The main risks arising from financial instruments are market, liquidity and credit risk. The risks have remained unchanged since the beginning of the year to which these financial statements relate (no change for 2014) and are summarised below: (a) Market risk Market risk is the risk that the value of the fund s investments or the benefits arising thereon will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign currency risk, interest rate risk, and other price risk. 28 Henderson Institutional UK Enhanced Equity Trust

33 Notes to the financial statements (continued) 3 Risk (continued) (a) Market risk (continued) Foreign currency risk Foreign currency risk is the risk that the value of the fund s investments will fluctuate as a result of changes in foreign currency exchange rates. Where 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 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. The fund s exposure to foreign currency risk is considered insignificant. This is consistent with the exposure during the prior year. Interest rate risk The fund invests in debt securities. The revenue for the fund may be affected by changes to the interest rates relevant to particular securities or as a result of the 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. 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 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. The majority of the fund s financial assets are investments which neither pay interest nor have a maturity date. Therefore, the fund s exposure to interest rate risk is considered insignificant. This is consistent with the exposure during the prior year. Other price risk Other price risk is the risk that the value of the fund s investment will fluctuate as a result of changes in market prices caused by factors other than interest rate or foreign currency movement. Other 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. The Manager has the responsibility for monitoring the existing portfolio selection in accordance with the fund s investment objectives and seeks to ensure that individual securities meet an acceptable risk and reward profile. (b) Liquidity risk Liquidity risk is the risk that the fund cannot raise sufficient cash to meet their liabilities when due. One of the key factors influencing this will be the ability to sell investments at, or close to, the fair value without a significant loss being realised. Under normal circumstances, the fund will remain close to fully invested. However, where circumstances require, for example because of illiquid securities markets or high levels of redemptions in the fund, the fund may hold cash and/or more liquid assets. 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 Manager manages the fund s cash to ensure it can meet its liabilities. The Manager receives daily reports of subscriptions and redemptions enabling the Manager to raise cash from the fund s portfolio in order to meet redemption requests. In addition the Manager monitors market liquidity of all securities, with particular focus on the FRN market, where relevant, 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 Manager and Administrator. Where investments cannot be realised in time to meet any potential liability, the fund may borrow up to 10% of its value to ensure settlement. All of the fund s financial liabilities are payable on demand or in less than one year. (c) Credit and counterparty risk Credit risk arises from three main sources. Firstly, the possibility that an issuer of a security will be unable to pay interest and principal in a timely manner. Secondly, for asset backed investments (including FRNs) there is the possibility of default of the issuer and default in the underlying assets meaning the fund may not receive back the full principal originally invested. Thirdly, there is counterparty risk, which is the risk that the counterparty will not deliver the investment for a purchase, or cash for a sale after the fund has fulfilled its responsibilities, which could result in the fund suffering a loss. Henderson Institutional UK Enhanced Equity Trust 29

34 Notes to the financial statements (continued) 3 Risk (continued) (c) Credit and counterparty risk (continued) In order to manage credit risk the fund is subject to investment limits for issuers of securities. Issuer credit ratings are evaluated periodically and an approved issuer list is maintained and monitored. In addition the fund will only buy and sell investments through brokers which have been approved by the 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. Assets held with the Trustee are ring fenced. 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 continuing credit worthiness of other counterparties is monitored on a daily basis. 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. (d) Sensitivity analysis A sensitivity analysis has not been undertaken as the fund s exposure to derivative activity is considered insignificant. 4 Net capital (losses)/gains Net capital (losses)/gains on investments during the year comprise: Derivative contracts 2,177 5,462 Forward currency contracts (150) 679 Non-derivative securities (51,141) 50,070 Other currency losses (7) (182) Transaction costs (14) (20) Net capital (losses)/gains on investments (49,135) 56, Henderson Institutional UK Enhanced Equity Trust

35 Notes to the financial statements (continued) 5 Portfolio transaction costs Purchases in year before transaction costs 54,976 84,488 Commissions 9 6 Other costs - 8 Taxes Total purchase transaction costs* Purchases including transaction cost 55,163 84,650 Sales in year before transaction costs 90, ,944 Commissions (26) (24) Total sale transaction costs* (26) (24) Sales net of transaction costs 90, ,920 Transaction handling charges* * These amounts have been deducted in determining net capital (losses)/gains. 6 Revenue Bank interest Derivative revenue (605) (992) Interest on debt securities 941 1,449 Interest on margin Contracts for difference 1, Overseas dividends 3,349 2,045 Stock dividends 3,552 5,554 Stock lending revenue UK dividends 21,747 20,645^ UK REIT revenue: PID ^ Non-PID ^ Underwriting commission Total revenue 31,294 30,274 ^ Prior year figures have been adjusted for presentation only and do not have an impact on the financial statements. Henderson Institutional UK Enhanced Equity Trust 31

36 Notes to the financial statements (continued) 7 Expenses Payable to the Manager, associates of the Manager and agents of either of them: Manager s periodic charge GAC* Payable to the Trustee, associates of the Trustee and agents of either of them: Trustee fees Safe custody fees Other expenses: Dividend collection charges 8 15 Professional fees Total expenses Irrecoverable VAT is included in the above expenses where relevant. * The current audit fee, which is levied through GAC, is 7,980 (2014: 7,980). 8 Taxation a) Analysis of charge in year The tax charge comprises: UK corporation tax Overseas withholding tax 140 (4) Total current tax (note 8b) Deferred tax (note 8c) (3) (11) Total taxation Henderson Institutional UK Enhanced Equity Trust

37 Notes to the financial statements (continued) 8 Taxation (continued) b) Factors affecting current tax charge for year The tax assessed for the year is different to the standard rate of corporation tax in the UK for authorised unit trusts of 20%. The differences are explained below: Net revenue before taxation 30,278 29,223 Corporation tax at 20% (2014 : 20%) 6,056 5,845 Effects of: Irrecoverable overseas tax 140 (3) Non-taxable overseas dividends** (670) (409) Revenue taxable in different periods 3 11 Stock dividends* (710) (1,111) UK dividends* (4,372) (4,146) Current tax charge for the year (note 8a) * 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 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 Provision at start of year Deferred tax charge for year (note 8a) (3) (11) Provision at end of year (d) Factors that may affect future tax charges There were no factors that may affect future tax charges at the current or prior accounting year end. Henderson Institutional UK Enhanced Equity Trust 33

38 Notes to the financial statements (continued) 9 Finance costs Distributions and interest The distributions take account of revenue received on the creation of units and revenue deducted on the cancellation of units, and comprise: Interim accumulation 9,627 10,244 Final accumulation 19,819 18,259 29,446 28,503 Amount deducted on cancellation of units Amount received on issue of units (420) (128) Finance costs: Distributions 29,833 29,047 Finance costs: Interest Total finance costs 30,157 29,438 Details of the distribution per unit are set out in the distribution tables on page Debtors Accrued revenue 6,036 5,744 Overseas withholding tax reclaimable Sales awaiting settlement Total debtors 6,161 6, Cash and bank balances Amounts held at futures clearing houses and brokers 6,576 5,520 Cash and bank balances 14,247 12,963 Deposit accounts 1,130 - Total cash and bank balances 21,953 18, Henderson Institutional UK Enhanced Equity Trust

39 Notes to the financial statements (continued) 12 Creditors Accrued Manager's periodic charge Accrued Trustee's fee 8 9 Accrued other expenses Amounts payable for cancellation of units Corporation tax payable Deferred taxation 6 51 Derivative interest payable Purchases awaiting settlement Total creditors 1,348 1, Contingent liabilities and commitments There were no contingent liabilities or outstanding commitments at the current or prior year end. 14 Related party transactions The Financial Reporting Standard number 8 (FRS 8) on Related Party Disclosures requires the disclosure of details of material transactions between the fund and any related parties. Under the FRS 8, the Manager and Trustee are deemed to be related parties. All transactions and balances associated with the Manager and Trustee are disclosed within the Statement of total return, Statement of change in net assets attributable to unitholders and the Balance sheet on pages 24 and 25 and notes 7, 10 and 12 on pages 32 to 35 including all creations and cancellations where the Manager acted as principal. Henderson Investment Funds Limited, as Manager to the fund is a related party. The ultimate holding party of Henderson Investment Funds Limited is Henderson Group plc. Aggregate value of purchases and sales transactions in Henderson Group plc and its subsidiaries for the year amounts to 104,117 (2014: nil). Revenue receivable from Henderson Group plc and its subsidiaries for the year amounts to 72,017 (2014: 63,601). The aggregate value of investments held in Henderson Group plc and its subsidiaries as at 31 August 2015 is 1,816,096 (2014: 1,719,745). National Westminster Bank plc, as Trustee to the fund is a related party. The ultimate holding party of National Westminster Bank plc is Royal Bank of Scotland Group plc. Aggregate value of purchases and sales transactions in Royal Bank of Scotland Group plc for the year amounts to 2,327,134 (2014: nil). Revenue receivable from Royal Bank of Scotland Group plc for the year amounts to nil (2014: nil). The aggregate value of investments held in Royal Bank of Scotland Group plc as at 31 August 2015 is 3,962,324 (2014: 3,178,640). HSBC Global Custody Nominee (UK) Ltd and Harewood Nominees Limited, as material unitholders, are related parties holding units comprising 75.66% (2014: 77.31%) and 17.29% (2014: 16.12%) respectively of the total net assets of the fund as at 31 August Material transactions throughout the year such as creations and cancellations for these unitholders are included in the Statement of change in net assets attributable to unitholders. 15 Dilution adjustment The Manager has discretion to make a dilution adjustment in the calculation of the dealing price and thereby swing the dealing price of units. The Manager s policy is to apply a dilution adjustment which is intended to cover certain dealing charges which could have a diluting effect on the performance of the fund when there is a large volume of deals. Normally the Manager will only apply such an adjustment in the following circumstances: (a) if the fund is experiencing large levels of net purchases (i.e. purchases less redemptions) relative to its size; (b) if the fund is experiencing large levels of net redemptions (i.e. redemptions less purchases) relative to its size; (c) in any other case where the Manager is of the opinion that the interests of existing/continuing unitholders and potential unitholders require the imposition of a dilution adjustment. The adjustment, where applied, is included within the dealing price available to unitholders and is not disclosed separately in the financial statements. Henderson Institutional UK Enhanced Equity Trust 35

40 Notes to the financial statements (continued) 16 Unitholder funds The fund currently has 3 unit classes available; Class I, Class Y and Class Z. The annual management charge on each unit class is as follows: % % Class I Class Y Class Z* * Charges for managing Z class units are levied outside the fund and are agreed between the Manager and investors. The net asset value of each unit class, the net asset value per unit and the number of units in each unit class are given in the comparative tables on page 5. The distribution per unit class is given in the distribution tables on page 38. All unit classes have the same rights on winding up. 17 Financial derivatives The fund has used financial derivatives for hedging and meeting the investment objectives including risk reduction and implementation of investment policies. The use of derivatives can create additional counterparty risks. Details of the 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 contracts for difference, credit default swaps, forward foreign exchange contracts and futures. Details of individual contracts are shown in the portfolio statement on pages 18 to 20, and the total position by counterparty at the year end is summarised below: At 31 August 2015 the underlying exposure for each category of derivatives were as follows: Contracts for Credit default Forward foreign Futures difference swaps exchange contracts Counterparty Goldman Sachs - 8, Royal Bank of Scotland - - 3,368 - UBS 31, ,633 At 31 August 2014 the underlying exposure for each category of derivatives were as follows: Contracts for Credit default Forward foreign Futures difference swaps exchange contracts Counterparty Credit Suisse 1,585 3, Goldman Sachs - 9, Royal Bank of Scotland UBS ,455 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. At 31 August 2015, no collateral had been pledged to counterparties in respect of the above. 36 Henderson Institutional UK Enhanced Equity Trust

41 Notes to the financial statements (continued) 18 Securities lending The fund and the Investment Manager have entered into a securities lending programme with BNP Paribas Securities Services acting as the Securities Lending Agent in order to generate income. Securities lending revenue is disclosed under Revenue in the Statement of total return. The gross stock lending revenue for the year was 389,389 with expenses of 58,408 deducted to give net stock lending revenue of 330,981 (2014: 139,646) Aggregate value of securities on loan at the year end 100,754 58,251 Aggregate value of collateral held at the year end 106,229 61,449 All collateral was in the form of equity securities and government bonds. 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% of the value of the securities on loan. The counterparties at the year end were ABN Amro, Barclays, Citigroup, Deutsche Bank, JP Morgan, Merrill Lynch and Société Générale. Henderson Institutional UK Enhanced Equity Trust 37

42 Distribution tables for the year ended 31 August 2015 (in pence per unit) Interim dividend distribution (accounting date 28 February 2015, paid on 30 April 2015) Group 1 : units purchased prior to 1 September 2014 Group 2 : units purchased on or after 1 September 2014 Net Equalisation Distribution Distribution revenue paid paid 30/04/ /04/2014 Class I accumulation Class Y accumulation Group Group Class Z accumulation Group Group Final dividend distribution (accounting date 31 August 2015, paid on 30 October 2015) Group 1 : units purchased prior to 1 March 2015 Group 2 : units purchased on or after 1 March 2015 Net Equalisation Distribution Distribution revenue paid paid 30/10/ /10/2014 Class I accumulation Class Y accumulation Group Group Class Z accumulation Group Group Henderson Institutional UK Enhanced Equity Trust

43 Further information 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: The following line is also available: Client Services: or you can contact us via at We may record telephone calls for our mutual protection and to improve customer service. Henderson Institutional UK Enhanced Equity Trust 39

44 Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no ), Henderson Fund Management Limited (reg. no ), Henderson Investment Funds Limited (reg. no ), Henderson Investment Management Limited (reg. no ), Henderson Alternative Investment Advisor Limited (reg. no ), Henderson Equity Partners Limited (reg. no ), Gartmore Investment Limited (reg. no ), (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. H018419/0915