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Section 1: 425 (425)

 

Filed by Henderson Group plc

This communication is filed pursuant to Rule 425 under the United States Securities Act of 1933

Subject Company: Janus Capital Group Inc.

Commission File Number: 001-15253

Date: March 2, 2017

 

ANNUAL REPORT 2016 EXPANDING OUR GLOBAL REACH

 


Expanding our global reach Henderson is an independent asset manager, specialising in active management. Our strategy is focused on achieving growth and globalisation by delivering excellent performance and service to an increasingly diverse client base across a widening global footprint. 2016 has been a momentous year for Henderson, with the announcement in October of our recommended merger of equals with Janus Capital Group.

 


1 Performance highlights As we move into the second half of our ÞYH \HDU JURZWK DQG JOREDOLVDWLRQ VWUDWHJ\ Henderson is a fundamentally stronger EXVLQHVV ,Q 2016 WKH FKDOOHQJLQJ PDFUR HQYLURQPHQW VDZ QHW RXWßRZV RI FOLHQW money and softer investment performance, and demonstrated the importance for RXU EXVLQHVV RI FRQWLQXLQJ GLYHUVLÞFDWLRQ This report and additional information about the Group can be found online at henderson.com/ir. 3DJHV 1 WR 47 RI WKLV UHSRUW FRQVWLWXWH the Strategic Report which has been signed on behalf of the Board. Richard Gillingwater Chairman Andrew Formica Chief Executive 4 Chairman’s statement 11 11 77 54 Governance structure 101.0 17.2 from continuing operations (excludes SURÞW DIWHU WD[ DWWULEXWDEOH WR HTXLW\ KROGHUV Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Notes 1. As a percentage of opening AUM TH Real Estate). 2. Assets under management from continuing operations. 3. Calculation based on continuing underlying of the parent. Dividend per share 10.5p 12 10.3 10.5 0 2012 2013 2014 2015 2016 9.00 8.00 7.15 6 Diluted earnings per share3 15.2p 20 0 2012 2013 2014 2015 2016 14.7 15.2 13.0 10.3 10 Assets under management (AUM)2 £101.0bn 0 2012 2013 2014 2015 2016 100 92.0 81.2 63.7 53.9 50 Strategic report 2 Group at a glance 8 Chief Executive’s review 12 Janus Henderson 14 Henderson’s strategy 16 Our people and culture 20 Our business model 24 Core investment management capabilities 32 Client relationships and brand 36 Financial review 40 Key performance indicators 42 Risk management Corporate Governance 49 Chairman’s introduction 50 Board of directors and leadership 56 Effectiveness 57 Committee reports 66 Relations with shareholders 67 Directors’ remuneration report 85 Compliance statements and application of principles and recommendations 89 Directors’ report 91 Directors’ responsibilities statement 92 Independent auditors’ report Financial statements 99 * URXS DQG &RPSDQ\ ÞQDQFLDO VWDWHPHQWV Other information 142 Glossary 144 Shareholder information 146 Summary of movements in AUM 147 ) LYH \HDU ÞQDQFLDO VXPPDU\ (XQDXGLWHG) 148 Contact information Net new money growth1 (4%) 15 -15 2012 2013 2014 2015 2016 6 -8 0 -4 Investment outperformance 77% of funds over three years 100 81 83 81 0 2012 2013 2014 2015 2016 69 50

 


2 STR ATEGIC REPORT Group at a glance Henderson is an independent asset manager, specialising in active management. We serve a global client base, offering our clients access to all major markets around the world. Our mission To be a trusted global asset manager, focused on delivering excellent performance and service to our clients. Our philosophy Active fund management, with our clients’ needs at the heart of everything we do. Our guiding principles The success of our strategy begins with the way in which our people operate. Collaboration We work together and share knowledge VR WKDW RXU FOLHQWV EHQHÞW IURP WKH FRPELQHG force of the whole company. Conviction We demand passion, belief and energy from our people. We have no house style to constrain the expertise of our investment professionals. Responsibility We know that performance, service DQG WUXVW DOO ßRZ IURP WDNLQJ SHUVRQDO and collective responsibility, always in the service of our clients’ needs. For more information go to page 20 Total assets under management (AUM) £101.0bn 2015: £92.0bn European Equities £19.7bn Fund range encompasses value and growth, long only and long/short strategies and a range of market capitalisation specialisms. Global Equities €34 0EQ Generalist global equity capability alongside more specialist funds, such as equity income, technology, growth, emerging markets and property equity offerings. Global Fixed Income £281. bn &RYHUDJH DFURVV Þ[HG LQFRPH DVVHW FODVVHV, including government debt, secured assets, corporate debt and derivative instruments, using dynamic asset allocation and multiple investment techniques. Multi-Asset £5.1bn A team approach with the relationship between risk and reward at the heart of the process. We manage portfolios suiting a range of risk appetites and incorporating third party funds and investment vehicles as well as direct holdings. Alternatives €141EQ Broad range of offerings managed by standalone teams, including absolute return, European equity long/short equities, global commodities and hedge funds. 1 year 3 years European Equities 26% 86% Global Equities 34% 70% Global Fixed Income 80% 76% Multi-Asset 48% 42% Alternatives 62% 99% Total 50% 77% Note: Percentage of funds, asset-weighted, that are outperforming based on the relevant metric: peer percentile ranking for Retail, positive for Absolute 5HWXUQ SRVLWLYH YHUVXV EHQFKPDUN IRU ,QVWLWXWLRQDO An award-winning brand proposition Knowledge. Shared, our award winning brand proposition, provides investment insight, thought leadership and transparency WR RXU FOLHQWV LQ D WLPHO\ DQG FRVW-HIÞFLHQW ZD\ Strong client relationships 2XU FOLHQWV DUH ÞQDQFLDO SURIHVVLRQDOV, SULYDWH DQG LQVWLWXWLRQDO investors. We focus on excellent client service and on establishing long-term client relationships based on trust. For more information go to pages 34 and 35 For more information go to page 32 Note: All data as at 31 December 2016, unless stated otherwise. 1 2WKHU LQFOXGHV 5HWDLO 8QLW 7UXVWV ,QYHVWPHQW 7UXVWV $XVWUDOLDQ 0DQDJHG ,QYHVWPHQW 6FKHPHV DQG 6LQJDSRUH 0XWXDO IXQGV Henderson Group plc Annual Report 2016 Investment performance by core capability Delivered across four key product ranges Institutional UK Retail OEICs & Other1 Retail SICAVs Retail US Mutuals

 


3 Investment case Continued investment outperformance 77% of funds outperformed over three years Strong net new money growth 7RWDO QHW IXQG LQßRZV of £11.7bn since start RI ÞYH \HDU VWUDWHJ\ For more information go to page 14 Clear strategy for growth On track to meet our 2018 AUM growth output 'LYHUVLÞHG EXVLQHVV PRGHO ,QFUHDVLQJO\ GLYHUVLÞHG by client type, investment strategy, product and geographic distribution Sustainable returns for shareholders 15.2p diluted earnings per VKDUH RQ XQGHUO\LQJ SURÞW 2XU FOLHQWV DUH ÞQDQFLDO SURIHVVLRQDOV, private and institutional investors. :H KDYH ÞYH FRUH LQYHVWPHQW FDSDELOLWLHV: European Equities, Global Equities, Global Fixed Income, Multi-Asset and Alternatives. We have four key product ranges: UK Retail, Retail SICAVs, Retail US Mutuals and Institutional. Total Retail 59.4 European Equities 19.7 Multi-Asset Alternatives 5.1 14.1 8. 5HWDLO 2(,&V & Other1 5HWDLO 6,&$9V Retail US Mutuals 9.0 ,QVWLWXWLRQDO41.6 30.7 19.7 7RWDO ,QVWLWXWLRQDO 41.6 Global Equities Global Fixed ,QFRPH 34.0 28.1 Broad geographic distribution Strong distribution platforms in the UK and Europe, with high growth in recent years in the US and Australia, and evolving business in Asia and Latin America. UK Europe, Middle East and Africa Total AUM: £51.7bn 190 investment professionals 164 distribution experts Total AUM: £22.1bn 32 distribution experts Strong Retail and Institutional client base. Award-winning Investment Trust business. Opportunities to selectively expand our Institutional presence and to continue to build on strong relationships with global distributors. For more information go to page 32 North America Asia Australia Total AUM: £14.5bn 28 investment professionals 40 distribution experts Total AUM: £1.7bn 21 investment professionals 24 distribution experts Total AUM: £10.9bn 19 investment professionals 17 distribution experts Established Retail network; Institutional presence strengthening. Business continued to evolve in 2016, EHQHÞWLQJ IURP UHFRJQLVHG VWUHQJWK LQ FRUH investment capabilities. Growth accelerated following three acquisitions in 2015. Strong brand awareness and Institutional growth momentum. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION AUM by product (£bn) AUM by core capability (£bn) AUM by client type (£bn)

 


4 STR ATEGIC REPORT Chairman’s statement This has been a momentous year for +HQGHUVRQ ,Q 2FWREHU 2016 ZH announced our recommended merger with Janus Capital Group – the beginning of the next stage on our 80 year journey to deliver value to our clients and shareholders. A transformational merger The Board thought carefully and diligently about the merits of a transformational merger for Henderson’s clients and shareholders, and VSHFLÞFDOO\ RXU UHFRPPHQGDWLRQ WR OLVW -DQXV Henderson Group on the New York and Australian stock exchanges, not London. At our strategy day in October 2015, we UHßHFWHG RQ WKH WLPH LW ZRXOG WDNH WR become a truly global asset manager, and asked the executive team to devote more time and energy to exploring options for a transformational solution. We undertook a thorough process, looking primarily at North American companies, until it became apparent that there was an opportunity to create a compelling merger of equals EHWZHHQ -DQXV DQG +HQGHUVRQ ,W LV D PHUJHU which your Board unanimously recommends. Cultural alignment Corporate actions in people businesses stand or fall on people-related issues. 6SHFLÞFDOO\ LQ WKH FDVH RI -DQXV +HQGHUVRQ it is critical to the success of the proposed merger that our investment teams buy into its value, that integration is handled smoothly, that our people are treated fairly and – most importantly – that we deliver minimum GLVUXSWLRQ DQG PD[LPXP EHQHÞW WR RXU FOLHQWV Dividend Pioneering history +HQGHUVRQ ZDV IRXQGHG LQ 1934 DQG QDPHG DIWHU RXU ÞUVW FOLHQW $OH[DQGHU +HQGHUVRQ made his fortune through investments in LQIUDVWUXFWXUH SURMHFWV DV IDU DÞHOG DV 6RXWK America, Spain and East Africa, and was one of the early pioneers of global investing. Evidence of his pioneering spirit remains ZLWKLQ WKH ÞUP WR WKLV GD\ :KHQ ZH IRXQGHG our US business over 15 years ago, there was D GHÞQLWH SLRQHHULQJ ßDYRXU WR RXU HQWHUSULVH Through sound strategy, dedication and constant client focus, our team in the US grew our AUM to £15bn at the end of 2016. They have been extraordinarily successful, DQG , ZDQW WR UHFRUG P\ WKDQNV WR DOO RI WKHP Now is the moment for a step change. Janus Capital Group (Janus) had AUM of US$151bn in the US at the end of 2016 – eight times the size of Henderson in the US. The proposed cross-border merger of equals between Henderson and Janus will create a compelling new global, independent, active investment manager, with pro-forma AUM of US$322bn, which matches the industry distribution of FOLHQW DVVHWV DQG VLJQLÞFDQWO\ DFFHOHUDWHV our progress in a fast-changing world. 10.5p 2015:10.3p Henderson Group plc Annual Report 2016 “Now is the moment for a step change. The cross-border merger of equals between Henderson and Janus will create a compelling new global brand of an independent, active investment manager.” Richard Gillingwater Chairman

 


5 With attention focused on our merger with Janus, it would be easy to overlook Henderson’s continuing achievement as a standalone business.” Richard Gillingwater Chairman The Boards of both companies were of the view that the continuing presence of the CEOs of both companies is essential to this process, so we are delighted that Andrew Formica and Dick Weil agreed to work together as co-CEOs, should the merger be approved by shareholders at an Extraordinary General Meeting. The excellent chemistry between Andrew and Dick mirrors a strong VHQVH RI FXOWXUDO ÞW DQG VKDUHG PLVVLRQ across our two organisations. This creates the strongest possible backdrop against which to execute a complex transaction. The Board and senior management of Janus Henderson will have a vital role to play in shaping and embedding a healthy corporate culture in the new organisation. The introduction of the FCA’s Senior Managers DQG &HUWLÞFDWLRQ 5HJLPH (60&5) LQ 2018 will help us focus on setting the values and standards of behaviour expected, and will EH LPSRUWDQW LQ LQßXHQFLQJ DQG HVWDEOLVKLQJ strong links between governance and a culture that supports long-term success. Continuing our journey With attention focused on our merger with Janus, it would be easy to overlook Henderson’s resilience as a standalone business. This annual report – which we expect to be our last as Henderson Group plc – comments on the turbulent year we have experienced from a political perspective in the UK, Europe, and the US, but also seeks to celebrate the fundamental strength of our business, which has positioned us well for the next stage of our journey. We cover the proposed merger with Janus in the opening sections, then focus in the rest of the report on the key events of this year from a Henderson perspective. This has been a volatile year for markets, politics and our business. Among the highlights from the Board’s perspective are our engagement with our clients to navigate political turmoil, our work with our regulators to enhance our product governance disciplines and product control procedures, and our continued disciplined approach to the deployment of capital. 7KLV \HDUpV ÞQDQFLDO UHVXOWV UHßHFW careful stewardship of our business in FKDOOHQJLQJ WLPHV 8QGHUO\LQJ SURÞW before tax of £212.7m (2015: £220.0m) UHßHFWV UHFRUG PDQDJHPHQW IHHV EXW lower performance fees, in light of softer investment performance. Our assets under management reached a record £101.0bn thanks to positive markets and FX PRYHPHQWV EXW ZH VDZ QHW RXWßRZV of client money in our Retail business. Against this backdrop, the Board is UHFRPPHQGLQJ D ÞQDO GLYLGHQG IRU 2016 of 7.30 pence per share, bringing the total dividend for the year to 10.5 pence per share, a 2% increase over 2015 in sterling terms. Henderson operates a progressive dividend policy, an approach we intend to carry forward into Janus Henderson. ,Q FRQFOXGLQJ , ZRXOG OLNH WR WKDQN P\ IHOORZ Board members for the thought, care and diligence with which they have discharged their stewardship duties. We have had a series of special meetings this year to consider the merger, and the engagement of the Board has always been high. , DOVR ZDQW WR WKDQN DOO P\ FROOHDJXHV at Henderson for the positive way in which they have embraced the proposed merger with Janus, and the whole executive team at Henderson for the huge amount of work they have undertaken to create the Janus +HQGHUVRQ PHUJHU , ORRN IRUZDUG WR ZRUNLQJ with the combined forces of Janus and Henderson in the coming years, to continue to deliver exceptional value to our clients and shareholders. Richard Gillingwater Chairman Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 2XU ÞYH Annual Report corporate section responsibility pillars • Responsible• Core investment investment management capabilities Page 24 • Clients• Client relationships Page 32 • People • People Page 16 • Community • Environment • Directors’ report Page 89 Corporate responsibility Henderson is committed to acting responsibly, not only in the way we invest and engage with our clients, but also in supporting our people, managing our impact on the environment and contributing to the communities in which we work. Our corporate responsibility (CR) achievements have been recognised by our inclusion in the Dow Jones 6XVWDLQDELOLW\ :RUOG ,QGH[ DQG LQ UHFHLYLQJ WKH o,QGXVWU\ 0RYHU 'LVWLQFWLRQp IRU excellent performance in The Sustainability Yearbook, the world’s most comprehensive publication on corporate sustainability. 2XU ÞYH FRUSRUDWH UHVSRQVLELOLW\ SLOODUV are fully integrated into our business, and feature in the following sections of this year’s report.

 


6 STR ATEGIC REPORT Regional focus: 8. t D ZHOO-GLYHUVLÞHG EXVLQHVV with a strong reputation Based on well-regarded client service, sustained investment performance and a diverse offering of products and solutions. Total AUM managed for UK based clients £51.7bn BUILDING ON SOLID FOUNDATIONS

 


7 Top three Retail funds Henderson UK Property PAIF £3.2bn Henderson Cautious Managed £2.2bn Henderson European Selected Opportunities £2.1bn Knowledge. Shared In the aftermath of the UK vote to leave the European Union, we focused on pro-active engagement with clients to inform them about our read on the situation. Page views on our Brexit materials were eight times higher than for a regular piece of monthly commentary. Regulatory environment Regulatory focus on the asset management industry, from both UK and EU authorities, is increasing the cost of doing business and highlighting the importance of having the necessary scale and expertise to respond appropriately. Global perspective 2XU /RQGRQ RIÞFH is on the very edge of the City of London, overlooking the up-and-coming areas RI 6SLWDOÞHOGV DQG Shoreditch, with views out as far as Canary Wharf. For more information on our global client relationships, see page 32 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


8 STR ATEGIC REPORT Chief 2016 ZDV D VLJQLÞFDQW \HDU IRU ZRUOG HFRQRPLHV and the political order, which also marked a major step in the history of Henderson. Executive’s review Funds outperforming over 3 years 77% 2015: 81% 2016 ZDV GHÞQHG E\ DQ XQSUHFHGHQWHG rise in anti-establishment populism which reasserted itself on the political scene and in turn on markets. As an independent, active fund manager, we do not pretend to be able to predict these seismic shifts in global markets. When they occur, our role is to support our clients by living and breathing our Knowledge. Shared brand promise, and by protecting our clients’ investments to the best of our ability. Deep and trusting relationships, as well as investment performance, differentiate what we do. The UK’s referendum vote to leave the European Union (EU) in June 2016 came as D VKRFN WR PRVW SDUWLFLSDQWV LQ WKH ÞQDQFLDO VHUYLFHV LQGXVWU\ ,W ZLOO EH PDQ\ \HDUV EHIRUH the effects of this decision are truly apparent, but in the short term, the operational implications for Henderson are relatively contained. We will continue to serve our European Retail clients through our EU-based product range, managed from Luxembourg, and do not expect any immediate change in RXU UHODWLRQVKLS ZLWK RXU ,QVWLWXWLRQDO FOLHQWV 1 year1 3 years1 Note 1. Percentage of funds, asset-weighted, that are outperforming based on the relevant metric: peer percentile ranking for Retail, positive for absolute UHWXUQ SRVLWLYH YHUVXV EHQFKPDUN IRU ,QVWLWXWLRQDO Henderson Group plc Annual Report 2016 European Equities26%86% Global Equities34%70% Global Fixed Income 80%76% Multi-Asset48%42% Alternatives62%99% Total 50%77% Investment outperformance “Our role is to support our clients by living and breathing our Knowledge. Shared brand promise, and by protecting our clients’ investments to the best of our ability. Deep and trusting relationships, as well as investment performance, differentiate what we do.” Andrew Formica Chief Executive

 


 

9 Assets under management £101.0bn 2015: £92.0bn (1,359) Market conditions proved challenging for our investment management teams this year. On a three year basis, 77% of our assets outperformed, demonstrating that we continue to deliver exceptional long-term track records for our clients. On a one year basis, performance was not as good, with 50% of assets outperforming. One year performance was weakest in our European Equities and Global Equities capabilities. At the beginning of 2016, some of our biggest European funds saw a period of poor investment performance as concerns over China and a rally in the energy sector KHDYLO\ LPSDFWHG PDUNHWV ,Q *OREDO (TXLWLHV, performance in many of our funds suffered throughout the year because of their lack of exposure to the US and the US dollar. ,Q ERWK DUHDV KRZHYHU, ZH KDYH D ZLGH UDQJH of investment teams with independent investment styles and theses, which means that even in tough market conditions we continue to have interesting investment ideas to discuss with our clients. Whether our performance is good or poor, we always make sure that our clients have frequent access to our managers, both in person and digitally, to make sure that they remain well informed. Strong client relationships can help mitigate the effects of poor short-term investment performance. Assets under management reached a record £101.0bn, driven by positive markets and FX movements. ,Q WHUPV RI FOLHQW GHPDQG, ZH H[SHULHQFHG RXWßRZV IURP RXU 5HWDLO FOLHQW EDVH WKLV \HDU mainly as a result of a global pull-back from exposure to European assets. This was in sharp contrast to last year, where our well-regarded European capabilities saw us deliver industry-leading growth and market share gains. Whilst disappointing, we see this as a result of the current environment rather than a longer-term trend. )ORZV IURP ,QVWLWXWLRQDO FOLHQWV LPSURYHG VLJQLÞFDQWO\ LQ WKH FRXUVH RI 2016 DV WKH investments we have been making in ,QVWLWXWLRQDO VWUDWHJLHV VWDUWHG WR EHDU IUXLW The most successful new team this year was the Emerging Markets Equity team, but we DOVR VDZ ßRZV LQWR WHFKQRORJ\, Þ[HG LQFRPH, property securities and absolute return strategies. We are seeing increased JHRJUDSKLF GLYHUVLW\ LQ RXU ,QVWLWXWLRQDO business, notably in the US and Australia, helped by the acquisition of Geneva Capital 0DQDJHPHQW LQ WKH 86 LQ 2014 DQG WKH Perennial funds in Australia in 2015. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 'HOLYHU ÞUVW-FODVV LQYHVWPHQW performance and service to our clients Expand our global investment offering to meet the current and future needs of our clients Diversify our business 2SHUDWH HIÞFLHQWO\ Our strategy Our strategy focuses on achieving growth and globalisation, by focusing on four key priorities. For more information go to page 14 1HW FOLHQW PRQH\ ßRZV (£bn) 4,0003,554 -2,000 -3,0001Q14 2Q14 3Q14 4Q14 1415}}} 2Q15 3Q15 4Q15 1416}}} 2Q16 3Q16 4Q16 ,QVWLWXWLRQDO Retail 2,988 3,000 2,042 2,0401,643 1,366 2,000 1,305 742 1,000 -1,000(679) (612) (1,359)

 


10 STR ATEGIC REPORT Chief Executive’s review continued Net new money growth: 36 months to December 2016 5% pa Growth and Globalisation – mid-point review June 2016 marked the mid-point in our ÞYH \HDU JURZWK DQG JOREDOLVDWLRQ SODQ By continuing to deliver strong investment performance and service to our clients, and by investing in our business, we aimed to double our AUM by 2018. By December 2016, our AUM stood at £101.0bn, an increase of 59% since the start of our strategy. At 5%, organic growth in net new client money in the period was ahead of the industry. We have FUHDWHG D VWURQJHU DQG EHWWHU GLYHUVLÞHG EXVLQHVV, ZLWK VLJQLÞFDQWO\ LPSURYHG SRWHQWLDO for future growth. A sea change – merger with Janus Capital Group 2016 marks a sea change for Henderson. ,Q D IDVW-FKDQJLQJ, XQSUHGLFWDEOH PDUNHWSODFH, every asset manager is seeking to remain relevant to their clients, and to adapt to constant structural changes and challenges in our industry. To do so, we need to provide broader investment expertise, greater choice of investment offering, and exemplary client service, delivered as and when our clients H[SHFW LW ,Q WHUPV RI LQGXVWU\ HYROXWLRQ, WKLV year has illustrated the scale of the challenge facing active investment managers. Trends LQFOXGH HYHU-LQFUHDVLQJ ßRZV RI FOLHQW money into passive funds, radical advances in technology which could revolutionise the way asset managers do business, and major regulatory initiatives in Europe and the US PDNLQJ IXUWKHU FDOOV RQ WKH ÞQDQFLDO DQG RSHUDWLRQDO UHVRXUFHV RI HYHU\ ÞUP The regulatory landscape in which we operate continues to evolve. Competition, conduct and capital remain central to reform and the regulators are continuing to undertake reviews into products and markets. 7KH SUHOLPLQDU\ ÞQGLQJV RI WKH )&$pV UHFHQW market study on the asset management sector centre around ensuring that investment products offer consumers value for money. During 2017 and looking ahead to 2018, our governance framework will transform, recognising both the proposed merger and the implementation of the FCA’s Senior 0DQDJHUV DQG &HUWLÞFDWLRQ 5HJLPH ,W LV DJDLQVW WKLV EDFNGURS WKDW WKH WHDPV at Henderson and Janus announced our intention to merge our businesses. Both businesses start from a position of strength. vs active transparency Client Henderson Group plc Annual Report 2016 Structural drivers in asset management industry Quest forPassive income and investment absolutemanagement return Squeezed middle ground Value forClients Competition between scale moneyplayers and Asset boutiques management industry DisruptiveCapital innovationTechnology Regulation requirements Cyber security interests Fee Growth and globalisation – three year progress review against our strategy £101.0bn AUMNet newMarket/FXAcquisitions AUM FY131 moneyFY16 1 ([FOXGHV $80 VXEMHFW WR 3URSHUW\ WUDQVDFWLRQV ZLWK 7,$$-&5() DQG UHVXOWDQW 7+ 5HDO (VWDWH -9 $80 EXW LQFOXGHV +HQGHUVRQ 8. 3URSHUW\ IXQG 7DUJHW: 2t4% SD 3 years to Dec 2016: £63.7bn 7DUJHW: 4t6% SD 3% pa 3 years to Dec 2016: 9% pa Target: 6–8% pa 3 years to Dec 2016: 5% pa

 


11 Together, we will create a Top 50 global asset manager which will manage over US$322bn on behalf of our clients.” Andrew Formica Chief Executive Henderson, through our Growth and Globalisation strategy, and Janus, through WKHLU ,QWHOOLJHQW 'LYHUVLÞFDWLRQ VWUDWHJ\, have invested substantially in expertise and infrastructure in recent years to create global active investment management franchises, capable of delivering substantial value to clients. Together, we will create a Top 50 global asset manager which will manage over US$322bn on behalf of our clients. The two businesses are deeply complementary in terms of investment management capabilities and distribution reach, and will be able to GHOLYHU WKH GLYHUVLÞFDWLRQ DQG HFRQRPLHV of scale necessary to succeed in global markets. Ours is a merger that creates VLJQLÞFDQW EHQHÞWV IRU RXU FOLHQWV, LQFUHDVHV opportunities for our staff, and provides demonstrable value for shareholders – in the short-term through cost synergies but much PRUH VLJQLÞFDQWO\, WKURXJK HQKDQFHG JURZWK SURVSHFWV LQ WKH ORQJHU WHUP ,W LV D WUXO\ transformative step for both companies. , DP ORRNLQJ IRUZDUG WR P\ QHZ UROH LQ -DQXV +HQGHUVRQ ,QYHVWRUV, DV FR-&(2 ZLWK Dick Weil, the current CEO of Janus. Dick and , KDYH D VKDUHG YLVLRQ IRU -DQXV +HQGHUVRQ, based on relentless client focus, superior risk-adjusted investment returns across a broad range of investment styles, supported by best-in-class client service, the nurturing of employee talent and embedding a deeply collaborative culture. Much work lies ahead of us, but we are excited to be taking this step IRUZDUG WRJHWKHU, WR FUHDWH EHQHÞWV IRU RXU clients, opportunities for our employees and value for our shareholders. , ZDQW WR ÞQLVK E\ SD\LQJ WULEXWH WR DOO P\ colleagues at Henderson for their hard work RYHU WKH SDVW \HDU ,W LV D SULYLOHJH WR OHDG such a talented team on the next stage of Henderson’s journey. Andrew Formica &KLHI ([HFXWLYH 2IÞFHU Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Transaction overview Company • 8. &ODVV 1 &LUFXODU DQG 6(& )4 to be published late March • EGM targeted for 26 April 2017 Key dates • Merger close expected in late May 2017, subject to shareholder and regulatory approvals • 6LJQLÞFDQW HPSOR\HH SUHVHQFH DQG executive roles in London and Denver, with co-CEOs located in London Location and domicile • Tax resident in the UK; registered in Jersey • F 57% +HQGHUVRQ DQG F 43% -DQXV • 7KH 'DL-LFKL /LIH ,QVXUDQFH &RPSDQ\, Pro-forma Janus’ largest shareholder, intends to ownership further invest in the combined company to increase its ownership interest to at least 15% • Recommended 100% stock merger • ([FKDQJH RI 4 7190 VKDUHV RI Merger ofHenderson for every Janus share equals • Combined market capitalisation of c.US$6bn • Combined entity to be known as Janus Henderson Group plc, listed on the US’s NYSE and Australia’s ASX structure and • Board of Directors to be comprised management of equal members of Janus and Henderson Directors

 


12 STR ATEGIC REPORT Janus Henderson Accelerating our growth potential *HRJUDSKLF GLYHUVLÞFDWLRQ (as at 31 December 2016, US$bn) Highly complementary businesses global client base 151 21 Americas (% of AUM) Americas UK and Continental Europe Pan Asia Henderson Group plc Annual Report 2016 100 12 18 16 14 71 30 33 77 54 53 17 0 HendersonJanus GroupCapital2 Janus Henderson2 Industry1 *HRJUDSKLF FOLHQW SURÞOH EHWWHU PDWFKHG WR LQGXVWU\ Compelling value creation At least US$110m annual net cost synergies Double digit accretion to both companies’ EPS (excluding RQH-RII FRVWV) LQ WKH ÞUVW 12 months following completion Ambition to deliver 2–3 percentage points of additional net new money growth following integration Well positioned for market evolution ,PSURYHG HFRQRPLHV of scale to combat rising cost of doing business Regulatory change and strengthened governance arrangements more easily adopted Robust balance sheet FUHDWHV ÞQDQFLDO VWDELOLW\ DQG ßH[LELOLW\ Total AUM $172bn Post-merger growth opportunity • 6LJQLÞFDQWO\ EURDGHU distribution of Henderson products Americas Relevant to future client needs Compelling products and solutions for an increasingly Ability to innovate on behalf of clients Continued demand for high performance, active investment management Client-centric collaborative cultures Well matched investment capabilities, focused on active management Complementary geographic footprints A compelling merger of equals

 


13 nental $98bn 3 6 24 UK Continental Eur pe 12 13 17 1 7 2 Japan Australia Pan Asia (ex. Japan and Australia) Map key Henderson Group Janus Capital Notes • Exchange rate used for translation from GBP to USD as at 31 'HFHPEHU 2016: 1 24 • Numbers may not cast due to rounding. 1 6RXUFH: 0F.LQVH\ *OREDO 6XUYH\ 2014 7 0 US Equities Mathematical Equities Global Equities Global Fixed Income Multi-Asset Alternatives 2 ,QFOXGHV 86$2EQ RI (73 DVVHWV, for which Janus is not the named advisor or sub-advisor and therefore does not earn a management fee on those assets. Henderson Group Janus Capital2 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 80 5 62 35 70 60 47 39 40 18 17 20 19 A compelling range of investment solutions (as at 31 December 2016, US$bn) Total AUM $52bn Post-merger growth opportunities • Develop Janus relationship with Dai-ichi in Japan • Develop our position as a Top 10 manager in Australia Pan Asia 64 Post-merger growth opportunities • Targeted marketing of Janus investment capabilities to Henderson’s regional client base • %URDGHU ,QVWLWXWLRQDO distribution reach UK an Conti Europ d e Total AU M “Janus and Henderson are both strong individually, and together will be even stronger.” Dick Weil Chief Executive, Janus Capital Group “We look forward to creating EHQHÞWV IRU RXU FOLHQWV, value for our shareholders and opportunities for our employees.” Andrew Formica Chief Executive, Henderson Group

 


14 STR ATEGIC REPORT Henderson’s strategy Our strategy focuses on achieving growth and globalisation by delivering excellent performance and service to an increasingly diverse client base. performance and service to our clients Our strategy is focused on the needs of our clients, delivering consistent value to them through active investment management and serving them responsibly, wherever they are in the world. • Treating customers fairly • ,QYHVWPHQW SHUIRUPDQFH* • ,QYHVWPHQW SHUIRUPDQFH • Market • Liquidity For more information, see pages 40 and 41 For more information, see pages 46 and 47 offering to meet the current and future needs of our clients :H GHSOR\ RXU H[SHUWLVH DFURVV RXU FRUH FDSDELOLWLHV WR ÞQG DWWUDFWLYH DQG LQQRYDWLYH opportunities for our clients, and provide products which consistently meet their current and future needs. • ,QYHVWPHQW SHUIRUPDQFH* • 1HW IXQG ßRZV* • )XQG ßRZV • Key personnel For more information, see pages 40 and 41 For more information, see pages 46 and 47 * 'HQRWHV D 6KRUW-7HUP ,QFHQWLYH 5HPXQHUDWLRQ .3, t VHH SDJH 71 Henderson Group plc Annual Report 2016 Principal risks Key performance indicators Strategic priority Expand our global investment How we performed in 2016 • Strong performance in new funds across HTXLWLHV, Þ[HG LQFRPH DQG DOWHUQDWLYHV • £1.1bn of net new money in Global Emerging Markets. • Continued to work closely with clients to develop new products e.g. a new Short Duration Bond strategy to meet the 6ROYHQF\ ,,-UHODWHG QHHGV RI D ODUJH 8. client, and a new investment strategy GHVLJQHG WR KHOS FDVK ßRZ QHJDWLYH pension schemes. Principal risks Key performance indicators Strategic priority 'HOLYHU ÞUVW-FODVV LQYHVWPHQW How we performed in 2016 • ,QYHVWPHQW SHUIRUPDQFH UHPDLQHG consistently strong, with 77% of funds outperforming on a three year basis. • On a one year basis, performance softened, with 50% of funds outperforming. • Continued embedding the fair treatment RI FXVWRPHUV LQWR WKH ÞUPpV EXVLQHVV model, including: – 0DQGDWRU\ &XVWRPHU ,QWHUHVWV employee training, designed for a global audience – Continuing the annual staff survey RI &XVWRPHU ,QWHUHVWV– – Escalation of customer issues to senior management by Customer Champions in Europe, US and Asia. 1. The survey captures global staff attitudes to customer-centric topics.

 


15 ,Q HDUO\ 2014, ZH DUWLFXODWHG D ÞYH \HDU SODQ to deliver a sustained period of organic growth, attracting net new money from clients at a higher rate than our industry peers. We said that we would supplement this organic growth with value accretive acquisitions. Assuming market growth in line with the long-term industry average, the output of this plan is expected to double our assets under management by the end of 2018. After three years of the plan, at 31 December 2016 assets under management had risen by 59% to £101.0bn. We have ambitious plans for growth and are expanding our investment management and distribution reach to deliver value to a broader client base. • 1HW IXQG ßRZV* • Fee margins • Acquisitions and divestments • Strategic For more information, see pages 40 and 41 For more information, see page 47 Our operating model is designed to meet client needs, attract and retain excellent people DQG GHOLYHU SURÞWDEOH JURZWK $V RXU EXVLQHVV JURZV, ZH DLP WR EXLOG RSHUDWLQJ OHYHUDJH and capital strength. • 1HW IXQG ßRZV* • Fee margins • Operating margin and compensation UDWLR* • Earnings per share • 2SHUDWLRQDO, ,7 DQG OHJDO • Regulatory change For more information, see pages 40 and 41 For more information, see page 47 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Principal risks Key performance indicators Strategic priority 2SHUDWH HIÞFLHQWO\ How we performed in 2016 • Continued investment in regulatory expertise to manage constant change. • Leveraged investments made in prior years. • Disciplined management of ÞQDQFLDO UHVRXUFHV Principal risks Key performance indicators Strategic priority Diversify our business How we performed in 2016 • c.50% of assets under management now managed for clients outside the UK (FY13: 33%). • Strong investment performance DQG SRVLWLYH ßRZV IURP DFTXLVLWLRQV in Australia. • ,QVWLWXWLRQDO EXVLQHVV FRQWLQXHG WR VHH VWHDG\ JURZWK, UHßHFWLQJ FRQWLQXHG success in our core UK business and increasingly global client base, with mandates awarded across a diverse range of products. 7KH RXWSXW RI RXU ÞYH \HDU VWUDWHJ\ To double assets under management between 2013 and 2018 (assuming market growth in line with the long-term industry average): AUM doubled 3% per annum Acquisitions: £63.7bn 2t4% SHU DQQXP 3 years to Dec 2016: 0DUNHW/);: 4t6% per annum 3 years to Dec 2016: 9% per annum Net new money: 6–8% per annum 3 years to Dec 2016: 5% per annum

 


16 STR ATEGIC REPORT Our people and culture Our people are undoubtedly central to Henderson and the reason we have made VXFK VLJQLÞFDQW SURJUHVV DJDLQVW RXU JURZWK and globalisation strategy. Employees who have worked for Henderson for 10 years or more 24% Over the past three years, our People Strategy has focused on supporting the business to deliver excellent performance and service to our clients as we continue to diversify, grow and globalise. ,Q 2016, ZH H[SHULHQFHG D SDUWLFXODUO\ YRODWLOH operating environment, caused by external factors such as Brexit, market volatility and challenging fund performance. During this period we have focused on supporting our employees to enable them to remain effective in turbulent times by extending our wellbeing, learning and development, reward and community initiatives. ,Q 2015 ZH DFTXLUHG WKH 3HUHQQLDO )L[HG ,QWHUHVW, 3HUHQQLDO *URZWK 0DQDJHPHQW DQG the 90 West businesses. During 2016 these teams have been successfully integrated into our Australian operations and strengthened our presence in Australia. This extension of our regional talent structure, combined with the collaboration and expertise of our global teams, has supported our progress towards IXOÞOOLQJ RXU JOREDO DPELWLRQV The Henderson culture Our culture is fundamental to our success and drives the outcomes that we achieve for our stakeholders, both internally and externally. The professional behaviours embodied by our employees are shaped and underpinned by our guiding principles of collaboration, commitment and responsibility, and have been instrumental in our ability to grow the business on a global scale. A key differentiator of Henderson in the marketplace is our philosophy of putting our clients at the heart of everything we do. This, together with our shared commitment to respect and collaboration, indicates a cultural alignment which we believe will contribute to the success of our proposed merger with Janus Capital. As testament to our people’s belief in our culture, our retention rates continue to be high. Our annual turnover is 10% and nearly a quarter of employees have worked for Henderson for 10 years or more, with 6 4 \HDUV RXU DYHUDJH OHQJWK RI VHUYLFH Henderson Group plc Annual Report 2016 “Our culture is fundamental to our success and drives the outcomes that we achieve for our stakeholders, both internally and externally.” Kathleen Reeves Global Head of Human Resources

 


17 2016 employee engagement score 86% 2015: 89% Employees saving for Henderson group shares monthly 84% Engaging our employees For the past three years we have run an employee survey through an external provider to gain feedback on Henderson, our culture and to measure engagement across the organisation. This is an important tool as LW DOORZV XV WR WUDFN WKH EHQHÞWV RI LQYHVWLQJ in our people and offers employees an opportunity to voice their opinions. The 2016 results were again well above industry benchmarks and continue to demonstrate high employee engagement. There was a slight dip in our engagement score, down three percentage points from 2015 (86% from 89%), however this was anticipated in light of the merger announcement and the challenging operating HQYLURQPHQW EXW VWLOO UHPDLQV VLJQLÞFDQWO\ higher than the industry average. Taking into account the results of the ‘pulse check’ in 2015, the focus for 2016 was to continue to build career and development opportunities and to increase collaboration between different parts of Henderson. We have seen positive improvements in both of these areas. Our employees’ commitment and responsibility to the company remains strong, ZLWK 94% RI HPSOR\HHV UHVSRQGLQJ SRVLWLYHO\ WR o, FDUH DERXW WKH IXWXUH RI +HQGHUVRQp Reward and recognition Recognising and rewarding the contribution of our people is an important lever in maintaining employees’ engagement and retention. 88% of employees indicated WKDW WKH\ YDOXHG WKH EHQHÞWV WKDW +HQGHUVRQ provides and 91% said they understood WKH EHQHÞWV DYDLODEOH Employee share ownership continues to be a popular component of our reward strategy. Employees hold 8.6% of the Group’s issued VKDUH FDSLWDO DQG 84% RI HPSOR\HHV contribute into our share schemes. This is supported and encouraged by global communications on our shareplan activities and demonstrates our employees’ faith and commitment to Henderson products. All employees 37% (388) 63% (651) ExCo 11% (1) 89% (8) Group Board 30% (3) 70% (7) Subsidiary Boards 17% (7) 83% (34) We continue to be recognised for our innovative and proactive approach to HPSOR\HH ÞQDQFLDO HGXFDWLRQ DQG ZRQ the following awards in 2016: • o%HVW ÞQDQFLDO HGXFDWLRQ LQLWLDWLYH IRU employees’ from ProShare • o%HVW ÞQDQFLDO HGXFDWLRQ RI HPSOR\HHVp from World Centre for Employee Ownership. We also operate a global recognition scheme which rewards employees who go the extra mile to help achieve Henderson’s strategic objectives and provide a role model for our guiding principles. The scheme is open to all staff throughout the year, with awards made on an individual or team basis. 100 employees have received an award since its inception LQ 2014 Building a diverse workforce Equal opportunities, diversity and inclusion are important to Henderson. We know that having a diverse and inclusive workplace will support our strategic vision of growth and globalisation, and aligns with the interests of our clients and shareholders. By employing individuals with a broad mix of skills, perspectives and experiences, we are better equipped to be a dynamic, innovative, and UHVSRQVLYH RUJDQLVDWLRQ UHßHFWLYH RI WKH diversity of our client base and the communities we operate in. 6LQFH LWV LQFHSWLRQ LQ 2014, WKH 'LYHUVLW\ DQG ,QFOXVLRQ )RUXP KDV IRFXVHG RQ PDNLQJ SURJUHVV LQ WKUHH PDLQ DUHDV: ßH[LEOH working, developing a global mind-set and gender diversity. To achieve these aspirations, we actively embed diversity and inclusion into our development programmes and require our core training providers to evidence their diversity and inclusion approach. We have also introduced lunchtime seminars covering diversity and inclusion-related topics, the ÞUVW RI ZKLFK IRFXVHG RQ KRZ OHVVRQV FDQ EH learned from sport in understanding diversity, and how treating everyone as individuals is central to the achievement of goals. :H UHODXQFKHG RXU ßH[LEOH ZRUNLQJ SROLF\ to include more information on informal ßH[LEOH ZRUNLQJ RSWLRQV DQG LQWURGXFHG ERWK maternity and paternity workshops to provide more support for expectant and new parents. Following the success of these initiatives, a parents’ network has been launched and initial feedback is very encouraging. We also successfully piloted a manager masterclass in Asia and the US to support managers in effectively navigating the challenges of working in a global organisation. This will be rolled out further during 2017. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION WomenMen Gender diversity

 


18 STR ATEGIC REPORT Our people and culture continued Employee participation in free mini health checks 20% A proactive approach has been taken to redressing the gender imbalance through our recruitment practices. Our principal recruitment agencies are required to demonstrate how they promote diversity and must provide balanced shortlists for HYHU\ UROH ,Q DGGLWLRQ, XQFRQVFLRXV ELDV testing and training has been introduced for those involved in our trainee and graduate selection processes. This will be rolled out further in 2017 to support our general recruitment practices. Women in Finance ,Q VXSSRUW RI RXU GLYHUVLW\ DQG LQFOXVLRQ agenda, Henderson signed the UK Government’s Women in Finance Charter, demonstrating our commitment to supporting the progression of women into senior roles ZLWKLQ ÞQDQFLDO VHUYLFHV DQG WR IDFLOLWDWH JUHDWHU GLYHUVLW\ LQ WKH ZRUNSODFH ,Q RUGHU to achieve this, Henderson has set the following targets: • ,QFUHDVH WKH RYHUDOO SURSRUWLRQ RI ZRPHQ IURP 37% WR D PLQLPXP RI 40% RYHU WKH QH[W ÞYH \HDUV • Achieve a gender split of at least 25% in senior management by the end of 2021, a targeted increase of almost 10% • Grow the number of female investment professionals from 16% to a minimum RI 20% RYHU WKH QH[W ÞYH \HDUV • Ensure our trainee hires reach parity by 2021. The Chief Executive and Executive Committee members will be accountable for our achievement of these targets, with a proportion of their variable pay being directly linked to these measures. These targets will be reviewed post the proposed merger ZLWK -DQXV WR UHßHFW WKH DVSLUDWLRQV RI WKH new organisation. Junior talent pipeline ,Q 2013, +HQGHUVRQ &KLHI ([HFXWLYH, Andrew Formica, along with Nichola Pease, former CEO of JO Hambro, initiated the ,QYHVWPHQW 2020 VFKHPH LQ RUGHU WR attract and engage with a diverse range of junior talent who may not otherwise have considered a career in investment management. The aim of the scheme was to bring fresh perspectives to the industry by offering talented individuals the opportunity to experience up to 12 months in an asset management company. Since inception, there have been 956 hired LQWR ,QYHVWPHQW 2020 DQG RI WKLV QXPEHU, 127 KDYH ZRUNHG DW +HQGHUVRQ ,Q 2016, ZH welcomed a total of 27 trainees in two intakes into positions in all areas of our business. We continue to look at opportunities to build our talent pipeline and 2017 will see us reintroduce our Graduate Programme IRU WKH IURQW RIÞFH WR VXSSRUW RXU VXFFHVVLRQ planning, and to ensure we are constantly developing our workforce to bring the best talent to our clients and shareholders. Henderson Group plc Annual Report 2016 Aims and objectives We are committed to supporting our employees’ development and wellbeing, offering a range of opportunities for them to develop both personally and professionally. Through the People pillar of our corporate responsibility programme, we focus on delivering wellbeing initiatives to our global workforce and improving career development opportunities. Progress in 2016 • Excellent feedback was again received for the Wellbeing Fortnights held LQ RXU 8. DQG 86 RIÞFHV t D WZR ZHHN programme of events such as exercise classes, walking competitions and specialist seminars. • Our Company healthcare initiatives have been enhanced with the introduction of free annual health checks. • Henderson participated in Britain’s Healthiest Workplace survey for the second year running to help understand WKH KHDOWK DQG ZHOOEHLQJ SURÞOH RI WKH RUJDQLVDWLRQ :H UDQNHG 45 RXW RI 147 participating companies and will use the results to inform our Wellbeing strategy. • Our Employee Assistance Programme became global and is now available to all staff worldwide. • We introduced a series of career development workshops to provide employees and managers with tools and frameworks to discuss and drive their careers. Corporate Responsibility: People

 


 

19 Investment 2020 trainees retained as full-time employees by Henderson after their placement 71% Henderson Foundation charitable spend £16 6,360 Committed to employee development During 2016 we continued to build on our talent and succession approach – developing and retaining talent across our business areas to ensure we are able to continue to deliver excellent performance and service. The global reach of our learning and development curriculum was further extended, and new training options were introduced to continually grow a professional and knowledgeable workforce. Our management development programme is now available in all regions. (PSOR\HHV KDYH DOVR EHQHÞWHG IURP enhanced career development support and the introduction of a structured mentoring scheme which was piloted in our Distribution IXQFWLRQ ,W LV DQWLFLSDWHG WKDW WKLV ZLOO EH extended and rolled out further in 2017. As we navigate tougher operating environments, we recognise that our people require greater levels of support to remain engaged and resilient. During 2016 we introduced a series of workshops outlining simple and practical techniques to help improve personal performance and wellbeing. We also added experienced talent in preparation for the increasingly complex UHJXODWRU\ UHTXLUHPHQWV RI 0L),' ,, DQG WKH 6HQLRU 0DQDJHUV DQG &HUWLÞFDWLRQ 5HJLPH Retention of talent is key to our People VWUDWHJ\ ,Q 2016, QHDUO\ 20% RI YDFDQFLHV IRU SHUPDQHQW SRVLWLRQV ZHUH ÞOOHG E\ internal hires, demonstrating the value that Henderson’s commitment to development has on the growth of the business. We also launched our global mobility policy to ensure a consistent approach to employees undertaking projects or new roles in different locations. Global mobility is a crucial element of globalisation by facilitating knowledge sharing, increasing collaboration, cementing our culture and developing diverse thought leadership across the business. Looking forward Our people are undoubtedly our most important asset and the reason we have made VXFK VLJQLÞFDQW SURJUHVV DJDLQVW RXU JURZWK DQG JOREDOLVDWLRQ VWUDWHJ\ ,I WKH PHUJHU is approved by our shareholders, in 2017 we will enter a new era in the evolution of the organisation. Our People strategy will focus on successfully unifying the individual Janus and Henderson businesses to create a powerful, global asset manager. The merger will provide greater career development opportunities for our employees and the strong global brand will attract world class skills and talent. As our cultures align, our shared values of collaboration, client service and commitment WR WKH QHZ ÞUP ZLOO FHPHQW WKH RUJDQLVDWLRQ and remain central to achieving our goals. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Aims and objectives Supporting our employees with their philanthropic activity and giving back to our local communities is central to the Community pillar of our corporate responsibility programme. The particular areas we focus on are our community ÞQDQFLDO HGXFDWLRQ LQLWLDWLYHV DQG employee volunteering. Progress in 2016 • Henderson hosted three RedSTART ÞQDQFLDO HGXFDWLRQ GD\V LQ WKH /RQGRQ RIÞFH DQG RIIHUHG ÞQDQFLDO HGXFDWLRQ and career preparation sessions in the US. We continue to collaborate with other LQYHVWPHQW ÞUPV WR LQFUHDVH WKH SURYLVLRQ RI ÞQDQFLDO HGXFDWLRQ WR \RXQJ SHRSOH • ,QWHUQDO FDPSDLJQV IRU WKH /RQGRQ &LW\ Giving Day 2016 resulted in a 50% increase in participation in our Give As You Earn (GAYE) scheme with donation matching. • There has been a 100% increase in employees registering for volunteering worldwide. • We introduced the opportunity for employees to donate part of their bonus to charity and continued to match employee charity fundraising in the UK and US. • All employees are encouraged to take one day’s paid leave each year for volunteering. These are used for a variety of causes from mentoring young people to working in animal centres. • Henderson continued to support the Disasters Emergency Committee and our long-standing East London charity partner, Community Links. • Donations were made to our partner charity in Asia, Angkor Hospital for Children, and to our US partner charities, Make a Difference Wisconsin, Hunger Task Force and Ronald McDonald House. Employee course attendance (%) Professional Skills Courses31 Financial and Client14 Management and Leadership28 Career Development 7 Performance Management14 Resilience6 Corporate Responsibility: Community

 


20 STR ATEGIC REPORT Our Our client-centric business model is scalable, LQFUHDVLQJO\ ZHOO-GLYHUVLÞHG DQG VXVWDLQDEOH business model Our value chain Market-leading Client-centric Assets under Active fund approach products and services management management A culture of client-centricity is at our heart, based on the principle that our customers should be treated fairly at all times. We work with clients through collaborative long-term relationships built on trust and transparency. Client satisfaction is the key measure on which success is judged. By properly understanding our clients’ challenges and evolving needs, we shape products and services to deliver market-leading solutions for our clients’ current and future needs. Our clients entrust money to Henderson – either their own or money they manage for their clients – and expect us to deliver WKH EHQHÞWV VSHFLÞHG LQ WKHLU mandate or fund prospectus. Our AUM increases or decreases, primarily depending on: • our ability to attract and retain clients’ money • our investment performance • markets and currency • acquisitions and divestments. As active managers with unique individual perspectives unconstrained by a house view, our teams invest and manage IXQGV DFFRUGLQJ WR D VSHFLÞHG mandate. Their expertise covers European Equities, Global (TXLWLHV, *OREDO )L[HG ,QFRPH, Multi-Asset and Alternatives. Drivers of our success Growing global footprint and distribution model ZLWK 5HWDLO DQG ,QVWLWXWLRQDO clients, tailored to local needs through local presence and marketing material. Successful investment track records in both traditional and alternative investment styles, across a diverse product range. High-calibre teams are the PRVW VLJQLÞFDQW UHVRXUFH used by Henderson to manage clients’ assets, including investment management, client relationship management, operations, ÞQDQFH DQG DVVXUDQFH Strong, investment-led culture based on the values of collaboration, conviction and responsibility, enabling us to adapt to changing market conditions and making Henderson a sought-after place to work. A scalable, increasingly ZHOO-GLYHUVLÞHG business model How we make money Our most important source of revenue is management fees, usually represented as a percentage of the money we manage for clients. We may also receive a performance fee from clients when our managers deliver strong investment performance. Our business model is scalable, which means that revenue growth should be followed by earnings growth. We earn our fees from a diverse range of investment strategies across a widening global footprint, which increases the resilience and sustainability of our business model. Henderson Group plc Annual Report 2016 Strong, investment-led culture High-calibre teams Successful investment track records Growing global footprint

 


21 Responsible Strong risk investment framework Henderson is committed to the principles of good stewardship and responsible investment, DQG WR EHLQJ D SRVLWLYH LQßXHQFH on the companies in which we invest. We manage assets within a FOHDUO\ GHÞQHG ULVN PDQDJHPHQW framework, monitored by our investment risk team to ensure the level of risk taken for each portfolio is in line with client expectations. Commitment to responsible investment and a deeply held sense of corporate responsibility, to our clients, our people, the communities in which we work and the environment. Knowledge. Shared, enhanced by our growing reputation for timely, relevant digital content for clients. remuneration arrangements growth and accretive Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION This balance between cost discipline, reward and investment is key to the long-term success of our business. We apply stringent cost discipline to our business, while at the same time making sure we have the right in place to attract and retain top-class talent across all business functions. We invest to grow our business in a careful and targeted way: Organic Value-globalisationacquisitions A high proportion of our earnings converts into cash, which we distribute to shareholders, usually via ordinary dividends. As our capital position strengthens, we will have LQFUHDVHG ßH[LELOLW\ WR UHGHSOR\ H[FHVV FDSLWDO and increase returns to shareholders. Compelling brand proposition Commitment to responsible investment Delivering sustainable value For clients • Returns generated through strong investment performance • Shared investment knowledge and insight • Trust For shareholders • Sustained income DQG SURÞW JURZWK s 6WURQJ SURÞW FRQYHUVLRQ • Dividend growth and capital returns For employees • Attractive career prospects • Competitive remuneration DQG EHQHÞWV • Strong corporate culture

 


22 STR ATEGIC REPORT Regional focus: Australia – a high growth business opportunity in a large and fast-growing market Based on the acquisitions RI 3HUHQQLDO )L[HG ,QWHUHVW Partners, Perennial Growth Management and 90 West Asset Management and with SURYHQ VWURQJ FOLHQW LQßRZV Henderson Group plc Annual Report 2016 ACCELERATING GROWTH

 


23 2016 growth in AUM 42% Total AUM managed for clients £10.9bn Successful acquisitions and integration, quickly gaining GLYHUVLÞHG JURZWK PRPHQWXP Our recent acquisitions mean that we now have a compelling suite of investment VROXWLRQV LQ $XVWUDOLD, DFURVV Þ[HG LQWHUHVW, equities, alternative investments and commodities, as well as established platform relationships and a growing Institutional client base. Strong global brand Our Australian heritage and shareholder base, as well as the excitement our local team has created around our growing EXVLQHVV, PHDQ WKDW ZH EHQHÞW IURP high levels of brand recognition. Global perspective Immediately after the acquisitions of Perennial Fixed Interest Partners, Perennial Growth Management and 90 West Asset Management, we connected our Australian businesses to our Institutional-grade operating model, global investment teams and systems. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


24 STR ATEGIC REPORT Core investment management capabilities ,Q D \HDU QRWHG IRU LWV YDULHW\ DQG unpredictability, the diversity of Henderson’s investment capabilities provided a stabilising force. Henderson is committed to the principles Social and Governance (ESG) issues Many asset classes in 2016 provided attractive returns but volatility in currencies and rotation among sectors meant there was wide dispersion beneath the market KHDGOLQH ÞJXUHV For Henderson, 2016 had its challenges, and aggregate performance slipped FRPSDUHG ZLWK D YHU\ VWURQJ 2015 ,Q SDUW, WKLV UHßHFWHG WKH XQH[SHFWHG RXWFRPHV RI the political set-pieces that punctuated the year, together with the sharp deviations in investor sentiment between ‘risk on’ and ‘risk off’. Henderson has spent the last few years, investing in its risk management capabilities, its investment teams and their support functions. This meant that we were prepared to meet the challenges of a trickier year on a much surer footing. Strength in depth Henderson’s investment management FDSDELOLW\ LV EXLOW RQ ÞYH SLOODUV t (XURSHDQ Equities, Global Equities, Global Fixed ,QFRPH, 0XOWL-$VVHW, DQG $OWHUQDWLYHV $FWLYH management is at the heart of our investment philosophy, with our products designed to allow careful research and manager talent to deliver attractive outcomes for clients. The breadth of asset classes covered, together with skills in long/short strategies and managing derivatives, allows Henderson to run a variety of actively managed funds and segregated mandates for investors of differing levels of sophistication. ,QYHVWPHQW WHDPV DUH ORFDWHG LQ RIÞFHV in Europe, the US, Asia and Australia. This provides global penetration that not only supports knowledge of local investment markets, but acts as a valuable bridge in allowing access to investment professionals ZKHQ HQJDJLQJ ZLWK FOLHQWV ,GHDV DUH VKDUHG DQG PDQDJHU VNLOO RU VSHFLDOLW\ LQ RQH RIÞFH is often translated globally as part of product development. Having a diverse range of capabilities proved pivotal in 2016 given meaningful shifts in asset preference. Appetite for European equities dissipated in the face of economic and political concerns but other capabilities were able to ignite investor interest. Within Alternatives, the long/short UK Absolute Return strategy, managed by Ben Wallace and Luke Newman, offered an attractive risk-reward proposition for investors concerned about Brexit, helping to offset RXWßRZV IURP 8. FRPPHUFLDO SURSHUW\ :RUULHV DERXW D PRUH LQßDWLRQDU\ RU ULVLQJ \LHOG HQYLURQPHQW OHG ,QVWLWXWLRQDO LQYHVWRUV to favour our multi-asset credit strategies over investment grade products. Meanwhile the VWUDWHJLF Þ[HG LQFRPH 5HWDLO IXQGV PDQDJHG by John Pattullo and Jenna Barnard or the equity-based funds managed by Alex Crooke DQG WKH *OREDO (TXLW\ ,QFRPH WHDP DSSHDOHG to Retail clients looking for income. ,QYHVWPHQW LQ WDOHQW LQ HDUOLHU \HDUV EHJDQ to pay off, with Glen Finegan’s Global Emerging Markets (GEM) team winning several mandates, and the high yield credit and several of the newly-launched AlphaGen strategies delivering strong performance. As assets grew in more established strategies, we added analyst and portfolio management talent to areas such as Cautious Managed and UK Absolute Return. The following pages provide greater detail about developments within each pillar. Shareholder voting participation 97% 2015: 95% Henderson Group plc Annual Report 2016 Aims and objectives of good stewardship and responsible investment, and to being a positive LQßXHQFH RQ WKH FRPSDQLHV ZH LQYHVW LQ We believe integrating Environmental, into our investment decision-making and ownership practices will help deliver better investment outcomes for our clients. We aim to ensure that our approach to responsible investment is a positive differentiator for Henderson as we seek to grow and globalise the business. Progress in 2016 • Good progress made in conducting ESG desk reviews for all investment teams. • Enhanced client reporting on ESG issues, LQFOXGLQJ GHYHORSLQJ RI Þ[HG LQFRPH VSHFLÞF UHSRUWLQJ • Continued good performance in the DQQXDO 8135, DVVHVVPHQW VXUYH\ DQG Tier 1 status in respect of the UK Stewardship Code. • Work undertaken to raise the prominence RI VSHFLDOLVW 65, SURGXFWV ERWK LQWHUQDOO\ and externally. Corporate Responsibility: Responsible investment Group AUM and investment outperformance AUM 31 Dec 2016 Core capability(£bn) % of assets at/exceeding relevant benchmark over: 1 year 3 years European Equities 19.7 26% 86% Global Equities 34.0 34% 70% *OREDO )L[HG ,QFRPH 28.1 80% 76% Multi-Asset 5.1 48% 42% Alternatives 14.1 62% 99% Total Group 101.0 50% 77%

 


25 We are seeing the return of pricing dispersion, the lifeblood of active managers looking to add value through stock selection.” John Bennett Head of European Equities European Equities What are the key features of the European Equities capability? Henderson is renowned for having a strong (XURSHDQ (TXLWLHV EXVLQHVV, UHßHFWLQJ GHSWK in both the team and the product range. The team comprises 21 specialists with an average of 20 years’ experience. Each team member operates in a collaborative environment where the sharing of research and ideas is encouraged. There is no over-arching team view, however, with managers able to implement their views according to where they believe the best potential lies for investors, in line with portfolio mandates and regulatory rules. Depth in product is demonstrated by the range of strategies that the team manages, including portfolios with distinct geographic exposures or different style biases. This spectrum of strategies allows Henderson to meet the European equity needs of a wide UDQJH RI FOLHQWV ZLWK GLIIHUHQW ULVN SURÞOHV What have been the challenges and highlights of 2016? For much of 2016 a combination of initially weak economic data and an unsettled political backdrop cast a shadow over European equity markets. Matters were not helped by strong momentum in US equities acting as a magnet for US stocks and the forthcoming 2017 European political calendar inviting caution among investors. For the most part, the region proved unpopular with investors and WKH LQGXVWU\ JHQHUDOO\ H[SHULHQFHG RXWßRZV, irrespective of the value available at an individual stock level. We were not immune to this environment. The biggest setback was the US-domiciled Henderson European Focus Fund, which is part of the US mutual fund range and managed separately by Stephen Peak. 7KLV IXQG H[SHULHQFHG D QHW RXWßRZ RI QHDUO\ £1.2bn in response to disappointing relative performance and US investors expressing a preference for their domestic market. /DUJH RXWßRZV DOVR LQFOXGHG €749P IURP the Henderson Horizon Pan European Equity Fund and £531m from the Henderson Gartmore Continental European Fund. While these redemptions are disappointing, both of these funds retain a large investor base and closed the year well above £3bn each in size. Amid the challenging backdrop, we understood the importance of communication, remaining measured in what we said to clients and ensuring they understood RXU VWUDWHJLHV DQG WRRN FRQÞGHQFH IURP our longer-term mindset. *UHDWHU DVVHW VWDELOLW\ ZDV VHHQ LQ RXU 2(,& range, where the translation effect of weaker sterling versus the euro gave a boost to returns for UK-based investors in European assets. There was also ongoing demand for the Henderson Horizon Euroland Fund, which DWWUDFWHG QHW LQßRZV RI €362P IRU WKH \HDU as investors demonstrated a drift away from defensive growth towards more value-orientated strategies. Aggregate relative performance for the capability weakened in 2016 as outperformance in smaller cap strategies was offset by underperformance among the more sizeable large cap funds. The percentage of assets outperforming their benchmark over one year to 31 December was 26%, although over the more meaningful three year period was a strong 86%. Were there any changes to the team? We continued to strengthen the team in 2016 with the promotion of James Ross, who is now working alongside Tim Stevenson as co-manager of the Henderson Horizon Pan European Equity Fund. James has been with Henderson since joining the graduate scheme in 2007 and continues our long-term strategy of developing talent in-house. Marc Schartz and Dan Davies also joined the team to provide additional analyst support. What are you most excited about seeing develop in 2017? The shock Brexit result marked the start of a rotation away from quality growth and other ‘safe haven’ areas, towards areas considered better value – a process that accelerated with Trump’s victory in the US election. Although challenging, this rotation means we are seeing the return of pricing dispersion, the lifeblood of active managers looking to add value through stock selection. ,I ZH DUH ULJKW, WKHQ ZH PD\ EH VHHLQJ VLJQV of a long-awaited shift from a growth to value market on a global basis. This would have enormous implications for global asset allocators and could favour the structurally value-biased markets of the world, such as Europe. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION European Equities AUM (£bn) £19.7bn

 


26 STR ATEGIC REPORT Our range of specialist and broad-based global strategies should be well placed to capture the secular trend for country GLYHUVLÞFDWLRQ DPRQJ LQYHVWRUV r Graham Kitchen Head of Equities Global Equities What are the key elements of the Global Equities capability? Our Global Equities capability continues to offer investors a broad range of investment strategies managed by specialist teams, some of which are global in nature while RWKHUV IRFXV RQ VSHFLÞF UHJLRQV RU FRXQWULHV Through experience, our expert teams have developed their own investment approaches, free to capture attractive investment opportunities without the hindrance of a ‘house style’. In general, how was 2016? Overall, global equities rose during 2016 with some markets, such as the US, reaching record highs. Market growth, however, was punctuated by periods of volatility, driven by changeable economic data and political shocks, which led to challenges for some VWUDWHJLHV 7KLV ZDV UHßHFWHG RYHU WKH RQH \HDU SHULRG, ZLWK 34% RI IXQGV RXWSHUIRUPLQJ their benchmark, compared with 70% outperforming over three years. By the end of 2016, assets under management in the FDSDELOLW\ VWRRG DW €34 0EQ (XS IURP €28 2EQ in 2015). What were the highlights? Despite ongoing volatility and the riskier nature of investing in developing markets, investors began to allocate back to Emerging Market (EM) Equities. Our EM strategy DWWUDFWHG JOREDO ßRZV RI €11EQ, QRWDEO\ IURP $XVWUDOLDQ DQG 8. ,QVWLWXWLRQDO LQYHVWRUV Our Global Equities franchise as a whole H[SHULHQFHG LPSURYLQJ ,QVWLWXWLRQDO ßRZV across geographies. Aside from EM, highlights included the £700m investment into our Technology strategy from a European FOLHQW DQG D QHW 86$594P IURP 86 FOLHQWV into the Geneva Small Cap Growth Strategy. ,Q $XVWUDOLD, WKH *OREDO 1DWXUDO 5HVRXUFHV Equities team, which became fully part of Henderson in 2015, won a £190m mandate, cementing this team’s credentials in a sector that is enjoying renewed appetite from investors. Demand for income also showed no sign of DEDWLQJ ZLWK QHW ßRZV LQWR WKH DERYH-DYHUDJH \LHOGLQJ 86 PXWXDO *OREDO (TXLW\ ,QFRPH Fund, lifting this fund to more than £3.2bn in size. Henderson’s equity income heritage was highlighted when The City of London ,QYHVWPHQW 7UXVW SOF UHDFKHG 50 \HDUV RI consecutive annual dividend increases. Elsewhere, our Global Growth Fund won the Global Equity category at the UK-based ,QYHVWPHQW :HHN DZDUGV Were there any challenges? ,Q WKH 86, GRPHVWLF LQYHVWRUV WHQGHG WR ORRN closer to home, and, after several years of strong performance, the £3.5bn US mutual ,QWHUQDWLRQDO 2SSRUWXQLWLHV )XQG UHFRUGHG D QHW RXWßRZ RI €317P, H[DFHUEDWHG by disappointing returns in 2016. Brexit concerns and recent relative XQGHUSHUIRUPDQFH DOVR OHG WR QHW RXWßRZV on several of our UK equity funds. Did momentum remain in the sustainable funds? ,QYHVWRU LQWHUHVW LQ (QYLURQPHQWDO, 6RFLDO and Governance (ESG) investing continued WR VWUHQJWKHQ, ZLWK RXU ßDJVKLS *OREDO &DUH Growth Fund climbing above £500m in size and total assets across our three ESG funds amounting to nearly £1bn. Flows remained strong in the second half of 2016 even as higher commodity prices led to some sector rotation towards fossil fuel and extraction companies as investors subscribed to the long-term sustainable prospects of the strategy. What are you most excited about seeing develop in 2017 and beyond? We are particularly excited by the momentum that is building in our EM Equities proposition. This has the potential to attract further sizeable JOREDO LQßRZV IURP PXOWLSOH LQYHVWPHQW channels given the growing reputation of the team. The international acquisitions are also beginning to bear fruit as Australia and the US deepen their market presence, something that will see an even bigger step change through the planned merger with Janus Capital Group. There also appears to be rotation towards equities among asset allocators, particularly since the election of Donald Trump as the US president. While the threat of protectionist policies to the global economy is a concern, D UHßDWLRQDU\ HQYLURQPHQW FRXOG ERGH ZHOO IRU corporate growth, earnings and dividends. Henderson Group plc Annual Report 2016 Global Equities AUM (£bn) €34 0EQ

 


27 Our broad product offering stood us in good stead as we were able to leverage our reputation for investing across the ratings spectrum.” Phil Apel +HDG RI )L[HG ,QFRPH Global )L[HG ,QFRPH Fixed income markets were supported for much of 2016 by investor interest from income-seeking and liability-matching investors, together with asset purchases from several central banks, some of which broadened their buying programmes to include corporate bonds. The period was, however, bookended in early 2016 by a sharp sell-off in credit and in late 2016 by a rise in government bond yields prompted by stronger JOREDO HFRQRPLF GDWD DQG WKH LQßDWLRQDU\ rhetoric of the incoming US president Donald Trump. Over the one and three year periods to 31 December 2016 some 80% and 76% of RXU Þ[HG LQFRPH IXQGV PHW RU H[FHHGHG WKHLU benchmark respectively. Were there notable themes to the market? Political shocks contributed to higher yields in US and some peripheral European sovereigns but elsewhere they generally ended the year lower, contributing to strong performance among strategies sensitive to longer duration, while most of our credit funds performed well thanks to good security selection and tighter FUHGLW VSUHDGV +LVWRULFDOO\ ORZ ERQG}\LHOGV}t particularly in Europe – began to cause resistance among investors, however, and we witnessed some rotation into strategic bond PDQGDWHV ,Q WKLV UHJDUG, RXU EURDG SURGXFW offering stood us in good stead as we were able to leverage our reputation for investing across the ratings spectrum. What were the highlights of 2016? 2XU ,QVWLWXWLRQDO EXVLQHVV EHQHÞWHG from earlier product development and the relationships they had established. Appetite was strong for our Global Credit, Multi-Asset Credit and Buy & Maintain Credit strategies, with assets in the latter strategy growing to a fresh high of £6.2bn at year end. At the end RI 2015, ZH ODXQFKHG WKH ,QVWLWXWLRQDO 6KRUW Duration Bond Fund, and in 2016 this strategy came in to its own by directly addressing the needs of clients with low risk tolerance to movements in bond yields. ,W ZDV SOHDVLQJ WR VHH RXU SURGXFWV DWWUDFW clients across geographies and business FKDQQHOV 7KH 6WUDWHJLF )L[HG ,QFRPH team drew an additional £363m into their UK-domiciled funds aimed at Retail clients, lifting total funds well above £3bn, and their 86-GRPLFLOHG IXQG JUHZ E\ D IXUWKHU 40% WR 86$430P LQ VL]H $ PDQGDWH ZLWK D (XURSHDQ investor led to £250m being invested in global investment grade credit, while consistent performance in high yield was recognised with a €300m mandate from a European LQYHVWRU, VHW WR IXQG LQ 2017 ,Q $XVWUDOLD, the business acquired from Perennial in 2015 performed well, retaining the client base and VHHLQJ SRVLWLYH QHW IXQG ßRZV, WKH ODUJHVW RI ZKLFK ZDV DQ $XVWUDOLDQ Þ[HG LQWHUHVW mandate worth nearly AU$510m. External endorsement was also encouraging: +HQGHUVRQ ZDV QDPHG )L[HG ,QFRPH 0DQDJHU of the Year at the 2016 European Pensions Awards and in Australia won the Australia )L[HG ,QFRPH FDWHJRU\ DW WKH 0RQH\ Management Fund Manager of the Year awards and the Australian Financial Review 6PDUW ,QYHVWRU %OXH 5LEERQ $ZDUG IRU o%HVW Australian Bond Fund’. Were there any challenges? There are always challenges. Low absolute yields on European investment grade offered limited attraction to clients and like many of its peers the Henderson Horizon Euro &RUSRUDWH %RQG )XQG VXIIHUHG QHW RXWßRZV RI €645P 7KHUH ZHUH VRPH PDQGDWH ORVVHV in more traditional segregated accounts such as core credit and core gilts, but we took encouragement from the wins among multi-asset credit and our newer outcome-orientated strategies. What are you most excited about seeing develop in 2017 and beyond? We continue to work with clients to address WKHLU QHHGV DQG DUH LQ WKH ÞQDO VWDJHV RI developing a strategy designed to help maturing pension schemes generate regular FDVKßRZ ,W LV DOVR JRRG WR VHH HDUOLHU SURGXFW developments delivering for clients. The Multi-Asset Credit strategy reaches its ÞIWK DQQLYHUVDU\ LQ VXPPHU 2017, ZLWK performance on target since inception DQG RYHU €900P LQ DVVHWV ,QYHVWLQJ DFURVV different types of bonds we believe this product offers attractions to investors seeking GLYHUVLÞFDWLRQ DQG ZKR DUH FRQFHUQHG DERXW the direction of bond yields. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Global Fixed Income AUM (£bn) £281. bn

 


28 STR ATEGIC REPORT Our broad instrument remit is particularly valuable as we are not obliged to invest in any geography or asset if conditions are unfavourable.” Paul O’Connor Head of Multi-Asset Multi-Asset What differentiates the Henderson Multi-Asset Team? One of the most attractive things about managing multi-asset strategies is that we have a huge investment opportunity set. At Henderson, our multi-asset funds are typically run to broad investment mandates, allowing us to exploit opportunities in a wide range of asset classes and geographies. We have great freedom in how we implement our ideas, choosing among active, passive and smart beta vehicles1, investing in funds managed by our Henderson colleagues as well as those by other investment houses. 2XU MRE LV WR EXLOG ZHOO-GLYHUVLÞHG, ULVN-DZDUH portfolios that meet or exceed our clients’ expectations for capital growth. Of course, some of our mandates have other more VSHFLÞF REMHFWLYHV DV ZHOO, VXFK DV LQFRPH JHQHUDWLRQ, VSHFLÞHG ULVN-WDUJHWV RU FRVW constraints. Our investment process is team-based, which allows us to blend together all our different specialist skill-sets for every fund we manage. On the team, we have expertise in asset allocation, including macroeconomics and quantitative analysis and in fund selection, covering not only traditional asset classes but a wide range of alternative asset classes as well. What have been the highlights and challenges of 2016? As we expected, 2016 was a fairly volatile year for global investors but ultimately a rewarding one. While it was clear from the outset that investors were going to have to deal with an unusually high level of political risk during the year, few anticipated the outcomes of the big political events and even fewer could have predicted the market impact of each. The UK’s referendum decision to leave the European Union and Donald Trump’s victory in the US presidential election were major surprises for pollsters and investors alike and were events that caused VLJQLÞFDQW WXUEXOHQFH LQ ÞQDQFLDO PDUNHWV Although the volatility surrounding these events was often very challenging, it did also present investment opportunities. At times like these, our broad instrument remit is particularly valuable as we are not obliged to invest in any geography or asset if conditions are unfavourable. ,Q WHUPV RI SHUIRUPDQFH, WKH GHFOLQH LQ aggregate performance for the capability compared with 2015 can be attributed to a cohort of segregated balanced mandates where underperformance of less than 0.1% over a three year period dragged 30% of assets into underperforming territory, together with a couple of large funds similarly missing the top half of their peer group by RQH RU WZR SHUFHQWLOHV ,Q WRWDO 48% RI IXQGV outperformed their benchmark over one year DQG 42% RYHU WKUHH \HDUV 7KH DJJUHJDWH ÞJXUHV PDVNHG WKH IDFW WKDW DOO RI WKH IXQGV in the retail range delivered positive returns for the year, with many in double digits. There was also a strong story developing LQ WKH LQVWLWXWLRQDOO\-IRFXVHG 'LYHUVLÞHG Growth fund, which, over one, three and ÞYH \HDUV WR 31 'HFHPEHU 2016, LV UDQNHG in the top quartile of its peer group for its risk-adjusted returns. On the product side, our focus during 2016 has been on managing our existing multi-asset range, rather than adding new funds. We continued to work with marketing to raise client awareness and understanding of our Core Solutions range, where the FRPSHOOLQJ PL[ RI DVVHW GLYHUVLÞFDWLRQ DQG a regular income helped contribute to net LQßRZV DFURVV DOO IRXU IXQGV LQ WKH UDQJH 2YHUDOO, KRZHYHU, WKHUH ZDV D QHW RXWßRZ of £200m across the total multi-asset retail fund range, although more than half of this UHßHFWHG WKH ZLQGLQJ-XS RI WKH 2SWLPXP ,QYHVWPHQW 0DQDJHPHQW EXVLQHVV, ZKLFK ZDV completed in June 2016. On the institutional side, our marketing efforts have been focused RQ WKH +HQGHUVRQ 'LYHUVLÞHG $OWHUQDWLYHV Fund, a highly differentiated fund that offers clients exposure to a wide range of listed alternative assets such as commodities, hedge funds, private equity and infrastructure. What are you most excited about seeing develop in 2017 and beyond? We think it will be a year in which the global economy experiences more growth and more LQßDWLRQ WKDQ LQ UHFHQW \HDUV EXW ZLWK OHVV support from central banks. We believe that 2016’s upsurge in political turbulence globally is more of a regime shift than a blip and H[SHFW PRUH ßDUH-XSV LQ 2017 :KLOH WKH EHQHÞWV RI DFWLYH IXQG PDQDJHPHQW DUH often overlooked in the sort of liquidity-driven, trending markets seen in recent years, the more challenging conditions that we see for 2017 should be a great opportunity for active managers to prove their worth. Note 1. Smart beta vehicles include indices based on style factors such as value, growth, volatility or dividend-targeting strategies. Henderson Group plc Annual Report 2016 Multi-Asset AUM (£bn) £5.1bn

 


 

29 Alternatives UK commercial property Overall, 2016 was a testing time for UK commercial property. The EU referendum had a negative effect on market sentiment and led to abnormally high withdrawals from property funds. This put exceptional liquidity pressure on the Henderson UK Property 3$,) H[DFHUEDWHG E\ GHDOLQJ VXVSHQVLRQV among other direct property funds. 7R EH IDLU RQ DOO FOLHQWV GHDOLQJ LQ WKH 3$,) and its Feeder Fund was suspended from 5 July 2016 so cash levels could be raised in an orderly fashion. Good performance was crystallised on properties that were sold and the investment team ensured an income-focused portfolio of high-quality DVVHWV ZDV UHWDLQHG. 7KH 3$,) DQG )HHGHU Fund were able to re-open to dealing on 14 2FWREHU 2016. $VVHWV LQ WKH FRPELQHG funds amounted to £3.2bn at 31 December 2016 GRZQ IURP €4.2EQ D \HDU HDUOLHU. While it was disappointing to have temporarily suspended dealing we received positive feedback on our handling of the suspension and for keeping clients fully informed. 'LYHUVLÞHG DOWHUQDWLYHV Performance across Commodity, Agriculture and Multi-Strategy products was broadly positive on both benchmark relative and DEVROXWH WHUPV. :KLOH ßRZV ZHUH VWURQJ in Multi-Strategy products, Commodity ßRZV ZHUH ßDW GXH LQ SDUW WR SRRU LQYHVWRU sentiment towards both hard and soft commodities in the earlier part of the year. Henderson’s Multi-Strategy team manages portfolios for primarily institutional investors, with the aim of generating returns from LQHIÞFLHQFLHV LQ JOREDO HTXLW\ DQG Þ[HG income markets. Sophisticated investment techniques are applied using four differentiated trading strategies – )XQGDPHQWDO 5HODWLYH 9DOXH /LTXLGLW\ and Event Driven – all of which delivered positive returns in 2016. ,Q 2010 WKH 0XOWL-6WUDWHJ\ WHDP VDZ SRWHQWLDO in the Liquidity strategy as a stand-alone hedge fund product, and now manages over £390m in this successful strategy. Following consistent performance, the team see similar SRWHQWLDO LQ D VXE-VWUDWHJ\ RI 5HODWLYH}9DOXH}t which uses a novel process to exploit a persistent supply-demand anomaly in the market for equity forwards – as the next ‘spin-out’ product, aiming to launch in 2017. Henderson’s broad range of alternative VWUDWHJLHV SURYLGHV GLYHUVLÞFDWLRQ WR RXU HTXLW\ Þ[HG LQFRPH DQG PXOWL-DVVHW UHYHQXH VWUHDPV. Uncertainty and volatility within traditional asset classes meant investor interest towards the alternatives sector remained strong, with DVVHWV DW SHULRG HQG ULVLQJ WR €14.1EQ. Absolute return Henderson has been active within the absolute return equity space for a number of years, with both global and regionally-focused products. During 2016, the UK Absolute Return strategy proved popular with investors looking for returns with low volatility in a market shaken by %UH[LW-LQGXFHG XQFHUWDLQW\. ,QßRZV RI €1.4EQ took strategy assets to £5.5bn. The strong long-term track record contributed to the Henderson UK Absolute Return Fund winning WKH o$EVROXWH 5HWXUQp FDWHJRU\ DW ,QYHVWPHQW Week’s 2016 Fund Manager of the Year Award for the second year running, a feat that was also repeated by the fund at the Money Observer Fund Awards 2016. AlphaGen Within the AlphaGen Capital range the funds that were launched in October 2015 made an impressive start: the AlphaGen Developing 0DUNHWV %HVW ,GHDV )XQG UHWXUQHG 29% LQ 2016 ZKLOH WKH $OSKD*HQ (QHUJ\ %HVW ,GHDV Fund provided a triple digit percentage return over 2016 as the manager deftly channelled the recovery in the oil price. Meanwhile AlphaGen Elnath, a long/short hedge fund version of the energy fund was among the best in its peer group. The AlphaGen Japan Absolute Return Fund and the AlphaGen Japan Select Absolute Return Fund, however, were both closed following a large client withdrawal and the retirement of the fund PDQDJHU OHDGLQJ WR D FRPELQHG RXWßRZ of just over £250m from these two funds. Volantis ,Q 1RYHPEHU 2016 LW ZDV DQQRXQFHG WKDW WKH HLJKW-SHUVRQ 9RODQWLV WHDP ZKLFK PDQDJHV a number of UK small cap mandates, will WUDQVIHU WR /RPEDUG 2GLHU ,QYHVWPHQW Managers. This move is expected to take place in March 2017 and lead to a sale of c.£850m of assets. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Alternatives AUM (£bn) €14.1EQ

 


30 STR ATEGIC REPORT Regional focus: Continental Europe and LatAm – a business with strong growth potential Based on global banking relationships, DQ H[SDQGLQJ ,QVWLWXWLRQDO FOLHQW EDVH and a diverse product offering across asset classes. Total AUM managed for Continental Europe and LatAm based clients £22.1bn Henderson Group plc Annual Report 2016 STRENGTHENING RELATIONSHIPS

 


31 Top three Retail funds Henderson Gartmore Continental European £3.7bn Henderson Gartmore UK Absolute Return £3.6bn Henderson Horizon Pan European Equity £3.2bn Broader relationships with global banks and institutions We are devoting more resource to our global banking relationships and our institutional clients, who are increasingly looking to us for a broad range of investment styles. Focus on absolute return We are focused on using our specialist expertise to help advisors meet client demand for security in an uncertain environment. Global perspective Swiss banks UBS and Credit Suisse are among our largest global clients. We aim to match their global reach, and provide them with appropriate client solutions wherever they operate. For more information on our investment management capabilities, see page 24 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


32 STR ATEGIC REPORT Client ,Q D \HDU WKDW UHVKDSHG ZRUOG views, collaborating and communicating with clients was of the utmost importance. relationships and brand 2016 was remarkable in many ways. ,W ZDV D \HDU LQ ZKLFK SHRSOH ZHUH IRUFHG to recalibrate their world view and what it PHDQW IRU LQYHVWPHQW PDUNHWV. ,W LV LQ WKHVH challenging conditions that the value of relationships with clients is tested and asset managers are judged on the quality of service and information they provide. One of the most pleasing things for me about 2016, therefore, was to see our relationships with clients proving their worth. The feedback from many clients has been that our ability, under Henderson’s Knowledge. Shared proposition, to provide tailored products, education and insights genuinely added value. A challenging backdrop The uncertain economic backdrop was generally mirrored by investor appetite at an industry level. Key themes included: • Continued rotation from active to passively managed products globally, albeit this was most prevalent in the US • 1HW RXWßRZV IURP HTXLWLHV ZLWK (XURSHDQ equities generally one of the least favoured asset classes • Alternatives products, particularly those with a track record of delivering positive absolute returns, were popular • )L[HG ,QFRPH IXQGV ZHUH LQ GHPDQG IRU much of the year, although sentiment shifted following the US election. Regional focus Henderson’s global footprint means we see common challenges and themes shaping clients’ asset allocation decisions worldwide. :H DOVR KRZHYHU VHH UHJLRQDO VSHFLÞF VKLIWV in appetite at the wholesale and institutional OHYHOV JOREDOO\ DQG WKHUHIRUH SODFH VLJQLÞFDQW value on our local presence to properly interpret and cater to these. 1. Europe, Middle East and Africa (EMEA) Wholesale EMEA provided a challenging backdrop for active managers generally with net sales in Continental Europe and the UK in negative WHUULWRU\ IRU WKH ÞUVW WLPH VLQFH 2011 DQG 2008 respectively. Flows were impacted in the run up to the UK’s referendum on leaving the European Union in June and the ‘leave’ vote OHG WR VKDUS RXWßRZV. :KLOH ßRZV LQFUHDVHG through the second half of the year, the US election brought ongoing uncertainty and the LQßRZV ZHUH QRW HQRXJK WR WDNH WKH LQGXVWU\ back into positive territory by year end. For Henderson, we saw strong sales in the region within our absolute return, European equity value, sustainable investing, strategic Þ[HG LQFRPH DQG HPHUJLQJ PDUNHW HTXLW\ SURGXFWV. 2XWßRZV UHßHFWHG WKH ZLGHU industry trends, with European equities particularly out of favour. Across Europe we continued to build on strong relationships with global distributors. We have a number of products on recommended lists and work hard to ensure we provide the level of service required to support these. This includes regular fund manager meetings, attending and hosting events and tailoring the communications, reporting and marketing support we offer to the appropriate level. Institutional 2016 overall was a strong year for EMEA ,QVWLWXWLRQDO. 2XU FRUH 8.-EDVHG EXVLQHVV EHQHÞWHG IURP WKH FRQWLQXLQJ WUHQG RI SHQVLRQ schemes seeking to de-risk away from equities into lower risk and/or liability-matching asset classes such as bonds. Henderson is well-placed to meet this need given our experienced and highly-regarded Þ[HG LQFRPH LQYHVWPHQW FDSDELOLW\. $SSHWLWH from new and existing clients was strong ZLWKLQ RXU PXOWL VHFWRU Þ[HG LQFRPH VWUDWHJLHV. Henderson Group plc Annual Report 2016 “One of the most pleasing things for me about 2016 was to see our relationships with clients proving their worth. The feedback from many clients has been that our ability, under Henderson’s Knowledge. Shared proposition, to provide tailored products, education and insights genuinely added value.” Phil Wagstaff Global Head of Distribution

 


33 ,Q DGGLWLRQ LW ZDV SOHDVLQJ WR VHH WKH GLYHUVLW\ RI LQßRZV DFURVV WKH (0($ UHJLRQ DQG RXU more specialist equity products gaining in popularity. This included large mandate wins for our Global Technology and Emerging 0DUNHW (TXLWLHV WHDPV. 2XWßRZV ZKLFK ZHUH JHQHUDOO\ OLPLWHG WHQGHG WR UHßHFW DVVHW allocation changes and shifts in strategy such DV PRYLQJ LQWR /LDELOLW\ 'ULYHQ ,QYHVWPHQW. 7KH RQJRLQJ VWUHQJWK RI RXU Þ[HG LQFRPH offerings and the broader range of our specialist products are encouraging for the future. We continue to work closely with clients to develop new products, an example being our new Short Duration Bond strategy GHYHORSHG WR PHHW WKH 6ROYHQF\ ,, UHODWHG needs of a large UK client. We have also developed a new investment strategy designed to help pension schemes that are FDVK ßRZ QHJDWLYH. ,W ZDV DOVR SOHDVLQJ WR receive third party validation of our client-led approach with Henderson being named by Financial News, one of Europe’s leading institutional publications, as the ‘2016 Asset Manager of the Year’. Alternatives The volatile macro backdrop to 2016 saw investors becoming increasingly nervous about equity markets. As a result, various alternatives strategies that seek absolute returns with minimal correlation to traditional asset classes gained in popularity. At Henderson we were able to cater for this demand, both through our equity long/short 8&,76 SURGXFWV DQG RXU $OSKD*HQ &DSLWDO hedge fund range. AlphaGen provides VRSKLVWLFDWHG LQYHVWRUV ZLWK D GLYHUVLÞHG range of alternative strategies and plc into a choice of the Henderson ,QWHUQDWLRQDO ,QFRPH 7UXVW SOF DQG WKH %DQNHUV ,QYHVWPHQW 7UXVW SOF. +HQGHUVRQ *OREDO 7UXVW SOF GLG QRW KDYH VXIÞFLHQW scale to remain relevant to investors in the global sector and the transaction provided shareholders with the choice of a global equity income strategy or a continuing global growth strategy. The fact that shareholders did not UHTXLUH D FDVK H[LW UHßHFWHG FRQÞGHQFH LQ Henderson’s investment management teams. Our capabilities within the investment trust space were recognised externally throughout the year with Henderson winning the 0RQH\ZLVH ,QYHVWPHQW 7UXVW *URXS RI WKH Year award for the third consecutive year, WKH %HVW ,QYHVWPHQW 7UXVW 3URYLGHU DZDUG DW WKH ,QYHVWPHQW /LIH DQG 3HQVLRQV 0RQH\IDFWV Awards 2016 and three awards at the ,QYHVWPHQW :HHN ,QYHVWPHQW &RPSDQ\ RI WKH <HDU $ZDUGV 2016. :H DOVR ZRQ WKH $,& Shareholder Communications 2016 awards for Best Website, for the third year running, and the inaugural Best PR Campaign. 2. America United States The environment for active managers was particularly challenging in the US, with QHW VDOHV DFURVV WKH LQGXVWU\ LQ VLJQLÞFDQW RXWßRZ VLQFH 0D\ 2015. 7KLV ZDV D UHVXOW of a combination of uncertainty at a macroeconomic level, notably around Brexit and the US election, and the continued trend towards passive investments. At a sector level, LQYHVWRUV IDYRXUHG Þ[HG LQFRPH WKURXJK WKH majority of the year and had a preference for domestic rather than international equities, historically a strong capability for Henderson. 7KLV SUHIHUHQFH UHßHFWHG WKH VWUHQJWK RI WKH US dollar and the relative strength of the US HTXLW\ PDUNHW KRZHYHU ZH H[SHFW ßRZV WR pick up again as and when this trend reverses. The end of the year saw a notable shift in appetite following the US Presidential (OHFWLRQ LQ 1RYHPEHU ZLWK ULVLQJ LQßDWLRQ expectations contributing to a sell-off in Þ[HG LQFRPH DQG UHDOORFDWLRQV WR HTXLWLHV. )RU XV ßRZV LQ VRPH SDUW UHßHFWHG WKH industry’s wider trends, with our European DQG ,QWHUQDWLRQDO HTXLW\ SURGXFWV LQ QHW RXWßRZ DQG RXU 6WUDWHJLF )L[HG ,QFRPH IXQGV in strong demand. Where we bucked the WUHQG ZDV LQ *OREDO (TXLW\ ,QFRPH ZLWK investors attracted to the team’s focus on customised solutions including equity long/short, benchmark-agnostic long only, commodities, agriculture, risk premia and multi-strategy offerings across developed and emerging markets. Investment Trusts Within our UK-based investment trust business, highlights included The City of /RQGRQ ,QYHVWPHQW 7UXVW SOF UHDFKLQJ WKH PLOHVWRQH RI ÞIW\ FRQVHFXWLYH \HDUV RI delivering increases in the annual dividend paid to shareholders, followed shortly after in HDUO\ 2017 E\ WKH %DQNHUV ,QYHVWPHQW 7UXVW SOF UHDFKLQJ D VLPLODU PLOHVWRQH t D VLJQLÞFDQW achievement for both trusts. We also saw the rollover of the £155m Henderson Global Trust Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Commercial Property challenges 2016 saw a number of challenges associated with commercial property for our UK clients and our Distribution team. ,Q 0D\ WKH +HQGHUVRQ 8. 3URSHUW\ 8QLW Trust converted to Property Authorised ,QYHVWPHQW )XQG (3$,)) VWDWXV. 7KLV EURXJKW WD[ EHQHÞWV WR HOLJLEOH LQYHVWRUV but required a high level of engagement to explain the changes and assist investors with any action they needed to take. Close behind the conversion was the Brexit vote; this led to uncertainty in the run up to the vote and then a sharp sell-off in the subsequent weeks. The shift in sentiment led to substantial withdrawals and, in turn, liquidity issues for some of the direct property funds within the sector with many, including our own, taking the decision to temporarily suspend daily dealing. Explaining the rationale for the suspension and then providing regular updates for investors on the progress being made to allow the fund to reopen was particularly important. While it was disappointing to have to apply the suspension, it was necessary to allow for an orderly disposal of assets and to act in the best interests of the majority of clients seeking to remain invested. There were more than 15,000 views of the regular updates we posted on our website and feedback from clients was positive on how the suspension was KDQGOHG. ,W ZDV DOVR SOHDVLQJ WR VHH WKDW upon reopening, the fund retained the bulk of its assets with investors continuing to value the high quality nature of this income-focused fund.

 


34 STR ATEGIC REPORT Client relationships and brand continued global companies exhibiting stable and growing dividend streams. We also saw interest in our Global Emerging Markets team, which is fast establishing a strong reputation. :LWKLQ WKH ,QVWLWXWLRQDO VSDFH LQßRZV ODUJHO\ centred on our US small and mid-cap equity VWUDWHJLHV DQG WKH *OREDO (TXLW\ ,QFRPH franchise. US offshore/Latin America 2016 saw a further strengthening of our US offshore and Latin American business. This is structured to provide diversity both in terms of the clients we service and the investment capabilities we offer. The year saw a number of drivers reshaping the backdrop IRU ßRZV DQG DSSHWLWH. 7KHVH LQFOXGHG changes at a regulatory and market level that encouraged reinvestment back into domestic markets. Argentina was a case in point, with WD[ UXOH FKDQJHV EULQJLQJ VLJQLÞFDQW FDSLWDO back onshore, while economic improvements in Brazil led investors to move assets previously allocated internationally closer WR KRPH. ,Q OLQH ZLWK WKLV VKLIW DQG WKH widespread negative sentiment towards (XURSHDQ HTXLWLHV WKHUH ZHUH RXWßRZV IURP Henderson’s European products, but it was pleasing to note that these were well below the industry average and testament to the relationships we have developed in the region. With a dedicated team with a local presence servicing the US offshore market and the strengthening of our Latin America distribution team in 2016, we see these as key growth markets for Henderson in the years to come. Our product range is well-suited to the needs of investors in the region and we look forward to building on the strong relationships already established and broadening our distribution footprint further. 3. $VLD 3DFLÞF Australia 2016 was year one in a three year plan for our Australian distribution team. The strategy is built around the domestic products managed by the investment teams that joined as part of our 2015 acquisitions of Perennial Fixed ,QWHUHVW 3DUWQHUV (QRZ +HQGHUVRQ $XVWUDOLDQ )L[HG ,QWHUHVW) DQG 3HUHQQLDO *URZWK Management (now Henderson Australian Equities), alongside Henderson’s global offerings. The latter include Global Equity ,QFRPH *OREDO (PHUJLQJ 0DUNHW (TXLWLHV Global Natural Resources and Global Fixed ,QWHUHVW 7RWDO 5HWXUQ VWUDWHJLHV. ,W ZDV SOHDVLQJ WR VHH WKH SURJUHVV PDGH against this plan in 2016. This included the EHGGLQJ GRZQ RI WKH $XVWUDOLDQ )L[HG ,QWHUHVW and Australian Equity teams, and strong fund ratings being maintained from both asset consultants and research houses. The Global Natural Resources team also delivered strong performance in absolute terms, and saw its assets under management double since joining Henderson in 2015. Our Australian and global capabilities have been well received in Australia, following our highly successful ‘Knowledge. Shared’ national roadshow presented in all major capital cities. With pleasing levels of net sales IURP D GLYHUVLÞHG FOLHQW EDVH PDQGDWH ZLQV and notable pipeline opportunities, the IRXQGDWLRQV QRZ VHHP ÞUPO\ ODLG WR EXLOG RXW our Australian business in the years ahead. Asia ,QYHVWRU DSSHWLWH LQ $VLD ZDV DOLJQHG ZLWK JOREDO WUHQGV UHßHFWLQJ DQ XQZLQGLQJ RI exposure to European equities and the ongoing search for yield. At a product level, ZH EHQHÞWHG IURP UHFRJQLVHG VWUHQJWK LQ RXU Global Property Equities capability, strong ßRZV LQWR RXU &KLQHVH HTXLWLHV VWUDWHJ\ DQG demand for our Japanese Smaller Companies offering, supported by a strong consultant rating. Global Technology, while challenged in the short term, is a longer-term theme that clients are embracing and our Global Emerging Markets team is beginning to gain traction. Another pleasing theme has been both wealth management and institutional clients becoming increasingly open to discussing new ideas and initiatives with our distribution team. These initiatives range from product development through to contributing to marketing initiatives with our Knowledge. Shared proposition extremely well received. ,Q -DSDQ WKH QHJDWLYH \LHOG HQYLURQPHQW OHG to increased appetite for income generally. We also had success with a property equities mandate with a big institutional client and successfully expanded our reach to clients through an enhanced digital platform. Product developments At Henderson, the Global Product Team sits within Distribution and plays an integral part in ensuring our offerings are aligned with clients’ needs. The team provides governance for all funds and strategies, and gauges the suitability of new offerings as well as ensuring that existing products remain relevant to the clients to which they are marketed. The emphasis within this area in 2016 was on allowing many of the new teams brought into the business in recent years to bed down and continue to build meaningful track records. ,Q DGGLWLRQ WKHUH ZHUH WDFWLFDO ODXQFKHV LQ various jurisdictions to allow wider access to new strategies; these included launching an Emerging Market Equities product in Australia. Knowledge. Shared ,W LV SDUWLFXODUO\ SOHDVLQJ WR VHH RXU Knowledge. Shared approach continuing to resonate with clients globally. We introduced the Knowledge. Shared concept with our UHEUDQG LQ 2014 WR UHßHFW WKH LPSRUWDQFH we place on transparency of approach, partnerships with clients and the sharing of insight and thought leadership from our investment teams. Education and development At a distribution level Knowledge. Shared encompasses a wide variety of interactions with clients and prospective investors. These include roadshows and webcasts covering topical investment themes and challenges. ,Q WKH 8. IRU H[DPSOH 346 480 KRXUV of structured Continuous Professional Development were delivered by Henderson in 2016 including discussing ‘Tomorrow’s World’ sustainable investment at a 25 date roadshow. Events through the year included the annual Henderson New Year conference in London, the Knowledge. Exchange in Paris, Asian equities-focused events in Singapore and Hong Kong and tailored conferences for our US and LatAm clients. Client dialogue Knowledge. Shared also encompasses the two-way dialogue with clients that we value so highly. This ranges from feedback from customer surveys at the end investor level through to one-to-one discussions with fund selector and institutional clients. The latter allows our managers to provide their views in an open and frank manner, helping clients make informed asset allocation decisions. ,PSRUWDQWO\ LW DOVR DOORZV XV WR XQGHUVWDQG the shifting needs of clients and assess where we might have the expertise to deliver VROXWLRQV. ,Q WKH LQVWLWXWLRQDO VSDFH WKLV has led to a number of successful product Henderson Group plc Annual Report 2016

 


35 The impact of Brexit Future trends +HQGHUVRQ *OREDO 'LYLGHQG ,QGH[ launches in recent years with strategies designed for a particular client subsequently adapted to meet wider demand. To support this dialogue, we seek to make our fund managers’ thinking readily available to clients. This insight is delivered in as timely a manner as possible, in a variety of formats and at the appropriate level of sophistication for our range of clients globally. The intention is to provide a level of candour and honesty not necessarily expected from an asset manager and we encourage our managers to ‘call it as they see it’. At times this may result in managers explaining that they believe the market to be overvalued with limited buying opportunities. While at odds with the industry’s usual ‘sales messaging’, we believe that it is on this kind of honesty that strong long-term relationships and an open dialogue with clients will be built. Thought leadership ,Q WHUPV RI IXQG PDQDJHU LQVLJKW 2016 VDZ Knowledge. Shared actioned in a variety of ways with the turbulence at a macroeconomic level repeatedly leaving clients seeking expert views and opinions. Our ‘Brexit: investment impact’ content campaign, which we launched in February, at year-end included 35 articles, 14 YLGHRV DQG WZR JXLGHV ZLWK FRQWHQW translated into eight languages. The content produced was promoted digitally across the world in a variety of ways, resulting in more than 50,000 website views and strong engagement in terms of email open and click through rates. A similar content delivery model was adopted for the US election with 22 articles, two videos and a guide produced in the run-up to and in the aftermath of the vote. This was again popular, resulting in more than 20,000 website views globally. We also provided timely manager reaction to other events including central bank monetary policy decisions, government bonds moving into QHJDWLYH WHUULWRU\ DQG WKH LPSDFW RI ßXFWXDWLQJ commodity prices. These macro reaction content campaigns resulted in positive feedback from clients and Henderson being highly commended in the ‘Digital Marketing Campaign of the Year’ category DW WKH ,QYHVWPHQW :HHN o,QYHVWPHQW 0DUNHWLQJ DQG ,QQRYDWLRQ $ZDUGV 2016p. ,Q DGGLWLRQ WR WKH WLPH-VHQVLWLYH PDQDJHU reaction pieces, we also seek to provide content that addresses the longer-term themes shaping the investment landscape. ,Q 2016 WKLV LQFOXGHG WKH UHODXQFK RI WKH Henderson Global Snapshot, a digital overview of the economic themes to watch and our Multi-Asset team’s asset allocation dashboard. We also launched the Henderson Future Trends content series that explores the drivers with the potential to reshape the investment landscape in the years to come. As part of the series, academics and industry specialists contribute expert views, while Henderson’s investment managers explain what the trends mean at a portfolio level. Launched in September, the series has been viewed nearly 15,000 times. 7KH +HQGHUVRQ *OREDO 'LYLGHQG ,QGH[ (+*',) is another Knowledge. Shared initiative that continues to go from strength to strength. +*', LV D ORQJ-WHUP VWXG\ LQWR JOREDO GLYLGHQG WUHQGV t WKH ÞUVW RI LWV NLQG t DQG PHDVXUHV WKH SURJUHVV WKDW JOREDO ÞUPV DUH PDNLQJ LQ paying investors an income on their capital. ,W KDV UHSHDWHGO\ ZRQ DZDUGV IRU WKH LQVLJKW it brings into dividend-related investing at a time when income is in such high demand. +*', KHOSHG +HQGHUVRQ WDNH WRS VSRW IRU Best Content and Best Digital Marketing at the UK’s 2016 Financial Services Forum Awards, along with two commendations for Public 5HODWLRQV DQG ,QWHJUDWHG %2% 0DUNHWLQJ. This followed wins at the Citywire Goldmine $ZDUGV IRU %HVW ,QWHUHVW DQG %HVW 7KRXJKW 3LHFH FDPSDLJQ. ,Q WRWDO +HQGHUVRQ KDV ZRQ six awards and received two commendations LQ 2016 IRU LWV ZRUN RQ +*', t LQFOXGLQJ beating the World Health Organisation to best JOREDO 35 &DPSDLJQ DW WKH &KDUWHUHG ,QVWLWXWH of Public Relations Awards. We see the various aspects of Knowledge. Shared as valuable additions to the performance-based service we provide WR FOLHQWV. ,W LV WKH WDQJLEOH UHSUHVHQWDWLRQ of our investment teams’ intellectual capital that we seek to make available to clients through market conditions good and bad. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Aims and objectives Client engagement is a central theme of Henderson’s Corporate Responsibility programme. We are committed to meeting the expectations of our clients and to ensuring the fair treatment of customers is fully integrated into our business model. Progress in 2016 Customer Satisfaction We undertake focused customer satisfaction studies to better understand our customers’ needs. These include: UK Retail • 2016: *UDQW 7KRUQWRQ/,)'61 &XVWRPHU &DOO 6DWLVIDFWLRQ 6FRUH 95.4/100 (2015: 95.9/100). • 2016: ,)'6 ,QYHVWRU LQ &XVWRPHUV UDWLQJ (,,&): +++ Exceptional (2015: +++ Exceptional). EMEA Institutional • 2016: Client service experience rated as VDWLVÞHG TXLWH VDWLVÞHG RU YHU\ VDWLVÞHG 100% (2015: Q/D 2014: 98% (above average or excellent)). For more information on progress against our client engagement objectives, refer to our Key Performance Indicators on page 40 Corporate Responsibility: Clients

 


36 STR ATEGIC REPORT Financial review Since the launch of our Growth and Globalisation strategy at the end of 2013, we have improved the quality and quantity of our earnings. Financial performance +HQGHUVRQ DFKLHYHG XQGHUO\LQJ SURÞW before tax of £212.7m, a decrease of 3% (2015: £220.0m) driven by lower underlying net income. 8QGHUO\LQJ QHW LQFRPH ZDV €594.7P GRZQ 4%. 7KLV UHGXFWLRQ ZDV GULYHQ E\ ORZHU SHUIRUPDQFH IHHV RI €40.4P (2015: €98.7P) LQ D SHULRG RI VLJQLÞFDQW PDUNHW YRODWLOLW\ partially offset by higher management fees. Management fees – our principal revenue stream – increased by 8% to £505.9m, primarily driven by market and FX gains LQ 2016 DV ZHOO DV VWURQJ ßRZV LQ 2015. Management fee margins fell to 53.0bps, largely due to business mix and one-off effects. Total operating expenses decreased by 2% to £378.7m, demonstrating the Group’s ability to control costs. A 16% decrease in variable compensation, UHßHFWLQJ EXVLQHVV SHUIRUPDQFH ZDV SDUWLDOO\ RIIVHW E\ LQFUHDVHG Þ[HG HPSOR\HH compensation as a result of 2015 headcount LQFUHDVHV ); DQG ZDJH LQßDWLRQ. Non-staff operating expenses increased E\ 4%. The Group delivered an operating margin of 35.1% (2015: 35.7%) LQ OLQH ZLWK WKH ÞUVW KDOI. 2XU FRPSHQVDWLRQ UDWLR LPSURYHG WR 43.7% (2015: 44.6%) UHßHFWLQJ ORZHU YDULDEOH compensation. 8QGHUO\LQJ SURÞW DIWHU WD[ GHFUHDVHG E\ 14% WR €169.7P SULPDULO\ UHßHFWLQJ DQ increased tax charge for the period of €43.0P. 7KH UHVXOWLQJ HIIHFWLYH WD[ UDWH IRU the period was 20.2%, in line with guidance. Diluted underlying EPS decreased by 12% to 15.2 pence, primarily driven by a higher HIIHFWLYH WD[ UDWH DQG ORZHU XQGHUO\LQJ SURÞWV. AUM £101.0bn 2015: £92bn Henderson Group plc Annual Report 2016 “The increasing diversity of the business by product, client base and geography means that the Group has a strong foundation for the future.” Roger Thompson &KLHI )LQDQFLDO 2IÞFHU

 


37 8QGHUO\LQJ SURÞW EHIRUH WD[ £213m 2015: £220m $80 DQG ßRZV The Group’s total AUM as at 31 December 2016 ZDV €101.0EQ UHßHFWLQJ QHW RXWßRZV RI €4.0EQ DQG SRVLWLYH PDUNHW DQG ); movements of £13.0bn. Against a challenging backdrop of market YRODWLOLW\ DQG SROLWLFDO XQFHUWDLQW\ 5HWDLO ßRZV ZHUH QHJDWLYH LQ 2016 ZLWK QHW RXWßRZV RI €4.6EQ. $W WKH VWDUW RI WKH \HDU FOLHQWV reduced their risk appetite and demand for European assets moderated. This theme continued throughout the year as political events unfolded, most notably the UK’s referendum on EU membership and the US Presidential election. ,Q WKH 8. WKH *URXS VDZ DQ LQFUHDVH LQ RXWßRZV LQ WKH DIWHUPDWK RI WKH UHIHUHQGXP DV SROLWLFDO DQG PDUNHW XQFHUWDLQW\ LQWHQVLÞHG. Most notably, the Group saw an acceleration RI RXWßRZV IURP WKH +HQGHUVRQ 8. 3URSHUW\ Fund and trading was suspended on 5 July 2016, allowing the fund to dispose of assets and rebuild liquidity. The fund re-opened on 14 2FWREHU 2016 ZLWK PRGHVW UHGHPSWLRQV. Encouragingly, the diversity of the Group’s product range helped to mitigate the impact of the referendum, with demand for UK DEVROXWH UHWXUQ DQG Þ[HG LQFRPH VWUDWHJLHV. 7KH *URXS DOVR EHQHÞWHG IURP SRVLWLYH ßRZV in the Australian Retail fund range, captured ZLWKLQ WKH *URXSpV o8. 2(,&V/8QLW 7UXVWV/ Other’ product line. 5HWDLO 6,&$9 ßRZV WXUQHG QHJDWLYH LQ 2016 as clients reduced their exposure to European assets and held higher proportions of their SRUWIROLRV LQ FDVK. 2XWßRZV ZHUH PRVW DFXWH in the last week of June 2016, immediately after the UK referendum. 86 PXWXDO IXQG ßRZV ZHUH EURDGO\ ßDW IRU WKH ÞUVW KDOI RI WKH \HDU EXW WXUQHG QHJDWLYH IROORZLQJ WKH 8. UHIHUHQGXP. )XQG RXWßRZV accelerated in the second half of the year, UHßHFWLQJ D UHYHUVDO LQ GHPDQG IRU QRQ-86 assets and the outcome of the US Presidential election. 7KH ,QVWLWXWLRQDO EXVLQHVV KDG D VXFFHVVIXO \HDU ZLWK SRVLWLYH QHW ßRZV RI €0.6EQ. )LQDQFLDO .3,V (RQ XQGHUO\LQJ RSHUDWLRQV) 2016 AUM by channel £m Opening AUM 1 Jan 16 Closing AUM 31 Dec 16 Net ßRZV Market/ FX Retail ,QVWLWXWLRQDO 56,915 35,070 (4 616) 607 7054 5,921 59,353 41 598 Total 91,985 (4,009) 12,975 100,951 1HW ßRZV E\ SURGXFW £m Retail 8. 2(,&V/8QLW 7UXVWV/2WKHU1 6,&$9V US Mutuals ,QYHVWPHQW 7UXVWV Institutional (4,616) (1,002) (2 584) (1,128) 98 607 Total (4,009) 1. 2WKHU LQFOXGHV ,QYHVWPHQW 7UXVWV $XVWUDOLDQ 0DQDJHG ,QYHVWPHQW 6FKHPHV DQG 6LQJDSRUH 0XWXDO IXQGV. 'HVSLWH QHW RXWßRZV DW WKH VWDUW RI WKH \HDU GULYHQ E\ SUHYLRXVO\ QRWLÞHG UHGHPSWLRQV DQG the closure of funds in areas of limited client GHPDQG ßRZV ZHUH SDUWLFXODUO\ VWURQJ LQ WKH VHFRQG KDOI UHßHFWLQJ WKH *URXSpV FRQWLQXHG success in its core UK business and an increasingly global client base in Continental Europe, the US and Australia. Most notably, the Group saw early success in its Global Emerging Markets strategy. :KLOVW LW UHPDLQV GLIÞFXOW WR SUHGLFW WKH WUDMHFWRU\ RI ,QVWLWXWLRQDO ßRZV LW ZDV encouraging to see increasingly diverse VRXUFHV RI ßRZ WKLV \HDU E\ FOLHQW JHRJUDSK\ and strategy. Pleasingly, the pipeline of new EXVLQHVV t QRWLÞHG EXW XQIXQGHG t UHPDLQV strong following the recent announcement of the recommended merger of equals with Janus and we are excited about our future prospects in this key segment. )XUWKHU FRPPHQWDU\ RQ IXQG ßRZV ZLWKLQ the channels and geographies in which the Group operates, can be found in the ‘Client relationships and brand’ section (pages 32 to 35). Overall market and FX movements for the period totalled £13.0bn driven by positive PDUNHWV DQG FXUUHQF\ WUDQVODWLRQ JDLQV}t D EHQHÞW IURP RXU LQFUHDVLQJO\ JOREDO business mix and Sterling weakness. Although 2016 was a challenging year for Henderson and its clients, Henderson delivered 5% net new money growth (excluding Property related AUM with the H[FHSWLRQ RI +HQGHUVRQ 8. 3URSHUW\ 3$,)) over the three years to 31 December 2016 – a positive result in light of muted industry growth. The increasing diversity of the business by product, client base and geography means that the Group has a strong foundation for the future. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 3 year investment performance 1HW IXQG ßRZV Management fee margin Compensation ratio Operating margin 3URÞW EHIRUH WD[ Diluted EPS 77% (£4.0bn) 53.0bps 43.7% 35.1% £212.7m 15.2p

 


38 STR ATEGIC REPORT Financial review continued Management fees and fee margins Management fees were up 8% to £505.9m (2015: €468.3P). 7KH SULQFLSDO SRVLWLYH drivers were market movements and currency WUDQVODWLRQ EHQHÞWV LQ WKH SHULRG WKH Australian acquisitions in November 2015 DQG VWURQJ ßRZV LQ 2015 SDUWLDOO\ RIIVHW E\ RXWßRZV LQ 2016. 7KH QHJDWLYH GULYHUV were one-off adjustments to fees and UHEDWHV D UHFODVVLÞFDWLRQ RI FHUWDLQ HOHPHQWV of US mutual fund fees to other income and general margin reduction. The Group’s management fee margin averaged 53bps in 2016, a decrease of 2bps on the 2015 exit rate (55bps), largely attributable to one-off adjustments to management fees and mix shifts in the second KDOI t 5HWDLO RXWßRZV FRXSOHG ZLWK DQ LQFUHDVH LQ ,QVWLWXWLRQDO $80. $V D UHVXOW WKH 5HWDLO H[LW PDUJLQ GHFOLQHG WR 71ESV. 7KH ,QVWLWXWLRQDO H[LW margin saw a small decline to 25bps. Performance fees ,Q 2016 ORQJ-WHUP LQYHVWPHQW SHUIRUPDQFH KHOG XS ZHOO LQ GLIÞFXOW PDUNHW FRQGLWLRQV ZLWK 77% of funds outperforming on a three year basis. One year performance was more challenged, with 50% of funds outperforming. Henderson delivered performance fees of €40.4P D GHFUHDVH IURP WKH H[FHSWLRQDO level reported in 2015 (£98.7m). ,Q 2016 WKH *URXS VDZ ORZHU SHUIRUPDQFH IHHV IURP 6,&$9V DQG LWV RIIVKRUH DEVROXWH UHWXUQ UDQJH. ,Q WKH 6,&$9 UDQJH SHUIRUPDQFH fees were lower for the Henderson Gartmore UK Absolute Return fund and no performance fees were paid on some of the European equity long only funds including Henderson Pan European Alpha and Henderson Horizon Pan European Equity, which generated VLJQLÞFDQW SHUIRUPDQFH IHHV LQ 2015. A reduction in offshore absolute return performance fees was largely attributable to the closure of the Japanese Absolute Return IXQGV LQ WKH ÞUVW TXDUWHU DQG ORZHU performance fees elsewhere in the range. Performance fees in 2016 were generated from 52 funds and accounted for 7% of net fee income (2015: 16%). The Group continues to generate performance fees from a diverse range of products, creating a solid foundation for the future. Income drivers (underlying) 2016 £m 2015 £m Expense drivers (underlying) 2016 £m 2015 £m Other income and income from associates and joint ventures ,Q 2016 RWKHU LQFRPH URVH IURP €34.8P WR €37.4P DQ LQFUHDVH RI 7% ODUJHO\ GXH WR a re-allocation of income from management fees. The largest component of this line item is a general administration charge to UK funds. ,QFRPH IURP DVVRFLDWHV DQG MRLQW YHQWXUHV increased from a £0.2m loss in 2015 and turned positive at £0.5m in 2016 due to the results of Northern Pines following closure of the joint venture in early 2016. Total operating expenses Total operating expenses decreased by 2% to £378.7m, largely driven by a 5% decrease LQ HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV. The reduction in employee compensation DQG EHQHÞWV ZDV GULYHQ E\ ORZHU YDULDEOH HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV ZKLFK ZHUH GRZQ 16% WR €141.9P. 7KH IDOO LQ variable compensation, despite higher bonus deferral amortisation in comparison to 2015, UHßHFWV ZHDNHU EXVLQHVV SHUIRUPDQFH SULQFLSDOO\ LQYHVWPHQW SHUIRUPDQFH DQG ßRZV. Fixed employee compensation increased E\ 13% WR €113.3P SULPDULO\ UHßHFWLQJ investments made in the second half of 2015 t QRWDEO\ WKH DFTXLVLWLRQV LQ $XVWUDOLD}t and a wage increase averaging 3%. Adverse FXUUHQF\ PRYHPHQWV FRQWULEXWHG €3.4P RU 3% WR WKH LQFUHDVH LQ Þ[HG VWDII FRVWV. The Group’s resulting compensation ratio IRU WKH SHULRG ZDV 43.7%. Non-staff operating expenses increased E\ 4% WR €123.5P UHßHFWLQJ KLJKHU information technology and investment administration costs. Finance income and expenses Finance income decreased from £17.3m in 2015 to £10.5m in 2016. The decrease SULPDULO\ UHßHFWV WKH SULRU \HDU €10.9P one-off gain on seed capital invested in the SURSHUW\ IXQGV VROG WR 7,$$-&5() DV SDUW RI WKH VDOH RI WKH *URXSpV 40% VWDNH LQ TH Real Estate. Finance expenses decreased from £12.1m in 2015 to £3.3m in 2016, following repayment of the £150.0m 2016 Senior Notes in March 2016. Henderson Group plc Annual Report 2016 Expenses )L[HG HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV 9DULDEOH HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV 113.3 141.9 99.9 168.7 7RWDO HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV Non-staff operating expenses 255.2 123.5 268.6 118.2 Total operating expenses Finance expenses 378.7 3.3 386.8 12.1 Total expenses 382.0 398.9 Income Management fees (net of commissions) Performance fees Other income 505.9 40.4 37.4 468.3 98.7 34.8 Net fee income ,QFRPH/(ORVV) IURP DVVRFLDWHV DQG MRLQW YHQWXUHV Finance income 583.7 0.5 10.5 601.8 (0.2) 17.3 Net income 594.7 618.9

 


 

39 ,Q 2016, WKH *URXS VDZ DQ LQFUHDVH LQ LWV HIIHFWLYH WD[ UDWH UHßHFWLQJ FKDQJHV LQ WKH *URXSpV JOREDO WD[ SURÞOH, JURZWK LQ KLJKHU WD[ jurisdictions and non-recurrence of one-off credits, which reduced the effective tax rate in 2015. We expect the Group’s effective tax rate to remain near the UK tax rate up until the proposed merger. Liquidity and capital management Total cash and cash equivalents at 31 'HFHPEHU 2016 ZHUH €244 0P, D decrease from £381.6m reported in 2015. The Group repaid the £150.0m 2016 Senior Notes in March 2016 from cash resources. 7R HQVXUH WKH *URXS KDG DFFHVV WR VXIÞFLHQW liquidity following repayment, Henderson entered into a one year revolving credit facility IRU €30 0P ,Q )HEUXDU\ 2017, WKH IDFLOLW\ was extended for a further one year period. Currently, there are no amounts drawn down under this facility. Should the recommended merger with Janus Capital complete, it is anticipated that the revolving credit facility will be replaced with a facility for the combined Group. Unrestricted cash stood at £225.7m after excluding cash held in consolidated structured entities. ,Q 2016, WKH *URXS JHQHUDWHG FDVK ßRZV from operating activities of £178.7m. These ZHUH RIIVHW E\ FDVK ßRZV IURP LQYHVWLQJ DFWLYLWLHV RI €54 4P, SULPDULO\ LQ UHODWLRQ to seed capital investments, consolidated structured entities and hedging, and an RXWßRZ RI €280 9P IURP ÞQDQFLQJ DFWLYLWLHV, ODUJHO\ UHßHFWLQJ UHSD\PHQW RI WKH 2016 Senior Notes and dividend payments. The Group is subject to regulatory oversight by the FCA and overseas regulatory bodies. The Group ensures it is compliant with its regulatory obligations at all times. Until April 2016, the Group operated under an investment ÞUP ZDLYHU IURP FRQVROLGDWLRQ VXSHUYLVLRQ ,Q February 2017, Henderson received feedback from the FCA following its review of the Group’s capital position. Henderson’s standalone capital requirement is £216.0m, resulting in capital above regulatory requirement of £69.0m as at 31 December 2016 (2015: £100.0m based on Henderson’s internal calculations). This includes a GHGXFWLRQ IRU WKH 2016 ÞQDO GLYLGHQG Henderson is committed to the active management of its cash and capital resources. The strength of its capital position gives ßH[LELOLW\ DURXQG WKH GHSOR\PHQW RI FDVK DQG capital, be that via organic growth, inorganic investment or returns to shareholders. Despite announcing the intention to buy back shares to the value of £25m in the second half of 2016, the Group decided to cease its on-market share buyback programme following the announcement of the recommended merger of equals with Janus. Dividend The Group operates a progressive ordinary dividend policy and expects to grow ordinary dividends broadly in line with underlying earnings growth over the medium term. The Board declared an interim dividend of 3.20 pence per share and is recommending D ÞQDO GLYLGHQG IRU 2016 RI 7 30 SHQFH SHU share, bringing total dividends for 2016 to 10 50 SHQFH SHU VKDUH 7KH SURSRVHG ÞQDO dividend will be paid on 19 May 2017 to shareholders on the register on 5 May 2017. 2Q 24 -DQXDU\ 2017, WKH *URXS DQQRXQFHG its intention to pay Henderson shareholders DQ H[WUDRUGLQDU\ GLYLGHQG, UHßHFWLQJ LWV ÞUVW quarter 2017 earnings, prior to the closing of the merger. The anticipated dividend payment will be of commensurate value to any Janus ÞUVW TXDUWHU 2017 GLYLGHQG, DQG UHPDLQV VXEMHFW WR ÞQDO +HQGHUVRQ %RDUG DSSURYDO 15% Mandates Offshore Acquisition related and non-recurring items The acquisition related and non-recurring items are disclosed separately from that of WKH *URXSpV XQGHUO\LQJ SURÞW WR HQDEOH WKH XVHUV RI RXU ÞQDQFLDO VWDWHPHQWV WR EHWWHU XQGHUVWDQG WKH FRPSRQHQWV RI RXU WRWDO SURÞW These costs totalled £60.1m after tax (2015: £35.9m) and are primarily attributable to intangible amortisation of previously acquired investment management contracts. ,Q 2016, WKH *URXS UHFRJQLVHG QRQ-UHFXUULQJ costs of £12.2m before tax relating to deal and integration expenses due to the proposed merger with Janus Capital. Tax 7KH *URXSpV SROLF\ LV WR HQVXUH WKDW SURÞWV DUH subject to tax in accordance with applicable tax laws and regulations in the jurisdictions in which it operates. The tax charge on the Group’s underlying SURÞW IRU 2016 ZDV €43 0P, UHVXOWLQJ LQ DQ HIIHFWLYH WD[ UDWH RI 20 2% (2015 10 4%) in comparison to a UK corporation tax rate of 20.0% (2015 pro-rata: 20.25%). Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Performance fees 6,&$9V 33%Segregated Absolute , QYHVWPHQW Return25%Trusts8% 8. 2(,&V Other3% & Unit Trusts16%

 


40 STR ATEGIC REPORT Key performance indicators We measure our strategic and operational progress through a set of indicators that focus on core performance factors. Treating customers fairly (7&)) Investment performance over 1 and 3 years (%) 1HW IXQG ßRZV (€P) Link to strategy With our clients’ needs at the heart of everything we do, we continue to strive to meet the expectations of our clients and their customers and to embed the fair treatment of customers into WKH ÞUPpV EXVLQHVV PRGHO Embedding is measured using monthly management information to derive a ‘Red Amber Green’ (RAG) rating for each of the six FCA TCF outcomes. Link to strategy Strong investment performance underpins our growth strategy, our reputation and our ability to attract net new money from clients. We measure the percentage of our assets at or exceeding the relevant metric over one and three years to monitor our performance. Link to strategy 1HW IXQG ßRZV DUH D VWURQJ OHDG LQGLFDWRU RI WKH success of our strategy and are a key driver of UHYHQXH DQG SURÞWDELOLW\ 5HßHFWHG LQ WKH PL[ RI RXU IXQG ßRZV DUH LQYHVWPHQW SHUIRUPDQFH, distribution and client service, the success of our product offering in meeting client needs, and our strategy to globalise our business, as well as external market factors. Performance Our continued focus on meeting customer H[SHFWDWLRQV KDV SURDFWLYHO\ LGHQWLÞHG D QXPEHU RI VSHFLÞF DUHDV IRU HQKDQFHPHQW ZKLFK ZHUH addressed over the year (Outcome 5). Key customer-focused initiatives have included: • Henderson has taken a central role in co-ordinating industry feedback to regulators and industry bodies from both product manufacturers and distributors on important customer-focused UHJXODWRU\ FKDQJH VXFK DV 0L),' ,, • Continued engagement with the Henderson Customer Panel – providing a real time dialogue with 600+ of our UK direct Retail clients – to help better understand their needs and inform the launch of products and services • &XVWRPHU ,QWHUHVWV 6WDII 6XUYH\ RQ SHUIRUPDQFH in achieving client goals showed an improved UHVSRQVH UDWH DW 87% (2015 84%, 2014 (UK only): 71%). Performance • At the end of 2016, 50% of funds had outperformed over one year and 77% over three years, demonstrating consistently strong investment performance. Performance • 1HW QHZ PRQH\ RXWßRZ RI (4%) • 7RWDO QHW IXQG RXWßRZV RI €4 0EQ • )ORZV IURP RXU ,QVWLWXWLRQDO EXVLQHVV ZHUH particularly strong in the second half of the year, contributing £0.6bn for the full year • 5HWDLO QHW RXWßRZV RI €4 6EQ UHßHFWHG FOLHQWVp reduced risk appetite and a moderation of demand for European assets • Three year net new money growth of 5%1. Note Note * :KLOH +HQGHUVRQ GRHV QRW JLYH DGYLFH, ZH recognise our responsibilities as a product provider in satisfying ourselves that products we develop are being sold in line with our expectations of the type of customer for which they were designed. 1. Excludes AUM subject to Property WUDQVDFWLRQV ZLWK 7,$$-&5() DQG UHVXOWDQW 7+ 5HDO (VWDWH -9 $80 EXW LQFOXGHV Henderson UK Property fund. Henderson Group plc Annual Report 2016 RAG count (months) 2015 2016 Outcome 1 Culture Outcome 2 Products 2015 2016 Outcome 3 Information 2015 2016 Outcome 4 Advice* 2015 2016 Outcome 5 Performance 2015 2015 2016 Outcome 6 Barriers 1HW IXQG ßRZV (£bn) 10,000 -2,000 -4,000 -6,000 2012 2013 2014 2015 2016 5HWDLO QHW ßRZV ,QVWLWXWLRQDO QHW ßRZV 7RWDO QHW ßRZV 8,000 6,000 4,000 2,000 0 Investment performance (%) 100 80 60 40 20 0 2012 2013 2014 2015 2016 % of assets at/exceeding relevant metric over: 1 year 3 years Treating customers fairly (TCF) 0 2016: achieved 2015: achieved 2016: Not yet achieved 2016 ,Q SURJUHVV 2015 ,Q SURJUHVV 12 10 8 6 4 2 KPI 3 KPI 2 KPI 1

 


41 For more information on our strategy go to page 14 Fee margins (ESV)2 Operating margin and compensation ratio (%)2 Earnings per share on continuing underlying SURÞW (S)2 Link to strategy Fee margins are under constant pressure across our industry – from clients, intermediaries, competitors and regulators. Our average fee margin is a strong indicator of our ability to adapt and respond to these pressures, by delivering the right product at the right price to our clients, globally. Link to strategy Our ability to deliver value to our clients and shareholders depends on achieving the right balance between investing in the growth of our business, rewarding and retaining our staff and RSHUDWLQJ HIÞFLHQWO\ 7KHVH WZR UDWLRV HQDEOH us to monitor this balance. Link to strategy Earnings per share on continuing underlying SURÞW LV D FOHDU PHDVXUH RI RXU DELOLW\ WR GHOLYHU VXVWDLQDEOH, SURÞWDEOH JURZWK RQ D JOREDO EDVLV, and deliver value to our shareholders. Performance • Total fee margin and net margin decreased to 61.1bps and 22.3bps respectively. The softening was predominantly driven by lower net fee income as a result of reduced performance fees • Management fee margin decreased to 53.0bps, ODUJHO\ DWWULEXWDEOH WR 5HWDLO RXWßRZV DQG RQJRLQJ fee pressure. Performance • Despite disciplined expense management, operating margin decreased in 2016 to 35.1%, driven by lower performance fee income • &RPSHQVDWLRQ UDWLR GHFUHDVHG LQ 2016 WR 43 7%, UHßHFWLQJ ORZHU YDULDEOH HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV Performance • 'LOXWHG HDUQLQJV SHU VKDUH RQ XQGHUO\LQJ SURÞW decreased to 15.2 pence in 2016, down from 17.2 pence in 2015 • The contraction was primarily driven by a higher HIIHFWLYH WD[ UDWH (20 2% FRPSDUHG WR 10 4% LQ 2015) DV ZHOO DV UHGXFHG SURÞWV Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Earnings per share on continuing XQGHUO\LQJ SURÞW (p)2 25 20 15 10 5 0 2012 2013 2014 2015 2016 Basic Diluted Operating margin and compensation ratio (%)2 50 45 40 35 30 2012 2013 2014 2015 2016 Compensation ratio Operating margin Fee margins (bps)2 100 80 60 40 20 0 2012 2013 2014 2015 2016 Total fee margin Management fee margin Net margin2 Note 2. Net margin, compensation ratio, operating margin and diluted earnings per share are DOO EDVHG XSRQ FRQWLQXLQJ XQGHUO\LQJ SURÞW which, while not a GAAP measure, in the opinion of the Directors, gives relevant LQIRUPDWLRQ RQ WKH SURÞWDELOLW\ RI WKH *URXS and its ongoing operations. KPI 6 KPI 5 KPI 4 Link to strategy 'HOLYHU ÞUVW-FODVV investment performance and service to our clients Expand our global investment offering to meet the current and future needs of our clients Diversify our business 2SHUDWH HIÞFLHQWO\

 


42 STR ATEGIC REPORT Risk management The primary purpose of the Risk and Compliance functions is to assist Henderson in achieving its strategic objectives by ‘doing the right business in the right way’. Developments in 2016 Macroeconomic and geopolitical risks throughout 2016 have continued to impact market prices and investors’ risk appetite. These included: • The low interest rate environment, with the potential that the rate cycle may be starting to turn as the year draws to a close • Risks to emerging market economies, notably China, and related commodity price risks • Continued uncertainty over the impact of the tightening of monetary policy in the US. Geopolitical risks included: • The UK’s referendum on its EU membership, which led to investor hesitation in the run up to the vote, a subsequent market shock immediately following the result and nervousness over the medium term impact • The US election, which has led to uncertainty following the anti-establishment result • Sustained positioning of Russia in relation to HDVWHUQ (XURSH DQG LWV LQFUHDVLQJ LQßXHQFH in the Middle East • The increased terrorism threat and instability OLQNHG WR ,6,6 DQG RWKHU H[WUHPLVW JURXSV The market impact of the UK’s referendum on EU membership was relatively short lived in relation to UK large-cap equities, however investor risk appetite in relation to European assets fell, triggering Retail redemptions. 7KH UHIHUHQGXP UHVXOW OHG WR D VLJQLÞFDQW increase in redemptions in open-ended UK Property funds. Although we had increased the liquidity buffer in Henderson’s UK Property Fund ahead of the referendum, WKH OHYHO RI RXWßRZV t SDUWLFXODUO\ DIWHU RWKHU funds in the sector suspended dealing – were higher than anticipated. We concluded it was in the best interests of investors to close Henderson’s UK Property Fund to subscriptions and redemptions on 5 July 2016. Following a period of stabilisation and additional liquidity building, the fund UH-RSHQHG WR LQYHVWRUV RQ 14 2FWREHU 2016 The devaluation of sterling on the currency markets has been more sustained since the vote, although the impact on Henderson’s business has been broadly positive. ,QYHVWPHQW XQGHUSHUIRUPDQFH ULVN, ERWK relative to benchmark and in absolute terms, continues to be a key risk affecting the Group’s business. Market reactions to political events have made this a particularly GLIÞFXOW \HDU WR JHQHUDWH FRQVLVWHQW investment performance and these risks remain as we go into 2017. The intensity of regulatory scrutiny continued LQ WKH \HDU ,Q WKH 8., WKH )&$ SXEOLVKHG WKHLU interim Asset Management Market Study report, focusing on competition and value for money. The report contains a number of VLJQLÞFDQW ÞQGLQJV DQG WKH LPSOLFDWLRQV RI WKH potentially far-reaching ‘remedies’, covering both retail investment funds and investment management services to institutional investors, will need to be assessed. The potential for downward pressure on fees appears high. :KLOVW WKH LPSOHPHQWDWLRQ GHDGOLQH RI 0L),' ,, ZDV GHOD\HG XQWLO -DQXDU\ 2018, WKH VFDOH of work required to meet the wide-ranging UHTXLUHPHQWV KDV QHFHVVLWDWHG D VLJQLÞFDQW programme of projects running throughout the year. The competitive and technological advances in the industry have increased in the year, with the continued popularity of passive funds and ETFs, and the growing acceptance of alternative approaches such as smart beta investment or the provision of investment services by robo-advisors. The potential disruptive effect of these trends on our business model is closely monitored. Henderson Group plc Annual Report 2016 “Market and liquidity risks, cyber risks and the intensity of regulatory change were key themes in the year.” Chris Chaloner &KLHI 5LVN 2IÞFHU

 


43 Risk & Executive & Internal Audit division and operating business. Audit Committee. Compliance functions which Cyber risks have remained a key focus for the Group and its regulators in the year. The recruitment of an experienced Chief ,QIRUPDWLRQ 6HFXULW\ 2IÞFHU LQ )HEUXDU\, who works closely with the Risk function, IXUWKHU VXSSRUWHG WKH ÞUPpV FRQWLQXHG enhancements in this critical area. There has been little structural change to the business in 2016, and so internal risks have remained broadly consistent with the prior year, in being primarily driven by the ongoing embedding and support of our global teams. Global risk management capabilities have continued to develop to ensure an appropriate level of partnership and challenge to the growing business. Merger with Janus Capital Group On 3 October 2016 Henderson announced its planned merger with Janus Capital Group, D JOREDO DVVHW PDQDJHPHQW ÞUP EDVHG LQ 'HQYHU, 86$ 7KH EHQHÞWV RI WKH PHUJHU DQG KRZ LW ÞWV ZLWK RXU VWUDWHJLF REMHFWLYHV have been articulated on pages 12 and 13. The risks associated with a merger of this scale include: • The broad risk of strategic failure and negative economics from the transaction • The risk of organisational stress and stretch leading to people, process or system failures • The loss of key individuals or teams. The strategic risks have been mitigated by a robust programme of due diligence carried out by a focused and experienced team. Organisational stress is being mitigated by separate completion and integration programmes, staffed by senior, experienced staff and supported by external specialists. Where business staff are engaged in completion or integration activities, consideration is given to the need for EDFN-ÞOOLQJ RI UROHV WR HQVXUH WKDW WKH EXVLQHVV DV XVXDO IXQFWLRQLQJ RI WKH ÞUP DQG RXU VHUYLFH to our clients is unaffected. Communication regarding the activities underway is frequent and as transparent as possible to ensure that staff are engaged in the process, and morale across the business is closely monitored by management and Human Resources. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Risk management framework Henderson Group plc Board 1st line of defence2nd line of defence3rd line of defence Chief management Compliance • Primary responsibility for strategy,• Overall responsibility for risk• ,QGHSHQGHQW DVVXUDQFH RQ WKH performance and risk managementmanagement oversight lies witheffectiveness of the risk lies with the Board, the Chiefthe Board Risk Committee.management systems is provided Executive and the heads of each• The CRO leads the Risk andE\ ,QWHUQDO $XGLW UHSRUWLQJ WR WKH • Business management isprovide day-to-day independent• Audit of business areas is based responsible for ensuringmonitoring and assessment of on an assessment of risk with Henderson has in place effective the risks in the divisions and higher risk activities audited internal controls.operating business. more frequently. Board Risk Audit Committee Committee

 


44 STR ATEGIC REPORT Risk management continued Capital position Henderson’s risk exposure has not materially changed in 2016. Through the continued delivery on our objectives, the Group’s gross capital resources have increased and our capital position remains within the Board’s risk appetite, with net capital above the £216.0m regulatory requirement by £69.0m at 31 December 2016. Risk management framework Risk management is a fundamental component of our global operating model and is deeply integrated in our day-to-day processes and controls. Although overall accountability for risk management lies with the Board, the principle of individual accountability and responsibility for risk awareness, monitoring and management is a key feature of our culture. All staff are assessed against their approach to, and demonstration of, risk management as part of the year end appraisal process. Henderson’s approach to risk management is documented in our risk appetite statement, ZKLFK LQFOXGHV VSHFLÞF TXDOLWDWLYH DQG quantitative statements covering the material risks which the Group faces as a result of its business model and strategy. The successful management of these risks is considered essential to the successful delivery of the Group’s strategic goals and the risk appetite statement provides direction as to the levels of risk which the business can take. The statement is updated on at least an annual basis and incorporates risk limits which, if reached, will prompt management to take action to reduce risk levels. These are supported by a broad range of key risk metrics to ensure the Board is able to assess levels of risk across the business against the mandated appetite. The risk appetite statement has been considerably enhanced during the year to provide more depth and transparency for the Board, covering the nine Principal Risks GHWDLOHG RQ SDJHV 46 DQG 47, DQG RWKHU VLJQLÞFDQW ULVNV QRWHG EHORZ 7KH %RDUG undertakes an annual review of the material ULVNV DIIHFWLQJ WKH ÞUP WR HQVXUH WKDW WKH 3ULQFLSDO 5LVNV LGHQWLÞHG UHPDLQ UHOHYDQW and appropriate from one year to the next. Principal Risks: • ,QYHVWPHQW SHUIRUPDQFH • Market • )XQG ßRZ • People • Acquisitions and divestments • Strategic • Fund liquidity • Regulatory change • 2SHUDWLRQDO, ,7 DQG OHJDO Other Risks: • Foreign exchange • Pension obligation • Tax • Client concentration • ,QWHUHVW UDWH • Credit • Corporate liquidity. Henderson treats reputational risk as a consequence of other risks crystallising, rather than as a distinct category of primary risk in itself. Whilst considered a second order risk it is nonetheless critical, as any event that results in damage to Henderson’s reputation or brand could trigger a consequential loss of client trust, on which the business is centred. The Board and senior management take a forward looking view of risk to enable timely assessment and, where necessary, mitigation of new and emerging risks. The risk management process supports this approach WKURXJK WKH HDUO\ LGHQWLÞFDWLRQ RI HPHUJLQJ risks so that they can be evaluated alongside known and continuing risks. The risk management framework is documented in the Group’s risk management policy, a summary of which can be found on our website (henderson.com/ir). Three lines of defence Our framework utilises a ‘three lines of defence’ approach to managing risk. 7KH ÞUVW OLQH FRPSULVHV WKH &KLHI ([HFXWLYH and business management, who are responsible for the management of the Group on a day-to-day basis in accordance with our risk appetite. The second line comprises the Risk and Compliance functions which monitor the ÞQDQFLDO, LQYHVWPHQW, RSHUDWLRQDO DQG regulatory risks in the business and the related controls in place to manage these risks. The Risk and Compliance teams report to the Chief 5LVN 2IÞFHU (&52), ZKR LV LQGHSHQGHQW RI management and reports directly to the chair of the Board Risk Committee (BRC). The CRO attends all Board, Audit Committee and BRC meetings and detailed Risk and Compliance reporting is provided to these meetings by the second line functions. The CRO is also a member of the ExCo to ensure that risk management remains central to all aspects of business strategy and management. 7KH WKLUG OLQH FRPSULVHV ,QWHUQDO $XGLW ZKLFK provides independent assurance over the operational effectiveness of processes and FRQWUROV DFURVV WKH EXVLQHVV ,QWHUQDO $XGLW reports directly to the chair of the Audit Committee. Henderson’s Assurance function The Assurance function comprises both second line of defence (Risk and Compliance) DQG WKLUG OLQH RI GHIHQFH (,QWHUQDO $XGLW) activities. The primary purpose of the Risk and Compliance functions is to assist Henderson in achieving its strategic objectives by ‘doing the right business in the right way’. Consequently, Henderson will successfully protect all its clients’ interests and its reputation as a trusted global asset manager. These goals underpin the work of all of Assurance, although each of the component parts of the function achieves them through different blends of educating, providing oversight and challenge, advising and supporting the business. Henderson Group plc Annual Report 2016

 


45 Viability statement ,Q DFFRUGDQFH ZLWK WKH SURYLVLRQV RI &2 2 of the UK Corporate Governance Code, the Directors have assessed the prospects of the Group, taking into account the current position and the principal risks that could have an impact on the Group’s business model, future performance, solvency or liquidity (VHH SDJHV 46 DQG 47) 7KH %RDUG KDV determined the principal risks through a process of consideration and assessment of Henderson’s strategic objectives and current global business model. The Directors have chosen to consider the SURVSHFWV RI WKH *URXS RYHU D ÞYH \HDU SHULRG, which is consistent with Henderson’s strategic planning process. $V WKH *URXS LV D UHJXODWHG ÞQDQFLDO VHUYLFHV business, the reports and procedures required by the Board to make its assessment are embedded within the Group’s governance processes, which include, but are not limited to, the following: • Budget and strategic planning results and assumptions reviewed by the Board FRQWDLQLQJ SURÞW, FDVK DQG FDSLWDO IRUHFDVWV RYHU WKH QH[W ÞYH \HDUV 7KLV SURFHVV also includes stress testing and a robust downside scenario. The scenarios are designed to be severe, yet plausible, and take into account the likely effectiveness of the mitigating actions that could be taken to reduce the impact should such an adverse event occur • &RQVLGHUDWLRQ E\ WKH %5& RI VLJQLÞFDQW ULVN events that are designed to explore the resilience of the Group as part of its reverse stress testing process • Consideration by the BRC of the Group’s risk appetite statement • Monitoring throughout the year by the BRC of the Group’s strategic risk metrics. The stress testing scenarios were performed on both a standalone and a projected post-merger with Janus basis and include a VLJQLÞFDQW DQG SURWUDFWHG PDUNHW GRZQWXUQ, poor investment performance and client withdrawals, as well as a scenario where the proposed merger does not complete. 7KH ÞYH \HDU VWUDWHJLF SODQQLQJ SHULRG LV considered an appropriate timescale over which to assess viability as this is the period DVVHVVHG E\ WKH %RDUG IRU LWV ,QWHUQDO &DSLWDO $GHTXDF\ $VVHVVPHQW 3URFHVV (,&$$3) DQG is considered to be the length of time required to determine whether a new investment team or strategy will ultimately be successful from ODXQFK 7KH ÞYH \HDU SHULRG SURYLGHV OHVV certainty of outcome than detailed one year budgets used to set internal targets, but provides a robust planning tool against which strategic decisions can be made. The Board have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period used for the assessment. ,Q GRLQJ VR, LW LV UHFRJQLVHG WKDW VXFK IXWXUH assessments are subject to a level of uncertainty that increases with time and, therefore, future outcomes cannot be guaranteed or predicted with certainty. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


46 STR ATEGIC REPORT Risk management continued Strategic priorities and associated principal risks of one or more key low throughout the year structures designed to Henderson Group plc Annual Report 2016 'HOLYHU ÞUVW-FODVV LQYHVWPHQW SHUIRUPDQFH DQG VHUYLFH WR RXU FOLHQWV Expand our global investment offering to meet the current and future needs of our clients Investment performance Market Liquidity )XQG ßRZV Key personnel Description • Risk that Henderson funds fail to achieve their performance hurdles or benchmarks, or performance is poor relative to that of peer funds, leading to increased client redemptions and reduction in AUM associated revenues earned by the Group • Poor fund performance will also result in lower performance fees and reduced revenue. • Risk that market conditions lead to a reduction in the value of clients’ AUM and revenues earned by the Group • Risk that market conditions lead to a decline in the value of Group seed capital investments. • Risk that underlying positions in funds managed by Henderson cannot be sold, liquidated or closed at a reasonable cost in an appropriate timeframe. As a result, a fund may incur losses and have a limited ability to meet its investor redemption obligations. Gating a fund could cause VLJQLÞFDQW UHSXWDWLRQDO damage. • Risk of net redemptions by clients resulting in a decline in AUM and revenues earned by the Group. • Risk that the departure individuals, in e.g. ExCo or one of the Group’s key investment or distribution teams, results in a VLJQLÞFDQW LPSDFW RQ the Group’s revenue, business growth and/or the retention of existing business, or that VLJQLÞFDQW WXUQRYHU results in operational LQHIÞFLHQF\ RU IDLOXUH Trends in 2016 • Weakened fund performance in challenging market conditions, with 50% and 77% of funds (weighted by AUM) outperforming over one and three years respectively. • The volatile global market performance experienced in 2015, continued into 2016 • Short-term impacts to equity markets from shock events such as the EU referendum in the UK and the US election result impacted client AUM values, and global geopolitical risks continue to pose a threat • Continued low interest rate environment. • A spike in redemptions following the result of the EU referendum in the UK led to the temporary suspension of the UK 3URSHUW\ 3$,) • Continued liquidity SUHVVXUH LQ JOREDO Þ[HG income markets • Sudden and large price movements in certain asset classes/securities became more frequent during the year. • )ODW ßRZV LQ WKH ÞUVW half of the year turned negative following the EU referendum vote in the UK, driven by negative investor sentiment and as a UHßHFWLRQ RI WKH *URXSpV scale in European Equities • ,PSURYHG ,QVWLWXWLRQDO ßRZV • 3RVLWLYH ßRZV LQ Australia. • Staff turnover remained in key investment teams, although one member of the ExCo left the Company in the year • Concentration risk in European Equities has reduced in the year and the percentage of Group revenues managed by any individual remains GLYHUVLÞHG Mitigation • Robust investment process including detailed research • Clearly articulated investment philosophy including analysis of our funds by comparing their performance against appropriate benchmarks • Broad range of asset classes and fund styles reduces the probability of all funds underperforming at the same time • ,QGHSHQGHQW ,QYHVWPHQW Risk function provides monitoring and challenge to ensure that the level of risk taken for each portfolio is consistent with client expectations. • Risk of a fall in the value of clients’ AUM is mitigated by having a broad range of clients by distribution channel, product, asset class and region • $ VLJQLÞFDQW DPRXQW of our expense base is variable • Limits on the aggregate amount of seed capital investment, GLYHUVLÞFDWLRQ RI WKH assets invested and appropriate hedging of the risks. • Liquidity risks considered during implementation of new products and approval of new instrument types • Dilution levies, swing prices and, in extreme circumstances, gating are used to ensure that all investors are treated fairly • Detailed oversight and challenge of holdings E\ ,QYHVWPHQW 5LVN, including stress and scenario testing of portfolios, with timely reporting and escalation to ExCo and Board • Close monitoring of global markets and liquidity events to ensure appropriate actions are taken as required. • Diversity of sources of revenue by asset class, capability, fund style, strategy and geography • Diversity of investor base between Retail and ,QVWLWXWLRQDO FKDQQHO and by geography • Solid long-term investment performance across product ranges. • Competitive remuneration recognise and reward staff performance that is in line with our principles • Succession plans are in place throughout the organisation to ensure that there is cover for key roles • Regular staff surveys are undertaken to identify any issues which could impact staff retention • Comprehensive training is offered to staff to improve skills and engagement • Strategy of sustaining broad and diverse fund manager teams to avoid dependence on single managers or teams.

 


47 Reputational risk This is the risk that negative publicity regarding the Group will lead to client redemptions and a decline in AUM and revenue and/or to litigation. The risk of damage to the Group’s reputation is considered more likely to result from one of the other risks materialising rather than as a standalone risk. Reputational risk is, therefore, mitigated primarily by the controls in place around our principal risks, but is also supported by our client-centric culture, which focuses on openness, transparency and delivery for clients. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Diversify our business 2SHUDWH HIÞFLHQWO\ Acquisitions and divestments Strategic Operational, IT and legal Regulatory change • Risk that an acquisition is a strategic failure, delivers negative economics or adversely impacts other parts of the business • Risk of organisational stress or process failures through potential demands on staff and resources through the need to integrate acquired businesses or to reorganise processes to divest parts of the business. • Risk that Henderson’s business strategy fails to deliver the required and expected outcomes for stakeholders • Risk that technological innovation and/or new market entrants within the asset management industry UHGXFHV SURÞWDELOLW\ DQG UHTXLUHV a fundamental change to Henderson’s business model. • Risk of losses through inadequate or failed internal processes, people or systems or through external events. This includes the risk of loss arising from failing to manage our key outsourced service providers SURSHUO\, IDLOLQJ WR PDQDJH ÞQDQFLDO crime risks, failing to manage operational aspects of our global expansion, the risk arising from major disruption to our business, including from cyber crime, and the risk of losses from trade execution errors or breaches of investment mandates • Risk of losses from litigation. • Risk that a change in laws and regulations, however driven, will materially affect the Group’s global business or markets in which it operates. This risk may affect the business either directly or indirectly by reducing investors’ appetite for our products, increasing capital requirements, restricting our ability to sell certain products or pursue VSHFLÞF LQYHVWPHQW VWUDWHJLHV, UHGXFLQJ RXU SURÞWDELOLW\ WKURXJK fee restrictions, affecting our ability to retain key personnel and/or increasing the cost and complexity of the Group’s business. • Announcement of the Group’s proposed merger with Janus Capital LLC, targeted for completion in second quarter of 2017 • Announcement of the transition RI WKH 9RODQWLV KHGJH IXQG WHDP WR /RPEDUG 2GLHU LQ WKH ÞUVW TXDUWHU of 2017 • Wind down of the joint ventures with Northern Pines Capital and 2SWLPXP ,QYHVWPHQW 0DQDJHPHQW • Continued innovation within the asset management industry, with ongoing focus on reduced costs and debate as to the relative merits of passive, ‘smart beta’ and active management strategies and business models • Emergence of low cost solution providers giving online discretionary investment management/ robo-advice. • Continued increase in the number and sophistication of acts of cyber FULPH DJDLQVW ÞUPV JHQHUDOO\ • Global expansion increases general operational risks through new staff, locations, system requirements and new/expanded third party relationships • ,VVXHV H[SHULHQFHG E\ VRPH of our third party service providers as a result of change projects. • The FCA Asset Management Market Study interim report highlighted the regulatory focus on competition and value for money in the sector • The pace of issuance of new regulation slowed, however the implementation of major regulatory change was a continued focus with central counterparty clearing for OTC GHULYDWLYHV, 0L),' ,, DQG )&$ 6HQLRU 0DQDJHUV DQG &HUWLÞFDWLRQ 5HJLPH • UK referendum result and the ongoing uncertainty created. • Acquisitions/divestments/mergers FRQVLGHUHG RQO\ ZKHUH WKH\ ÞW ZLWK our strategic goals and meet our ÞQDQFLDO FULWHULD VXFK WKDW ZH FDQ realise value for our shareholders. The Board’s risk appetite statement includes quantitative and qualitative criteria that must be met by any acquisition/divestment • Thorough due diligence performed before any acquisition is made, including assessment of our ability to successfully integrate any acquired/merging business • 6SHFLÞF JRYHUQDQFH DQG project management structures implemented for acquisitions/ disposals • ,QWHJUDWLRQ ULVN, SRVW-FORVLQJ, LV managed, monitored and reported. • Concentration on delivery of Henderson’s strategy through SURYLVLRQ RI ÞUVW-FODVV DFWLYHO\ managed investment performance and service for our clients DV HIÞFLHQWO\ DV SRVVLEOH • Monitoring of emerging developments in the asset management industry, which might pose a threat to our current business model • Maintaining a clear understanding of our clients’ needs through communication and interaction. • Our control systems are designed to ensure operational and legal risks are mitigated to a level which is consistent with our risk appetite • Globally embedded ‘three lines of defence’ model is key • 'HGLFDWHG &KLHI ,QIRUPDWLRQ 6HFXULW\ 2IÞFHU UHFUXLWHG LQ WKH ÞUVW TXDUWHU RI 2016 WR FRRUGLQDWH ,7 VHFXULW\ DQG VHUYLFH GHOLYHU\ • Outsourced service providers are overseen by the relevant line function and the controls of key service providers are also reviewed by the Group’s Assurance function • We maintain and test service and business continuity plans, including crisis management, which are designed to ensure that, in the event of business disruption, we can maintain our operations without material damage to the business. • Continued active and constructive engagement with regulators through regular dialogue • Positive engagement in regulatory initiatives and studies • Regulatory developments are monitored by a dedicated team in Compliance, in liaison with external experts where required • Formalised cross-business project groups implement required changes to our business processes • Active involvement with and through relevant industry bodies.

 


48 SCOTRRAPTOERGAICTERGEOPOVERRTNANCE Contents 49 50 54 Chairman’s introduction Board of Directors and leadership Strategy, governance structure and Board business Effectiveness Nomination Committee report Accountability Board Risk Committee report Audit Committee report Relations with shareholders Directors’ remuneration report Compliance statements and application of principles and recommendations Directors’ report Directors’ responsibilities statement Independent auditors’ report 56 57 59 60 62 66 67 85 89 91 92 CORPORATE GOVERNANCE

 


 

49 Chairman’s introduction Dear Shareholder , DP SOHDVHG WR UHSRUW WKDW ZH KDYH FRQWLQXHG on our journey of growth and globalisation with the proposed transformational merger of equals between Henderson and Janus Capital. As you would expect the Board spent a great deal of time considering the merger, which continues to be the case. Updates and presentations were made to the Board throughout 2016 and we also constituted a committee to oversee the necessary due diligence which considered the proposed VWUXFWXUH, ULVN IDFWRUV, ÞQDQFH LVVXHV, WD[ matters, operational matters, people matters and legal issues. The Janus merger was considered against a backdrop of Brexit. Brexit dominated the headlines over the last year, and it is also a matter which received regular attention from the Board, with updates being made in the earlier part of the year regarding the possible outcome of the referendum vote and potential risks to the Group and, since the referendum, on the effect and possible implications of Brexit. The Directors fully recognise the importance of corporate culture. During 2016, the Board received an update on the key actions XQGHUZD\ WR DGGUHVV WKH ÞQGLQJV DQG conclusions reported to the Board following the review of culture carried out by ,QWHUQDO $XGLW DQG .30* LQ 2015. ,Q DGGLWLRQ, a self-assessment of the culture of both Henderson and Janus Capital has been carried out which showed remarkably similar results between the two organisations. $V , XVXDOO\ PHQWLRQ, +HQGHUVRQ RSHUDWHV LQ a constantly evolving regulatory environment. A great deal of time was spent by a dedicated committee of the Board to review the work the Group is undertaking in enhancing various areas of its control environment. The work of this committee has since been transferred to the Audit Committee. 6HH SDJH 64 RI WKH $XGLW &RPPLWWHH UHSRUW. We continue to have in place a robust governance framework that underpins and enables us to deliver on our strategy DQG VXSSRUW RXU EXVLQHVV PRGHO DQG , KRSH \RX ÞQG XVHIXO WKH UHSRUWV IURP WKH &KDLUV of the Audit, Nomination, Remuneration and Board Risk Committees. This Corporate Governance Statement is correct as at 8 February 2017 and has been approved by the Board of Directors. Our formal compliance statements with an explanation of how we applied the principles of the UK Governance Code and the recommendations set out in the ASX Principles are set out on pages 85 to 88 Richard Gillingwater Chairman 8 February 2017 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION “The Board spent a great deal of time considering the merger with Janus Henderson, which continues to be the case.” Richard Gillingwater Chairman

 


50 CORPOR ATE GOVERNANCE Board of Directors and Leadership The Board comprises a Non-Executive Chairman, three Executive Directors and six other Non-Executive Directors. Kalpana Desai ,QGHSHQGHQW Non-Executive Director Richard Gillingwater Non-Executive Chairman Phil Wagstaff Global Head of Distribution Robert Jeens ,QGHSHQGHQW Non-Executive Director Andrew Formica Chief Executive Henderson Group plc Annual Report 2016

 


51 Sarah Arkle ,QGHSHQGHQW Non-Executive Director Roger Thompson &KLHI )LQDQFLDO 2IÞFHU Angela Seymour-Jackson ,QGHSHQGHQW Non-Executive Director Kevin Dolan ,QGHSHQGHQW Non-Executive Director Tim How ,QGHSHQGHQW Non-Executive Director Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


52 CORPOR ATE GOVERNANCE Board of Directors and Leadership continued Non-Executive Chairman Executive Directors Non-Executive Directors Richard Gillingwater Chairman of the Board and Chairman of the Nomination Committee Experience: Mr Gillingwater served as Dean of Cass Business School until 2012. Prior to this, he spent 23 years in investment banking at Kleinwort Benson Group plc, before moving to BZW and, in due course becoming joint Head of Corporate Finance and then latterly Chairman of European ,QYHVWPHQW %DQNLQJ DW &UHGLW 6XLVVH First Boston (which took over BZW). After banking, he served as Chief Executive and later Chairman of WKH 6KDUHKROGHU ([HFXWLYH. ,Q KLV non-executive career, he has been Chairman of CDC Group plc and also a non-executive director of P&O, Debenhams, Homebase, Tomkins, Qinetiq Group, Kidde, Hiscox and Wm Morrison Supermarkets. 7HUP RI RIÞFH–: Non-Executive Director since February 2013 and appointed as Chairman following the AGM in May 2013. Current three year term RI RIÞFH H[SLUHV LQ )HEUXDU\ 2019. External appointments and VLJQLÞFDQW FRPPLWPHQWV: Currently Chairman of SSE plc and a Non-Executive Director of Helical Bar plc. Committee membership: • Nomination Committee (Chairman) • Attends other Committee meetings by invitation. Andrew Formica Chief Executive Experience: 0U )RUPLFD KDV EHHQ ZLWK WKH ÞUP and in the fund management industry since 1998. He has held various senior roles with Henderson and he has been a member of the executive FRPPLWWHH VLQFH 2004. 3ULRU WR EHLQJ appointed Chief Executive, he served as Joint Managing Director of the Listed Assets business (from September 2006) and as Head of (TXLWLHV (IURP 6HSWHPEHU 2004). ,Q WKH HDUO\ SDUW RI KLV FDUHHU, KH ZDV an equity manager and analyst for Henderson. Mr Formica was D GLUHFWRU RI 7,$$ +HQGHUVRQ 5HDO (VWDWH /LPLWHG IURP $SULO 2014 to July 2015. 7HUP RI RIÞFH–: Executive Director since November 2008. 1R Þ[HG WHUP RI RIÞFH. External appointments: 6HQLRU ,QGHSHQGHQW 'LUHFWRU RI WKH %RDUG RI 7KH ,QYHVWPHQW $VVRFLDWLRQ. Non-Executive Director of Hammerson plc since 26 November 2015. Committee membership: • Attends Committee meetings by invitation. Phil Wagstaff Global Head of Distribution Experience: Mr Wagstaff has over 28 years of experience in the fund management industry and has been the Global Head of Distribution at Henderson since 2012. Prior to this he was Global Head of Distribution at *DUWPRUH ,QYHVWPHQW 0DQDJHPHQW Limited from 2007–2011, and he has also held managing director roles in UK Retail with both New Star Asset Management (2005–2007) and 0&* ,QYHVWPHQWV (2000t2004). He was previously at Henderson IURP 1994t1997 DV /RQGRQ Regional Sales Director. 7HUP RI RIÞFH–: Executive Director since May 2016. 1R Þ[HG WHUP RI RIÞFH.  External appointments: None. Committee membership: • Attends Committee meetings by invitation. Sarah Arkle Independent Non-Executive Director and Chair of the Board Risk Committee Experience: 0V $UNOH KDV EHHQ LQ WKH ÞQDQFLDO VHUYLFHV LQGXVWU\ IRU RYHU 34 \HDUV. She joined Allied Dunbar Asset Management in 1983, which became 7KUHDGQHHGOH LQ 1994. 6KH VHUYHG DV QRQ-H[HFXWLYH 9LFH &KDLUPDQ RI Threadneedle Asset Management Ltd until the end of July 2012 and as Chief ,QYHVWPHQW 2IÞFHU XQWLO 'HFHPEHU 2010, a role she held for 10 years. She was instrumental in establishing Threadneedle’s investment process DQG UHFUXLWLQJ D QXPEHU RI WKH ÞUPpV senior fund managers. Previously, Ms Arkle worked at the Far Eastern VWRFNEURNHU :, &DUU (2YHUVHDV) Limited and was an advisor to the South Yorkshire Pension Fund. 7HUP RI RIÞFH–: Non-Executive Director since September 2012. Current three \HDU WHUP RI RIÞFH H[SLUHV LQ September 2018. External appointments: Non-Executive Director of Foreign & &RORQLDO ,QYHVWPHQW 7UXVW SOF DQG a member of the Newnham College, &DPEULGJH ,QYHVWPHQW &RPPLWWHH. Non-Executive Director of JPMorgan (PHUJLQJ 0DUNHWV ,QYHVWPHQW Trust plc. Committee membership: • Board Risk Committee (Chair) • Audit Committee • Nomination Committee • Remuneration Committee. Roger Thompson &KLHI )LQDQFLDO 2IÞFHU Experience: Mr Thompson joined Henderson from J.P. Morgan Asset Management where he served latterly as Global Chief 2SHUDWLQJ 2IÞFHU DQG ZDV SUHYLRXVO\ Head of UK and, prior to that, ,QWHUQDWLRQDO &)2. ,Q KLV 19 \HDU career at J.P. Morgan, Mr Thompson held a broad range of roles and worked internationally, spending time in Tokyo, Singapore and Hong Kong. He has wide-ranging asset management experience, both in the UK and internationally. 7HUP RI RIÞFH–: Executive Director since June 2013. 1R Þ[HG WHUP RI RIÞFH.  External appointments: None. Committee membership: • Attends Committee meetings by invitation. Kalpana Desai Independent Non-Executive Director Experience: Ms Desai has over 30 years of international advisory and investment banking experience, primarily gained LQ WKH $VLD-3DFLÞF UHJLRQ. 8QWLO 2013, Ms Desai was Head of Macquarie Capital Asia, the investment banking division of Macquarie Group Limited, headquartered in Australia. Prior to WKLV, VKH ZDV +HDG RI $VLD-3DFLÞF Mergers & Acquisitions, and a Managing Director from 2001 in the ,QYHVWPHQW %DQNLQJ 'LYLVLRQ RI %DQN of America Merrill Lynch, based in +RQJ .RQJ, KDYLQJ MRLQHG WKDW ÞUP in 1998. Earlier, Ms Desai worked in the Corporate Finance Divisions of Barclays de Zoete Wedd in London and Hong Kong and at J. Henry Henderson Group plc Annual Report 2016

 


53 Schroder Wagg in London, having started her career in the Financial Services Consulting Division of Coopers & Lybrand in London. She was a member of the Takeovers and Mergers Panel of the Securities and Futures Commission in Hong Kong IURP 2007t2014. External appointments: Non-Executive Director of Canaccord *HQXLW\ *URXS ,QF., KHDGTXDUWHUHG in Canada. 7HUP RI RIÞFH–: Non-Executive Director since October 2015. Ms Desai’s current WKUHH \HDU WHUP RI RIÞFH H[SLUHV in October 2018. Committee membership: • Board Risk Committee • Audit Committee • Nomination Committee • Attends Remuneration Committee meetings by invitation. 7HUP RI RIÞFH–: Non-Executive Director since July 2009. Mr Jeens’ current term RI RIÞFH H[SLUHV LQ -XO\ 2017. External appointments: Non-Executive Director of JP Morgan Russian Securities plc and Chairman of Allianz Technology Trust plc (previously RCM Technology Trust plc). Committee membership: • Audit Committee (Chairman) • Board Risk Committee • Nomination Committee • Attends Remuneration Committee meetings by invitation • &RQßLFWV RI ,QWHUHVW &RPPLWWHH (Chairman). Tim How Senior Independent Director and Chairman of the Remuneration Committee Experience: Mr How has extensive business experience. He was Chief Executive of Majestic Wine plc from 1989 until August 2008 and was formerly Managing Director of Bejam Group plc. He was Chairman of Downing ,QFRPH 9&7 4 SOF (IRUPHUO\ )UDPOLQJWRQ $,0 9&7 SOF) XQWLO December 2013 and Deputy Chairman of the Peabody Trust and Non-Executive Director of Peabody &DSLWDO SOF XQWLO )HEUXDU\ 2014. 7HUP RI RIÞFH–: Non-Executive Director since November 2008 and Senior ,QGHSHQGHQW 'LUHFWRU VLQFH -DQXDU\ 2010. Mr How’s current term of RIÞFH H[SLUHV LQ 1RYHPEHU 2017. External appointments: Chairman of both Woburn Enterprises Limited and Roys (Wroxham) Ltd. He is also Non-Executive Director of Dixons Carphone plc and Senior ,QGHSHQGHQW 'LUHFWRU RI WKH 1RUIRON and Norwich University Hospitals NHS Foundation Trust. Committee membership: • Remuneration Committee (Chairman) • Audit Committee • Nomination Committee • Attends Board Risk Committee meetings by invitation. Angela Seymour-Jackson Independent Non-Executive Director Experience: Ms Seymour-Jackson has over 20 \HDUVp H[SHULHQFH LQ UHWDLO ÞQDQFLDO services. She has held various senior marketing and distribution roles in 1RUZLFK 8QLRQ ,QVXUDQFH, *HQHUDO $FFLGHQW ,QVXUDQFH, &*8 SOF DQG Aviva. She was Chief Executive 2IÞFHU RI 5$& 0RWRULQJ 6HUYLFHV Limited from 2010 until 2012 and led its sale to Carlyle. She was Managing Director of the Workplace Solutions Division at Aegon U.K. from 2012 until September 2016. 7HUP RI RIÞFH–: Non-Executive Director since -DQXDU\ 2014. 0V 6H\PRXU-Jackson’s current three year term RI RIÞFH H[SLUHV LQ -DQXDU\ 2020. External appointments: Non-executive director of Rentokil ,QLWLDO SOF DQG HVXUH *URXS SOF. She is also Deputy Chair and Senior ,QGHSHQGHQW 'LUHFWRU DW *RFRPSDUH. com Group plc, which listed on the LSE on 3 November 2016. Ms Seymour-Jackson is also a Senior Advisor to Lloyds Banking Group (insurance). Committee membership: • Board Risk Committee • Nomination Committee • Remuneration Committee • Attends Audit Committee meetings by invitation. Kevin Dolan Independent Non-Executive Director Experience: 0U 'RODQ KDV EHHQ LQ WKH ÞQDQFLDO services industry for over 36 years; he has extensive experience in working in large global investment management organisations, as well as in M&A transactions, both in Europe and the US Mr Dolan has held various executive positions, including as Chief Executive of the Asset Management 'LYLVLRQ RI %DQN RI ,UHODQG *URXS DQG Chief Executive of Edmond de Rothschild Asset Management. He spent 10 years with the AXA Group, in London, New York and Paris where KH VHUYHG DV &KLHI ([HFXWLYH 2IÞFHU RI $;$ ,QYHVWPHQW 0DQDJHUV 3DULV, and Global Deputy Chief Executive 2IÞFHU RI $;$ ,QYHVWPHQW 0DQDJHUV. He was Chief Executive of La Fayette ,QYHVWPHQW 0DQDJHPHQW LQ /RQGRQ from 2006 until 2009. 7HUP RI RIÞFH1: Non-Executive Director since September 2011. Mr Dolan’s current WKUHH \HDU WHUP RI RIÞFH H[SLUHV in September 2017. External appointments: )RXQGLQJ SDUWQHU RI $QDÞQ //& DQG D senior advisor to One Peak Partners. Committee membership: • Board Risk Committee • Nomination Committee • Remuneration Committee • Attends Audit Committee meetings by invitation. Robert Jeens Independent Non-Executive Director and Chairman of the Audit Committee Experience: Mr Jeens has extensive experience in ÞQDQFLDO VHUYLFHV, LQLWLDOO\ DV DQ DXGLW partner in Touche Ross & Co, and subsequently as Finance Director of Kleinwort Benson Group plc and Woolwich plc. His previous non-executive director appointments include serving as the Chairman of nCipher plc and the Deputy Chairman of Hepworth plc. Mr Jeens was a non-executive director of The Royal /RQGRQ 0XWXDO ,QVXUDQFH 6RFLHW\ Limited from 2003 until May 2012. He resigned as a non-executive director of TR European Growth Trust SOF LQ -XQH 2014. Notes 1. ,I D 1RQ-([HFXWLYH 'LUHFWRU LV reappointed after having served six years, such reappointment, and any subsequent reappointment, will normally be for a period of 12 months. Resignations in 2015: None. All Directors’ appointments are subject to their retirement by rotation and reappointment by shareholders at the Company’s Annual General Meetings. 2. Executive Directors are employed on annual rolling agreements and their service contracts are terminable on 12 months’ written notice by the Company or on not less than six months’ written notice by the relevant Executive Director. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Independence Although the Chairman, Richard Gillingwater, met the independence criteria on appointment, the UK Code provides that the test of independence is not appropriate thereafter and does not allow the Chairman to be counted with the independent Non-Executive Directors in determining whether there is an appropriate balance on the Board, which is not the case under the ASX Principles. For the avoidance of doubt, the Chairman considers himself to be both objective and independent but for good order he is not counted with the independent Non-Executive Directors. The Board considers all the other Non-Executive 'LUHFWRUV}t 6DUDK $UNOH, .DOSDQD Desai, Kevin Dolan, Tim How, Robert Jeens and Angela Seymour-Jackson – to be independent, as they do not have any interest or business or other relationship which could, or could reasonably be perceived to, interfere materially with their ability to act in the best interests of the Company. We have considered the criteria proposed by the UK Code and the ASX Principles in assessing the independence of the Directors. Materiality, as referred to in the ASX Principles, has been assessed on a case-by-case basis by reference to each Director’s individual circumstances rather than general materiality thresholds. :H DUH VDWLVÞHG WKDW WKH independent Non-Executive Directors meet a quantitative materiality threshold for independence, which is that none of them has a relationship with the Group which generates or accounts for more than 5% of the Group’s revenue or expenses. Accordingly, the Board (excluding the Chairman) has a majority of Directors who are independent.

 


54 CORPOR ATE GOVERNANCE Strategy, governance structure and Board business Strategy An explanation of the business model and the strategy for delivering the objectives of the Group is set out on pages 20 and 21 DQG 14 DQG 15, UHVSHFWLYHO\. Strategy day We dedicated a day to strategy at which the Board received presentations and proposals from management on our progress against strategy, in addition to considering regular strategy updates from management during the year. Some of the Non-Executive Directors also attended the senior management conference held LQ 0D\ 2016. ,VVXHV FRQVLGHUHG DW WKH Strategy Day included: • ,QGXVWU\ %DFNGURS Board consideration of the recommended merger with Janus Capital Group Inc. As set out in the Chairman’s statement on SDJH 4, WKH %RDUG KDG SUHYLRXVO\ DJUHHG WR explore possibilities for a transformational deal. The main business of the strategy day in June was to consider a proposed merger with Janus. ,W ZDV QRWHG WKDW WKH SURSRVHG PHUJHU ZRXOG SURYLGH D QXPEHU RI VWUDWHJLF EHQHÞWV IRU the combined Group including an expanded FOLHQW-IDFLQJ WHDP, GLYHUVLÞHG SURGXFWV DQG investment strategies, enhanced talent, ÞQDQFLDO VWUHQJWK DQG YDOXH FUHDWLRQ. Therefore the decision was made to move forward with the possibility of undertaking a merger between the two groups. A thorough governance and due diligence exercise was conducted between June DQG WKH ÞQDO %RDUG PHHWLQJ DW WKH HQG RI September to approve the merger to ensure that the assumptions made were supported and that the strategic rationale for the deal was correct. This included full consideration of the matters relating to the potential synergies to be gained, which were supported by a review E\ D ÞUP RI LQGHSHQGHQW H[WHUQDO DFFRXQWDQWV, WKH IXWXUH OLVWLQJ VWUXFWXUH, FXOWXUDO ÞW EHWZHHQ WKH RUJDQLVDWLRQV, 2SHUDWLRQV DQG ,7 arrangements, distribution synergies, the GLYHUVLÞHG SURGXFW DQG LQYHVWPHQW VWUDWHJLHV that the merger could provide and the structure of the proposed Board. Following this process the Board agreed that the various agreements could be signed and that the proposed merger could proceed. Board business A typical Board agenda is ordered so that the strategic items and projects are considered ÞUVW. 'HSHQGLQJ RQ WKH LPSRUWDQFH RI WKH LWHPV, HLWKHU UHJXODWRU\ RU ÞQDQFH, FDSLWDO DQG budget items be considered next, followed by other business matters. The items that do not require detailed consideration or discussion are set out at the end of the agenda. Where possible, items are grouped together to HQVXUH WKDW WKH LWHPV ßRZ DFFRUGLQJ WR WRSLF and management’s time is used effectively when presenting. Sessions are usually provided which include training or presentations from the business during days on which Board meetings are held. Read more in the Strategic report on pages 1 to 47 • Update on Merger and Acquisitions Read more on pages 12 and 13 • People and Culture Read more on pages 16 to 19 • 2YHUYLHZ RI WKH +HQGHUVRQ ,QQRYDWLRQ Project • Blockchain and Robo-advice. Group plc Henderson Group plc Annual Report 2016 Governance structure Henderson Board Other&RQßLFWV Remuneration committees Executive Committee Chief Executive: Audit Board Risk Nomination Remuneration Andrew Committee Committee Committee Committee Formica Code Staff operatingCommitteeCommittee Read more Read the Matters reserved to the Board on our Group website A description of how the Board operates, including a high level statement of which types of decisions are taken by the Board and management is set out on page 85 in Role of the Board

 


55 Notes • All Directors attended 100% of Board and Committee meetings of which they are members, with the exception of Phil Wagstaff who was unable to attend one meeting. • 3KLO :DJVWDII ZDV DSSRLQWHG WR WKH %RDUG RQ 24 0D\ 2016. Policy • ,QWHULP 'LYLGHQG IRU 2016 • 3HQVLRQV 9DOXDWLRQ Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION An overview of the topics addressed by the Board in 2016 February • M&A Update on North American Targets • Update on UK referendum on EU membership • 'LVUXSWLYH ,QQRYDWLRQ • FCA Competition Review • Treating Customers Fairly • Results of Employee Survey • Final Dividend for 2015 • 2016 Share Buy Backs • Notice of 2016 AGM • Monitoring of Actions from Board Evaluation • Revolving Credit Facility • Update on FCA Matters April • Update on UK referendum on EU membership • Update on M&A • 2016 Board Strategy Day • FY2016 Re-Forecast • 'LYHUVLW\ DQG ,QFOXVLRQ: :RPHQ in Finance Charter • $SSURYDO RI ,&$$3 • Proposed appointment of Mr Wagstaff to the Board • Update on FCA Matters June • Board Strategy Day • Proposed merger with Janus • Update on Brexit • M&A Update • Quarterly Trading Statements • ,QWHULP 'LYLGHQG IRU 2016 • Treating Customers Fairly July • Proposed merger with Janus • Update on Brexit • Personal Account Dealing • 2016 ,QWHULP 5HVXOWV August • Proposed merger with Janus • Five Year Forecast September • Approval of proposed merger with Janus October • Update on proposed merger with Janus • Update on Brexit • Draft 2016 Re-forecast and 2017 Budget • Treating Customers Fairly • Update on Culture Audit Actions Follow Up • 8SGDWH RQ 1HZ ,QYHVWPHQW Teams December • Update on proposed merger with Janus • World Outlook post Brexit and US Election Result • 2017 Budget and Five Year Strategic Plan • 2016 Dividend • Review of Corporate Governance Arrangements • FCA Asset Management Study • Update on other FCA Matters • Approval of Risk Appetite Statement 2016 Director attendance at Board and Committee meetings Date appointed Board and Committee meetings attended Board Audit Remuneration Nomination Board Risk Richard Gillingwater 06/02/13 12/12 n/a n/a 3/3 n/a Andrew Formica 05/11/08 12/12 n/a n/a n/a n/a Roger Thompson 26/06/13 12/12 n/a n/a n/a n/a Phil Wagstaff 24/05/16 7/8 n/a n/a n/a n/a Tim How 28/11/08 12/12 6/6 7/7 3/3 n/a Robert Jeens Kevin Dolan 29/07/09 26/09/11 12/12 12/12 6/6 n/a n/a 7/7 3/3 3/3 4/4 4/4 Sarah Arkle 05/09/12 12/12 6/6 7/7 3/3 4/4 Angela Seymour-Jackson 23/01/14 12/12 n/a 7/7 3/3 4/4 Kalpana Desai 05/10/15 12/12 6/6 n/a 3/3 4/4

 


56 CORPOR ATE GOVERNANCE Effectiveness Training To ensure that the Directors continually update their skills and knowledge, all Directors receive regular presentations on different aspects of WKH *URXSpV EXVLQHVV DQG RQ ÞQDQFLDO, OHJDO and regulatory matters affecting our sector. For example, during 2016, the Directors received presentations regarding the progress of investment in teams made during the last ÞYH \HDUV DQG REOLJDWLRQV DQG UHVSRQVLELOLWLHV IRU ÞOLQJ YDULRXV VXEPLVVLRQV ZLWK WKH 6(&. ,Q DGGLWLRQ FHUWDLQ 'LUHFWRUV UHFHLYHG WUDLQLQJ regarding US corporate governance requirements compared to both the UK and Australian models. Board evaluation Evaluation of the Board’s performance The 2016 Board internal evaluation focused RQ WKH DUHDV KLJKOLJKWHG IURP ERWK WKH 2014 external evaluation and 2015 internal evaluation, and was conducted internally YLD D ZHE SRUWDO, WR LQFUHDVH HIÞFLHQF\ DQG improve upon the previous paper-based exercise. As usual for the evaluation, the Directors completed a questionnaire regarding the effectiveness of the Board and its Committees following which the Chairman held a formal evaluation meeting with each 'LUHFWRU. 7KH 6HQLRU ,QGHSHQGHQW 'LUHFWRU met with the Non-Executive Directors and evaluated the Chairman’s performance. The performance of Andrew Formica, Chief Executive, was evaluated by the Chairman and the Remuneration Committee. The evaluation of the ExCo members was undertaken by the Chief Executive and the Remuneration Committee. These performance evaluations were conducted in accordance with the processes disclosed on our website. The outcome of the 2016 evaluation process was that the Board and its Committees continue to operate effectively and the progress against the actions arising from WKH 2014 H[WHUQDO HYDOXDWLRQ ZLOO FRQWLQXH to be monitored and progress mapped. An action from the 2015 evaluation, as reported in the 2015 corporate governance statement, was to ensure that strategy remains a focal part of the Board agenda. As set out in this report, a great deal of time was spent on strategic matters, which culminated in the approval of the proposed merger, and this continues to be the case. The Board receives various updates on strategic matters, such as the merger with Janus and Brexit and the Chief Executive ensures during agenda setting meetings that Board meetings have an appropriate strategic focus. Certain items arising from the 2016 evaluation included continuing to review succession planning and for further improvements to be made to the content and provision of materials to the Board. Henderson Group plc Annual Report 2016 Board skills Asset management ,QWHUQDWLRQDO Acquisitions Finance Risk Client focus Richard Gillingwater Andrew Formica Roger Thompson Phil Wagstaff Kevin Dolan Kalpana Desai Robert Jeens Angela Seymour-Jackson Tim How Sarah Arkle

 


57 Nomination Committee report Dear Shareholder ,Q 2016 WKH 1RPLQDWLRQ &RPPLWWHH concentrated on two main issues: (i) the appointment of Phil Wagstaff; and (ii) succession planning. During the 2015 Board Evaluation process it was agreed that the Nomination Committee should continue to review succession planning and leadership development. ,QIRUPDO GLVFXVVLRQV ZHUH KHOG DW WKH end of 2015 in respect of the possible appointment of Phil Wagstaff to the Board. 0U :DJVWDII ZDV LGHQWLÞHG DV DQ H[SHULHQFHG leader with strong commercial judgement DQG FXVWRPHU IRFXV DV SDUW RI WKH 2014 management succession planning exercise FRQVLGHUHG DW WKH 2014 PHHWLQJ RI WKH Nomination Committee. From an orderly succession planning point of view, it was agreed that the appointment of Mr Wagstaff ZRXOG EH EHQHÞFLDO WR WKH %RDUG DQG ZRXOG ensure that there is a good blend of Executive H[SHULHQFH, WR LQFOXGH VSHFLÞF FOLHQW-IRFXVHG H[SHULHQFH. ,W ZDV WKHUHIRUH QRW SURSRVHG to engage external search consultants to identify external candidates. Taking into account the Company’s agreed strategic priorities, challenges and opportunities, it was thought that Mr Wagstaff’s in-depth knowledge of global distribution across Henderson’s businesses and client focus would strengthen the Company’s strategy of globalisation and ensuring clients are at the centre of the business. Following the discussions at the Nomination Committee, it was recommended to the Board that Mr Wagstaff was both competent and capable, was the best individual for the UROH DQG ZRXOG PDNH D VLJQLÞFDQW FRQWULEXWLRQ to the promotion of the long-term success of the Company as an Executive Director. The Board agreed with the recommendation to appoint Mr Wagstaff as an Executive Director and his appointment took effect RQ 24 0D\ 2016. As part of his induction to the Board, Mr Wagstaff received training on his responsibilities and obligations as a Director of the Group. The Nomination Committee also received an update on management succession (see page 58). Richard Gillingwater Chairman 8 February 2017 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Membership • Richard Gillingwater (Chairman) • Sarah Arkle • Kalpana Desai • Kevin Dolan • Tim How • Robert Jeens • Angela Seymour-Jackson Role of the Nomination Committee The nomination committee has responsibility for considering the size, composition, expertise and balance of the Board as well as succession planning. Read more information on our Group website: www.henderson.com/ir “Succession planning was extended across the organisation to include business critical roles.” Richard Gillingwater Chairman of the Nomination Committee

 


58 CORPOR ATE GOVERNANCE Nomination Committee report continued Diversity As set out on page 18, Henderson has signed the Government’s Women in Finance Charter and set a number of targets to facilitate greater diversity in the workplace. We believe that appointments should be based on merit and objective criteria and we are committed to promoting equality and diversity in the workplace and recognise the need for, DQG EHQHÞWV RI, GLYHUVLW\ LQ KHOSLQJ XV DWWUDFW and retain high potential employees. We have QXPHURXV SROLFLHV, HPSOR\HH EHQHÞWV DQG business practices in place to support a diverse workforce and a forum, chaired by the General Counsel and Company Secretary, made up of representatives from across the business has been constituted on behalf of the ExCo to look more closely at diversity and inclusion at Henderson. As we grow globally, it is important to ensure we are attracting, developing and retaining the best people and this means ensuring RXU FXOWXUH DQG YDOXHV UHßHFW WKH GLYHUVLW\ RI our people and the communities we operate in. Our Human Resources policies and staff EHQHÞWV DLP WR DWWUDFW DQG UHWDLQ D GLYHUVH DQG ßH[LEOH ZRUNIRUFH. ,Q RUGHU WR DVVLVW XV in monitoring our progress on diversity, senior management reviews statistics on numbers and proportions of men and women in the workplace generally and broken down by: working patterns; status; length of service; turnover; region; division; and salary band. We apply the same principles at Board level. Candidates for appointment to the Board DUH LGHQWLÞHG WDNLQJ LQWR DFFRXQW: • The current composition of the Board, ZLWK GXH UHJDUG IRU WKH EHQHÞWV RI GLYHUVLW\ on the Board, including gender • The need for independence • The strategic direction and progress of the business • The geographic spread and diversity of the Group. Sarah Arkle, Kalpana Desai and Angela Seymour-Jackson constitute 33% of the Board. The General Counsel and Company 6HFUHWDU\, -DFTXL ,UYLQH FRQVWLWXWHV 11% of the ExCo. 1 6 Chairman Directors of this exercise was on: coaching, ongoing feedback and group as a collaborative leadership team. implementation plans Through the review 97% of the global our female talent pool. Succession planning was extended across and succession planning strategy forward, roles, taking a longer-term view where leadership team to ensure development roles now have succession plans and Henderson Group plc Annual Report 2016 Succession planning and talent management The Nomination Committee has successiondevelopment planning conversations planning as a standing item for its meetings.have taken place with all ExCo members An annual talent and succession review wasto identify and address any gaps. LQWURGXFHG LQ 2015. ,Q 2016 \HDU WKH IRFXV Executive development focused on individual • Extending succession planning to business offsites. These included strategy sessions critical rolesand facilitated team building to continue • ,GHQWLI\LQJ DFWLRQV DQG DJUHHLQJto foster global thinking and to operate • Spotting internal ‘rising stars’ to developThis year’s talent review exercise was whilst early in their careerSRVLWLYHO\ UHFHLYHG DQG WKH EHQHÞWV RI • Reviewing diversity and understandingthe practice are starting to be realised. workforce was discussed and mapped. the organisation to include business criticalTo maintain momentum and drive the talent DSSURSULDWH. ,Q DGGLWLRQ, NH\ IXQG PDQDJHUHuman Resources will support the plans are implemented and actions achieved. Tenure of Non-Executive Directors 6+ years2 1–3 years1 3–6 years4 Board split Non-ExecutiveNon-Executive Executive Directors 3 Board gender balance (%) MaleĖď Female30

 


 

59 Accountability Risk management and Internal control We consider risk assessment and the existence of effective controls to be fundamental to achieving the Group’s corporate objectives within an acceptable ULVN DQG UHZDUG SURÞOH. 7KH %RDUG KDV RYHUDOO responsibility for the Group’s system of internal controls and for reviewing its effectiveness and takes into account the *XLGDQFH RQ 5LVN 0DQDJHPHQW ,QWHUQDO Control and Related Financial and Business 5HSRUWLQJ LVVXHG LQ 6HSWHPEHU 2014. $ UREXVW assessment of the principal risks facing the Company has been carried out, including those that would threaten its business model, future performance, solvency or liquidity. There is an ongoing process for identifying, evaluating and managing the principal risks faced by the Company and a description of those risks and an explanation as to how they are being managed or mitigated is set out in the Risk management section together with the Group’s viability statement. • Read more in our Risk management section RQ SDJHV 42 WR 47. • 5HDG WKH *URXSpV 9LDELOLW\ 6WDWHPHQW RQ SDJH 45. The Board, via the Board Risk Committee and the Audit Committee, regularly reviews and monitors the Company’s risk management and internal control systems and principal risks faced by the Group via the ‘three lines of defence’ model. ,Q DGGLWLRQ DQ $$) 01/06 &RQWURO 5HSRUW (AAF) is produced annually. This report FRYHUV DOO PDWHULDO FRQWUROV LQFOXGLQJ ÞQDQFLDO operational, compliance controls and risk management systems. The AAF included a TXDOLÞFDWLRQ LQ UHODWLRQ WR D FRQWURO ZHDNQHVV ZKLFK KDG EHHQ LGHQWLÞHG E\ PDQDJHPHQW and is being remediated as part of a broader &RPSOLDQFH SURMHFW. 6HH SDJH 64 RI WKH $XGLW Committee report for further information. ,QWHUQDO FRQWUROV RYHU ÞQDQFLDO reporting 2XU ÞQDQFLDO UHSRUWLQJ SURFHVV KDV EHHQ designed to provide reasonable assurance UHJDUGLQJ WKH UHOLDELOLW\ RI WKH ÞQDQFLDO UHSRUWLQJ DQG SUHSDUDWLRQ RI ÞQDQFLDO statements, including consolidated ÞQDQFLDO VWDWHPHQWV IRU H[WHUQDO SXUSRVHV LQ DFFRUGDQFH ZLWK ,)56. 7KLV SURFHVV LV under the supervision of the Chief Executive DQG WKH &KLHI )LQDQFLDO 2IÞFHU DQG KDV appropriate internal controls to ensure its effectiveness. The internal controls include policies and procedures that: • Relate to the maintenance of records that, in reasonable detail, accurately and fairly UHßHFW WKH WUDQVDFWLRQV DQG GLVSRVDOV RI the Group’s assets • Provide reasonable assurance that transactions are recorded as necessary WR SHUPLW SUHSDUDWLRQ RI ÞQDQFLDO VWDWHPHQWV and that the receipts and expenditures of the Group are being made only in accordance with authorisations of management and Directors • Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposal of Group assets that could have a material HIIHFW RQ WKH *URXSpV ÞQDQFLDO VWDWHPHQWV. An annual formal review of the effectiveness of Henderson’s system of risk management and internal controls is also carried out in order to support the statements included in the Annual Report and Financial Statements. The internal control and risk management systems have been in place for the year under review and up to the date of the approval of the report and accounts. • Read more in our Board Risk Committee report on pages 60 and 61. • Read more in our Audit Committee report on pages 62 to 65. The Board received assurances from the Chief ([HFXWLYH DQG WKH &KLHI )LQDQFLDO 2IÞFHU WKDW WKH ÞQDQFLDO UHFRUGV RI WKH *URXS KDYH EHHQ properly maintained and that the consolidated ÞQDQFLDO VWDWHPHQWV FRPSO\ ZLWK WKH appropriate accounting standards and give a WUXH DQG IDLU YLHZ RI WKH ÞQDQFLDO SRVLWLRQ DQG performance of the Group and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively (see also the Directors’ Responsibilities Statement). ,Q DGGLWLRQ WKH ([&R UHSRUWHG WR WKH %RDUG on the effectiveness of the Group’s system of internal controls. Read the Directors’ Responsibilities Statement on page 91. Read the Going Concern statement on page 90 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


60 CORPOR ATE GOVERNANCE Board Risk Committee report Dear Shareholder , DP SOHDVHG WR SUHVHQW WKH UHSRUW IURP the Board Risk Committee (BRC) for 2016. Although the purpose of the BRC is to assist the Board in the oversight of risk, it is important to note that the Audit, Nomination and Remuneration Committees as well as the Board also consider certain key risks relating to Henderson as appropriate, at which certain members of the BRC are also present. We believe it is important to ensure that the right information regarding the principal risks facing Henderson is being presented to the Committee. Therefore, during 2016 we conducted a thorough review of the Committee’s Terms of Reference and the principal risks it considers. As part of this process, a detailed assessment of the principal risks was undertaken and their relative magnitude was considered. We also put in place a comprehensive schedule of matters to be considered during the year to ensure that the Committee considers these risks DQG IXOÞOV LWV REOLJDWLRQV XQGHU WKH 7HUPV of Reference. This schedule is reviewed and updated throughout the year. To support this, papers are therefore presented during the year ZKLFK VSHFLÞFDOO\ DGGUHVV WKH SULQFLSDO risks facing the Group set out in the Risk PDQDJHPHQW VHFWLRQ E\ RXU &KLHI 5LVN 2IÞFHU (&52) &KULV &KDORQHU RQ SDJHV 46 DQG 47. This also summarises Henderson’s risk IUDPHZRUN DQG SURÞOH DQG SURYLGHV VRPH useful context to the activities of the Committee in 2016. ,Q 2016 ZH UHYLHZHG DQG XSGDWHG WKH *URXSpV Risk Appetite Statement. This followed a robust process, including the consideration of the responses to a survey completed by both the Board and the ExCo, together with D WKRURXJK UHYLHZ RI WKH SURSRVHG GHÞQLWLRQV of risk appetite, along with the proposed rating attached to each risk, in light of these responses. A great deal of time was spent by the Committee challenging and reviewing these proposals as we believe that the language used in the statement should be as clear as possible in order to ensure that both the language and the tone is understood and embedded throughout the organisation and linked to our culture. ,W LV ZRUWK SRLQWLQJ RXW WKDW FRQVLGHUDWLRQ of risks relating to the merger with Janus Henderson were discussed in detail at the Board Due Diligence Committee constituted by the Board to consider the transaction, as referred to by the Chairman in his statement RQ SDJH 49. $OO RI WKH %RDUG ZHUH SUHVHQW including members of the Board Risk Committee and a presentation was made by WKH &KLHI 5LVN 2IÞFHU UHJDUGLQJ WKH SRWHQWLDO risks facing the organisation as part of the merger. These fell under the categories of economic risks of the transaction, deal execution risk and post-completion integration risk. Henderson Group plc Annual Report 2016 Membership • Sarah Arkle (Chair) • Kalpana Desai • Kevin Dolan • Robert Jeens • Angela Seymour-Jackson Role of the Board Risk Committee The purpose of the Board Risk Committee is to assist the Board in the oversight of risk. The Committee also looks to identify any forward-looking and emerging risks that relate to the industry or Henderson VSHFLÞFDOO\ DQG ZLOO UHIUHVK DQG PRQLWRU these risks and look at mitigating actions on an ongoing basis. Read more information on our Group website: www.henderson.com/ir “During 2016 we conducted a thorough review of the Committee’s terms of reference and the principal risks it considers.” Sarah Arkle Board Risk Committee Chair

 


61 The risks facing the business as a result of Brexit were considered by the Board ERWK EHIRUH DQG DIWHU WKH YRWH. ,Q DGGLWLRQ D VSHFLÞF UHSRUW ZDV SUHSDUHG IRU WKH %5& on this topic which outlined the political, economic and regulatory change risks facing the organisation. This issue was also referred to in the regular updates presented by the &KLHI 5LVN 2IÞFHU. One of the key agenda items of the BRC at each meeting is identifying and discussing forward-looking and emerging risks facing the Company, including macro-economic and political risks, liquidity risks, regulatory risks and longer-term strategic risks. As referred to in the Risk management section, an important issue has been the oversight and management RI F\EHU ULVN DQG DQ XSGDWH RQ ,7 *RYHUQDQFH and information security risk was presented to the Committee in 2016. Liquidity risk within funds was also an important topic throughout 2016 and a paper was presented which summarised Henderson’s work on assessing liquidity exposure. $V SDUW RI LWV DQQXDO WLPHWDEOH WKH ,&$$3 was reviewed, challenged and approved for recommendation to the Board. This included the assumptions used in the stress and scenario tests, the wind-down analysis, the methodology used for assessing the amount of capital held and the basis for and the aggregate amount of capital held for RSHUDWLRQDO ULVN. $Q XSGDWHG SUR-IRUPD ,&$$3 VSHFLÞF WR WKH PHUJHU ZLWK +HQGHUVRQ DQG Janus, was also required and this was also considered by the Committee in early 2017. The Committee also considered and approved the Reverse Stress Test analysis. This included identifying scenarios that might cause Henderson’s business model to fail which are taken into account in the design of our risk management framework and FRQWURO SURFHVVHV. ,W ZDV DJUHHG WKDW WKH risk management framework and control SURFHVVHV DUH VXIÞFLHQWO\ UREXVW IRU WKH QHW risk of failure to lie beyond the ‘1 in 200’ \HDU FRQÞGHQFH LQWHUYDO XVHG IRU ,&$$3 capital purposes. Updates are also provided at each meeting regarding credit, operational and strategic risks, which included a risk heat map for strategic risks. As a result of these reports the BRC discusses and assesses whether appropriate mitigating actions are in place. The risk heat map itself was reviewed and updated in 2016 as part of the update to the Risk Appetite Statement, using the same underlying metrics and focusing on the same key risks as the Risk Appetite Statement. To ensure clear reporting of any risks outside the agreed appetite. Risk categories are constantly reviewed and either added or removed from the heat map depending on the probability or severity of the risk facing Henderson. The Committee is also responsible for agreeing the CRO and Assurance function’s objectives, priorities and resourcing and reviewing these. Sarah Arkle Chair of the Board Risk Committee 8 February 2017 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Risk control environment Henderson Group plc Board Audit Committee Remuneration Committee Board Risk Committee Nomination Committee ExCo Sub-committees of ExCo

 


62 CORPOR ATE GOVERNANCE Audit Committee report Dear Shareholder ,W LV YLWDO WKDW RXU FRQWLQXLQJ MRXUQH\ DORQJ our strategy of growth and globalisation is supported by an embedded and effective V\VWHP RI LQWHUQDO FRQWUROV DQG ÞQDQFLDO reporting as well as a challenging and LQGHSHQGHQW ,QWHUQDO $XGLW IXQFWLRQ. During 2016 we carried out a review of the Audit Committee’s terms of reference alongside those of the Board Risk Committee to ensure that the responsibilities of the committees are aligned. As mentioned in the Board Risk Committee report, due diligence relating to the merger with Janus Henderson was discussed at D VSHFLÞFDOO\ FRQVWLWXWHG %RDUG FRPPLWWHH to consider the transaction. This included a GHWDLOHG ÞQDQFH DQG WD[ GXH GLOLJHQFH UHSRUW from KPMG, in addition to an independent report from PricewaterhouseCoopers LLP (PwC) regarding the anticipated synergies to be gained from the transaction and all members of the Committee were present. At a later stage the Audit Committee met to FRQVLGHU UHYLHZ DQG DSSURYH WKH GUDIW )-4 6(& ÞOLQJ DV UHTXLUHG IRU WKH 1<6( OLVWLQJ process which is a condition of the merger. Training was also provided by PwC to the Directors in respect of the content and VWUXFWXUH RI WKH )-4. Reliability and appropriateness of the *URXSpV ÞQDQFLDO UHSRUWLQJ As usual, a key matter for us as a Committee to consider was the reliability and appropriateness of the Group’s ÞQDQFLDO UHSRUWLQJ. The Company has in place arrangements to ensure that the Annual Report, taken as a whole, is fair, balanced and understandable as required by the UK Code and provides shareholders with the information necessary to assess the Group’s performance, business model and strategy. To assist the Board in making this decision, the Audit Committee, as part of the oversight of the reliability and appropriateness of the *URXSpV ÞQDQFLDO UHSRUWLQJ UHFHLYHG DQG reviewed reports from management and the external auditors (PwC) relating to the Annual Report of the Group and the &RPSDQ\ DV ZHOO DV WKH ,QWHULP 5HSRUW DQG Accounts, interim management statements, UHODWHG GLVFORVXUHV DQG WKH ÞQDQFLDO UHSRUWLQJ process. This included the review and approval of the timetable and deliverables for both the annual and interim results. ,Q DGGLWLRQ WKH &RPPLWWHH FRQVLGHUHG VLJQLÞFDQW LVVXHV UHODWLQJ WR WKH ÞQDQFLDO statements as set out on page 63. The reports from PwC included an update on the audit plan, year end timetable, audit quality review and an update regarding the integrated audit. PwC also discussed their review of the 2015/2016 AAF Control Report ZLWK WKH &RPPLWWHH 6HH SDJH 64 RI WKH $XGLW Committee report for further information. Read more on the Internal Audit function and internal review on page 65 Read the Financial review on pages 36 to 39 Henderson Group plc Annual Report 2016 Membership • Robert Jeens (Chairman) • Sarah Arkle • Kalpana Desai • Tim How All members of the Committee are independent and have ‘recent and relevant ÞQDQFLDO H[SHULHQFHp DQG oÞQDQFLDO H[SHUWLVHp as recommended by the UK Code and the ASX Principles. Both Robert Jeens and Kalpana Desai have competence in accounting and auditing as required by the Disclosure and Transparency Rules. Role of the Audit Committee The Audit Committee is responsible for overseeing the reliability and DSSURSULDWHQHVV RI WKH *URXSpV ÞQDQFLDO reporting, overseeing the effectiveness of the Group’s system of internal controls, DVVHVVLQJ WKH HIIHFWLYHQHVV RI WKH ,QWHUQDO Audit function, reviewing the performance and independence of the external auditors (as well as being responsible for recommending their appointment, reappointment and removal) and reviewing the Group’s arrangements in respect of whistleblowing. However, ultimate responsibility for reviewing and approving the Annual Report and other public reports, declarations and statements remains with the Board. Read more information on our Group website: www.henderson.com/ir “During 2016 we carried out a review of the Audit Committee’s terms of reference alongside those of the Board Risk Committee review to ensure that the responsibilities of the committees are aligned.” Robert Jeens Audit Committee Chair

 


63 Group and viability matters and balanced and Final dividend considerations 6LJQLÞFDQW LVVXHV As part of the review of the Annual Report, the Audit Committee also considered various VLJQLÞFDQW DFFRXQWLQJ DQG UHSRUWLQJ LVVXHV and discussed how these may be addressed. These included the matters set out below. Acquisitions and Disposals During 2016 the Audit Committee considered a number of issues relating to acquisitions and disposals and the effect of these on the report and accounts. (i) Recommended merger with Janus The recommended merger of equals with -DQXV &DSLWDO *URXS ,QF. ZDV FRQVLGHUHG by the Audit Committee as part of the review of the 2016 results. The merger agreement does not impact the 2016 results, with the exception of any deal costs and integration costs incurred for the period ended 31 December 2016, which are recognised as a non-recurring item in the Group’s &RQVROLGDWHG ,QFRPH 6WDWHPHQW. (ii) Northern Pines During 2016 the Group took the decision to wind up its joint venture in Northern Pines Henderson Capital GP LLC and Northern Pines Henderson Capital LLC (together ‘Northern Pines’). The transaction resulted in the Group impairing its £2.7m investment in April 2016. This will be presented as a non-recurring item in the Consolidated ,QFRPH 6WDWHPHQW. (iii) Volantis team As referred to in the Strategic Report, the Group agreed to the sale of the 9RODQWLV EXVLQHVV WR /RPEDUG 2GLHU $VVHW Management with the deal due to complete in early 2017. Consideration for the sale consists of a deferred share of future fees and will be booked as a non-recurring gain at completion. Total deferred consideration will be re-assessed at each reporting period, with any adjustments recognised directly LQ WKH ,QFRPH 6WDWHPHQW DV D QRQ-UHFXUULQJ item. The above does not impact the Group’s 2016 results. Other Matters The Audit Committee received regular updates and reports from management which set out a summary of both the above and other matters to be discussed or considered by the Committee (as for example, forward-looking guidance, the disclosure of alternative performance measures, topics relating to provisions or accruals, tax matters or recommendations made as to the appropriate accounting treatment or disclosure in respect of a certain item). The Committee considers these and challenges management where appropriate on matters of judgement and the resultant recommendations. Recurring areas of focus A number of areas of focus were also considered, which included two areas as set out below. (i) The recognition of management and performance fees; Management and performance fees are an area of focus due to the size and importance of revenue to the Group’s results. (ii) Goodwill and intangible assets impairment review 8QGHU ,$6 36 o,PSDLUPHQW RI $VVHWVp WKH Group is required to carry out an impairment review of goodwill at least annually or if an LQGLFDWLRQ RI LPSDLUPHQW LV LGHQWLÞHG. 7KH carrying value of goodwill as at 31 December 2016 was £568.7m. The annual goodwill test showed no indicators of impairment were LGHQWLÞHG. 7KH FDUU\LQJ YDOXH RI WKH *URXSpV ,QYHVWPHQW 0DQDJHPHQW &RQWUDFWV (,0&V) intangible assets at 31 December 2016 was £68.8m which mainly relates to the acquisitions of Gartmore, Geneva and Perennial. There have been no indicators RI LPSDLUPHQW LGHQWLÞHG DQG WKH ,0&V continue to be amortised in line with the set amortisation periods. The Committee, in each case, discussed these areas of focus with the auditors at both the planning and completion stages of their audit. The Committee concluded that the judgements made in respect of the above matters are reasonable and that appropriate disclosures have been included in the accounts. A further explanation of the above issues and how they were viewed by PwC is set out in their report on pages 92 to 97. Fair, Balanced and Understandable The Committee fully reviewed the Annual Report and recommended to the Board that the Annual Report, taken as a whole, is fair, EDODQFHG DQG XQGHUVWDQGDEOH. ,Q SDUWLFXODU it was noted that the Financial Review on pages 36 to 39 provides an explanation of the Group’s results. This is reviewed by Management and the Group’s auditors to HQVXUH FRQVLVWHQF\ ZLWK WKH ÞQDQFLDO VWDWHPHQWV. ,Q DGGLWLRQ WKH *URXS XVHV non-GAAP measures in the report and accounts but provides a reconciliation in WKH ÞQDQFLDO VWDWHPHQWV WR VWDWXWRU\ SURÞW. Acquisition-related and non-recurring items are referred to in the Financial Review and in Note 7 to the Financial Statements on page 113. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Consideration of Annual Report Matters considered when reviewing the Annual Report 6LJQLÞFDQWFairGoing concern performance judgements understandable statement

 


64 CORPOR ATE GOVERNANCE Audit Committee report continued External auditors and auditor independence The reappointment of our external auditors, PwC, was approved by shareholders at the 2016 AGM. During 2016, the Audit Committee considered the risk and contingency plan in the event of the withdrawal of PwC from the market. The audit engagement partner rotates HYHU\ ÞYH \HDUV KRZHYHU RWKHU SDUWQHUV on the account is every seven years, and directors every 10 and no contractual obligations exist to restrict the choice of auditors of the Group and the Company. The Charter of Statutory Auditor ,QGHSHQGHQFH ZDV DOVR UHYLHZHG ZKLFK requires both the Company and the external auditors to take measures to safeguard both the objectivity and the independence of the external auditors. The Charter takes into account the FRC Guidance on Audit Committees. The Charter includes those services which are deemed to be pre-approved, those which need prior approval and those which are prohibited. These measures include a prohibition regarding any non-audit services LQ UHVSHFW RI VSHFLÞF DUHDV (H.J. VHFRQGPHQWV to management positions) or which could FUHDWH D FRQßLFW RU SHUFHLYHG FRQßLFW. ,W DOVR includes information on the procedures for the selection, appointment and rotation of the external audit engagement partner. The Charter is on our website. The Audit Committee also reviewed the independence of PwC and has in place a policy on non-audit services to maintain auditor independence. As part of the review of PwC, the Audit Committee reviewed and authorised details of the non-audit services provided by the external auditors and agreed that the provision of non-audit services was satisfactory and had not compromised their objectivity or independence. Read more on the services provided and IHHV SDLG WR 3Z& LQ QRWH 4.2 WR WKH )LQDQFLDO Statements on page 111. 7KH +HDG RI ,QWHUQDO $XGLW DQG H[WHUQDO auditors attended the scheduled Audit Committee meetings during the year and, on one occasion, met the Non-Executive Directors without the Executive Directors being present. Outside the framework of formal meetings, the Audit Committee Chairman meets and has regular contact with the Chief Executive, the Chief Financial 2IÞFHU WKH +HDG RI )LQDQFH WKH +HDG RI ,QWHUQDO $XGLW WKH *OREDO +HDG RI &RPSOLDQFH and the senior engagement partner of our external auditors. Review of internal controls: Legal, Compliance and Internal Audit As part of the internal controls and oversight process, the Audit Committee also receives an internal controls report each quarter which FRQWDLQV DQ XSGDWH IURP HDFK RI WKH ,QWHUQDO Audit, Legal and Compliance functions. The ,QWHUQDO $XGLW VHFWLRQ RI WKH UHSRUW FRQWDLQHG an update of outstanding audits in accordance ZLWK WKH ,QWHUQDO $XGLW 3ODQ DQG WKH UHVXOWV RI audits undertaken throughout the business, WRJHWKHU ZLWK DQ\ ÞQGLQJV DQG RXWVWDQGLQJ actions. The Audit Committee also received a list of auditable activities ranked in priority of risk. The Legal section sets out a summary RI VLJQLÞFDQW NQRZQ RU SRWHQWLDO FODLPV PDGH by or against the Group. The Compliance VHFWLRQ VHWV RXW D VXPPDU\ RI DQ\ VLJQLÞFDQW compliance issues facing the Group such as priority areas relating to a combination of business as usual, and other regulatory GHYHORSPHQWV LQFOXGLQJ QRWLÞFDWLRQV WR regulators, client money and assets, regulatory developments and initiatives, compliance PRQLWRULQJ UHYLHZV ÞQDQFLDO FULPH DQG updates regarding contact and meetings with the FCA. Where necessary, the updates included actions undertaken or those recommended to be undertaken by the Group. Our Compliance department forms part of our second line of defence and advises and monitors how the Group conducts its business activities in accordance with global regulation and the wider expectations of our regulators in all countries where regulated business is performed. Regular reports were presented by the Global Head of Compliance, Charles Jones, to the Committee on a broad range of regulatory topics affecting our current business as well as on the impact of future regulation. A summary timetable for regulatory change projects over the next three years was presented to the Committee, some of the most pressing of which included the FCA Asset Management Market Study, the Global Derivatives Reform, Markets in )LQDQFLDO ,QVWUXPHQWV 'LUHFWLYH (0L),') ,, DQG %UH[LW. ,Q DGGLWLRQ DV UHIHUUHG WR E\ WKH &KDLUPDQ LQ KLV VWDWHPHQW RQ SDJH 49 a dedicated committee of the Board met to review the work the Group is undertaking in enhancing various areas of its control environment, particularly in relation to product management and governance, management RI FRQßLFWV RI LQWHUHVW DQG VHFRQG OLQH monitoring processes. The work of this committee was transferred to the Audit Committee at the end of 2016. The Committee also considered correspondence with key regulators such as the FCA and the SEC. Our system of internal controls requires line PDQDJHUV WR FRQÞUP PRQWKO\ WKDW FRQWUROV in their respective areas have operated effectively. These controls, and the risks which they are designed to mitigate, are maintained within the Group’s operational ULVN GDWDEDVH ZKLFK LQ WXUQ UHßHFWV WKH ULVN SURÞOHV RI HDFK SDUW RI WKH *URXSpV EXVLQHVV. The Committee also received an update regarding the 2015/2016 AAF Control Report during 2016 which was formally approved in early 2017. The Committee reviewed the matters in relation to investment JXLGHOLQH PRQLWRULQJ WKDW OHG WR D TXDOLÞFDWLRQ of the AAF and the mitigating actions taken E\ WKH *URXS WR DGGUHVV WKHVH PDWWHUV. ,W ZDV FRQÞUPHG WKDW QR EUHDFKHV KDG RFFXUUHG DV D UHVXOW RI WKH H[FHSWLRQV RU TXDOLÞFDWLRQ. Read more in our Accountability section on page 59 Henderson Group plc Annual Report 2016 Review of external auditors The Audit Committee reviewed and approved PwC’s remuneration, engagement letter and their effectiveness which included an overview and cost of the services provided, a description of the DVVLJQPHQWV IXOÞOOHG DQG IHHGEDFN IURP management on the quality of service. The 2016 year end was the third year RI 3Z& DV *URXS DXGLWRUV. $V LQ WKH ÞUVW year, PwC performed well with respect to the quality of presentation materials to Management and the Committee, the rigour of the audit approach and testing and challenge to established ideas and FRQFHSWV. ,Q DGGLWLRQ WR WKHVH SRLQWV the pre-year end interim audit scope was enhanced to help the Group meet its reduced reporting timetable for the 2015 results. As in 2015 there were learning points for both teams, such as the allocation of resources and planning by PwC and Henderson continuing to improve communication between UK and overseas Finance areas. Joint meetings held between Management and PwC provide the platform to carry out these improvements. Management believes that the services provided by PwC are satisfactory.

 


65 helps the organisation meet its objectives actions for improvements with the business EXVLQHVV XQLWV. ,QWHUQDO $XGLW LV LQGHSHQGHQW approach to challenge executive DGGLWLRQ WKH +HDG RI ,QWHUQDO $XGLW SURYLGHV Audit Committee. The team has unrestricted effectiveness of risk management, control environment to the Audit Committee. and business areas and freedom to allocate to the Board, Audit Committee and function continued to operate effectively. cycle based on an assessment of risks within and effectiveness of the Group’s presented to the Audit Committee for review External Auditors Tender As part of the proposed merger with Janus Capital, in late 2016 the Audit Committee agreed to undertake a tender process between the current external auditors of Henderson and Janus (PwC and Deloitte respectively), given that this transaction is a merger of equals, with each auditor having an understanding of one half of the proposed FRPELQHG JURXS. %RWK ÞUPV ZHUH FRQVLGHUHG to have the requisite experience and global scope necessary to carry out the assignment DQG QR RWKHU ÞUPV ZHUH DVNHG WR WHQGHU. A Request for Proposal was sent to both ÞUPV LQ 'HFHPEHU 2016 DQG UHVSRQVHV ZHUH received in January 2017. During January DQG HDUO\ )HEUXDU\ ERWK ÞUPV SUHVHQWHG WR key stakeholders involved within the process of Henderson and Janus, including representatives of management, Robert Jeens and Jeff Diermeier, the Chairman of the Janus Audit Committee. Following this process, at its meeting in February 2017, the Audit Committee recommended to the Board that PwC be reappointed as external auditors whether the merger is or is not approved by shareholders. &RQßLFWV RI ,QWHUHVW &RPPLWWHH ,Q LQYHVWPHQW PDQDJHPHQW D SUH-UHTXLVLWH of integrity in the conduct of business is SURSHU PDQDJHPHQW RI FRQßLFWV RI LQWHUHVW. As well as being good business management, Henderson believes that proper management RI FRQßLFWV RI LQWHUHVW LV FHQWUDO WR RXU PLVVLRQ of delivering excellent performance and service to our clients. 7KH &RQßLFWV RI ,QWHUHVW &RPPLWWHH (&&) LV a sub-committee of the Audit Committee and is responsible for reviewing and overseeing the Group’s arrangements for identifying and PDQDJLQJ FRQßLFWV RI LQWHUHVW DQG HQVXULQJ the best interests of its clients are considered DW DOO WLPHV. ,Q SDUWLFXODU WKH && KDV responsibility for: • Overseeing the Group’s culture, awareness DQG WUDLQLQJ LQ UHODWLRQ WR FRQßLFWV RI LQWHUHVW including its embedding in the organisation • Overseeing the policies and procedures designed to ensure clients’ interests are considered in the business conduct of the Group and its governance • 2YHUVHHLQJ WKH *URXSpV &RQßLFWV RI ,QWHUHVW Policy and related policies, ensuring these adhere to regulatory requirements and have regard to industry best practice • 5HYLHZLQJ FRQßLFW LGHQWLÞFDWLRQ DQG FRQWUROV LPSOHPHQWHG WR PLWLJDWH FRQßLFWV RI LQWHUHVW • Reviewing appropriate management LQIRUPDWLRQ WR GHWHUPLQH ZKHWKHU FRQßLFWV of interest are being effectively mitigated and/or managed. During 2016 the CC continued its programme of thematic reviews including presentations RQ DQG GLVFXVVLRQ RI SRWHQWLDO JOREDO FRQßLFWV including those occurring in Pan Asia and North America. The Committee undertook D UREXVW UHYLHZ RI WKH FRQßLFWV JRYHUQDQFH framework and instigated the establishment RI D )URQW 2IÞFH &RQßLFWV &RPPLWWHH WR receive regular reports and detailed management information going forward. The &RPPLWWHH DOVR FRQVLGHUHG SRWHQWLDO FRQßLFWV arising from the proposed merger with Janus. Robert Jeens Chairman of the Audit Committee 8 February 2017 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Internal audit ,QWHUQDO $XGLW LV OHG E\ WKH +HDG RI ,QWHUQDOFRQWURO SURFHVVHV. ,Q SUDFWLFH WKLV LV DFKLHYHGDQG DSSURYDO. %DVHG RQ ,QWHUQDO $XGLWpV Audit, Fortune Chigwende. The functionthrough risk-based audits of businesscontinuous risk assessment process of the forms the third line of defence and existsactivities which are designed to assess therisks within each business area, the annual to help the Board and senior managementHIIHFWLYHQHVV RI FRQWUROV. ,I LPSURYHPHQWVaudit plan is revised and any changes to the protect the assets, reputation andare found to be necessary, appropriateplan are presented to the Audit Committee sustainability of the Group by providing anactions are proposed by management andIRU UHYLHZ DQG DSSURYDO. ,QWHUQDO $XGLW independent objective assurance service DJUHHG E\ ,QWHUQDO $XGLW UHSRUWHG WR WKHevaluates the design and operating designed to add value and improve theAudit Committee and tracked to completion.effectiveness of the system of internal operations of the Group. The function,QWHUQDO $XGLW FRYHUV DOO ORFDWLRQV DQGcontrol and risk management, agreeing by bringing a systematic, disciplinedof management and reports directly to theXQLW DQG WKH DSSURSULDWH ([&R PHPEHU. ,Q management and evaluate theaccess to all information, systems, peoplean overall opinion annually on the internal control and governance processes.resources and determine the scope of workDuring 2016, an internal evaluation exercise ,QWHUQDO $XGLWpV SULPDU\ REMHFWLYH LV WRto accomplish its audit objectives.ZDV FRQGXFWHG RI ,QWHUQDO $XGLW IROORZLQJ provide an independent assurance service ,QWHUQDO $XGLW RSHUDWHV D ULVN-EDVHG DXGLWZKLFK LW ZDV DJUHHG WKDW WKH ,QWHUQDO $XGLW executive management on the adequacyeach business area. The annual audit plan is governance, risk management and internal

 


66 CORPOR ATE GOVERNANCE Relations with shareholders Over the course of 2016, the share of the Group’s listed holdings has migrated from a near-equal weighting of the Australian and UK listings, to the Australian listing being greater (63%) than the UK listing (37%). 'XULQJ WKLV SHULRG WKH $XVWUDOLDQ ÞUP 3HUSHWXDO ,QYHVWPHQWV SURJUHVVLYHO\ EXLOW D VLJQLÞFDQW KROGLQJ LQ +HQGHUVRQ RQFH more, having fallen below the disclosable interests threshold in 2015. Capital Group of Companies, on the UK register, maintained D VLJQLÞFDQW VKDUHKROGLQJ ZLWK %HQQHORQJ Funds Management and Goldman Sachs Group on the Australian register, moving to hold greater than 3% of issued shares in the Group. Wilson HTM Group and Airlie Funds Management – both on the Australian share register – fell below the disclosable interests threshold. Henderson employees hold 8.6% of issued share capital. ,Q WKH FRXUVH RI WKH \HDU RXU ([HFXWLYH Directors conducted over 200 meetings with institutional shareholders in London, Edinburgh, Sydney, Melbourne, New York, Chicago and Boston. Meetings focused on progress with our growth and globalisation strategy, fee margin trends, management of our cost base, operating leverage, uses of cash and capital, updates on announced acquisitions and the impact of increasing industry regulation. Following the announcement of the recommended merger with Janus, a comprehensive shareholder engagement programme was arranged for Andrew Formica and Roger Thompson together with Janus CEO, Dick Weil, to meet with shareholders to discuss the rationale behind the merger. 7KH &KDLUPDQ DOVR PHW ZLWK VLJQLÞFDQW shareholders in London. The Board regularly receives feedback on shareholder sentiment and sell-side analysts’ views of the Group and the wider industry. ,Q -DQXDU\ 2016 WKH &KDLUPDQ PHW ZLWK our largest shareholders during a roadshow in Sydney and Melbourne. The Chairman welcomed the opportunity to learn more about WKH ÞUPVp LQWHUHVWV LQ +HQGHUVRQ DQG WKHLU broader view on the industry. 7KH 6HQLRU ,QGHSHQGHQW 'LUHFWRU 7LP +RZ HQJDJHG ZLWK VKDUHKROGHUV UHSUHVHQWLQJ 54% of issued share capital in his capacity as Chair of the Remuneration Committee in 2016. Beyond these engagements, there were no requests from shareholders for meetings with WKH 6HQLRU ,QGHSHQGHQW 'LUHFWRU. ,Q WKH FRXUVH RI WKH \HDU +HQGHUVRQ JLYHV four scheduled updates to the market in addition to our Annual General Meeting. 7KH ,QYHVWRU 5HODWLRQV WHDP DQG management have frequent contact with the 23 sell-side analysts who follow Henderson. Further information regarding the Group’s VKDUHKROGHUV FDQ EH IRXQG RQ SDJH 144 LQ the Shareholder information section. Henderson Group plc Annual Report 2016 Henderson shareholder base (%) ASX listing63 LSE listing37 Henderson shareholder base (%) Total institutional 97 Total retail3

 


67 Directors’ remuneration report Annual statement from the Chairman Dear Shareholder , DP SOHDVHG WR SUHVHQW RXU 2016 UHSRUW RQ Directors’ remuneration for your approval at our Annual General Meeting on 26 April 2017 in the UK and Australia. We comply with the UK reporting requirements and the ASX Principles relating to Directors’ remuneration on a voluntary basis. We last submitted our remuneration policy to VKDUHKROGHUV DV SDUW RI WKH 2014 UHSRUWLQJ cycle and indicated that, subject to shareholder support, it would be our intention for that policy to apply for up to three years until the AGM in 2018. As of writing, there are no material changes to that policy being proposed and we therefore are not required and do not propose to re-submit the policy for re-approval this year. As you will expect, should the proposed merger, upon which shareholders will vote separately, be approved, it is highly likely that a revised remuneration policy will be developed to harmonise any differences between the remuneration policies and practices of the PHUJHU SDUWQHUV DQG WR UHßHFW WKH VWUDWHJLF goals and horizons of the combined entity. However, it would not be appropriate to pre-judge the outcome of the merger vote in this document nor to pre-empt remuneration policy decisions that will be the responsibility of the new Remuneration Committee at the appropriate time. The following section is therefore dedicated to the Directors’ Remuneration Report, which provides information on how the policy has been implemented during the year, and in respect of which we are offering shareholders the usual advisory vote at our 2017 AGM. ,W VKRXOG EH QRWHG WKDW 0U 3KLO :DJVWDII Global Head of Distribution, was appointed to the Henderson Group plc Board with effect IURP 24 0D\ 2016. 7KLV UHSRUW ZLOO WKHUHIRUH include details of his remuneration since the date of his appointment. 2016 performance and key pay outcomes During 2016 all remuneration decisions have been made in line with the remuneration policy approved by shareholders at the AGM in April 2015. As per last year’s report, a summary of the key performance outcomes and associated remuneration decisions is set out in the ‘At a Glance’ section on pages 70 and 71. Clearly 2016 has been a challenging year against a backdrop of considerable market volatility and political uncertainty, with unforeseeable seismic shifts impacting investor sentiment and appetites. While our short-term investment performance has softened, our three year investment performance has remained strong, demonstrating our ability to deliver exceptional long-term performance for our clients. Our investment performance has enabled XV WR JHQHUDWH VLJQLÞFDQW SHUIRUPDQFH fees (although materially down on the levels reported in 2015), and management fee income (our principal revenue stream) KDV LQFUHDVHG UHßHFWLQJ WKH LPSDFW RI ßRZV from 2015 and our Australian acquisition, boosted by market movements and currency translation. Although we have experienced UHWDLO RXWßRZV PDLQO\ DV D UHVXOW RI WKH JOREDO pull back from exposure to European assets, WKLV KDV EHHQ SDUWO\ RIIVHW E\ SRVLWLYH ßRZV ZLWKLQ RXU ,QVWLWXWLRQDO EXVLQHVV DV LQYHVWPHQW in our institutional strategies have begun to bear fruit. The above, together with disciplined cost management, has enabled us to deliver a VLPLODU OHYHO RI XQGHUO\LQJ SURÞWDELOLW\ WR 2015. 7KLV \HDU ZH SDVVHG WKH PLG SRLQW RI RXU ÞYH year strategy, as part of which we targeted GRXEOLQJ RXU $80 E\ 2018. ,W LV SOHDVLQJ WR note that we are on schedule, having achieved 59% AUM growth since the beginning of 2014 ZLWKLQ WKH FRQWH[W RI D PRUH GLYHUVLÞHG and global business, even before what is hoped to be a transformative corporate transaction on which shareholders will vote shortly. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION q2XU ÞQDQFLDO UHVXOWV UHßHFW FDUHIXO DQG SUXGHQW management of our business in challenging times. This is UHßHFWHG LQ DVVRFLDWHG UHZDUG outcomes, particularly in relation to the outcome of our long-term plans which are closely aligned to shareholder returns.” Tim How Remuneration Committee Chairman

 


68 CORPOR ATE GOVERNANCE Directors’ remuneration report continued 2XU RYHUDOO ÞQDQFLDO UHVXOWV UHßHFW FDUHIXO stewardship of our business in these turbulent market conditions with the following key highlights: • Total AUM at 31 December 2016 up 9.8% to £101.0bn (2015: £92.0bn) • 1HW RXWßRZV RI €4.0bn (2015: £8.5bn QHW LQßRZ) • 8QGHUO\LQJ SURÞW EHIRUH WD[ IURP FRQWLQXLQJ operations down 3.3% to £212.7m (2015: £220.0m) • Diluted continuing underlying EPS down 12% to 15.2 pence per share (2015: 17.2 pence per share) • The lower momentum in the business, coupled with the challenging political and HFRQRPLF FRQGLWLRQV KDV EHHQ UHßHFWHG LQ the Company’s share price which stood at £2.36 as at 31 December 2016 compared to £3.10 as of 31 December 2015 • Total dividend slightly up at 10.5 pence per share (2015: 10.3 pence per share). $V \RX ZRXOG H[SHFW D VLJQLÞFDQW DPRXQW RI time and effort has been expended, especially by our Executive Directors, in constructing, planning, negotiating and preparing for the proposed merger. The realisation of the PHUJHU DQG LWV EHQHÞWV LV GHSHQGHQW RQ WKH vote of shareholders. However you will see LW UHßHFWHG LQ WKH DVVHVVPHQW RI WKH VWUDWHJLF contribution for all of our Executive Directors, notably for Mr Formica, who has demonstrated considerable vision and energy in bringing to the table what we believe may be a transformative strategic opportunity for our Company and our shareholders. From a Total Shareholder Return (TSR) SHUVSHFWLYH WKH VLJQLÞFDQW IDOO LQ WKH Company’s share price following the external events of 2016 has materially impacted our TSR performance, especially versus the ASX 100, where currency effects have had a further dilutive impact, but we believe we are well positioned, even before the merger, to recover. Taking into account the performance KLJKOLJKWHG DERYH , KDYH VXPPDULVHG WKH key 2016 remuneration outcomes below which are shown graphically overleaf: Performance against indices/peer groups in the period 2014–2016 (%)1 Median TSR Henderson TSR growth growth of indices/peer group Percentile ranking2 )76( 350 *HQHUDO )LQDQFLDO 6HUYLFHV ,QGH[1 15.4 29.0 26.4 Period 2015–20162 FTSE 350 19.0 16.0 56.0 ASX 100 6.7 20.4 18.3 Year 20163 FTSE 350 (20.6) 5.7 12.0 ASX 100 (33.8) 13.4 0.9 • Following a performance assessment DV RXWOLQHG RQ SDJHV 74 WR 77 WKH Remuneration Committee (Committee) awarded: – To the Chief Executive a performance UHODWHG 6KRUW-7HUP ,QFHQWLYH (67,) of £1,515,000 . This represents a pay-out of 350% of base salary (70% of the SUHYDLOLQJ PD[LPXP 67, RSSRUWXQLW\ of 500% of base salary) – 7R WKH &KLHI )LQDQFLDO 2IÞFHU D SHUIRUPDQFH-UHODWHG 67, ERQXV of £700,000, representing a pay-out of 200% of base salary (67% of the PD[LPXP 67, RSSRUWXQLW\ RI 300% of base salary) – To the Global Head of Distribution D SHUIRUPDQFH-UHODWHG 67, ERQXV RI €445 0004. This represents a pay-out of 196% of base salary5 (65% of the SUHYDLOLQJ PD[LPXP 67, RSSRUWXQLW\ of 300% of base salary). • 7KH SHUIRUPDQFH SHULRG IRU WKH /7,3 2014 ended on 31 December 2016. Henderson’s relative TSR performance (accounting for 95% of the total award) was positioned at the 38th percentile relative to the peer group. This resulted in zero vesting of this element. Taking into account performance against the additional risk and sustainability element 3% (out of the available 5% DZDUGHG) WKH RYHUDOO YHVWLQJ OHYHO IRU /7,3 2014 DZDUGV LV 3% RI WKH PD[LPXP DZDUG. • The combination of the above outcomes has resulted in the Single Figure Disclosures for the Chief Executive and Chief Financial 2IÞFHU EHLQJ PDWHULDOO\ UHGXFHG (E\ 65% DQG 43% UHVSHFWLYHO\) FRPSDUHG WR WKH SULRU year (see page 73). There is no prior year comparator for the Global Head of Distribution as he was only appointed as an Executive Director during 2016. Key pay decisions for 2017 ,W VKRXOG EH QRWHG WKDW XQOHVV DQG XQWLO the proposed merger is approved and a revised remuneration policy is adopted by the Remuneration Committee of the combined entity, pay decisions for 2017 will continue to be made in line with the prevailing remuneration policy which was approved by VKDUHKROGHUV DW RXU 2015 $*0. ,Q OLQH ZLWK that policy, the following key decisions are proposed: • We propose to increase the annual base salaries of the Chief Executive and the Chief )LQDQFLDO 2IÞFHU E\ 2.9% WR €445 000 DQG £360,000 respectively, which is marginally below the average increase across the wider employee group (3.1% on average). There is no proposed increase to the salary of the Global Head of Distribution • 2017 67, ERQXVHV (GXH WR EH GHWHUPLQHG LQ WKH ÞUVW TXDUWHU RI 2018) ZLOO FRQWLQXH to be determined in line with the existing policy unless and until a revised mechanism is adopted following the merger • There are no proposed changes to the fees payable to the Chairman or Non-Executive Directors. These will be reviewed and may be subject to change in the event that the merger is approved and once the new Board has been constituted. Henderson Group plc Annual Report 2016

 


 

69 £’000 £’000 £’000 7,000 7,000 7,000 1,000 0 0 0 2015 2016 2015 2016 2016 • Shareholders should note that the precise GHVLJQ DQG FRQÞUPDWLRQ RI WKH SHUIRUPDQFH PHWULFV XQGHU /7,3 2017 ZLOO EH GHSHQGHQW on the outcome of the shareholder vote on the merger. However, on the assumption that the plan will continue in its existing form, awards are proposed to be made to the &KLHI ([HFXWLYH WKH &KLHI )LQDQFLDO 2IÞFHU and the Global Head of Distribution at the maximum opportunity (500% and 300% of EDVH VDODU\ UHVSHFWLYHO\) XQGHU /7,3 2017 The proposed awards will have a maximum face value at the date of grant as follows: – Mr Formica: £2,162,500 – Mr Thompson: £1,050,000 – Mr Wagstaff: £990,0006. 7KH QXPEHU RI /7,3 RSWLRQV ZLOO EH determined by reference to the share price at the date of award. Notes 1 7 KH 765 ÞJXUHV TXRWHG LQ WKLV WDEOH DUH measured on a ‘point to point’ basis between WKH HQGV RI WKH UHOHYDQW \HDUV ,W VKRXOG EH QRWHG WKDW IRU WKH SXUSRVH RI WKH /7,3 SODQV it is measured as an average over the three months prior to the start and end of the relevant performance periods in line with UHOHYDQW /7,3 SODQ GHVLJQ 2./3. These periods relate to the proportion of the performance periods completed to date for WKH /7,3 2015 DQG /7,3 2016 SODQV respectively. 4 7KLV ÞJXUH UHSUHVHQWV WKH 67, DZDUG JUDQWHG to the Global Head of Distribution for the period since his appointment to the Board on 24 0D\ 2016 7KH IXOO \HDU DPRXQW LQFOXGLQJ the prior period during which the structure and mix of his remuneration was markedly GLIIHUHQW ZDV €940 000 Expressed as a % of base salary earned since the date of his appointment to Executive Director. 5HßHFWV 300% RI WKH EOHQGHG VDODU\ UHFHLYHG GXULQJ 2016 UHßHFWLQJ KLV WHQXUH SUH-DQG post-appointment to Executive Director. 5. 6 Further details are provided on pages 80 and 81 ,I WKHUH DUH SURSRVHG FKDQJHV WR WKH remuneration policy following the merger, these will be communicated to shareholders of the new entity separately. The Remuneration Committee would ask shareholders to consider and approve the Annual report on remuneration set out in the following pages at our AGM on 26 April 2017. Tim How Chairman of the Remuneration Committee 8 February 2017 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Other /7, 67, Pension %HQHÞWV Base 6,000 6,0006,000 5,0005,000 5,000 4,0004,000 4,000 3,0003,000 3,000 2,000 2,000 2,000 1,000 1,000 )LJXUH 1: 6LQJOH WRWDO ÞJXUH RI UHPXQHUDWLRQ Andrew Formica Roger Thompson Phil Wagstaff

 


70 CORPOR ATE GOVERNANCE At a glance The Directors’ remuneration policy was approved by shareholders at the AGM in April 2015 and will remain in force until the 2018 AGM unless material changes are proposed in the intervening period. Our remuneration principles are reinforced by achieving an appropriate balance of the following remuneration elements: For ease of reference, a summary of the Company’s key remuneration principles and remuneration elements is set out below. ,I WKHUH DUH SURSRVHG FKDQJHV WR WKH remuneration policy following the proposed merger, these will be communicated to shareholders of the new entity separately. Remuneration principles Our remuneration policy remains focused on pay for performance and in driving shareholder returns over the long term, while prudently PDQDJLQJ ULVN ,Q GRLQJ VR WKH &RPPLWWHH and the Board recognise that our remuneration policies and practices must enable us to attract, motivate and retain exceptional people, while aligning their interests with those of shareholders. The Committee works closely with the Board Risk Committee to ensure that performance is not achieved by taking unnecessary risks that fall outside the Board’s risk appetite. The key drivers of our remuneration philosophy and strategy are to: • Attract and retain individuals critical to the long-term success of the Company by providing total reward opportunities which, subject to performance, are competitive ZLWKLQ RXU GHÞQHG PDUNHWV ERWK LQ WHUPV RI TXDQWXP DQG VWUXFWXUH DQG UHßHFW LQGLYLGXDO contribution to business performance and sound risk management • Maintain an appropriate balance between ERWK Þ[HG DQG YDULDEOH SD\ DQG VKRUW DQG long-term elements of remuneration, to minimise the probability of excessive risk taking and to align with the Company’s strategic objectives and time horizons • Reinforce a strong performance culture through rewards which are differentiated based on Company, division, team and individual performance • Align management interests with those of the Company’s shareholders and clients through building appropriate share and fund ownership over time • Ensure that reward related processes are compliant with industry regulations, legislation and market best practice and have effective risk management controls. Short-Term personal contribution, thereby aligning (STI) business plan and to the interests of to the achievement of the Company’s Henderson Group plc Annual Report 2016 Supports superior business performance over the longer term and aligns Executive Long-Term Directors’ and shareholders’ interests via Incentive plan the linkage to TSR and to other long-term (LTI)performance measures which are aligned long-term strategy. Reward performance on an annual basis, E\ UHIHUHQFH WR &RPSDQ\ ÞQDQFLDO performance and individual strategic and Incentive plan employee interests with the annual shareholders. A material proportion of the 67, DZDUG LV GHIHUUHG WR VDWLVI\ UHJXODWRU\ requirements in addition to aligning the interests of the employee with those of the shareholders and clients via mutual linkage to the Group share price and investment performance of selected Henderson funds. Provision of market competitive pension arrangements, in a way that does not FUHDWH DQ XQDFFHSWDEOH OHYHO RI ÞQDQFLDO Pension risk or cost to the Group, to assist with employee recruitment and retention, and to assist employees in building wealth for their retirement years. Provision of competitive, cost and tax HIIHFWLYH EHQHÞWV JHDUHG WRZDUGV WKH promotion of employee wellbeing, to %HQHÞWVattract and retain employees with the personal attributes, skills and experience required to deliver our strategy. &RUH Þ[HG SD\ HOHPHQW WR DWWUDFW DQG UHWDLQ employees with the personal attributes, skills and experience required to deliver Base pay our strategy.

 


71 STI performance measures Weighted achievement of max (out of 50) Actual outcome Percentage of max3 Weighting Target2 Note 1. These measures exclude performance fee revenues and all variable compensation. 2 7KH ÞJXUH VKRZQ LV WKH WDUJHW DW ZKLFK 50% RI WKH PD[LPXP 67, DZDUG (500% DQG 300% RI EDVH VDODU\ IRU WKH &KLHI ([HFXWLYH DQG &KLHI )LQDQFLDO 2IÞFHUI Global Head of Distribution respectively) would be awarded. 3 7KLV VKRZV DFWXDO DFKLHYHPHQW DV D SHUFHQWDJH RI WKH RXWFRPH DW ZKLFK WKH PD[LPXP 67, DZDUG ZRXOG EH DZDUGHG 6WUDWHJLF REMHFWLYHV t &KLHI ([HFXWLYH DVVHVVHG DV 98% DFKLHYHPHQW (90% IRU &KLHI )LQDQFLDO 2IÞFHU DQG IRU *OREDO +HDG RI 'LVWULEXWLRQ) t 24 6% DQG 22 5% respectively out of possible 25%. 3HUVRQDO REMHFWLYHV t &KLHI ([HFXWLYH DVVHVVHG DV 96% DFKLHYHPHQW (90% IRU &KLHI )LQDQFLDO 2IÞFHU DQG 85% IRU *OREDO +HDG RI 'LVWULEXWLRQ) t 24 1% 22 6 % DQG 21 3% RXW RI SRVVLEOH 25% IRU WKH &KLHI ([HFXWLYH &KLHI )LQDQFLDO 2IÞFHU DQG *OREDO +HDG RI 'LVWULEXWLRQ UHVSHFWLYHO\ (VHH IXUWKHU GHWDLOV RQ SDJHV 74 DQG 75) Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 7KLUG SRVLWLYH \HDU RI SURJUHVV DJDLQVW WKH ÞYH \HDU JURZWK DQGResponded to the Board’s challenge to accelerate growth globalisation strategy which remains well communicated andin a process which eventually led to the proposed merger with understood by investorsJanus Capital Group ,QFUHDVHG JHRJUDSKLF GLYHUVLÞFDWLRQ ZLWK WKH 8. QRZ UHSUHVHQWLQJSuccessful development of new investment strategies, notably less than 50% of Henderson’s client basein Emerging Markets Delivery of consistently strong investment performance,6LPLODU XQGHUO\LQJ SURÞWV WR 2015 GHVSLWH SHUIRUPDQFH IHHV successful investments in organic growth and successful integrationEHLQJ VLJQLÞFDQWO\ ORZHU DQG WKH FKDOOHQJLQJ SROLWLFDO DQG of acquisitions in the US and Australiaeconomic conditions 1RQ-ÞQDQFLDO Return on equity (ROE) pre tax (pre variable compensation1) growth vs 2015 10% 5% 0.8%39.6% 22.7% 8QGHUO\LQJ SUH WD[ SURÞW (SUH YDULDEOH FRPSHQVDWLRQ1) growth vs 2015 30% 5% 8 4% 58 4% Revenue growth (management fees only) vs 2015 15% 5% 8.0%57.6% Operating margin (pre variable compensation1) growth vs 2015 15% 0.75% (0.2%)45 8% One and three year investment performance15% 70% 64 3% 49 3% 1HW LQßRZV15% 6% (4 4%) 7.3% Financial

 


72 CORPOR ATE GOVERNANCE Directors’ remuneration report: Annual report on remuneration Role and membership of the Remuneration Committee The Committee reviews and approves, where appropriate, the Group’s remuneration plans and overall Human Resources (HR) policies and practices. ,WV NH\ UHVSRQVLELOLWLHV DUH WR: • Approve the Group’s Remuneration Policy Statement and the remuneration terms and arrangements for Code Staff in accordance with the relevant regulatory remuneration codes • Approve the policy and terms of the Group’s employee and executive share incentive schemes • Determine annually the remuneration of the Chairman, the Executive Directors and the direct reports of the Chief Executive • Consider pay levels and employment conditions for all employees. The full terms of reference of the Committee, which are reviewed annually, are available on the Company’s website (www.henderson. com/ir). The Committee consists entirely of independent Non-Executive Directors. ,Q 2016 LW FRQVLVWHG RI 7LP +RZ (&RPPLWWHH Chairman), Sarah Arkle, Kevin Dolan DQG $QJHOD 6H\PRXU--DFNVRQ ,Q SUDFWLFH all Non-Executive Directors (including the Chairman) and the Chief Executive attend all Committee meetings, although they do not attend if their own remuneration is under consideration. The Committee meets regularly and takes advice on a range of matters, including the scale and composition of total remuneration payable to executives with similar TXDOLÞFDWLRQV VNLOOV DQG H[SHULHQFH holding similar roles and with similar levels of responsibility in comparable companies. ,Q DGGLWLRQ WR UHJXODU DJHQGD LWHPV LQ 2016 the Committee took advice on the potential remuneration impacts of the EBA guidelines RQ 6RXQG 5HPXQHUDWLRQ XQGHU &5' ,9 the Gender Pay Reporting regulations, the LPSOHPHQWDWLRQ RI 8&,76 9 UHJXODWLRQV LQ WKH UK, the potential implications of the proposed merger on share and remuneration plans and practices, market practice in relation to deferral regimes, share plans and changing pension practice and legislation. ,Q 2016 WKH &RPPLWWHH ZDV VXSSRUWHG E\ WKH &KLHI )LQDQFLDO 2IÞFHU WKH *HQHUDO &RXQVHO the Global Head of HR, the Head of Reward DQG WKH &KLHI 5LVN 2IÞFHU 7KH *OREDO +HDG of HR and Head of Reward attend all meetings, except when their own remuneration is under consideration. The Committee Chairman and the Chief Executive make remuneration recommendations for the Executive Committee, members of which report to the Chief Executive. The Chairman is also consulted about the remuneration of the Executive Directors. The remuneration of the Chief Executive is recommended by the Committee Chairman and the Chairman, and approved by the Committee. No Executive Director, other member of the Executive Committee or Non-Executive Director, is involved in any decision on their own remuneration. The Committee held seven meetings during the year. There was full attendance at all meetings. External advisors The Committee does not retain a formal appointed remuneration advisor although it receives consultancy advice from Deloitte LLP (Deloitte) on an ad hoc basis. Deloitte do not attend all Committee meetings. During 2016, the Committee received advice from Deloitte on executive and senior remuneration matters. Deloitte has provided advice to the Committee on regulatory matters, competitive market benchmarking, emerging market practices, remuneration plan design, the approach to shareholder engagement activities as well as potential implications of the proposed merger on share and remuneration plans and practices for Henderson employees. Deloitte’s fees in respect of the advice provided to the Committee were £86,860. Deloitte has also provided advice on remuneration to management during 2016. Deloitte has no other connection to the Company, although as auditors of Janus Capital Group, they were invited to participate in the tender process to be appointed as auditors of the combined group. Further information regarding the tender is outlined on page 65. Henderson Group plc Annual Report 2016 Membership • Tim How (Chairman) • Sarah Arkle • Kevin Dolan • Angela Seymour-Jackson Contents 72 Role and membership of the Remuneration Committee 72 External advisers 73 Total remuneration 73 )L[HG SD\ DQG EHQHÞWV 74 Pension entitlements and contributions 74 STI for the year ended 31 December 2016 78 LTI vesting in respect of performance periods ended in 2016 79 Year-on-year percentage increase in the remuneration of the Chief Executive 80 7RWDO 6KDUHKROGHU 5HWXUQ (765) performance 80 Chief Executive remuneration over last seven years 80 Relative importance of the spend on pay 80 How the policy will be applied in 2017 82 Outstanding LTI and other share scheme awards 83 Directors’ personal shareholding and EHQHÞFLDO VKDUH LQWHUHVWV 84 Shares personally held 84 Payments within the year to past Directors 84 External directorships 84 Statement of shareholder voting

 


73 Total remuneration 7KH WDEOHV EHORZ UHSRUW WKH VLQJOH ÞJXUH UHPXQHUDWLRQ IRU WKH \HDUV HQGHG 31 'HFHPEHU 2016 DQG 31 'HFHPEHU 2015 UHVSHFWLYHO\ The amounts shown represent earned remuneration in accordance with the regulations and are shown graphically in the Committee Chairman’s statement on page 69. 6LQJOH WRWDO ÞJXUH RI UHPXQHUDWLRQ t ([HFXWLYH 'LUHFWRUV (DXGLWHG LQIRUPDWLRQ) Executive Director Base pay %HQHÞWV Pension 67, /7, Other Total 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 £’000 Notes • Remuneration of Executive Directors and Non-Executive Directors is for the calendar year or, if applicable, from the date of appointment or to the date of resignation. • %HQHÞWV FRQVLVW RI WKH SURYLVLRQ RI OLIH DVVXUDQFH FULWLFDO LOOQHVV LQVXUDQFH SULYDWH PHGLFDO LQVXUDQFH DQG OXQFK DOORZDQFH • 3HQVLRQ LQFOXGHV DQ\ DGGLWLRQDO HPSOR\HU FRQWULEXWLRQ LQ UHVSHFW RI D 6HOI-,QYHVWHG 3HUVRQDO 3HQVLRQ DQG DV DSSOLFDEOH D FDVK DOORZDQFH WDNHQ LQ OLHX RI contribution to the Company pension scheme. • 67, LV WKH JURVV DQQXDO GLVFUHWLRQDU\ DZDUG IRU WKH SHUIRUPDQFH \HDU EHIRUH PDQGDWRU\ GHIHUUDO LV DSSOLHG • The split of deferral between Group shares and fund interests is given on page 77. • /7, LQFOXGHV /7,3 DZDUGV YHVWLQJ GXULQJ WKH \HDU (LQFOXGLQJ GLYLGHQG HTXLYDOHQWV DZDUGHG GXULQJ WKH \HDU) 6$<( DQG 563 DZDUGV ZKLFK YHVWHG GXULQJ WKH \HDU and (for 2015 only) ESOP matching shares vesting during the year. • 2015 UHSRUWHG /7, DZDUGV KDYH EHHQ UHVWDWHG WR UHßHFW WKH DFWXDO VKDUH SULFH DW WKH GDWH RI YHVWLQJ (€2 50 DQG €2 39 IRU /7,3 2013 DQG (623 2011 respectively) versus £2.88 which was the share price used in the 2016 report (being the average share price over the last quarter of 2015). • o2WKHUp FRPSULVHV DPRXQWV SDLG LQ UHODWLRQ WR GLYLGHQGV HDUQHG RQ EHQHÞFLDO LQWHUHVWV LQ &RPSDQ\ VKDUH SODQV • For Mr Wagstaff, the following notes apply: – 7KH EDVH VDODU\ VKRZQ LV WKH DPRXQW SDLG VLQFH KLV DSSRLQWPHQW DV ([HFXWLYH 'LUHFWRU RQ 24 0D\ 2016 t WKH IXOO \HDU DPRXQW LV €331 000; – WKH ERQXV VKRZQ DERYH LV WKH DPRXQW DZDUGHG LQ UHODWLRQ WR WKH SHULRG VLQFH KLV DSSRLQWPHQW DV ([HFXWLYH 'LUHFWRU t WKH IXOO \HDU DPRXQW (€940 000) UHßHFWV the period prior to his appointment, during which the structure and mix of his remuneration was markedly different; – WKH /7, DZDUG UHßHFWV WKH RXWFRPH RI WKH 2014 /7,3 DZDUG SOXV WKH YHVWLQJ RI DQ DZDUG XQGHU WKH 5HVWULFWHG 6KDUH 3ODQ (VHH IXUWKHU GHWDLO EHORZ); – the RSP award was granted upon his appointment to Henderson in March 2012. The performance conditions were as follows: – 1HW VDOHV (85% ZHLJKWLQJ) t QHW VDOHV DW 31 'HFHPEHU 2016 (DV D SHUFHQWDJH RI $80 DW 1 -XO\ 2012) ZLWK ]HUR YHVWLQJ IRU QHW VDOHV EHORZ 4% DQG 100% vesting for net sales at/above 12%; and – 1RQ-ÞQDQFLDO (15%) t SHUFHQWDJH DW WKH GLVFUHWLRQ RI WKH &KLHI ([HFXWLYH WDNLQJ LQWR DFFRXQW QRQ-ÞQDQFLDO PHWULFV LQFOXGLQJ 7&) DQG ULVN DFURVV WKH Distribution area as well as the Executive’s general performance of his duties. The maximum award was 932,030 shares: Assessment – 7.5% net sales equating to 61% of the net sales element (51.7% of total award) plus 100% for the QRQ-ÞQDQFLDO HOHPHQW (15% RI WRWDO DZDUG) t UHVXOWLQJ LQ WRWDO YHVWLQJ RI 621 353 VKDUHV YDOXHG XVLQJ D VKDUH SULFH RI €2 39 ZKLFK LV WKH DYHUDJH VKDUH SULFH over the last quarter of 2016. 6LQJOH WRWDO ÞJXUH RI UHPXQHUDWLRQ t &KDLUPDQ DQG RWKHU 1RQ-([HFXWLYH 'LUHFWRUV Non-Executive Director Fees %HQHÞWVIH[SHQVHV 2016 2016 £’000 2015 2015 Notes • .DOSDQD 'HVDLpV 2015 IHHV UHßHFW VHUYLFH VLQFH KHU DSSRLQWPHQW RQ 5 2FWREHU 2015 • ,W VKRXOG EH QRWHG WKDW .DOSDQD 'HVDLpV H[SHQVHV UHßHFW WKH FRVW RI WUDYHOOLQJ IURP KHU EDVH LQ +RQJ .RQJ WR %RDUG DQG &RPPLWWHH PHHWLQJV )L[HG SD\ DQG EHQHÞWV 7KH &KLHI ([HFXWLYHpV DQG &KLHI )LQDQFLDO 2IÞFHUpV EDVH SD\ ZDV LQFUHDVHG E\ 3% WR €432 500 DQG €350 000 UHVSHFWLYHO\ ZLWK HIIHFW IURP 1 $SULO 2016 VXFK LQFUHDVHV EHLQJ LQ OLQH ZLWK DYHUDJH LQFUHDVHV DZDUGHG WR WKH ZLGHU HPSOR\HH SRSXODWLRQ 7KH Þ[HG SD\ VKRZQ LQ WKH WDEOH represents the amounts paid during the year. The Global Head of Distribution’s base pay was increased to £275,000 with effect from 1 $SULO 2016 DQG WKHQ WR €375 000 ZLWK HIIHFW IURP 1 -XQH 2016 WR UHßHFW KLV DSSRLQWPHQW WR WKH %RDUG DQG WKH UHVXOWLQJ PDWHULDO FKDQJH to the structure and mix of his compensation. 7KH EHQHÞWV FRQVLVW RI OLIH LQVXUDQFH FULWLFDO LOOQHVV LQVXUDQFH DQG SULYDWH PHGLFDO LQVXUDQFH SOXV D OXQFK DOORZDQFH LQ OLQH ZLWK EHQHÞWV provided to other employees. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Chairman Richard Gillingwater Other Non-Executive Directors Sarah Arkle Kevin Dolan Tim How Robert Jeens Angela Seymour-Jackson Kalpana Desai 220 97 74 109 99 74 74 200 90 70 103 93 70 18 3 0 6 1 0 2 26 3 0 7 0 0 3 7 Andrew Formica Roger Thompson Phil Wagstaff 429 348 227 420 338 n/a 6 2 1 5 2 n/a 45 31 17 37 27 n/a 1,515 700 445 1,560 650 n/a 42 20 1,502 3,828 925 n/a 0 9 17 20 7 n/a 2,037 1,110 2,209 5,870 1 949 n/a

 


74 CORPOR ATE GOVERNANCE Directors’ remuneration report: Annual report on remuneration continued Pension entitlements and contributions 7KH ([HFXWLYH 'LUHFWRUV SDUWLFLSDWH LQ WKH QRQ-FRQWULEXWRU\ VHFWLRQ RI WKH +HQGHUVRQ *URXS 3HQVLRQ 6FKHPH WKDW SURYLGHV GHÞQHG FRQWULEXWLRQ EHQHÞWV RQ WKH VDPH EDVLV DV RWKHU HPSOR\HHV 7KH ([HFXWLYH 'LUHFWRUV DUH HDFK HQWLWOHG WR D FRQWULEXWLRQ FXUUHQWO\ 10 5% RI EDVH SD\ LQWR WKH *URXSpV GHÞQHG FRQWULEXWLRQ SHQVLRQ SODQ 'XH WR WKH DSSOLFDWLRQ RI +05& SHQVLRQ OLPLWV (/LIHWLPH $OORZDQFH DQG $QQXDO $OORZDQFH) ERWK WKH &KLHI ([HFXWLYH DQG &KLHI )LQDQFLDO 2IÞFHU HOHFWHG WR WDNH WKH FDVK DOWHUQDWLYH GXULQJ 2015 ,Q WKH FDVH RI 0U :DJVWDII KH HOHFWHG WR WDNH WKH cash alternative with effect from 1 April 2016. ,Q 2016 WKH *URXS SDLG D SHQVLRQ FDVK DOORZDQFH RI €45 090 WR 0U )RUPLFD DQG D SHQVLRQ FDVK DOORZDQFH RI €31 275 WR 0U 7KRPSVRQ ,Q UHVSHFW of Mr Wagstaff, the Group paid a cash allowance of £16,500 for the period since his appointment as Executive Director. For the full year, additional contributions of £6,759 were made to Mr Wagstaff’s pension in the period up to 31 March 2016, and a cash allowance of £2,062 paid in the SHULRG DIWHU WKDW GDWH XS WR 24 0D\ 2016 STI for the year ended 31 December 2016 For the purpose of determining the 2016 bonus, the Committee assessed the performance of the business overall and of each of the Executive Directors. Financial performance 7KH *URXS GHOLYHUHG ÞQDQFLDO UHVXOWV ZKLFK ZHUH UREXVW LQ WKH FRQWH[W RI FKDOOHQJLQJ DQG YRODWLOH PDUNHW FRQGLWLRQV DQG H[WHUQDO HYHQWV ZKLFK ZHUH RXWVLGH RI WKH &RPSDQ\pV FRQWURO 7KH NH\ ÞQDQFLDO KLJKOLJKWV DUH VXPPDULVHG LQ WKH &RPPLWWHH &KDLUPDQpV VWDWHPHQW DQG WKH $W D *ODQFH section on pages 70 and 71. 7KH RYHUDOO DVVHVVPHQW RI ÞQDQFLDO SHUIRUPDQFH XQGHU WKH 67, VFRUHFDUG LV D WRWDO VFRUH RI 45 4% RI PD[LPXP (22 7%1 out of a possible 50% as shown in the table on pages 76 and 77). Strategic and personal contributions During the year, the progress on business strategy strongly exceeded expectations with a number of strategic initiatives being driven by the Executive Directors, in particular by the Chief Executive, including: • 3UG SRVLWLYH \HDU RI SURJUHVV DJDLQVW WKH ÞYH \HDU JURZWK DQG JOREDOLVDWLRQ VWUDWHJ\ ZKLFK UHPDLQV ZHOO FRPPXQLFDWHG DQG XQGHUVWRRG E\ LQYHVWRUV 7KH &RPSDQ\ LV ZHOO RQ FRXUVH WR PHHW WKH RULJLQDO VWUHWFKLQJ WDUJHW RI GRXEOLQJ $80 LQ ÞYH \HDUV • Responding to the Board’s challenge to accelerate growth in a process which eventually led to the proposed merger with Janus Capital Group • ,QFUHDVHG JHRJUDSKLF GLYHUVLÞFDWLRQ ZLWK WKH 8. QRZ UHSUHVHQWLQJ FLUFD 50% RI +HQGHUVRQpV FOLHQW EDVH • Successful development of new investment strategies, notably in Emerging Markets • 'HOLYHU\ RI WKH VXFFHVVIXO LQWHJUDWLRQ RI DFTXLVLWLRQV LQ WKH 86 DQG $XVWUDOLD DQG WKH GLVSRVDO RI 9RODQWLV • Maintained sLPLODU XQGHUO\LQJ SURÞWV WR 2015 GHVSLWH SHUIRUPDQFH IHHV EHLQJ VLJQLÞFDQWO\ ORZHU DQG WKH FKDOOHQJLQJ SROLWLFDO DQG economic conditions. The Executive Directors each exceeded their agreed personal objectives. ,Q SDUWLFXODU $QGUHZ )RUPLFD KDV: • Delivered on the Group’s growth and globalisation strategy, with results in line with plan • Built a very cohesive Executive Committee which is now working well • Helped propel the merger discussions and integration planning, and has helped sustain a positive staff morale • Played an exceptional role in communicating the merger with Janus, and ensuring that this has been well received by clients, shareholders, employees and regulators • 6WHHUHG +HQGHUVRQ WKURXJK FKDOOHQJLQJ PDUNHW FRQGLWLRQV SDUWLFXODUO\ IROORZLQJ WKH 8. UHIHUHQGXP WR OHDYH WKH (8 ZKLFK KDYH LPSDFWHG ßRZV and which led to the suspension of trading of the Henderson UK Property Fund • 3OD\HG DQ LPSRUWDQW OHDGHUVKLS UROH DW WKH ,QYHVWPHQW $VVRFLDWLRQ DQG LQ WKH FRQWH[W RI WKH $VVRFLDWLRQ ZRUNHG RQ WKH )&$pV PDUNHW VWXG\ LQWR the asset management industry • 7RJHWKHU ZLWK RWKHU ([HFXWLYH 'LUHFWRUV KDV EHHQ D NH\ GULYHU RI WKH &RPSDQ\pV 3HRSOH 6WUDWHJ\ DV UHßHFWHG LQ FRQVLVWHQWO\ ORZ WXUQRYHU UDWHV DQG KLJK VWDII HQJDJHPHQW VFRUHV ZKLFK VLJQLÞFDQWO\ RXW-VFRUH VHFWRU EHQFKPDUNV Roger Thompson has: • Delivered on the Group’s growth and globalisation strategy, with results in line with plan • 3URYLGHG LQVWUXPHQWDO LQSXW WR WKH PHUJHU IURP HDUO\ LGHQWLÞFDWLRQ WKURXJK WR WKH GHFLVLRQ WR H[HFXWH • Pro-actively driven cost containment (e.g. recruitment freeze, tightening and expectation management of discretionary spending, focus on both staff and non-staff costs) to mitigate market challenges • Brought forward the annual reporting cycle for Group results by two weeks • Made a strong contribution to the Executive Committee as the voice of pragmatism and affordability • Made an exceptional and passionate contribution to the development of our charitable foundation and extension of wellbeing initiatives across the Company • 7RJHWKHU ZLWK RWKHU ([HFXWLYH 'LUHFWRUV KDV EHHQ D NH\ GULYHU RI WKH &RPSDQ\pV 3HRSOH 6WUDWHJ\ DV UHßHFWHG LQ FRQVLVWHQWO\ ORZ WXUQRYHU UDWHV DQG KLJK VWDII HQJDJHPHQW VFRUHV ZKLFK VLJQLÞFDQWO\ RXW-VFRUH VHFWRU EHQFKPDUNV Note 1 7KLV UHSUHVHQWV WKH FRQWULEXWLRQ WRZDUGV WKH PD[LPXP 67, RSSRUWXQLW\ (RXW RI D PD[LPXP 50% UHODWLQJ WR ÞQDQFLDO PHDVXUHV) ZHLJKWLQJ [ DFKLHYHPHQW [ 50% Henderson Group plc Annual Report 2016

 


75 Phil Wagstaff has: • Delivered on the Group’s growth and globalisation strategy, with results in line with plan • Demonstrated motivational leadership of the Distribution function in challenging market conditions • 2YHUVHHQ D PDWHULDO LPSURYHPHQW LQ ,QVWLWXWLRQDO 6DOHV • Made a strong contribution to the management of property funds as Chairman of the regulated ACD • Made a strong contribution to the Executive Committee, championing client concentricity • 0DGH D VLJQLÞFDQW FRQWULEXWLRQ VLQFH KLV DSSRLQWPHQW WR WKH %RDUG LQ 0D\ 2016 • Ensured continued focus on client relationships through our Knowledge. Shared brand promise • 7RJHWKHU ZLWK RWKHU ([HFXWLYH 'LUHFWRUV KDV EHHQ D NH\ GULYHU RI WKH &RPSDQ\pV 3HRSOH 6WUDWHJ\ DV UHßHFWHG LQ FRQVLVWHQWO\ ORZ WXUQRYHU UDWHV DQG KLJK VWDII HQJDJHPHQW VFRUHV ZKLFK VLJQLÞFDQWO\ RXW-VFRUH VHFWRU EHQFKPDUN 6WUDWHJLF FRQWULEXWLRQV: &KLHI ([HFXWLYH, &KLHI )LQDQFLDO 2IÞFHU, *OREDO +HDG RI 'LVWULEXWLRQ (assessed at 98%, 90% and 90% achievement respectively) Achievement • 3URJUHVV DJDLQVW WKH ÞYH \HDU VWUDWHJ\ • Responded to the Board’s challenge to accelerate growth – culminating in the proposed merger with Janus Capital Group • ,QFUHDVHG JHRJUDSKLF GLYHUVLÞFDWLRQ • Successful development of new investment strategies notably in Emerging Markets • 6XFFHVVIXO LQWHJUDWLRQ RI DFTXLVLWLRQV LQ WKH 86 DQG $XVWUDOLD DQG WKH GLVSRVDO RI 9RODQWLV • 0DLQWHQDQFH RI VLPLODU XQGHUO\LQJ SURÞWV LQ FKDOOHQJLQJ FRQGLWLRQV Strong progress Exceptional progress Strong progress Strong progress Strong progress Strong progress Personal contributions: Chief Executive (assessed at 96% achievement) Achievement • Delivering against strategic plan • Built cohesive Executive Committee • Crucial in merger discussions/integration planning • Key role in communicating the merger • 6XFFHVVIXOO\ QDYLJDWHG GLIÞFXOW PDUNHWV LQ 2016 • ,PSRUWDQW OHDGHUVKLS UROH DW WKH ,QYHVWPHQW $VVRFLDWLRQ • Contribution to People Strategy Strong progress Strong progress Exceptional contribution Exceptional progress Strong progress Strong progress Exceptional contribution 3HUVRQDO FRQWULEXWLRQ: &KLHI )LQDQFLDO 2IÞFHU (DVVHVVHG DW 90% DFKLHYHPHQW) Achievement • Delivering against strategic plan • Contribution to merger • Focus on cost containment • ,PSURYHPHQW LQ *URXS UHSRUWLQJ F\FOH • Contribution to Executive Committee and Board • Contribution to charitable foundation/wellbeing initiatives • Contribution to People Strategy Strong progress Exceptional contribution Strong contribution Strong contribution Strong contribution Exceptional contribution Exceptional contribution Personal contribution: Global Head of Distribution (assessed at 85% achievement) Achievement • Delivering against strategic plan • Motivational Leadership contribution • ,QVWLWXWLRQDO 6DOHV SURJUHVV • Contribution to Executive Committee and Board • Client focus through Knowledge. Shared • Contribution to Property Funds • Contribution to People Strategy Strong progress Exceptional contribution Strong progress Strong contribution Strong contribution Strong contribution Exceptional contribution 7KH LQGLYLGXDO 67, RXWFRPHV UHODWLYH WR WKH PD[LPXP 67, RSSRUWXQLW\ (357 2%I203 6%I199 4% RI EDVH VDODU\ IRU WKH &KLHI ([HFXWLYH &KLHI )LQDQFLDO 2IÞFHU DQG *OREDO +HDG RI 'LVWULEXWLRQ UHVSHFWLYHO\ EHIRUH DQ\ ULVN DGMXVWPHQW) DUH VKRZQ JUDSKLFDOO\ RQ WKH IROORZLQJ SDJH(V) Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


76 CORPOR ATE GOVERNANCE Directors’ remuneration report: Annual report on remuneration continued 7KH &RPPLWWHH GHWHUPLQHG WKH 67, LQFHQWLYH ERQXVHV RI WKH ([HFXWLYH 'LUHFWRUV DJDLQVW D EDODQFHG VFRUHFDUG RI: • )LQDQFLDO PHDVXUHV (QHW ßRZV RQH DQG WKUHH \HDU LQYHVWPHQW SHUIRUPDQFH DQG JURZWK LQ RSHUDWLQJ PDUJLQ XQGHUO\LQJ SURÞW EHIRUH WD[ management fee revenue and ROE), and • 1RQ-ÞQDQFLDO PHDVXUHV (VWUDWHJLF FRQWULEXWLRQ DQG SHUIRUPDQFH DJDLQVW SHUVRQDO REMHFWLYHV) The targets are set as part of the annual planning process overseen and ultimately approved by the Board. The Target represents the planned outcome for the Group with Maximum aligned with the stretch target and Threshold representing a minimum requirement for any incentive bonus to be paid. The same process is used to guide incentive decisions more widely across the Executive Committee. For the CEO, the performance against each of these measures is set out in the graphic above. The weighted outcome of these measures as a percentage of maximum bonus opportunity (500% x salary for 2016) resulted in an aggregate bonus equivalent to 357.2% of salary (L H €1 545 000) SULRU WR DQ\ DGMXVWPHQWV GHWHUPLQHG E\ WKH &RPPLWWHH DW LWV GLVFUHWLRQ 50.0% For the CFO, the performance against each of these measures is set out in the graphic above. The weighted outcome of these measures as a percentage of maximum bonus opportunity (300% x salary for 2016) resulted in an aggregate bonus equivalent to 203.6% of salary (i.e. £713,000) prior to any adjustments determined by the Committee at its discretion. Henderson Group plc Annual Report 2016 3HUIRUPDQFH 2016: &KLHI )LQDQFLDO 2IÞFHU Target (50% ofActual Weightingmaximum)outcome 5% 0.8% 5%8 4% 5%8.0% 0.75%-0.2% 70% 64 3% 6%-4 4% 25.0%n/a n/a 25.0%n/an/a Threshold TargetMaximum Weighted Contribution Achievement achievementto bonus vs maximumvs maximum(% of salary) ROE growth 8QGHUO\LQJ SUH-WD[ SURÞW JURZWK Management fee growth Operating margin growth Investment performance Flows Strategic objectives Personal objectives 0 25 50 75 100 68.2% 67.5% 67.9% 203.6% 22.7% (out of maximum of 50%) 22.5% 22.6% 67.9% 40% 58% 58% 46% 49% 7% 90% 90% Performance 2016: Chief Executive Target (50% ofActual Weightingmaximum)outcome 5% 0.8% 5%8 4% 5%8.0% 50.0% 0.75%-0.2% 70% 64 3% 6%-4 4% 25.0%n/a n/a 25.0%n/an/a Threshold TargetMaximum Weighted Contribution Achievement achievementto bonus vs maximumvs maximum(% of salary) ROE growth 8QGHUO\LQJ SUH-WD[ SURÞW JURZWK Management fee growth Operating margin growth Investment performance Flows Strategic objectives Personal objectives 0 25 50 75 100 113.7% 123.0% 120.5% 357.2% 22.7% (out of maximum of 50%) 24 6% 24 1% 71.4% 40% 58% 58% 46% 49% 7% 98% 96%

 


77 50.0% For the Global Head of Distribution, the performance against each of these measures is set out in the graphic above. The weighted outcome of these measures as a percentage of maximum bonus opportunity (300% x salary for 2016) resulted in an aggregate bonus (for the period since KLV DSSRLQWPHQW WR ([HFXWLYH 'LUHFWRU) HTXLYDOHQW WR 199 4% RI VDODU\ (L H €455 000) SULRU WR DQ\ DGMXVWPHQWV GHWHUPLQHG E\ WKH &RPPLWWHH DW its discretion. As part of the annual review process, the Committee considered the recommendations of the Board Risk Committee in relation to the nature, incidence and materiality of risk issues arising during the year and an overall assessment of risk management relative to the risk appetite statement. As a result of that review, the Committee determined that a negative adjustment of £1m should be made (2015: no adjustment) and WKH 67, RXWFRPHV IRU WKH ([HFXWLYH 'LUHFWRUV ZHUH DPHQGHG DFFRUGLQJO\ WR UHßHFW D SURSRUWLRQ RI WKH DERYH DGMXVWPHQW $ IXUWKHU DGMXVWPHQW ZDV DSSOLHG WR WKH YHVWLQJ RXWFRPH RI WKH 2014 /7,3 (VHH SDJH 78) 7KH &RPPLWWHH DOVR KDV WKH GLVFUHWLRQ WR DGMXVW WKH ÞQDO 67, RXWFRPH (XSZDUGV RU GRZQZDUGV DW HLWKHU DQ RYHUDOO IXQGLQJ OHYHO DQGIRU LQ UHVSHFW RI DZDUGV WR VSHFLÞF ([HFXWLYH 'LUHFWRUV) WR HQVXUH WKDW WKH RXWFRPH RI WKH 67, VFRUHFDUG LV IDLU LQ WKH FRQWH[W RI RYHUDOO *URXS performance, business performance and individual strategic/personal objectives, or in the event that an exceptional event occurred outside RI WKH ([HFXWLYH 'LUHFWRUVp FRQWURO ZKLFK LQ WKH &RPPLWWHHpV RSLQLRQ PD\ KDYH PDWHULDOO\ DIIHFWHG WKH 67, RXWFRPH 7KH &RPPLWWHH GHFLGHG that no such adjustment was required. The awards for Executive Directors were subject to the Group’s mandatory deferral policy. 7KH UHVXOWLQJ 67, DZDUGV (DQQXDO ERQXVHV) IRU 2016 ZHUH DV IROORZV: Deferred £’000 As a % of maximum opportunity Total1 £’000 Cash2 £’000 Company shares6 As a % of base salary Executive Director Funds7 Andrew Formica3 1,515 827 688 350.3% 70.1% Roger Thompson4 700 420 140 140 200.0% 66.7% Phil Wagstaff5 445 255 95 95 195.6% 65.2% Notes 1 7KH &RPPLWWHH GHWHUPLQHG WKDW HDFK RI WKH ([HFXWLYH 'LUHFWRUVp 67, DZDUGV VKRXOG EH UHGXFHG UHODWLYH WR WKH FDOFXODWHG DPRXQW E\ 2% WR UHßHFW WKH ULVN adjustment set out above, This is a higher percentage reduction than was applied across the incentive pool as a whole. 2 $V ,GHQWLÞHG 6WDII XQGHU $,)0' D SURSRUWLRQ RI ([HFXWLYH 'LUHFWRUVp QRQ-GHIHUUHG (L H o&DVKp) 67, DZDUG VHW RXW LQ WKH WDEOH LV GHOLYHUHG LQ WKH IRUP RI 5HWDLQHG 8QLWV 7KHVH DUH XQLWV LQ UHOHYDQW $,)V ZKLFK DUH LPPHGLDWHO\ YHVWHG RQ DZDUG EXW PXVW EH UHWDLQHG IRU D PLQLPXP SHULRG RI 6 PRQWKV )RU WKHVH SXUSRVHV WKH &RPSDQ\ DZDUGV XQLWV LQ D EDVNHW RI (11) $,)V ZKLFK DUH GHHPHG WR EH UHSUHVHQWDWLYH RI WKH RYHUDOO $,)0' DFWLYLWLHV RI WKH &RPSDQ\ 7KH DPRXQWV GHOLYHUHG LQ WKLV IRUP DUH €42 968 €21 840 DQG €13 884 IRU 0U )RUPLFD 0U 7KRPSVRQ DQG 0U :DJVWDII UHVSHFWLYHO\ 3 7KH 67, ERQXV DZDUGHG WR WKH &KLHI ([HFXWLYH ZDV LPSDFWHG E\ WKH VWUHQJWK RI KLV SHUVRQDO DQG VWUDWHJLF FRQWULEXWLRQV DV ZHOO DV WKH RXWFRPH RI WKH ÞQDQFLDO VFRUHFDUG DV UHßHFWHG RQ SDJH 76 +LV DZDUG ZDV RIIVHW E\ WKH ULVN DGMXVWPHQW UHIHUUHG WR DERYH DV D UHVXOW RI ZKLFK KLV RYHUDOO 67, DZDUG LV UHGXFHG E\ 3% relative to 2015. 4 )RU WKH &KLHI )LQDQFLDO 2IÞFHU VKDUHKROGHUV DUH UHPLQGHG WKDW LQ UHVSHFW RI 2015 0U 7KRPSVRQ ZDLYHG DQ DPRXQW (€109 000) RI KLV FDOFXODWHG 67, ERQXV in the interests of consistency with wider reward outcomes across the Group. Therefore, although the bonus awarded to him, after adjustment for the risk DGMXVWPHQW DSSHDUV WR UHßHFW D 7 6% LQFUHDVH IURP KLV SULRU \HDU LQFHQWLYH DZDUG LQ UHDOLW\ LW UHßHFWV D 7 7% UHGXFWLRQ UHODWLYH WR KLV SULRU \HDU FDOFXODWHG DZDUG 5 7KH ÞJXUH VKRZQ IRU WKH *OREDO +HDG RI 'LVWULEXWLRQ UHßHFWV WKH 67, ERQXV IRU WKH SHULRG IURP 24 0D\ 2016 DW ZKLFK WLPH KH ZDV DSSRLQWHG WR ([HFXWLYH 'LUHFWRU 7KH IXOO \HDU ÞJXUH (€940 000) LQFOXGHV WKH 67, DZDUG IRU WKH SHULRG SULRU WR KLV DSSRLQWPHQW GXULQJ ZKLFK WKH VWUXFWXUH DQG PL[ RI KLV UHPXQHUDWLRQ was markedly different. 6. The deferred Company shares referred to in the table above will be awarded at a price equal to the average purchase price of the underlying shares acquired to satisfy all awards (to all participants) under the Deferred Equity Plan (DEP) immediately prior to the date of award (expected to be on or around 3 April 2017). 7. The deferred fund interests referred to in the table above will be awarded at the unit value of the relevant fund(s) at the date that the fund investment is made (expected to be on or around 3 April 2017). Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Performance 2016: Global Head of Distribution Target (50% ofActual Weightingmaximum)outcome 5% 0.8% 5%8 4% 5%8.0% 0.75%-0.2% 70% 64 3% 6%-4 4% 25.0%n/a n/a 25.0%n/an/a Threshold Target Maximum Weighted Contribution Achievement achievementto bonus vs maximumvs maximum(% of salary) ROE growth 8QGHUO\LQJ SUH-WD[ SURÞW JURZWK Management fee growth Operating margin growth Investment performance Flows Strategic objectives Personal objectives 0 25 50 75 100 68.2% 67.5% 63.8% 199.4% 22.7% (out of maximum of 50%) 22.5% 21.3% 66.5% 40% 58% 58% 46% 49% 7% 90% 85%

 


78 CORPOR ATE GOVERNANCE Directors’ remuneration report: Annual report on remuneration continued LTI vesting in respect of performance periods ended in 2016 7KH SHUIRUPDQFH SHULRG IRU WKH ÞUVW WUDQFKH RI WKH 2014 /7,3 HQGHG RQ 31 'HFHPEHU 2016 7KH WDEOH EHORZ VKRZV WKH FDOFXODWLRQ WR GHWHUPLQH the percentage vesting based on the TSR result over the performance period. This accounts for vesting of 95% of the award. The Committee ZDV VDWLVÞHG WKDW WKLV UHßHFWHG WKH ÞQDQFLDO DQG RSHUDWLQJ SHUIRUPDQFH RI WKH EXVLQHVV RYHU WKH SHULRG ,Q DGGLWLRQ WKH &RPPLWWHH DVVHVVHG performance against a range of risk and sustainability measures which account for the other 5% of the award and determined that this element VKRXOG EH UHGXFHG WR 3% RI WKH PD[LPXP 5% DYDLODEOH 7KLV UHßHFWV WKH &RPPLWWHHpV UHFRJQLWLRQ RI D VPDOO QXPEHU RI OHJDF\ FRQWURO DQG JRYHUQDQFH LVVXHV ZKLFK KDYH EHHQ LGHQWLÞHG DQG DGGUHVVHG (RU DUH LQ WKH SURFHVV RI EHLQJ DGGUHVVHG) 7KH UHVSRQVLELOLW\ IRU WKHVH VKRUWFRPLQJV XOWLPDWHO\ UHVWV ZLWK WKH VHQLRU FDGUH RI WKH ÞUP ZKR PDNH XS WKH PDWHULDO SURSRUWLRQ RI SDUWLFLSDQWV ZLWKLQ WKLV SODQ DQG LW ZDV FRQFOXGHG WKDW WKH WLPLQJ RI WKHVH OHJDF\ LVVXHV FRUUHODWHG ZLWK WKH SHUIRUPDQFH SHULRG RI WKH 2014 /7,3 7KHUHIRUH WKH &RPPLWWHH IHOW WKDW D UHGXFWLRQ LQ WKH HOHPHQW UHODWLQJ WR WKH ULVN DQG VXVWDLQDELOLW\ PHWULFV ZDV MXVWLÞHG Metric Weighting Condition Threshold target Stretch target Actual % vesting TSR vs FTSE General Financials 25% at 50th percentile 100% at 75th percentile 38th percentile Relative TSR 95% 0% Subjective assessment by the Committee, taking in to account the recommendations of the Board Risk Committee, across a range of risk and sustainability metrics Risk and sustainability 5% 3% Total (% of maximum) 3% 7KH WDEOH EHORZ VKRZV WKH YHVWLQJ GHWDLOV RI WKH ÞUVW WUDQFKH RI /7,3 2014 IRU WKH ([HFXWLYH 'LUHFWRUV 7KH DZDUGV YHVW RQ 1 $SULO 2017 The value of the vested shares is based on a share price of £2.39, this being the average share price during the last quarter of 2016 in accordance with the regulations. Any material change to the valuation based on the actual share price as at 1 April 2017 will be disclosed in the Directors’ remuneration report for 2017. 9HVWLQJ share price (£) Dividend Equivalent (£) Number of options at grant 1 Number of options vested Number of lapsed options /7,3 YDOXH (£) /7,3 YDOXH (£) Executive Director Andrew Formica 526,667 15,800 510,867 2.39 37,757 4 479 42 236 Roger Thompson 248 334 7450 240 884 2.39 17,803 2,112 19,915 Phil Wagstaff 2 220,000 6,600 213 400 2.39 15,772 1,871 17643 Notes 1 7KH DERYH WDEOH UHßHFWV WKH RXWFRPH RI WKH ÞUVW WUDQFKH RI /7,3 2014 (WZR WKLUGV RI WKH WRWDO LQLWLDO DZDUG) 7KH VHFRQG WUDQFKH (RQH WKLUG RI WKH WRWDO LQLWLDO DZDUG) ZLOO YHVW LQ $SULO 2018 GHSHQGLQJ RQ SHUIRUPDQFH RYHU WKH IRXU \HDU SHULRG IURP 1 -DQXDU\ 2014 WR 31 'HFHPEHU 2017 2 ,Q DGGLWLRQ WR WKH YHVWHG DZDUG XQGHU /7,3 2014 WKH VLQJOH ÞJXUH /7, GLVFORVXUH (€1 502 489) IRU 3KLO :DJVWDII VHW RXW RQ SDJH 73 LQ WKLV UHSRUW LQFOXGHV WKH vesting of 621,353 shares in March 2017, by reference to the performance period ending on 31 December 2016, under an award granted to him on joining the Company in March 2012. LTI awards made during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ÞUVW YHVWHG WUDQFKH DQG RQH \HDU IRU WKH VHFRQG YHVWHG WUDQFKH) VXFK WKDW WKH PLQLPXP SHULRG EHWZHHQ JUDQW DQG UHOHDVH LV ÞYH \HDUV 9HVWHG DZDUGV PD\ EH H[HUFLVHG DW DQ\ WLPH ZLWKLQ WKH KROGLQJ SHULRG RU WKH IROORZLQJ ÞYH \HDUV RWKHUZLVH WKH DZDUG DXWRPDWLFDOO\ ODSVHV 7KH SHUIRUPDQFH PHDVXUHV XQGHU WKH 2016 /7,31 are: • TSR performance measured equally against the FTSE 350 and the ASX 100 (50% in aggregate) • 1HW ßRZV (15%) • Three year investment performance (15%) • Growth in operating margin (10%) • Success in implementing the People Strategy (10%). ,Q DGGLWLRQ WKH &RPPLWWHH PXVW EH VDWLVÞHG WKDW WKH DERYH SHUIRUPDQFH FRQGLWLRQV DSSURSULDWHO\ UHßHFW WKH &RPSDQ\pV XQGHUO\LQJ ÞQDQFLDO performance over the measurement period. The Committee has the power to vary or lapse individual unvested awards in cases of poor risk management, or where results have been PLVVWDWHG RU ZKHUH WKHUH KDV EHHQ VHULRXV PLVFRQGXFW D PDWHULDO IDLOXUH LQ ULVN PDQDJHPHQW RU D GRZQWXUQ LQ ÞQDQFLDO SHUIRUPDQFH The Committee also has the ability in certain cases to claw back vested awards. Henderson Group plc Annual Report 2016

 


 

79 ,Q 0DUFK 2016, WKH IROORZLQJ /7, DZDUGV ZHUH JUDQWHG WR ([HFXWLYH 'LUHFWRUV: % of face value that would vest at threshold performance Number of options granted Face value of award (£’000) Basis of award (% of salary)2 Share price (£)3 9HVWLQJ GHWHUPLQHG by performance over Executive Director Type of award 2016–2018 (2/3) 2016–2019 (1/3) Andrew Formica4 Nil priced options 500% 2.50 840,000 2,100,000 25% 2016–2018 (2/3) 2016–2019 (1/3) Roger Thompson4 Nil priced options 300% 2.50 400,000 1,000,000 25% 2016–2018 (2/3) 2016–2019 (1/3) Phil Wagstaff5 Nil priced options n/a n/a n/a n/a n/a Notes 1. 7 KH VDPH SHUIRUPDQFH FULWHULD DQG ZHLJKWLQJV DOVR DSSO\ WR /7,3 2015. 2. 2XU SROLF\ IRU /7,3 DZDUGV WR RXU ([HFXWLYH 'LUHFWRUV LV, RWKHU WKDQ ZKHUH D PDWHULDO SHUIRUPDQFH RU RWKHU FRQFHUQ ZDV SUHVHQW, WR JUDQW /7,3 RSWLRQV DW WKH PD[LPXP IDFH YDOXH SHUPLWWHG XQGHU WKH VKDUHKROGHU DSSURYHG SODQ (L.H. DW 500% DQG 300% RI EDVH VDODU\ IRU WKH &KLHI ([HFXWLYH DQG &KLHI )LQDQFLDO 2IÞFHU/ Global Head of Distribution respectively) to maximise their alignment with the long-term interests of the Company and its shareholders. 3. The face value of the award is based on the share price at the date of award (£2.50). 4. 7 KH /7,3 DZDUGV JUDQWHG RQ 24 0DUFK 2016 ZHUH LQ WKH IRUP RI QLO SULFHG RSWLRQV. 7KLV JLYHV WKH SDUWLFLSDQWV ULJKWV RYHU VKDUHV DW WKH WLPH RI YHVWLQJ VXEMHFW to the satisfaction of relevant performance conditions over the plan measurement period. The resulting value of the award will be based on the number of options that vest and the prevailing share price at the point of vesting. 5. 7 KH *OREDO +HDG RI 'LVWULEXWLRQ ZDV QRW DQ ([HFXWLYH 'LUHFWRU DW WKH GDWH WKH 2016 /7,3 ZDV DZDUGHG, DOWKRXJK KH ZDV DZDUGHG 282,000 QLO SULFHG RSWLRQV ZLWK D IDFH YDOXH RI €705,000 RQ 24 0DUFK 2016, SULRU WR KLV DSSRLQWPHQW. Year-on-year percentage increase in the remuneration of the Chief Executive This table reports the year-on-year percentage change in the remuneration of the Chief Executive between 2016 and 2015 compared to that of the average employee. Employee Salary %HQHÞWV 67, Andrew Formica 2.9% 3% -3% Average employee 3.0% 3% -10% Notes • Average employee data has been calculated by dividing the annual costs, excluding the Chief Executive, by the average number of staff employed during the year. • %HQHÞWV DERYH LQFOXGH SURYLVLRQ RI OLIH DVVXUDQFH, FULWLFDO LOOQHVV LQVXUDQFH DQG SULYDWH PHGLFDO LQVXUDQFH DQG OXQFK DOORZDQFH. • )RU WKH DYHUDJH HPSOR\HH, WKLV SHUFHQWDJH FKDQJH UHßHFWV WKH LPSDFW RQ EHQHÞW FRVWV RI LQFUHDVHG VDODULHV DQG LQFUHDVHV WR WKH SULYDWH PHGLFDO LQVXUDQFH premium – on a per capita basis, the absolute increase is small (i.e. average of £1,229 in 2016 vs £1,187 in 2015). • ,Q WKH DERYH DQDO\VLV, 67, FRYHUV DOO 2016 GLVFUHWLRQDU\ ERQXV DZDUGV ZLWKLQ +HQGHUVRQ *URXS. 7KH &RPPLWWHH FRQWLQXHV WR EHOLHYH WKDW VKDUHKROGHUVp LQWHUHVWV DUH EHVW VHUYHG E\ HQVXULQJ WKDW D VLJQLÞFDQW SURSRUWLRQ RI YDULDEOH SD\ LV SHUIRUPDQFH UHODWHG. $FURVV WKH ZLGHU EXVLQHVV, WKH DJJUHJDWH GHFUHDVH LQ 67, (-10%) LV ODUJHO\ GXH WR UHGXFWLRQV LQ DZDUGV WR LQYHVWPHQW DQG GLVWULEXWLRQ SURIHVVLRQDOV, WR UHßHFW WKH LPSDFW RQ ERQXV IXQGLQJ PHFKDQLVPV UHVXOWLQJ IURP WKH VOLJKW VRIWHQLQJ RI VKRUW-WHUP LQYHVWPHQW SHUIRUPDQFH DQG QHW RXWßRZV. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


80 CORPOR ATE GOVERNANCE Directors’ remuneration report: Annual report on remuneration continued Total Shareholder Return (TSR) performance This graph provided by JP Morgan Cazenove (calculated according to a methodology that is compliant with the UK Companies Act) shows +HQGHUVRQpV SHUIRUPDQFH DJDLQVW WKH )76( 350 *HQHUDO )LQDQFLDO 6HUYLFHV ,QGH[ RYHU WKH ODVW HLJKW \HDUV EDVHG RQ WKH FKDQJH LQ WKH YDOXH of a hypothetical £100 holding since December 2009: Chief Executive remuneration over last eight years 7KH WRWDO UHPXQHUDWLRQ RI $QGUHZ )RUPLFD DV &KLHI ([HFXWLYH IRU WKH ODVW HLJKW ÞQDQFLDO \HDUV LV VKRZQ LQ WKH IROORZLQJ WDEOH. 7KH WRWDO UHPXQHUDWLRQ ÞJXUH LQFOXGHV WKH DQQXDO ERQXV DQG /7,3 DZDUGV ZKLFK YHVWHG EDVHG RQ SHUIRUPDQFH LQ HDFK \HDU. 7KH /7,3 YHVWLQJ ÞJXUHV show the pay-out for each year as a percentage of the maximum. 2009 2010 2011 2012 2013 2014 20151 2016 Notes 1. 7KH ÞJXUHV IRU 2015 LQ WKH WDEOH DERYH KDYH EHHQ UHVWDWHG IURP WKH 2015 UHSRUW WR UHßHFW WKH DFWXDO YHVWLQJ SULFH RI 2013 /7,3 DQG 2011 (623 DZDUGV, (£2.50/£2.39 respectively) versus the estimated share price of £2.88 as previously reported. 2. ,W VKRXOG EH QRWHG WKDW, SULRU WR 2015, 0U )RUPLFDpV PD[LPXP ERQXV RSSRUWXQLW\ ZDV 600% RI EDVH VDODU\. 7KLV ZDV UHGXFHG WR 500% RI EDVH VDODU\ IRU 2015 DZDUGV. 7KH UHODWLYH DZDUG DV D SHUFHQWDJH RI PD[LPXP RSSRUWXQLW\ UHßHFWV WKH KLJKHU RSSRUWXQLW\ LQ WKH \HDUV SULRU WR 2015. Relative importance of the spend on pay The following table shows the year-on-year movement in total remuneration of all employees compared to the increase in dividends paid and declared on ordinary shares: 20151 £m 20162 £m change Notes 1. 7KH ÞJXUHV IRU GLYLGHQGV SDLG LQ 2015 RQ RUGLQDU\ VKDUHV UHSRUWHG LQ WKH 2015 $QQXDO 5HSRUW ZDV €0.6P KLJKHU WR UHßHFW WKH IDFW WKDW WKH GLYLGHQGV RI WKDW DPRXQW ZHUH ZDLYHG E\ WKH WUXVWHHV RI WKH HPSOR\HH EHQHÞW WUXVW RQ FHUWDLQ VKDUHV KHOG LQ WUXVW RQ EHKDOI RI *URXS HPSOR\HHV. 7KH UHGXFHG DPRXQW KDV EHHQ GLVFORVHG DV WKH FRPSDUDWLYH ÞJXUH. 2. 7KH 2016 ÞJXUH LV DIWHU GHGXFWLRQ RI €12P RI PHUJHU DQG LQWHJUDWLRQ FRVWV. How the policy will be applied in 2017 This section is prepared on the assumption that the current shareholder approved remuneration policy will continue in its existing form for 2017. However dependent on the outcome of the shareholder vote on the merger and any subsequent remuneration decisions made by any new Remuneration Committee the details outlined below may be subject to change. Base salary The Committee has generally taken a restrained approach to base salary increases, and only made changes where it feels there is a material misalignment with the market, and in the context of good performance. The average percentage increase to base salaries across the Group ZKLFK ZLOO EH DZDUGHG DV SDUW RI WKH 2017 FRPSHQVDWLRQ UHYLHZ LV 3.1%. 7KLV UHßHFWV WKH &RPPLWWHHpV YLHZ WKDW WKH &RPSDQ\pV FRPSHWLWLYH position on base salaries had fallen over the past two to three years to a position towards the bottom of the range (95-105% of market median) which is stated as part of the Remuneration Policy. ,W LV SURSRVHG WR LQFUHDVH WKH EDVH VDODULHV RI WKH &KLHI ([HFXWLYH DQG WKH &KLHI )LQDQFLDO 2IÞFHU E\ 2.9% WR €445,000 DQG €360,000 respectively, to maintain the current competitive position against the peer group in line with general market expectations. This increase is marginally below the average increase across the general workforce. The salary of the Global Head of Distribution was increased to £375,000 ZLWK HIIHFW IURP 1 -XQH 2016 WR UHßHFW KLV DSSRLQWPHQW WR WKH %RDUG DQG QR IXUWKHU LQFUHDVH LV SURSRVHG. Henderson Group plc Annual Report 2016 Cost of remuneration of all employees (continuing operations) Dividends on ordinary shares1 3URÞW DIWHU WD[ DWWULEXWDEOH WR RZQHUV RI WKH SDUHQW (FRQWLQXLQJ RSHUDWLRQV)2 265.1 117.9 110.9 273.0-3% 1 5.4 2% 161.2-31% Total remuneration (£’000)2,2053,5166,4202,8024,9894,315 5,870 67, % PD[LPXP 2 50% 66% 71% 43% 79% 65% 74% /7,3 % PD[LPXP YHVWLQJ100% 100% 100% 0%78% 43% 98% 2,037 70% 3% Total Shareholder Return 800 700 600 500 400 200 100 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Henderson)76( 350 *HQHUDO )LQDQFLDO 6HUYLFHV ,QGH[ 300

 


81 7KH &RPPLWWHH WDNHV WKH LVVXH RI SD\ GLVFLSOLQH YHU\ VHULRXVO\ DQG ÞUPO\ EHOLHYHV WKDW ZKLOH EDVH SD\ VKRXOG EH VHW DW D UHDVRQDEOH OHYHO, it takes equally seriously the need to retain high-performing executives by ensuring that their pay is competitive. Getting this balance right is clearly in the interests of shareholders. Executive Director 2016 2017 ,QFUHDVH Fees for the Board Chairman and other Non-Executive Directors The table below shows the annualised fees payable to the Chairman and other Non-Executive Directors in 2016. There are no proposed changes to fees payable to the Chairman or Non-Executive Directors. These will be reviewed and may be subject to change in the event that the merger is approved and once the new Board has been constituted. Senior ,QGHSHQGHQW Base fee Director fee Proposed Proposed increase Board Chairman Committee Committee memberTotal 2016 Total 2017 (annualised) £ Chair Note 1. 0U -HHQVp IHH LQFOXGHV DQ DGGLWLRQDO IHH RI €2,500 IRU UHVSRQVLELOLW\ IRU WKH &RQßLFWV RI ,QWHUHVW &RPPLWWHH, D VXE-FRPPLWWHH RI WKH $XGLW &RPPLWWHH. Performance targets for STI and LTI awards to be granted in 2017 ,W VKRXOG EH QRWHG WKDW, VKRXOG WKH SURSRVHG PHUJHU EH DSSURYHG, WKH %RDUG ZLOO UHO\ RQ WKH 5HPXQHUDWLRQ &RPPLWWHH RI WKH QHZ HQWLW\, ZKLFK ZLOO EH composed of independent directors, to recommend the form and amount of compensation to be paid to Executive Directors following the effective time of the merger. However, the new Remuneration Committee of the Board is not yet formed and will not be formed until after the effective WLPH RI WKH PHUJHU. ,W LV H[SHFWHG WKDW WKH 5HPXQHUDWLRQ &RPPLWWHH ZLOO JHQHUDOO\ DGRSW FRPSHQVDWLRQ SROLFLHV GHVLJQHG WR (1) DWWUDFW, PRWLYDWH and retain the best executive directors and align their interests with the Company’s shareholders, (2) align executive compensation with the Company’s overall expected business strategies and values, and (3) foster an ownership approach among the Company’s Executive Directors that rewards their focus on long-term objectives. Until such decisions are made by the new Remuneration Committee after the merger, the &RPSDQ\pV ([HFXWLYH 'LUHFWRUV ZLOO FRQWLQXH WR UHFHLYH WKHLU FXUUHQW VDODU\ DQG EHQHÞWV, DQG WKH &RPSDQ\ ZLOO FRQWLQXH WR RSHUDWH LWV FXUUHQW 67, DQG /7, SURJUDPPHV LQ OLQH ZLWK WKH DSSURYHG UHPXQHUDWLRQ SROLF\1 (as approved by shareholders at the 2015 AGM). 7DNLQJ WKH DERYH LQWR DFFRXQW, WKH DQQXDO 67, ERQXV IRU 2017 ZLOO FRQWLQXH WR EH EDVHG RQ SHUIRUPDQFH DJDLQVW D VFRUHFDUG RI ÞQDQFLDO WDUJHWV DQG WKH DFKLHYHPHQW RI QRQ-ÞQDQFLDO REMHFWLYHV, DV GHWDLOHG LQ WKH UHPXQHUDWLRQ SROLF\1, which are illustrated on pages 76 and 77 respectively. The Committee has chosen not to disclose, in advance, the performance targets for the forthcoming year as these include items which the Committee considers commercially sensitive. However, retrospective disclosure of performance will be disclosed in the 2017 Annual report on remuneration. 7KH PDLQ .3,V WDNHQ LQWR DFFRXQW DUH: • *URZWK LQ XQGHUO\LQJ SURÞW, 52( DQG RSHUDWLQJ PDUJLQ2 and revenue (management fees only), indicative of meeting our shareholders’ H[SHFWDWLRQV IRU SURÞWDEOH JURZWK DQG VWURQJ ÞQDQFLDO FRQWURO • Net new business growth, indicative of our success in delivering investment performance and service, but also in delivering appropriate products which meet our clients’ long-term investment needs • Proportion of funds which outperform, indicative of our success in delivering excellent investment performance to our clients and a key driver in our objective of growing long-term, stable AUM and to grow sustainable revenue streams. ,Q UHODWLRQ WR WKH /7,3, WKH &RPPLWWHH SURSRVHV WR JUDQW DZDUGV XQGHU WKH FXUUHQW DSSURYHG /7,3 VWUXFWXUH, ZLWK WKH VDPH PHDVXUHPHQW DQG YHVWLQJ SHULRGV IRU WKH 2017 /7,3 DV DSSOLHG WR WKH 2016 /7,3, QDPHO\: • Two thirds of the award being eligible to vest after three years subject to the plan performance over a three year measurement period, and • One third of the award being eligible to vest after four years, subject to the plan performance over a four year measurement period. (DFK WUDQFKH RI WKH DZDUG ZLOO EH VXEMHFW WR DGGLWLRQDO KROGLQJ SHULRGV (WZR \HDUV LQ UHVSHFW RI WKH ÞUVW WUDQFKH DQG RQH \HDU LQ UHVSHFW RI WKH VHFRQG WUDQFKH), VXFK WKDW WKH SHULRG EHWZHHQ DZDUG JUDQW DQG XOWLPDWH UHOHDVH ZLOO EH WR ÞYH \HDUV, WKHUHE\ DOLJQLQJ SDUWLFLSDQW DQG VKDUHKROGHU LQWHUHVWV RYHU D ÞYH \HDU SHULRG. 7KH &RPPLWWHH KDV GHFLGHG DW WKLV VWDJH QRW WR FRQÞUP WKH IRUP DQG QDWXUH RI SHUIRUPDQFH PHWULFV DQG WDUJHWV IRU 2017, DV WKH UHOHYDQW PHWULFV FDQ RQO\ EH GHWHUPLQHG RQFH WKH RXWFRPH RI WKH YRWH RI WKH SURSRVHG PHUJHU LV NQRZQ DQG WKH ORQJ-WHUP ÞQDQFLDO DQG VWUDWHJLF JRDOV DQG WDUJHWV RI WKH FRPELQHG HQWLW\ DUH FRQÞUPHG. 6KDUHKROGHUV ZLOO EH QRWLÞHG RI WKH IRUP DQG QDWXUH RI WKH SURSRVHG PHWULFV RQFH FRQÞUPHG. Notes 1. The remuneration policy, though not included with this year’s report, can be read at www.henderson.com/ir/content/corporate-governance-ir. 2. These measures exclude performance fee revenues and all variable compensation. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Chairman Richard Gillingwater220,000 220,000 Other Non-Executive Directors Sarah Arkle62,50022,50011,50096,500 Kevin Dolan62,50011,50074,000 Tim How62,50012,50022,50011,500109,000 Robert Jeens162,50025,00011,50099,000 Angela Seymour-Jackson62,50011,50074,000 Kalpana Desai62,50011,50074,000 220,000 96,500 74,000 109,000 99,000 74,000 74,000 0% 0% 0% 0% 0% 0% 0% Total 220,000375,00012,50070,00069,000746,500 746,500 0% Other Non-Executive Directors only 0% Andrew Formica432,500 445,000 2.9% Roger Thompson350,000 360,000 2.9% Phil Wagstaff375,000 375,000 0%

 


82 CORPOR ATE GOVERNANCE Directors’ remuneration report: Annual report on remuneration continued Outstanding LTI and other share scheme awards 7KH WDEOH EHORZ VKRZV WKH YHVWLQJ UHVXOWV RI /7,3 DZDUGV IRU 2012 WR 2014 (ÞUVW WUDQFKH). 7KH VHFRQG WUDQFKH RI WKH 2014 SODQ DQG WKH 2015 DQG 2016 SODQV PD\ YHVW, GHSHQGLQJ RQ SHUIRUPDQFH RYHU WKH PHDVXUHPHQW SHULRG, LQ 2017 (2014 /7,3 VHFRQG WUDQFKH DQG /7,3 2015 ÞUVW WUDQFKH), 2018 (2015 /7,3 VHFRQG WUDQFKH DQG /7,3 2016 ÞUVW WUDQFKH) DQG 2019 (2016 /7,3 VHFRQG WUDQFKH UHVSHFWLYHO\). 7KH WDEOH DOVR shows the outstanding interests of Executive Directors in these plans. ,W VKRXOG EH QRWHG WKDW, DW WKLV VWDJH, LW LV QRW SURSRVHG WR DPHQG WKH SHUIRUPDQFH PHWULFV RI WKH LQ-ßLJKW /7,3 SODQV WR UHßHFW WKH SURSRVHG merger. However, should the merger be approved, the Remuneration Committee of the combined entity will review the prevailing measures WR HQVXUH WKDW WKH\ UHPDLQ UHOHYDQW, UHßHFW DQ DSSURSULDWH OHYHO RI VWUHWFK, DQG UHPDLQ DOLJQHG ZLWK WKH ORQJ-WHUP KRUL]RQV DQG VWUDWHJLF JRDOV of the new entity. The Company will undertake appropriate shareholder engagement and approval activities in the event that any changes to the metrics are proposed. 2012 /7,3 2013 /7,3 2014 /7,3 2015 /7,3 2016 /7,3 Awards made April 2012 April 2013 $SULO 2014 May 2015 March 2016 2014-2016 (2/3) 2014-2017 (1/3) 2015-2017 (2/3) 2015-2018 (1/3) 2016-2018 (2/3) 2016-2019 (1/3) Performance period 2012-2014 2013-2015 2014 DZDUG vests 2017/182 2015 award vests 2018/19 2016 award vests 2019/20 ,QWHUHVW DW 31 December 2016 Executive Director Plan Type Notes 1. 7KH VKDUH SULFH VKRZQ IRU WKH 2014 /7,3 LV WKH DYHUDJH VKDUH SULFH GXULQJ WKH ODVW TXDUWHU RI 2016. 2. 7KH Þ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respectively subject to the following performance conditions: – Net sales (85% weighting) – net sales at 31 December prior to the vesting date as a percentage of AUM as at 1 January 2017, with zero vesting for net sales EHORZ 4% DQG 100% YHVWLQJ IRU QHW VDOHV DW/DERYH 12%, DQG OLQHDU H[WUDSRODWLRQ EHWZHHQ WKHVH SRLQWV – 1RQ-ÞQDQFLDO (15%) t SHUFHQWDJH DW WKH GLVFUHWLRQ RI WKH &KLHI ([HFXWLYH WDNLQJ LQWR DFFRXQW QRQ-ÞQDQFLDO PHWULFV LQFOXGLQJ 7&) DQG ULVN DFURVV WKH Distribution area as well as the Executive’s general performance of his duties. Henderson Group plc Annual Report 2016 Andrew Formica Roger Thompson Phil Wagstaff 3 /7,3 /7,3 /7,3 Options790,000751,879840,000 2,381,879 Options372,500354,457400,0001,126,957 Options330,000 267,812282,000 879,812 Performance criteria TSR vs FTSE TSR vs FTSEGeneral GeneralFinancials (95%) FinancialsRisk and %HORZ 50WKsustainability (5%) zero%HORZ 50WK ]HUR $W 50WK 25% $W 50WK 25% $ERYH 75WK$ERYH 75WK 100% 100% Straight lineStraight line between these between these pointspoints TSR vs FTSE • TSR (measured equally against FTSE 350 and General $6; 100): %HORZ 50WK ]HUR DW 50WK 25% Financials (95%) DW/DERYH 75WK 100% VWUDLJKW OLQH EHWZHHQ Risk and these points sustainability (5%) • 1HW IXQG ßRZV: %HORZ 3.5% ]HUR DW 3.5% %HORZ 50WK ]HUR 25% DW/DERYH 7% 100% VWUDLJKW OLQH $W 50WK 25% between these points $ERYH 75WK • 3 year investment performance: Performance 100% DJDLQVW EHQFKPDUN EHORZ 55WK ]HUR DW 55% Straight line 25% DW/DERYH 70% 100% VWUDLJKW OLQH between these between these points points • *URZWK LQ RSHUDWLQJ PDUJLQ: %HORZ 0.5% ]HUR DW 0.5% 25% DW/DERYH 1% 100% straight line between these points • People Strategy: Assessment by the Committee against success of People Strategy 9HVWLQJ GDWHV 6 April 2015 6 April 2016 1 April 2017 (2/3) 1 May 2018 (2/3) 24 0DUFK 2019 (2/3) 1 April 2018 (1/3) 1 May 2019 (1/3) 24 0DUFK 2020 (1/3) Exercise by 6 April 2020 6 April 2021 1 April 2022 (2/3) 1 May 2023 (2/3) 24 0DUFK 2024 (2/3) 1 April 2023 (1/3) 1 0D\ 2024 (1/3)24 0DUFK 2025 (1/3) Outcome TSR of 116% TSR of 171% 55th percentile90th percentile 43% YHVWHG 98% vested Tranche 1 PerformancePerformance 765 RI 27.4%period not complete period not complete 38th percentile For Tranche 2, performance period not complete 9HVWLQJ GDWH share price £2.90£2.50 £2.39 1 n/a n/a

 


83 The table below shows the Executive Directors’ outstanding interests in the Group share schemes at 31 December 2015 and 2016, together ZLWK WKH DGGLWLRQDO LQWHUHVWV LQ VKDUHV KHOG EHQHÞFLDOO\ E\ WKH ([HFXWLYH 'LUHFWRUV RXWVLGH RI WKH *URXS VKDUH VFKHPHV. ,W LQFOXGHV WKH PRYHPHQWV LQ WKH HPSOR\HH DQG H[HFXWLYH VKDUH SODQV GXULQJ 2016. Movement during year 9HVWHG LQ previous years and exercised ,QWHUHVW DW 31 December 2015 9HVWHG 2016 not exercised 9HVWHG 2016 and exercised ,QWHUHVW DW 31 December 2016 Executive Director Plan Type Awarded Lapsed Andrew Formica SAYE BAYE Options Shares 8,169 61,478 205,272 2,591,879 8,169 66,324 0 2,381,879 4,846 410,544 840,000 DEP/ESOP Shares 615,816 1,029,000 /7,3 Options 21,000 Total outstanding interests in Group share schemes 2,456,372 Total shares held outright outside Group share schemes 4,113,019 Total interests in Group shares 6,569,391 Roger Thompson SAYE BAYE Options Shares 8,41 5,088 69,322 1,076,957 8,41 7,578 86,543 1,469,957 2,490 44,500 400,000 DEP/ESOP Shares 27,279 /7,3 Options 343,000 7,000 Total outstanding interests in Group share schemes 1,572,489 Total shares held outright outside Group share schemes 202,696 Total interests in Group shares 1,775,185 Phil Wagstaff SAYE BAYE Options Shares 4,205 18,987 366,376 922,812 1,864,060 4,368 4,185 85,832 282,000 613,447 8,573 23,172 163,509 879,812 1,545,477 DEP/ESOP Shares 288,699 318,500 932,030 /7,3 RSP Options Shares 6,500 Total outstanding interests in Group share schemes 2,620,543 Total shares held outright outside Group share schemes 0 Total interests in Group shares 2,620,543 'LUHFWRUVp SHUVRQDO VKDUHKROGLQJ DQG EHQHÞFLDO VKDUH LQWHUHVWV Over time, each Executive Director is required to maintain a personal target shareholding equivalent to 300% of base salary (excluding unvested LQWHUHVWV LQ &RPSDQ\ VKDUH VFKHPHV). 0U )RUPLFD KDV DFKLHYHG WKLV WDUJHW. 0U 7KRPSVRQ, ZKR ZDV DSSRLQWHG &KLHI )LQDQFLDO 2IÞFHU RQ 26 -XQH 2013, FXUUHQWO\ KROGV VKDUHV ZLWK D YDOXH HTXLYDOHQW WR 139% (2014: 114%) RI EDVH VDODU\, DQG LV H[SHFWHG WR DFKLHYH WKH 300% WDUJHW RYHU WLPH. 0U :DJVWDII, ZKR ZDV DSSRLQWHG DV DQ ([HFXWLYH 'LUHFWRU ZLWK HIIHFW IURP 24 0D\ 2016, FXUUHQWO\ KROGV QR VKDUHV EXW LV H[SHFWHG to achieve the 300% target over time. 7KH WDEOH EHORZ VKRZV WKH ÞQDQFLDO YDOXH RI WKH SHUVRQDO KROGLQJ DV D PXOWLSOH RI EDVH VDODU\ DV DW 31 'HFHPEHU 2016: 9DOXH (£’000) Multiple of base salary Executive Director Andrew Formica 9,829 22.7 Roger Thompson 484 1.4 Phil Wagstaff 0 0.0 Note Based on share price of £2.39, being the average over the three months prior to the end of 2016. There is no personal target shareholding requirement for Non-Executive Directors. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


84 CORPOR ATE GOVERNANCE Directors’ remuneration report: Annual report on remuneration continued Shares personally held $V DW 8 )HEUXDU\ 2017, 31 'HFHPEHU 2016 DQG 31 'HFHPEHU 2015, WKH 'LUHFWRUV KDG WKH IROORZLQJ EHQHÞFLDO LQWHUHVWV LQ VKDUHV in the Company: 31 Dec 2016 (or date of 8 Feb 2017 appointment) 31 Dec 2015 (or date of appointment) Note 'LUHFWRUVp ÞJXUHV LQFOXGH LQWHUHVWV RI FRQQHFWHG SHUVRQV. Payments within the year to past Directors Payments made to past Directors during 2016, in relation to awards vesting under relevant Company share plans, are set out in the following table: Executive Director Plan Type 9HVWHG Lapsed 9DOXH YHVWHG Shirley Garrood ESOP Shares 62,672 – 150,281 David Jacob DEP ESOP Shares Shares 1,858 66,178 – – 4,397 158,442 James Darkins DEP ESOP Shares Shares 41,939 32,906 – – 104,423 78,905 External directorships $QGUHZ )RUPLFD LV D PHPEHU RI WKH %RDUG RI WKH ,QYHVWPHQW $VVRFLDWLRQ DQG UHFHLYHG QR UHPXQHUDWLRQ IRU WKLV UROH. +H LV DOVR D 1RQ-([HFXWLYH 'LUHFWRU RI +DPPHUVRQ SOF. ,Q 2016, KH ZDV UHPXQHUDWHG €61,500 IRU WKLV UROH. Statement of shareholder voting At last year’s AGM held on 28 April 2016, the Directors’ remuneration report received the following votes from shareholders: Directors’ remuneration policy Directors’ remuneration report Prior year Prior year 9RWHV FDVW LQ IDYRXU 9RWHV FDVW DJDLQVW 9RWHV DW SUR[\pV GLVFUHWLRQ Total votes cast Abstentions n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 664,781,669 123,355,647 1,616,979 789,754,295 737,070 84.2% 15.6% 0.2% 100% – 684,775,145 100,972,921 1,554,342 787,302,408 5,284,710 87.0% 12.8% 0.2% 100% – 672,179,298 115,986,335 1,621,804 789,769,437 721,148 85.1% 14.7% 0.2% 100% – The Committee was encouraged by the further increase in the positive voting for the remuneration report relative to that in 2015. The Committee has analysed the reasons for the negative voting above and believe that, similar to the vote in 2015, it arises in relation to two key factors, mainly in relation to its Australian shareholder base, these being: • Material differences in market pay levels for the chief executives within the European asset management sector (against whom our &KLHI ([HFXWLYHpV SD\ LV EHQFKPDUNHG) DQG WKRVH ZLWKLQ WKH $XVWUDOLDQ ÞQDQFLDO VHFWRU • 7KH GHJUHH RI VWUHWFK LPSOLFLW LQ WKH WKUHVKROG, WDUJHW DQG PD[LPXP WDUJHWV RI WKH /7,3 SURJUDPPH. The Committee has sought to engage on, and provide rationale for, these matters via correspondence with major shareholders (and proxy voting agencies) and with face-to-face discussions where appropriate. The Committee believes that its policy and decisions in this regard DUH DSSURSULDWH IRU WKH &RPSDQ\, DUH UHßHFWLYH RI WKH FRQWLQXHG VWURQJ SHUIRUPDQFH RI WKH &RPSDQ\, DQG DSSURSULDWHO\ EDODQFH DQG DOLJQ the interests of Executive Directors and shareholders. The Committee anticipates similar, or increased, levels of support for the 2016 Directors’ remuneration report. Henderson Group plc Annual Report 2016 Executive Directors Andrew Formica (Chief Executive)4,113,019 5RJHU 7KRPSVRQ (&KLHI )LQDQFLDO 2IÞFHU)202,696 Phil Wagstaff (Global Head of Distribution)0 Chairman and Non-Executive Director Richard Gillingwater15,000 Other Non-Executive Directors Sarah Arkle20,663 Kevin Dolan3,083 Tim How11,780 Robert Jeens14,694 Angela Seymour-Jackson11,082 Kalpana Desai20,000 4,113,019 202,696 0 15,000 20,663 3,083 11,780 14,694 11,082 20,000 6,721,414 188,239 0 15,000 20,663 3,083 11,780 14,694 11,082 0 Total 4,412,017 4,412,017 6,985,955

 


85 Compliance statements and application of principles and recommendations Compliance with the UK Corporate Governance Code Set out below is the Board’s assessment of the Company’s compliance with the main principles of the UK Code. A. Leadership A.1 The role of the Board The Board is responsible for making all key strategic, management and commercial decisions which are necessary for the conduct of the Company’s business as a whole, including the approval of corporate strategy, DQQXDO EXGJHWV, LQWHULP DQG IXOO \HDU ÞQDQFLDO statements and reports, dividends, accounting SROLFLHV DQG DOO VLJQLÞFDQW FDSLWDO SURMHFWV, acquisitions and disposals. The Chief Executive and the ExCo are responsible for developing the appropriate business strategy and, once approved by the Board, for ensuring that the strategy is effectively implemented in accordance with the approved operating plan and within a sound system of internal controls to achieve agreed objectives. A schedule of matters reserved for approval by the Board is reviewed annually and is also on our website. 7KH %RDUG KDV JUDQWHG VSHFLÞF GHOHJDWHG DXWKRULWLHV (ZLWK ÞQDQFLDO OLPLWV DSSURYHG E\ the Board) to the Chief Executive, the Chief )LQDQFLDO 2IÞFHU DQG RWKHU VHQLRU H[HFXWLYHV LQ UHVSHFW RI ÞQDQFLDO, DFFRXQWLQJ, WUHDVXU\, regulatory and other matters relating to the Group’s business and these were reviewed and updated during 2016. A number of other Committees have been appointed to manage aspects of our business and form part of the risk management framework that monitors and mitigates the risks and uncertainties. 6HH SDJHV 54 DQG 55 IRU D GHVFULSWLRQ RI Board business and activities in 2016. A.2 Division of responsibilities There is a division of responsibility between the Chairman, who is responsible for leading the Board and ensuring its effectiveness, and the Chief Executive who is responsible to the Board for the overall management and performance of the Group. A summary of the roles of the Chairman and the Chief Executive is set out in the Corporate Governance Policy on our website. A.3 The Chairman The Chairman provides the appropriate leadership to the Board as demonstrated by the recent Board evaluation and ensures its effectiveness on all aspects of its role. He also holds meetings to discuss and agree the setting of its agenda to ensure that all matters DUH FRQVLGHUHG DQG SURYLGHG ZLWK VXIÞFLHQW time according to their importance. See SDJHV 54 WR 56 IRU D VXPPDU\ RI WKH %RDUG evaluation and the activities of the Board. A.4 Non-Executive Directors The Chairman is committed to making certain that the Board devotes enough time to consider the Group’s strategy and its link to the business. A discussion is often held with the Non-Executive Directors following Board meetings to ensure that matters are being considered and addressed to their satisfaction. The Non-Executive Directors are given the opportunity to question and challenge any initiatives and proposals from management on a regular basis. B. Effectiveness B.1 The composition of the Board The Nomination Committee reviews the mix of diversity, skills and experience on the Board and succession planning for the Non-Executive Directors. See pages 57 and 58 for a summary of the activities of the Committee. Directors’ biographies are set out on pages 50 to 53. See page 53 for a summary of independence of Directors on the Board and page 56 for a further summary of skills and experience. B.2 Appointments to the Board The Nomination Committee makes recommendations to the Board when appointing new Directors. A summary of any appointment process is also reported when applicable. See page 57 for an overview of the induction process for Phil Wagstaff. A summary of our policy on the appointment and reappointment of Directors is on our website, as is a summary of the terms and conditions of their appointment. The Company is subject to the high standards of corporate governance contained in both the UK Corporate Governance Code issued E\ WKH )5& LQ 6HSWHPEHU 2014 (8. &RGH) and the Corporate Governance Principles and Recommendations issued by the ASX Corporate Governance Council in March 2014 ($6; 3ULQFLSOHV). 7KH 8. &RGH DQG WKH ASX Principles can be found on the websites of their respective organisations at www.frc.org. uk and www.asx.com.au. The Company’s corporate governance policies can be found on our website. Throughout the year, the Company applied the main principles of the UK Code and the ASX Principles and Recommendations. The Company has complied with all the provisions of the UK Code and the ASX Recommendations as set out in the Corporate Governance Statement except in regard to the setting and disclosure of gender diversity targets in the diversity policy as set out in ASX Recommendation 1.5 (although Henderson has signed the Women in Finance Charter and set a number of targets to facilitate greater diversity in the workplace) and the Senior ,QGHSHQGHQW 'LUHFWRU GLG QRW DWWHQG PHHWLQJV with major shareholders as set out in provision E.1.1 of the UK Code. The reasons for non-compliance are set out on pages 58 and 66 respectively. This section, together with the Directors’ remuneration report, describes how we applied the ‘main principles’ set out in the UK Code and complied with the ASX Principles. Further details can be found in the Corporate Governance section of our website. The ASX Principles also encourage companies that are not subject to the Australian Corporations Act 2001 to adopt practices and make disclosures to achieve the aims of the provisions contained in certain sections of that Act. We achieved the aims of some of the provisions, although not fully on senior executives’ remuneration. Our disclosure of individuals’ remuneration is limited to the Executive Directors who were members of the Board in 2016. Disclosure of the remuneration of non-directors is not a requirement in the UK and we consider this information to be commercially sensitive. However, we have disclosed the aggregate annual remuneration of FCA Code Staff on our website at www.henderson.com/ir. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


86 CORPOR ATE GOVERNANCE Compliance statements and application of principles and recommendations continued B.3 Commitment 'LUHFWRUV DUH QRWLÞHG RI WKH WLPH FRPPLWPHQW expected from them in their letters of appointment and reappointment. The schedule of Board and Committee meetings is prepared and agreed two years in advance where possible, to ensure that the Directors are aware of and can meet their commitments. B.4 Development Regular training sessions to update Directors’ skills and knowledge of the business and regulatory matters when appropriate are held during the year and details are set out on page 56. See page 57 for an overview of the induction process for Phil Wagstaff. B.5 Information and support The Chairman, Chief Executive and &KLHI )LQDQFLDO 2IÞFHU KROG DJHQGD-VHWWLQJ meetings before each Board meeting to review the items of business, the likely time to be spent on each agenda item, who should present particular items and to ensure that appropriate papers are provided. These are provided both in hard copy and in a secure format electronically as requested by the Directors in advance of Board and Committee meetings. B.6 Evaluation The Board carries out an internal evaluation exercise of its own performance and that of its Committees and individual Directors on an annual basis. Every three years, an external evaluation specialist is appointed to carry out the process and report to the Board. The last external evaluation was undertaken LQ 2014. 7KH UHVXOWV RI WKH 2016 HYDOXDWLRQ are set out on page 56. B.7 Re-election of Directors Non-Executive Directors are initially DSSRLQWHG IRU D Þ[HG WHUP, QRUPDOO\ WKUHH years, and any subsequent terms are FRQVLGHUHG E\ WKH %RDUG. ,I D 1RQ-([HFXWLYH Director is reappointed after having served six years, such reappointment, and any subsequent reappointment, will normally be for a period of 12 months. At our AGM held on 28 April 2016, shareholders reappointed Sarah Arkle, Kalpana Desai, Kevin Dolan, Andrew Formica, Richard Gillingwater, Tim How, Robert Jeens, Angela Seymour-Jackson and Roger Thompson as Directors. Our next AGM is due to take place on 26 April 2017 in London, when Directors on the Board at that date will be seeking reappointment in accordance with the recommendations of the UK Code. C. Accountability C.1 Financial and business reporting The Audit Committee reviews the Annual Report which sets out the Company’s position and prospects to ensure that it is fair, balanced and understandable, to assist the Board in making their decision. Further detail regarding this process is set out on pages 62 and 63. C.2 Risk management and internal control The Board Risk Committee considers the Group’s risk appetite statement and risk management framework. Further details are set out on pages 60 and 61. The Audit Committee considers the system on internal controls and the annual internal controls report and further information is set out RQ SDJHV 59 DQG 64. C.3 Audit Committee and auditors The Board has in place a framework of formal and transparent arrangements to apply the corporate reporting and risk management and internal control principles and for maintaining an appropriate relationship with the Company’s auditors. A description of these arrangements can be found in the relevant Board Risk and Audit Committee reports on pages 60 and 61 and 62 to 65 respectively. D. Remuneration D.1 The level and components of remuneration Details of the Executive Directors’ remuneration and how this promotes the long-term success of the Company is set out in the the Directors’ Remuneration Report RQ SDJHV 67 WR 84. The Remuneration Policy was approved by shareholders at the 2015 AGM. D.2 Procedure The Group’s approach to setting remuneration policy is set out in the Remuneration Policy, as approved by shareholders at the 2015 AGM. E. Relations with shareholders E.1 Dialogue with shareholders We actively engage with investors and investor bodies and welcome the opportunity to discuss their views on relevant issues. The Board also receives regular feedback from WKH ,QYHVWRU 5HODWLRQV WHDP DQG WKH ([HFXWLYH Directors about investors’ and analysts’ views on the Group and wider industry matters. :H SXEOLVK RXU ÞQDQFLDO UHVXOWV RQ ERWK WKH LSE and the ASX. The 2015 Annual Report was sent to all shareholders that had requested it and all other shareholders were QRWLÞHG, YLD SRVW RU HPDLO, WKDW WKH 2015 Annual Report was available on our website. More information regarding dialogue with our shareholders is set out on page 66. E.2 Constructive use of General Meetings The AGM provides our shareholders with an opportunity to question the Board and the Chairman invites questions during the course of the meeting. All shareholders were invited to the AGM held on 28 April 2016, held in London and simultaneously broadcast to Sydney, Australia. All Directors attended the AGM. Notice of the AGM was given to shareholders and a summary of the questions asked at the AGM and the answers given, together with the results of resolutions put to the AGM, are on our website. Compliance with the ASX Corporate Governance Principles and Recommendations Principle 1 – Lay solid foundations for management and oversight 1.1 Role of the Board and delegation of responsibilities 6HH SDJHV 49 DQG 85 IRU D GHVFULSWLRQ of the role of the Board and delegation of UHVSRQVLELOLWLHV. ,Q DGGLWLRQ, D FRS\ RI RXU Corporate Governance Policy, which sets out the roles of the Board and the Directors, is on our website. 1.2 Appropriate checks undertaken when appointing Directors and information relevant to the appointment of Directors As the Group has a number of subsidiaries which are regulated, the appointment of every Director to the Board of Henderson Group plc is subject to pre-approval from the FCA before such an appointment can be made. Biographies for each of the Directors are set out on pages 50 to 53. 1.3 Terms of appointment The terms of appointment for Non-Executive Directors are set out in their letters of appointment, an example of which is available on the website. The Executive Directors and senior executives have service contracts. Henderson Group plc Annual Report 2016

 


87 1.4 The Company Secretary -DFTXL ,UYLQH, WKH *HQHUDO &RXQVHO DQG Company Secretary, is directly accountable to the Board and all Directors have access to her services. The Company Secretary can be appointed or removed only with the approval of the Board. The Directors are entitled to seek independent professional advice, at the Company’s expense, where they judge it necessary for them to discharge their responsibilities. 1.5 Diversity policy and objectives A copy of our Diversity Policy is on our website. Page 17 contains the relevant proportions of men and women on the Board, ExCo and across the whole organisation. See pages 18 and 85 for our diversity GLVFORVXUHV DQG FRQÞUPDWLRQ WKDW +HQGHUVRQ has signed the Women in Finance Charter and set a number of targets to facilitate greater diversity in the workplace. 1.6 Evaluation of the Board See page 56 and also B.6 ‘Evaluation’ above for further information regarding our Board evaluation process. 1.7 Evaluation of senior executives See page 56 for further information regarding the evaluation of our senior executives. A copy of the Evaluation of Senior Executives policy is available on our website. Principle 2 – Structure the Board to add value 2.1 Nomination Committee The Nomination Committee is comprised RI VHYHQ 1RQ-([HFXWLYH ,QGHSHQGHQW Directors (including the Chairman). See page 53 for an analysis of the independence of the Chairman. See pages 57 and 58 for a description of the activities of the Nomination Committee. Terms of reference of the Committee are available on the website. Committee attendance is set out on page 55. 2.2 Board skills matrix Page 56 contains a summary of the skills and experience of each of the Directors. A note on Henderson’s policy on diversity is set out on page 58. A skills matrix is also reviewed on an annual basis by the Nomination Committee. 2.3 Independence of Directors See page 53 for a summary of the independence of Directors. Dates of appointment are set out on page 55. ,Q DGGLWLRQ, SDJH 58 VHWV RXW WKH WHQXUH of the Non-Executive Directors. 2.4 A majority of the board of a listed entity should be independent directors ,QGHSHQGHQW 1RQ-([HFXWLYH 'LUHFWRUV constitute a majority of the Board. See page 53 for a summary. 2.5 Independence of the Chairman See page 53 for a summary of the independence of Directors and the Chairman. There is a division of responsibility between the Chairman, who is responsible for leading the Board and ensuring its effectiveness, and the Chief Executive who is responsible to the Board for the overall management and performance of the Group. 2.6 Induction and training See page 57 for an overview of the induction process for Mr Wagstaff. Regular training sessions to update Directors’ skills and knowledge of the business and regulatory matters when appropriate are held during the year and details are set out on page 56. Principle 3 – Act ethically and responsibly 3.1 Code of Conduct A copy of the Code of Conduct, which is applicable to all directors, senior executives and employees of the organisation, is available on the website. Principle 4 – Safeguard integrity in corporate reporting 4.1 Audit Committee A description of the activities of the Audit Committee is set out on pages 62 to 65. Terms of reference of the Audit Committee are available on our website. Committee attendance is set out on page 55. The Audit Committee is comprised of four Non-([HFXWLYH ,QGHSHQGHQW 'LUHFWRUV, LQFOXGLQJ an independent director as chair who is not the Chairman of the Board. 4.2 Chief Executive and Chief Financial 2IÞFHU 'HFODUDWLRQ The Chief Executive and Chief Financial 2IÞFHUpV GHFODUDWLRQ WR WKH %RDUG LV VHW RXW on page 59. 4.3 External auditors and AGM The external auditors will be asked to attend the Company’s AGM on 26 April 2017 and will be available to answer questions from shareholders about the conduct of the audit and the preparation and content of the independent auditors’ report as shown on pages 92 to 97. Principle 5 – Make timely and balanced disclosure 5.1 Market Disclosure Policy A copy of the Group’s Market Disclosure 3ROLF\ LV DYDLODEOH RQ RXU ZHEVLWH. ,Q DGGLWLRQ, the Company has a Market Disclosure Committee which supports the Company 'LVFORVXUH 2IÞFHU (WKH &KLHI )LQDQFLDO 2IÞFHU) DQG HQVXUHV WKDW IXOO FRQVLGHUDWLRQ is given to the appropriateness, quality and adequacy of material information that is released to the market by the Group and that there is an adequate system in place for the timely disclosure of all material information to the ASX and UK Listing Authority and RWKHU DXWKRULWLHV. ,W DGYLVHV WKH %RDUG members where the Committee considers there is an obligation to disclose information in accordance with the Group’s continuous disclosure obligations. The Committee meets regularly and reviews the status of projects and the employee insider list as well as some other materials that may be published internally or externally from time to time. The Company also has a Share Trading Policy (available on our website) which sets out a procedure and situations when the Directors and employees of the Company can and cannot deal in shares in Henderson Group plc. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


88 CORPOR ATE GOVERNANCE Compliance statements and application of principles and recommendations continued Principle 6 – Respect the rights of security holders 6.1 Online information Our website provides online services, which includes a Corporate Governance page, to help shareholders manage their KROGLQJ DQG HQJDJH ZLWK WKH ,QYHVWRU Relations team and Share Registry. To assist shareholders in accessing up-to-date LQIRUPDWLRQ RQ WKH *URXS, PDUNHW EULHÞQJV and other Company announcements and presentations are available on our website as well as the other policies required by the UK Code and ASX Principles, including the Company’s Market Disclosure and Communication and Shareholder Communication Policies. 6.2 Investor Relations programme ,QIRUPDWLRQ UHJDUGLQJ RXU ,QYHVWRU 5HODWLRQV programme with our shareholders is set out on page 66. 6.3 Policies and processes to facilitate and encourage participation at meetings of security holders Henderson’s approach to communicating to shareholders and our markets is set out in the Market Disclosure and Communication Policy, designed to ensure compliance with our disclosure obligations. A Chief Disclosure 2IÞFHU KDV EHHQ DSSRLQWHG WR RYHUVHH WKLV via the Market Disclosure Committee as set out in 5.1 above. 6.4 Electronic communications (-PDLO GHWDLOV IRU WKH ,QYHVWRU 5HODWLRQV WHDP and Computershare, the Registrar, can be found on our website. Computershare routinely sends a ‘Deemed Consent’ mailing. This gives the option for shareholders to opt for electronic (E-comms) RU IXOO KDUG FRS\ FRPPXQLFDWLRQV. ,I WKH\ GR not reply, the shareholder is ‘deemed’ to have opted for a reduced hard copy mailing and will receive paper shareholder documents (GLYLGHQG WD[ YRXFKHUV) EXW WKH\ DUH QRWLÞHG that company documents (Annual Reports etc.) can be found online. This preference can be changed at any point by phoning, writing to or e-mailing Computershare. A shareholder can also make these changes themselves RQOLQH RQ WKH ,QYHVWRU &HQWUH. Principle 7 – Recognise and manage risk 7.1 Board Risk Committee A description of the responsibilities of the Board Risk Committee and our risk management framework is set out on pages 42 WR 47 DQG 60 WR 61, UHVSHFWLYHO\. 7HUPV of reference of the Committee are available on our website. Committee attendance is set out on page 55. The Board Risk Committee is FRPSULVHG RI ÞYH 1RQ-([HFXWLYH ,QGHSHQGHQW Directors which includes an independent director as chair. 7.2 Risk Management Framework Our risk management framework is set out RQ SDJHV 42 WR 47 DQG UHYLHZHG DQQXDOO\. Disclosures relating to the review of the risk management framework are set out on page 59. 7.3 Internal Audit Function 'LVFORVXUHV UHODWLQJ WR WKH ,QWHUQDO $XGLW Function are included on page 65. 7.4 Risks and Sustainability A description of our principal risks and XQFHUWDLQWLHV FDQ EH IRXQG RQ SDJHV 46 DQG 47. 6HH DOVR WKH 'LUHFWRUVp 5HSRUW RQ page 89 for a description of Greenhouse Gas Emissions. Principle 8 – Remunerate fairly and responsibly 8.1 Remuneration Committee A description of the responsibilities and activities of the Remuneration Committee is set out in the Directors’ Remuneration Report RQ SDJHV 67 WR 84. 7HUPV RI UHIHUHQFH RI the Committee are available on our website. Committee attendance is set out on page 55. The Remuneration Committee is comprised RI IRXU 1RQ-([HFXWLYH ,QGHSHQGHQW 'LUHFWRUV which includes an independent director as chair. 8.2 Remuneration Policies and Practices The Group’s Remuneration Policy was approved by shareholders at the 2015 AGM. For ease of reference, a summary of the Company’s key remuneration principles and remuneration elements is set out in the Directors’ Remuneration Report. 8.3 Share Trading Policy A copy of the Share Trading Policy which prohibits the use of derivatives in respect of employee holdings in Henderson Group securities is available on our website. Henderson Group plc Annual Report 2016

 


 

89 Directors’ report Greenhouse Gas Emissions by scope (W&22H) 2015 (restated)1 Scope 2016 Note 1 2015 UHVWDWHPHQW LQFOXGHV o%XVLQHVV WUDYHOp DQG FRQÞUPDWLRQ RI SUHYLRXVO\ HVWLPDWHG 6FRSH 2 ÞJXUHV Reporting Shares in Henderson Group plc are listed on both the LSE and the ASX (in the form RI &+(66 'HSRVLWDU\ ,QWHUHVWV (&',V)) DQG therefore, the Company is required to comply with both sets of disclosure requirements. Management report Together, the Strategic report and Directors’ report make up the Management report for the purpose of Disclosure and Transparency 5XOH 4 1 8 Branches The Group continues to operate a number of overseas branches. Directors Details of the Board members who served during the year and at the date of this report are set out on pages 52 and 53. Powers Subject to the Company’s Articles of Association and provisions of relevant statutes, the Board may exercise all powers of the Company. Appointment/removal of Directors ,Q DFFRUGDQFH ZLWK WKH 8. &RUSRUDWH Governance Code, all Directors will offer themselves for reappointment at the AGM on 26 April 2017. Pursuant to the Articles of Association, shareholders may remove a Director before the end of his or her term by passing an ordinary resolution at a meeting of shareholders. &RQßLFWV RI LQWHUHVW The Directors have put in place procedures WR GHDO ZLWK FRQßLFWV RI LQWHUHVW DQG WKHVH have operated effectively throughout 2016. $ 5HJLVWHU RI &RQßLFWV RI ,QWHUHVW LV maintained by the Company and reviewed by the Board on an annual basis. ,QGHPQLÞFDWLRQ DQG LQVXUDQFH RI 'LUHFWRUV DQG RIÞFHUV The Company provides an indemnity to Directors to the extent permitted by the Companies (Jersey) Law 1991. The indemnity ZDV HQIRUFHG WKURXJKRXW WKH ÞQDQFLDO \HDU and at the date of the approval of the Annual Report and Accounts. The Company continues to maintain appropriate insurance cover against certain OLDELOLWLHV IRU DOO 'LUHFWRUV DQG RIÞFHUV RI the Group. Political donations The Group made no political donations during the year. Human Rights and Modern Slavery The Group supports all efforts to eradicate forced labour and other abuses of human ULJKWV $V D ÞQDQFLDO VHUYLFHV ÞUP ZH EHOLHYH the likelihood of Modern Slavery existing within our own organisation or supply chain to be very low. A risk assessment of all suppliers based on region of operation and goods or services VXSSOLHG ZDV FDUULHG RXW DQG LGHQWLÞHG no areas of concern. The Procurement department received training on ethical sourcing, and incorporated further checks into the supplier due diligence process. We remain vigilant and take a zero-tolerance approach to this matter. Rounding ,Q DFFRUGDQFH ZLWK WKH $XVWUDOLDQ 6HFXULWLHV DQG ,QYHVWPHQWV &RPPLVVLRQ &ODVV 2UGHU 98/100, amounts in this Directors’ report and other sections of this Annual Report and Accounts have been rounded to the nearest £0.1m, unless stated otherwise. Annual General Meeting A separate document, the Notice of Annual General Meeting 2017, covering the AGM of the Company to be held on 26 April 2017, will be sent or made available to all shareholders and will contain an explanation of the business before that meeting. Extraordinary General Meeting A separate Circular and Notice of Extraordinary General Meeting, covering the EGM of the Company which is intended to be held on the same day as the AGM, being 26 April 2017, will be sent or made available to all shareholders before that meeting and will contain an explanation of the proposed PHUJHU ZLWK -DQXV &DSLWDO *URXS ,QF Share capital and structure Details of the movements in allotted share capital during the year, together with the rights and obligations attaching to the &RPSDQ\pV VKDUHV DUH JLYHQ LQ 1RWH 24 WR WKH ÞQDQFLDO VWDWHPHQWV As set out in the announcement to the market on 3 October 2016, Janus, Henderson and Dai-ichi entered into an amended and restated ,QYHVWPHQW DQG 6WUDWHJLF &RRSHUDWLRQ Agreement relating to the continuing investment of Dai-ichi in the combined group from closing of the merger of equals between +HQGHUVRQ DQG -DQXV &DSLWDO (WKH o,6&$p) 7KH ,6&$ JLYHV 'DL-LFKL WKH ULJKW WR SDUWLFLSDWH LQ future share issuances of the combined group on a pre-emptive basis, dependent on Dai-ichi maintaining its shareholding in the combined group at the level immediately after closing of the merger (subject to dilution in certain FLUFXPVWDQFHV) 7KH ,6&$ SURYLGHV WKDW Dai-ichi’s shareholding in the combined group PD\ QRW H[FHHG 20% 7KH ,6&$ FRQWDLQV certain restrictions on Dai-ichi’s sale of Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Scope 1 Fuel (natural gas) – – Scope 2 Electricity 2,106 2 304 Scope 3 Business travel (air, rail, road) Hotels Business freight (air, road) Total Scope 3 2,219 174 54 2,447 2 645 213 44 2,902 Total GHG emissions Total per employee 4,552 4.12 5,206 5.60 Further disclosures, where applicable to the Company, are contained in the sections of this Annual Report and Accounts LGHQWLÞHG EHORZ DQG IRUP SDUW RI WKLV Directors’ report: 48t65 & 85–88 Corporate Governance 39 Dividend 138 Events after the reporting date 67t84 ' LUHFWRUVp 5HPXQHUDWLRQ & ,QWHUHVWV 133 Financial Risk Management & )LQDQFLDO ,QVWUXPHQWV

 


90 CORPOR ATE GOVERNANCE Directors’ report continued ,W LV WKHUHIRUH SURSRVHG WKDW PricewaterhouseCoopers LLP be reappointed as independent auditors and a resolution for shareholders will be proposed at the 2017 AGM. Financial reporting and going concern The Directors have acknowledged their responsibilities in the Directors’ responsibilities statement in relation WR WKH FRQVROLGDWHG ÞQDQFLDO VWDWHPHQWV and those of the Company for the year ended 31}'HFHPEHU 2016 (UHIHU WR SDJH 91) Our business activities, together with the factors likely to affect their future development, performance and position, are set out in the Chief Executive’s review on pages 8 to 11. 7KH ÞQDQFLDO SRVLWLRQ RI WKH *URXS DQG LWV FDVK ßRZ DQG OLTXLGLW\ SRVLWLRQ DUH GHVFULEHG LQ WKH FRQVROLGDWHG ÞQDQFLDO VWDWHPHQWV DQG QRWHV ,Q SDUWLFXODU 1RWH 26 WR WKH ÞQDQFLDO statements summarises the Group’s objectives, policies and processes for managing its ÞQDQFLDO ULVN PDQDJHPHQW REMHFWLYHV GHWDLOV RI ÞQDQFLDO LQVWUXPHQWV XVHG DQG KHGJLQJ activities and its exposures to price, interest rate, liquidity, foreign currency and credit risks. 7KH *URXS KDV VXIÞFLHQW ÞQDQFLDO UHVRXUFHV together with diverse revenue streams. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. The Directors closely monitored the material uncertainties inherent in current and expected market conditions, the trading performance of the Group and the debt instruments issued by the Group. After consideration, the Directors are VDWLVÞHG WKDW WKH &RPSDQ\ KDV VXIÞFLHQW ÞQDQFLDO UHVRXUFHV WR FRQWLQXH RSHUDWLQJ in the foreseeable future, and therefore, continue to adopt the going concern basis in preparing the Annual Report. Signed in accordance with a resolution of the Board of Directors: Total number of shares Substantial shareholder % Perpetual Limited 7KH &DSLWDO *URXS &RPSDQLHV ,QF Commonwealth Bank of Australia Bennelong Fund Management Group Pty Ltd -&3 ,QYHVWPHQW 3DUWQHUV /WG 165 604 501 56 242 825 56,052,098 46 533 660 34 300 553 14 63 4 97 4 95 4 1 3.03 Janus Henderson shares (in each case, subject to limited exceptions). The transfer restrictions fall away in part from the earlier of termination RI WKH ,6&$ DQG WKUHH \HDUV DIWHU VLJQLQJ :LWK WKH H[FHSWLRQ RI WKRVH VSHFLÞHG DERYH no other restrictions exist on the transfer or holding of securities in the Company under its Articles of Association and there are no shares carrying special rights with regards to the control of the Company. Substantial shareholdings As at 8 February 2017, the Company had UHFHLYHG QRWLÞFDWLRQ RI KROGLQJV LQ WKH Company’s issued share capital as set out in the table above. Employee share schemes The Company has a number of employee share schemes and the rights attached to the shares of certain share schemes are not exercisable by employees. The discretion to vote remains with the trustees with two exceptions: 1. in cases of takeover or reconstruction; and 2. the trustee of the Henderson Group plc Buy As You Earn Share Plan (and its international equivalent) does not have discretion on how to vote and seeks instructions from WKH EHQHÞFLDULHV Restrictions on voting rights There are no restrictions on voting rights of securities in the Company. The Notice of AGM VSHFLÞHV GHDGOLQHV IRU GHWHUPLQLQJ DWWHQGDQFH and voting entitlements at the AGM. Amendment to the Articles of Association of the Company The Company may only amend its Articles of Association if its shareholders pass a special resolution to that effect. New issues of share capital and disapplication of pre-emption rights At the 2016 AGM, the Directors were authorised by shareholders to allot the Company’s unissued shares up to an DJJUHJDWH QRPLQDO DPRXQW RI €47160 087 RU €94 320 175 ZKHQ LQ FRQQHFWLRQ ZLWK an offer of equity securities by way of a rights issue to shareholders in proportion to their existing holdings. The Directors also have authority to allot equity securities for cash or sell ordinary shares held in treasury (treasury shares) for cash on a non-pre-emptive basis: (a) pursuant to a rights issue; or (b) up to an aggregate QRPLQDO DPRXQW RI €14 148 026 Purchase of own share capital At the 2016 AGM, the Directors were authorised to purchase up to a maximum RI 113 184 210 RUGLQDU\ VKDUHV PLQXV WKH QXPEHU RI VKDUHV SXUFKDVHG DV &',V XQGHU a Contingent Purchase Contract. During the year, the Company announced its intention to commence an on-market share buyback programme. However, as a result of WKH &RPSDQ\ UHDFKLQJ D GHÞQLWLYH DJUHHPHQW for an all-stock merger of equals with Janus &DSLWDO *URXS ,QF WKH &RPSDQ\ GHFLGHG WR stop the on-market share buyback programme. The Company did not buy back any of its RUGLQDU\ VKDUHV RU &',V $FFRUGLQJO\ WKH Company did not expend any cash on buying EDFN HLWKHU VKDUHV RU &',V GXULQJ WKH \HDU Shareholders will be asked to renew these authorities up to a maximum number which is equal to 10% of the issued share capital of the Company as at completion of the merger at the AGM on 26 April 2017. Further information, including the maximum and minimum prices ZKLFK PD\ EH SDLG IRU WKH VKDUHV DQG &',V is set out in the Notice of AGM. 6LJQLÞFDQW DJUHHPHQWV During the year, Henderson UK Finance Limited (a wholly owned subsidiary of the Company) announced that the outstanding £150,000,000 2016 Notes maturing on 24 0DUFK 2016 ZHUH SDLG RQ 24 0DUFK 2016 in accordance with the terms of their issue. Furthermore, the listing of the Debt Securities DGPLWWHG WR WKH 2IÞFLDO /LVW DQG DGPLWWHG to trading on the LSE’s Gilt-Edged and )L[HG ,QWHUHVW 0DUNHW ZDV FDQFHOOHG RQ 29 March 2016. Independent auditors Following the Audit tender, as set out on page 65, the Audit Committee recommended to the Board that PwC be reappointed as external auditors whether the merger is or is not approved by shareholders. Richard Gillingwater Chairman 8 February 2017 Andrew Formica Chief Executive 8 February 2017 Henderson Group plc Annual Report 2016

 


91 Directors’ responsibilities statement ,Q UHODWLRQ WR WKH ÞQDQFLDO statements The Directors are responsible for preparing the Annual Report and Accounts which includes the Directors’ report, the Strategic report, the Directors’ remuneration report and WKH ÞQDQFLDO VWDWHPHQWV 7KH 'LUHFWRUV DUH UHTXLUHG WR SUHSDUH DQG DSSURYH WKH ÞQDQFLDO statements for the Group and Parent Company in accordance with Jersey law for each ÞQDQFLDO \HDU ZKLFK VKRZ D WUXH DQG IDLU YLHZ of the state of affairs of the Group and the &RPSDQ\ DQG RI WKH SURÞW RU ORVV RI WKH Group for that period in accordance with generally accepted accounting principles. The Directors have elected to prepare the *URXS DQG &RPSDQ\ ÞQDQFLDO VWDWHPHQWV LQ DFFRUGDQFH ZLWK ,QWHUQDWLRQDO )LQDQFLDO Reporting Standards as adopted by the (XURSHDQ 8QLRQ (,)56) ,$6 1 3UHVHQWDWLRQ RI )LQDQFLDO 6WDWHPHQWV UHTXLUHV WKDW ÞQDQFLDO VWDWHPHQWV SUHVHQW IDLUO\ IRU HDFK ÞQDQFLDO \HDU WKH *URXSpV DQG &RPSDQ\pV ÞQDQFLDO SRVLWLRQ ÞQDQFLDO SHUIRUPDQFH DQG FDVK ßRZV ,Q SUHSDULQJ WKH *URXS DQG &RPSDQ\ ÞQDQFLDO VWDWHPHQWV the Directors are also required to: • Select suitable accounting policies in DFFRUGDQFH ZLWK ,$6 8 $FFRXQWLQJ 3ROLFLHV Changes in Accounting Estimates and Errors and then apply them consistently • Make judgements and accounting estimates that are reasonable and prudent • Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information • Provide additional disclosures when FRPSOLDQFH ZLWK WKH VSHFLÞF UHTXLUHPHQWV RI ,)56 LV LQVXIÞFLHQW WR HQDEOH XVHUV to understand the impact of particular transactions, other events and conditions RQ WKH *URXSpV DQG &RPSDQ\pV ÞQDQFLDO SRVLWLRQ DQG ÞQDQFLDO SHUIRUPDQFH • State that the Group and Company have FRPSOLHG ZLWK ,)56 VXEMHFW WR DQ\ PDWHULDO departures disclosed and explained in the ÞQDQFLDO VWDWHPHQWV • 3UHSDUH WKH ÞQDQFLDO VWDWHPHQWV on the going concern basis unless it is inappropriate to presume that the Company will continue in business. 7KH 'LUHFWRUV FRQÞUP WKH\ KDYH FRPSOLHG with all the above requirements in preparing WKH ÞQDQFLDO VWDWHPHQWV Directors’ statement as to disclosure of information to auditors The Directors who were members of the Board at the time of approving this Directors’ report are listed on pages 52 and 53. Having made enquiries of fellow Directors and of the Company’s auditors, each of these Directors FRQÞUPV WKDW: • So far as the Director is aware, there is no relevant audit information needed by the Company’s external auditors in connection with preparing their report, of which the Company’s external auditors are unaware • The Director has taken all the steps that he or she ought to have taken as a Director in order to make themselves aware of any relevant audit information needed by the Company’s external auditors in connection with preparing their report and to establish that the Company’s external auditors are aware of that information • The Directors are responsible for keeping adequate accounting records that are VXIÞFLHQW WR VKRZ DQG H[SODLQ WKH &RPSDQ\pV transactions which disclose with reasonable DFFXUDF\ DW DQ\ WLPH WKH ÞQDQFLDO SRVLWLRQ of the Group and the Company to ensure WKDW WKH ÞQDQFLDO VWDWHPHQWV FRPSO\ ZLWK Jersey law. They are also responsible for safeguarding the assets of the Group and the Company, and for taking reasonable steps for the prevention and detection of fraud and other irregularities. 7KH 'LUHFWRUV FRQÞUP WKDW WR WKH best of their knowledge: • 7KH ÞQDQFLDO VWDWHPHQWV KDYH EHHQ SUHSDUHG LQ DFFRUGDQFH ZLWK ,)56 DQG JLYH a true and fair view of the assets, liabilities, ÞQDQFLDO SRVLWLRQ DQG SURÞW RI WKH *URXS and Company for the year ended 31 December 2016 • The Strategic report includes a fair review of the development and performance of the business and the position of the Group for the year ended 31 December 2016 and a description of the principal risks and uncertainties faced by the Group • The Annual Report and Accounts, taken as a whole, provides the information necessary for shareholders to assess the Company’s performance, business model and strategy and is fair, balanced and understandable • The accounting records have been properly maintained. The Directors are responsible for the maintenance and integrity of the corporate DQG ÞQDQFLDO LQIRUPDWLRQ LQFOXGHG RQ WKH Group’s website, www.henderson.com/ir. Legislation in Jersey and the United Kingdom governing the preparation and dissemination RI ÞQDQFLDO VWDWHPHQWV PD\ GLIIHU IURP legislation in other jurisdictions. Signed in accordance with a resolution of the Directors: Andrew Formica Chief Executive 8 February 2017 Roger Thompson &KLHI )LQDQFLDO 2IÞFHU 8 February 2017 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


92 CORPOR ATE GOVERNANCE Independent auditors’ report to the members of Henderson Group plc 5HSRUW RQ WKH ÞQDQFLDO VWDWHPHQWV Our opinion ,Q RXU RSLQLRQ +HQGHUVRQ *URXS SOFpV FRQVROLGDWHG ÞQDQFLDO VWDWHPHQWV DQG &RPSDQ\ ÞQDQFLDO VWDWHPHQWV (WKH oÞQDQFLDO VWDWHPHQWVp): • give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2016 and of the Group’s DQG WKH &RPSDQ\pV SURÞW DQG FDVK ßRZV for the year then ended; • have been properly prepared in accordance ZLWK ,QWHUQDWLRQDO )LQDQFLDO 5HSRUWLQJ 6WDQGDUGV (o,)56Vp) DV DGRSWHG E\ WKH European Union; and • have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991. What we have audited 7KH ÞQDQFLDO VWDWHPHQWV LQFOXGHG ZLWKLQ WKH Annual Report, comprise: • the Consolidated and Company Statements of Financial Position as at 31 December 2016; • WKH &RQVROLGDWHG DQG &RPSDQ\ ,QFRPH Statements and the Consolidated and Company Statements of Comprehensive ,QFRPH IRU WKH \HDU WKHQ HQGHG; • the Consolidated and Company Statements of Cash Flows for the year then ended; • the Consolidated and Company Statements of Changes in Equity for the year then ended; and • WKH QRWHV WR WKH ÞQDQFLDO VWDWHPHQWV ZKLFK LQFOXGH D VXPPDU\ RI VLJQLÞFDQW DFFRXQWLQJ policies and other explanatory information. 7KH ÞQDQFLDO UHSRUWLQJ IUDPHZRUN WKDW KDV EHHQ DSSOLHG LQ WKH SUHSDUDWLRQ RI WKH ÞQDQFLDO VWDWHPHQWV LV DSSOLFDEOH ODZ DQG ,)56V as adopted by the European Union. Our audit approach Context ,Q SODQQLQJ IRU RXU DXGLW ZH PHW ZLWK WKH Audit Committee, other Board members and management to discuss and understand VLJQLÞFDQW FKDQJHV GXULQJ WKH \HDU DQG WR understand their perspectives on associated business risks. We used this insight when forming our own views regarding the business DV SDUW RI GHYHORSLQJ RXU DXGLW SODQ ,Q particular we have discussed the proposed merger of Henderson with Janus Capital *URXS ,QF DQG FRQVLGHUHG WKH LPSDFW RI WKLV RQ EXVLQHVV ULVNV DV ZHOO DV ÞQDQFLDO statement and audit risks. We also considered general market conditions and the performance of the Group when scoping and performing our work, in particular over revenue which is driven by the value of assets under management (‘AUM’). The scope of our audit and our areas of focus We conducted our audit in accordance with ,QWHUQDWLRQDO 6WDQGDUGV RQ $XGLWLQJ (8. DQG ,UHODQG) (o,6$V (8. & ,UHODQG)p) We designed our audit by determining materiality and assessing the risks of material PLVVWDWHPHQW LQ WKH ÞQDQFLDO VWDWHPHQWV ,Q SDUWLFXODU ZH ORRNHG DW ZKHUH WKH 'LUHFWRUV made subjective judgements, for example LQ UHVSHFW RI VLJQLÞFDQW DFFRXQWLQJ HVWLPDWHV that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud. The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, DUH LGHQWLÞHG DV oDUHDV RI IRFXVp LQ WKH WDEOH overleaf. We have also set out how we tailored RXU DXGLW WR DGGUHVV WKHVH VSHFLÞF DUHDV LQ RUGHU WR SURYLGH DQ RSLQLRQ RQ WKH ÞQDQFLDO statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete OLVW RI DOO ULVNV LGHQWLÞHG E\ RXU DXGLW Henderson Group plc Annual Report 2016 Overview Materiality 2YHUDOO *URXS PDWHULDOLW\: €9 5P ZKLFK UHSUHVHQWV 5% RI SURÞW before tax, adjusted for the amortisation of intangible assets. Scope The Group comprises a number of subsidiaries, the majority of which are UK incorporated entities. The UK Group engagement team conducted all audit work in UHVSHFW RI WKH DXGLW RI WKH *URXS ÞQDQFLDO VWDWHPHQWV LQFOXGLQJ LQ relation to certain entities incorporated overseas as accounting is centralised primarily in the UK. Taken together, the subsidiaries and functions in the scope of our audit work accounted for 97% of Group revenues. Our work over WKH ÞYH SULQFLSDO VXEVLGLDULHV DFFRXQWHG IRU 79% RI DGMXVWHG *URXS SURÞW EHIRUH WD[ ZKLFK ZH VXSSOHPHQWHG ZLWK SURFHGXUHV RYHU VSHFLÞF EDODQFHV LQ HQWLWLHV DFURVV WKH *URXS Recurring areas of focus • Recognition of management fees and performance fees. • Goodwill and intangible assets impairment review.

 


93 We agreed a sample of fee rates and calculation methodologies We understood and evaluated the systems, processes and controls in relevant controls on which we sought to place reliance. This included FRQÞUP WKH UHOHYDQW FRQWUROV KDG FRQWLQXHG WR RSHUDWH FRQVLVWHQWO\ We used a combination of data auditing and manual sampling identify any differences as a result of this testing. We reconciled the fees we recalculated against the general ledger Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Recognition of management fees and performance fees Recurring area of focus How our audit addressed the area of focus Management and performance fees are an area of focus due to the size and importance of revenue to the Group’s results. The existence of multiple fee arrangements on different terms creates a further risk that fees may be incorrectly calculated and/or recognised in the wrong period. Fees are calculated as a percentage of AUM, net of any rebates. The fee rates vary across different funds and products and, for performance fees, are only earned once investment performance exceeds a certain level. Performance fees are inherently more complex as judgement can be required to determine whether performance criteria have been met, particularly when the performance period runs over more than RQH ÞQDQFLDO UHSRUWLQJ SHULRG The correct recognition of management and performance fees is dependent on: a) The fee rate and calculation methodology set out in the terms of the underlying contracts between the Group and its clients and/or the funds; b) The valuation, existence and completeness of the AUM of the funds or the client portfolio; c) The mathematical accuracy of the fee calculation; and d) The posting of the fees to the general ledger, including recognition of the fees in the correct period. We focused our testing on the following areas: a) Basis of calculation to contracts and did not identify any differences. b) Accuracy and completeness of AUM place in respect of the valuation and existence of AUM and tested the WHVWLQJ LQ-KRXVH FRQWUROV (LQFOXGLQJ ,7 JHQHUDO FRQWUROV) DQG REWDLQLQJ independent third party controls reports where functions are outsourced to Third Party Administrators (‘TPAs’) or Transfer Agents (o7$Vp) ,Q VXFK LQVWDQFHV ZH UHDG WKH UHSRUWV DQG GHWHUPLQHG WKDW WKH\ were appropriate for our purposes. Where the reports did not cover the IXOO ÞQDQFLDO \HDU ZH REWDLQHG EULGJLQJ OHWWHUV IURP WKH 73$V/7$V WR ZLWKLQ WKH JDS SHULRG DQG WKDW QR GHÞFLHQFLHV KDG EHHQ LGHQWLÞHG The results showed that the relevant controls were operating effectively. c) Fee calculations to independently recalculate management fees, rebates and performance fees. We obtained AUM data from source systems at Henderson and/or the TPAs and TAs in our calculations. We did not d) Posting of fees postings and investigated differences, where applicable. For a sample of fees recognised either side of the year-end we tested that they had been recognised in the correct period, paying particular attention to performance fees. Based on our work, the fees have been correctly calculated and recognised. We also tested a sample of bank reconciliations and performed tests over journals impacting revenue which appeared to be unusual. We did not identify any exceptions as a result of this testing. 5HIHU WR SDJH 62 ($XGLW &RPPLWWHH 5HSRUW), QRWH 2 WR WKH ÞQDQFLDO statements for the Directors’ disclosures of the related accounting policies, judgements and estimates and note 3 for further informat ion. Recurring areas of focus There are two areas of focus which we expect to recur each year EHFDXVH WKH\ UHODWH WR VLJQLÞFDQW EDODQFHV LQ WKH ÞQDQFLDO statements and are an integral part of the business.

 


94 CORPOR ATE GOVERNANCE Independent auditors’ report continued forecasts and historical results; and the Group. :H FRQVLGHUHG ZKHWKHU WKHUH ZDV DQ\ LQGLFDWLRQ WKDW WKH ,0&V PD\ VLQFH WKH DFTXLVLWLRQ GDWHV 1R VXFK LQGLFDWRUV ZHUH LGHQWLÞHG :H DOVR life of investors and funds based on independent third party research Henderson Group plc Annual Report 2016 Goodwill and intangible assets Recurring area of focus How our audit addressed the area of focus The Group’s intangible asset primarily consist of goodwill of £568.7m DQG ,0&V RI €68 8P IURP KLVWRULF DFTXLVLWLRQV ,QWDQJLEOH DVVHWV LV WKH PRVW VLJQLÞFDQW EDODQFH LQ WKH &RQVROLGDWHG 6WDWHPHQW RI Financial Position which makes this an area of focus. The amounts relating to acquisitions which occurred in prior periods are treated as follows: Goodwill: Assessed annually for impairment by calculating the current ‘value in use’ of the business and comparing this with the carrying value. This requires judgements to be made about future performance, the most subjective of which are the projected future FDVK ßRZV DQG WKH GLVFRXQW UDWH 7KH FXUUHQW \HDU DVVHVVPHQW VKRZHG WKDW WKHUH ZDV VLJQLÞFDQW KHDGURRP EHIRUH DQ LPSDLUPHQW would be required. ,0&V: $PRUWLVHG RYHU WKH SHULRG WKH\ DUH H[SHFWHG WR JHQHUDWH revenue and considered for indicators of impairment at each UHSRUWLQJ GDWH 7KH 'LUHFWRUV KDYH QRW LGHQWLÞHG DQ\ LPSDLUPHQW indicators which may arise if, for example, the value of AUM was falling at a higher rate than anticipated at the time the amortisation period was determined. Goodwill We recalculated the difference between the carrying value and the 'LUHFWRUVp YDOXDWLRQ RI JRRGZLOO WR WHVW WKHUH ZDV VXIÞFLHQW KHDGURRP We tested the mathematical accuracy of the valuation and tested the inputs to the model by: • &RPSDULQJ WKH FDVK ßRZ IRUHFDVWV WR WKH ODWHVW %RDUG DSSURYHG ÞYH \HDU SODQV DQG FRQVLGHULQJ WKH DFFXUDF\ RI WKH EXGJHWLQJ SURFHVV with reference to historic forecasts; • Challenging the growth rates by reference to economic and industry • Challenging the discount rate by comparing it to the cost of capital for IMCs be impaired with reference to recent performance and performance compared the amortisation periods being used against the average and our knowledge of the industry. Sensitivity analysis :H SHUIRUPHG VHQVLWLYLW\ DQDO\VLV LQ UHVSHFW RI JRRGZLOO DQG ,0&V to consider which changes to assumptions, either individually or collectively, could result in an impairment. We discussed the likelihood of the analysis with the Directors and, although uncertainties always exist with regards to forecasts, the Director’s conclusion that there is no impairment, is consistent with the audit evidence obtained. 5HIHU WR SDJH 62 ($XGLW &RPPLWWHH 5HSRUW), QRWH 2 WR WKH ÞQDQFLDO statements for the Directors’ disclosures of the related accounting policies, judgements and estimates and note 13 for further information. Recurring areas of focus

 


95 How we tailored the audit scope :H WDLORUHG WKH VFRSH RI RXU DXGLW WR HQVXUH WKDW ZH SHUIRUPHG HQRXJK ZRUN WR EH DEOH WR JLYH DQ RSLQLRQ RQ WKH ÞQDQFLDO VWDWHPHQWV DV D ZKROH taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the Group operates. 7KH *URXSpV DFFRXQWLQJ SURFHVV LV VWUXFWXUHG DURXQG D SULPDU\ ÞQDQFH IXQFWLRQ LQ WKH 8. 7KH 8. DQG RYHUVHDV ÞQDQFH IXQFWLRQV PDLQWDLQ their own accounting records but use the same, integrated general ledger system. $OO DXGLW ZRUN LQ UHODWLRQ WR WKH ÞQDQFLDO VWDWHPHQWV ZDV SHUIRUPHG LQ WKH 8. E\ WKH *URXS HQJDJHPHQW WHDP LQFOXGLQJ LQ UHODWLRQ WR RYHUVHDV territories such as the US, Luxembourg and Australia where applicable. ,Q HVWDEOLVKLQJ WKH RYHUDOO DSSURDFK WR WKH *URXS DXGLW ZH GHWHUPLQHG ZKLFK HQWLWLHV ZLWKLQ WKH *URXS ZHUH RI PRVW ÞQDQFLDO VLJQLÞFDQFH :H DXGLWHG WKH FRPSOHWH ÞQDQFLDO LQIRUPDWLRQ RI ÞYH SULQFLSDO VXEVLGLDULHV ZLWKLQ WKH *URXS HDFK RI ZKLFK FRQWULEXWHG PRUH WKDQ 15% RI WKH SURÞW EHIRUH WD[ RI WKH *URXS :H VXSSOHPHQWHG WKLV ZLWK DGGLWLRQDO WHVWLQJ RYHU FHUWDLQ EDODQFHV 7KLV LQFOXGHG SURFHGXUHV RYHU VSHFLÞF WUDQVDFWLRQV (such as the debt repayment), testing of consolidation adjustments (such as goodwill) and certain other balances (such as pensions) which were UHFRJQLVHG ZLWKLQ HQWLWLHV QRW FRQVLGHUHG WR EH ÞQDQFLDOO\ VLJQLÞFDQW 7DNHQ WRJHWKHU WKH VXEVLGLDULHV DQG IXQFWLRQV LQ WKH VFRSH RI RXU DXGLW ZRUN DFFRXQWHG IRU 97% RI *URXS UHYHQXHV 2XU ZRUN RYHU WKH ÞYH SULQFLSDO VXEVLGLDULHV DFFRXQWHG IRU 79% RI *URXS SURÞW EHIRUH WD[ (DGMXVWHG IRU WKH amortisation of intangible assets) which was further supplemented by testing of other balances as described above. These combined procedures HQDEOHG XV WR GHWHUPLQH WKDW ZH KDG REWDLQHG VXIÞFLHQW HYLGHQFH WR VXSSRUW WKH RSLQLRQ RQ WKH *URXS ÞQDQFLDO VWDWHPHQWV DV D ZKROH Materiality 7KH VFRSH RI RXU DXGLW ZDV LQßXHQFHG E\ RXU DSSOLFDWLRQ RI PDWHULDOLW\ :H VHW FHUWDLQ TXDQWLWDWLYH WKUHVKROGV IRU PDWHULDOLW\ 7KHVH WRJHWKHU with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the LQGLYLGXDO ÞQDQFLDO VWDWHPHQW OLQH LWHPV DQG GLVFORVXUHV DQG LQ HYDOXDWLQJ WKH HIIHFW RI PLVVWDWHPHQWV ERWK LQGLYLGXDOO\ DQG RQ WKH ÞQDQFLDO statements as a whole. %DVHG RQ RXU SURIHVVLRQDO MXGJHPHQW ZH GHWHUPLQHG PDWHULDOLW\ IRU WKH *URXS ÞQDQFLDO VWDWHPHQWV DV D ZKROH DV IROORZV: :H DJUHHG ZLWK WKH $XGLW &RPPLWWHH WKDW ZH ZRXOG UHSRUW WR WKHP PLVVWDWHPHQWV LGHQWLÞHG GXULQJ RXU DXGLW DERYH €0 5P (2015: €0 5P) DV ZHOO as any misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Going concern Under the Listing Rules we are required to review the Directors’ statement, set out on page 91, in relation to going concern. We have nothing to report having performed our review. 8QGHU ,6$V (8. & ,UHODQG) ZH DUH UHTXLUHG WR UHSRUW WR \RX LI ZH KDYH DQ\WKLQJ PDWHULDO WR DGG RU WR GUDZ DWWHQWLRQ WR LQ UHODWLRQ WR WKH 'LUHFWRUVp VWDWHPHQW DERXW ZKHWKHU WKH\ FRQVLGHUHG LW DSSURSULDWH WR DGRSW WKH JRLQJ FRQFHUQ EDVLV LQ SUHSDULQJ WKH ÞQDQFLDO VWDWHPHQWV :H KDYH QRWKLQJ material to add or to draw attention to. $V QRWHG LQ WKH 'LUHFWRUVp VWDWHPHQW WKH GLUHFWRUV KDYH FRQFOXGHG WKDW LW LV DSSURSULDWH WR DGRSW WKH JRLQJ FRQFHUQ EDVLV LQ SUHSDULQJ WKH ÞQDQFLDO statements. The going concern basis presumes that the Group and Company have adequate resources to remain in operation, and that the 'LUHFWRUV LQWHQG WKHP WR GR VR IRU DW OHDVW RQH \HDU IURP WKH GDWH WKH ÞQDQFLDO VWDWHPHQWV ZHUH VLJQHG $V SDUW RI RXU DXGLW ZH KDYH FRQFOXGHG that the Directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s and Company’s ability to continue as a going concern. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Overall Group materiality £9.5m (2015: £10.6m). How we determined it 5% RI SURÞW EHIRUH WD[ DGMXVWHG IRU WKH DPRUWLVDWLRQ RI LQWDQJLEOH DVVHWV Rationale for benchmark applied :H DGMXVWHG SURÞW EHIRUH WD[ WR DUULYH DW D SURÞW PHDVXUH ZKLFK LQ RXU MXGJHPHQW LV D UHOHYDQW EHQFKPDUN DV LW LV WKH NH\ SHUIRUPDQFH PHDVXUH UHSRUWHG E\ PDQDJHPHQW DQG XVHG E\ RWKHUV WR UHßHFW WKH XQGHUO\LQJ SHUIRUPDQFH RI WKH EXVLQHVV in both its internal and external reporting to stakeholders, including shareholders and analysts. 7KH DGMXVWPHQW PDGH ZDV WR DGG EDFN DPRUWLVDWLRQ RI LQWDQJLEOH DVVHWV 7KLV DGMXVWPHQW KDV EHHQ PDGH WR UHßHFW WKH IDFW WKDW WKLV LV D SUHGLFWDEOH UHFXUULQJ FKDUJH ZKLFK KDV DULVHQ DV D UHVXOW RI DFTXLVLWLRQ DFFRXQWLQJ ,W LV DOVR QRQ-FDVK DQG LV QRW UHßHFWLYH RI WKH XQGHUO\LQJ SHUIRUPDQFH RI WKH EXVLQHVV 7KH DGMXVWHG SURÞW EHIRUH WD[ EHQFKPDUN LV WKH SURÞW PHDVXUH DJDLQVW ZKLFK WKH *URXSpV SHUIRUPDQFH LV PRUH FRPPRQO\ measured and was communicated to the Audit Committee.

 


96 CORPOR ATE GOVERNANCE Independent auditors’ report continued Other required reporting Under ISAs (UK and Ireland), we are required to report to you if, in our opinion: report. The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group Under ISAs (UK and Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to: Under the Listing Rules we are required to review the Directors’ statement that they have carried out a robust assessment of the principal risks facing the Group and the Directors’ statements in relation to the longer-term viability of the Group, set out on page 59. Our review was substantially less in scope than an audit and only consisted of making enquiries and considering the Directors’ process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review. Henderson Group plc Annual Report 2016 7KH 'LUHFWRUVp FRQÞUPDWLRQ RQ SDJH 59 RI WKH $QQXDO 5HSRUW LQ DFFRUGDQFH ZLWK SURYLVLRQ & 2 1 RI WKH &RGH WKDW they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. We have nothing material to add or to draw attention to. The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated. We have nothing material to add or to draw attention to. 7KH 'LUHFWRUVp H[SODQDWLRQ RQ SDJH 45 RI WKH $QQXDO 5HSRUW LQ DFFRUGDQFH ZLWK SURYLVLRQ & 2 2 RI WKH &RGH DV WR KRZ they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related GLVFORVXUHV GUDZLQJ DWWHQWLRQ WR DQ\ QHFHVVDU\ TXDOLÞFDWLRQV RU DVVXPSWLRQV We have nothing material to add or to draw attention to. ,QIRUPDWLRQ LQ WKH $QQXDO 5HSRUW LV: • PDWHULDOO\ LQFRQVLVWHQW ZLWK WKH LQIRUPDWLRQ LQ WKH DXGLWHG ÞQDQFLDO VWDWHPHQWV; RU • apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group and Company acquired in the course of performing our audit; or otherwise misleading. We have no exceptions to The statement given by the Directors on page 91, in accordance with provision C.1.1 of the UK Corporate Governance Code (the ‘Code’), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group’s and Company’s position and performance, business model and strategy is materially inconsistent with our knowledge of the Group and Company acquired in the course of performing our audit. We have no exceptions to report. The section of the Annual Report on pages 62 to 65, as required by provision C.3.8 of the Code, describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee. We have no exceptions to report.

 


97 Propriety of accounting records and information and explanations received Under the Companies (Jersey) Law 1991, we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • proper accounting records have not been kept by the Company; or • proper returns adequate for our audit have not been received from branches not visited by us; or • WKH &RPSDQ\ ÞQDQFLDO VWDWHPHQWV DUH QRW in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Corporate Governance statement Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the 10 further provisions of the UK Corporate Governance Code. We have nothing to report having performed our review. Other voluntary reporting Opinion on other matters ,Q RXU RSLQLRQ WKH LQIRUPDWLRQ JLYHQ LQ WKH 'LUHFWRUVp UHSRUW IRU WKH ÞQDQFLDO \HDU IRU ZKLFK WKH ÞQDQFLDO VWDWHPHQWV DUH SUHSDUHG LV FRQVLVWHQW ZLWK WKH ÞQDQFLDO VWDWHPHQWV 5HVSRQVLELOLWLHV IRU WKH ÞQDQFLDO statements and the audit Our responsibilities and those of the Directors As explained more fully in the Directors’ Responsibilities Statement set out on page 91, the Directors are responsible for WKH SUHSDUDWLRQ RI WKH ÞQDQFLDO VWDWHPHQWV DQG IRU EHLQJ VDWLVÞHG WKDW WKH\ JLYH D WUXH and fair view. Our responsibility is to audit and express DQ RSLQLRQ RQ WKH ÞQDQFLDO VWDWHPHQWV LQ DFFRUGDQFH ZLWK DSSOLFDEOH ODZ DQG ,6$V (8. & ,UHODQG) 7KRVH VWDQGDUGV UHTXLUH XV 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 Company’s members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 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. :KDW DQ DXGLW RI ÞQDQFLDO VWDWHPHQWV involves An audit involves obtaining evidence about WKH DPRXQWV DQG GLVFORVXUHV LQ WKH ÞQDQFLDO VWDWHPHQWV VXIÞFLHQW WR JLYH UHDVRQDEOH DVVXUDQFH WKDW WKH ÞQDQFLDO VWDWHPHQWV DUH free from material misstatement, whether caused by fraud or error. This includes an assessment of: • whether the accounting policies are appropriate to the Group’s and the Company’s circumstances and have been consistently applied and adequately disclosed; • WKH UHDVRQDEOHQHVV RI VLJQLÞFDQW accounting estimates made by the Directors; and • WKH RYHUDOO SUHVHQWDWLRQ RI WKH ÞQDQFLDO statements. We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures LQ WKH ÞQDQFLDO VWDWHPHQWV We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. ,Q DGGLWLRQ ZH UHDG DOO WKH ÞQDQFLDO DQG QRQ-ÞQDQFLDO LQIRUPDWLRQ LQ WKH $QQXDO Report to identify material inconsistencies ZLWK WKH DXGLWHG ÞQDQFLDO VWDWHPHQWV DQG 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. ,I ZH EHFRPH DZDUH RI DQ\ DSSDUHQW PDWHULDO misstatements or inconsistencies we consider the implications for our report. With respect to the Directors’ Report, we consider whether the report includes the disclosures required by applicable legal requirements. Parwinder Purewal for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Registered Auditors London 8 February 2017 Notes 1. The maintenance and integrity of the Henderson Group plc website is the responsibility of the Directors; 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 RFFXUUHG WR WKH ÞQDQFLDO VWDWHPHQWV VLQFH WKH\ were initially presented on the website. 2. Legislation in the United Kingdom and Jersey governing the preparation and dissemination of ÞQDQFLDO VWDWHPHQWV PD\ GLIIHU IURP OHJLVODWLRQ in other jurisdictions. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


98 FINANCIAL STATEMENTS Contents 99 Consolidated Income Statement 100 Consolidated Statement of Comprehensive Income 101 Consolidated Statement of Financial Position 102 Consolidated Statement of Changes in Equity 103 Consolidated Statement of Cash Flows 104 Company Income Statement 104 Company Statement of Comprehensive Income 104 Company Statement of Financial Position 105 Company Statement of Changes in Equity 105 Company Statement of Cash Flows 106 Notes to the Financial Statements FINANCIAL STATEMENTS

 


 

99 Consolidated Income Statement For the year ended 31 December 2016 2016 2015 Acquisition related and Underlying non-recurring SURÞW items (note 7) Acquisition related and non-recurring items (note 7) £m Underlying SURÞW £m Total £m Total £m £m £m Notes Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Income Gross fee and deferred income3 Commissions and deferred acquisition costs3 738.0– 738.0 (154.3)– (154.3) 756.0– 756.0 (154 2) – (154 2) Net fee income ,QFRPH/(ORVV) IURP DVVRFLDWHV and joint ventures14 2 Finance income3 583.7– 583.7 0.5(2.7)(2.2) 10.5– 10.5 601.8– 601.8 (0.2)(0.5)(0.7) 17.312 4 29.7 Net income/(expense) 594.7(2.7)592.0 618.911.9630.8 Expenses Operating expenses4 1 Amortisation and depreciation (372.7) (17.5)(390.2) (6.0)(51.3)(57.3) (381.6)(5.9)(387.5) (5.2)(56.2) (61 4) Total operating expenses Finance expenses6 (378.7)(68.8)(447.5) (3.3)(2.0) (5.3) (386.8)(62.1)(448 9) (12.1)(1.9)(14 0) Total expenses (382.0)(70.8)(452.8) (398.9)(64 0) (462 9) 3URÞW/(ORVV) EHIRUH WD[ Tax (charge)/credit8 212.7(73.5)139.2 (43.0) 13.4 (29.6) 220.0(52.1)167.9 (22.9) 16.2 (6.7) 3URÞW/(ORVV) DIWHU WD[ DWWULEXWDEOH WR owners of the parent 169.7(60.1)109.6 197.1(35.9)161.2 Basic and diluted earnings per share Basic9.2 Diluted9.2 10.0p 9.8p 14 7S 14 1S

 


100 FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income For the year ended 31 December 2016 2016 £m 2015 £m Note Henderson Group plc Annual Report 2016 3URÞW DIWHU WD[ Other comprehensive income/(expense) ,WHPV WKDW PD\ EH UHFODVVLÞHG WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW Exchange differences on translation of foreign operations ([FKDQJH GLIIHUHQFHV WUDQVIHUUHG WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW RQ GLVSRVDO RI IRUHLJQ operations Tax effect of exchange differences $YDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV: Net (losses)/gains on revaluation 5HFODVVLÞFDWLRQ WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW RQ GLVSRVDO ,WHPV WKDW ZLOO QRW EH UHFODVVLÞHG WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW Actuarial gains/(losses): 2Q GHÞQHG EHQHÞW SHQVLRQ VFKHPHV (DIWHU WD[ GHGXFWHG DW VRXUFH)20.2 Tax effect of actuarial gains/(losses) 109.6 49.8 – 0.2 (10.0) (0.9) 8.9 0.2 161.2 8.8 0.5 – 14 8 (9.6) (2.9) (0.1) Other comprehensive income after tax 48.2 11.5 Total comprehensive income after tax 157.8 172.7 Attributable to: Owners of the parent Non-controlling interests 151.4 6.4 164 0 8.7 157.8 172.7

 


101 Consolidated Statement of Financial Position As at 31 December 2016 2016 £m 2015 £m Notes 7KH ÞQDQFLDO VWDWHPHQWV ZHUH DSSURYHG E\ WKH %RDUG RI 'LUHFWRUV DQG DXWKRULVHG IRU LVVXH RQ 8 )HEUXDU\ 2017 They were signed on its behalf by: Richard Gillingwater Chairman Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Non-current assets ,QWDQJLEOH DVVHWV13 ,QYHVWPHQWV DFFRXQWHG IRU XVLQJ WKH HTXLW\ PHWKRG Property and equipment15 5HWLUHPHQW EHQHÞW DVVHWV 20.2 Deferred tax assets22 Trade and other receivables 17 656.9 0.2 13.9 145.9 22.0 – 680.6 2.9 14 4 130.0 37.5 0.1 Current assets $YDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV16 )LQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV16 Current tax assets Trade and other receivables 17 Cash and cash equivalents18.1 838.9 41.9 216.1 0.7 274.6 244.0 865.5 64 6 145 7 0.9 232.7 381.6 777.3 825.5 Total assets 1,616.2 1,691.0 Non-current liabilities )LQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV Trade and other payables23 5HWLUHPHQW EHQHÞW REOLJDWLRQV20.2 Provisions21 Deferred tax liabilities22 37.6 5.0 9.6 9.2 23.6 22.6 10.7 8.1 10.0 31.6 Current liabilities Debt instrument in issue19 )LQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV Trade and other payables23 Provisions21 Current tax liabilities 85.0 – 111.7 319.4 2.8 15.4 83.0 149 9 96.7 291.3 1.9 20.5 449.3 560.3 Total liabilities 534.3 643 3 Net assets 1,081.9 1,0477 Capital and reserves Share capital24 2 Share premium Own shares held Translation reserve Revaluation reserve 3URÞW DQG ORVV UHVHUYH 141.5 747.9 (92.0) 42.7 3.9 220.9 141 5 7479 (106.9) 6.3 7.6 240 7 Equity attributable to owners of the parent Non-controlling interests 1,064.9 17.0 1,037.1 10.6 Total equity 1,081.9 1,0477

 


102 FINANCIAL STATEMENTS Consolidated Statement of Changes in Equity For the year ended 31 December 2016 Equity attributable to owners of the parent £m Own shares Translation Revaluation 3URÞW DQG loss reserve £m Non controlling interests £m Share capital £m Share premium £m Total equity £m held £m reserve £m reserve £m At 1 January 2015 3URÞW DIWHU WD[ Other comprehensive income/(expense) after tax 142 4 – 743 9 – (94 7) – (1.7) – 9.8 – 216 4 161.2 1,016.1 161.2 1.9 – 1,018.0 161.2 – – – 8.0 (2.2) (3.0) 2.8 8.7 11.5 Total comprehensive income/(expense) after tax Dividends paid to equity shareholders Purchase of own shares for employee share schemes 9HVWLQJ RI VKDUH VFKHPHV ,VVXH RI VKDUHV IRU VKDUH VFKHPHV Movement in equity-settled share scheme expenses Tax on equity-settled share schemes Purchase and cancellation of shares – – – – – – 8.0 – (2.2) – 158.2 (105 4) 164 0 (105 4) 8.7 – 172.7 (105 4) – – 0.2 – – 4 0 (63.0) 55.0 (4 2) – – – – – – – (55.0) – (63.0) – – – – – (63.0) – – – – (1.1) – – – – – – – – – – – – 39.2 11.2 (23.9) 39.2 11.2 (25.0) – – – 39.2 11.2 (25.0) At 31 December 2015 3URÞW DIWHU WD[ Other comprehensive income/(expense) after tax 141 5 – 7479 – (106.9) – 6.3 – 7.6 – 240 7 109.6 1,037.1 109.6 10.6 – 1,0477 109.6 – – – 36.4 (3.7) 9.1 41.8 6.4 48.2 Total comprehensive income/(expense) after tax Dividends paid to equity shareholders Purchase of own shares for employee share schemes 9HVWLQJ RI VKDUH VFKHPHV Movement in equity-settled share scheme expenses Tax on equity-settled share schemes – – – – – – 36.4 – (3.7) – 118.7 (116.2) 151.4 (116.2) 6.4 – 157.8 (116.2) – – – – (40.1) 55.0 – – – – – (55.0) (40.1) – – – (40.1) – – – – – – – – – – – 36.4 (3.7) 36.4 (3.7) – – 36.4 (3.7) Henderson Group plc Annual Report 2016 At 31 December 2016 141.5747.9(92.0)42.73.9220.91,064.917.01,081.9

 


103 Consolidated Statement of Cash Flows For the year ended 31 December 2016 2016 £m 2015 £m Notes Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 1HW FDVK ßRZV JHQHUDWHG IURP RSHUDWLQJ DFWLYLWLHV18.2 &DVK ßRZV IURP LQYHVWLQJ DFWLYLWLHV Acquisition of subsidiaries, net of cash acquired Proceeds from disposal of: – interests in associates – DYDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV t VHHG FDSLWDO – ÞQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV t VHHG FDSLWDO Dividends from associates and distributions from joint ventures and funds Purchases of: – QHW ÞQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV t FRQVROLGDWHG IXQGV – property and equipment15 – computer software intangible assets13 – investment management contracts – interests in associates and joint ventures ,QWHUHVW LQFRPH UHFHLYHG E\ FRQVROLGDWHG IXQGV Cash movement on disposal of consolidated funds Net cash paid on realised hedges 178.7 – – 23.3 3.7 0.5 (26.7) (2.6) (7.9) – – 4.8 (14.2) (35.3) 269.8 (37.8) 84 3 26.6 3.5 1.6 (26 4) (1.9) (6.0) (2.6) (4 0) – – – 1HW FDVK ßRZV (XVHG LQ)/JHQHUDWHG IURP LQYHVWLQJ DFWLYLWLHV (54.4) 37.3 &DVK ßRZV IURP ÞQDQFLQJ DFWLYLWLHV Proceeds from share schemes Purchase of own shares for employee share schemes Dividends paid to equity shareholders11 ,QWHUHVW SDLG RQ GHEW LQVWUXPHQWV LQ LVVXH Repayment of debt instruments in issue Non-controlling interests’ investments in consolidated funds Purchase of shares 8.1 (40.1) (116.2) (5.4) (150.0) 22.7 – 10.3 (63.0) (105 4) (10.9) – 21.5 (25.0) 1HW FDVK ßRZV XVHG LQ ÞQDQFLQJ DFWLYLWLHV (280.9) (172.5) Effects of exchange rate changes 19.0 4 2 Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year (137.6) 381.6 138.8 242 8 Cash and cash equivalents at end of year 244.0 381.6

 


104 FINANCIAL STATEMENTS Company Income Statement For the year ended 31 December 2016 2016 £m 2015 £m Note Company Statement of Comprehensive Income For the year ended 31 December 2016 2016 £m 2015 £m Company Statement of Financial Position As at 31 December 2016 2016 £m 2015 £m Notes 7KH ÞQDQFLDO VWDWHPHQWV ZHUH DSSURYHG E\ WKH %RDUG RI 'LUHFWRUV DQG DXWKRULVHG IRU LVVXH RQ 8 )HEUXDU\ 2017 They were signed on its behalf by: Richard Gillingwater Chairman Henderson Group plc Annual Report 2016 Non-current assets ,QYHVWPHQW LQ VXEVLGLDULHV14 1 1,032.0 1,029.8 Current assets Trade and other receivables 17 )LQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV16 Cash and cash equivalents18.1 1,032.0 15.8 53.8 10.6 1,029.8 8.8 41 7 7.2 80.2 57.7 Total assets 1,112.2 1,087.5 Liabilities 1RQ-FXUUHQW ÞQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV &XUUHQW ÞQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV Current trade and other payables23 17.0 25.0 40.4 9 4 18.8 21.2 Total liabilities 82.4 49 4 Net assets 1,029.8 1,038.1 Capital and reserves Share capital24 2 Share premium Own shares held 3URÞW DQG ORVV UHVHUYH 141.5 747.9 (92.0) 232.4 141 5 7479 (106.9) 255.6 Total equity 1,029.8 1,038.1 3URÞW DIWHU WD[ 111.6 272.2 Total comprehensive income after tax 111.6 272.2 Dividends received Administration expenses 118.8 (7.2) 277.0 (4 8) 3URÞW EHIRUH WD[ Tax8 111.6 – 272.2 – 3URÞW DIWHU WD[ 111.6 272.2

 


105 Company Statement of Changes in Equity For the year ended 31 December 2016 Share capital £m Share premium £m Own shares held £m 3URÞW DQG loss reserve £m Total equity £m At 1 January 2015 Total comprehensive income after tax Dividends paid to equity shareholders Purchase of own shares for employee share schemes 9HVWLQJ RI VKDUH VFKHPHV ,VVXH RI VKDUHV IRU VKDUH VFKHPHV Movement in equity-settled share scheme expenses Purchase and cancellation of shares 142 4 – – – – 0.2 – (1.1) 743 9 – – – – 4 0 – – (94 7) – – (63.0) 55.0 (4 2) – – 128.5 272.2 (105 4) – (55.0) – 39.2 (23.9) 920.1 272.2 (105 4) (63.0) – – 39.2 (25.0) At 31 December 2015 Total comprehensive income after tax Dividends paid to equity shareholders Purchase of own shares for employee share schemes 9HVWLQJ RI VKDUH VFKHPHV Movement in equity-settled share scheme expenses 141 5 – – – – – 7479 – – – – – (106.9) – – (40.1) 55.0 – 255.6 111.6 (116.2) – (55.0) 36.4 1,038.1 111.6 (116.2) (40.1) – 36.4 Company Statement of Cash Flows For the year ended 31 December 2016 2016 £m 2015 £m Notes Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION &DVK ßRZV JHQHUDWHG IURP RSHUDWLQJ DFWLYLWLHV 3URÞW EHIRUH WD[ Changes in operating assets and liabilities18.3 111.6 40.0 272.2 (89.2) 1HW FDVK ßRZV JHQHUDWHG IURP RSHUDWLQJ DFWLYLWLHV 151.6 183.0 &DVK ßRZV IURP ÞQDQFLQJ DFWLYLWLHV Proceeds from share schemes Purchase of own shares for employee share schemes Dividends paid to equity shareholders Purchase of shares 8.1 (40.1) (116.2) – 10.3 (63.0) (105 4) (25.0) 1HW FDVK ßRZV XVHG LQ ÞQDQFLQJ DFWLYLWLHV (148.2) (183.1) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year 3.4 7.2 (0.1) 7.3 Cash and cash equivalents at end of year18.1 10.6 7.2 At 31 December 2016 141.5747.9(92.0)232.41,029.8

 


106 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) 1 $XWKRULVDWLRQ RI ÞQDQFLDO statements and statement of compliance with IFRS 7KH *URXS DQG &RPSDQ\ ÞQDQFLDO VWDWHPHQWV for the year ended 31 December 2016 were authorised for issue by the Board of Directors on 8 February 2017 and the respective VWDWHPHQWV RI ÞQDQFLDO SRVLWLRQ ZHUH VLJQHG on the Board’s behalf by the Chairman. Henderson Group plc is a public limited company incorporated in Jersey and tax resident and domiciled in the United Kingdom. The Company’s ordinary shares DUH WUDGHG RQ WKH /6( DQG &',V DUH WUDGHG on the ASX. 7KH *URXS DQG &RPSDQ\ ÞQDQFLDO VWDWHPHQWV KDYH EHHQ SUHSDUHG LQ DFFRUGDQFH ZLWK ,)56 DQG ,)56 ,QWHUSUHWDWLRQV &RPPLWWHH (,)56 ,&) LQWHUSUHWDWLRQV DV DGRSWHG E\ WKH European Union and the provisions of the Companies (Jersey) Law 1991. Presentation of the Consolidated Income Statement The Group maintains a columnar format for WKH SUHVHQWDWLRQ RI LWV &RQVROLGDWHG ,QFRPH Statement. The columnar format enables the Group to continue its practice of improving the understanding of its results by presenting SURÞW IRU WKH \HDU EHIRUH FHUWDLQ DFTXLVLWLRQ related and non-recurring items. This is the SURÞW PHDVXUH XVHG WR FDOFXODWH (36 RQ XQGHUO\LQJ SURÞW (UHIHU WR QRWH 9) DQG LV considered to be most appropriate to better UHßHFW WKH *URXSpV XQGHUO\LQJ WUDGLQJ SHUIRUPDQFH 3URÞW EHIRUH DFTXLVLWLRQ UHODWHG DQG QRQ-UHFXUULQJ LWHPV LV UHFRQFLOHG WR SURÞW before tax on the face of the Consolidated ,QFRPH 6WDWHPHQW The column ‘Acquisition related and non-recurring items’ comprises: • Acquisition related items: the amortisation of intangible assets, fair value changes and ÞQDQFH FKDUJHV RQ FRQWLQJHQW GHIHUUHG consideration on business combinations, long-term remuneration plans recognised as part of a business combination and void SURSHUW\ ÞQDQFH FKDUJHV; DQG • Non-recurring items: deemed to be one-off and material, when considering both size and nature. These items are disclosed separately to give a clearer presentation of the Group’s results and are analysed further in note 7. Income recognition Fee income includes management fees and performance fees, net of rebates. Management fees are recognised in the accounting period in which the associated investment management service is provided. Performance fees are recognised when the prescribed performance hurdles are achieved and it is probable that a fee will crystallise as a result. Commissions Commissions on management fees are accounted for on an accruals basis and are recognised in the accounting period in which the associated management fee is earned. Operating expenses Operating expenses are accrued and recognised as incurred. Finance income and expenses ,QWHUHVW LQFRPH LV UHFRJQLVHG DV LW DFFUXHV using the effective interest rate method. Other net investment income is recognised on the date that the right to receive payment has been established. The net interest credit RQ WKH *URXSpV UHWLUHPHQW EHQHÞW DVVHW KDV EHHQ UHFRJQLVHG LQ ÞQDQFH LQFRPH Finance expenses are recognised on an accruals basis. The results of consolidated entities acquired or disposed of during the year are included in WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW IURP WKH effective date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that the control ceases. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with an entity and has the ability to affect those returns through its power over the entity. The Group re-assesses whether or not it controls an entity if facts and circumstances indicate that there are changes to one or more of the elements of control. 7KH SURÞW RU ORVV DQG HDFK FRPSRQHQW RI other comprehensive income are attributed to the owners of the parent of the Group and to any non-controlling interests. All intra-group assets and liabilities, equity, income, expenses DQG FDVK ßRZV UHODWLQJ WR WUDQVDFWLRQV between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a consolidated entity, without a loss of control, is accounted for as an equity transaction. ,I WKH *URXS ORVHV FRQWURO RYHU D FRQVROLGDWHG entity, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised LQ WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW $Q\ investment retained is recognised at fair value. ,QWHUHVWV LQ SULYDWH HTXLW\ IXQGV DQG RSHQ-HQGHG SRROHG IXQGV, VXFK DV 2(,&V, Ńnit trusts and absolute return funds, are accounted for as subsidiaries, consolidated VWUXFWXUHG HQWLWLHV RU RWKHU ÞQDQFLDO investments depending on the economic interest of the Group assessed via fees earned, equity holdings and on the level of LQßXHQFH DQG FRQWURO WKDW WKH *URXS H[HUFLVHV through investment management and other contractual agreements. The Group’s investment in associates, where the Group KDV WKH DELOLW\ WR H[HUFLVH VLJQLÞFDQW LQßXHQFH as well as joint ventures where there is joint control, are accounted for using the equity method of accounting. Under the equity method of accounting, the Group presents its share of its economic interest in these LQYHVWPHQWV LQ WKH ÞQDQFLDO VWDWHPHQWV 2 Accounting policies 2.1 6LJQLÞFDQW DFFRXQWLQJ SROLFLHV Basis of preparation 7KH *URXS DQG &RPSDQ\ ÞQDQFLDO VWDWHPHQWV have been prepared on a going concern basis and on the historical cost basis, except for FHUWDLQ ÞQDQFLDO LQVWUXPHQWV WKDW KDYH EHHQ measured at fair value. 7KH *URXS DQG &RPSDQ\ ÞQDQFLDO VWDWHPHQWV are presented in GBP and all values are rounded to the nearest one hundred thousand pounds (£0.1m), except when otherwise indicated. See the glossary to the Annual Report IRU GHÞQLWLRQV RI FHUWDLQ DFFRXQWLQJ WHUPV XVHG LQ WKHVH ÞQDQFLDO VWDWHPHQWV Basis of consolidation 7KH FRQVROLGDWHG ÞQDQFLDO VWDWHPHQWV RI WKH *URXS FRPSULVH WKH ÞQDQFLDO VWDWHPHQWV RI Henderson Group plc and its interests in subsidiaries and consolidated structured entities (together consolidated entities), associates and joint ventures as at 31 December each year. 7KH ÞQDQFLDO VWDWHPHQWV RI DOO WKH *URXSpV VLJQLÞFDQW FRQVROLGDWHG HQWLWLHV DUH SUHSDUHG to the same year end date as that of the &RPSDQ\ 7KH ÞQDQFLDO VWDWHPHQWV RI DOO material consolidated entities are prepared XQGHU HLWKHU ,)56 RU ORFDO *$$3 :KHUH prepared under local GAAP, balances reported by consolidated entities are adjusted WR PHHW ,)56 UHTXLUHPHQWV IRU WKH SXUSRVH RI WKH FRQVROLGDWHG ÞQDQFLDO VWDWHPHQWV Henderson Group plc Annual Report 2016

 


107 3RVW-HPSOR\PHQW UHWLUHPHQW EHQHÞWV The Group provides employees with UHWLUHPHQW EHQHÞWV WKURXJK ERWK GHÞQHG EHQHÞW DQG GHÞQHG FRQWULEXWLRQ VFKHPHV The assets of these schemes are held separately, from the Group’s general assets, in trustee administered funds. 'HÞQHG EHQHÞW REOLJDWLRQV DQG WKH FRVW RI SURYLGLQJ EHQHÞWV DUH GHWHUPLQHG DQQXDOO\ E\ LQGHSHQGHQW TXDOLÞHG DFWXDULHV XVLQJ the projected unit credit method. The obligation is measured as the present YDOXH RI WKH HVWLPDWHG IXWXUH FDVK RXWßRZV using a discount rate based on AA rated corporate bond yields of appropriate duration. 7KH UHVXOWLQJ VXUSOXV RU GHÞFLW RI GHÞQHG EHQHÞW DVVHWV OHVV OLDELOLWLHV LV UHFRJQLVHG in the Consolidated Statement of Financial Position, net of any taxes that would be deducted at source. The Group’s expense UHODWLQJ WR WKH GHÞQHG EHQHÞW VFKHPHV LV recognised over the employees’ service lives, based upon the actuarial cost for the accounting period, having considered the QHW LQWHUHVW FUHGLW RU FRVW RQ WKH QHW GHÞQHG EHQHÞW DVVHW RU OLDELOLW\ 5HFRJQLVHG DFWXDULDO gains and losses are included in the Consolidated Statement of Comprehensive ,QFRPH LQ WKH DFFRXQWLQJ SHULRG LQ ZKLFK WKH\ occur, net of any taxes that would be deducted DW VRXUFH 1RUPDO FRQWULEXWLRQV WR WKH GHÞQHG contribution scheme are expensed in the &RQVROLGDWHG ,QFRPH 6WDWHPHQW DV DQG ZKHQ they become payable. Share-based payment transactions The Group issues share-based awards to HPSOR\HHV, DOO RI ZKLFK DUH FODVVLÞHG DV equity-settled share-based payments. Equity-settled share-based payments are measured at the fair value of the shares at the grant date. The awards are expensed, with a corresponding increase in reserves, on either a straight-line basis or a graded basis (depending on vesting conditions) over the vesting period, based on the Group’s estimate of shares that will eventually vest. Based on the Group’s estimate, the determination of fair value, using a Black-Scholes or Monte Carlo model at the date of grant is adjusted for the effects of market performance and behavioural considerations. Income taxes The Group provides for current tax expense according to the tax laws in each jurisdiction in which it operates, using tax rates that have been enacted or substantively enacted by the reporting date. Foreign currencies The functional currency of the Company is GBP. Transactions in foreign currencies are recorded at the appropriate exchange rate prevailing at the date of the transaction. Foreign currency monetary balances at the reporting date are converted at the prevailing exchange rate. Foreign currency non-monetary balances carried at fair value or cost are translated at the rates prevailing at the date when the fair value or cost is determined. Gains and losses arising on retranslation are WDNHQ WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW, H[FHSW IRU DYDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV where the unhedged changes in fair value are recognised in the Consolidated Statement of &RPSUHKHQVLYH ,QFRPH On consolidation, the assets and liabilities of the Group’s overseas operations whose functional currency is not GBP are translated at exchange rates prevailing at the reporting GDWH ,QFRPH DQG H[SHQVH LWHPV DUH recognised at daily exchange rates for the accounting period. Exchange differences arising, if any, are taken through the Consolidated Statement of Comprehensive ,QFRPH WR WKH WUDQVODWLRQ UHVHUYH :KHUH QHW investment hedge accounting is applied using forward foreign currency contracts, the fair value movement on these contracts is also UHFRJQLVHG ZLWKLQ WKH WUDQVODWLRQ UHVHUYH ,Q the period in which an operation is disposed of, translation differences previously recognised in the translation reserve are recognised LQ WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW Business combinations All business combinations are accounted for using the acquisition method. The cost of a business combination is the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed and equity instruments issued by the acquirer. The fair value of a business combination is calculated at the acquisition date by recognising the DFTXLUHHpV LGHQWLÞDEOH DVVHWV, OLDELOLWLHV and contingent liabilities that satisfy the recognition criteria, at their fair values at that date. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree. The cost of a business combination LQ H[FHVV RI IDLU YDOXH RI QHW LGHQWLÞDEOH DVVHWV or liabilities acquired, including intangible DVVHWV LGHQWLÞHG, LV UHFRJQLVHG DV JRRGZLOO Any costs incurred in relation to a business combination are expensed as incurred. Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and WKHLU FDUU\LQJ DPRXQWV IRU ÞQDQFLDO UHSRUWLQJ purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised only to the extent that it is SUREDEOH WKDW WD[DEOH SURÞWV ZLOO EH DYDLODEOH against which deductible temporary differences can be utilised. Deferred tax liabilities are not recognised on goodwill but DUH UHFRJQLVHG RQ VHSDUDWHO\ LGHQWLÞDEOH intangible assets, where appropriate. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that VXIÞFLHQW WD[DEOH SURÞWV ZLOO EH DYDLODEOH WR allow all or part of the asset to be recovered. Deferred tax liabilities are not recognised for taxable differences arising on investments in consolidated entities, branches, associates and joint ventures where the Group controls the timing of the reversal of the temporary differences and where the reversal of the temporary differences is not anticipated in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates and tax laws that have been enacted or substantively enacted by the reporting date. ,QFRPH WD[ UHODWLQJ WR LWHPV UHFRJQLVHG LQ WKH Consolidated Statement of Comprehensive ,QFRPH DQG &RQVROLGDWHG 6WDWHPHQW RI Changes in Equity is also recognised in the respective statement and not in the &RQVROLGDWHG ,QFRPH 6WDWHPHQW Sales taxes ,QFRPH DQG H[SHQVHV DUH UHFRJQLVHG QHW of sales taxes, except where the sales tax is irrecoverable, in which case the sales tax is recognised as part of the cost of acquisition of an asset or as an expense. Receivables and payables are stated with the amount of sales taxes included. The net amount of sales tax recoverable from, or payable to, the tax authority, is included within receivables or payables in the Consolidated Statement of Financial Position. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


108 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 2.1 6LJQLÞFDQW DFFRXQWLQJ SROLFLHV continued Contingent consideration, resulting from business combinations, is recognised at fair value at the acquisition date as part of the business combination, and discounted where the time value of money is material. The determination of the fair value is based RQ GLVFRXQWHG FDVK ßRZV, ZLWK WKH NH\ assumptions being the probability of meeting each performance target and the discount factor applied. When the contingent FRQVLGHUDWLRQ PHHWV WKH GHÞQLWLRQ RI D ÞQDQFLDO OLDELOLW\, LW LV VXEVHTXHQWO\ UHPHDVXUHG to fair value at each reporting date through WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW, DORQJ ZLWK ÞQDQFH FKDUJHV ZKHUH GLVFRXQWLQJ KDV been applied. Goodwill Goodwill arising on acquisitions is capitalised in the Consolidated Statement of Financial Position. Goodwill on acquisitions prior to 1}-DQXDU\ 2004 LV FDUULHG DW LWV YDOXH RQ 1}-DQXDU\ 2004 OHVV DQ\ VXEVHTXHQW impairments. Goodwill arising on investments in associates and joint ventures is included within the carrying value of the equity accounted investments. Where goodwill forms part of an entity or sub-group and the entity or sub-group or part thereof is disposed of, the goodwill associated with the entity or sub-group disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal. Impairment of goodwill Goodwill is reviewed for impairment annually or more frequently if changes in circumstances indicate that the carrying value may be impaired. For this purpose, management prepares a valuation for the Group’s cash generating unit based on its value in use. The value in use is based on forecasts approved by the Board, extrapolated for expected future growth rates and discounted at a risk-adjusted discount rate based on the Group’s pre-tax weighted average cost of capital. Where the value in use is less than the carrying amount, an impairment is recognised. Any impairment is recognised immediately WKURXJK WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW and cannot subsequently be reversed. Investment management contracts ,QYHVWPHQW PDQDJHPHQW FRQWUDFWV KDYH EHHQ LGHQWLÞHG DV D VHSDUDWHO\ LGHQWLÞDEOH intangible asset arising on the acquisition of subsidiaries. Such contracts are recognised at the present value of the expected future FDVK ßRZV RI WKH LQYHVWPHQW PDQDJHPHQW contracts at the date of acquisition. The intangible asset is then amortised on a straight-line basis over the expected life of the contracts, currently estimated at between three and eight years. Computer software The costs of purchasing and developing computer software are capitalised where LW LV SUREDEOH WKDW IXWXUH HFRQRPLF EHQHÞWV WKDW DUH DWWULEXWDEOH WR WKH DVVHWV ZLOO ßRZ to the Group and the cost of the assets can be measured reliably. Computer software is subsequently measured at cost less accumulated amortisation. Computer software is amortised on a straight-line basis over a period of three to seven years. Investments in subsidiaries ,QYHVWPHQWV E\ WKH &RPSDQ\ LQ VXEVLGLDU\ undertakings are held at cost less any impairment in value where circumstances indicate that the carrying value may not be recoverable. Equity accounted investments The Group’s investment in associates, where the Group has the ability to exercise VLJQLÞFDQW LQßXHQFH, DV ZHOO DV MRLQW YHQWXUHV, where there is joint control, are accounted for using the equity method of accounting. ,QYHVWPHQWV DUH UHFRJQLVHG LQLWLDOO\ DW FRVW where purchased for cash, or at the fair value of shares received where acquired as part of a wider transaction. The investments are subsequently carried at cost adjusted for the *URXSpV VKDUH RI SURÞWV RU ORVVHV DQG RWKHU changes in comprehensive income of the associate or joint venture, less any dividends or distributions received by the Group. The &RQVROLGDWHG ,QFRPH 6WDWHPHQW LQFOXGHV WKH *URXSpV VKDUH RI SURÞWV RU ORVVHV DIWHU WD[ for the year, or period of ownership, if shorter. Impairment of assets (excluding goodwill DQG ÞQDQFLDO DVVHWV) At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes an estimate of the recoverable amount, being the higher of an asset’s fair value less costs to sell, DQG LWV YDOXH LQ XVH ,Q DVVHVVLQJ YDOXH LQ XVH, WKH HVWLPDWHG IXWXUH FDVK ßRZV DUH GLVFRXQWHG to their net present value using a risk-adjusted discount rate based on the Group’s post-tax weighted average cost of capital. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered to be impaired and is written down to its recoverable amount. An impairment loss is recognised in the Consolidated ,QFRPH 6WDWHPHQW Financial instruments Financial assets and liabilities are recognised at fair value in the Consolidated Statement of Financial Position when the Group becomes party to the contractual provisions of an instrument. The fair value recognised is adjusted for transaction costs, except for ÞQDQFLDO DVVHWV FODVVLÞHG DW IDLU YDOXH WKURXJK SURÞW RU ORVV, ZKHUH WUDQVDFWLRQ FRVWV DUH immediately recognised in the Consolidated ,QFRPH 6WDWHPHQW )LQDQFLDO DVVHWV DUH derecognised when the rights to receive FDVK ßRZV IURP WKH LQYHVWPHQWV KDYH H[SLUHG or where they have been transferred and the Group has also transferred substantially all the risks and rewards of ownership. Financial liabilities cease to be recognised when the obligation under the liability has been discharged or cancelled or has expired. Financial assets 3XUFKDVHV DQG VDOHV RI ÞQDQFLDO DVVHWV are recognised at the trade date, being the date when the purchase or sale becomes contractually due for settlement. Delivery and settlement terms are usually determined by established practices in the market concerned. Debt securities, equity securities and holdings in authorised collective investment schemes are designated as either fair value through SURÞW RU ORVV RU DYDLODEOH-IRU-VDOH DQG DUH measured at subsequent reporting dates at fair value. The Group determines the FODVVLÞFDWLRQ RI LWV ÞQDQFLDO DVVHWV RQ initial recognition. Financial assets at fair value through SURÞW RU ORVV )LQDQFLDO DVVHWV FODVVLÞHG DV IDLU YDOXH WKURXJK SURÞW RU ORVV FRPSULVH WKH *URXSpV PDQDJHU ER[ SRVLWLRQV LQ 2(,&V DQG XQLW trusts, investments in the Group’s fund SURGXFWV KHOG E\ HPSOR\HH EHQHÞW WUXVWV DQG investments designated as fair value through SURÞW RU ORVV UHODWLQJ WR WKH LQLWLDO VHHGLQJ RI funds. Where securities are designated as fair YDOXH WKURXJK SURÞW RU ORVV, JDLQV DQG ORVVHV arising from changes in fair value are included LQ WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW :KHUH investments in the Group’s fund products are held against outstanding deferred compensation liabilities, any movement in the fair value of these assets will be offset by a corresponding movement in the deferred compensation liability in the Consolidated ,QFRPH 6WDWHPHQW Henderson Group plc Annual Report 2016

 


 

109 $YDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV )RU DYDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV, gains and losses arising from changes in fair value which are not part of a designated hedge relationship are recognised in the Consolidated Statement of Comprehensive ,QFRPH. :KHQ DQ DVVHW LV GLVSRVHG RI, WKH cumulative changes in fair value, previously recognised in the Consolidated Statement RI &RPSUHKHQVLYH ,QFRPH, DUH WDNHQ WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW LQ WKH current accounting period. 8QUHDOLVHG JDLQV DQG ORVVHV RQ ÞQDQFLDO assets represent the difference between the IDLU YDOXH RI ÞQDQFLDO DVVHWV DW WKH UHSRUWLQJ date and cost or, if these have been previously revalued, the fair value at the last reporting GDWH. 5HDOLVHG JDLQV DQG ORVVHV RQ ÞQDQFLDO assets are calculated as the difference between the net sale proceeds and cost or amortised cost. Where a fall in the value of an investment is SURORQJHG RU VLJQLÞFDQW, LW LV FRQVLGHUHG DQ LQGLFDWLRQ RI LPSDLUPHQW. ,Q VXFK DQ HYHQW, WKH investment is written down to fair value and the amounts previously recognised in the Consolidated Statement of Comprehensive ,QFRPH LQ UHVSHFW RI FXPXODWLYH FKDQJHV LQ fair value, are taken to the Consolidated ,QFRPH 6WDWHPHQW DV DQ LPSDLUPHQW FKDUJH. Trade and other receivables and cash Trade receivables, which generally have 30 day payment terms, are initially recognised at fair value, normally equivalent to the invoice amount. When the time value of money is material, the fair value is discounted. Provision IRU VSHFLÞF GRXEWIXO GHEWV LV PDGH ZKHQ there is evidence that the Group may not be able to recover balances in full. Balances are written off when the receivable amount is deemed irrecoverable. Cash amounts represent cash in hand and on-demand deposits. Cash equivalents are short-term highly liquid government securities or investments in money market instruments with a maturity date of three months or less. Financial liabilities Financial liabilities, excluding deferred consideration, provisions, derivatives, fund deferral liabilities and non-controlling interests in consolidated funds, are stated at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement. Provisions Provisions which are liabilities of uncertain timing or amount, are recognised when: the Group has a present obligation, legal or constructive, as a result of a past event, LW LV SUREDEOH WKDW DQ RXWßRZ RI UHVRXUFHV HPERG\LQJ HFRQRPLF EHQHÞWV ZLOO EH UHTXLUHG to settle the obligation and a reliable estimate FDQ EH PDGH RI WKH DPRXQW. ,Q WKH HYHQW WKDW the time value of money is material, provisions are determined by discounting the expected IXWXUH FDVK ßRZV DW D GLVFRXQW UDWH WKDW UHßHFWV D FXUUHQW PDUNHW DVVHVVPHQW RI WKH time value of money and, where appropriate, WKH ULVNV VSHFLÞF WR WKH OLDELOLW\. :KHQ discounting, the increase in the provision due to the passage of time is recognised DV D ÞQDQFH FKDUJH. Non-controlling interests in consolidated funds For consolidated funds where a non-controlling interest is present, the non-controlling interest is presented as a liability where there is an obligation on the fund to repurchase units at the investor’s request and LV UHFRJQLVHG LQ ÞQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV. 'HULYDWLYH ÞQDQFLDO LQVWUXPHQWV and hedging The Group may, from time to time, use GHULYDWLYH ÞQDQFLDO LQVWUXPHQWV WR KHGJH against price, interest rate, foreign currency DQG FUHGLW ULVN. 'HULYDWLYH ÞQDQFLDO LQVWUXPHQWV DUH FODVVLÞHG DV ÞQDQFLDO DVVHWV ZKHQ WKH IDLU YDOXH LV SRVLWLYH RU DV ÞQDQFLDO OLDELOLWLHV ZKHQ the fair value is negative. At the inception of a hedge, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. Such hedges are expected to be effective in achieving offsetting changes in fair value and are assessed on an ongoing basis to determine that they have been effective throughout the reporting periods for which they were designated and are expected to remain effective over the remaining hedge period. Forward foreign currency contracts that are used to hedge the currency nominal value RI FHUWDLQ QRQ-*%3 GHQRPLQDWHG ÞQDQFLDO DVVHWV DUH FODVVLÞHG DV IDLU YDOXH KHGJHV. The change in the fair value of a hedging instrument is recognised in the Consolidated ,QFRPH 6WDWHPHQW. 7KH FKDQJH LQ WKH IDLU value of the hedged item, attributable to the risk being hedged, is also recognised in the &RQVROLGDWHG ,QFRPH 6WDWHPHQW, RIIVHWWLQJ the fair value changes arising on the designated hedge instrument. Fair value estimation Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 7KH IDLU YDOXH RI ÞQDQFLDO LQVWUXPHQWV WUDGHG in active markets (such as publicly traded securities and derivatives) is based on quoted market prices at the reporting date. The TXRWHG PDUNHW SULFH XVHG IRU ÞQDQFLDO instruments is the last traded market price for ERWK ÞQDQFLDO DVVHWV DQG ÞQDQFLDO OLDELOLWLHV where the last traded price falls within the bid-DVN VSUHDG. ,Q FLUFXPVWDQFHV ZKHUH WKH ODVW traded price is not within the bid-ask spread, management will determine the point within the bid-ask spread that is most representative of fair value current bid price. The fair value of ÞQDQFLDO LQVWUXPHQWV WKDW DUH QRW WUDGHG LQ DQ active market is determined using valuation techniques commonly used by market participants, including the use of comparable recent arm’s length transactions, discounted FDVK ßRZ DQDO\VLV DQG RSWLRQ SULFLQJ PRGHOV. Equity shares The Company’s ordinary equity shares of 12.5}SHQFH HDFK DUH FODVVLÞHG DV HTXLW\ instruments. Equity shares issued by the Company are recorded at the fair value of the proceeds received or the market price on the day of issue. Direct issue costs, net of tax, are deducted from equity through share premium. When share capital is repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity. Purchase of own shares Own shares held Own shares held are equity shares of the Company acquired by or issued to employee EHQHÞW WUXVWV. 2ZQ VKDUHV KHOG DUH UHFRUGHG at cost and are deducted from equity. No gain or loss is recognised in the Consolidated ,QFRPH 6WDWHPHQW RQ WKH SXUFKDVH, LVVXH, sale or cancellation of the Company’s own equity shares. Share buyback programmes Shares purchased as part of a share buyback programme are immediately cancelled. The nominal value of each share purchased and cancelled is debited against share capital and the remaining balance, being the difference between the price paid per share and the QRPLQDO YDOXH, LV GHELWHG DJDLQVW WKH SURÞW and loss reserve. Dividend recognition Dividend distributions to the Company’s shareholders are recognised in the accounting period in which the dividends DUH SDLG DQG, LQ WKH FDVH RI ÞQDO GLYLGHQGV, when these are approved by the Company’s shareholders at the AGM. Dividend distributions are recognised in equity. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


110 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 2.2 6LJQLÞFDQW DFFRXQWLQJ judgements, estimates and assumptions ,Q WKH SURFHVV RI DSSO\LQJ WKH *URXSpV accounting policies, management has PDGH VLJQLÞFDQW MXGJHPHQWV LQYROYLQJ estimations and assumptions which are summarised below: Acquisition accounting Acquisitions may require certain judgements and estimates to be made around the future performance of the business when accounting for any contingent deferred FRQVLGHUDWLRQ SD\DEOH LQ WKH IXWXUH. ,Q DUULYLQJ at the recognised liability, management apply estimates, which may include market growth rates, expectations about the growth potential of the business post acquisition and QHW ßRZ GDWD XVLQJ FOLHQW-VSHFLÞF LQIRUPDWLRQ and other assumptions supported by management’s industry knowledge. Impairment of intangible assets Goodwill and investment management contracts are reviewed for impairment annually or more frequently if there are indicators that the carrying value may be impaired. The judgement exercised by management in arriving at these valuations includes the VHOHFWLRQ RI PDUNHW JURZWK UDWHV, IXQG ßRZ assumptions, expected margins and costs. Further details on these assumptions are given in note 13. Share-based payment transactions The Group measures the cost of equity-settled share schemes at fair value at the date of grant and expenses them over the vesting period based on the Group’s estimate of shares that will eventually vest. Consolidation of funds From time to time, the Group invests seed capital on the launch of products, such as 2(,&V, 6,&$9V, KHGJH IXQGV DQG SULYDWH equity funds and other investment vehicles. The seed capital investments vary in duration depending on the nature of the investment. The Group reviews the size and nature of these investments to consider its level of LQßXHQFH RU FRQWURO RYHU WKH XQGHUO\LQJ IXQGV to warrant accounting for them using the equity method, consolidating them into the *URXSpV ÞQDQFLDO VWDWHPHQWV RU FODVVLI\LQJ them as investments carried at fair value. 2.3 Changes in accounting policies The accounting policies adopted in this Annual Report are consistent with those RI WKH SUHYLRXV ÞQDQFLDO \HDU. 2.4 Future changes in accounting policies A number of new standards and amendments to standards and interpretations are effective for periods beginning on or after 1 January 2017. The following new standards are not DSSOLFDEOH WR WKHVH ÞQDQFLDO VWDWHPHQWV EXW are expected to have an impact when they become effective. The Group plans to apply these standards in the reporting period in which they become effective. ,)56 9 o)LQDQFLDO ,QVWUXPHQWVp LQWURGXFHV QHZ UHTXLUHPHQWV IRU FODVVLÞFDWLRQ DQG measurement, impairment and hedge accounting. This standard is currently expected to become effective in 2018. ,)56 15 o5HYHQXH IURP &RQWUDFWV ZLWK Customers’ requires revenue to be recognised DW DQ DPRXQW WKDW UHßHFWV WKH FRQVLGHUDWLRQ to which an entity expects to be entitled in exchange for transferring services to a customer. This standard is currently expected to become effective in 2018. ,)56 16 o/HDVHVp UHTXLUHV D OHVVHH WR recognise lease assets and liabilities, currently accounted for as operating leases, on the balance sheet and recognise amortisation of lease assets and interest on lease liabilities over the lease term. This standard is currently expected to become effective in 2019. ,)56 9, ,)56 15 DQG ,)56 16 DUH VXEMHFW to endorsement from the European Union. The Group is assessing the impact of the above standards on the Group’s future ÞQDQFLDO VWDWHPHQWV. Where the Group does not control the fund it holds seed capital investments in, the *URXS LV DOVR QRW GHHPHG WR KROG VLJQLÞFDQW LQßXHQFH RYHU WKHVH IXQGV. $V WKH VHHG capital investments are intended to help establish a fund track record and provide VXIÞFLHQW FDSLWDO XQWLO D IXQG KDV VXIÞFLHQW external client capital, it is more appropriate for the Group’s interest to be shown as either DQ DYDLODEOH-IRU-VDOH ÞQDQFLDO DVVHW RU D ÞQDQFLDO DVVHW FDUULHG DW IDLU YDOXH WKURXJK SURÞW RU ORVV. The Group has judged that its pooled investment funds are structured entities unless substantive removal or liquidation rights exist. Further details are provided LQ QRWH 14. Pension and other post-employment EHQHÞWV The costs of, and period end obligations XQGHU, GHÞQHG EHQHÞW SHQVLRQ VFKHPHV are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these schemes, such estimates DUH VXEMHFW WR VLJQLÞFDQW XQFHUWDLQW\. Further details are given in note 20. Provisions %\ WKHLU QDWXUH, SURYLVLRQV RIWHQ UHßHFW VLJQLÞFDQW OHYHOV RI MXGJHPHQW RU HVWLPDWHV by management. The nature and amount of the provisions included in the Consolidated Statement of Financial Position are detailed in note 21 and contingencies not provided for are disclosed in note 30. Deferred tax assets Deferred tax assets are recognised for unused tax losses to the extent that it is SUREDEOH WKDW IXWXUH WD[DEOH SURÞWV ZLOO EH available against which the losses can be XWLOLVHG. 6LJQLÞFDQW MXGJHPHQW LV UHTXLUHG E\ management in determining the amount of deferred tax assets that can be recognised, based upon the likely timing and level of IXWXUH WD[DEOH SURÞWV DQG WKH OLNHO\ WLPLQJ of deduction of the relevant expenses. Henderson Group plc Annual Report 2016

 


111 3 Income Group 2016 £m 2015 £m Notes 4 Expenses 4.1 Operating expenses Group 2016 £m 2015 £m Note Other expenses include marketing, travel and subsistence, legal and professional costs and irrecoverable indirect taxes. 4.2 Auditors’ remuneration Group and Company This note discloses the total remuneration payable to the Group’s auditors. 2016 £m 2015 £m Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION )HHV SD\DEOH WR 3Z& IRU WKH DXGLW RI WKH *URXSpV FRQVROLGDWHG ÞQDQFLDO VWDWHPHQWV Fees payable to PwC and their associates for other services: – statutory audit of the Group’s subsidiaries – audit related assurance services – other assurance services – VHUYLFHV UHODWLQJ WR FRUSRUDWH ÞQDQFH WUDQVDFWLRQV – other services 0.3 0.5 0.4 0.4 1.4 0.1 0.4 0.6 0.2 0.3 – – Total fees 3.1 1.5 (PSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV5.2 ,QYHVWPHQW DGPLQLVWUDWLRQ ,QIRUPDWLRQ WHFKQRORJ\ Operating leases 2IÞFH H[SHQVHV Foreign exchange (gains)/losses Other expenses 265.1 34.1 24.3 9.5 8.4 (0.7) 49.5 273.0 31.6 19.8 7.7 9.3 3.2 42.9 Operating expenses 390.2 387.5 Gross fee and deferred income Gross fee income Amortisation of deferred income 737.6 0.4 754.6 1.4 Commissions and deferred acquisition costs Commissions and fees payable Amortisation of deferred acquisition and commission costs 738.0 (151.1) (3.2) 756.0 (150.1) (4.1) (154.3) (154.2) Net fee income Loss from associates and joint ventures 14.2 Finance income ,QWHUHVW RQ FDVK DQG FDVK HTXLYDOHQWV Gain on sale of associate7 *DLQ RQ VDOH RI DYDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV *DLQ/(ORVV) RQ ÞQDQFLDO LQVWUXPHQWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV Other net investment income 1HW LQWHUHVW FUHGLW RQ GHÞQHG EHQHÞW SHQVLRQ VFKHPHV20.2 583.7 (2.2) 0.9 – 0.9 2.8 0.6 5.3 601.8 (0.7) 1.0 12.3 11.0 (1.2) 1.8 4.8 10.5 29.7 Net income 592.0 630.8

 


112 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 4.2 Auditors’ remuneration continued 7KH DERYH DQDO\VLV UHßHFWV WKH DPRXQWV ELOOHG E\ 3Z& RU DFFUXHG E\ WKH *URXS LQ 2016. ,QFOXGHG LQ WKH IHHV SD\DEOH WR WKH *URXSpV DXGLWRUV IRU WKH DXGLW RI WKH *URXSpV 2016 FRQVROLGDWHG ÞQDQFLDO VWDWHPHQWV DUH IHHV RI €30,293 IRU WKH DXGLW RI WKH &RPSDQ\pV 2016 ÞQDQFLDO VWDWHPHQWV (2015 €29,411). Audit related assurance services include the half year review of the Group’s interim results, the auditors’ regulatory engagements covering client assets and a review of the regulated European Economic Area consolidated group. Other assurance services primarily relate to the work RQ WKH *URXSpV $$) FRQWUROV UHSRUW. ,Q DGGLWLRQ, LQ 2016 WKH FDWHJRU\ oVHUYLFHV UHODWLQJ WR FRUSRUDWH ÞQDQFH WUDQVDFWLRQVp FRQWDLQV €1.4P RI costs relating to the work carried out as reporting accountants for the proposed listing on the New York Stock Exchange which has to be carried out by the Group’s auditors and other work related to the proposed merger with Janus Capital Group . The Group has strict policies in place that restrict the use of the Group’s auditors with respect to non-audit services. 5 (PSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV 5.1 Number of employees Group The number of full-time employees was as follows: Average1 As at 31 December1 2016 no. 2016 no. 2015 no. 2015 no. Note 1. Excluding those working on capitalised projects. Company 7KH &RPSDQ\ KDV QR IXOO-WLPH HPSOR\HHV. 1RQ-H[HFXWLYH GLUHFWRUV RI WKH &RPSDQ\ DUH QRW FODVVLÞHG DV IXOO-WLPH HPSOR\HHV. 5.2 $QDO\VLV RI HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV H[SHQVH (PSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV H[SHQVH FRPSULVHV WKH IROORZLQJ Group Company 2016 £m 2016 £m 2015 £m 2015 £m Note 6 Finance expenses Group 2016 £m 2015 £m Notes Henderson Group plc Annual Report 2016 Debt instruments interest expense 'HIHUUHG FRQVLGHUDWLRQ ÞQDQFH FKDUJH7 9RLG SURSHUW\ ÞQDQFH FKDUJH21 Other 2.7 1.5 0.5 0.6 11.3 1.2 0.7 0.8 7RWDO ÞQDQFH H[SHQVHV 5.3 14.0 Salaries, wages and bonuses Share-based payments10.2 Social security costs Pension service cost 201.6 28.3 25.2 10.0 196.2 28.9 39.2 8.7 0.8 – 0.1 – 0.7 – 0.1 – (PSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV H[SHQVH 265.1 273.0 0.9 0.8 Number of employees 1,009 955 1,006 1,016

 


113 7 Acquisition related and non-recurring items Group 2016 2015 Acquisition Non-recurring Acquisition related items £m Non-recurring items £m related items £m items £m Total £m Total £m Notes 7.1 Acquisition related items Intangible amortisation ,QYHVWPHQW PDQDJHPHQW FRQWUDFWV KDYH EHHQ LGHQWLÞHG DV VHSDUDWHO\ LGHQWLÞDEOH LQWDQJLEOH DVVHWV DULVLQJ RQ WKH DFTXLVLWLRQ RI VXEVLGLDULHV or the purchase of stand-alone contracts. They are amortised on a straight-line basis over the expected life of the contracts, currently estimated at between three and eight years. Australian acquisitions $PRXQWV LQFOXGHG LQ DFTXLVLWLRQ UHODWHG LWHPV UHSUHVHQW GHIHUUHG FRQVLGHUDWLRQ UHODWLQJ WR WKH 3HUHQQLDO )L[HG ,QWHUHVW 3DUWQHUV 3W\ /WG and Perennial Growth Management Pty Ltd (together ‘Perennial’) and 90 West Asset Management Limited (‘90 West’) acquisitions treated as compensation expense due to the acquisition contract requiring service conditions for the employee vendor. 9RLG SURSHUW\ ÞQDQFH FKDUJH Upon the acquisition of Gartmore and New Star, certain property leases acquired became onerous contracts and provisions were established DW WKH SRLQW RI DFTXLVLWLRQ, UHßHFWLQJ WKH QHW SUHVHQW YDOXH RI WKH H[FHVV OHDVH UHQWDOV DQG RWKHU SD\PHQWV RYHU WKH DPRXQWV H[SHFWHG WR EH UHFRYHUHG IURP VXEOHWWLQJ WKHVH SURSHUWLHV. 7KH ÞQDQFH FKDUJH LV XQZRXQG GXULQJ WKH WHUP RI WKH XQGHUO\LQJ OHDVHV WKURXJK ÞQDQFH H[SHQVHV. 'HIHUUHG FRQVLGHUDWLRQ ÞQDQFH FKDUJH The acquisitions of Geneva and Perennial provide for contingent consideration payable to vendors subject to certain revenue and growth targets EHLQJ DFKLHYHG. 7KH GHIHUUHG FRQVLGHUDWLRQ LV UHFRUGHG DW LWV QHW SUHVHQW YDOXH DQG WKH ÞQDQFH FKDUJH LV H[SHQVHG RYHU WKH SHULRG XQWLO WKH consideration is payable should the condition be met. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Loss/(income) from associates and joint ventures Wind up of joint venture14.2 Associate intangible amortisation TH Real Estate establishment costs – 2.72.7 – – – – – – – – – 0.8– 0.8 – (0.3)(0.3) Finance income TH Real Estate gain on sale Australian acquisitions – 2.72.7 – – – – – – 0.8(0.3)0.5 – (12.3)(12.3) – (0.1)(0.1) Operating expenses and amortisation ,QWDQJLEOH DPRUWLVDWLRQ13 Merger transaction costs Merger integration costs Transactions relating to other disposals Australian acquisitions and integration costs – – – 51.3– 51.3 – 6.06.0 – 6.26.2 – 0.70.7 3.80.84.6 – (12.4) (12.4) 56.2– 56.2 – – – – – – – – – 0.75.25.9 Finance expenses 9RLG SURSHUW\ ÞQDQFH FKDUJH21 'HIHUUHG FRQVLGHUDWLRQ ÞQDQFH FKDUJH 55.113.768.8 0.5– 0.5 1.5– 1.5 56.95.262.1 0.7– 0.7 1.2– 1.2 2.0– 2.0 1.9– 1.9 7RWDO ORVV/(SURÞW) EHIRUH WD[ Tax credit8 57.1 16.4 73.5 (12.0)(1.4)(13.4) 59.6 (7.5) 52.1 (12.7)(3.5)(16.2) 7RWDO ORVV/(SURÞW) DIWHU WD[ 45.115.060.1 46.9 (11.0)35.9

 


114 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 7.2 Non-recurring items 2016 Wind up of joint venture • Loss/(income) from associates and joint ventures An impairment of the investment in Northern Pines of £2.7m was made during the year ahead of its planned wind up. Merger transaction costs • Operating expenses and amortisation The Group has incurred transaction costs of £6.0m in the second half of the year in relation to the proposed merger with Janus Capital Group, due to complete in 2017. Merger integration costs • Operating expenses and amortisation The Group has incurred expenses of £6.2m in the year in relation to integration with Janus Capital Group, as part of the proposed merger. Transactions relating to other disposals • Operating expenses and amortisation The Group has incurred costs in the year related to other disposal transactions, primarily relating to the disposal of the alternative UK small cap WHDP (o9RODQWLV WHDPp), GXH WR FRPSOHWH LQ 2017. Australian integration costs • Operating expenses and amortisation The Group incurred costs of £0.8m in the year in relation to the integration of Perennial and 90 West. 2015 TH Real Estate • Loss/(income) from associates and joint ventures $ €0.3P DGMXVWPHQW WR WKH *URXSpV €5.4P VKDUH RI RQH-RII HVWDEOLVKPHQW FRVWV UHFRJQLVHG LQ 2014 ZDV PDGH LQ WKH \HDU HQGHG 31 December 2015. • Finance income 2Q 1 -XQH 2015, WKH *URXS VROG LWV 40% VWDNH LQ 7+ 5HDO (VWDWH, UHVXOWLQJ LQ D €12.3P JDLQ. Australian acquisitions and integration costs • Finance income $ €0.1P JDLQ ZDV UHFRJQLVHG RQ WKH UHYDOXDWLRQ RI WKH *URXSpV SUHYLRXV 41.4% VWDNH LQ 90 :HVW, EDVHG RQ WKH WUDQVDFWLRQ SULFH RQ 29 May 2015 when the Group acquired the remaining 58.6% of shares. • Operating expenses and amortisation The Group incurred costs of £5.2m relating to the acquisition of Perennial and 90 West. 8 Tax Tax recognised in the income statement Group Company 2016 £m 2016 £m 2015 £m 2015 £m Henderson Group plc Annual Report 2016 Current tax: – charge for the year – prior year adjustments Deferred tax: – credit for the year – prior year adjustments 30.5 (0.4) (2.4) 1.9 21.4 (4.6) (9.7) (0.4) – – – – – – – – Total tax charged to the income statement 29.6 6.7 – –

 


115 5HFRQFLOLDWLRQ RI SURÞW/(ORVV) EHIRUH WD[ WR WD[ FKDUJH/(FUHGLW) 7KH WD[ FKDUJH/(FUHGLW) IRU WKH \HDU LV UHFRQFLOHG WR WKH SURÞW/(ORVV) EHIRUH WD[ LQ WKH LQFRPH VWDWHPHQW DV IROORZV Group 2016 2015 Acquisition related and Underlying non-recurring SURÞW £m items £m Total £m Total £m Company 2016 £m 2015 £m The UK corporation tax rate was reduced from 21% to 20% with effect from 1 April 2015. Accordingly, the UK corporation tax rate for 2015 was 20.25%. The rate for the current year was 20%. 9 Earnings per share Group The weighted average number of shares for the purpose of calculating earnings per share is as follows: 2016 no. (millions) 2015 no. (millions) %DVLF DQG GLOXWHG HDUQLQJV SHU VKDUH KDYH EHHQ FDOFXODWHG RQ WKH SURÞW DWWULEXWDEOH WR RZQHUV RI WKH SDUHQW. 7KH GLIIHUHQFH EHWZHHQ WKH ZHLJKWHG DYHUDJH QXPEHU RI VKDUHV XVHG LQ WKH EDVLF HDUQLQJV SHU VKDUH DQG WKH GLOXWHG HDUQLQJV SHU VKDUH FDOFXODWLRQV UHßHFWV WKH GLOXWLYH impact of options and awards of shares to employees, which are anticipated to be exercised based on market conditions as at the reporting date. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION ,VVXHG VKDUH FDSLWDO Less: own shares held 1,131.8 (40.7) 1,139.2 (46.1) Weighted average number of ordinary shares for the purpose of basic earnings per share Add: potential dilutive impact of share options and awards 1,091.1 24.3 1,093.1 49.9 Weighted average number of ordinary shares for the purpose of diluted earnings per share 1,115.4 1,143.0 3URÞW EHIRUH WD[ 111.6 272.2 Tax charge at the UK corporation tax rate of 20.0% (2015: 20.25%) Factors affecting the tax charge: Non-taxable income and disallowable expenditure Group relief (claimed)/surrendered 22.3 (22.2) (0.1) 55.1 (55.9) 0.8 Total tax charged to the Company Income Statement – – 3URÞW/(ORVV) EHIRUH WD[ 212.7(73.5)139.2 167.9 Tax charge/(credit) at the UK corporation tax rate of 20.0% (2015: 20.25%) Factors affecting the tax charge/(credit): 'LIIHUHQFHV LQ HIIHFWLYH WD[ UDWHV RQ RYHUVHDV SURÞWV Staff compensation deductions Prior period adjustments Utilisation of previously unrecognised tax losses Non-taxable income and disallowable expenditure Changes in statutory tax rates Other items 42.5(14.7)27.8 0.3(2.0)(1.7) – – – 1.10.41.5 (0.2)– (0.2) 0.82.93.7 (0.6)– (0.6) (0.9)– (0.9) 34.0 (13.1) (6.9) (5.0) (1.6) (1.4) 0.1 0.6 Total tax charged/(credited) to the Consolidated Income Statement 43.0(13.4)29.6 6.7

 


116 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 9.1 2Q XQGHUO\LQJ SURÞW DIWHU WD[ DWWULEXWDEOH WR RZQHUV RI WKH SDUHQW Earnings 2016 £m 2015 £m Earnings per share 2016 pence 2015 pence 9.2 2Q SURÞW DIWHU WD[ DWWULEXWDEOH WR RZQHUV RI WKH SDUHQW Earnings 2016 £m 2015 £m Earnings per share 2016 pence 2015 pence 10 Share-based payments Group 10.1 Share-based compensation plans The Group operates a number of share-based compensation plans, being the Restricted Share Plan, Employee Share Ownership Plan, /RQJ-7HUP ,QFHQWLYH 3ODQ, 'HIHUUHG (TXLW\ 3ODQ, %X\ $V <RX (DUQ 6KDUH 3ODQ, &RPSDQ\ 6KDUH 2SWLRQ 3ODQ, ([HFXWLYH 6KDUHG 2ZQHUVKLS 3ODQ and Sharesave Scheme. Further details of the material plans in operation during 2016 are set out below: Deferred Equity Plan (DEP) Employees who receive cash-based incentive awards over a preset threshold, have an element deferred. The deferred awards are deferred into the Company’s shares, or into Group managed funds. The DEP trustee purchases Company shares and units or shares in Group managed funds and holds them in trust. Awards are deferred for up to three years and vest in three equal tranches. Those employees who elected to participate in the 2011 ESOP, had their restricted shares, upon vesting, automatically transferred into the 2011 ESOP as purchased shares. They attracted matching shares subject to the performance and employment conditions of that plan. The 2013 DEP had a matching share element where employees, excluding Executive Directors, were awarded one matching share for every three restricted shares held in trust on the third anniversary of the award. One third of the restricted shares became unrestricted on each anniversary. ,I DQ HPSOR\HH UHTXHVWHG WR UHFHLYH DQ\ RI WKH XQUHVWULFWHG VKDUHV SULRU WR WKH WKLUG DQQLYHUVDU\, WKH UHODWHG PDWFKLQJ VKDUHV ZHUH IRUIHLW. Forfeiture conditions applied in the case of leavers. A matching share element is not included on any DEP schemes awarded for later years. 7KH H[SHQVH RI GHIHUUHG VKRUW-WHUP LQFHQWLYH DZDUGV (LQFOXGLQJ VRFLDO VHFXULW\ FRVWV) LV UHFRJQLVHG LQ WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW RYHU WKH SHULRG RI GHIHUUDO. $V DW 31 'HFHPEHU 2016, €54.4P (2015 €57.0P) RI WKH H[SHQVH RI GHIHUUHG DZDUGV LV WR EH UHFRJQLVHG LQ IXWXUH SHULRGV. Restricted Share Plan (RSP) The RSP allows employees to receive shares in the Company for £nil consideration at a future point, usually after three years. The awards are made typically for staff recruitment and retention purposes and larger awards generally have performance hurdles. The Remuneration Committee approves awards to Code Staff, any awards over £500,000 and award vestings that exceed £50,000. On vesting, the employee must satisfy any employee tax and social security obligations. Henderson Group plc Annual Report 2016 Basic Diluted 10.0 9.8 14.7 14.1 Earnings for the purpose of basic and diluted earnings per share 109.6 161.2 Basic Diluted 15.6 15.2 18.0 17.2 3URÞW DIWHU WD[ DWWULEXWDEOH WR RZQHUV RI WKH SDUHQW Add back: Acquisition related and non-recurring items after tax 109.6 60.1 161.2 35.9 Earnings for the purpose of basic and diluted earnings per share 169.7 197.1

 


117 Long-Term Incentive Plan (LTIP) 7KH /7,3 DZDUGV SURYLGH VHOHFWHG HPSOR\HHV UHVWULFWHG VKDUHV RU €QLO FRVW RSWLRQV WKDW KDYH HPSOR\PHQW FRQGLWLRQV DQG SHUIRUPDQFH FRQGLWLRQV DWWDFKHG DV VKRZQ EHORZ. (PSOR\HHV ZKR KDYH EHHQ DZDUGHG VXFK RSWLRQV KDYH ÞYH \HDUV WR H[HUFLVH WKHLU RSWLRQV IROORZLQJ WKH WKUHH \HDU YHVWLQJ SHULRG IRU 2013 /7,3 DQG ÞYH DQG IRXU \HDUV WR H[HUFLVH WKHLU RSWLRQV IROORZLQJ WKH WKUHH DQG IRXU \HDU YHVWLQJ SHULRGV (UHVSHFWLYHO\) IRU WKH 2014 /7,3. 7ZR WKLUGV RI WKH 2015 DQG 2016 /7,3 FDQ EH H[HUFLVHG IURP WKH HQG RI \HDU WKUHH DQG RQH WKLUG IURP WKH HQG RI \HDU IRXU. 2014 DZDUG FULWHULD Amount vesting Henderson Group TSR less than the 50th percentile of the FTSE 350 General Financial Services companies Henderson Group TSR at the 50th percentile of the FTSE 350 General Financial Services companies Henderson Group TSR at or above the 75th percentile of the FTSE 350 General Financial Services companies nil% 25% 100% ,I WKH +HQGHUVRQ *URXS 765 LV EHWZHHQ WKH 50WK DQG 75WK SHUFHQWLOHV, WKH DPRXQW YHVWLQJ ZLOO LQFUHDVH RQ D OLQHDU EDVLV. 7KH 5HPXQHUDWLRQ &RPPLWWHH PXVW DOVR EH VDWLVÞHG WKDW WKH +HQGHUVRQ *URXS 765 UHß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in equal tranches, at vesting and one year after vesting. Employees are not entitled to vote or receive dividends in respect of these awards until the vesting conditions are met, nor are they allowed to pledge, hedge or assign the expected awards in any way. 7KH 2015 DQG 2016 /7,3 DZDUG YHVWLQJ DQG UHOHDVH RI WKH DZDUG DUH VXEMHFW WR SHUIRUPDQFH DJDLQVW WKH IROORZLQJ SHUIRUPDQFH FRQGLWLRQV PHDVXUHG (DV DSSURSULDWH) RYHU, RU DW WKH HQG RI, WKH UHOHYDQW WKUHH RU IRXU \HDU SHUIRUPDQFH SHULRG (LQ UHVSHFW RI WKH ÞUVW DQG VHFRQG WUDQFKH of the awards respectively): 2015 and 2016 award criteria Weighting Market conditions – FTSE 350 – ASX 100 25% 25% Non-market – Net Fund Flows Condition – ,QYHVWPHQW 3HUIRUPDQFH &RQGLWLRQ – Operating Margin Condition – People Strategy Condition 15% 15% 10% 10% ,Q UHVSHFW RI WKH ÞUVW WUDQFKH RI WKH DZDUG, DQ DGGLWLRQDO KROGLQJ SHULRG RI WZR \HDUV VKDOO DSSO\ FRPPHQFLQJ RQ WKH UHOHYDQW YHVWLQJ GDWH, during which time the participant may not sell, pledge, charge, assign, dispose of or otherwise transfer ownership of the underlying shares SHUWDLQLQJ WR WKH DZDUG, RWKHU WKDQ WR PHHW PDQGDWRU\ OLDELOLWLHV WR WD[ DQG/RU VRFLDO VHFXULW\ FRQWULEXWLRQV. ,Q UHVSHFW RI WKH VHFRQG WUDQFKH of the award, an additional holding period of one year shall apply commencing on the relevant vesting date with similar conditions. 7KH SHUIRUPDQFH SHULRG IRU WKH 2013 /7,3 ZDV FRPSOHWHG RQ 31 'HFHPEHU 2015 DQG 98% RI DZDUGV YHVWHG LQ $SULO 2016. 7KH SHUIRUPDQFH SHULRG IRU WKH ÞUVW WUDQFKH RI 2014 /7,3 ZDV FRPSOHWHG RQ 31 'HFHPEHU 2016 DQG 3% RI DZDUGV ZLOO YHVW LQ $SULO 2017. 10.2 Share-based payments charged to the Consolidated Income Statement 2016 £m 2015 £m Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION DEP /7,3 RSP BAYE ExSOP CSOP SAYE ESOP 13.6 5.5 3.8 2.2 1.4 1.1 0.5 0.2 12.6 5.7 5.4 1.9 1.3 1.1 0.5 0.4 Share-based payments expense 28.3 28.9

 


118 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 10.2 Share-based payments charged to the Consolidated Income Statement continued The total amount settled through the Consolidated Statement of Changes in Equity is analysed between: 2016 £m 2015 £m $OO DPRXQWV DERYH H[FOXGH UHODWHG HPSOR\PHQW WD[HV ZKLFK DUH UHFRJQLVHG LQ WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW. 10.3 Fair value of share-based compensation plans The following share schemes involve the grant of shares and options for £nil consideration. The fair value of these grants is calculated using the VKDUH SULFH DW JUDQW GDWH, ZKLFK LV VHW RXW LQ WKH IROORZLQJ WDEOH. /7,3 IDLU YDOXHV KDYH EHHQ GLVFRXQWHG RQ WKH EDVLV WKDW WKH RSWLRQ KROGHU KDV QR entitlement to dividends over the vesting period of the option. Dividend equivalents, should they be awarded, are treated as separate, cash-settled awards. No adjustments have been made for dividends relating to the DEP and BAYE. 2016 2015 Shares/ options Average grant Shares/ options granted no. Average grant share price £ granted no. share price £ 7KH IDLU YDOXH FDOFXODWLRQ IRU WKH /7,3 LQFOXGHV D VWDWLVWLFDO DVVHVVPHQW RI WKH OLNHOLKRRG RI WKH *URXS DFKLHYLQJ SHUIRUPDQFH WDUJHWV DV VHW RXW LQ the plan. 11 Dividends paid and proposed Company 2016 pence per share 2015 pence per share 2016 £m 2015 £m 2016 pence per share 2015 pence per share 2016 £m 2015 £m 7KH %RDUG LV UHFRPPHQGLQJ D ÞQDO GLYLGHQG IRU 2016 RI 7.30}SHQFH SHU VKDUH ZKLFK, ZKHQ DGGHG WR WKH LQWHULP 2016 GLYLGHQG RI 3.20}SHQFH SHU VKDUH, UHVXOWV LQ D WRWDO GLYLGHQG IRU 2016 RI 10.50}SHQFH SHU VKDUH. 7KH ÞQDO GLYLGHQG SURSRVHG LQ UHVSHFW RI 2016 RI €82.6P LV EDVHG RQ WKH WRWDO QXPEHU RI RUGLQDU\ VKDUHV LQ LVVXH DW 31 'HFHPEHU 2016. 7KHUH ZDV D €1.5P GHFUHDVH EHWZHHQ WKH SURSRVHG GLYLGHQGV (2015 ÞQDO €81.5P DQG 2016 LQWHULP €36.2P), DV UHSRUWHG LQ WKH 2015 $QQXDO 5HSRUW DQG WKH ,QWHULP 5HSRUW IRU WKH VL[ PRQWKV HQGHG 30 -XQH 2016, YHUVXV WKH GLYLGHQGV SDLG RXW GXULQJ WKH \HDU (2015 ÞQDO €80.9P DQG 2016 LQWHULP €35.3P). 7KLV UHSUHVHQWV GLYLGHQGV ZDLYHG E\ HPSOR\HH EHQHÞW WUXVW WUXVWHHV RQ VKDUHV KHOG LQ WUXVW RQ EHKDOI RI *URXS HPSOR\HHV. 7KH DPRXQW ZDLYHG LQ UHVSHFW RI WKH ÞQDO GLYLGHQG GHFODUHG LQ UHVSHFW RI 2016 ZLOO EH HVWDEOLVKHG E\ WKH HPSOR\HH EHQHÞW WUXVW WUXVWHHV RQ 5 0D\ 2017, EHLQJ WKH GLYLGHQG UHFRUG GDWH. Henderson Group plc Annual Report 2016 Dividends proposed on ordinary shares for approval by the shareholders at the AGM Final dividend for 2016 (2015) 82.67.30 81.57.20 Dividends on ordinary shares declared and paid in the year )LQDO GLYLGHQG LQ UHVSHFW RI 2015 (2014) ,QWHULP GLYLGHQG LQ UHVSHFW RI 2016 (2015) 80.97.20 35.33.20 70.96.40 34.5 3.10 Total dividends paid and charged to equity 116.210.40 105.4 9.50 /7,3 DEP RSP 6,757,6002.50 5,634,3512.51 2,613,1332.39 6,192,5312.73 4,982,915 2.86 1,262,9892.60 6KDUH-EDVHG SD\PHQWV FKDUJHG WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW Proceeds from share schemes 28.3 8.1 28.9 10.3 Amounts settled through equity 36.4 39.2

 


 

119 12 Segmental information Group Henderson is a global investment manager. The Group manages a broad range of actively managed investment products for institutional and UHWDLO LQYHVWRUV, DFURVV ÞYH FDSDELOLWLHV, EHLQJ (XURSHDQ (TXLWLHV, *OREDO (TXLWLHV, *OREDO )L[HG ,QFRPH, 0XOWL-$VVHW DQG $OWHUQDWLYHV, LQFOXGLQJ Private Equity and Property. Management operates across product lines, distribution channels and geographic regions. All investment product types are sold in most, if not all, of these regions and are managed in various locations. ,QIRUPDWLRQ LV UHSRUWHG WR WKH FKLHI RSHUDWLQJ GHFLVLRQ-PDNHU, WKH %RDUG, RQ DQ DJJUHJDWHG EDVLV 6WUDWHJLF DQG ÞQDQFLDO PDQDJHPHQW GHFLVLRQV are determined centrally by the Board and, on this basis, the Group is a single segment investment management business. Entity-wide disclosures 2016 £m 2015 £m The Group does not have a single client which accounts for more than 10% of revenues. Geographic information 2016 £m 2015 £m The geographical revenue information is split according to the country in which the revenue is generated, not necessarily where the client is based. 2016 £m 2015 £m Non-current assets for this purpose consist of intangible assets, investments accounted for using the equity method and property and equipment. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Non-current assets UK Americas Australia Other 521.8 89.0 58.8 1.4 558.1 85.2 53.9 0.7 671.0 697.9 Revenues from clients UK Luxembourg Americas Australia Singapore Japan Other 382.7 208.7 127.0 15.8 2.5 1.3 – 457 9 179.0 112.6 3.7 4 1.2 0.2 Gross fee and deferred income 738.0 756.0 Revenues by product 8. 2(,&V/XQLW WUXVWV 6,&$9V US mutuals ,QVWLWXWLRQDO VHJUHJDWHG PDQGDWHV DQG FDVK IXQGV Offshore absolute return funds Other 237.7 252.6 95.0 75.1 32.9 44.7 262.5 257.0 82.8 62.8 50.0 40 9 Gross fee and deferred income 738.0 756.0

 


120 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 13 Intangible assets Group ,QWDQJLEOH DVVHWV DUH DQDO\VHG DV IROORZV: 2016 ,QYHVWPHQW management contracts £m Computer software £m Goodwill £m Total £m Cost At 1 January Additions ,PSDFW RI IRUHLJQ H[FKDQJH PRYHPHQW 556.7 – 12.0 384 0 – 10.8 20.9 7.9 – 961.6 7.9 22.8 At 31 December 568.7 394 8 28.8 992.3 Accumulated amortisation At 1 January Charge – – (274 7) (51.3) (6.3) (3.1) (281.0) (54 4) At 31 December – (326.0) (9 4) (335 4) 2015 ,QYHVWPHQW management contracts £m Computer software £m Goodwill £m Total £m Cost At 1 January Additions ,PSDFW RI IRUHLJQ H[FKDQJH PRYHPHQW 523.7 29.5 3.5 361.5 18.7 3.8 4 9 6.0 – 900.1 54 2 7.3 At 31 December 556.7 384 0 20.9 961.6 Accumulated amortisation At 1 January Charge – – (218.5) (56.2) (3.7) (2.6) (222.2) (58.8) At 31 December – (274 7) (6.3) (281.0) Carrying value at 31 December 556.7 109.3 4 6 680.6 The Group considers itself to have one cash generating unit to which goodwill is allocated. 7KH UHFRYHUDEOH YDOXH RI JRRGZLOO IRU WKH *URXS DW 3 'HFHPEHU 20 6 KDV EHHQ GHWHUPLQHG E\ D YDOXH LQ XVH FDOFXODWLRQ, XVLQJ FDVK ßRZV EDVHG RQ WKH *URXSpV DQQXDO EXGJHW DQG ÞYH \HDU IRUHFDVWV DSSURYHG E\ WKH %RDUG DQG D WHUPLQDO YDOXH IRU WKH SHULRG WKHUHDIWHU 7KH NH\ DVVXPSWLRQV DSSOLHG WR WKH *URXSpV DQQXDO EXGJHW DQG ÞYH \HDU IRUHFDVW DUH PDUNHW SHUIRUPDQFH DQG QHW IXQG ßRZV 0DQDJHPHQW GHWHUPLQHG WKHVH NH\ assumptions by assessing current market conditions and through the utilisation of forward looking external evidence. The terminal value has been calculated assuming a long-term growth rate of 2.0% per annum in perpetuity, based on the Group’s view of long-term nominal growth, which does not exceed market expectations. A pre-tax risk-adjusted discount rate of 11.8% per annum has been applied. The resultant value in use calculation has been compared with WKH FDUU\LQJ YDOXH RI WKH *URXSpV JRRGZLOO WR GHWHUPLQH LI DQ\ JRRGZLOO LPSDLUPHQW DULVHV 7KH FDOFXODWLRQ VKRZV VLJQLÞFDQW KHDGURRP LQ WKH recoverable value of goodwill. Sensitivities were performed by adjusting key assumptions for reasonable possible changes, with the model FRQWLQXLQJ WR VKRZ VLJQLÞFDQW KHDGURRP Recent market transactions and the Group’s current market capitalisation provide additional evidence that the recoverable value of goodwill is in excess of the carrying value. Henderson Group plc Annual Report 2016 Carrying value at 31 December 568.768.819.4656.9

 


121 14 Interests in other entities The Group operates as a global investment manager and reports its results to the Board on an aggregated basis. The Group manages its operations via investments in subsidiaries, associates and joint ventures and interests in structured entities. 7KH *URXSpV LQWHUHVWV LQ VWUXFWXUHG HQWLWLHV DUH WKURXJK HPSOR\HH EHQHÞW WUXVWV DQG VHHG FDSLWDO LQYHVWPHQWV LQ IXQGV (PSOR\HH EHQHÞW WUXVWV are consolidated and are for the purpose of administering the Group’s share-based payment arrangements. Further details of the Group’s share-based payment arrangements are set out in note 10. The Group holds interests in funds via seed capital investments and investment management agreements, for which it earns management fees and, in certain funds, performance fees. Segregated mandates and investment trusts do not give the Group any rights over the client or trust who have the right to remove the Group as manager, being a right similar to a voting right. As such, segregated mandates and investment trusts are not structured entities. Management has determined that the Group acts as agent for unconsolidated funds due to its relatively low economic exposure and variability of returns. The Group is exposed to structured entities via the risk that their AUM decreases which will cause a fall in the Group’s income. Considering the potential for changes in the AUM of structured entities, management has determined that the Group’s structured entities should be aggregated E\ WKH W\SH RI YHKLFOH $V DOO RI WKH *URXSpV XQFRQVROLGDWHG IXQGV WKDW PHHW WKH GHÞQLWLRQ RI D VWUXFWXUHG HQWLW\ DUH LQ SRROHG LQYHVWPHQW IXQGV, GLVFORVXUHV KDYH EHHQ PDGH RQ WKLV EDVLV 5HIHU WR QRWH 4 3 14.1 Subsidiaries Company Investment in subsidiaries 2016 £m 2015 £m The wholly owned and directly held subsidiaries of the Company are as follows: Country of incorporation and principal place of operation Functional currency Henderson Group Holdings Asset Management Limited Horizon Orbit Corporation UK USA GBP USD 7KH UHJLVWHUHG RIÞFH DGGUHVV RI +HQGHUVRQ *URXS +ROGLQJV $VVHW 0DQDJHPHQW /LPLWHG LV 20 %LVKRSVJDWH, /RQGRQ, 8QLWHG .LQJGRP, (&20 3$( DQG WKH UHJLVWHUHG RIÞFH DGGUHVV RI +RUL]RQ 2UELW &RUSRUDWLRQ LV F/R &RUSRUDWLRQ 6HUYLFH &RPSDQ\, 27 &HQWHUYLOOH 5RDG, 6XLWH 400, :LOPLQJWRQ, 'HODZDUH 9808 Group Refer to note 33 for the subsidiaries of the Group, excluding the directly held subsidiaries of the Company shown above. 14.2 Investments accounted for using the equity method Group The Group holds interests in the following associates and joint ventures managed through shareholder agreements with third party investors, accounted for under the equity method: 2016 FunctionalPercentage 2015 Percentage owned Country of incorporation and principal place of operation owned currency Share of loss after tax from associates and joint ventures The Group’s share of loss after tax from associates and joint ventures is as follows: 2016 £m 2015 £m 2Q -XQH 20 5, WKH *URXS VROG LWV 40% VWDNH LQ 7+ 5HDO (VWDWH, ZLWK D FDUU\LQJ YDOXH RI €72 9P, IRU FRQVLGHUDWLRQ RI €84 3P During 2016, the Group recognised an impairment of £2.7m on its investment in Northern Pines ahead of its planned wind up. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 7+ 5HDO (VWDWH VKDUH RI XQGHUO\LQJ SURÞW TH Real Estate share of acquisition related and non-recurring items – – 0.1 (0.5) TH Real Estate share of loss ,PSDLUPHQW RI MRLQW YHQWXUH Share of income/(loss) from other associates and joint ventures – (2.7) 0.5 (0 4) – (0.3) Total loss from associates and joint ventures (2.2) (0.7) Northern Pines Henderson Capital GP LLCUSAUSD Northern Pines Henderson Capital LLCUSAUSD 2SWLPXP ,QYHVWPHQW 0DQDJHPHQW /LPLWHG UKGBP 50% 50% 50% 50% 50% 50% At 31 December 1,032.0 1,029.8

 


122 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 14.3 Interests in unconsolidated structured entities Group $ UHFRQFLOLDWLRQ RI $80 UHSRUWHG E\ WKH *URXS WR $80 LQ IXQGV WKDW PHHW WKH GHÞQLWLRQ RI DQ XQFRQVROLGDWHG VWUXFWXUHG HQWLW\ LV VKRZQ EHORZ: Less: segregated mandates and investment trusts Less: consolidated pooled investment funds Pooled investment funds AUM £bn Total AUM 31 December 2015 92.0 (25.5) (0.2) 66.3 'XULQJ WKH \HDU, WKH *URXS UHFRJQLVHG JURVV IHH DQG GHIHUUHG LQFRPH RI €622 4P (20 5: €657 6P) IURP XQFRQVROLGDWHG VWUXFWXUHG HQWLWLHV LQ WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW The Group has the following exposure to unconsolidated structured entities, which equates to the Group’s maximum exposure to loss: Trade debtors Accrued income Seed capital investments £m Total 31 December 2015 5.5 92.9 4 3 102.7 15 Property and equipment Group 2016 £m 2015 £m Henderson Group plc Annual Report 2016 Cost At 1 January Additions Disposals ,PSDFW RI IRUHLJQ H[FKDQJH PRYHPHQW 26.9 2.6 (0.4) 0.6 25.0 1.9 – – At 31 December 29.7 26.9 Accumulated depreciation At 1 January Charge Disposals ,PSDFW RI IRUHLJQ H[FKDQJH PRYHPHQW (12.5) (2.9) 0.1 (0.5) (9.9) (2.6) – – At 31 December (15.8) (12.5) Net book value at 31 December 13.9 4 4 31 December 2016 0.495.619.9115.9 31 December 2016 101.0(31.3)(0.2)69.5

 


123 16 )DLU YDOXH RI ÞQDQFLDO LQVWUXPHQWV Group 7RWDO ÞQDQFLDO DVVHWV DQG OLDELOLWLHV 7KH IROORZLQJ WDEOH VHWV RXW WKH ÞQDQFLDO DVVHWV DQG OLDELOLWLHV RI WKH *URXS: Carrying value 2016 £m 2015 £m Notes The carrying value of these assets and liabilities is considered to be materially equal to their fair value with the exception of the Group’s debt LQVWUXPHQW ZKLFK KDG D IDLU YDOXH RI € 5 4P DW 3 'HFHPEHU 20 5 7KH *URXSpV GHEW LQVWUXPHQW ZDV IXOO\ UHSDLG RQ 24 0DUFK 20 6 DW WKH SDU value of £150.0m. )LQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV PDLQO\ FRQVLVW RI VHHG FDSLWDO LQYHVWPHQWV, LQYHVWPHQWV DQG GHULYDWLYHV KHOG LQ FRQVROLGDWHG VWUXFWXUHG HQWLWLHV DQG LQYHVWPHQWV LQ WKH *URXSpV IXQG SURGXFWV ZKLFK DUH KHOG, LQ HPSOR\HH EHQHÞW WUXVWV, DJDLQVW RXWVWDQGLQJ GHIHUUHG compensation arrangements. Any movement in the fair value of the assets held against deferred compensation liabilities is offset by a FRUUHVSRQGLQJ PRYHPHQW LQ GHIHUUHG FRPSHQVDWLRQ OLDELOLWLHV %RWK PRYHPHQWV DUH UHFRJQLVHG WKURXJK WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW $YDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV FRQVLVW RI VHHG FDSLWDO LQYHVWPHQWV DQG LQYHVWPHQWV LQ FRQVROLGDWHG IXQGV )LQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV PDLQO\ FRQVLVW RI QRQ-FRQWUROOLQJ LQWHUHVWV LQ FRQVROLGDWHG VWUXFWXUHG HQWLWLHV, GHIHUUHG compensation liabilities which are held against the investments in the Group’s fund products, derivative instruments, provisions and contingent deferred consideration. The Group enters into forward foreign exchange contracts to hedge seed capital investments denominated in foreign currency. Forward foreign H[FKDQJH FRQWUDFWV DUH DOVR XVHG WR KHGJH WKH WUDQVODWLRQ RI FHUWDLQ FRQVROLGDWHG VWUXFWXUHG HQWLWLHV ,Q DGGLWLRQ, WKH *URXS HQWHUHG LQWR D number of contracts for difference (CFDs), credit default indices (CDXs), futures and total return swaps (TRSs) to hedge the market movements RI VSHFLÞF DYDLODEOH-IRU-VDOH DQG IDLU YDOXH WKURXJK SURÞW RU ORVV ÞQDQFLDO DVVHWV 7KHVH GHULYDWLYHV DUH UHFRJQLVHG LQ ÞQDQFLDO DVVHWV DQG ÞQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW DQG ORVV Current loans and receivables and trade and other payables carried at amortised cost, included in the table above, represent balances mainly settling in a short timeframe, and accordingly, the fair value of these assets and liabilities is considered to be materially equal to their carrying value after taking into account any impairment. Company $V DW 3 'HFHPEHU 20 6, WKH &RPSDQ\ KHOG ÞQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV ZLWK D FDUU\LQJ DQG IDLU YDOXH RI €53 8P (20 5: €4 7P) 7KHVH LQYHVWPHQWV DUH FODVVLÞHG DV /HYHO DQG /HYHO 2 XVLQJ WKH KLHUDUFK\ VHW RXW RQ WKH IROORZLQJ SDJH $V DW 3 'HFHPEHU 20 6, WKH &RPSDQ\ KHOG ÞQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV ZLWK D FDUU\LQJ DQG IDLU YDOXH RI €42 0P (20 5:}€28 2P), ZKLFK ZHUH FODVVLÞHG DV /HYHO 3 XVLQJ WKH KLHUDUFK\ VHW RXW RQ WKH IROORZLQJ SDJH 'XULQJ 20 6, WKHUH ZHUH QR WUDQVIHUV LQ WR RU RXW RI /HYHO , /HYHO 2 DQG /HYHO 3 (20 5:}€QLO) Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION )LQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV $YDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV 216.1 41.9 45 7 64 6 7RWDO ÞQDQFLDO DVVHWV PHDVXUHG DW IDLU YDOXH 258.0 210.3 $FFUXHG LQFRPH, 2(,& DQG XQLW WUXVW GHEWRUV, WUDGH GHEWRUV DQG RWKHU GHEWRUV Cash and cash equivalents18.1 263.3 244.0 22 4 381.6 Total loans and receivables 507.3 603.0 7RWDO ÞQDQFLDO DVVHWV 765.3 813.3 Debt instrument in issue19 Trade and other payables (excluding deferred income) – 324.0 49 9 301.0 Total loans and payables carried at amortised cost 324.0 450 9 )LQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV Provisions21 149.3 12.0 119.3 11.9 7RWDO ÞQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV 161.3 131.2 7RWDO ÞQDQFLDO OLDELOLWLHV 485.3 582.1

 


24 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 16 )DLU YDOXH RI ÞQDQFLDO LQVWUXPHQWV FRQWLQXHG Group Fair value hierarchy The following asset and liability types are carried at fair value after initial recognition. 7KH *URXS XVHV WKH IROORZLQJ KLHUDUFK\ IRU GHWHUPLQLQJ DQG GLVFORVLQJ WKH IDLU YDOXH RI ÞQDQFLDO DVVHWV DQG OLDELOLWLHV E\ YDOXDWLRQ WHFKQLTXH: • Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; • /HYHO 2: RWKHU WHFKQLTXHV ZKHUH DOO LQSXWV, ZKLFK KDYH D VLJQLÞFDQW HIIHFW RQ WKH UHFRUGHG IDLU YDOXH, DUH REVHUYDEOH, HLWKHU GLUHFWO\ or indirectly; and • /HYHO 3: WHFKQLTXHV ZKHUH LQSXWV ZKLFK KDYH D VLJQLÞFDQW HIIHFW RQ WKH UHFRUGHG IDLU YDOXH WKDW DUH QRW EDVHG RQ REVHUYDEOH PDUNHW GDWD At 31 December 2016 Total £m Level 1 £m Level 2 £m Level 3 £m Financial assets )LQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV $YDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV 216.1 4 9 107.9 3 4 107.7 4 4 0.5 34 At 31 December 2015 Total £m Level 1 £m Level 2 £m Level 3 £m Financial assets )LQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV $YDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV 45 7 64 6 79.0 10.1 66.2 15.5 0.5 39.0 7RWDO ÞQDQFLDO DVVHWV PHDVXUHG DW IDLU YDOXH 210.3 89.1 81.7 39.5 At 31 December 2016 Total £m Level 1 £m Level 2 £m Level 3 £m Financial liabilities )LQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV Provisions 49 3 12.0 4 6 – 1.5 – 133.2 12.0 At 31 December 2015 Total £m Level 1 £m Level 2 £m Level 3 £m Financial liabilities )LQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV Provisions 119.3 11.9 8.8 – 5 4 – 105.1 11.9 7RWDO ÞQDQFLDO OLDELOLWLHV PHDVXUHG DW IDLU YDOXH 131.2 8.8 5 4 117.0 'XULQJ 20 6, WKHUH ZDV D €3 P WUDQVIHU RI ÞQDQFLDO DVVHWV EHWZHHQ /HYHO Level 2 and Level 3 during the year (2015: £nil). DQG /HYHO 2 7KHUH ZHUH QR RWKHU WUDQVIHUV LQ RU RXW RI /HYHO , Level 3 investments at 31 December 2016 mainly comprise private equity investments. Private equity investments are valued using a combination RI WKH HQWHUSULVH YDOXH/(%,7'$ PXOWLSOH PHWKRG DQG WKH GLVFRXQWHG FDVK ßRZ PHWKRG 6LJQLÞFDQW XQREVHUYDEOH LQSXWV LQFOXGH ORQJ-WHUP revenue growth rates, discount rate and pre-tax operating margin, taking into account management’s experience and knowledge of market FRQGLWLRQV RI WKH VSHFLÞF LQGXVWULHV $V WKH IDLU YDOXH PHDVXUHPHQW RI WKH ÞQDQFLDO DVVHWV LQFOXGHG LQ /HYHO 3 LV EDVHG RQ XQREVHUYDEOH LQSXWV, D FKDQJH LQ RQH RU PRUH XQGHUO\LQJ DVVXPSWLRQV FRXOG UHVXOW LQ D VLJQLÞFDQW FKDQJH LQ IDLU YDOXH +RZHYHU, GXH WR WKH QXPHURXV GLIIHUHQW IDFWRUV DIIHFWLQJ WKH DVVHWV, WKH LPSDFW FDQQRW EH TXDQWLÞHG Henderson Group plc Annual Report 2016 7RWDO ÞQDQFLDO OLDELOLWLHV PHDVXUHG DW IDLU YDOXH 161.314.61.5145.2 7RWDO ÞQDQFLDO DVVHWV PHDVXUHG DW IDLU YDOXH 258.0111.3112.134.6

 


125 7KH IROORZLQJ LV D UHFRQFLOLDWLRQ RI WKH PRYHPHQWV LQ WKH *URXSpV ÞQDQFLDO DVVHWV FODVVLÞHG DV /HYHO 3 GXULQJ WKH \HDU: 2016 £m 2015 £m /HYHO 3 ÞQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV UHSUHVHQW QRQ-FRQWUROOLQJ LQWHUHVWV LQ FRQVROLGDWHG IXQGV, WKH GHIHUUHG FRPSHQVDWLRQ liabilities which are held against the investments in the Group’s fund products, contingent deferred consideration and provisions. With respect to non-controlling interests in consolidated funds, the fair value movements are primarily driven by fair value changes in investments held in these funds and the dilution of the Group’s investments as a result of additional external investments in the funds . Details of the inputs used to calculate the fair value of contingent deferred consideration and provisions can be found in notes 2.2 and 21 respectively. Sensitivity analysis around likely SRVVLEOH FKDQJHV WR WKH LQSXWV LQWR WKH YDOXDWLRQV RI WKHVH OLDELOLWLHV KDV EHHQ SHUIRUPHG DQG UHVXOWHG LQ QR VLJQLÞFDQW GLIIHUHQFH WR WKH IDLU YDOXHV UHFRJQLVHG WKDW, LI DGMXVWHG IRU, ZRXOG LPSDFW WKH SURÞW DWWULEXWDEOH WR RZQHUV RI WKH SDUHQW 7KH IROORZLQJ LV D UHFRQFLOLDWLRQ RI WKH PRYHPHQWV LQ WKH *URXSpV ÞQDQFLDO OLDELOLWLHV FODVVLÞHG DV /HYHO 3 GXULQJ WKH \HDU: 2016 £m 2015 £m 17 Trade and other receivables Group Company 2016 £m 2015 £m 2016 £m 2015 £m Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Accrued income 2(,& DQG XQLW WUXVW GHEWRUV Trade debtors Other debtors Prepayments Deferred acquisition costs Amounts owed by subsidiaries 127.9 115.0 6.0 14.4 8.6 2.7 – 120.6 77.7 0 4 12.7 74 4 0 – – – – 0.1 – – 15.7 – – – 0.1 – – 8.7 274.6 232.8 15.8 8.8 Non-current Current – 274.6 0.1 232.7 – 15.8 – 8.8 274.6 232.8 15.8 8.8 Fair value at 1 January Net movement on bonuses deferred into funds Other net additions Other movements 117.0 13.8 22.7 (8.3) 96.0 2.1 21.5 (2.6) Fair value at 31 December 145.2 117.0 Fair value at 1 January Additions Disposals 0RYHPHQWV UHFRJQLVHG LQ WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW 7UDQVIHUUHG IURP &RQVROLGDWHG 6WDWHPHQW RI &RPSUHKHQVLYH ,QFRPH WR &RQVROLGDWHG ,QFRPH 6WDWHPHQW )DLU YDOXH PRYHPHQWV UHFRJQLVHG LQ WKH &RQVROLGDWHG 6WDWHPHQW RI &RPSUHKHQVLYH ,QFRPH 39.5 0.3 – – – (5.2) 478 0.5 (23.9) 9.9 (9.6) 4 8 Fair value at 31 December 34.6 39.5

 


126 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 18 Cash and cash equivalents 18.1 Cash at bank and in hand and cash equivalents Group Company 2016 £m 2016 £m 2015 £m 2015 £m Cash and cash equivalents consist of cash at bank, cash in hand and short-term highly liquid government securities or investments in money market instruments with a maturity date of three months or less. $V DW 3 }'HFHPEHU 20 6, FDVK DQG FDVK HTXLYDOHQWV LQFOXGHV € 8 3P (20 5: €27 2P) RI FDVK KHOG E\ FRQVROLGDWHG VWUXFWXUHG HQWLWLHV $V DW 3 }'HFHPEHU 20 6, FDVK DQG FDVK HTXLYDOHQWV DOVR LQFOXGHG €QLO RI FDVK DW EDQN DQG LQ KDQG WKDW ZDV KHOG LQ WKH *URXSpV PDQDJHU GHDOLQJ DFFRXQWV ZKLFK UHSUHVHQWHG SD\PHQWV GXH WR DQG IURP 2(,&V DQG XQLWV WUXVWV DV D UHVXOW RI FOLHQW WUDGLQJ (20 5: € 7P), DQG UHQWDO JXDUDQWHH deposits of £nil (2015: £0.1m). After deducting these restricted cash balances, total unrestricted cash is £225.7m (2015: £352.6m). 18.2 1HW FDVK ßRZV JHQHUDWHG IURP RSHUDWLQJ DFWLYLWLHV Group 2016 £m 2015 £m Notes ,QFOXGHG ZLWKLQ QHW FDVK ßRZV JHQHUDWHG IURP RSHUDWLQJ DFWLYLWLHV DUH FDVK RXWßRZV UHODWLQJ WR QRQ-UHFXUULQJ LWHPV RI €6 5P (20 5: €2 5P) Henderson Group plc Annual Report 2016 1HW FDVK ßRZV JHQHUDWHG IURP RSHUDWLQJ DFWLYLWLHV 3URÞW EHIRUH WD[ $GMXVWPHQWV WR UHFRQFLOH SURÞW EHIRUH WD[ WR QHW FDVK ßRZV JHQHUDWHG IURP RSHUDWLQJ DFWLYLWLHV: – interest expense – share-based payment charges10.2 – intangible amortisation – share of income from associates and joint ventures – impairment of associate4 2 – property and equipment depreciation15 – gain on disposal of seed capital investments – contributions to Group pension schemes in excess of costs recognised – net movements on other provisions – RWKHU ÞQDQFH FKDUJHV – RWKHU ÞQDQFH LQFRPH – seed capital investment impairment – gain on sale of associates7 139.2 3.0 28.3 54.4 (0.5) 2.7 2.9 (0.9) (5.5) 1.1 2.6 (3.4) – – 167.9 11.3 28.9 59.6 (0.1) – 2.6 (11.0) (5.0) 0 4 2.7 (0.2) 1.0 ( 2 4) 1HW FDVK ßRZV JHQHUDWHG IURP RSHUDWLQJ DFWLYLWLHV EHIRUH FKDQJHV LQ RSHUDWLQJ DVVHWV and liabilities Changes in operating assets and liabilities18.3 Net tax paid 223.9 (15.1) (30.1) 245 7 33.5 (9 4) 1HW FDVK ßRZV JHQHUDWHG IURP RSHUDWLQJ DFWLYLWLHV 178.7 269.8 Cash at bank and in hand Cash equivalents 180.2 63.8 308.5 73.1 10.6 – 7.2 – Cash at bank and in hand and cash equivalents 244.0 381.6 10.6 7.2

 


127 18.3 Changes in operating assets and liabilities Group Company 2016 £m 2015 £m 2016 £m 2015 £m 19 Debt instrument in issue Group 2016 Carrying value £m 2016 Fair value £m 2015 Carrying value £m 2015 Fair value £m 2Q 24 0DUFK 20 , WKH *URXS LVVXHG, DW SDU, € 50 0P RI 20 6 1RWHV ZKLFK ZHUH OLVWHG RQ WKH /6(, XQVHFXUHG, XQUDWHG, UHSD\DEOH LQ IXOO RQ 24}0DUFK 20 6 DQG ERUH LQWHUHVW DW D Þ[HG UDWH RI 7 25% SHU DQQXP SD\DEOH VL[ PRQWKO\ 7KH IDLU YDOXH RI WKH 20 6 1RWHV ZDV REWDLQHG E\ DSSO\LQJ D /HYHO YDOXDWLRQ WHFKQLTXH 7KH QRWHV ZHUH UHSDLG LQ IXOO DW WKHLU PDWXULW\ RQ 24 0DUFK 20 6 20 5HWLUHPHQW EHQHÞWV Group 20.1 &KDUDFWHULVWLFV DQG ULVNV DVVRFLDWHG ZLWK WKH UHWLUHPHQW EHQHÞW SODQV 7KH PDLQ GHÞQHG EHQHÞW SHQVLRQ SODQ VSRQVRUHG E\ WKH *URXS LV WKH GHÞQHG EHQHÞW VHFWLRQ RI +HQGHUVRQ *URXS 3HQVLRQ 6FKHPH (+*36), ZKLFK FORVHG WR QHZ PHPEHUV RQ 5 1RYHPEHU 999 7KH VSRQVRU DQG SULQFLSDO HPSOR\HU RI WKH +*36 LV +*, *URXS /LPLWHG DQG WKH SDUWLFLSDWLQJ FRPSDQ\ LV +HQGHUVRQ $GPLQLVWUDWLRQ /LPLWHG 7KH DSSRLQWHG LQYHVWPHQW PDQDJHU IRU WKH ÞQDO VDODU\ VFKHPH LV +HQGHUVRQ *OREDO ,QYHVWRUV /LPLWHG 7KH +*36 LV IXQGHG E\ FRQWULEXWLRQV WR D VHSDUDWHO\ DGPLQLVWHUHG IXQG 7KH DFWXDULDO DGYLVHUV WR WKH +*36 DUH 7RZHUV :DWVRQ %HQHÞWV LQ WKH +*36 DUH EDVHG RQ VHUYLFH DQG ÞQDO VDODU\ 7KH SODQ LV DSSURYHG E\ +05& IRU WD[ SXUSRVHV, DQG LV RSHUDWHG VHSDUDWHO\ IURP WKH *URXS DQG PDQDJHG E\ DQ LQGHSHQGHQW 7UXVWHH ERDUG 7KH 7UXVWHH LV UHVSRQVLEOH IRU SD\PHQW RI WKH EHQHÞWV DQG PDQDJHPHQW RI WKH HGPS assets. The HGPS is subject to UK regulations, which require the Group and Trustee to agree a funding strategy and contribution schedule for the scheme. 7KH WULHQQLDO YDOXDWLRQ RI WKH +*36 DV DW 3 'HFHPEHU 20 4, FDUULHG RXW E\ WKH 7UXVWHHpV LQGHSHQGHQW DFWXDULDO DGYLVHUV, UHYHDOHG D GHÞFLW of £29.0m on a technical provisions basis. As a result, the Group has agreed with the Trustee to fund additional contributions, commencing in -DQXDU\ 20 7 7KH FRQWULEXWLRQ ZLOO EH €8 4P SHU DQQXP DQG ZLOO EH VSUHDG RYHU IRXU \HDUV WR WKH HQG RI 2020 7KHVH SD\PHQWV ZLOO EH PDGH RXW RI FDVK UHVRXUFHV 7R WKH H[WHQW WKDW IXWXUH YDOXDWLRQV UHYHDO DQ DGGLWLRQDO IXQGLQJ GHÞFLW, DGGLWLRQDO FRQWULEXWLRQV PD\ EH UHTXLUHG IURP WKH *URXS 7KH *URXS DOVR KDV D FRQWUDFWXDO REOLJDWLRQ WR SURYLGH FHUWDLQ PHPEHUV RI WKH +*36 ZLWK DGGLWLRQDO GHÞQHG EHQHÞWV RQ DQ XQIXQGHG EDVLV 7KH YDOXDWLRQ RI WKH +*36 XQGHU ,$6 9 o(PSOR\HH %HQHÞWVp LV EDVHG RQ IXOO PHPEHUVKLS GDWD DV DW 3 'HFHPEHU 20 4 DQG XSGDWHG WR WKH DFFRXQWLQJ GDWH E\ DQ LQGHSHQGHQW DFWXDU\ LQ DFFRUGDQFH ZLWK ,$6 9 7KH +*36 DVVHWV DUH VWDWHG DW WKHLU IDLU YDOXHV DV DW 3 'HFHPEHU 20 6 7KH *URXS H[SHFWV WR FRQWULEXWH DSSUR[LPDWHO\ € 6 0P WR WKH +*36 LQ WKH \HDU HQGLQJ 3 'HFHPEHU 20 7 (GHÞQHG EHQHÞW DQG PRQH\ SXUFKDVH VHFWLRQV) EDVHG RQ WKH WULHQQLDO YDOXDWLRQ DV DW 3 'HFHPEHU 20 4, LQFOXVLYH RI WKH DGGLWLRQDO FRQWULEXWLRQV DJUHHG ZLWK WKH WUXVWHHV %HQHÞWV SDLG YLD WKH XQIXQGHG DUUDQJHPHQWV DUH SDLG GLUHFWO\ E\ WKH *URXS DQG DUH H[SHFWHG WR EH €0 3P LQ 20 7 $V ZLWK WKH YDVW PDMRULW\ RI VLPLODU DUUDQJHPHQWV LQ WKH 8QLWHG .LQJGRP, WKH *URXS XOWLPDWHO\ XQGHUZULWHV WKH ULVNV UHODWLQJ WR WKHVH GHÞQHG EHQHÞW SODQV 7KHVH ULVNV LQFOXGH LQYHVWPHQW ULVNV DQG GHPRJUDSKLF ULVNV, VXFK DV WKH ULVN RI PHPEHUV OLYLQJ ORQJHU WKDQ H[SHFWHG Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 6HQLRU, XQUDWHG Þ[HG UDWH QRWHV GXH 24 0DUFK 20 6 (20 6 1RWHV) – – 49 9 5 4 &KDQJHV LQ 2(,& DQG XQLW WUXVW GHEWRUV DQG FUHGLWRUV (,QFUHDVH)/GHFUHDVH LQ RWKHU DVVHWV (Decrease)/increase in provisions and other liabilities (3.4) (2.5) (9.2) (0.1) 29.6 4 0 – (19.1) 59.1 – (13.3) (75.9) Changes in operating assets and liabilities (15.1) 33.5 40.0 (89.2)

 


128 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 20.2 $PRXQWV UHFRJQLVHG LQ WKH ÞQDQFLDO VWDWHPHQWV 5HWLUHPHQW EHQHÞW DVVHWV DQG REOLJDWLRQV UHFRJQLVHG LQ WKH &RQVROLGDWHG 6WDWHPHQW RI )LQDQFLDO 3RVLWLRQ 2016 £m 2015 £m Pension service cost recognised in the Consolidated Income Statement 2016 £m 2015 £m Actuarial gains/(losses) recognised in the Consolidated Statement of Comprehensive Income 2016 £m 2015 £m 5HFRQFLOLDWLRQ RI SUHVHQW YDOXH RI GHÞQHG EHQHÞW REOLJDWLRQV 2016 £m 2015 £m 5HFRQFLOLDWLRQ RI IDLU YDOXH RI GHÞQHG EHQHÞW VFKHPH DVVHWV 2016 £m 2015 £m Henderson Group plc Annual Report 2016 At 1 January ,QWHUHVW FUHGLW Administration costs Actuarial gains/(losses) arising from scheme assets Contributions %HQHÞW SD\PHQWV 595.1 22.0 (1.0) 114.3 2.1 (22.6) 613.0 21.7 (0.9) (20.6) 2.1 (20.2) At 31 December 709.9 595.1 At 1 January Current service cost ,QWHUHVW FRVW Actuarial (gains)/losses arising from: – experience – demographics – FKDQJHV LQ ÞQDQFLDO DVVXPSWLRQV %HQHÞW SD\PHQWV 457.5 0.9 16.7 (2.0) (1.3) 100.3 (22.6) 479 4 1.0 16.9 (3.8) – (15.6) (20 4) At 31 December 549.5 4575 Actuarial gains/(losses) Tax at source 17.3 (8.4) (1.2) (1.7) Net gain/(loss) recognised in the Consolidated Statement of Comprehensive Income 8.9 (2.9) &KDUJHV/(FUHGLWV) UHODWLQJ WR GHÞQHG EHQHÞW DQG XQDSSURYHG VFKHPHV Administration costs Current service cost Net interest credit 1.0 0.9 (5.3) 0.9 1.0 (4 8) Contributions to money purchase members’ accounts (3.4) 5.5 (2.9) 5.3 Net charge to the Consolidated Income Statement 2.1 2 4 5HWLUHPHQW EHQHÞW DVVHWV UHFRJQLVHG LQ WKH &RQVROLGDWHG 6WDWHPHQW RI )LQDQFLDO 3RVLWLRQ Henderson Group Pension Scheme 145.9 130.0 5HWLUHPHQW EHQHÞW REOLJDWLRQV UHFRJQLVHG LQ WKH &RQVROLGDWHG 6WDWHPHQW RI )LQDQFLDO 3RVLWLRQ Henderson Group unapproved pension scheme (9.6) (8.1) 1HW UHWLUHPHQW EHQHÞW DVVHW UHFRJQLVHG LQ WKH &RQVROLGDWHG 6WDWHPHQW RI )LQDQFLDO 3RVLWLRQ 136.3 121.9

 


 

129 1HW UHWLUHPHQW EHQHÞW DVVHW UHFRJQLVHG LQ WKH &RQVROLGDWHG 6WDWHPHQW RI )LQDQFLDO 3RVLWLRQ 2016 £m 2015 £m Pension scheme assets The major categories of assets in the HGPS are as follows: 2016 £m 2015 £m 7KH DVVHWV RI WKH +*36 DUH DOORFDWHG WR D JURZWK SRUWIROLR DQG ERQG DVVHWV. 7KH PDMRULW\ RI WKH JURZWK SRUWIROLR LV LQYHVWHG LQ SRROHG GLYHUVLÞHG funds, with the objective of achieving a level of growth greater than the bond portfolio. The bond portfolio is managed on a segregated basis, ZLWK WKH SULPDU\ REMHFWLYH RI PHHWLQJ WKH FDVK ßRZV DV WKH\ PDWXUH. The current strategic allocation is broadly 25% growth assets and 75% bond assets. For strategic purposes, the buy and maintain credit fund is split evenly between a growth portfolio and bond assets. The Trustee intends to increase the allocation to bond assets as the funding level of the +*36 (FDOFXODWHG RQ D oVHOI-VXIÞFLHQF\p EDVLV) LPSURYHV. $OO RI WKH +*36 DVVHWV DUH TXRWHG LQ DFWLYH PDUNHWV. 20.3 Actuarial assumptions Financial assumptions )RU WKH SXUSRVH RI WKH IROORZLQJ GLVFORVXUHV, WKH UHWLUHPHQW EHQHÞW DUUDQJHPHQWV KDYH EHHQ FRPELQHG RQ WKH JURXQGV RI PDWHULDOLW\: 2016 2015 % per annum % per annum $PRXQW, WLPLQJ DQG XQFHUWDLQW\ RI IXWXUH FDVK ßRZV 7KH DSSUR[LPDWH LPSDFW RI FKDQJLQJ WKHVH PDLQ DVVXPSWLRQV RQ WKH GHÞQHG EHQHÞW REOLJDWLRQ DW 31 'HFHPEHU 2016 LV DV IROORZV: • UHGXFLQJ WKH GLVFRXQW UDWH E\ 0.1% SHU DQQXP ZRXOG LQFUHDVH WKH ,$6 19 GHÞQHG EHQHÞW REOLJDWLRQ E\ €11.0P (2015: €9.0P); • LQFUHDVLQJ 53, DQG &3, LQßDWLRQ DVVXPSWLRQV E\ 0.1% SHU DQQXP ZRXOG LQFUHDVH WKH ,$6 19 GHÞQHG EHQHÞW REOLJDWLRQ E\ €3.0P (2015: €3.0P); and • LQFUHDVLQJ WKH OLIH H[SHFWDQF\ RI PHPEHUV E\ RQH \HDU ZRXOG LQFUHDVH WKH ,$6 19 GHÞQHG EHQHÞW REOLJDWLRQ E\ €16.0P (2015: €14.0P). There would also be an impact on the current service cost, but given the small active population in these plans this is likely to be immaterial. The above sensitivity analysis may not be representative of the actual change, as in practice the changes in assumptions may not occur in LVRODWLRQ. 7KH ZHLJKWHG DYHUDJH GXUDWLRQ RI WKH GHÞQHG EHQHÞW REOLJDWLRQV LV DSSUR[LPDWHO\ 19 \HDUV (2015: 19 \HDUV). Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Discount rate Rate of increase in pensionable salaries ,QßDWLRQ (53,) ,QßDWLRQ (&3,) 2.9 2.5 3.2 2.1 3.8 2.5 3.0 2.0 Post-retirement mortality (expectancy of life): years years Male currently aged 60 Female currently aged 60 Male aged 60 in 15 years Female aged 60 in 15 years 28.6 29.7 29.9 31.2 28.5 30.0 30.0 31.5 Growth portfolio – GLYHUVLÞHG JURZWK Bond assets Buy and maintain credit fund Cash and cash equivalents 147.4 529.7 31.8 1.0 129.9 435.5 28.4 1.3 At 31 December 709.9 595.1 3UHVHQW YDOXH RI GHÞQHG EHQHÞW REOLJDWLRQV )DLU YDOXH RI GHÞQHG EHQHÞW VFKHPH DVVHWV Tax at source (549.5) 709.9 (24.1) (457.5) 595.1 (15.7) At 31 December 136.3 121.9

 


130 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 21 Provisions Group 9RLG SURSHUWLHV £m Other £m Total £m At 1 January 2016 Additions Finance charge Utilised Released ,PSDFW RI IRUHLJQ H[FKDQJH PRYHPHQW 10.3 – 0.5 (0.8) (0.1) – 1.6 1.1 – (0.4) (0.4) 0.2 11.9 1.1 0.5 (1.2) (0.5) 0.2 Non-current Current 8.0 1.9 1.2 0.9 9.2 2.8 Void properties 7KH YRLG SURSHUWLHV SURYLVLRQ UHßHFWV WKH QHW SUHVHQW YDOXH RI WKH H[FHVV RI OHDVH UHQWDOV DQG RWKHU SD\PHQWV RQ 1HZ 6WDU DQG *DUWPRUH properties with onerous contracts, over the amounts expected to be recovered from subletting these properties. The discounting of expected FDVK ßRZV ZLOO EH XQZRXQG GXULQJ WKH WHUP RI WKH XQGHUO\LQJ OHDVHV (PD[LPXP RI QLQH \HDUV) DV D YRLG SURSHUW\ ÞQDQFH FKDUJH WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW. Other Other provisions relate to issues which have arisen as a result of litigation and obligations during the course of the Group’s business activities. $OO SURYLVLRQV UHßHFW WKH *URXSpV FXUUHQW HVWLPDWHV RI DPRXQWV DQG WLPLQJV. Henderson Group plc Annual Report 2016 At 31 December 2016 9.92.112.0 At 31 December 2016 9.92.112.0

 


131 22 Deferred tax Group Deferred tax assets/(liabilities) recognised by the Group and movements therein are as follows: Accelerated Other temporary differences £m capital allowances £m Retirement EHQHÞWV £m ,QWDQJLEOH assets £m Compensation plans £m Total £m At 1 January 2015 Acquisitions through business combinations (&KDUJH)/FUHGLW WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW Charge to the Consolidated Statement of &RPSUHKHQVLYH ,QFRPH Credit to the Consolidated Statement of Changes in Equity ,PSDFW RI IRUHLJQ H[FKDQJH PRYHPHQWV 1.0 – (0.4) (18.4) – 1.8 (18.6) (4.8) 10.6 30.7 – (2.6) 2.4 – 0.7 (2.9) (4.8) 10.1 – (0.1) – – – (0.1) – – – – – (0.4) 3.7 – – 0.3 3.7 (0.1) At 31 December 2015 Acquisitions through business combinations (&KDUJH)/FUHGLW WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW Credit to the Consolidated Statement of &RPSUHKHQVLYH ,QFRPH Charge to the Consolidated Statement of Changes in Equity ,PSDFW RI IRUHLJQ H[FKDQJH PRYHPHQWV 0.6 – (0.3) (16.7) – 1.0 (13.2) – 9.6 31.8 – (4.7) 3.4 0.2 (5.1) 5.9 0.2 0.5 – 0.2 – – 0.2 0.4 – – – – – (0.6) (9.2) 0.6 – 0.6 (9.2) 0.6 Deferred tax assets and liabilities in the above summary represent gross assets and liabilities as follows: Assets £m Liabilities £m Total £m At 31 December 2015 37.5 (31.6) 5.9 Of the Group’s total deferred tax assets and liabilities, £0.8m (2015: £0.6m) and £2.1m (2015: £8.7m), respectively, are anticipated to be received/settled within 12 months of balance sheet date. The remaining amounts are anticipated to be received or settled after 12 months of balance sheet date. The future reduction in the UK corporation tax rate from 18% to 17% with effect from 1 April 2020 was substantively enacted in 2016. This tax rate change has affected the Group’s deferred tax assets and deferred tax liabilities by £0.2m and £1.2m respectively. At the reporting date, the Group has unused capital losses in respect of which no deferred tax has been recognised as utilisation of the capital losses is dependent on future taxable capital gains. The unrecognised deferred tax asset in respect of capital losses carried forward is £13.3m (2015: €14.1P), RI ZKLFK €0.8P (2015: €0.7P) ZLOO H[SLUH LQ WZR \HDUV (2015: WKUHH \HDUV) LI XQXVHG. 7KH UHPDLQLQJ FDSLWDO ORVVHV KDYH QR expiry date. At the reporting date, the Group has unused tax losses in respect of which no deferred tax has been recognised as utilisation of the tax losses LV GHSHQGHQW RQ WKH H[LVWHQFH RI IXWXUH WD[DEOH SURÞWV. 7KH XQUHFRJQLVHG GHIHUUHG WD[ DVVHW LQ UHVSHFW RI WD[ ORVVHV FDUULHG IRUZDUG LV €1.8P (2015: €1.4P) DQG WKHVH ORVVHV KDYH QR H[SLU\ GDWH. Deferred tax is not recognised in respect of taxable temporary differences associated with the Group’s investments in overseas subsidiaries, branches, associates and joint ventures where the Group controls the timing of the reversal of the temporary differences and where the reversal of the temporary differences is not anticipated in the foreseeable future (2015: £nil). Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION At 31 December 2016 22.0(23.6)(1.6) At 31 December 2016 0.3(15.5)(4.2)18.5(0.7)(1.6)

 


132 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 23 Trade and other payables Group Company 2016 £m 2016 £m 2015 £m 2015 £m 24 Share capital Group and Company 24.1 Authorised share capital 2016 £m 2015 £m 24.2 Allotted share capital Allotted, called up and fully paid equity shares: Shares in issue no. £m At 1 January 2015 ,VVXH RI VKDUHV IRU VKDUH VFKHPHV Cancellation of shares 1,139,167,195 1,687,715 (9,012,801) 142.4 0.2 (1.1) During 2015, the Company purchased and cancelled 9.0m shares at a cost of £25.0m through a share buyback programme. The Company has not purchased and cancelled any shares under share buyback programmes during 2016. All ordinary shares in issue carry the same rights to receive dividends and other distributions declared, made or paid by the Company. 24.3 Capital management The Directors consider equity attributable to owners of the parent to represent Group capital. The Directors manage the Group’s capital structure on an ongoing basis. Changes to the Group’s capital structure can be affected by adjusting the dividend policy, returning capital to shareholders or issuing new shares and other forms of capital. The Group’s policy with respect to capital management is to safeguard the Group’s ability to continue as a going concern, maximise shareholder value and to maintain an optimal capital structure to reduce the cost of capital whilst ensuring compliance with all regulatory capital requirements. Certain subsidiaries of the Group are subject to regulatory oversight and inspection by the FCA and other international regulatory bodies. The Board receives regular updates on headroom over regulatory capital and approves key decisions that may impact the future capital position of the Group. All regulated entities within the Group complied with externally imposed regulatory capital requirements during the period. 7KH *URXS PDLQWDLQV D SURJUHVVLYH GLYLGHQG SROLF\, ZLWK WKH %RDUG DFWLYHO\ UHYLHZLQJ DQG VHWWLQJ LQWHULP DQG ÞQDO GLYLGHQGV LQ OLQH ZLWK EXVLQHVV performance and outlook. Henderson Group plc Annual Report 2016 At 31 December 2015 and 31 December 2016 1,131,842,109141.5 2,194,910,776 (2015: 2,194,910,776) RUGLQDU\ VKDUHV RI 12.5 SHQFH HDFK 274.4 274.4 2(,& DQG XQLW WUXVW FUHGLWRUV Other creditors Accruals Deferred income Amounts owed to subsidiaries 111.6 12.4 200.0 0.4 – 77.7 11.6 211.7 1.0 – – 1.2 3.5 – 35.7 – 0.9 0.2 – 20.1 324.4 302.0 40.4 21.2 Non-current Current 5.0 319.4 10.7 291.3 – 40.4 – 21.2 324.4 302.0 40.4 21.2

 


133 25 Reserves Group and Company The Consolidated Statement of Changes in Equity and Company Statement of Changes in Equity provide details of movements in equity for the Group and Company respectively. Nature and purpose of reserves Share premium Share premium records the difference between the nominal value of shares issued and the full value of the consideration received or the market price on the day of issue. Own shares held 7RWDO RZQ VKDUHV KHOG KDG D FRVW RI €92.0P (2015: €106.9P) DQG D PDUNHW YDOXH RI €91.5P (2015: €143.3P) DV DW 31 'HFHPEHU 2016 DQG FRQVWLWXWHG 3.4% (2015: 4.1%) RI WKH &RPSDQ\pV LVVXHG VKDUH FDSLWDO DV DW WKDW GDWH. 2016 2015 no. of shares no. of shares The above trusts are used by the Group to operate the share-based compensation schemes as set out in note 10. Shares are distributed to employees as and when they vest or the holding period ends, in line with the terms of each scheme, under the administration of the trustees. ACS HR Solutions Share Plan Services (Guernsey) Limited, a Conduent Company, administers all of the above trusts. Translation reserve The translation reserve comprises differences on exchange arising from the translation of subsidiaries, whose functional currency is not GBP to period end rates. Revaluation reserve The revaluation reserve comprises the amount of any unrealised gain or loss recognised in the Consolidated Statement of Comprehensive ,QFRPH LQ UHODWLRQ WR DYDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV ZKLFK DUH QRW SDUW RI D GHVLJQDWHG KHGJH UHODWLRQVKLS. Upon disposal or impairment of these assets, amounts previously recognised in the revaluation reserve are recycled out and the cumulative DPRXQW RI WKH JDLQ RU ORVV LV UHFRJQLVHG LQ WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW. 3URÞW DQG ORVV UHVHUYH 7KH SURÞW DQG ORVV UHVHUYH FRPSULVHV: • UHVXOWV UHFRJQLVHG WKURXJK WKH &RQVROLGDWHG DQG &RPSDQ\ ,QFRPH 6WDWHPHQW; • DFWXDULDO JDLQV DQG ORVVHV UHFRJQLVHG LQ WKH &RQVROLGDWHG 6WDWHPHQW RI &RPSUHKHQVLYH ,QFRPH, QHW RI WD[; • dividends paid to equity shareholders; • transactions relating to share-based payments; and • amounts paid in excess of the nominal value of the Company’s shares under share buyback programmes. 26 Financial risk management Financial risk management objectives and policies )LQDQFLDO DVVHWV SULQFLSDOO\ FRPSULVH LQYHVWPHQWV LQ HTXLW\ VHFXULWLHV, Þ[HG LQFRPH LQYHVWPHQWV, VKRUW-WHUP LQYHVWPHQWV, WUDGH DQG RWKHU receivables and cash and cash equivalents. Financial liabilities comprise trade and other payables, non-controlling interests in consolidated IXQGV, GHULYDWLYHV, GHIHUUHG FRQVLGHUDWLRQ RQ EXVLQHVV FRPELQDWLRQV DQG SURYLVLRQV. 7KH PDLQ ULVNV DULVLQJ IURP ÞQDQFLDO LQVWUXPHQWV DUH SULFH, LQWHUHVW UDWH, OLTXLGLW\, IRUHLJQ FXUUHQF\ DQG FUHGLW. (DFK RI WKHVH ULVNV LV H[DPLQHG LQ GHWDLO EHORZ. 7KH *URXS PRQLWRUV ÞQDQFLDO ULVNV RQ a consolidated basis and intra-group balances are settled when it is deemed appropriate for both parties to the transaction. The Company is QRW H[SRVHG WR PDWHULDO ÞQDQFLDO ULVN DQG VHSDUDWH GLVFORVXUHV IRU WKH &RPSDQ\ KDYH QRW EHHQ LQFOXGHG. The Group has designed a framework to manage the risks of its business and to ensure that the Directors have in place risk management practices appropriate for a listed company. The management of risk within the Group is governed by the Board and overseen by the Board Risk Committee. Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Henderson Employee Trust 2000 ++* SOF (PSOR\HH 7UXVW 2004 Henderson Employee Trust 2009 Henderson Group plc Employee Trust 2009 ACS HR Solutions UK Limited Henderson Employee Share Ownership Trust 2,053,186 – 25,602,569 7,459,668 1,167,944 2,565,382 2,115,862 10,000 27,826,741 12,180,438 1,119,140 3,035,913 38,848,749 46,288,094

 


134 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 26.1 Price risk 3ULFH ULVN LV WKH ULVN WKDW D GHFOLQH LQ WKH YDOXH RI DVVHWV DGYHUVHO\ LPSDFWV RQ WKH SURÞWDELOLW\ RI WKH *URXS. The Group is exposed to price risk in respect of its direct investment in seed capital investments in Group funds (being available-for-sale ÞQDQFLDO DVVHWV DQG ÞQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV) DQG FRQVROLGDWHG VWUXFWXUHG HQWLWLHV. 6HHG FDSLWDO LQYHVWPHQWV YDU\ LQ GXUDWLRQ, GHSHQGLQJ RQ WKH QDWXUH RI WKH LQYHVWPHQW, ZLWK D W\SLFDO UDQJH RI RQH \HDU WR WKUHH \HDUV IRU HTXLW\, Þ[HG LQFRPH DQG PXOWL-DVVHW products and approximately seven years for private equity products. The total market value of the Group’s direct investment in seed capital investments at 31 December 2016, was £123.8m (2015: £117.3m). 0DQDJHPHQW PRQLWRUV H[SRVXUHV WR SULFH ULVN RQ DQ RQJRLQJ EDVLV. 6LJQLÞFDQW PRYHPHQWV LQ LQYHVWPHQW YDOXHV DUH PRQLWRUHG RQ D GDLO\ EDVLV. Where appropriate, management will hedge price risk. At 31 December 2016, investments with a market value of £103.3m (2015: £96.7m) were hedged against price risk through the use of CFDs, CDXs, futures and TRSs. Price risk sensitivity analysis on seed capital investments 2016 2015 Consolidated Statement of Comprehensive Income £m Consolidated Statement of Comprehensive ,QFRPH £m Consolidated Income Statement £m Consolidated ,QFRPH Statement £m 26.2 Interest rate risk ,QWHUHVW UDWH ULVN LV WKH ULVN WKDW WKH *URXS ZLOO VXVWDLQ ORVVHV IURP DGYHUVH PRYHPHQWV LQ LQWHUHVW UDWHV, HLWKHU WKURXJK D PLVPDWFK RI LQWHUHVW-bearing assets and liabilities, or through the effect such movements have on the value of interest-bearing instruments. The Group is exposed to interest rates on banking deposits held in the ordinary course of business. However, likely possible movements in LQWHUHVW UDWHV RQ WKH *URXSpV EDQN DFFRXQWV GR QRW FDXVH D PDWHULDO GLIIHUHQFH WR WKH &RQVROLGDWHG ,QFRPH 6WDWHPHQW. 6HHG FDSLWDO LQYHVWPHQWV are not currently exposed to interest rate risk. This exposure is monitored by management on a continuous basis. 26.3 Liquidity risk Liquidity risk is the risk that the Group may be unable to meet its payment obligations as they fall due. *URXS OLTXLGLW\ LV PDQDJHG RQ D GDLO\ EDVLV E\ WKH *URXSpV )LQDQFH IXQFWLRQ, WR HQVXUH WKDW WKH *URXS KDV VXIÞFLHQW FDVK RU KLJKO\ OLTXLG DVVHWV DYDLODEOH WR PHHW LWV OLDELOLWLHV. )LQDQFH DOVR FRQWUROV DQG PRQLWRUV WKH XVH RI WKH *URXSpV QRQ-RSHUDWLQJ FDSLWDO UHVRXUFHV. ,W LV WKH *URXSpV SROLF\ to ensure that it has access to funds to cover all forecast commitments for at least the next 12 months. 7KH PDWXULW\ GDWHV RI WKH *URXSpV ÞQDQFLDO OLDELOLWLHV DQG REOLJDWLRQV DUH DV IROORZV: At 31 December 2016 Carrying value in the Consolidated Within 1 year or repayable on demand £m Statement of Financial Position £m Within 2-5 years £m After 5 years £m Total £m Trade and other payables (excluding deferred income) )LQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV Provisions 319.0 113.2 3.1 5.0 39.5 4.9 – – 5.1 324.0 152.7 13.1 324.0 149.3 12.0 At 31 December 2015 Carrying value in the Consolidated Statement of Financial Position £m Within 1 year or repayable on demand £m Within 2-5 years £m After 5 years £m Total £m Debt instrument in issue (including interest) Trade and other payables (excluding deferred income and DFFUXHG}GHEW LQWHUHVW) )LQDQFLDO OLDELOLWLHV DW IDLU YDOXH WKURXJK SURÞW RU ORVV Provisions 155.4 – – 155.4 152.9 287.3 98.0 2.6 10.7 26.5 6.6 – – 2.7 298.0 124.5 11.9 298.0 119.3 11.9 543.3 43.8 2.7 589.8 582.1 Henderson Group plc Annual Report 2016 435.349.45.1489.8485.3 Market value movement +/-10% – 3.9 – 4.3

 


135 26.4 Foreign currency risk Foreign currency risk is the risk that the Group will sustain losses through adverse movements in foreign currency exchange rates. The Group is exposed to foreign currency risk through its exposure to non-GBP income, expenses, assets and liabilities of its overseas subsidiaries as well as net assets and liabilities denominated in a currency other than GBP. The currency exposure is managed by monitoring foreign currency positions. The Group uses forward foreign currency contracts to reduce or eliminate the currency exposure on certain LQGLYLGXDO WUDQVDFWLRQV. 7KH *URXS DOVR VHHNV WR XVH QDWXUDO KHGJHV WR UHGXFH H[SRVXUH. :KHUH WKHUH LV D PLVPDWFK RQ PDWHULDO FXUUHQF\ ßRZV DQG WKH WLPLQJ LV UHDVRQDEO\ FHUWDLQ, WKH\ DUH DFWLYHO\ KHGJHG. :KHUH WKHUH LV LQVXIÞFLHQW FHUWDLQW\, WKH FXUUHQF\ LV WUDQVODWHG EDFN LQWR *%3 RQ receipt. Foreign currency risk management is overseen by the Hedge Committee. A rolling programme of forward foreign currency contracts has been implemented to hedge the currency exposures arising from certain seed FDSLWDO LQYHVWPHQWV (EHLQJ DYDLODEOH-IRU-VDOH ÞQDQFLDO DVVHWV DQG ÞQDQFLDO DVVHWV DW IDLU YDOXH WKURXJK SURÞW RU ORVV) DQG FRQVROLGDWHG VWUXFWXUHG HQWLWLHV ZLWK D \HDU HQG QRWLRQDO YDOXH RI 86'134.2P, (858.0P DQG $8'38.0P (2015: 86'130.0P, (857.7P DQG $8'38.3P). Foreign currency risk sensitivity analysis Fund related investments are either denominated in GBP or hedged back to GBP using forward foreign currency contracts based on the *URXSpV KHGJLQJ SROLF\. ,Q DGGLWLRQ, WKHUH DUH XQKHGJHG IRUHLJQ FXUUHQF\ FDVK EDODQFHV DQG QHW WUDGLQJ UHFHLSWV LQ VXEVLGLDULHV RI WKH *URXS. 7KH WDEOH EHORZ LOOXVWUDWHV WKH LPSDFW RI *%3 ZHDNHQLQJ E\ 10% RQ DOO XQKHGJHG ÞQDQFLDO DVVHWV DQG OLDELOLWLHV GHQRPLQDWHG LQ FXUUHQFLHV material to the Group other than GBP. The reverse would be the case if GBP were to strengthen by 10%. Foreign currency sensitivity analysis 2016 2015 Consolidated Statement of Comprehensive Income £m Consolidated Statement of Comprehensive ,QFRPH £m Consolidated Income Statement £m Consolidated ,QFRPH Statement £m 26.5 Credit risk Credit risk is the risk of a counterparty of the Group defaulting on funds deposited with it or the non-receipt of a trade debt. The Group has an established credit policy to ensure that it only transacts with counterparties that are able to meet satisfactory rating requirements. Counterparty limits are reviewed and set centrally by the Credit Risk Committee. Management is responsible for ensuring that it remains within these limits and the Risk function monitors and reports any exceptions to the policy. The Group suffered losses of £nil as a result of trade debtor or counterparty defaults during the year (2015: £3.3m as part of the wind-down of private equity). The Risk function is also responsible for reporting credit exposures to the Board Risk Committee on a quarterly basis and for ensuring that any credit concerns are raised and actions taken to mitigate risks. 7KH WDEOH EHORZ FRQWDLQV DQ DQDO\VLV RI FXUUHQW DQG RYHUGXH GHEWRUV. $OO RWKHU ÞQDQFLDO DVVHWV DUH QRW SDVW GXH. At 31 December 2016 Greater than 0-3 months past due £m 3-6 months past due £m 6-12 months past due £m 12 months past due £m Not past due £m Total £m At 31 December 2015 Greater than 12 months past due £m 0-3 months past due £m 3-6 months past due £m 6-12 months past due £m Not past due £m Total £m $FFUXHG LQFRPH, 2(,& DQG XQLW WUXVW debtors, trade debtors and other debtors 211.0 9.1 – 0.7 0.6 221.4 Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION $FFUXHG LQFRPH, 2(,& DQG XQLW WUXVW debtors, trade debtors and other debtors 257.34.80.30.40.5263.3 US dollar Singaporean dollar Australian dollar Japanese yen Euro 12.74.3 (0.1)1.6 1.9(0.5) 0.20.3 (13.0)1.4 2.53.8 0.4 0.9 1.0(0.1) (0.2) 0.3 (2.9) 1.5

 


136 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 26.5 Credit risk continued The table below contains an analysis of cash and cash equivalents, as rated by Fitch Ratings. $OO RWKHU ÞQDQFLDO DVVHWV RI WKH *URXS DUH JHQHUDOO\ QRW UDWHG. At 31 December 2016 BBB/ not rated £m AAA £m AA £m A £m Total £m At 31 December 2015 BBB/ not rated £m AAA £m AA £m A £m Total £m Cash and cash equivalents 78.0 193.1 96.2 14.3 381.6 27 Leases Group Operating leases 7KH *URXS LV SDUW\ WR SURSHUW\ OHDVHV LQ WKH 8. DQG LQWHUQDWLRQDOO\. $ 20.5 \HDU RSHUDWLQJ OHDVH ZDV HQWHUHG LQWR GXULQJ 2008 RQ 201}%LVKRSVJDWH, /RQGRQ, ZKLFK SURYLGHV IRU UHYLHZV WR RSHQ PDUNHW UHQW RQ HYHU\ ÞIWK DQQLYHUVDU\ RI WKH OHDVH DQG SURYLGHG DQ LQLWLDO UHQW-IUHH SHULRG RI 30 months. The rental expense on this lease is being recognised on a straight-line basis over the lease period. On acquisition of New Star and Gartmore, the Group became party to three further UK material operating leases. These were in relation to 1}.QLJKWVEULGJH *UHHQ, /RQGRQ, 8 /DQFHORW 3ODFH, /RQGRQ DQG 5H[ +RXVH, 4XHHQ 6WUHHW, /RQGRQ. 7KH OHDVH LQ UHVSHFW RI 1 .QLJKWVEULGJH Green expired during the year. At the reporting date, the leases in respect of 8 Lancelot Place and Rex House run for a period of six years and nine years respectively. A void properties provision has been recognised for these leases at the net present value of the net expected future FDVK RXWßRZV (UHIHU WR QRWH 21). 7KH *URXS DOVR KDV SURSHUW\ OHDVHV LQ $XVWUDOLD, 6LQJDSRUH DQG WKH 86$. The future minimum lease payments under non-cancellable operating leases fall due as follows: 2016 £m 2015 £m The total future minimum sublease payments expected to be received under non-cancellable subleases within one year at the reporting date, were £5.0m (2015: £7.0m). 28 Capital commitments Group and Company 7KH DPRXQWV RI FDSLWDO H[SHQGLWXUH FRQWUDFWHG IRU EXW QRW SURYLGHG IRU LQ WKH ÞQDQFLDO VWDWHPHQWV DW 31 'HFHPEHU 2016 DPRXQWHG WR €QLO (2015: £nil). 29 Related party transactions Company Details of transactions between the Company and its controlled entities, which are related parties, together with amounts due from and to these related parties at the reporting date, are disclosed below: 2016 £m 2015 £m Notes Henderson Group plc Annual Report 2016 Transactions with related parties during the year Movements in capital contributions to indirect subsidiary companies Dividends received Net settlement of balances with subsidiary companies Amounts owed by/(to) related parties at 31 December Amounts owed by subsidiary companies17 Amounts owed to subsidiary companies23 2.2 118.8 8.6 15.7 (35.7) (1.0) 277.0 (112.2) 8.7 (20.1) Within one year ,Q WZR WR ÞYH \HDUV LQFOXVLYH $IWHU ÞYH \HDUV 14.6 56.6 59.7 16.1 56.8 72.8 Total 130.9 145.7 Cash and cash equivalents 63.884.182.114.0244.0

 


137 Group 'LVFORVXUHV UHODWLQJ WR LQYHVWPHQWV DFFRXQWHG IRU XVLQJ WKH HTXLW\ PHWKRG DQG *URXS SHQVLRQ VFKHPHV DUH FRYHUHG XQGHU QRWHV 14.2 DQG 20 respectively. Transactions between the Company and its controlled subsidiaries and between controlled subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Compensation of key management personnel (including Directors) The aggregate annual remuneration of Executive Committee members and all Directors, representing key management personnel, is disclosed below for 2016: 2016 £m 2015 £m On 1 January 2016 the population of key management personnel was reduced from 23 people at 31 December 2015 to 16 people. Share-based payments attributable to key management personnel are calculated based on the value of awards that have vested in the year. $V DW 31 'HFHPEHU 2016, WKHUH ZHUH 8.0P XQYHVWHG €QLO FRVW RSWLRQV (2015: 8.9P) DQG 4.6P XQYHVWHG €QLO FRVW VKDUHV RXWVWDQGLQJ (2015:}7.0P) IRU WKLV SRSXODWLRQ. ,Q DGGLWLRQ, WKH YDOXH RI XQYHVWHG XQLWV KHOG LQ IXQGV DW 31 'HFHPEHU 2016 ZDV €3.4P (2015: €3.6P). 30 Contingent liabilities Group The following contingent liabilities existed or may exist at 31 December 2016: • ,Q WKH QRUPDO FRXUVH RI EXVLQHVV, WKH *URXS LV H[SRVHG WR FHUWDLQ OHJDO RU WD[ PDWWHUV, ZKLFK FRXOG LQYROYH OLWLJDWLRQ DQG DUELWUDWLRQ, DQG PD\ UHVXOW in contingent liabilities; • Under the Facilitation Agreement dated 8 December 2010 relating to the merger of the assets of the Henderson Liquid Assets Fund (HLAF) into the Deutsche Managed Sterling Fund, the Group gave: (a) certain tax warranties relating to HLAF; and (b) indemnities against certain losses arising from liabilities of HLAF existing prior to the effective date of the merger, certain warranted statements being untrue and any miscalculation of the net asset value of HLAF in the period prior to the effective date of the merger. These warranties and indemnities are subject WR FHUWDLQ H[FOXVLRQV DQG OLPLWDWLRQV, LQFOXGLQJ D ÞQDQFLDO FDS. 7KH ZDUUDQWLHV UHODWLQJ WR WD[DWLRQ ZLOO H[SLUH RQ 28 )HEUXDU\ 2018 DQG WKH indemnities will expire on 28 February 2017; • 8QGHU WKH 6KDUH 3XUFKDVH $JUHHPHQW GDWHG 13 0D\ 2011 UHODWLQJ WR WKH VDOH RI WKH HQWLUH LVVXHG VKDUH FDSLWDO RI :RUOG,QYHVW 0DQDJHPHQW /WG. to Connor, Clark & Lunn UK Limited (CC&L), the Group gave an indemnity against losses suffered by CC&L arising from prior acts, omissions, OLDELOLWLHV RU REOLJDWLRQV RI 1HZ 6WDU ,QVWLWXWLRQDO 0DQDJHUV /LPLWHG WKDW GR QRW UHODWH WR LWV EXVLQHVV, ZLWK QR H[SLU\ GDWH; • 8QGHU WKH 6KDUH 6DOH $JUHHPHQW GDWHG 1 1RYHPEHU 2011 UHODWLQJ WR WKH VDOH RI WKH HQWLUH LVVXHG VKDUH FDSLWDO RI *DUWPRUH -9 /LPLWHG WR +HUPHV )XQG 0DQDJHUV /LPLWHG, WKH *URXS JDYH DQ LQGHPQLW\ DJDLQVW DQ\ OLDELOLWLHV RI *DUWPRUH -9 /LPLWHG H[LVWLQJ SULRU WR, RU DULVLQJ DV D UHVXOW RI, FRPSOHWLRQ RI WKH VDOH, VXEMHFW WR FHUWDLQ H[FHSWLRQV. 7KH LQGHPQLW\ LV VXEMHFW WR FHUWDLQ H[FOXVLRQV DQG OLPLWDWLRQV, LQFOXGLQJ D ÞQDQFLDO FDS, with no expiry date; • 8QGHU WKH -RLQW 9HQWXUH DQG 6KDUHKROGHU $JUHHPHQW GDWHG 17 0D\ 2012 ZLWK 6HVDPH %DQNKDOO *URXS /LPLWHG (6HVDPH) UHODWLQJ WR 2SWLPXP ,QYHVWPHQW 0DQDJHPHQW /LPLWHG (2,0/) ZKLFK DFWHG DV DXWKRULVHG FRUSRUDWH GLUHFWRU RI DQ 2(,&, WKH *URXS JDYH WR: (D) 6HVDPH DQG 2,0/, FHUWDLQ ZDUUDQWLHV UHODWLQJ WR 2,0/; DQG (E) 2,0/, FHUWDLQ LQGHPQLWLHV LQ UHVSHFW RI ORVVHV WKDW PD\ EH VXIIHUHG E\ 2,0/ DQG ZKLFK DULVH IURP acts, omissions or circumstances occurring prior to completion of that agreement. Those warranties and indemnities are subject to certain exclusions and limitations and will expire on 17 May 2019; • 8QGHU WKH ,PSOHPHQWDWLRQ $JUHHPHQW GDWHG 24 -XQH 2013 UHODWLQJ WR WKH FRQWULEXWLRQ RI WKH +HQGHUVRQ SURSHUW\ EXVLQHVV RXWVLGH 1RUWK $PHULFD (QRQ-86 3URSHUW\ %XVLQHVV) WR D MRLQW YHQWXUH FRPSDQ\ (QDPHG 7,$$ +HQGHUVRQ 5HDO (VWDWH /LPLWHG) ZLWK 7,$$-&5() $VVHW 0DQDJHPHQW ,QF., WKH *URXS JDYH: (D) FHUWDLQ ZDUUDQWLHV DQG WD[ FRYHQDQWV UHODWLQJ WR LWVHOI DQG WKH QRQ-86 3URSHUW\ %XVLQHVV; DQG (E) FHUWDLQ indemnities against (i) certain losses that may be incurred by certain companies prior to completion of the transaction or that may arise as a result of completion, (ii) certain undertakings being breached and (iii) stamp duty being incurred in connection with the transfer of shares in certain companies to be transferred to the joint venture. 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138 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 30 Contingent liabilities continued • 8QGHU WKH $VVHW 3XUFKDVH $JUHHPHQW GDWHG 24 -XQH 2013 UHODWLQJ WR WKH VDOH DQG SXUFKDVH RI WKH +HQGHUVRQ SURSHUW\ EXVLQHVV LQ 1RUWK $PHULFD (86 3URSHUW\ %XVLQHVV) WR 7HDFKHUV ,QVXUDQFH DQG $QQXLW\ $VVRFLDWLRQ RI $PHULFD (7,$$), WKH *URXS JDYH DQ LQGHPQLW\ (ZLWK QR H[SUHVV H[SLU\ GDWH) DJDLQVW FHUWDLQ ORVVHV WKDW PD\ DULVH IURP (L) DQ\ OLDELOLWLHV VSHFLÞFDOO\ H[FOXGHG IURP WKH WUDQVDFWLRQ, (LL) DOO WD[HV RI WKH *URXS not relating to the US Property Business and any pre-completion taxes and (iii) certain employee related liabilities other than any that may be DVVXPHG E\ 7,$$ XQGHU WKH $VVHW 3XUFKDVH $JUHHPHQW; • Under the terms of the Gartmore Pension Scheme wind-up, the indemnity provided by the Group to the Trustee, covering all liabilities and expenses incurred by the Trustee, including actions against it, will continue for 12 years after the signing of the deed of termination on 10 )HEUXDU\ 2014; • 8QGHU WKH 6KDUH 6DOH $JUHHPHQW GDWHG 30 $SULO 2014, DQG FRPSOHWHG RQ 1 'HFHPEHU 2014, UHODWLQJ WR WKH DFTXLVLWLRQ RI +HQGHUVRQ *OREDO ,QYHVWRUV (+ROGLQJV) /LPLWHGpV 50% VKDUHKROGLQJ LQ ,QWULQVLF &LULOLXP ,QYHVWPHQW &RPSDQ\ /LPLWHG (,&,&/) E\ LWV MRLQW YHQWXUH SDUWQHU, ,QWULQVLF )LQDQFLDO 6HUYLFHV /LPLWHG, WKH *URXS LQGHPQLÞHG ,&,&/ IRU (D) 39.7% RI ORVVHV VXIIHUHG SRVW FRPSOHWLRQ UHODWLQJ WR LWV FRQGXFW GXULQJ WKH period when it was a joint venture company; and (b) all losses suffered by it relating to the period before it became a joint venture company; • 8QGHU WKH 6KDUH 6DOH $JUHHPHQW GDWHG 28 $SULO 2015 UHODWLQJ WR WKH DFTXLVLWLRQ E\ HQWLWLHV FRQWUROOHG E\ 7,$$-&5() RI +HQGHUVRQ *OREDO ,QYHVWRUV (+ROGLQJV) /LPLWHGpV UHPDLQLQJ 40% VKDUHKROGLQJ LQ 7,$$ +HQGHUVRQ 5HDO (VWDWH /LPLWHG, WKH *URXS JDYH FHUWDLQ ZDUUDQWLHV UHODWLQJ WR LWVHOI DQG LWV VKDUHKROGLQJ LQ 7,$$ +HQGHUVRQ 5HDO (VWDWH /LPLWHG. 7KHVH ZDUUDQWLHV DUH VXEMHFW WR FHUWDLQ H[FOXVLRQV DQG OLPLWDWLRQV (LQFOXGLQJ D ÞQDQFLDO FDS) DQG ZLOO H[SLUH RQ 1 -XQH 2017; • Under the Agreement and Plan of Merger dated 3 October 2016 (Merger Agreement) relating to the business combination of Henderson Group SOF (+HQGHUVRQ) DQG -DQXV &DSLWDO *URXS ,QF (-DQXV) (WKH 0HUJHU), FXVWRPDU\ UHSUHVHQWDWLRQV DQG ZDUUDQWLHV ZHUH PDGH E\ HDFK RI +HQGHUVRQ and Janus. The Merger Agreement also provides that if Henderson or Janus terminates the Merger Agreement because of a failure of the shareholders of the other party to approve the Merger at the shareholder meeting, Henderson or Janus, as the case may be, will reimburse the other party for its actual out-of-pocket fees and expenses subject to a cap of US$10 million and that, upon termination of the Merger Agreement XQGHU VSHFLÞHG FLUFXPVWDQFHV, LQFOXGLQJ: (L) D FKDQJH LQ WKH UHFRPPHQGDWLRQ RI WKH +HQGHUVRQ %RDUG RU WKH -DQXV %RDUG; RU (LL) D WHUPLQDWLRQ RI the Merger Agreement by Henderson or Janus, because of a failure of the shareholders of the other party to approve the Merger or because the Merger is not completed by 30 September 2017, in each case at a time when there was an offer or proposal for an alternative transaction with respect to such party (and such party enters into or completes an alternative transaction within a 12-month tail period), Henderson or Janus, as WKH FDVH PD\ EH, ZLOO SD\ WR WKH RWKHU SDUW\ D WHUPLQDWLRQ IHH HTXDO WR 86$34 PLOOLRQ LQ FDVK. 7KHUH DUH QR RWKHU FLUFXPVWDQFHV LQ ZKLFK D termination fee or indemnity would become payable in respect of a party’s breach of a representation or warranty; and • 8QGHU WKH )DFLOLWDWLRQ $JUHHPHQW GDWHG 1 1RYHPEHU 2016 UHODWLQJ WR WKH WUDQVIHU RI WKH LQYHVWPHQW EXVLQHVV FDUULHG RXW E\ +HQGHUVRQpV 9RODQWLV WHDP (WKH 9RODQWLV %XVLQHVV) WR /RPEDUG 2GLHU $VVHW 0DQDJHPHQW ((XURSH) /LPLWHG (/2), +HQGHUVRQ *OREDO ,QYHVWRUV (+ROGLQJV) /LPLWHG (+*,(+)/) JDYH FHUWDLQ ZDUUDQWLHV UHODWLQJ WR LWVHOI DQG WKH 9RODQWLV %XVLQHVV. 7KHVH ZDUUDQWLHV DUH VXEMHFW WR FHUWDLQ H[FOXVLRQV DQG OLPLWDWLRQV (LQFOXGLQJ D ÞQDQFLDO FDS) DQG ZLOO H[SLUH 30 PRQWKV IURP WKH FRPSOHWLRQ GDWH (ZKLFK LV H[SHFWHG WR EH LQ WKH ÞUVW TXDUWHU RI 2017). 7KH )DFLOLWDWLRQ $JUHHPHQW DOVR FRQWDLQV DQ LQGHPQLW\ IURP +*,(+)/ LQ IDYRXU RI /2 DJDLQVW DQ\ OLDELOLWLHV WKDW DULVH LQ FRQQHFWLRQ ZLWK DQ\ DFW RU RPLVVLRQ RI Henderson prior to the completion date in respect of any contracts that are novated to LO. $V DW WKH GDWH RI DSSURYDO RI WKH 2016 ÞQDQFLDO VWDWHPHQWV, WKH *URXS DQG &RPSDQ\ QHLWKHU IRUHVHH QRU KDYH WKH\ EHHQ QRWLÞHG RI DQ\ PDWHULDO claims under outstanding warranties and indemnities from the above-mentioned agreements. 31 Movements in controlled entities Group There have been no acquisitions or disposals of controlled entities during the year ended 31 December 2016. 32 Events after the reporting date Group On 3 February 2017, the Group renewed its £30.0m revolving credit facility. Currently, there are no amounts drawn down. 7KH %RDUG KDG QRW, DV DW 8 )HEUXDU\ 2017, EHLQJ WKH GDWH RQ ZKLFK WKH ÞQDQFLDO VWDWHPHQWV ZHUH DSSURYHG, UHFHLYHG DQ\ LQIRUPDWLRQ FRQFHUQLQJ VLJQLÞFDQW FRQGLWLRQV LQ H[LVWHQFH DW WKH UHSRUWLQJ GDWH, ZKLFK KDV QRW EHHQ UHßHFWHG LQ WKH ÞQDQFLDO VWDWHPHQWV DV SUHVHQWHG. Henderson Group plc Annual Report 2016

 


 

139 33 Subsidiaries of the Group Group 7KH VXEVLGLDULHV RI WKH *URXS, H[FOXGLQJ WKH GLUHFWO\ KHOG VXEVLGLDULHV RI WKH &RPSDQ\, DV GHWDLOHG LQ QRWH 14.1, DUH DV IROORZV: Country of incorporation and principal place of operation Functional currency Percentage owned 2016 Principal activity Advizas Limited22 UK GBP 100% Company in liquidation Alphagen Capital Limited1 UK GBP 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV &/2) ,, 8. /LPLWHG22 UK GBP 100% Company in liquidation Gartmore Group Limited2 &D\PDQ ,VODQGV GBP 100% Holding company *DUWPRUH ,QYHVWPHQW /LPLWHG1 UK GBP 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV *DUWPRUH ,QYHVWPHQW 0DQDJHPHQW /LPLWHG1 UK GBP 100% Holding company *DUWPRUH ,QYHVWPHQW 6HUYLFHV *PE+3 Germany EUR 100% Company in liquidation *DUWPRUH ,QYHVWPHQW 6HUYLFHV /LPLWHG1 UK GBP 100% Holding company Gartmore Services Limited4 Jersey GBP 100% Professional services Geneva Capital Management LLC7 USA USD 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV Gibran Securities Pty Limited23 Australia AUD 100% Holding company *.,./. 1RPLQHHV /LPLWHG22 UK GBP 100% Company in liquidation H3 Global Advisors Limited22 UK GBP 100% Company in liquidation H3 Global Advisors Pty Limited6 Australia AUD 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV Henderson Administration Limited1 UK GBP 100% Administrative services Henderson AE Pty Limited6 Australia AUD 100% Company in liquidation +HQGHUVRQ $), 3W\ /LPLWHG6 Australia AUD 100% Company in liquidation +HQGHUVRQ $OWHUQDWLYH ,QYHVWPHQW $GYLVRU /LPLWHG1 UK GBP 100% Holding company Henderson Asset Management Limited1 UK GBP 100% Holding company Henderson Equity Holdings LLC7 USA USD 100% Holding company Henderson Equity Partners (GP) Limited8 UK GBP 100% General partner Henderson Equity Partners Funds Limited4 Jersey GBP 100% ,QYHVWPHQW KROGLQJ FRPSDQ\ +HQGHUVRQ (TXLW\ 3DUWQHUV ,QGLD 3ULYDWH /LPLWHG10 ,QGLD ,15 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV Henderson Equity Partners Jersey (GP) Limited4 Jersey GBP 100% General partner Henderson Equity Partners Limited1 UK GBP 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV Henderson Finances22 UK GBP 100% Company in liquidation Henderson Fund Management (Luxembourg) SA11 Luxembourg EUR 100% Company in liquidation Henderson Fund Management Limited1 UK GBP 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV Henderson Global Group Limited5 ,UHODQG GBP 100% Holding company +HQGHUVRQ *OREDO ,QYHVWRUV ($XVWUDOLD) )XQGV 0DQDJHPHQW Limited6 Australia AUD 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ *OREDO ,QYHVWRUV ($XVWUDOLD) ,QVWLWXWLRQDO )XQGV Management Limited6 Australia AUD 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ *OREDO ,QYHVWRUV ($XVWUDOLD) /LPLWHG6 Australia AUD 100% Administrative services +HQGHUVRQ *OREDO ,QYHVWRUV (%UDQG 0DQDJHPHQW) 6DUO13 Luxembourg GBP 100% ,QWHOOHFWXDO SURSHUW\ +HQGHUVRQ *OREDO ,QYHVWRUV (+ROGLQJV) /LPLWHG1 UK GBP 100% Holding company +HQGHUVRQ *OREDO ,QYHVWRUV (+RQJ .RQJ) /LPLWHG14 Hong Kong HKD 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ *OREDO ,QYHVWRUV (,QWHUQDWLRQDO +ROGLQJV) %915 Netherlands EUR 100% Holding company +HQGHUVRQ *OREDO ,QYHVWRUV (,UHODQG) /LPLWHG12 ,UHODQG EUR 100% Company in liquidation +HQGHUVRQ *OREDO ,QYHVWRUV (-DSDQ) /LPLWHG16 Japan JPY 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ *OREDO ,QYHVWRUV (1RUWK $PHULFD) ,QF7 USA USD 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ *OREDO ,QYHVWRUV (6FKZHL]) $*17 Switzerland CHF 100% Marketing services +HQGHUVRQ *OREDO ,QYHVWRUV (6LQJDSRUH) /LPLWHG18 Singapore SGD 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ *OREDO ,QYHVWRUV $VVHW 0DQDJHPHQW /LPLWHG1 UK GBP 100% Holding company +HQGHUVRQ *OREDO ,QYHVWRUV %915 Netherlands EUR 100% Marketing services +HQGHUVRQ *OREDO ,QYHVWRUV (TXLW\ 3ODQQLQJ ,QF7 USA USD 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ *OREDO ,QYHVWRUV *HQHYD (/X[HPERXUJ) Finance SA13 Luxembourg USD 100% *URXS ÞQDQFLQJ +HQGHUVRQ *OREDO ,QYHVWRUV *HQHYD )LQDQFH /LPLWHG1 UK USD 100% Holding company +HQGHUVRQ *OREDO ,QYHVWRUV /LPLWHG1 UK GBP 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ *OREDO ,QYHVWRUV 13& +ROGLQJV //&7 USA USD 100% Holding company +HQGHUVRQ +ROGLQJV *URXS %915 Netherlands GBP 100% Holding company Henderson Holdings Group Limited1 UK GBP 100% Holding company Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


140 FINANCIAL STATEMENTS 1RWHV WR WKH ÞQDQFLDO VWDWHPHQWV (*URXS DQG &RPSDQ\) continued 33 Subsidiaries of the Group continued Country of incorporation and Functional Percentage principal place of operation currency owned 2016 Principal Activity Henderson Holdings Limited1 UK GBP 100% Holding company +HQGHUVRQ ,QWHUQDWLRQDO *3 //&7 USA USD 100% General partner +HQGHUVRQ ,QWHUQDWLRQDO ,QF7 USA USD 100% Holding company +HQGHUVRQ ,QYHVWPHQW &RQVXOWLQJ (%HLMLQJ) /LPLWHG19 China CNY 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ ,QYHVWPHQW )XQGV /LPLWHG1 UK GBP 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV +HQGHUVRQ ,QYHVWPHQW 0DQDJHPHQW /LPLWHG1 UK GBP 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV Henderson Management SA13 Luxembourg USD 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV Henderson Nominees Limited1 UK GBP 100% Dormant company Henderson Secretarial Services Limited1 UK GBP 100% Company secretarial services Henderson UK Finance Limited 22 UK GBP 100% Company in liquidation Henderson Unit Trusts Limited1 UK GBP 100% Dormant company HEP (GP) Limited1 UK GBP 100% General partner +*, (,QYHVWPHQWV) /LPLWHG1 UK GBP 100% ,QYHVWPHQW KROGLQJ FRPSDQ\ +*, $VVHW 0DQDJHPHQW *URXS /LPLWHG1 UK GBP 100% Holding company +*, *URXS /LPLWHG1 UK GBP 100% Holding company +*, 203 8. /LPLWHG22 UK GBP 100% Company in liquidation HGP2 Limited8 UK GBP 100% General partner HGP3 Limited9 UK GBP 100% Company in liquidation +*34 /LPLWHG9 UK GBP 100% Company in liquidation HGP5 Limited9 UK GBP 100% Company in liquidation HPC Nominees Limited1 UK GBP 100% Dormant company New Star Asset Management (Bermuda) Limited20 Bermuda GBP 100% ,QYHVWPHQW PDQDJHPHQW VHUYLFHV New Star Asset Management Group Limited1 UK GBP 100% Holding company 2[IRUG $FTXLVLWLRQ ,,, /LPLWHG22 UK GBP 100% Company in liquidation UKFP (Asia) Nominees Limited21 %ULWLVK 9LUJLQ ,VODQGV HKD 100% Dormant company 90 West Asset Management Limited6 Australia AUD 100% Company in liquidation The Group has a number of regulated subsidiaries which are subject to the capital requirements of certain regulatory bodies which can restrict their ability to remit funds to an immediate, intermediate or ultimate holding company within the Group. 5HJLVWHUHG RIÞFH RI VXEVLGLDULHV 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 201 Bishopsgate, London, United Kingdom, EC2M 3AE 0DSOHV &RUSRUDWH 6HUYLFHV /LPLWHG, 8JODQG +RXVH, *UDQG &D\PDQ, &D\PDQ ,VODQGV, .<1-1104 25th Floor, Tower 185, Friedrich-Ebert-Anlage 35-37, 60327 Frankfurt am Main, Germany 5WK )ORRU, 37 (VSODQDGH, 6W +HOLHU, -HUVH\, -(1 275 70 6LU -RKQ 5RJHUVRQpV 4XD\, 'XEOLQ 2, ,UHODQG Level 36, Grosvenor Place, 225 George Street, Sydney, NSW 2000, Australia F/R &RUSRUDWLRQ 6HUYLFH &RPSDQ\, 2711 &HQWHUYLOOH 5RDG, 6XLWH 400, :LOPLQJWRQ, 'HODZDUH, 19808 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ, Scotland 20 Castle Terrace, Edinburgh, EH1 2EG F/R %XGKUDMD $GODNKD & &R., 5/31 :.(.$ .DURO %DJK, 1HZ 'HOKL, 110 005, ,QGLD F/R 7KHPL[ /H[ $YRFDWV, 15, 5XH 'X )RUW %RXUERQ, /-1249, /X[HPERXUJ 5XVVHO &RXUW, 6WRNHV 3ODFH, 6W. 6WHSKHQV *UHHQ, 'XEOLQ, ,UHODQG 2 Rue de Bitbourg, L-1273, Luxembourg 6XLWHV 4108 -DUGLQH +RXVH, 1 &RQQDXJKW 3ODFH, &HQWUDO, +RQJ .RQJ 5RHPHU 9LVVFKHUVWUDDW 43-45, 1054 (: $PVWHUGDP, 1HWKHUODQGV 6-5 Marunouci 1-chrome, Chiyoda-ku, Tokyo, 100-0005, Japan 5HQQZHJ 28/)RUWXQDJDVVH 40, 8001 =XULFK, 6ZLW]HUODQG One Marina Boulevard, # 28-00, Singapore, 018989 6XLWH 2401-15, &KLQD :RUOG 2IÞFH 2, 1R.1 -LDQJXRPHQZDL $YHQXH, %HLMLQJ, 100004, &KLQD 20. 2 Church Street, Hamilton, HM 11, Bermuda 21. 32 %R[ 438 %HDXIRUW +RXVH , 5RDG 7RZQ, 7RUWROD, %ULWLVK 9LUJLQ ,VODQGV 22. .30*, 15 &DQDGD 6TXDUH, /RQGRQ, (14 5*/ 23. /HYHO 47, 6XLWH 4702, 1 0DFTXDULH 3ODFH, 6\GQH\, 16: 2000, $XVWUDOLD Henderson Group plc Annual Report 2016

 


141 OTHER INFORMATION Contents 142 Glossary 144 Shareholder information 146 Summary of movements in AUM 147 ) LYH \HDU ÞQDQFLDO VXPPDU\ (XQDXGLWHG) STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION OTHER INFORMATION

 


142 OTHER INFORMATION Glossary 90 West 90 West Asset Management Limited 2016 Notes 6HQLRU, XQUDWHG Þ[HG UDWH QRWHV repaid in full in March 2016 AAF Control Report Audit and Assurance Facility Control Report AGM Annual General Meeting AIFMD (8 $OWHUQDWLYH ,QYHVWPHQW )XQG Managers Directive ASX Australian Securities Exchange ASX Principles The ASX Corporate Governance Council issued Corporate Governance Principles and Recommendations AUM Assets under management BAYE Buy As You Earn Share Plan Board The Board of Directors RI +HQGHUVRQ}*URXS}SOF bps Basis points BRC Board Risk Committee CDIs &+(66 'HSRVLWDU\ ,QWHUHVWV CDP Formerly known as Carbon Disclosure Project CDXs Credit default indices CFDs Contracts for difference CFO &KLHI )LQDQFLDO 2IÞFHU Code Staff (PSOR\HHV ZKR SHUIRUP D VLJQLÞFDQW LQßXHQFH IXQFWLRQ, VHQLRU PDQDJHPHQW and risk takers whose professional activities could have a material impact RQ D ÞUPpV ULVN SURÞOH Company Henderson Group plc compensation ratio (PSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV from continuing operations divided by net fee income from continuing operations, FDOFXODWHG RQ DQ XQGHUO\LQJ SURÞW EDVLV CPI &RQVXPHU 3ULFH ,QGH[ CRO &KLHI 5LVN 2IÞFHU CSOP Company Share Option Plan DEP Deferred Equity Plan Directors The directors of Henderson Group plc EBITDA Earnings before interest, tax, depreciation and amortisation EMEA Europe, Middle East and Africa EPS Earnings per share ESG Environmental, Social and Governance ESOP Employee Share Ownership Plan ExCo Executive Committee Executive Directors Being the Chief Executive, &KLHI )LQDQFLDO 2IÞFHU, DQG *OREDO +HDG RI Distribution ExSOP Executive Share Ownership Plan FCA UK Financial Conduct Authority FRC UK Financial Reporting Council FTE Full-Time Equivalent FX Foreign Exchange GAAP Generally accepted accounting principles Gartmore Gartmore Group Limited and its controlled entities Gartmore acquisition The acquisition of the entire share capital of Gartmore Group Limited Geneva Geneva Capital Management LLC GHG emissions Greenhouse Gas emissions Group Henderson Group plc and its controlled entities hedge funds Hedge funds including absolute return funds Henderson Controlled entities of Henderson Group plc carrying out core investment management activities HGPS Henderson Group Pension Scheme Henderson Group plc Annual Report 2016

 


143 HMRC HM Revenue & Customs HR Human Resources IAS ,QWHUQDWLRQDO $FFRXQWLQJ 6WDQGDUG ICAAP ,QWHUQDO &DSLWDO $GHTXDF\ Assessment Process ICICL ,QWULQVLF &LULOLXP ,QYHVWPHQW Company Limited IFRS IC ,QWHUQDWLRQDO )LQDQFLDO 5HSRUWLQJ 6WDQGDUGV ,QWHUSUHWDWLRQV &RPPLWWHH IFRS ,QWHUQDWLRQDO )LQDQFLDO 5HSRUWLQJ 6WDQGDUGV as adopted by the European Union KPI Key performance indicator LLC Limited Liability Company LLP Limited Liability Partnership LSE London Stock Exchange LTIP /RQJ-7HUP ,QFHQWLYH 3ODQ management fee margin Management fees divided by average assets under management MiFID II 0DUNHWV LQ )LQDQFLDO ,QVWUXPHQWV 'LUHFWLYH 2 net margin 8QGHUO\LQJ SURÞW EHIRUH WD[ IURP FRQWLQXLQJ operations divided by average assets under management New Star New Star Asset Management Group PLC and its controlled entities OEIC 2SHQ-(QGHG ,QYHVWPHQW &RPSDQ\ OIML 2SWLPXP ,QYHVWPHQW 0DQDJHPHQW /LPLWHG operating margin Net fee income from continuing operations less total operating expenses from continuing operations divided by net fee income from continuing operations OTC Over The Counter Perennial 3HUHQQLDO )L[HG ,QWHUHVW 3DUWQHUV 3W\ /LPLWHG and Perennial Growth Management Pty Limited PwC PricewaterhouseCoopers LLP RPI 5HWDLO 3ULFH ,QGH[ RSP Restricted Share Plan SAYE Sharesave Scheme SICAV Société d’investissement à capital variable (collective investment scheme) Solvency II European Union-wide insurance regulatory regime TCF Treating Customers Fairly TH Real Estate The joint venture vehicle named 7,$$ +HQGHUVRQ 5HDO (VWDWH /LPLWHG into which the Group contributed its European and Asian property business TIAA-CREF transactions The agreement to sell the North American property business and to contribute the European and Asian property business into a newly formed joint venture, 7,$$ +HQGHUVRQ 5HDO (VWDWH /LPLWHG total fee margin Net fee income from continuing operations divided by average assets under management TRSs Total return swaps TSR Total Shareholder Return UCITS 8QGHUWDNLQJ IRU &ROOHFWLYH ,QYHVWPHQW in Transferable Securities UK/United Kingdom The United Kingdom of Great Britain DQG 1RUWKHUQ ,UHODQG UK Code Financial Reporting Council issued UK Corporate Governance Code UK Companies Act Companies Act 2006 UNPRI United Nations Principles for 5HVSRQVLEOH ,QYHVWPHQW Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


144 OTHER INFORMATION Shareholder information As at 8 February 2017 Total number of holders of shares and CDIs and their voting rights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holders can instruct CDN to appoint a proxy on their behalf and can direct the proxy how to vote on the basis of one vote per person taken by a VKRZ RI KDQGV, DQG RQH YRWH SHU &', RQ D YRWH WDNHQ RQ D SROO. Twenty largest share/CDI holders % of issued capital 6KDUHV/&',V 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 J P Morgan Nominees Australia Limited HSBC Custody Nominees (Australia) Limited 5%& ,QYHVWRU 6HUYLFHV $XVWUDOLD 1RPLQHHV 3W\ /LPLWHG National Nominees Limited BNP Paribas Nominees Pty Ltd Citicorp Nominees Pty Limited Nortrust Nominees Limited Chase Nominees Limited Wealth Nominees Limited State Street Nominees Limited 9LGDFRV 1RPLQHHV /LPLWHG Hargreaves Lansdown (Nominees) Limited HSBC Global Custody Nominee (UK) Limited UBS Nominees Pty Ltd Nutraco Nominees Limited The Bank of New York (Nominees) Limited %%+,6/ 1RPLQHHV /LPLWHG Bond Street Custodians Limited $YDQWHRV ,QYHVWPHQWV /LPLWHG Dr Peter Malcolm Heyworth 129,805,290 124,054,664 87,772,680 87,517,468 73,278,436 68,132,593 59,165,382 59,029,711 48,257,480 39,375,475 25,898,651 16,428,697 16,174,496 12,245,358 8,195,579 5,060,330 4,505,217 3,028,886 2,149,335 1,894,013 11.47 10.96 7.75 7.73 6.47 6.02 5.23 5.22 4.26 3.48 2.29 1.45 1.43 1.08 0.72 0.45 0.40 0.27 0.19 0.17 Top 20 total 871,969,741 77.04 Total shares 1,131,842,109 100.00 Distribution of share/CDI holdings Number of holders % of issued capital Categories 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 and over 28,723 10,156 2,456 1,928 296 1.32 2.14 1.59 4.16 90.79 Total 43,559 100.00 1,837 VKDUH/&', KROGHUV KHOG OHVV WKDQ $$500 ZRUWK RI VKDUHV/&',V L.H. IHZHU WKDQ 139 VKDUHV/&',V. Stock exchange listings +HQGHUVRQ *URXS SOF LV OLVWHG RQ WKH /6( DQG LWV &',V DUH TXRWHG RQ WKH $6;. Henderson Group plc Annual Report 2016

 


145 Substantial shareholders Details of the Company’s substantial shareholders are set out in the Directors’ report on page 90. Total number of options over unissued shares 7KHUH ZHUH 30,280,554 RSWLRQV RYHU unissued ordinary shares in the Company held by 902 option holders. Restricted securities There are no restricted securities in issue. Buyback There is no current on-market buyback of &',V RQ WKH $6;. 7KH &RPSDQ\ KDV DXWKRULW\ to purchase ordinary shares on the LSE. Company Secretary -DFTXL ,UYLQH Principal place of business in the United Kingdom 201 Bishopsgate, London EC2M 3AE 3KRQH: +44 (0) 20 7818 1818 5HJLVWHUHG RIÞFH LQ -HUVH\ 47 (VSODQDGH, 6W +HOLHU, -HUVH\ -(1 0%' 5HJLVWHUHG RIÞFH LQ $XVWUDOLD Level 5, Deutsche Bank Place, 126 Phillip Street, Sydney NSW 2000 3KRQH: +61 (0) 2 9230 4000 Share registry Australia Henderson Group Share Registry, *32 %R[ 4578, 0HOERXUQH 9,& 3001 Phone: 1300 137 981 RU +61 (0) 3 9415 4081 )D[: +61 (0) 3 9473 2500 Jersey Henderson Group Share Registry, Queensway House, Hilgrove Street, St Helier, Jersey JE1 1ES 3KRQH: +44 (0) 1534 281842 )D[: +44 (0) 370 873 5851 New Zealand Henderson Group Share Registry, 3ULYDWH %DJ 92119, $XFNODQG 1142 Phone: 0800 888 017 )D[: +64 (0) 9 488 8787 Email &', KROGHUV: [email protected] Shareholders: [email protected] Website www.henderson.com/ir Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

 


146 OTHER INFORMATION Summary of movements in AUM Closing AUM net management fee bps1 31 Dec 2016 Opening AUM 1 Jan 2016 Closing AUM 31 Dec 2016 £m 1HW ßRZV Market/FX Notes 1. 2. 3. 4. 5. 6. 7. 8. Closing management fee bps excludes joint venture and associates AUM. ,QFOXGHV $XVWUDOLDQ 0DQDJHG ,QYHVWPHQW 6FKHPHV (0,6), 6LQJDSRUH 0XWXDOV DQG 5HWDLO 6HJUHJDWHG 0DQGDWHV. Private Equity funds’ closing AUM is based on 30 September 2016 valuations. 6ROHO\ 86 0XWXDOV. Equities includes Multi-Asset and Commodities. )L[HG ,QFRPH LQFOXGHV &DVK. ,QFOXGHV $80 RI WKH +HQGHUVRQ 8. 3URSHUW\ 3$,) ZKLFK LV VXE-DGYLVHG E\ 7+ 5HDO (VWDWH. &HUWDLQ LWHPV (LQFOXGLQJ WUDLQLQJ DQG UHFUXLWPHQW DJHQF\ FRVWV) ZHUH UHFODVVLÞHG IURP HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV WR RWKHU H[SHQVHV LQ 2014. 7KHUH ZDV QR LPSDFW RQ SULRU \HDU SURÞWV. 3ULRU \HDU FRPSDUDWLYHV ZHUH UHVWDWHG. 8QGHUO\LQJ SURÞW, ZKLOH QRW D *$$3 PHDVXUH, LQ WKH RSLQLRQ RI WKH 'LUHFWRUV, JLYHV UHOHYDQW LQIRUPDWLRQ RQ WKH SURÞWDELOLW\ RI WKH *URXS DQG LWV RQJRLQJ operations. )LJXUHV RQ WKHVH OLQH LWHPV IRU WKH \HDUV HQGHG 31 'HFHPEHU 2016, 2015 DQG 2014 DUH DXGLWHG; ÞJXUHV IRU WKH \HDUV HQGHG 31 'HFHPEHU 2013 DQG 2012 were audited and restated. Net fee income from continuing operations less total operating expenses from continuing operations divided by net fee income from continuing operations. (PSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV IURP FRQWLQXLQJ RSHUDWLRQV GLYLGHG E\ QHW IHH LQFRPH IURP FRQWLQXLQJ RSHUDWLRQV, FDOFXODWHG RQ DQ XQGHUO\LQJ SURÞW basis. 1HW PDUJLQ FDOFXODWHG RQ XQGHUO\LQJ SURÞW EHIRUH WD[ IURP FRQWLQXLQJ RSHUDWLRQV GLYLGHG E\ DYHUDJH DVVHWV XQGHU PDQDJHPHQW. %DVHG RQ XQGHUO\LQJ SURÞW DIWHU WD[ DWWULEXWDEOH WR RZQHUV RI WKH SDUHQW. Asset-weighted performance of funds measured over one and three years to 31 December 2016. Performance for 2016 through to 2013 includes Henderson 8. 3URSHUW\ 3$,) t DOO SULRU SHULRGV LQFOXGH 3URSHUW\ DQG +HQGHUVRQ 8. 3URSHUW\ 3$,) SHUIRUPDQFH. )<13 SHUIRUPDQFH GDWD UHßHFWV D PLQRU UHVWDWHPHQW, SUHYLRXVO\ UHSRUWHG DV 82%. 9. 10. 11. 12. 13. 14. 15. 16. Henderson Group plc Annual Report 2016 Retail 8. 2(,&V/8QLW 7UXVWV/2WKHU2 6,&$9V US Mutuals ,QYHVWPHQW 7UXVWV 23,358 19,328 8,647 5,582 (1,002)2,057 (2,584) 2,956 (1,128) 1,454 98 587 24,413 19,700 8,973 6,267 Total Retail 56,915 (4,616) 7,054 59,353 71 Institutional 8. 2(,&V/8QLW 7UXVWV 6,&$9V $XVWUDOLDQ 0,6 Offshore Absolute Return Funds Managed CDOs Segregated Mandates Private Equity Funds3 Other4 9,742 1,565 1,499 2,397 102 19,653 58 54 254 1,123 (267) 126 (96) 301 (523) 432 (15) 16 1,2773,909 (6)3 (17) 11 11,119 1,424 1,704 2,306 103 24,839 55 48 Total Institutional 35,070 607 5,921 41,598 25 Group total 91,985 (4,009) 12,975 100,951 52 Total asset class Equities5 )L[HG ,QFRPH6 Property7 Private Equity3 60,891 26,841 4,171 82 (3,003)9,672 (126) 3,370 (859) (74) (21)7 67,560 30,085 3,238 68 64 26 n/a n/a Total Group 91,985 (4,009) 12,975 100,951 52 Absolute Return analysis Retail ,QVWLWXWLRQDO 5,549 3,402 557 654 (640) 496 6,760 3,258 Total Absolute Return 8,951 (83)1,150 10,018

 


147 )LYH \HDU ÞQDQFLDO VXPPDU\ (unaudited) FY13 (restated)8 £m FY12 (restated)8 £m FY16 £m FY15 £m )<14 £m Henderson Group plc Annual Report 2016 STR ATEGIC REPORT CORPOR ATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION Income Management fees (net of commissions) Performance fees Other income 505.9 40.4 37.4 468.3 403.5 331.9301.9 98.782.894.5 30.4 34.8 32.534.9 39.2 Net fee income from continuing operations ,QFRPH/(ORVV) IURP DVVRFLDWHV DQG MRLQW YHQWXUHV Finance income 583.7 0.5 10.5 601.8518.8461.3 371.5 (0.2)5.11.8– 17.310.110.214.1 Net income from continuing operations 594.7 618.9534.0 473.3 385.6 Expenses )L[HG HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV8 9DULDEOH HPSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV (113.3) (141.9) (99.9) (88.4) (80.6)(83.3) (168.7)(143.6) (128.8)(70.6) (PSOR\HH FRPSHQVDWLRQ DQG EHQHÞWV ,QYHVWPHQW DGPLQLVWUDWLRQ ,QIRUPDWLRQ WHFKQRORJ\ 2IÞFH H[SHQVHV Depreciation Other expenses8 (255.2) (34.0) (24.0) (17.8) (6.0) (41.7) (268.6)(232.0)(209.4) (153.9) (31.6)(30.2)(24.4) (24.8) (20.0) (17.1) (17.1) (14.4) (16.9) (15.0)(13.7)(13.3) (5.2) (4.7) (3.2)(2.8) (44.5) (35.6)(28.9)(35.5) Total operating expenses from continuing operations Finance expenses (378.7) (3.3) (386.8)(334.6) (296.7)(244.7) (12.1)(11.6)(11.1)(14.3) Total expenses from continuing operations (382.0) (398.9)(346.2) (307.8)(259.0) 8QGHUO\LQJ SURÞW EHIRUH WD[ IURP FRQWLQXLQJ RSHUDWLRQV9, 10 8QGHUO\LQJ SURÞW EHIRUH WD[ IURP GLVFRQWLQXHG RSHUDWLRQ 212.7 – 220.0187.8165.5126.6 – 7.624.6 26.4 8QGHUO\LQJ SURÞW EHIRUH WD[ IURP WRWDO RSHUDWLRQV9, 10 7D[ RQ XQGHUO\LQJ SURÞW IURP FRQWLQXLQJ RSHUDWLRQV 7D[ RQ XQGHUO\LQJ SURÞW IURP GLVFRQWLQXHG RSHUDWLRQ 212.7 (43.0) – 220.0195.4 190.1153.0 (22.9) (20.6) (17.9) (15.3) – (1.3)(2.9)(4.2) 7RWDO XQGHUO\LQJ SURÞW DIWHU WD[9, 10 Acquisition related items Non-recurring items Tax on acquisition related items Tax on non-recurring items Non-recurring tax credit 169.7 (57.1) (16.4) 12.0 1.4 – 197.1173.5169.3133.5 (59.6) (57.0)(58.4) (64.1) 7.5145.0 (4.3) 13.8 12.711.217.918.5 3.5(14.2) 0.64.7 – – – – Total acquisition related and non-recurring items after tax (60.1) (35.9)85.0(44.2) (27.1) 7RWDO SURÞW10 109.6 161.2258.5125.1106.4 Attributable to: Equity owners of the parent Non-controlling interests 109.6 – 161.2258.5125.1106.2 – – – 0.2 Continuing KPIs Operating margin11 (%) Compensation ratio8, 12 (%) Average number of full-time employees Assets under management (AUM) at year end (£bn) Average AUM for the year for margin calculations on continuing basis (£bn) Management fee margin (bps) Total fee margin (bps) Net margin13 (bps) 35.1 43.7 1,009 101.0 95.5 53.0 61.1 22.3 35.735.535.734.1 44.6 44.7 45.4 41.4 955 875 812 861 92.081.263.753.9 83.669.959.053.4 56.057.856.356.5 72.074.3 78.269.6 26.326.928.123.7 Basic and diluted earnings per share (EPS)10 Weighted average number of ordinary shares for basic EPS (m) Weighted average number of ordinary shares for diluted EPS (m) %DVLF RQ WRWDO XQGHUO\LQJ SURÞW9, 14 (p) %DVLF RQ FRQWLQXLQJ XQGHUO\LQJ SURÞW9, 14 (p) Basic (p) 'LOXWHG RQ WRWDO XQGHUO\LQJ SURÞW9, 14 (p) 'LOXWHG RQ FRQWLQXLQJ XQGHUO\LQJ SURÞW9, 14 (p) Diluted (p) Dividend per share (p) 1,091.1 1,115.4 15.6 15.6 10.0 15.2 15.2 9.8 10.50 1,093.11,085.21,058.81,034.0 1,143.0 1,139.81,137.01,082.0 18.016.016.012.9 18.015.4 13.910.8 14.723.811.810.3 17.215.214.9 12.3 17.214.713.010.3 14.1 22.711.09.8 10.309.008.007.15 Investment performance15 Funds at or exceeding benchmark over one year (%) Funds at or exceeding benchmark over three years (%)16 50 77 78 66 78 73 81 83 81 69

 


148 OTHER INFORMATION Contact information For more information, please go to our website: henderson.com/ir For shareholder queries, please contact the Henderson Group Share Registry: Australia *32 %R[ 4578 0HOERXUQH, 9,& 3001 T: 1300 137 981 or +61 (0) 3 9415 4081 ): +61 (0) 3 9473 2500 [email protected] Jersey Queensway House Hilgrove Street, St Helier Jersey JE1 1ES 7: +44 (0) 1534 281842 ): +44 (0) 370 873 5851 [email protected] New Zealand Private Bag 92119 $XFNODQG 1142 T: 0800 888 017 ): +64 (0) 9 488 8787 [email protected] 5HJLVWHUHG RIÞFH: 47 (VSODQDGH, 6W +HOLHU Jersey JE1 0BD Henderson Group plc Annual Report 2016

 


 

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