HNE Henderson Eurotrust Plc

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO, THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA, IN ANY MEMBER STATE OF THE EEA OR IN ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

This announcement is not an offer to sell, or a solicitation of an offer to acquire, securities in the United States or in any other jurisdiction in which the same would be unlawful. Neither this announcement nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

20 May 2024

Henderson EuroTrust plc

Publication of Circular

Further to the announcements made by Henderson EuroTrust plc (the "Company" or "HNE") on 14 March 2024 and 14 May 2024, the board of HNE is pleased to announce that it has today published a circular (the "Circular") in connection with the proposed merger of interests with Henderson European Focus Trust ("HEFT") to form Henderson European Trust plc (the "Combined Trust") - an enlarged, flagship European investment trust to be managed by the European equities team at Janus Henderson Investors ("Janus Henderson" or the "Manager") (the "Proposals").

The Circular provides the Company's shareholders (the "Shareholders") with further details of the Proposals. General meetings of the Company will take place at 11.30 a.m. on 20 June 2024 and 9.30 a.m. on 4 July 2024 (the "General Meetings") to seek approval from Shareholders for the implementation of the Proposals.

The Circular will shortly be available for inspection at the National Storage Mechanism which is located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the Company's website at www.hendersoneurotrust.com.

Terms used and not defined in this announcement shall have the meanings given to them in the Circular.

Background

On 14 March 2024 the Board announced that it had agreed heads of terms with HEFT in respect of a proposed merger between the two companies. The Board subsequently announced updated and enhanced agreed terms of the proposed merger on 14 May 2024, following an unsolicited third party approach to the Company, negotiations by the Board seeking to optimise the outcome for Shareholders, and a consultation with certain major Shareholders who were unanimously supportive.

The Combined Trust will be co-managed by Jamie Ross and Tom O'Hara, currently lead and co-lead portfolio managers of HNE and HEFT, respectively. The Combined Trust will bring together their respective expertise and proven track records of benchmark outperformance under a single mandate: to maximise total return by investing in companies predominantly listed in Europe (excluding the UK). Its focus will be on Europe's "global champions" - large, established and well managed businesses operating internationally but based in Europe. The Combined Trust expects to hold a concentrated list of stocks, selected with no particular style bias but with an emphasis on the potential for long-term growth in the context of enduring global trends.

The merger will be effected by way of a scheme of reconstruction and members' voluntary winding up of the Company under section 110 of the Insolvency Act (the "Scheme") and the issue of New HEFT Shares to Shareholders who are deemed to have elected to roll over their investment into the Combined Trust.

The recommended Proposals have been structured with a view to avoiding any costs of change falling on continuing shareholders in the Combined Trust, and to reduce the overall ongoing charges ratio of the Combined Trust. This will be achieved through a contribution to costs from Janus Henderson to support the Scheme when the recommended Proposals become effective. In addition, the AIFM has agreed to reduce the management fees payable by the Combined Trust and to waive the termination fees that would otherwise be payable by HNE to the AIFM.

Overview of the Proposals

Under the Proposals, which are conditional upon, amongst other things, the approval of Shareholders:

(a) all Shareholders will be entitled to elect to receive cash in respect of some or all of their Shares (subject to an overall limit of 15 per cent. of the Shares in issue at the Calculation Date, excluding treasury shares) (the "Cash Option"); and

(b) eligible Shareholders will by default receive New HEFT Shares (the "Rollover Option") to the extent that they do not make a valid election for the Cash Option in respect of all of their Shares or to the extent that their elections for the Cash Option are scaled back in accordance with the Scheme.

The Cash Option will be priced at a 2 per cent. discount (the "Cash Option Discount") to a formula asset value. This formula asset value will represent the proportion of the Residual Net Asset Value attributable to those Shares in respect of which valid elections have been made for the Cash Option (following any required scaling back in accordance with the Scheme), such amount in aggregate being the "Cash Pool". The "HNE Cash FAV per Share" shall be equal to the value of the Cash Pool divided by the number of Shares validly elected for the Cash Option (following any required scaling back in accordance with the Scheme). The value arising from the application of the Cash Option Discount will be allocated to the Rollover Pool. The value of the Rollover Pool shall be equal to the Residual Net Asset Value less the value of the Cash Pool, plus HNE's portion of the Janus Henderson Contribution to the extent required to ensure that the Proposals are cost-neutral for continuing shareholders in the Combined Trust. The "HNE Rollover FAV per Share" shall be equal to the value of the Rollover Pool divided by the number of Shares elected for the Rollover Option.

The choice between the options available under the Proposals will be a matter for each Shareholder to decide and will be influenced by their investment objectives and by their personal, financial and tax circumstances. Accordingly, Shareholders should, before making any Election, read carefully all the information in the Circular and in the HEFT Prospectus. A short document which includes some "Frequently asked questions" is available on the Company's website at: www.hendersoneurotrust.com.

Benefits of the Proposals

The Directors believe that the Proposals will have the following benefits for Shareholders:

§    A compelling investment case: The Rollover Option will provide Shareholders with exposure to the Combined Trust, a flagship Europe excluding UK equities proposition, seeking to maximise total return from a portfolio of the Investment Manager's assessment of Europe's biggest and best companies, selected according to long-standing global trends and with an emphasis on substantial, well-managed businesses, with sustainable business models.

§    Demonstrable track record of strong performance: HNE's NAV total return over three, five and ten years to 30 April 2024 has been 13.1 per cent., 59.8 per cent. and 155.5 per cent. respectively. HEFT's NAV total return over three, five and ten years to 30 April 2024 has been 30.6 per cent., 74.8 per cent., and 164.8 per cent. respectively.

§    A "best ideas" approach: The Combined Trust will be managed by Jamie Ross, who has managed HNE's portfolio since 2019, and Tom O'Hara, who has co-managed HEFT's portfolio since 2020. The portfolio managers have their own distinct and proven expertise but share a fundamental investment philosophy. Working collaboratively from an enhanced knowledge base, and with the benefit of increased discussion throughout the stock picking process, it is expected that the Combined Trust will represent the very best ideas of both portfolio managers.

§    Continuity of manager and excellent European equities team: The Combined Trust will be supported by Janus Henderson's award-winning European equities team which encompasses 11 team members and conducts around 1,300 company meetings a year.

§    Continuity of exposure: HEFT and HNE have over 50 per cent. of common holdings by value and the majority of the Combined Trust's portfolio is expected to comprise assets currently held by at least one of the companies. This complementarity of holdings and style will reduce the extent of any portfolio realignment required in connection with the Scheme.

§    Increased scale: As a result of the Proposals, the Combined Trust is anticipated to have net assets of approximately £680 million (based on valuations as at 30 April 2024) and, assuming full take up of the Cash Option and the HEFT Tender Offer, would become the second largest investment company in the AIC European sector. It is also expected to be eligible for inclusion in the FTSE 250 Index¹. The enhanced scale of the Combined Trust should improve secondary market liquidity, as well as raise the profile and help marketability.

§    Reduced management fees for the Combined Trust: The Combined Trust will benefit from improved management fee terms, with management fees to be charged on the following basis: 0.600% per annum of the Net Asset Value up to, but excluding, £500 million; 0.475% per annum of the Net Asset Value equal to and in excess of £500 million and up to, but excluding, £1 billion; and 0.450% per annum of the Net Asset Value equal to and in excess of £1 billion. This compares with the current structure of both HNE and HEFT of 0.65% per annum of the Net Asset Value up to £300 million and 0.55% per annum of the Net Asset Value in excess of £300 million.

§    Reduced OCR: The Scheme is expected to reduce fixed costs proportionately and, along with the reduced management fees, produce a competitive OCR for the Combined Trust estimated to be approximately 0.70 per cent.² compared to HNE's current OCR of 0.79 per cent. and HEFT's of 0.80 per cent.

§    Contribution from Janus Henderson to the costs of the Proposals: The AIFM has committed to make a contribution of £1,550,000 to the costs of the Proposals, to ensure the Proposals will be cost-neutral for continuing shareholders in the Combined Trust, and with any surplus being available for the benefit of continuing shareholders in the Combined Trust.

§    Discount/premium management policy: The Combined Trust will introduce a five-yearly conditional performance related tender offer and will also use share buybacks and share issuance where appropriate and subject to prevailing market conditions. In addition, the board of the Combined Trust will consider, at its discretion, subject to normal market conditions and no earlier than after an initial three-year period, whether it would be in the long-term interests of shareholders as a whole to be offered additional opportunities to realise some of their investment in the Combined Trust.

§    Gearing: The Combined Trust expects to deploy strategically both the longer-term structural and short-term gearing currently in place in HEFT, with the benefit of inexpensive long-term gearing of €35 million over 25 to 30 years (weighted average cost of 1.57 per cent.) and short-term gearing in the form of an overdraft.

§    Experienced board: The Combined Trust's board will include directors of both HNE and HEFT ensuring continuity and collective competence and experience.

§    Opportunity for cash exit: The Proposals include a cash exit opportunity of up to 15 per cent. of the Company's shares in issue, providing all Shareholders with the ability to realise part of their investment at the HNE Cash FAV per Share.

Expected timetable

Note: All references to time are to UK time. Each of the times and dates in the above expected timetable (other than in relation to the General Meetings) may be extended or brought forward. If any of the above times and/or dates change, the revised time(s) and/or date(s) will be notified to Shareholders by an announcement through a Regulatory Information Service.

(1)  Index eligibility subject to subsequent market movement and FTSE eligibility review.

(2) This figure is an estimate, which is subject to change. The actual OCR will depend on subsequent movements in costs and net assets.

For further information please contact:

Notes

Legal Entity Identifier:

HNE: 213800DAFFNXRBWOEF12

Disclaimers

The information in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. The material contained in this announcement is given as at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment. In particular, any proposals referred to herein are subject to revision and amendment.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This announcement is not an offer of securities for sale into the United States. Any securities that may be issued in connection with the matters referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration under the Securities Act and in compliance with the securities laws of any state, county or any other jurisdiction of the United States. No public offering of securities is being made in the United States.

Furthermore, any securities that may be issued in connection with the matters referred to herein may not be offered or sold indirectly or indirectly in, into or within the United States or to or for the account or benefit of U.S. Persons except under circumstances that would not result in the Company being in violation of the U.S. Investment Company Act of 1940, as amended.

Outside the United States, the securities may be sold to persons who are not U.S. Persons pursuant to Regulation S.

Moreover, any securities that may be issued in connection with the matters referred to herein have not been, nor will they be, registered under the applicable securities laws of Australia, Canada, Japan, New Zealand, the Republic of South Africa, or any member state of the EEA (other than any member state of the EEA where the shares are lawfully marketed).

The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements.  When you sell your investment you may get back less than you originally invested. Figures refer to past performance and past performance should not be considered a reliable indicator of future results. Returns may increase or decrease as a result of currency fluctuations.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "might", "will" or "should" or, in each case, their negative or other variations or similar expressions. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, proposed acquisitions and objectives, are forward-looking statements.

Forward-looking statements are subject to risks and uncertainties and, accordingly, the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These forward-looking statements speak only as at the date of this announcement and cannot be relied upon as a guide to future performance. Subject to their respective legal and regulatory obligations, each of HNE and Janus Henderson expressly disclaims any obligations or undertaking to update or revise any forward-looking statements contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based unless required to do so by law or any appropriate regulatory authority, including FSMA, the Listing Rules, the Prospectus Regulation Rules, the Disclosure Guidance and Transparency Rules, the Prospectus Regulation and MAR.

None of HNE or Janus Henderson, or any of their respective affiliates, accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to them, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith. Each of HNE and Janus Henderson, and their respective affiliates, accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this announcement or its contents or otherwise arising in connection therewith.