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Henderson Horizon Pan European

Equity Fund

This document is solely for the use of professionals and is not for general public distribution.

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.

October 2014

1

7.1 6.1

6.6

1.7 2.9

14.4 12.8

4.8 4.9 2.6

4.3

0.6 1.9

-3.7 -3.9

-0.8

-4.3

2.5

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

S&

P 5

00

MS

CI E

merg

ing

MS

CI

Euro

pe

FT

SE

All

Sh

are

DA

X

MIB

IBE

X

AS

E

Germ

an B

un

ds

H1 2014

H2 2014

Market returns

Source: Henderson Global Investors, Bloomberg, as at 29 September 2014

Note: Returns are in local currency, total return

Global market returns (%)

2

Peripheral bond yields returning to normality

Source: Datastream, as at 26 September 2014

0

1

2

3

4

5

6

7

8

Apr-

10

Ju

n-1

0

Aug

-10

Oct-

10

De

c-1

0

Fe

b-1

1

Apr-

11

Ju

n-1

1

Aug

-11

Oct-

11

De

c-1

1

Fe

b-1

2

Apr-

12

Ju

n-1

2

Aug

-12

Oct-

12

De

c-1

2

Fe

b-1

3

Apr-

13

Ju

n-1

3

Aug

-13

Oct-

13

De

c-1

3

Fe

b-1

4

Apr-

14

Ju

n-1

4

Aug

-14

US 10 year yield

German 10 year yield

Italian 10 year yield

Spanish 10 year yield

3

Ireland

Labour market

Deregulation

Reform – broadly adopted

Spain

Labour market

Deregulation

Catalan autonomy?

Portugal

Labour market

Deregulation Greece

Deepest reforms

OECD continue – deregulation and

divestments

France

Getting there – non labour costs

Corporate income and payroll,

social spending cuts

Italy

Labour market – temp contracts, uniform employment contracts

Political – abolition of upper house

4

Competitiveness adjustment in the euro area is happening

Unit labour costs in industry: Evolution vs Germany (indexed at Q1 01)

Periphery Core

Source: Haver Analytics, Barclays Research, Barclays Economic Team, as at October 2013

60

80

100

120

140

160

91 93 95 97 99 01 03 05 07 09 11 13

Germany = 100FinlandFranceAustriaBelgiumNL

60

80

100

120

140

160

180

91 93 95 97 99 01 03 05 07 09 11 13

Germany = 100GreeceItalySpainPortugalIreland

• The ‘core’ countries have generally kept the evolution of their industrial unit labour costs in line with that of Germany

since EMU began

5

Market spooked by German industrial production

-40

-30

-20

-10

0

10

20

30

40

-5

-4

-3

-2

-1

0

1

2

3

4

5

Ja

n 1

0

Ma

r 10

Ma

y 1

0

Ju

l 10

Sep

10

No

v 1

0

Ja

n 1

1

Ma

r 11

Ma

y 1

1

Ju

l 11

Sep

11

No

v 1

1

Ja

n 1

2

Ma

r 12

Ma

y 1

2

Ju

l 12

Sep

12

No

v 1

2

Ja

n 1

3

Ma

r 13

Ma

y 1

3

Ju

l 13

Sep

13

No

v 1

3

Ja

n 1

4

Ma

r 14

Ma

y 1

4

Ju

l 14

Sep

14

Industrial output

Car production (RHS)

Germany industrial output & car production (%MoM)

Source: Datastream, as at 20 October 2014

6

What did Draghi do?

ECB meeting 6 June 2014

Options Decision Comment

Refinancing rate cut Done From 0.25% to 0.15%

Negative deposit rate Done From 0% to -0.1%

Lending facility rate cut Done From 0.75% to 0.4%

Extension of MRO full allotment Done Until December 2016

End of SMP sterilization Done 165 bn € liquidity freed

Creation of targeted LTROs Done Est. new 400 bn € liquidity

ABS purchase programme Done “Preparatory work”

Full quantitative easing Open Remains open

7

Currency

Euro versus USD

Source: Datastream, as at 26 September 2014

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1.60

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1.60

Sep

-04

Ja

n-0

5

Ma

y-0

5

Sep

-05

Ja

n-0

6

Ma

y-0

6

Sep

-06

Ja

n-0

7

Ma

y-0

7

Sep

-07

Ja

n-0

8

Ma

y-0

8

Sep

-08

Ja

n-0

9

Ma

y-0

9

Sep

-09

Ja

n-1

0

Ma

y-1

0

Sep

-10

Ja

n-1

1

Ma

y-1

1

Sep

-11

Ja

n-1

2

Ma

y-1

2

Sep

-12

Ja

n-1

3

Ma

y-1

3

Sep

-13

Ja

n-1

4

Ma

y-1

4

Sep

-14

Exch

an

ge

rate

Exch

an

ge

rate

Average

H1 2014

= 1.3709

Average

H2 2013

= 1.3399

8

Global growth

Source: Henderson Global Investors, Bloomberg, as at 23 September 2014

BRIC = Brazil, Russia, India and China

GDP growth (YoY%) 2008 2009 2010 2011 2012 2013 2014E 2015E

World 1.5 -2.4 4.0 3.0 2.1 2.2 2.5 3.0

UK -0.8 -5.2 1.7 1.1 0.3 1.7 3.1 2.6

United States -0.3 -2.8 2.5 1.6 2.3 2.2 2.1 3.0

Europe 0.2 -4.4 2.0 1.6 -0.3 0.1 1.4 1.7

Asia 7.1 6.0 9.4 7.6 6.2 6.3 6.3 6.3

BRICs 7.7 4.7 8.8 7.1 5.6 5.6 5.2 5.4

9

Earnings growth – forecast

European earnings growth (YoY %)

Source: Goldman Sachs research, Citi group research, Henderson Global Investors, as at 30 September 2014

0.7

-4.1 -10.7

-13.8

-4.2

47.0

11.7

20.7 21.9

3.4

33.2

23.9

-35.1

-22.9

54.0

31.2 29.6

17.6

6.0

-32.1

-6.1

39.4

-2.1 -5.0 -4.3

5.4

13.2

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

10

European equity valuation – where next?

Source: Henderson Global Investors, DataStream, as at 26 September 2014

6

7

8

9

10

11

12

13

14

15

16

Ma

r-08

Ju

n-0

8

Sep

-08

Dec-0

8

Ma

r-09

Ju

n-0

9

Sep

-09

Dec-0

9

Ma

r-10

Ju

n-1

0

Sep

-10

Dec-1

0

Ma

r-11

Ju

n-1

1

Sep

-11

Dec-1

1

Ma

r-12

Ju

n-1

2

Sep

-12

Dec-1

2

Ma

r-13

Ju

n-1

3

Sep

-13

Dec-1

3

Ma

r-14

Ju

n-1

4

Sep

-14

MSCI Europe Ex UK - 12 monthforward P/E

14.2x

11

Yields – where next?

Source: DataStream, Henderson Global Investors, as at 9 October 2014

IBOXX corporate bond indices

0

1

2

3

4

5

6

7

8

9

10

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

Yie

ld (

%)

German 10 year bund yield FTSE Europe dividend yield

AAA Euro corporate bond yield BBB Euro corporate bond yield

US 10 year treasury yield

1.9%

0.9%

1.5%

3.3%

2.3%

12

Current positioning

Source: Henderson Global Investors, UBS, as at 30 September 2014

Note: Past performance of the fund is not necessarily indicative of the future or likely performance of the fund

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Ja

n-1

0

Ma

r-10

Ma

y-1

0

Ju

l-1

0

Sep

-10

Nov-1

0

Ja

n-1

1

Ma

r-11

Ma

y-1

1

Ju

l-1

1

Sep

-11

Nov-1

1

Ja

n-1

2

Ma

r-12

Ma

y-1

2

Ju

l-1

2

Sep

-12

No

v-1

2

Ja

n-1

3

Ma

r-13

Ma

y-1

3

Ju

l-1

3

Sep

-13

Nov-1

3

Ja

n-1

4

Ma

r-14

Ma

y-1

4

Ju

l-1

4

Sep

-14

Portfolio

Benchmark

PE Growth (Consensus)

13

Feature stock – L’Oreal – Quality growth

100%

150%

200%

250%

300%

10.0x

15.0x

20.0x

25.0x

30.0x

35.0x

40.0x

45.0x

50.0x

55.0x

60.0x

Dec-9

6

Ju

l-9

7

Fe

b-9

8

Sep

-98

Apr-

99

Nov-9

9

Ju

n-0

0

Ja

n-0

1

Aug

-01

Ma

r-02

Oct-

02

Ma

y-0

3

Dec-0

3

Ju

l-0

4

Fe

b-0

5

Sep

-05

Apr-

06

Nov-0

6

Ju

n-0

7

Ja

n-0

8

Aug

-08

Ma

r-09

Oct-

09

Ma

y-1

0

Dec-1

0

Ju

l-1

1

Fe

b-1

2

Sep

-12

Apr-

13

Nov-1

3

Ju

n-1

4

Ja

n-1

5

Aug

-15

Rel. 12m P/E 12m P/E

Rel. 12m P/E

L Oreal S.A. (lhs)

European Consumer Staples (lhs)

Source: DataStream, Exane, as at 24 September 2014

14

Policy action

6 June 2014 September TLTRO To come…

• Refinancing rate cut

• Negative deposit rate

• Extension of MRO full

allotment

• End of SMP sterilization

• Further refinancing

rate cut to 0.05%

• Deposit rate cut to

-0.2%

• ABS purchase

programme

• TLTRO uptake €82bn • AQR

• TLTRO II

• Quantitative easing?

15

Why did Draghi act?

Euro area inflation (YoY %)

Source: Datastream, as at July 2014

Eurozone GDP Q2 2014 0.0%

Eurozone unemployment Q2 2014 11.57%

-1

0

1

2

3

4

5

Feb-0

0

Ju

l-0

0

Dec-0

0

Ma

y-0

1

Oct-

01

Ma

r-02

Aug

-02

Ja

n-0

3

Ju

n-0

3

Nov-0

3

Apr-

04

Sep

-04

Feb-0

5

Ju

l-0

5

Dec-0

5

Ma

y-0

6

Oct-

06

Ma

r-07

Aug

-07

Ja

n-0

8

Ju

n-0

8

No

v-0

8

Apr-

09

Sep

-09

Feb-1

0

Ju

l-1

0

Dec-1

0

Ma

y-1

1

Oct-

11

Ma

r-12

Aug

-12

Ja

n-1

3

Ju

n-1

3

Nov-1

3

Apr-

14

0.38%

16

Wage Growth

-1

0

1

2

3

4

5

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

12

m c

ha

nge

(%

)

German wages [Jun 14 = 3.6]

Eurozone wages [May 14 = 1.9]

Spanish wages [Aug 14 = 0.5]

European consumers should start to feel better off (or at least less badly off)

Source: Absolute Strategy Research Ltd, Thomson Reuters Datastream, as at 15 August 2014

Eurozone Wage Growth Holding Steady at 2%

17

Eurozone BLS vs GDP growth

Loans picking up

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

-150

-100

-50

0

50

100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Consumer credit and other lending [Q2 2014 = +17]

Loans for house purchase [Q2 2014 = +19]

Overall corporate [Q2 2014 = +4]

Eurozone GDP [May 14 = 0.8%]

Net b

ala

nce (

%)

An

nu

al c

ha

nge

(%)

Stronger demand

Weaker demand

Source: Absolute Strategy Research Ltd, Thomson Reuters Datastream, as at 7 September 2014

18

Some things to worry about

• Politics – protest parties are gaining everywhere – AfD, Le Pen, UKIP amongst

others

• Lack of pricing power prevents any margin improvement

• Currency wars escalate

• Ebola

• Geo-political events

• China growth slows more than expected

19

Fund manager and product overview

• Launched in 2001

• Focus on quality, consistent,

reliable companies

• Total return objective

• Developed markets only

• Large-cap, liquid portfolio

(Market cap >€2bn)

• Typically less than 60 holdings

• Maximum cash 5% (except in exceptional

circumstances)

• Minimum position size 1%

Tim Stevenson

Head of European Equities

30 years’ investment experience

Joined Henderson in 1986

Assisted by the strongest European team

Henderson has had in 28 years

Fund manager

20

Henderson Pan European Equity team

Large cap Mid cap Small cap

Growth Agnostic Value Long/short

Tim Stevenson

€4.7bn

John Bennett

€5.8bn

Nick Sheridan

€673m

Léopold

Arminjon

€1.5bn

Simon Rowe

€1.3bn*

Ollie Beckett

€1.6bn

Dealing, Operations and Marketing Support

Eleanor Cameron Richard Brown Julia Brown

Analysts/Assistant Managers

New joiner** Asim Rahman Robert Schramm-Fuchs Bill Casey Rory Stokes

Source: Henderson Global Investors, as at 17 October 2014

AUM as at 30 September 2014

* Excludes the Henderson European Special Situations Fund

** Joins 1 December 2014

21

-0.4 -0.2 0.0 0.2 0.4 0.6 0.8

Utilities

Telecoms

Industrials

Consumer Discretionary

IT

Consumer Staples

Health Care

Energy

Materials

Financials

Source: Henderson Global Investors, as at 30 September 2014

Retail share class returns

Contribution reflects the % each sector added to the fund over the benchmark return

Fund % Benchmark % Excess return %

Q3 1.3 0.8 0.5

%

Largest contributors by sector Q3

Attribution by sector

22

Attribution by stock


Retail share class returns, net of fees in Euros

Contribution reflects the % each stock added to the fund over the benchmark return

-0.3 -0.2 -0.1 0.0 0.1 0.2 0.3

Tullow Oil plc

Valeo SA

Sanofi (not owned)

HSBC (not owned)

Infineon Technologies

Continental

Adecco

Deutsche Post

Volkswagen

Legrand

ING Groep

ASML

BP (not owned)

BASF (not owned)

Fresenius SE

Dixons Carphone

FMC

Credit Agricole

ITV

Standard Life

%

Largest contributors by stock in Q3

Fund % Benchmark % Excess return %

Q3 1.3 0.8 0.5

23

Sector positioning

• Reduced financials (increased our

underweight)

• Still underweight utilities

• Small reduction in overweight

industrials position

• Otherwise no major changes

Sector weights relative to benchmark


Benchmark: FTSE World Europe Index

Note: Past performance of the fund is not necessarily indicative of the

future or likely performance of the fund

-15 -10 -5 0 5 10 15 20

Energy

Consumer Stap

Materials

Financials

Utilities

Telecoms

Health Care

IT

Consumer Disc

Industrials

30-Mar-14

30-Jun-14

30-Sep-14

24

Current positioning

Industrial sub sector weights relative to benchmark Financial sub sector weights relative to benchmark



-10 -5 0 5 10

Banks

REITs

Diversified Financial Services

Insurance

% -4 -2 0 2 4 6

Machinery

Industrial Conglomerates

Construction & Engineering

Transportation Infrastructure

Airlines

Road & Rail

Aerospace & Defense

Building Products

Trading Companies & Distributors

Electrical Equipment

Marine

Commercial Services & Supplies

Air Freight & Logistics

Professional Services

%

25

Portfolio construction – Portfolio DNA

Portfolio Benchmark

1 year forward P/E 14.3 13.7

Forecast yield 2.9 3.7

Forecast earnings growth 14.4 10.5

Forecast dividend growth 14.9 7.3

Return on equity 14.9 12.4

The above table is purely for illustrative purposes only and these forecasts involve risks, variables and uncertainties. Consequently, no guarantee is presented or implied as to the

accuracy of specific forecasts, projections or predictive statements contained herein.

Source: Henderson Global Investors, UBS, as at 30 September 2014

Note: Fund is the HHF Pan European Equity Fund vs FTSE World Europe Index

0

10

20

30

40

50

60

70

80

Jan-1

2

Ma

r-1

2

Ma

y-1

2

Jul-1

2

Oct-

12

De

c-1

2

Ma

r-1

3

Ma

y-1

3

Jul-1

3

Oct-

13

De

c-1

3

Feb

-14

Ma

y-1

4

Jul-1

4

Sep-3

0

Cash Quality Cyclicals

Financials Quality Growth

Sleepers/Trades

52.4%

26.1%

19.5%

2.0%

0.0%


Classification exposures

%

26

Performance – quality pays in the long run

Fund (%) Benchmark (%) Relative (%) Percentile

3 months 1.3 0.8 0.5 18

6 months 2.2 5.2 -3.0 57

1 year 11.1 13.8 -2.7 44

2 year 34.7 35.2 -0.5 20

3 years 69.4 66.4 3.0 17

5 years 70.0 64.7 5.3 14

7 years 33.0 15.0 18.0 6

10 years 122.2 99.1 23.1 7

Since inception (Nov ‘01) 136.0 77.8 58.2 2


Note: Net of fees in Euros, retail share class (A2), cumulative returns, Fund NAV based on midday prices. Benchmark refers to the FTSE World Europe Index.


Net of fees, retail share class

27

Risk characteristics

31 Dec 2012 30 Jun 2013 31 Dec 2013 30 Jun 2014 30 Sept 2014

No of stocks 56 57 58 57 60

Active risk* 76% 72% 74% 74% 73%

Predicted beta 0.96 0.96 0.96 0.98 0.98

Predicted volatility fund** 17.9 16.5 14.6 13.3 12.7

Predicted volatility

benchmark** 18.4 16.9 14.9 13.2 12.7

Predicted tracking error** 3.0 2.8 3.0 2.6 2.4

Source: Henderson Global Investors, BARRA, as at 30 September 2014

* (Sum of absolute deviation from benchmark)/2

** 12 month forward

Risk control

28

Sales

Stock Month sold Relative

performance

since sale*

Philips July +9.2%

GlaxoSmithKline July -9.3%

EDP Aug +0.8%


Note: * Performance shown is the total return – MSCI Europe index return since disposal/purchase. ** Holding period relative return

References made to individual companies or stocks should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase in the Company.

Past performance is not a guide to future performance.

Trading activity Q3 2014

Purchases

Stock Month bought Relative

performance

since purchase*

Wolseley July -0.3%

SAP July +0.7%

Bayer Sept -0.3%

29

What we have done in October 2014

• Sold Renault and Zurich Insurance

• Bought Essilor

• Top up of quality names

• Not panicking

30

Top 10 holdings

Name Sector Portfolio weight (%)

Deutsche Post Industrials 3.5

Roche Health Care 3.4

Fresenius SE Health Care 3.3

Sodexo Consumer Discretionary 3.1

Capita Industrials 2.9

Novartis Health Care 2.6

Fresenius Medical Care Health Care 2.6

Nestle Consumer Staples 2.6

Maersk Industrials 2.4

Standard Life Financials 2.4

Source: Henderson Global Investors, as at 17 October 2014

Note: Reference to individual companies or any securities is purely for the purpose of information only and should not be construed as a recommendation to buy or sell the same

31

Outlook

• European economic growth could show signs of improvement over the next

few months

• Early estimates for EPS growth in 2015 are encouraging

• Weaker euro is helpful to many European companies

• Politics is a distraction, but should not alter the path towards rational economic

reforms

• Valuations of European equities are at interesting levels

Appendices

33

Stock attribution YTD 2014

Top ten stocks Total effect (%)

Capita 0.5

AP Moller 0.5

Pandora 0.4

Dixons Retail 0.2

Credit Agricole 0.2

Standard Life 0.2

ITV 0.2

Valeo 0.2

Tesco 0.2

Societe BIC 0.1

Bottom ten stocks Total effect (%)

Svenska Cellulosa Aktiebolaget -0.4

Deutsche Post -0.4

Royal Philips -0.3

Amadeus IT -0.3

Renault -0.3

Airbus Group -0.2

Rolls-Royce -0.2

Volkswagen -0.2

Continental -0.2

Shire -0.2

Source: Henderson Global Investors, as at 31 August 2014

34

Holding period – turnover

Portfolio age profile


The chart shows the portfolio activity and the holding period of current positions


4.0 4.0

12.0 12.0 12.0

8.6 7.1

40.4

0

5

10

15

20

25

30

35

40

45

0-3 months 3-6 months 6-12 months 12-18 months 18-24 months 24-30 months 30-36 months >36 months

%

% of Fund

35

Biographies

Tim Stevenson

Fund manager European Equities

Career:

1991 Director, European Equities

1986 Henderson Global Investors

Fund Manager, Europe, with responsibility for

overseas clients

1984 Aetna Montagu Asset Management Limited

Responsible for European Investments for ERISA

clients and MIM Pension Funds

1983 Savory Milln

European Analyst

Education: Christian Albrechts Universitat zu Kiel

Sussex University,

BA (Hons) Economics and European Studies

36

Henderson Global Investors

201 Bishopsgate, London EC2M 3AE

Tel: 020 7818 1818 Fax: 020 7818 1819

Important information

This document is intended solely for the use of professionals, defined as Eligible Counterparties or Professional Clients, and is not for general public distribution.

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. Ref: 34S

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