Henderson Global Trust — Update 31 March 2016

Henderson Global Trust — Update 31 March 2016

Henderson Global Trust

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Henderson Global Trust

Proposed rollover with choice of strategies

Investment trusts

31 March 2016

Price

376.1p

Market cap

£138.9m

AUM

£156.8m

NAV*

422.1p

Discount to NAV

10.9%

NAV**

422.6p

Discount to NAV

11.0%

*Excluding income. **Including income. Data at 23 March 2016.

Yield

2.7%

Ordinary shares in issue

36.93m

Code

HGL

Primary exchange

LSE

AIC sector

Global

Share price/discount performance

Three-year cumulative perf. graph

52-week high/low

416.0p

335.5p

471.8p

373.4p

**Including income.

Gearing

Gross*

0.0%

Net cash*

3.0%

*As at 29 February 2016.

Analyst

Sarah Godfrey

+44 (0)20 3681 2519

On 1 February 2016 the directors of Henderson Global Trust (HGL) announced that they had agreed in principle to combine the trust with stablemate Henderson International Income Trust (HINT), with an option for shareholders in HGL to roll their investment over into the Henderson-managed Bankers Investment Trust (BNKR) if they wished to continue to follow a global growth strategy. HGL had a market capitalisation of £138.9m at 23 March and had traded at an average discount of c 10% over one, three and five years in spite of an active share buyback programme. HINT has traded at an average premium of 1.1% since launch in 2011, and it was felt that combining to create a bigger trust under the HINT strategy would be in the interests of current and future shareholders. In this note we explain the rollover options for HGL investors and outline the timescale for action.

12 months ending

HGL share price (%)

HGL NAV
(%)

HINT share price (%)

HINT NAV (%)

BNKR share price (%)

BNKR NAV (%)

29/02/12

(7.0)

(0.5)

--

--

3.8

1.3

28/02/13

17.6

14.2

19.8

21.0

27.3

15.4

28/02/14

4.1

4.5

1.8

7.9

14.9

12.6

28/02/15

12.5

14.3

18.9

14.3

9.2

13.4

29/02/16

(5.5)

(6.5)

(7.6)

0.1

(5.3)

(4.4)

Note: Total returns in sterling.

Henderson International Income Trust

HINT (click here for the December 2015 Edison note) is unusual among investment trusts as it invests for income exclusively in companies outside the UK. Managed by Ben Lofthouse since launch in April 2011, it has a market cap of £94.7m and a dividend yield of 3.9% (both at 23 March). HINT has a concentrated portfolio of c 60 stocks in three sub-portfolios (Europe, the Americas and Asia Pacific); the manager focuses on finding undervalued companies that may contribute to capital growth, and well-managed, sustainably financed dividend payers. HINT pays dividends quarterly.

The Bankers Investment Trust

BNKR (click here for the March 2016 note) offers broad global exposure with the aim of achieving growth in both capital and income. The trust is overweight the UK
(c 35% but reducing towards 30%) compared with global indices (HGL has an in-line UK weighting of c 9%). BNKR is split into regional portfolios (UK, Europe, Asia Pacific, North America, Emerging Markets, China A shares) run on a bottom-up basis by specialists at Henderson. Lead manager Alex Crooke oversees the geographical allocation and is also in charge of the UK portfolio. BNKR is a large trust (market cap of £648.7m) with a yield of 2.8% (both at 23 March). It also pays quarterly dividends.

HINT rollover at NAV, BNKR at 1% premium

If the proposals are agreed on 15 April (see page 4), HGL’s assets will be split into three pools – a HINT rollover fund, a BNKR rollover fund and a small liquidation fund for divesting assets that are unsuitable for HINT or BNKR. Investors taking the HINT option will receive new shares equal to the NAV of their HGL holding. Those choosing BNKR will receive new shares issued at a 1% premium to BNKR NAV.

Henderson Global Trust is a research client of Edison Investment Research Limited

Exhibit 1: Henderson International Income Trust at a glance

Investment objective and fund background

Recent developments

Henderson International Income Trust aims to provide a high and rising level of dividends, as well as capital appreciation over the long term from a focused and internationally diversified portfolio of securities (predominantly listed equities and fixed income) outside the UK. It is benchmarked against the MSCI World ex-UK index.

23 March 2016: Publication of prospectus and circular outlining rollover option into HINT for investors in Henderson Global Trust.

8 March 2016: Second interim dividend of 1.15p per share declared for the year ending 31 August 2016.

27 January 2016: First interim dividend of 1.15p per share declared for the year ending 31 August 2016.

Forthcoming

Capital structure

Fund details

AGM

November 2016

Ongoing charges

1.11%

Group

Henderson Global Investors

Interim results

April 2016

Gearing

9.0%

Manager

Ben Lofthouse

Year end

31 August

Annual mgmt fee

0.75%

Address

201 Bishopsgate, London,
EC2M 3AE

Dividend paid

Feb, May, Aug, Nov

Performance fee

No

Launch date

28 April 2011

Trust life

Indefinite

Phone

020 7818 6825

Continuation vote

Three-yearly, next 2017

Loan facilities

£20m overdraft facility

Website

www.hendersoninternationalincome
trust.com

Dividend policy and history

Share buyback policy and history

Dividends paid quarterly in February, May, August and November. Note: *Six dividends were paid in respect of the period from launch in April 2011 and the first full year-end at 31 August 2012. The annualised dividend for this period was 4.05p.

HINT has authority to buy back up to 14.99% of shares and will also issue shares to manage a premium. 2014 issuance includes the conversion of C shares issued in November 2013 and the final exercise of subscription shares issued at launch.

Shareholder base (as at 29 February 2016)

Portfolio exposure by geography (as at 17 March 2016)

Top 10 holdings (as at 17 March 2016)

Portfolio weight %

Company

Country of listing

Sector

17 March 2016

31 August 2015*

Novartis

Switzerland

Pharmaceuticals

3.3

2.7

Microsoft

US

Computing

3.1

2.6

Roche

Switzerland

Pharmaceuticals

2.9

2.5

Verizon Communications

US

Telecommunications

2.6

2.4

Six Flags Entertainment

US

Leisure

2.4

2.2

Lockheed Martin

US

Aerospace & defence

2.4

2.6

Nielsen

US

Media

2.4

2.1

Chevron

US

Oil & gas

2.3

N/A

Eurocommercial

Netherlands

Shopping centres

2.3

N/A

AXA

France

Financial services

2.2

N/A

Top 10 (% of portfolio)

25.9

24.6

Source: Henderson International Income Trust, Edison Investment Research, Morningstar, Thomson. Note: *N/A where not in August 2015 top 10.

Exhibit 2: The Bankers Investment Trust at a glance

Investment objective and fund background

Recent developments

The Bankers Investment Trust aims to maximise total returns by means of a broadly diversified portfolio of international equities. It aims to exceed the long-term growth of the FTSE All-Share index and to grow its dividend ahead of the Retail Prices Index. BNKR has one of the longest records of uninterrupted annual dividend growth for an investment trust, at 49 years (based on year ended 31 October 2015). It is listed on the London Stock Exchange with a secondary listing in New Zealand.

23 March 2016: Publication of prospectus and circular outlining rollover option into BNKR for investors in Henderson Global Trust.

25 February 2016: First interim dividend of 4.0p declared for FY16, payable 31 May. (FY15 first interim: 3.9p.)

18 January 2016: Annual results for the year ended 31 October 2015. NAV TR of +8.4% compared with +3.0% for FTSE All Share. Final dividend of 4.0p brings total dividend for the year to 15.8p, the 49th annual increase.

Forthcoming

Capital structure

Fund details

AGM

February 2017

Ongoing charges

0.52%

Group

Henderson Global Investors

Interim results

June 2016

Gearing

2.0%

Manager

Alex Crooke

Year end

31 October

Annual mgmt fee

0.45% of net assets (0.4% above £750m)

Address

201 Bishopsgate,
London, EC2M 3AE

Dividend paid

May, Aug, Nov, Feb

Performance fee

No

Launch date

13 April 1888

Trust life

Indefinite

Phone

020 7818 6825

Continuation vote

None

Loan facilities

Various, £75m

Website

www.bankersinvestmenttrust.com

Dividend policy and history

Share buyback policy and history

Dividends paid quarterly in May, August, November and February. The trust has paid a dividend in all but two of its 127 years of existence and has grown its annual dividend in each of the last 49 years.

BNKR seeks authority annually to buy back its shares at a discount or issue at a premium to NAV in order to manage supply and demand.

Shareholder base (as at 29 February 2016)

Portfolio exposure by geography (as at 17 March 2016)

Top 10 holdings (as at 17 March 2016)

Portfolio weight %

Company

Country of listing

Sector

17 March 2016

31 August 2015*

BP

UK

Oil & gas

1.7

1.7

British American Tobacco

UK

Personal & household goods

1.6

1.4

Delphi Automotive

US

Automobiles & parts

1.4

1.4

ITV

UK

Media

1.3

1.4

Apple

US

Technology

1.3

1.3

CVS Health

US

Healthcare retailer

1.3

1.3

American Tower

US

Telecommunications

1.3

N/A

Galliford Try

UK

Construction & materials

1.3

1.5

Roper Technologies

US

Technology

1.2

N/A

Royal Dutch Shell

UK

Oil & gas

1.2

N/A

Top 10 (% of portfolio)

13.6

14.5

Source: The Bankers Investment Trust, Edison Investment Research, Morningstar, Thomson. Note: *N/A where not in August 2015 top 10.

Proposed benefits and features of the deal

Given HINT has historically traded close to NAV or at a small premium, HGL investors who roll over to HINT could potentially see the discount narrow on their investment. HINT will benefit from a larger pool of assets, enabling it to appeal to a wider range of investors and potentially improving liquidity, as well as spreading fixed costs over an enlarged asset base, resulting in a lower total expense ratio. HINT will also reduce its management fee from 0.75% to 0.65% of NAV (0.6% above £250m). By rolling their investment into HINT or BNKR, HGL investors will avoid crystallising any tax liability that could have been triggered by a straightforward liquidation; dealing costs will be kept to a minimum by transferring HGL’s holdings to HINT or BNKR where practicable. HINT will see its board enlarged with the appointment of HGL directors Richard Hills and Aidan Lisser. Following combination of HGL and HINT, a tender offer for up to 20% of the new shares at NAV less costs is proposed if HINT’s discount to NAV exceeds 5% on average in the 90 days after completion. HGL will pay a 2.5p special dividend to investors on its register at 8 April. HINT and BNKR have brought forward the ex-dividend dates of their May dividends so the first dividends due to former HGL shareholders will be paid in August.

Exhibit 3: Comparison of key features of HGL, HINT and BNKR

HGL

HINT

BNKR

AIC sector

Global

Global Equity Income

Global

Assets under management

£150m

£109m

£748m

Number of holdings

65

59

191

Main geographical exposures

US 53.9%, Europe ex UK 16.7%, UK 9.4%, Asia ex Japan 7.0%, Japan 6.7%

US 38.8%, Europe ex UK 37.1%, Asia ex Japan 17.4%, Japan 1.4%

UK 35.8%, Nth America 26.2%, Europe 13.3%, Japan 12.3%, Asia ex Japan 10.4%

Three-year cumulative NAV TR to 29 Feb

11.8%

23.5%

22.1%

Management fee/latest ongoing charge

0.6%/0.85%

0.75%*/1.11%

0.45%**/0.52%

Three-year average cum-income discount

10.3%

0.1%

1.8%

Dividend yield

2.7%

3.9%

2.8%

Source: Henderson Global Investors. Correct at 29 February 2016 (HGL)/17 March (HINT, BNKR). Note: *HINT management fee will fall to 0.65% following the deal. **BNKR fee falls to 0.4% above £750m net assets.

Timescale for investors

Shareholders in HGL, HINT and BNKR have been sent a circular outlining the terms of the deal. Investors in HGL must elect to transfer their holding to HINT or BNKR by 14 April. Those who make no election will receive shares in HINT. Shareholder meetings of all three trusts to vote on the proposals take place on 15 April. If the resolutions are passed, it is expected that the new shares in HINT and BNKR will be admitted to trading on 26 April.

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