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Section 1: 425 (425)

Table of Contents

 

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 21, 2017

 

THIS DOCUMENT AND THE ACCOMPANYING PROXY FORM OR CDI VOTING INSTRUCTION FORM ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or the action you should take, you are recommended to seek your own financial advice as soon as possible from your stockbroker, bank, solicitor, accountant or other appropriate independent financial adviser duly authorised under FSMA if you are in the United Kingdom, or, if not, from another appropriately authorised independent financial adviser.

 

If you sell or transfer or have sold or otherwise transferred all your Existing Henderson Shares or Existing Henderson CDIs, please send this document together with the accompanying documents at once to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected for onward delivery to the purchaser or transferee. However, such documents should not be forwarded or transmitted in or into any jurisdiction in which such act would constitute a violation of the relevant laws or regulations in such jurisdiction. If you sell or transfer or have sold or otherwise transferred only part of your holding of Existing Henderson Shares or Existing Henderson CDIs, you should retain these documents and consult the stockbroker, bank or other agent through whom the sale or transfer was effected.

 

Except where stated otherwise or where the context otherwise requires, where the term “Henderson Shareholder” is used in this document, it refers to a holder of equity securities regardless of whether the equity securities are traded on the main market for listed securities of the LSE in the form of Existing Henderson Shares or quoted on the ASX in the form of Existing Henderson CDIs. Similarly, where the term “share” or “shareholding” is used in this document, it includes Existing Henderson CDIs, where appropriate.

 

The release, publication or distribution of this document in jurisdictions other than the United Kingdom and Australia may be restricted by law and, therefore, any persons who are subject to the laws of any jurisdiction other than the United Kingdom or Australia should inform themselves about, and observe, any applicable requirements. Failure to comply with any such restrictions may constitute a violation of the securities laws or regulations of any such jurisdiction. This document has been prepared to comply with the requirements of English, Jersey and Australian law, the Listing Rules, the DTRs, the rules of the LSE and the ASX Listing Rules and information disclosed may not be the same as that which would have been disclosed if this document had been prepared in accordance with the laws of jurisdictions outside England, Jersey or Australia.

 

 

(incorporated and registered in Jersey with registered number 101484)

 

Proposed Merger

 

with

 

Janus Capital Group Inc.

 

and

 

Notice of Extraordinary General Meeting

 

You should read the whole of this document. Your attention, in particular, is drawn to the letter from the Chairman of Henderson that is set out in Part I (Letter from the Chairman of Henderson) of this document, which contains a unanimous recommendation by the Henderson Directors that you vote in favour of the Resolutions to be proposed at the EGM and the risk factors set out in Part III (Risk Factors) of this document.

 

Notice of the EGM to be held on 26 April 2017 at 201 Bishopsgate, London, EC2M 3AE at 8.30 a.m. (London time), which will be simultaneously broadcast to Shangri-La Hotel, 176 Cumberland Street, The Rocks, Sydney NSW 2000 at 5.30 p.m. (Sydney time), is set out in Part XI (Notice of Extraordinary General Meeting) of this document.

 

The actions to be taken in respect of the EGM are set out in paragraph 24 of Part I (Letter from the Chairman of Henderson) of this document. A Proxy Form or a CDI Voting Instruction Form (as applicable) will be made available to Henderson Shareholders for use in connection with the EGM. Whether or not you intend to attend the EGM in person, please complete, sign and return the Proxy Form or CDI Voting Instruction Form (as applicable) (or appoint a proxy electronically, as referred to below) in accordance with the instructions printed on it as soon as possible and, in any event, so as to be received by no later than the time and date printed on the Proxy Form or CDI Voting Instruction Form (as applicable).

 

If you have any questions about this document, the EGM or the completion and return of the Proxy Form or CDI Voting Instruction Form (as applicable), please call the shareholder helpline. If calling from the UK, please call between 8.30 a.m. and 5.30 p.m. (London time) Monday to Friday (except UK public holidays) on either 0800 073 3916 or +44 (0) 1534 281 842. If calling from Australia, please call between 8.30 a.m. and 5.00 p.m. (Sydney time) Monday to Friday (except Australian national public holidays) on 1300 651 710 or +61 3 9415 4037. Please note that calls may be monitored or recorded and the helpline cannot provide financial, legal or tax advice or advice on the merits of the Merger.

 



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Merrill Lynch International (“Bank of America Merrill Lynch”), which is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the UK, is acting exclusively for Henderson and no one else in connection with the Merger. Bank of America Merrill Lynch is not, and will not be responsible to anyone other than Henderson for providing the protections afforded to its clients or for providing advice in relation to the Merger, the contents of this document or any transaction, arrangement or other matters referred to in this document.

 

Centerview Partners is authorised and regulated by the FCA. Centerview Partners is acting exclusively for Henderson in connection with the Merger. Centerview Partners is not, and will not be, responsible to anyone other than Henderson for providing the protections afforded to its clients or for providing advice in relation to the Merger, the contents of this document or any transaction, arrangement or other matters referred to in this document.

 

Each of Bank of America Merrill Lynch and Centerview Partners accepts no responsibility whatsoever (apart from the responsibilities and liabilities, if any, which may be imposed on it by FSMA), and makes no representation or warranty, express or implied, as to the contents of this document, including its accuracy, fairness, sufficiency, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with Henderson or the Merger, and nothing in this document is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. Each of Bank of America Merrill Lynch and Centerview Partners accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this document.

 

This document has been approved by the FCA and is dated 21 March 2017.

 

Capitalised terms have the meaning ascribed to them in Part X (Definitions) of this document.

 

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CONTENTS

 

 

 

PAGE

PRESENTATION OF INFORMATION

5

 

 

 

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

8

 

 

 

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

10

 

 

 

PART I

LETTER FROM THE CHAIRMAN OF HENDERSON

12

 

1.                                      Introduction

12

 

2.                                      Summary of terms of the Merger

12

 

3.                                      Information on Janus

13

 

4.                                      Background to and reasons for the Merger

14

 

5.                                      Revenue growth opportunities and cost synergies

14

 

6.                                      Dividends

16

 

7.                                      Governance and management of the Combined Group

17

 

8.                                      Remuneration

18

 

9.                                      Dai-ichi Agreements

18

 

10.                               Financial effects of the Merger

19

 

11.                               Accounting treatment of the Merger

19

 

12.                               Integration

19

 

13.                               Regulatory capital

19

 

14.                               Current trading and prospects

20

 

15.                               Regulatory approvals

20

 

16.                               Conditions to the Merger

21

 

17.                               Share Consolidation

21

 

18.                               Treatment of Henderson and Janus equity awards

22

 

19.                               London De-listing and NYSE Listing

22

 

20.                               Settlement and dealings in New Janus Henderson Shares after Completion

23

 

21.                               Taxation

23

 

22.                               Risk factors

26

 

23.                               Extraordinary General Meeting and the Resolutions

26

 

24.                               Action to be taken

30

 

25.                               Further information

30

 

26.                               Recommendation to Henderson Shareholders

30

 

 

 

PART II

VOTING INFORMATION FOR HENDERSON SHAREHOLDERS AND HENDERSON CDI HOLDERS

32

 

 

 

PART III

RISK FACTORS

36

 

 

 

PART IV

FINANCIAL INFORMATION ON JANUS

53

 

 

 

PART V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE COMBINED GROUP

100

 

 

 

PART VI

HENDERSON MANAGEMENT FORECAST

114

 

 

 

PART VII

SUMMARY OF THE PRINCIPAL TERMS AND CONDITIONS OF THE MERGER AGREEMENT AND OTHER RELATED ARRANGEMENTS

117

 

 

 

 

1.                                      Summary of Merger Agreement

117

 

2.                                      Dai-ichi Agreements

119

 

3.                                      New Janus Henderson Articles

120

 

 

 

PART VIII

SETTLEMENT AND DEALINGS IN NEW JANUS HENDERSON SHARES AFTER COMPLETION

124

 

 

 

 

1.                                      Janus Henderson DIs

124

 

2.                                      Janus Henderson CSN Facility

126

 

3.                                      The Direct Registration System (the “DRS”)

127

 

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PAGE

PART IX

ADDITIONAL INFORMATION

129

 

 

 

 

1.                                      Responsibility

129

 

2.                                      Company information

129

 

3.                                      Janus 2018 Convertible Notes

129

 

4.                                      Information required under the ASX Listing Rules

130

 

5.                                      Henderson Directors

131

 

6.                                      Details of key individuals of Janus

131

 

7.                                      Biographies of Janus Henderson Directors

132

 

8.                                      Biographies of Executive Committee

134

 

9.                                      Henderson Directors’ interests in Henderson

136

 

10.                               Henderson Directors’ service agreements and arrangements

138

 

11.                               Janus executive officers’ service agreements and arrangements

139

 

12.                               Significant Henderson Shareholders

141

 

13.                               Material contracts

141

 

14.                               Litigation

143

 

15.                               Related party transactions

143

 

16.                               No significant change

143

 

17.                               Working capital

144

 

18.                               Consents

144

 

19.                               Documents available for inspection

144

 

 

 

PART X

DEFINITIONS

145

 

 

 

PART XI

NOTICE OF EXTRAORDINARY GENERAL MEETING

152

 

 

 

ANNEX — CSN TERMS AND CONDITIONS

158

 

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PRESENTATION OF INFORMATION

 

FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements” with respect to the financial condition, results and business of Janus, Henderson and the Combined Group. These relate to, among other matters, the following: financial condition; results of operations; the respective businesses of Henderson and Janus; the economic conditions in which Henderson and Janus operate; and benefits of the Merger and management plans and objectives. Henderson considers any statements that are not historical facts to be “forward-looking statements”. Without limitation, any statements preceded or followed by, or that include, the words “targets”, “plans”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “estimates” or “projects” or words or terms of similar substance, or the negative thereof, identify forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events, and depend on circumstances, that will occur in the future. Actual future results may differ materially from the results expressed or implied in these forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to: (i) completion of the Merger on anticipated terms and timing, including obtaining required shareholder approvals, anticipated tax treatment, unforeseen liabilities, failure to obtain board and shareholder approval from the Janus US mutual funds for new investment advisory agreements, failure to obtain regulatory approvals and other conditions to Completion; (ii) risks related to the operation of the Combined Group, including macro-economic conditions, investment performance, operation of an international business, exchange rate fluctuations, failure or breach of security systems, indebtedness, continued availability of capital and financing and rating agency actions, managing expenses, operational losses, future prospects and business and management strategies for the management, expansion and growth of the Combined Group’s operations; (iii) the ability of Henderson and Janus to integrate their businesses successfully and to achieve anticipated synergies; (iv) potential litigation relating to the Merger; (v) the risk that disruptions from the Merger will harm Henderson’s or Janus’s business, including current plans and operations; (vi) the ability of Henderson or Janus to retain and hire key personnel; (vii) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Merger; (viii) termination of existing investment advisory agreements; (ix) political, legislative, regulatory and economic developments; (x) potential business uncertainty, including changes to existing business relationships, during the period before Completion that could affect Henderson’s and/or Janus’s financial performance; (xi) certain restrictions during the period before Completion that may impact Henderson’s or Janus’s ability to pursue certain business opportunities or strategic transactions; and (xii) unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on Henderson’s or Janus’s assets under management, consolidated financial condition, results of operations or liquidity.

 

Any forward-looking statements in this document only speak as of the date on which they are made, and the events discussed herein may not occur. Neither Janus nor Henderson assumes any duty to update forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, nor does Janus or Henderson intend to do so, except as required by securities and other applicable laws, including but not limited to the Listing Rules, the Prospectus Rules and the DTRs.

 

Statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this document is subject to change without notice and, except as required by applicable law, neither Henderson nor any of the Bank of America Merrill Lynch or Centerview Partners or their respective affiliates assumes any responsibility, obligation or undertaking to update, review or revise any of the forward-looking statements contained herein whether as a result of new information, future developments or otherwise. You should not place undue reliance on forward-looking statements, which speak only as the date of this document.

 

SYNERGIES INFORMATION

 

The estimated cost synergies have been calculated on the basis of the existing cost and operating structures of Henderson and Janus and by reference to current economic conditions and the current regulatory environment. These estimates relate to future actions and circumstances that, by their nature, involve risks, uncertainties and other factors. As a result, the synergies referred to may not be achieved, or those achieved could be materially different from those estimated.

 

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PRESENTATION OF FINANCIAL INFORMATION

 

This document includes certain non-US GAAP measures (e.g. EBITDA) with respect to each of Henderson and Janus. These unaudited non-US GAAP financial measures should be considered in addition to, and not as a substitute for, measures of Henderson’s and Janus’s financial performance prepared in accordance with US GAAP. In addition, these measures may be defined differently than similar terms used by other companies.

 

NO PROFIT FORECAST

 

No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings or EPS for Henderson, Janus or Janus Henderson, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings.

 

WEBSITE

 

The contents of Henderson’s or Janus’s website or of any website accessible via hyperlinks from Henderson’s or Janus’s website are not incorporated into, and do not form part of, this document.

 

NO REPRESENTATIONS

 

No person has been authorised to give any information or to make any representations other than those contained in this document and, if given or made, such information or representations must not be relied on as having been authorised by Henderson, Bank of America Merrill Lynch or Centerview Partners.

 

This document is for information purposes only and does not constitute an offer for sale of any securities, an offer or an invitation to purchase any such securities in any jurisdiction or a solicitation of any vote or approval. This document does not constitute a prospectus or equivalent document.

 

Nothing in this document should be construed as, or is intended to be, a solicitation for or an offer to provide investment advisory services.

 

The summary of the Merger Agreement and its terms contained in this document has been included in order to provide investors with information regarding the principal terms of the Merger Agreement and is not intended to modify or supplement any factual disclosures about Janus in its public reports filed with the SEC. Except for the status of the Merger Agreement as a contractual document that establishes and governs the legal relations among the parties thereto with respect to the transactions related thereto, the Merger Agreement is not intended to be a source of factual, business or operational information about the parties. The representations, warranties and covenants made by the parties in the Merger Agreement are made solely for the benefit of the parties to such agreement and are qualified, including by information in disclosure schedules that the parties exchanged in connection with the execution of such agreement. Representations and warranties may be used as a tool to promote disclosure and allocate risks between the parties, including where the parties do not have complete knowledge of all facts. Investors are not third party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterisations of the actual state of facts or conditions of Henderson, Janus or any member of the Henderson Group or the Janus Group.

 

ROUNDING

 

Percentages and certain amounts included in this document have been rounded for ease of presentation. Accordingly, figures shown as totals in certain tables may not be the precise sum of the figures that precede them.

 

TO VOTE ON THE MERGER

 

You should read the entire document before deciding how to vote.

 

If you would like to vote, you may do so by either:

 

·                                          attending and voting at the EGM on 26 April 2017. If you are a Henderson CDI Holder and wish to attend the EGM, please read the voting instructions in Part II (Voting information for Henderson Shareholders and Henderson CDI Holders) of this document; or

 

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·                                          appointing someone as your proxy to attend and vote for you at the EGM. To appoint someone in writing use either the Proxy Form or the CDI Voting Instruction Form provided. Instructions about how to complete the form are set out on the front of the Proxy Form and on the reverse of the CDI Voting Instruction Form. Alternatively, you can go to the Henderson website at www.henderson.com/EGM2017 to appoint someone online.

 

There are different voting procedures depending on whether you hold your Existing Henderson Shares on the LSE’s main market for listed securities or if you hold Existing Henderson CDIs quoted on the ASX. Please read the voting instructions in Part II (Voting information for Henderson Shareholders and Henderson CDI Holders) of this document carefully to ensure you are aware of the arrangements affecting you. Holders of Existing Henderson Shares who are members of CREST may also choose to utilise the CREST electronic proxy appointment service in accordance with the procedures set out in the notes to the Notice of Extraordinary General Meeting set out in Part XI (Notice of Extraordinary General Meeting) at the end of this document.

 

Whether or not you intend to attend the EGM in person, please complete, sign and return the Proxy Form or CDI Voting Instruction Form (as applicable) (or appoint a proxy electronically) in accordance with the instructions printed on it as soon as possible and, in any event, so as to be received by no later than the time and date printed on the Proxy Form or CDI Voting Instruction Form (as applicable).

 

INFORMATION AVAILABLE IN THE US

 

On or around the date of this document, Henderson has filed with the SEC the US Registration Statement relating to the New Janus Henderson Shares to be issued in connection with the Merger, which also contains a proxy statement in respect of the vote by Janus Stockholders in relation to the Merger.

 

YOU ARE URGED TO READ THE US REGISTRATION STATEMENT, AND OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE MERGER CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER, THE PARTIES TO THE MERGER AND THE RISKS ASSOCIATED WITH THE MERGER. A copy of the US Registration Statement may be obtained, without charge, by directing a request by telephone on +44 (0)207 818 5310, via the SEC’s website at www.sec.gov or via Henderson’s website at www.henderson.com/EGM2017. The contents of these websites and the US Registration Statement are not incorporated into this document by reference and do not form part of this document.

 

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EXPECTED TIMETABLE OF PRINCIPAL EVENTS

 

All dates and times are based on Henderson’s and Janus’s current expectations and are subject to change. If any of the dates and/or times change, the revised dates and/or times will be notified to Henderson Shareholders by announcement on the LSE and ASX.

 

Event

 

Expected time/date

 

 

 

Latest time and date for receipt of CDI Voting Instruction Forms for the EGM

 

5.30 p.m. (Sydney time)

 

 

on 24 April 2017

 

 

 

Voting record time for the EGM for Henderson CDI Holders

 

7.00 p.m. (Sydney time)

 

 

on 24 April 2017(1)

 

 

 

Latest time and date for receipt of Proxy Forms for the EGM

 

8.30 a.m. (London time)

 

 

on 24 April 2017

 

 

 

Voting record time for the EGM for holders of Existing Henderson Shares

 

6.00 p.m. (London time)

 

 

on 24 April 2017(2)

 

 

 

Janus Stockholder Meeting

 

10.00 a.m. (Denver time)

 

 

on 25 April 2017(3)

 

 

 

Extraordinary General Meeting

 

8.30 a.m. (London time)

 

 

on 26 April 2017

 

 

 

 

 

and

 

 

 

 

 

5.30 p.m. (Sydney time)

 

 

26 April 2017

 

 

 

The following dates are indicative only and subject to change; please see note (4) below

 

 

 

 

 

Final day of dealings in Existing Henderson CDIs on the ASX

 

24 May 2017(4)

 

 

 

Commencement of trading in New Janus Henderson CDIs on a deferred settlement basis on the ASX

 

8.00 a.m. (Sydney time)
on 25 May 2017(4)

 

 

 

Cross-border movements between Existing Henderson Shares and Existing Henderson CDIs suspended:

 

 

 

 

 

Existing Henderson CDIs to Existing Henderson Shares

 

4.30 p.m. (Sydney time)

 

 

on 25 May 2017(4)

 

 

 

Existing Henderson Shares to Existing Henderson CDIs

 

4.30 p.m. (London time)

 

 

on 25 May 2017(4)

 

 

 

CDI Consolidation Record Time

 

7:00 p.m. (Sydney time)

 

 

on 26 May 2017(4)

 

 

 

Final day of dealings in Existing Henderson Shares on the LSE

 

26 May 2017(4)

 

 

 

Share Consolidation Record Time

 

6:00 p.m. (London time)

 

 

on 26 May 2017(4)

 

 

 

Completion Date

 

30 May 2017(4)

 

 

 

De-listing of Existing Henderson Shares from the Official List and the LSE

 

8:00 a.m. (London time)

 

 

on 30 May 2017(4)

 

 

 

Issue of New Janus Henderson Shares in connection with the Merger

 

Before 8.00 a.m. (New York time)

 

 

on 30 May 2017(4)

 

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Admission and commencement of dealings in New Janus Henderson Shares on the NYSE

 

8:00 a.m. (New York time)
on 30 May 2017(4)

 

 

 

Issue of Janus Henderson DIs to CREST participant accounts and crediting of Janus Henderson CSN Facility accounts

 

30 May 2017(4)

 

 

 

Issue of New Janus Henderson CDIs

 

Before 8.00 a.m. (Sydney time)

 

 

on 31 May 2017(4)

 

 

 

Cross-border movements between New Janus Henderson Shares, Janus Henderson DIs and New Janus Henderson CDIs commence

 

31 May 2017(4)

 

 

 

Despatch of holding confirmations/statements in respect of holdings of New Janus Henderson CDIs

 

2 June 2017(4)

 

 

 

Commencement of normal trading in New Janus Henderson CDIs on the ASX, under ASX ticker HGG

 

5 June 2017(4)

 

 

 

Name change is effected by ASX; commencement of normal trading in New Janus Henderson CDIs under ASX ticker JHG

 

13 June 2017(4)

 

 

 

Despatch of DRS Advices in respect of holdings of New Janus Henderson Shares on DRS

 

On or around 14 June 2017(4)

 

 

 

Payment (where applicable) of fractional entitlements arising from the Share Consolidation or the Merger

 

On or around 14 June 2017(4)

 

 

 

Despatch of CSN statements in respect of holdings of New Janus Henderson Shares through the Janus Henderson CSN Facility

 

On or around 14 June 2017(4)

 

 

 

Outside Date

 

30 September 2017(5)

 

NOTES:

 

(1)         Only those Henderson CDI Holders entered in the register of CDI Holders at 7.00 p.m. (Sydney time) on 24 April 2017 or, if the EGM is adjourned, in the register of CDI Holders 48 hours before the time of the adjourned meeting, shall be entitled to provide voting instructions to CDN in respect of the number of Existing Henderson CDIs registered in their name at that time.

 

(2)         Only those Henderson Shareholders entered in the register of members at 6.00 p.m. (London time) on 24 April 2017 or, if the EGM is adjourned, in the register of members at 6.00 p.m. on the day which is two business days before the time of the adjourned meeting, shall be entitled to attend and vote at the EGM in respect of the number of Existing Henderson Shares registered in their name at that time.

 

(3)   An affirmative vote of Janus Stockholders at the Janus Stockholder Meeting is a condition to the Merger becoming effective.

 

(4)         These times and dates are indicative only and will depend on, among other things, the dates on which the conditions to the Merger set out in the Merger Agreement are satisfied or (where applicable) waived.

 

(5)         If the Merger is not completed on or before the Outside Date then termination rights will arise for each of Henderson and Janus.

 

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DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

 

Henderson Directors

 

Richard Gillingwater (Chairman)

 

 

Andrew Formica (Chief Executive)

 

 

Roger Thompson (Chief Financial Officer)

 

 

Phil Wagstaff (Global Head of Distribution)

 

 

Sarah Arkle (Non-Executive Director)

 

 

Kalpana Desai (Non-Executive Director)

 

 

Kevin Dolan (Non-Executive Director)

 

 

Tim How (Non-Executive Director)

 

 

Robert Jeens (Non-Executive Director)

 

 

Angela Seymour-Jackson (Non-Executive Director)

 

 

 

Company Secretary

 

Jacqui Irvine

 

 

 

Registered Office

 

47 Esplanade

 

 

St Helier

 

 

Jersey

 

 

JE1 0BD

 

 

 

Principal place of business in the UK

 

201 Bishopsgate

 

London

 

 

EC2M 3AE

 

 

 

Financial Adviser, Corporate Broker and Sponsor to Henderson

 

Bank of America Merrill Lynch

 

2 King Edward Street

 

London

 

 

EC1A 1HQ

 

 

 

Financial Adviser to Henderson

 

Centerview Partners

 

 

100 Pall Mall

 

 

London

 

 

SW1Y 5NQ

 

 

 

Legal Adviser to Henderson on English Law and US Law

 

Freshfields Bruckhaus Deringer LLP

 

65 Fleet Street

 

 

London

 

 

EC4Y 1HS

 

 

 

Legal Adviser to Henderson on Australian Law

 

Lander & Rogers

 

Level 19, Angel Place

 

 

123 Pitt Street

 

 

Sydney NSW 2000

 

 

 

Legal Adviser to Henderson on Jersey Law

 

Carey Olsen

 

47 Esplanade

 

 

Jersey

 

 

JE1 0BD

 

 

 

Reporting Accountants and Auditors of Henderson

 

PricewaterhouseCoopers LLP

 

1 Embankment Place

 

 

London

 

 

WC2N 6RH

 

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Registrar of Henderson

 

Computershare Investor Services (Jersey) Limited

 

 

Queensway House

 

 

Hilgrove Street

 

 

St Helier

 

 

Jersey

 

 

JE1 1ES

 

 

 

 

 

or

 

 

 

 

 

Computershare Investor Services Pty Limited

 

 

Level 4

 

 

60 Carrington Street

 

 

Sydney NSW 2000

 

 

Australia

 

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PART I

 

LETTER FROM THE CHAIRMAN OF HENDERSON

 

HENDERSON GROUP PLC

(Incorporated and registered in Jersey with registered number 101484)

 

Henderson Directors:

 

Registered Office:

 

 

 

Richard Gillingwater (Chairman)

 

47 Esplanade

Andrew Formica (Chief Executive)

 

St Helier

Roger Thompson (Chief Financial Officer)

 

Jersey

Phil Wagstaff (Global Head of Distribution)

 

JE1 0BD

Sarah Arkle (Non-Executive Director)

 

 

Kalpana Desai (Non-Executive Director)

 

 

Kevin Dolan (Non-Executive Director)

 

 

Tim How (Non-Executive Director)

 

 

Robert Jeens (Non-Executive Director)

 

 

Angela Seymour-Jackson (Non-Executive Director)

 

 

 

 

 

 

 

21 March 2017

 

To Henderson Shareholders, Henderson CDI Holders and, for information only, holders of options granted under, and other participants in, Henderson Share Plans

 

Proposed Merger and Notice of Extraordinary General Meeting

 

1.             INTRODUCTION

 

On 3 October 2016, the Henderson Board and the Janus Board announced that agreement had been reached on the terms of a merger of equals of Henderson and Janus. The Merger has been unanimously recommended by each of the Henderson Board and the Janus Board.

 

Completion of the Merger is conditional upon, among other things, the approval of Henderson Shareholders, which is required by the Listing Rules due to the size of Janus relative to that of Henderson. The approval of Henderson Shareholders is also required for: (i) the issuance of New Janus Henderson Shares in connection with the Merger; (ii) the adoption of the New Janus Henderson Memorandum and New Janus Henderson Articles; (iii) the change of the name of Henderson Group plc to “Janus Henderson Group plc”; and (iv) the de-listing of the Existing Henderson Shares from the LSE, as well as to give effect to certain other terms of the Merger Agreement and in relation to certain ancillary matters in relation to the Merger.

 

I am writing to you to:

 

·                                          give you further information on Janus, the Merger and the Resolutions;

 

·                                          explain why the Henderson Directors unanimously consider the Merger to be in the best interests of Henderson and the Henderson Shareholders as a whole and recommend that you vote in favour of the Resolutions; and

 

·                                          seek your approval for the Merger and the Resolutions.

 

2.             SUMMARY OF TERMS OF THE MERGER

 

Under the terms of the proposed Merger, Henderson Group plc, which will be renamed Janus Henderson Group plc, will become the holding company of the Combined Group, comprising the Henderson Group and the Janus L Group.

 

The terms of the Merger Agreement provide that Janus Stockholders will receive:

 

4.719 Existing Henderson Shares for each Janus Share

 

The exchange ratio was determined primarily by reference to the 30-day trading volume weighted average price of each of Henderson and Janus prior to the announcement of the Merger on 3 October 2016. Following

 

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Completion, Henderson Shareholders and Janus Stockholders are expected to own approximately 57% and approximately 43%, respectively, of the New Janus Henderson Shares.(1)

 

The Merger will be implemented by way of a statutory merger pursuant to the laws of Delaware and in accordance with the terms of the Merger Agreement. Subject to the satisfaction of certain conditions, including the approval of Henderson Shareholders and Janus Stockholders, Henderson and Janus shall procure that Merger Sub (a newly-formed, direct wholly-owned subsidiary of Henderson) will merge with and into Janus, with Janus surviving such merger as a direct wholly-owned subsidiary of Henderson.

 

It has also been agreed that, subject to and taking effect immediately prior to Completion, the Existing Henderson Shares and Existing Henderson CDIs will be consolidated on a “1-for-10” basis, so that each existing Henderson Shareholder or Henderson CDI Holder (as applicable) will receive:

 

1 New Janus Henderson Share for every 10 Existing Henderson Shares

 

1 New Janus Henderson CDI for every 10 Existing Henderson CDIs

 

As a result, and in accordance with the terms of the Merger Agreement, the exchange ratio will be adjusted to reflect the Share Consolidation so that at Completion each Janus Stockholder will receive:

 

0.4719 New Janus Henderson Shares for each Janus Share

 

Both Henderson Shareholders and Henderson CDI Holders (as a result of the Share Consolidation) and Janus Stockholders (as a result of the Merger and the application of the Adjusted Exchange Ratio) will be entitled to receive cash in lieu of any fractional entitlement to New Janus Henderson Shares based on the then prevailing market price.

 

The Share Consolidation is to be carried out, and the exchange ratio consequently adjusted, in order to ensure that the resultant price of the New Janus Henderson Shares is above the minimum share price of US$4 required for admission to listing on the NYSE and, so far as practicable, is at a comparable level to Janus Henderson’s peers on the NYSE.

 

Upon Completion: (i) the New Janus Henderson Shares will be listed for trading on the NYSE; and (ii) the listing of the Existing Henderson Shares on the Official List and the admission to trading of the Existing Henderson Shares on the main market of the LSE will each be cancelled. The New Janus Henderson CDIs will continue to be quoted and traded on the ASX.

 

Following Completion, the headquarters of Janus Henderson will be in London, where the co-Chief Executive Officers will be located. The Combined Group will continue to have significant operations in London and Denver, with members of the Executive Committee based in both locations. Janus Henderson will continue to be tax resident in the UK and incorporated and registered in Jersey. The Combined Group is expected to be authorised to conduct business in the same jurisdictions globally as was the case for each of the Henderson Group and the Janus Group individually.

 

Further details of the terms of, and conditions to, the Merger, are set out in paragraph 1 of Part VII (Summary of the principal terms and conditions of the Merger Agreement and other related arrangements).

 

3.             INFORMATION ON JANUS

 

Janus is a global investment firm dedicated to delivering better outcomes for clients through a broad range of investment solutions. Janus provides investment management, administration, distribution and related services to financial advisers, individuals and institutional clients through mutual funds, separate accounts, other pooled investment vehicles, exchange-traded products and sub-advised relationships in both US and international markets. Janus provides investment management competencies across a range of disciplines, including fundamental US and non-US equities (growth and value), mathematical equities, fixed income and alternatives, through its subsidiaries, Janus Capital Management LLC, INTECH and Perkins Investment Management LLC. These subsidiaries specialise in specific investment styles, and each has its own unique and independent perspective. Janus’s investment products are distributed through three primary channels: intermediary, institutional and self-directed. Each distribution channel focuses on specific investor groups and the unique requirements of each group. Based in Denver, Colorado, Janus has offices located in 12 countries throughout

 


(1)         Based on the fully diluted share capital of each of Henderson and Janus prior to the announcement of the Merger on 3 October 2016 and excluding the dilutive effect of any New Janus Henderson Shares issued pursuant to the Dai-ichi Option Agreement.

 

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North America, Europe, Asia and Australia. The firm had total assets under management and ETP assets totalling US$196.8 billion as at 31 December 2016.

 

Janus is currently listed on the NYSE under the ticker JNS, and as at the Latest Practicable Date had a market capitalisation of US$2.4 billion.

 

As at 31 December 2016, Janus had total assets of US$2,949.9 million and income before taxes of US$242.2 million. Further information on the financial performance of Janus can be found in Part IV (Financial Information on Janus) of this document.

 

4.             BACKGROUND TO AND REASONS FOR THE MERGER

 

In 2013, Henderson announced a five year strategic plan to deliver growth and globalisation. In the following two years, Henderson delivered consistently strong investment performance to clients, generated significant organic net new money growth, completed acquisitions in the US and Australia to accelerate growth in these regions, diversified investment management capabilities, deepened client relationships, extended its global infrastructure and substantially increased the strength of its brand. In October 2015, the Henderson Board reviewed key industry drivers, including the future role of active managers, meeting the needs of an increasingly global client base and continued regulatory change. The Henderson Board determined that the successful delivery of Henderson’s strategy to date should be given further impetus through a US-focused, transformational transaction. A series of potential partners were reviewed, and it was concluded that a merger with Janus was the preferred option.

 

The Henderson Board believes that Henderson and Janus have highly complementary businesses which share client-centric and collaborative cultures, well-matched investment capabilities and a focus on active management. The Merger is expected to combine the talent pools of both organisations to build a strong global team with an enhanced ability to innovate on behalf of clients and to create a leading independent active asset manager with a globally relevant brand, footprint, investment proposition and client service capability.

 

As at 31 December 2016, the Henderson Group and the Janus Group had a combined AUM of more than US$320 billion, being approximately 54% in the Americas, 31% in EMEA and 15% in Asia. The Combined Group is expected to have a market capitalisation of approximately US$5.6 billion based on the market capitalisation of each of Henderson and Janus as at the Latest Practicable Date.

 

The Merger will provide increased distribution strength and coverage in key markets, including the US, Europe, Australia, Japan and the UK, as well as a growing presence in the Asia-Pacific region, the Middle East and Latin America. In addition, the companies have complementary investment capabilities: Janus’s strength in US and Mathematical Equities complements Henderson’s in European Equities, Henderson’s Global Fixed Income operation complements Janus’s assets in the US, and Henderson has a strong Alternatives business.

 

The combination of Henderson and Janus will give the Combined Group enhanced scale, diversity of products and investment strategies and increased depth and breadth in global distribution, better positioning it to provide world-class client service, gain additional market share and further enhance shareholder value. The Merger is expected to be double-digit accretive to each company’s consensus earnings per share (excluding one-off costs) in the first 12 months following Completion.

 

The Combined Group is expected to achieve at least US$110 million of recurring annual run rate pre-tax net cost synergies within three years post-Completion (further details of which are set out in paragraph 5).

 

In evaluating the success of the Combined Group, the Janus Henderson Board will monitor the delivery of the planned cost synergies alongside the new key performance indicators that it considers most appropriate to allow an accurate assessment of the performance of the business, which will include progress made toward realising the revenue growth opportunities that are expected to arise from the cross-selling of Henderson and Janus products. The Combined Group’s strengthened positioning in global markets, continued innovation to benefit clients, and delivery of superior investment offerings to a global client base is expected to provide the potential for superior financial returns over the longer term.

 

5.             REVENUE GROWTH OPPORTUNITIES AND COST SYNERGIES

 

Revenue growth opportunities

 

The Merger is expected to create additional revenue growth opportunities for the Combined Group. In large part, this is due to the highly complementary geographic footprints of the two businesses. For example:

 

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·                                          in the US, where Janus’s approximately US$151 billion of AUM is significantly larger than Henderson’s US business of approximately US$18 billion of AUM as at 31 December 2016;

 

·                                          in Japan, where Janus currently has approximately US$17 billion of AUM, having benefited from the strategic relationship with Dai-ichi, compared to Henderson which has less than US$1 billion of AUM as at 31 December 2016;

 

·                                          in the UK, where Henderson has approximately US$64 billion of AUM and Janus has US$3 billion of AUM as at 31 December 2016; and

 

·                                          in Europe and Latin America, where Henderson has approximately US$27 billion of AUM, compared to Janus which has less than US$7 billion of AUM as at 31 December 2016.

 

The Combined Group has the ambition of generating approximately 2-3 percentage points of additional AUM growth from net new money following integration through leveraging both companies’ brand and distribution strength to cross-sell an expanded product range across the respective core geographies and customer bases of Henderson and Janus.

 

Cost synergies

 

As a result of the detailed and collaborative integration planning work undertaken since announcement of the Merger, Henderson and Janus have been able both to further validate the initial cost synergy estimate and identify areas with further potential for cost synergies. Accordingly, Henderson and Janus continue to believe that the Combined Group will be able to achieve at least US$110 million of recurring annual run rate pre-tax net cost synergies, representing approximately 19% of the Combined Group’s underlying EBITDA.(2)

 

The work undertaken by the integration teams has led Henderson and Janus to believe that the delivery of these synergies will be accelerated, with significant elements of the cost synergy plan already in progress. The Combined Group is expected to realise approximately US$80 million of net cost synergies by the end of the first 12 months following Completion on a run rate basis, with the remainder expected to be fully executed on a run rate basis within three years post-Completion.

 

The announced cost synergies are expected to be realised as follows:

 

·                                          More than half of the synergies are expected to arise from staff operating expenses in internal support functions and non-staff operating expenses, as follows:

 

a.                                      Staff operating expenses: synergies will arise from reducing combined headcount in internal support functions. These savings will arise from streamlining governance and management structures; and harmonisation and rationalisation of internal support functions such as finance, human resources, legal, risk, compliance, IT, and operations, among others;

 

b.                                      Non-staff operating expenses: consolidation of offices in overlapping locations; elimination of duplicative overheads; efficiencies in procurement spend; and leveraging potential operational economies of scale;

 

·                                          Approximately one quarter of the synergies will arise from reducing combined headcount in investment management and trading functions. These savings will arise from removing duplication of certain investment and research teams and leveraging potential economies of scale in trading activities; and

 

·                                          Approximately one fifth of the synergies will arise from reducing combined headcount in distribution and marketing functions. These savings will arise from rationalising management structures; removing duplication in centralised non-client facing roles; and consolidation of teams and staff in certain overlapping sales regions.

 

It is estimated that the realisation of these net cost synergies and other integration-related activities will result in non-recurring costs of up to US$185 million, of which US$125 million has already been incurred or will be incurred by the end of the 2017 financial year and the balance within three years post-Completion. These costs are in addition to the transaction and related costs of approximately US$65 million referred to in paragraph 10 of this Part I.

 


(2)         Based on the Henderson Underlying EBITDA (US$275.3 million) and the Janus Underlying EBITDA (US$310.9 million) in each case for the year ended 31 December 2016.

 

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Basis of belief

 

The analysis undertaken by Henderson and Janus in quantifying the potential synergies has been reviewed by external accountants and is informed by Henderson and Janus managements’ industry experience as well as their experience of executing and integrating past acquisitions. The analysis is based on the Henderson business and Janus business on a stand-alone basis and their detailed plans to integrate the two businesses globally.

 

The potential synergies have been calculated based on the latest available management information, consistent with that contained in Henderson’s and Janus’s respective financial information for the period ended 31 December 2016.

 

In arriving at the estimate and phasing of the potential synergies and non-recurring costs Henderson and Janus have made a number of key assumptions, including that:

 

·                                          the Merger will complete in May 2017;

 

·                                          there will be no significant impact on the underlying operations of Henderson or Janus or the ability for the Combined Group to conduct business;

 

·                                          there will be no material change in foreign exchange rates (with a sterling/US Dollar exchange rate of 1.3 assumed for the duration of the integration); and

 

·                                          there will be no material change to macro-economic, political, tax or legal conditions in the markets or regions in which Henderson or Janus operate that materially impacts the implementation, or costs to achieve, the proposed synergies.

 

The estimated cost synergies identified above reflect both the beneficial elements and relevant costs of achieving them. The estimated synergies are contingent on the Merger being completed and the expected benefits of the Merger being realised. They assume that no restrictions, terms or other conditions will be imposed in connection with the receipt of any governmental, regulatory or other approvals or consents necessary in connection with completion of the Merger. The estimated synergies would not be achievable on a stand-alone basis.

 

6.             DIVIDENDS

 

Pre-Completion dividends

 

Prior to Completion, subject to the approval of the Henderson Shareholders at the 2017 AGM, Henderson intends to declare and pay a final dividend of 7.30 pence per Existing Henderson Share for the financial year ended 31 December 2016. If approved by Henderson Shareholders, the dividend will be paid on or around 19 May 2017 to all Henderson Shareholders on the register of members at the close of business on 5 May 2017.

 

As announced on 24 January 2017, the Henderson Board also currently intends to declare and pay to Henderson Shareholders prior to Completion an interim dividend in respect of the first quarter of the financial year ending 31 December 2017 with a view to ensuring equality of treatment of Henderson Shareholders and Janus Stockholders. The Henderson Board will determine the amount of any such Q1 2017 dividend following the end of the quarter. Henderson Shareholders will be informed of the amount and timetable for payment of the Q1 2017 dividend prior to the date of the EGM by an announcement on the LSE and ASX.

 

Janus has declared and paid to Janus Stockholders quarterly cash dividends of US$0.11 and US$0.11 per Janus Share for the third and fourth quarter of 2016 respectively. Janus also currently expects to declare and pay a dividend in respect of Q1 2017 to Janus Stockholders prior to Completion.

 

Post-Completion dividends

 

Whilst there can be no assurance that Janus Henderson Shareholders will receive or be entitled to dividends that are equivalent to the historic dividends of Henderson or Janus, the Henderson Board and Janus Board expect that Janus Henderson will continue to follow a progressive dividend policy, increasing the dividend broadly in line with growth in adjusted operating income over the medium term and with a pay-out ratio consistent with Henderson’s past practice. Following Completion, it is intended that Janus Henderson will declare dividends on a quarterly basis beginning with the second quarter of 2017.

 

However, the amount of dividends, if any, that are declared or paid to Janus Henderson Shareholders in respect of financial periods after Completion cannot yet be determined and will depend on a number of factors. The Janus Henderson Board will have sole discretion to determine whether any interim dividends will be declared, the

 

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amount of any such interim dividends, the amount of any final dividend recommended to Janus Henderson Shareholders (which may be paid subject to the approval of Janus Henderson Shareholders) and when any dividend will be paid. The Henderson Board and the Janus Board expect that such determination would be based on a number of considerations, including, but not limited to, Janus Henderson’s results of operations, capital management plans, the market price of the New Janus Henderson Shares and Janus Henderson’s access to capital markets, as well as legal requirements, industry practice and other factors deemed relevant by the Janus Henderson Board.

 

7.             GOVERNANCE AND MANAGEMENT OF THE COMBINED GROUP

 

At Completion, Janus Henderson will adopt a corporate governance policy in a form customary for NYSE-listed companies, adapted as necessary to reflect Janus Henderson’s dual listed status in the US and Australia.

 

The Janus Henderson Board will be comprised of 12 directors and will meet in London and Denver. The initial Janus Henderson Directors will be:

 

Name

 

Position

 

 

 

Richard Gillingwater

 

Chairman

Glenn Schafer

 

Deputy Chairman

Andrew Formica

 

Co-Chief Executive Officer

Richard Weil

 

Co-Chief Executive Officer

Sarah Arkle

 

Non-Executive Director

Kalpana Desai

 

Non-Executive Director

Jeffrey Diermeier

 

Non-Executive Director

Kevin Dolan

 

Non-Executive Director

Eugene Flood Jr.

 

Non-Executive Director

Lawrence Kochard

 

Non-Executive Director

Angela Seymour-Jackson

 

Non-Executive Director

Tatsusaburo Yamamoto

 

Non-Executive Director

 

The decision to appoint co-Chief Executive Officers reflects the very important role both will play in achieving a successful integration of the two businesses, and was unanimously supported by each of the Henderson Board and the Janus Board.

 

The new Janus Henderson Directors will be appointed with effect from Completion and will be proposed to Janus Henderson Shareholders for election at the annual general meeting of Janus Henderson held in 2018. The New Janus Henderson Articles will limit the tenure of each initial independent Janus Henderson Director to 15 years from the date of their original appointment to the Henderson Board or the Janus Board (as applicable). Additional Janus Henderson Directors will be appointed if and when required and their tenure will be limited to 10 years from the date of their appointment. At Completion, the Henderson Directors who will not become members of the Janus Henderson Board will resign.

 

As described in Part VII (Summary of the principal terms and conditions of the Merger Agreement and other related arrangements), Dai-ichi will have the right to select an individual for appointment to the Janus Henderson Board until such right is terminated in accordance with the terms of the Dai-ichi Investment and Strategic Co-operation Agreement. The initial Janus Henderson Director nominated by Dai-ichi will be Tatsusaburo Yamamoto who is currently a director of Janus under its existing agreement with Dai-ichi.

 

At Completion, the Janus Henderson Board will establish four committees: an Audit Committee chaired by Jeffrey Diermeier, a Nominating/Corporate Governance Committee chaired by Richard Gillingwater, a Compensation Committee chaired by Lawrence Kochard and a Risk Committee chaired by Sarah Arkle. All of the members of each committee must qualify as independent directors under the NYSE Listed Company Manual and ASX Principles.

 

In addition, an Executive Committee will be established at Completion. It will be led by co-Chief Executive Officers Andrew Formica and Richard Weil and will initially consist of 10 members, being (in addition to Andrew Formica and Richard Weil):

 

·                                          Janus’s President, Head of Investments, Enrique Chang, who will become Global Chief Investment Officer;

 

·                                          Henderson’s Global Head of Distribution, Phil Wagstaff, who will become Global Head of Distribution;

 

·                                          Janus’s President, Bruce Koepfgen, who will become Head of North America;

 

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·                                          Henderson’s Executive Chairman Pan Asia, Rob Adams, who will become Head of Asia Pacific;

 

·                                          Janus’s Chief Financial Officer, Jennifer McPeek, who will become Chief Operating and Strategy Officer;

 

·                                          Henderson’s Chief Financial Officer, Roger Thompson, who will become Chief Financial Officer;

 

·                                          Janus’s Chief Compliance Officer, David Kowalski, who will become Chief Risk Officer; and

 

·                                          Henderson’s General Counsel and Company Secretary, Jacqui Irvine, who will become Group General Counsel and Company Secretary.

 

Biographies of the members of the Executive Committee are set out in paragraph 8 of Part IX (Additional information) of this document.

 

8.             REMUNERATION

 

Janus Henderson’s approach to remuneration will reflect its status as a newly NYSE-listed company, adapted as necessary to take account of Janus Henderson’s dual listed status in the US and Australia. A revised remuneration approach, including future remuneration for the co-Chief Executive Officers and other directors, will be developed by the Compensation Committee to integrate the remuneration policies and practices of Henderson and Janus, and to reflect the strategic goals and horizons of Janus Henderson. It is intended that Janus Henderson, as a company incorporated outside the UK and with no LSE listing, will move away from voluntary compliance with the UK regulations governing the disclosure and approval of directors’ remuneration as set out in The Large & Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. Henderson’s remuneration policy, as approved at its annual general meeting on 30 April 2015 on an advisory basis will continue to apply on a voluntary basis until the revised Janus Henderson remuneration approach has been determined, save that: (i) the existing contractual entitlements of the Janus directors who are joining the Janus Henderson Board will be honoured in full; and (ii) the individual non-executive director fees may be increased and the collective cap on non-executive director fees will be increased in accordance with the New Janus Henderson Articles.

 

After the Latest Practicable Date but prior to Completion, in accordance with the terms of the Merger Agreement, Henderson intends to make grants under the Henderson Share Plans (other than the Henderson Group plc Long Term Incentive Plan) in the ordinary course consistent with past practice. Henderson has also notified participants in the Henderson Group plc Long Term Incentive Plan of the potential face value of awards for 2017 (which value is consistent with past practice in all material respects). The precise form in which any such awards will be granted will be subject to review and determination by the Compensation Committee following Completion.

 

Pursuant to the Merger Agreement, during the one year period following Completion, Janus Henderson will be required to provide each employee who is employed by Henderson, Janus or their respective subsidiaries prior to Completion and who remains employed by Janus Henderson following Completion, with a base salary no less favourable than the base salary provided to such employee immediately prior to Completion, aggregate incentive compensation opportunities that are substantially comparable in the aggregate to those provided to such employee immediately prior to Completion and other employee benefits that are substantially comparable in the aggregate to those provided to such employee prior to Completion. Further details of the current service agreements and arrangements of Henderson and Janus directors and officers are set out in paragraphs 10 and 11 of Part IX (Additional information) of this document.

 

9.             DAI-ICHI AGREEMENTS

 

In 2012, Janus entered into a strategic alliance with Dai-ichi, the Japanese life insurance company. Dai-ichi, has committed to vote its Janus Shares, which represent approximately 20% of the issued and outstanding Janus Shares as at the Latest Practicable Date, in favour of the Merger.

 

Immediately following Completion, Dai-ichi will hold approximately 9% of the New Janus Henderson Shares and intends to further invest in New Janus Henderson Shares to increase its ownership interest to at least 15%. To assist Dai-ichi in achieving its ownership ambitions, Henderson has agreed to sell to Dai-ichi options to subscribe for or purchase New Janus Henderson Shares representing up to approximately 5% of the New Janus Henderson Shares in issue at Completion pursuant to the Dai-ichi Option Agreement. Such agreement is subject to and conditional upon: (i) Completion; and (ii) in respect of options to subscribe for or purchase New Janus Henderson Shares representing approximately 2.2% of the New Janus Henderson Shares in issue at Completion, the necessary Henderson Shareholder approvals being obtained at the EGM. Further details of the terms of the

 

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Dai-ichi Option Agreement are set out in Part VII (Summary of the principal terms and conditions of the Merger Agreement and other related arrangements).

 

In February 2017, Dai-ichi invested approximately US$172 million into one of Henderson’s funds and, following Completion, Dai-ichi anticipates making additional investments in the Janus Henderson product range of up to US$500 million, which would bring its total committed invested assets in Janus Henderson products to more than US$2.5 billion.

 

10.          FINANCIAL EFFECTS OF THE MERGER

 

Unaudited pro forma financial information illustrating the effect of the Merger on Henderson’s consolidated net assets as at 31 December 2016, as if Completion had occurred at that date, is set out in Part V (Unaudited pro forma financial information of the Combined Group) of this document. This information has been prepared for illustrative purposes only. It shows that the Merger would have led to a pro forma movement in consolidated net assets from US$1,692.3 million to US$4,203.2 million as at 31 December 2016. More detailed information on the expected impact of the Merger on the consolidated assets and liabilities of Henderson is set out in Part V (Unaudited pro forma financial information of the Combined Group) of this document.

 

Henderson and Janus expect to incur transaction and related costs (including advisory, legal, audit, valuation and other professional fees) of approximately US$65 million in connection with the Merger (which are in addition to the costs associated with realising the net cost synergies and other integration-related activities referred to in paragraph 5 of this Part I).

 

It is expected that the effective tax rate for the Combined Group will reflect a blend of the stand-alone tax rates of Henderson and Janus.

 

11.          ACCOUNTING TREATMENT OF THE MERGER

 

The Merger will be accounted for as a business combination under US GAAP (ASC 805), which requires as the first step in the application of acquisition accounting for one of the combining entities to be identified as the acquirer (ASC 805-10-25-4). Henderson will be treated as the acquiring entity for accounting purposes. In identifying Henderson as the acquiring entity for accounting purposes, Henderson took into account the voting rights of all equity instruments, the intended corporate governance structure of Janus Henderson, and the size of each of the companies. In assessing the size of each of the companies, Henderson evaluated various metrics, including, but not limited to: market capitalisation, revenue, operating profit, assets and assets under management. No single factor was the sole determinant in the overall conclusion that Henderson is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion.

 

12.          INTEGRATION

 

Post-Completion integration planning is being overseen by a steering committee comprising members of senior management of both Henderson and Janus to manage the integration process effectively across each functional division. The objective of this joint team is to deliver the benefits of the Merger after Completion whilst minimising disruption to the business of the Combined Group. Given the people-intensive nature of both businesses, a key focus of the integration planning process has been to provide employees with as much clarity as possible on future organisational structure.

 

13.          REGULATORY CAPITAL

 

In February 2017, Henderson received feedback following the FCA’s Supervisory Review and Evaluation Process (“SREP”) of Henderson’s capital position on a stand-alone basis (i.e. before taking into account the Merger). On that stand-alone basis, Henderson’s capital requirement as at 31 December 2016 was £216 million. As a result, Henderson held capital in excess of its regulatory capital requirement on a consolidated basis of £69 million as at 31 December 2016.

 

Henderson will continue to use the FCA’s latest interim Individual Capital Guidance (“ICG”) in relation to Henderson stand-alone to assess the regulatory capital requirements of the Combined Group until such time as it is reviewed by the FCA in the future.

 

The latest ICG, when applied to the Combined Group, is estimated by Henderson to increase the regulatory capital requirements of the Combined Group. However, the Henderson Board believes the Combined Group will hold

 

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capital in excess of its estimate for regulatory capital required from Completion and that the Combined Group would have sufficient capital to comply with its regulatory capital requirements going forward.

 

14.          CURRENT TRADING AND PROSPECTS

 

Henderson

 

On 9 February 2017, Henderson released its results for the year ended 31 December 2016. Henderson achieved underlying profit before tax of £212.7 million (2015: £220.0 million), reflecting lower underlying net income, down 4% year on year. The reduction in underlying net income was driven by lower performance fees of £40.4 million (2015: £98.7 million). Management fees, Henderson’s principal revenue stream, increased by 8% to £505.9 million, primarily driven by market and foreign exchange gains in 2016, partially offsetting the decrease in performance fees. Total operating expenses decreased by 2% to £378.7 million. Underlying profit after tax decreased by 14% to £169.7 million, primarily reflecting an increased tax charge for the period. Diluted underlying earnings per share decreased by 12% to 15.2 pence, primarily driven by a higher effective tax rate (20.2%) and lower underlying profits.

 

Assets under management as at 31 December 2016 increased by 10% to £101.0 billion, reflecting positive market and foreign exchange movements of £13.0 billion, partially offset by net outflows of £4.0 billion.

 

Market conditions were extremely volatile in 2016. However, on a three year basis as at 31 December 2016, 77% of Henderson’s assets outperformed the relevant metrics, demonstrating the Henderson Group’s long-term track record. On a one year basis, performance was less strong, with 50% of assets outperforming.

 

The macro environment was challenging in 2016 and this is expected to continue in 2017. Although retail flows have moderated in the US, political and economic conditions in the UK and Continental Europe remain challenging, with the UK set to begin Brexit negotiations with the EU and several European elections due to take place in 2017. However, Henderson remains focused on delivering excellent performance and maintaining strong client relationships.

 

Janus

 

On 24 January 2017, Janus reported full year 2016 net income attributable to Janus of $146.1 million, or $0.78 per diluted share, compared with net income attributable to Janus of $155.8 million, or $0.80 per diluted share, for 2015. Full year 2016 revenues of $1,010.7 million decreased from 2015 revenues of $1,076.2 million due to a product mix shift to lower yielding products and lower performance fees. Operating expenses were consistent year-on-year while non-operating expenses decreased largely as a result of the early retirement of debt in 2015. Assets under management (including ETP assets) at 31 December 2016 increased by $4.5 billion, reflecting positive market movements of $8.5 billion and net outflows of $4.0 billion.

 

15.          REGULATORY APPROVALS

 

The Merger is subject to customary regulatory approvals, including, among others: (i) expiration or termination of any applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act of 1976; (ii) approval by the US Financial Industry Regulatory Authority, Inc.; (iii) approval of the Merger by the FCA in respect of Henderson becoming a controller of each Janus entity authorised by the FCA; (iv) the approval by the JFSC of the US Registration Statement and any other relevant document deemed to be a prospectus pursuant to the Jersey Companies Law, and the issue by the JFSC of any consent required pursuant to the Control of Borrowing (Jersey) Order 1958 for Henderson to lawfully assume the Janus awards and plans; and (v) consents, non-objections and/or approvals from the applicable governmental authorities in Canada, Hong Kong, Ireland, Singapore, Switzerland, and, if applicable, Australia, India and Jersey and certain other jurisdictions, as well as obtaining approvals, consents and/or non-objections from the applicable governmental authorities in Jersey, Switzerland and, if applicable, Ireland, necessary in connection with the transactions contemplated by the Dai-ichi Agreements.

 

As at the Latest Practicable Date, the only regulatory approvals outstanding were approval of the Merger by FINRA, the Hong Kong Securities and Futures Commission (the “Hong Kong SFC”), and the Central Bank of Ireland (the “CBI”).

 

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16.          CONDITIONS TO THE MERGER

 

Completion is subject to customary conditions for a transaction of this size and type including, among other things, the following:

 

(a)                                 approval of the Merger by Janus Stockholders at the Janus Stockholder Meeting to be held on 25 April 2017;

 

(b)                                 approval of the Merger, the increase of Henderson’s share capital to permit the issuance of New Janus Henderson Shares in connection with the Merger, the change of name of Henderson Group plc to “Janus Henderson Group plc”, the New Janus Henderson Memorandum and the New Janus Henderson Articles and the London De-listing by Henderson Shareholders at the EGM;

 

(c)                                  approval of the final dividend of 7.30 pence for the year ended 31 December 2016 by Henderson Shareholders at the 2017 AGM;

 

(d)                                 receipt of the remaining customary regulatory approvals, in respect of the Merger, being approvals from FINRA, the Hong Kong SFC and the CBI;

 

(e)                                  the absence of certain governmental restraints or prohibitions preventing Completion from occurring;

 

(f)                                   approval by the boards of trustees and shareholders of Janus-advised US mutual funds of new investment advisory agreements with Janus to take effect at Completion representing at least 67.5% of the assets under management of those funds as at 30 September 2016;

 

(g)                                  the SEC having declared effective the US Registration Statement and the absence of any stop order or proceeding seeking a stop order; and

 

(h)           the approval for listing by the NYSE of the New Janus Henderson Shares, subject to official notice of issuance.

 

17.          SHARE CONSOLIDATION

 

In connection with the Merger, Henderson is proposing a Share Consolidation to take effect immediately prior to Completion. The purpose of the Share Consolidation is to seek to ensure that, following Completion, the price of the New Janus Henderson Shares is above the minimum share price of US$4 for admission to listing on the NYSE and, so far as possible, is at a comparable level to Janus Henderson’s peers on the NYSE.

 

The effect of the Share Consolidation will be to replace every 10 Existing Henderson Shares in issue at the Share Consolidation Record Time with one New Janus Henderson Share. In order to ensure that holders of Existing Henderson CDIs are treated in the same way as holders of Existing Henderson Shares, CDN will also consolidate the Existing Henderson CDIs on the same basis by replacing every 10 Existing Henderson CDIs in issue at the CDI Consolidation Record Time with one New Janus Henderson CDI.

 

Fractional entitlements and Surplus New Janus Henderson Shares

 

Henderson Shareholders whose holdings of Existing Henderson Shares cannot be consolidated into an exact number of New Janus Henderson Shares, and Henderson CDI Holders whose holdings of Existing Henderson CDIs cannot be consolidated into an exact number of New Janus Henderson CDIs, will be left with a fractional entitlement.

 

In addition, although CDN holds Existing Henderson Shares on behalf of multiple Henderson CDI Holders, Jersey Companies Law requires Henderson to treat CDN’s holding of Existing Henderson Shares as a single, undivided holding. The Share Consolidation will therefore result in CDN holding a number of New Janus Henderson Shares in excess of the total number of New Janus Henderson Shares to which Janus Henderson CDI Holders would have been entitled had they each been a direct holder of the relevant Existing Henderson Shares for the purposes of the Share Consolidation (such additional New Janus Henderson Shares to which CDN is entitled being the “Surplus New Janus Henderson Shares”).

 

Fractional entitlements of Henderson Shareholders to New Janus Henderson Shares and the Surplus New Janus Henderson Shares will be aggregated and sold in the market for the best price reasonably obtainable on behalf of the relevant Henderson Shareholders or Henderson CDI Holders (as applicable). Janus Henderson reserves the right to instruct the sale of such aggregated fractional entitlements for the relevant Henderson Shareholders and Henderson CDI Holders (as applicable) on the NYSE (as New Janus Henderson Shares) and/or the ASX (as New

 

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Janus Henderson CDIs). The net proceeds of the sale, after the deduction of the expenses of the sale (including any fees in relation to currency conversions), will be paid in due proportion to the relevant Henderson Shareholders or Henderson CDI Holders (as applicable) and, in the case of Henderson CDI Holders, such that they are each paid the amount that they would have received for their fractional entitlement had they been a direct holder of the relevant Existing Henderson Shares for the purposes of the Share Consolidation. The value of any fractional entitlement will not exceed the value of one New Janus Henderson Share or New Janus Henderson CDI when the relevant New Janus Henderson Shares or New Janus Henderson CDIs are sold.

 

Payment of fractional entitlements

 

Payment of fractional entitlements (where applicable) will be despatched as soon as practicable following the sale of the relevant New Janus Henderson Shares or New Janus Henderson CDIs, as described above. Henderson Shareholders who hold their Existing Henderson Shares in CREST will receive their fractional entitlement payment via their CREST accounts. Henderson Shareholders who hold their Existing Henderson Shares in certificated form will be sent a cheque for their fractional entitlement, regardless of whether they have an existing mandate to a bank or building society account in respect of the payment of dividends. Henderson CDI Holders will have their fractional entitlement payment deposited into the bank account into which their Henderson dividends are paid (where applicable) or, if no existing mandate is in place, will be sent a cheque.

 

Henderson Shareholders will receive any fractional entitlement payment in Pounds Sterling, whilst Henderson CDI Holders will receive any fractional entitlement payment in Australian Dollars or New Zealand Dollars in accordance with their preference for, and applying the currency exchange rate applicable to, the payment of dividends.

 

Henderson Shareholders who hold fewer than 10 Existing Henderson Shares, and Henderson CDI Holders who hold fewer than 10 Existing Henderson CDIs, will still have their holding consolidated but will receive cash only and no New Janus Henderson Shares or New Janus Henderson CDIs (as applicable).

 

18.          TREATMENT OF HENDERSON AND JANUS EQUITY AWARDS

 

All Henderson equity awards will remain outstanding in accordance with the terms and conditions under the applicable plans and award agreements in effect immediately prior to Completion, provided that the number of shares under such equity awards and any exercise price payable will be adjusted to take account of the Share Consolidation. Following Completion, performance targets applicable to the outstanding Henderson equity awards will be reviewed by the Compensation Committee to consider any adjustments that it deems appropriate to reflect the performance of the Combined Group, provided that such adjustments will not be to the advantage of participants or more difficult to satisfy.

 

Pursuant to the Merger Agreement, all Janus equity awards outstanding immediately prior to Completion, whether vested or unvested, will be converted into corresponding Janus Henderson equity awards with respect to a number of New Janus Henderson Shares calculated using the Adjusted Exchange Ratio. For converted options, the exercise price will be determined by dividing the per share exercise price by the Adjusted Exchange Ratio.

 

Further details of the treatment of the outstanding equity awards of Henderson and Janus in connection with the Merger are set out in paragraph 1 of Part VII (Summary of the principal terms and conditions of the Merger Agreement and other related arrangements) of this document.

 

19.          LONDON DE-LISTING AND NYSE LISTING

 

London De-listing

 

The Existing Henderson Shares are currently listed on the premium segment of the Official List and admitted to trading on the main market for listed securities of the LSE. The Existing Henderson CDIs are quoted and traded on the ASX. The Janus Shares are currently listed and admitted to trading on the NYSE.

 

Both the Henderson Board and the Janus Board wish to maximise liquidity for the holders of the New Janus Henderson Shares following Completion. Currently the deepest pool of liquidity for Henderson is in Australia and for Janus is in the US.

 

Having considered the cost and complexity of continuing to have its securities trade on each of the NYSE, the ASX and LSE, the Henderson Board determined that, subject to the approval of Henderson Shareholders (which is required pursuant to Listing Rule 5.2.5 R), it would apply to cancel the listing of Existing Henderson Shares on

 

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the Official List and the admission of the Existing Henderson Shares to trading on the LSE with effect from Completion.

 

Following the London De-listing, the Listing Rules and Disclosure Guidance and Transparency Rules will no longer apply to Janus Henderson, which may mean that certain shareholder protections are no longer applicable. In particular: (a) shareholder approval will no longer be required for significant transactions entered into by the Combined Group in accordance with Listing Rule 10 or for certain transactions entered into between the Combined Group and a related party of Janus Henderson under Listing Rule 11; (b) the restrictions on Janus Henderson dealing in its own securities set out in Listing Rule 12 will no longer be applicable; and (c) the requirement to include certain information in circulars sent to shareholders, including where the Combined Group enters into a significant transaction or seeks other shareholder approvals, will no longer be applicable.

 

However, Janus Henderson will remain subject to the requirements of the ASX Listing Rules and following Completion, upon the NYSE Listing becoming effective, Janus Henderson will become subject to the requirements of the NYSE Listed Company Manual, including: (a) shareholder approval requirements under NYSE Listed Company Rule 312.03 for certain share issuances, including share issuances to related parties and share issuances that exceed 20% of the amount of shares outstanding; and (b) notification and proxy submission obligations for matters affecting the rights or privileges of shareholders under Section 4 of the NYSE Listed Company Manual. Janus Henderson will also become subject to relevant SEC rules of practice, which include rules in relation to Janus Henderson dealing in its own securities.

 

It is intended that the last day of trading in Existing Henderson Shares on the LSE will be 26 May 2017.

 

NYSE Listing

 

At Completion, the New Janus Henderson Shares will be admitted to trading on the NYSE. Janus Henderson will also maintain its listing on the ASX and the quotation of New Janus Henderson CDIs, each representing one New Janus Henderson Share, on the ASX will continue.

 

Index inclusion

 

Henderson is currently a member of the FTSE 250 and ASX 100 indices, among others; Janus is currently a member of the S&P Mid-Cap 400 and Russell 2000 indices, among others.

 

Following Completion, Janus Henderson expects to maintain its inclusion in the ASX 100 and Russell indices. Janus Henderson will not be automatically included in any S&P indices but will seek inclusion for the Combined Group as soon as practicable following Completion.

 

20.          SETTLEMENT AND DEALINGS IN NEW JANUS HENDERSON SHARES AFTER COMPLETION

 

Following the London De-listing and the NYSE Listing becoming effective, it will no longer be possible to transfer or settle New Janus Henderson Shares directly through the CREST settlement system. In addition, certain holders of Existing Henderson Shares may find that they cannot hold and trade New Janus Henderson Shares in the same way as they currently hold and trade their Existing Henderson Shares. In light of this, Janus Henderson has entered into certain arrangements in order to assist such Henderson Shareholders, which are further described in Part VIII (Settlement and dealings in New Janus Henderson Shares after Completion) of this document.

 

Henderson Shareholders are advised to read Part VIII (Settlement and dealings in New Janus Henderson Shares after Completion) of this document carefully to ensure that they understand the arrangements that will apply following Completion.

 

21.          TAXATION

 

Henderson Shareholders who are in any doubt about their tax position or who may be subject to tax in a jurisdiction other than the UK or Australia are strongly recommended to consult their own professional advisers.

 

21.1        UK taxation

 

The following statements are intended only as a general guide to certain UK tax considerations and do not purport to be a complete analysis of all potential UK tax consequences of the Share Consolidation or the

 

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holding or disposal of New Janus Henderson Shares or New Janus Henderson CDIs. The following statements are based on current UK legislation and what is understood to be the current practice of HM Revenue & Customs as at the date of this document, both of which may change, possibly with retroactive effect. They apply only to holders of Existing Henderson Shares (for the purposes of this paragraph 21, “Existing Henderson Shareholders”) who are resident, and in the case of Existing Henderson Shareholders who are individuals who are domiciled, for tax purposes in (and only in) the UK (except insofar as express reference is made to the treatment of other Henderson Shareholders or Janus Henderson Shareholders), and who hold their Existing Henderson Shares as an investment (other than in an individual savings account or exempt pension arrangement), and who are the absolute beneficial owners of both their Existing Henderson Shares and any dividends paid on them. The tax position of certain categories of Existing Henderson Shareholders who are subject to special rules (such as persons who hold or will hold their Existing Henderson Shares, New Janus Henderson Shares or Janus Henderson DIs in connection with employment, dealers in securities, insurance companies and collective investment schemes) is not considered.

 

(a)           Taxation Of Chargeable Gains

 

It is expected that, for the purposes of UK taxation of chargeable gains (“CGT”), the Share Consolidation will be treated as follows:

 

(i)                                     the New Janus Henderson Shares (including where represented by Janus Henderson DIs) arising from the Share Consolidation will result from a reorganisation of the share capital of Henderson. Accordingly, to the extent that an Existing Henderson Shareholder receives New Janus Henderson Shares (including where represented by Janus Henderson DIs), the Existing Henderson Shareholder should not in practice be treated as making a disposal of all or part of their holding of Existing Henderson Shares by reason of the Share Consolidation being implemented, and the New Janus Henderson Shares (including where represented by Janus Henderson DIs) which replace an Existing Henderson Shareholder’s holding of Existing Henderson Shares as a result of the Share Consolidation (the “new holding”) will be treated as the same asset as the Existing Henderson Shareholder’s holding of Existing Henderson Shares and as having been acquired at the same time as the Existing Henderson Shareholder’s holding of Existing Henderson Shares was acquired;

 

(ii)                                  to the extent that an Existing Henderson Shareholder receives cash by virtue of a sale on his or her behalf of any New Janus Henderson Shares to which he or she has a fractional entitlement, the Existing Henderson Shareholder will not in practice normally be treated as making a part disposal of their holding of Existing Henderson Shares, the proceeds instead being deducted from the base cost of the Existing Henderson Shareholder’s new holding. If those proceeds exceed that base cost, however, or if an Existing Henderson Shareholder holds less than 10 Existing Henderson Shares at the Completion Date and so is not entitled to any New Janus Henderson Shares, the Existing Henderson Shareholder will be treated as disposing of part or all of his or her existing holding of Existing Henderson Shares and will be subject to tax in respect of any chargeable gain thereby realised; and

 

(iii)                               on a subsequent disposal of the whole or part of the New Janus Henderson Shares (including where represented by Janus Henderson DIs) comprised in the new holding, an Existing Henderson Shareholder may, depending on his or her circumstances, be subject to tax on the amount of any chargeable gain realised.

 

It is expected that the redenomination of the Existing Henderson Shares should not give rise to any immediate liability to CGT in an Existing Henderson Shareholder’s hands.

 

(b)           Taxation of income

 

It is expected that neither the redenomination of the Existing Henderson Shares nor the Share Consolidation will give rise to any immediate liability to UK income tax (or corporation tax on income) in an Existing Henderson Shareholder’s hands.

 

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(c)           UK stamp duty and stamp duty reserve tax (“SDRT”)

 

The statements in this section regarding UK stamp duty and SDRT apply to Henderson Shareholders and Janus Henderson Shareholders irrespective of their residence and are intended as a general guide only. Special rules may apply to certain categories of persons, including intermediaries, brokers, dealers and persons connected with depositary receipt arrangements and clearance services.

 

(i)            New Janus Henderson Shares

 

No liability to UK stamp duty or SDRT is expected to arise on the transfers at Completion of New Janus Henderson Shares into the DTC or DRS systems pursuant to the arrangements described in Part VIII (Settlement and dealings in New Janus Henderson Shares after Completion) of this document.

 

No liability to SDRT will arise on agreements to transfer New Janus Henderson Shares (including within the DTC or DRS systems), provided that the New Janus Henderson Shares are not registered in a register kept in the UK by or on behalf of Henderson. Henderson currently does not intend that any register of New Janus Henderson Shares will be kept in the UK.

 

UK stamp duty will not normally be payable in connection with a transfer of New Janus Henderson Shares (including within the DTC or DRS systems), provided that there is no instrument of transfer.

 

(ii)           Janus Henderson DIs

 

No liability to UK stamp duty or SDRT will arise on the issue of Janus Henderson DIs to Existing Henderson Shareholders.

 

HMRC have confirmed to Henderson, by way of formal clearance, that no UK SDRT will arise on agreements to transfer the Janus Henderson DIs, provided that the legal title in the New Janus Henderson Shares in respect of which such Janus Henderson DIs are issued continues to be held by Cede & Co., as nominee for DTC. No UK stamp duty will be payable on transfers within CREST of Janus Henderson DIs, provided that there is no instrument of transfer.

 

No UK stamp duty or SDRT is in practice expected to be payable on a cancellation (without change in beneficial ownership) of Janus Henderson DIs.

 

(iii)          New Janus Henderson CDIs

 

No liability to UK stamp duty or SDRT will arise on the issue of New Janus Henderson CDIs to Janus Henderson CDI Holders.

 

No UK stamp duty will be payable on transfers of New Janus Henderson CDIs, provided that there is no instrument of transfer. No SDRT should be payable in respect of any agreement to transfer the New Janus Henderson CDIs, provided that neither the New Janus Henderson CDIs nor the New Janus Henderson Shares are registered in a register kept in the UK by or on behalf of CDN or Henderson. Henderson currently does not intend that any register of New Janus Henderson CDIs or New Janus Henderson Shares will be kept in the UK.

 

(d)           Situs of Janus Henderson DIs

 

Existing Henderson Shareholders who are not domiciled in the UK may wish to seek advice as to whether or not the Janus Henderson DIs are assets situated in the UK for the purposes of UK inheritance tax and UK taxation of capital gains.

 

21.2        Australian taxation

 

The following is a summary of the likely Australian income tax implications associated with the Share Consolidation for Australian resident Henderson CDI Holders or Henderson Shareholders (“Australian Henderson CDI/Share Holders”). The summary below is based on the Australian income tax law and published practice of the Australian Taxation Office as at the date of this document. The summary does not represent a complete analysis of all the likely Australian income tax implications associated with the Share

 

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Consolidation. The summary only covers the Australian income tax consequences for Australian Henderson CDI/Share Holders that hold their Existing Henderson CDIs/Existing Henderson Shares on capital account. It does not apply to Australian Henderson CDI/Share Holders that hold their Existing Henderson CDIs/Existing Henderson Shares as trading stock or revenue assets. During the time of ownership of the Existing Henderson CDIs/Existing Henderson Shares by investors, the taxation laws of Australia or their interpretation may change. The precise implications of ownership or disposal will depend upon each investor’s specific circumstances. Investors should seek their own professional advice on the taxation implications of holding or disposing of their CDIs/Shares, taking into account their specific circumstances.

 

(a)           Class Ruling application

 

A class ruling is currently being sought from the Australian Tax Office (the “ATO”) by Henderson on behalf of Australian CDI/Share Holders to confirm specific income tax consequences set out in this document inclusive of both the Share Consolidation and fractional consideration (the “Class Ruling”).

 

The final Class Ruling will be published on Henderson’s website and the ATO website following Completion. It is the ATO’s standard practice that class rulings are not issued until the completion of the relevant transaction. Ultimately, the ATO may or may not issue a final Class Ruling consistent with the outline below.

 

(b)           Share Consolidation

 

It is expected that the New Janus Henderson CDIs/New Janus Henderson Shares arising from the Share Consolidation will result from a reorganisation of the share capital of Henderson involving the consolidation of every 10 Existing Henderson CDIs into one New Janus Henderson CDI, and every 10 Existing Henderson Shares into one New Janus Henderson Share, respectively.

 

Australian Henderson CDI/Share Holders should not be treated as having disposed of their Existing Henderson CDIs/Existing Henderson Shares as a result of the Share Consolidation. Accordingly, no capital gain or loss should be realised in respect of those Existing Henderson CDIs/Existing Henderson Shares that are consolidated into New Janus Henderson CDIs/New Janus Henderson Shares under the proposed Share Consolidation.

 

The aggregate cost base of the Existing Henderson CDIs/Existing Henderson Shares should be apportioned across the New Janus Henderson CDIs/New Janus Henderson Shares. The New Janus Henderson CDIs/New Janus Henderson Shares should have the same date of acquisition as the Existing Henderson CDIs/Existing Henderson Shares which is relevant for the purposes of the capital gains tax discount to the extent it is relevant to specific investors.

 

(c)           Fractional entitlements

 

Australian Henderson CDI/Share Holders should recognise a capital gain or loss upon disposal of any fractional entitlement to a New Janus Henderson Share or Surplus New Janus Henderson Shares representing a fractional entitlement to a New Janus Henderson CDI. This will be determined by comparing the payment received for such disposal against the cost base of the Existing Henderson CDIs/Existing Henderson Shares relating to any fractional entitlement to a New Janus Henderson CDI/New Janus Henderson Share.

 

22.          RISK FACTORS

 

For a discussion of the risks and uncertainties which you should take into account when considering whether to vote in favour of the Resolutions, please refer to Part III (Risk Factors) of this document.

 

23.          EXTRAORDINARY GENERAL MEETING AND THE RESOLUTIONS

 

Given the size of the Merger in relation to the current size of Henderson, it is necessary for Henderson to seek shareholder approval for the Merger. Under the terms of the Merger Agreement, in order for the Merger to become effective Henderson Shareholders are also required to approve: (i) the allotment of New Janus Henderson Shares in connection with the Merger; (ii) the change of the name of Henderson Group plc to “Janus Henderson Group plc”; (iii) the adoption of the New Janus Henderson Memorandum and the New Janus Henderson Articles; and (iv) the de-listing of the Existing Henderson Shares from the LSE. The EGM has been convened to seek these approvals, together with certain ancillary approvals, from the Henderson Shareholders.

 

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Resolutions 1 to 8 (inclusive) and 12 are inter-conditional which means that for any of them to take effect, they must all be passed.

 

Resolution 1 — Redenomination of issued share capital and cancellation of unissued shares

 

Resolution 1 will be proposed as a special resolution and will be passed if two-thirds or more of the votes cast are in favour.

 

Resolution 1 proposes that Henderson’s issued share capital be re-denominated from Pounds Sterling into US Dollars. The nominal value of each Existing Henderson Share of £0.125 each will be converted at an exchange rate of 1.2376 (being the exchange rate as at the close of business on 17 March 2017) to US$0.1547. Resolution 1 further proposes that the remaining 1,063,068,666 unissued Existing Henderson Shares of £0.125 each be cancelled.

 

In order to comply with the requirements of Jersey Companies Law, it is proposed that the redenomination of Henderson’s issued share capital will become effective on the date of the EGM.

 

Resolution 2 — Adoption of Interim Henderson Memorandum

 

Resolution 2 will be proposed as a special resolution and will be passed if two-thirds or more of the votes cast are in favour.

 

Resolution 2 proposes that the Interim Henderson Memorandum be adopted with effect from the redenomination of the nominal value of the Existing Henderson Shares referred to in Resolution 1 becoming effective. The Interim Henderson Memorandum gives effect to the changes proposed by Resolution 1. It is intended that the Interim Henderson Memorandum will remain in place up to the time that the reduction of the nominal value of the ordinary shares referred to in Resolution 3 below becomes effective, at which time a statutory minute delivered to the Jersey Registrar of Companies in connection with that process replaces the relevant parts of the Interim Henderson Memorandum. The Interim Henderson Memorandum as supplemented by that statutory minute will remain in place until Completion when the New Janus Henderson Memorandum will become effective as proposed by Resolution 7.

 

Resolution 3 — Reduction of the nominal value of the Existing Henderson Shares following the redenomination into US Dollars

 

Resolution 3 will be proposed as a special resolution and will be passed if two-thirds or more of the votes cast are in favour.

 

Resolution 3 proposes that the nominal value of each Existing Henderson Share of US$0.1547 (following the redenomination of Henderson’s share capital into US Dollars described above) is reduced to US$0.15. This ensures that the new nominal value is a round number which is helpful to Henderson from an administrative perspective. In accordance with Jersey Companies Law, the nominal capital account of Henderson will be reduced from US$175,095,974.417 to US$169,776,316.50 to reflect the reduction of the nominal value of the shares and an equivalent amount will be transferred to the share premium account.

 

The reduction of the nominal value of the Existing Henderson Shares will become effective when a copy of the special resolution and certain supporting documents (including a statutory minute setting out certain information relating to Henderson’s share capital following the reduction) are delivered to the Jersey Registry and are registered by the Jersey Registrar of Companies, which is expected to be on or around 2 May 2017.

 

Resolution 4 — Consolidation of every 10 Existing Henderson Shares into one New Janus Henderson Share

 

Resolution 4 will be proposed as a special resolution and will be passed if two-thirds or more of the votes cast are in favour.

 

Resolution 4 proposes that every 10 Existing Henderson Shares in issue at the Share Consolidation Record Time are consolidated into one New Janus Henderson Share taking effect immediately prior to Completion. The Existing Henderson CDIs will also be consolidated in the same ratio. Resolution 4 further proposes that any fractional entitlements of Henderson Shareholders to New Janus Henderson Shares, or of Henderson CDI Holders to Surplus New Janus Henderson Shares, are aggregated and sold in the market for the best price reasonably obtainable on behalf of the relevant Henderson Shareholders or Henderson CDI Holders (as applicable). The net proceeds of the sale, after the deduction of the expenses of the sale, will be paid in due proportion to the relevant

 

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Henderson Shareholders or Henderson CDI Holders (as applicable) and, in the case of Henderson CDI Holders, such that they are each paid the amount that they would have received for their fractional entitlement had they been a direct holder of the relevant Existing Henderson Shares for the purposes of the Share Consolidation.

 

Resolution 5 — Increase of share capital

 

Resolution 5 will be proposed as a special resolution and will be passed if two-thirds or more of the votes cast are in favour.

 

Resolution 5 proposes that the authorised share capital of Henderson be increased to US$720,000,000, comprising 480,000,000 New Janus Henderson Shares, with effect from Completion. The increase is proposed in order to allow Henderson to issue New Janus Henderson Shares in connection with the Merger and the Dai-ichi Option Agreement (if Dai-ichi exercises the options) and to provide sufficient headroom for the Combined Group following Completion.

 

Resolution 6 — Change of name

 

Resolution 6 will be proposed as a special resolution and will be passed if two-thirds or more of the votes cast are in favour.

 

Resolution 6 proposes that the name of Henderson Group plc be changed to “Janus Henderson Group plc” with effect from Completion.

 

Resolution 7 — Adoption of New Janus Henderson Memorandum and New Janus Henderson Articles

 

Resolution 7 will be proposed as a special resolution and will be passed if two-thirds or more of the votes cast are in favour.

 

Resolution 7 proposes that the New Janus Henderson Memorandum and the New Janus Henderson Articles be adopted with effect from Completion.

 

The New Janus Henderson Memorandum contains the provisions set out in, and gives effect to the changes proposed by, Resolutions 4 to 6 (inclusive). The New Janus Henderson Articles contain various changes to reflect corporate governance arrangements appropriate for a NYSE-listed company. For further details refer to paragraph 3 of Part VII (Summary of the principal terms and conditions of the Merger Agreement and other related arrangements).

 

Resolution 8 — To approve the Merger

 

Resolution 8 will be proposed as an ordinary resolution and will be passed if more than 50% of the votes cast are in favour.

 

Resolution 8 proposes that:

 

(a)                                 the Merger is approved as a Class 1 transaction under the Listing Rules and the Henderson Directors are authorised to implement the Merger;

 

(b)                                 in addition to all existing authorities and the authority proposed to be granted pursuant to Resolution 9 (as described below), the Henderson Directors are authorised to allot and issue New Janus Henderson Shares in connection with the Merger up to an aggregate nominal amount of US$142,500,000 (representing, in aggregate, 95,000,000 New Janus Henderson Shares, being 83.9% of Henderson’s issued share capital as at the Latest Practicable Date, once adjusted to take account of the Share Consolidation) for a period expiring on 30 September 2017. This amount includes:

 

(i)                                     the New Janus Henderson Shares to be issued to Janus Stockholders in exchange for their Janus Shares in accordance with the terms of the Merger Agreement; and

 

(ii)                                  the New Janus Henderson Shares to be issued to holders of the Janus 2018 Convertible Notes which, in accordance with their terms, will be settled in New Janus Henderson Shares if a holder of such notes exercises its conversion rights after Completion;

 

(c)                                  in addition to the authority proposed to be granted pursuant to Resolution 11 (as described below), for the purposes of ASX Listing Rule 7.1 approval is given to allot and issue up to 93,489,000 New Janus Henderson Shares to Janus Stockholders and holders of the Janus 2018 Convertible Notes (to the extent that

 

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they exercise their conversion rights) in connection with the Merger for a period expiring on 30 September 2017; and

 

(d)                                 for the purposes of ASX Listing Rule 10.11, approval is given to allot and issue up to 1,511,000 New Janus Henderson Shares in connection with the Merger to Glenn Schafer, Richard Weil, Jeffrey Diermeier, Eugene Flood Jr., Lawrence Kochard and Tatsusaburo Yamamoto and their respective related parties (as defined in the ASX Listing Rules) for a period expiring on 30 September 2017.

 

Resolution 9 — Authority to allot New Janus Henderson Shares in connection with the Dai-ichi Option Agreement

 

Resolution 9 will be proposed as an ordinary resolution and will be passed if more than 50% of the votes cast are in favour.

 

Resolution 9 proposes that, in addition to all existing authorities and the authority granted pursuant to Resolution 8, the Henderson Directors are authorised to grant options in respect of New Janus Henderson Shares to Dai-ichi pursuant to the Option Agreement up to a nominal amount of US$6,750,000 (representing, in aggregate, 4,500,000 New Janus Henderson Shares being 4.0% of Henderson’s issued share capital as at the Latest Practicable Date, once adjusted to take account of the Share Consolidation) for a period expiring on 30 September 2017. This relates to the nine conditional options granted under the Dai-ichi Option Agreement, each to subscribe for or purchase 500,000 New Janus Henderson Shares at a strike price of 2,997.2 pence per New Janus Henderson Share (once automatically adjusted in accordance with the terms of the Dai-ichi Option Agreement to take account of the effect of the Share Consolidation) (the “Unapproved Conditional Options”), which would, if exercised in full, represent approximately 2.2% of the New Janus Henderson Shares in issue at Completion. The Unapproved Conditional Options were granted subject to this Resolution 9 and Resolution 10 being passed. If either Resolution is not passed, the Unapproved Conditional Options will not be exercisable by Dai-ichi.

 

The other 11 conditional options granted under the Dai-ichi Option Agreement, each to subscribe for or purchase 500,000 New Janus Henderson Shares at a strike price of 2,997.2 pence per New Janus Henderson Share (once automatically adjusted in accordance with the terms of the Dai-ichi Option Agreement to take account of the effect of the Share Consolidation) (the “Approved Conditional Options”), which would if exercised in full represent approximately 2.7% of the New Janus Henderson Shares in issue at Completion, have been granted pursuant to the authority to allot and issue shares granted by Henderson Shareholders at Henderson’s 2016 annual general meeting.

 

Further information on the Dai-ichi Option Agreement is set out in Part VII (Summary of the principal terms and conditions of the Merger Agreement and other related arrangements).

 

Resolution 10 — Limited disapplication of pre-emption rights in connection with the Dai-ichi Option Agreement

 

Resolution 10 requires a three-quarters majority under the Existing Henderson Articles and will be passed if 75% or more of the votes cast are in favour.

 

Subject to the passing of Resolution 9 and in addition to all existing authorities, Resolution 10 gives the Henderson Directors authority to grant options in respect of New Janus Henderson Shares to Dai-ichi for cash in accordance with the terms of the Dai-ichi Option Agreement. This authority relates to the Unapproved Conditional Options only; the Approved Conditional Options were granted pursuant to the authority to allot shares for cash on a non-pre-emptive basis given by Henderson Shareholders at Henderson’s 2016 annual general meeting.

 

This authority shall be limited to the allotment of New Janus Henderson Shares up to a nominal amount of US$6,750,000 (representing, in aggregate, 4,500,000 New Janus Henderson Shares being 4.0% of Henderson’s issued share capital as at the Latest Practicable Date, once adjusted to take account of the Share Consolidation) for a period expiring on 30 September 2017.

 

If this Resolution 10 is not passed, the Unapproved Conditional Options will not be exercisable by Dai-ichi.

 

Resolution 11 — Approval of the grant of options to Dai-ichi under the Dai-ichi Option Agreement for the purposes of ASX Listing Rule 7.1

 

Resolution 11 will be proposed as an ordinary resolution and will be passed if more than 50% of the votes cast are in favour.

 

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Resolution 11 proposes that the grant of the Approved Conditional Options and the Unapproved Conditional Options is approved for the purposes of ASX Listing Rule 7.1. This approval is not required for the options to be valid and exercisable but is being proposed to preserve the ability of Janus Henderson to issue New Janus Henderson Shares representing up to 15% of its issued share capital without requiring a further approval of the Janus Henderson Shareholders for the purposes of ASX Listing Rule 7.1. The Henderson Board considers that this will maintain flexibility for Janus Henderson after Completion.

 

Resolution 12 — Cancellation of the listing of Existing Henderson Shares on the Official List and cessation of trading of Existing Henderson Shares on the LSE

 

Resolution 12 requires a three-quarters majority under Listing Rule 5.2.5 R and will be passed if 75% or more of the votes cast are in favour.

 

Resolution 12 proposes that:

 

·                                          the cancellation of the Existing Henderson Shares from the Official List and the cessation of trading of the Existing Henderson Shares on the main market of the LSE be approved to take effect from Completion; and

 

·                                          the Henderson Directors be authorised to implement the London De-listing.

 

Further details on the London De-listing and how it relates to the NYSE Listing are set out in paragraph 19 of this Part I. Further details on the transitional arrangements being put in place to assist Henderson Shareholders to hold their New Janus Henderson Shares through DTC from Completion are set out in Part VIII (Settlement and dealings in New Janus Henderson Shares after Completion) of this document.

 

24.          ACTION TO BE TAKEN

 

Henderson Shareholders will be sent a Proxy Form or a CDI Voting Instruction Form (as applicable) for use in connection with the EGM. Whether or not you intend to attend the EGM in person, please complete, sign and return the Proxy Form or CDI Voting Instruction Form in accordance with the instructions printed on it as soon as possible and, in any event, so as to be received by no later than the time and date printed on the Proxy Form or CDI Voting Instruction Form (as applicable).

 

Holders of Existing Henderson Shares who are members of CREST may also choose to utilise the CREST electronic proxy appointment service in accordance with the procedures set out in the notes to the Notice of Extraordinary General Meeting set out in Part XI (Notice of Extraordinary General Meeting) at the end of this document.

 

25.          FURTHER INFORMATION

 

The expected timetable of principal events for the Merger is set out on page 8 of this document. Further information regarding the terms of the Merger is set out in Part VII (Summary of the principal terms and conditions of the Merger Agreement and other related arrangements) of this document. Henderson Shareholders are advised to read the whole of this document and not merely rely on the summarised information set out in this letter.

 

If you have any questions about this document, the EGM or the completion and return of the Proxy Form or CDI Voting Instruction Form (as applicable), please call the shareholder helpline. If calling from the UK, please call between 8.30 a.m. and 5.30 p.m. (London time) Monday to Friday (except UK public holidays) on either 0800 073 3916 or +44 (0) 1534 281 842. If calling from Australia, please call between 8.30 a.m. and 5.00 p.m. (Sydney time) Monday to Friday (except Australian national public holidays) on 1300 651 710 or +61 3 9415 4037. Please note that calls may be monitored or recorded and the helpline cannot provide financial, legal or tax advice or advice on the merits of the Merger.

 

26.          RECOMMENDATION TO HENDERSON SHAREHOLDERS

 

The Henderson Directors have received financial advice in respect of the Merger from Bank of America Merrill Lynch and Centerview Partners. In providing their advice to the Henderson Directors, each of Bank of America Merrill Lynch and Centerview Partners has relied upon the Henderson Directors’ commercial assessment of the Merger.

 

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The Henderson Directors consider the Merger and each of the Resolutions to be in the best interests of Henderson and the Henderson Shareholders as a whole. Accordingly, the Henderson Board unanimously recommends that Henderson Shareholders vote in favour of the Resolutions to be proposed at the EGM, as the Henderson Directors each intend to do in respect of their own beneficial holdings of Existing Henderson Shares (representing approximately 0.5% of the total issued share capital of Henderson as at the Latest Practicable Date).

 

Yours faithfully

 

 

 

/s/ Richard Gillingwater

 

Richard Gillingwater

 

 

Chairman

 

Henderson Group plc

 

 

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PART II

 

VOTING INFORMATION FOR HENDERSON SHAREHOLDERS

AND HENDERSON CDI HOLDERS

 

1.             Voting information for Henderson Shareholders (other than Henderson CDI Holders)

 

Who can vote at the EGM?

 

Only those Henderson Shareholders entered in the register of members of Henderson at 6.00 p.m. (London time) on 24 April 2017 or, if the EGM is adjourned, in the register of members at 6.00 p.m. on the day which is two business days before the time of the adjourned meeting, shall be entitled to attend and vote at the EGM in respect of the number of Existing Henderson Shares registered in their name at that time. Changes to entries in the register of members after that time shall be disregarded in determining the rights of any person to attend or vote at the EGM.

 

How can you vote at the EGM?

 

You may attend the EGM in person or appoint either one or more persons as proxies (who need not be a Henderson Shareholder) to attend, speak and vote on your behalf. If you wish to appoint more than one proxy, please copy the Proxy Form.

 

Who can be a proxy?

 

You may appoint anyone as your proxy, including the Chairman of the EGM. A proxy need not be a Henderson Shareholder.

 

What happens if you appoint more than one proxy?

 

A Henderson Shareholder may appoint more than one proxy, provided each proxy is appointed to exercise the rights attached to different Existing Henderson Shares. If you appoint more than one proxy, then on each Proxy Form you must specify the number of Existing Henderson Shares for which each proxy is appointed. If you appoint more than one proxy, each proxy will be entitled to vote on a show of hands (when they will have one vote) and on a poll (when each proxy will have one vote for every Existing Henderson Share to which their appointment relates, except in the case of a proxy appointed by CDN).

 

How do you submit your proxy instructions?

 

·                                          By internet via the Henderson website at www.henderson.com/EGM2017. To use this facility, you will need your Control Number, unique PIN and your Shareholder Reference Number (SRN). These numbers are shown on your Proxy Form, email bulletin or notification of availability of this document. We will assume you have signed the Proxy Form if you lodge it in accordance with the instructions on the website;

 

·                                          By mail to the Registrar, using the reply-paid envelope provided or by posting it to: Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY; or

 

·                                          By CREST message. If you are a CREST system user (including a CREST personal member) you can submit proxy instructions by having an appropriate CREST message transmitted to CREST Participant ID 3RA50. CREST personal members or other CREST sponsored members should contact their CREST sponsor for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and systems timings, please refer to the CREST manual. Henderson may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Article 34 of the Companies (Uncertificated Securities) (Jersey) Order 1999.

 

What is the last time for receiving your proxy?

 

The latest time for receipt of Proxy Forms sent by mail, by CREST message and proxy instructions submitted via the internet is 8.30 a.m. (London time) on 24 April 2017. If your proxy instructions (and any supporting documents) are not received by then, your proxy appointment will not be effective.

 

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What if a proxy is appointed under a power of attorney or other authority?

 

Proxy instructions given under authority on behalf of a Henderson Shareholder must be submitted by mailing a Proxy Form. If the Proxy Form is signed under a power of attorney or other authority on behalf of a Henderson Shareholder, then the attorney must make sure that either the original power of attorney or other authority, or a certified copy, is sent to the Registrar so as to arrive no later than 8.30 a.m. (London time) on 24 April 2017 unless it has been previously lodged with the Registrar or Henderson.

 

How does a Henderson Shareholder that is a UK company execute the Proxy Form?

 

If the Henderson Shareholder submitting proxy instructions is a UK company, then it must execute the Proxy Form in one of the following ways:

 

·                                          by having two directors or a director and a secretary of the company sign the Proxy Form;

 

·                                          by having a director of the company sign in the presence of a witness who attests the signature;

 

·                                          by having a duly authorised officer or attorney sign the Proxy Form (in which case the Henderson Shareholder must send with the Proxy Form the original, or a certified copy, of the document authorising the attorney or representative); or

 

·                                          if the company has a common seal, by affixing the common seal in accordance with the company’s constitution.

 

Does a proxy have to vote?

 

Your proxy can decide whether or not to attend the EGM and, if he or she attends, can decide whether or not to vote. Therefore, you should nominate someone you can trust.

 

Can a proxy vote in favour or against, as he or she wishes?

 

If a proxy decides to attend the EGM, and the appointing Henderson Shareholder directs the proxy how to vote on an item of business, then the proxy should only vote on that item of business in the way the Henderson Shareholder directed. Or, if a Henderson Shareholder does not direct the proxy how to vote on an item of business, then the proxy may vote in favour, against or abstain on that item.

 

The proxy will also have discretion to vote as he or she thinks fit on any other business which may properly come before the EGM including amendments to any Resolution, and at any adjourned or postponed meeting.

 

How will the Chairman vote as proxy if he has not been directed how to vote?

 

If a Henderson Shareholder appoints the Chairman of the EGM as proxy and does not direct the Chairman how to vote on an item of business, then when the Chairman votes as proxy on a poll, his current intention is to vote in favour of each of the Resolutions. The Chairman’s intention necessarily expresses his intention at the Latest Practicable Date and therefore, in exceptional circumstances, the Chairman’s intention may change subsequently. In such circumstances, Henderson would notify Henderson Shareholders of the change in the Chairman’s intentions through the LSE and ASX.

 

Persons nominated to receive information rights

 

The proxy rights set out above do not apply to persons nominated by a Henderson Shareholder to receive information rights pursuant to Article 80 of the Existing Henderson Articles. Persons nominated to receive information rights under Article 80 that have been sent this document are hereby informed that they may have the right under an agreement with the registered Henderson Shareholder by whom they were nominated to be appointed, or to have someone else appointed, as a proxy for the EGM. If they do not have such a right or do not wish to exercise it, they may have a right under such an agreement to give instructions to the registered shareholder as to the exercise of voting rights. Nominated persons should contact the registered Henderson Shareholder who nominated them in respect of these arrangements.

 

Further information

 

If you have any questions about this document, the EGM or the completion and return of the Proxy Form, please call the shareholder helpline between 8.30 a.m. and 5.30 p.m. (London time) Monday to Friday (except UK public

 

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holidays) on either 0800 073 3916 or +44 (0) 1534 281 842. Please note that calls may be monitored or recorded and the helpline cannot provide financial, legal or tax advice or advice on the merits of the Merger.

 

2.             Voting information for Henderson CDI Holders

 

Who can vote at the EGM?

 

Only those Henderson CDI Holders entered in the register of CDI Holders at 7.00 p.m. (Sydney time) on 24 April 2017 or, if the EGM is adjourned, in the register of CDI Holders 48 hours before the time of the adjourned meeting, shall be entitled to provide voting instructions to CHESS Depositary Nominees Pty Limited (CDN) in respect of the number of Existing Henderson CDIs registered in their name at that time. Changes to entries in the register of CDI Holders after that time shall be disregarded in determining the rights of any Henderson CDI Holders to provide voting instructions to CDN in regard to the EGM.

 

How can you exercise your voting rights?

 

You can exercise your voting rights by directing CDN how to vote on each of the Resolutions in respect of your Existing Henderson CDIs. If instead you wish to attend the EGM (or you would like someone else to attend on your behalf), you can exercise your voting rights by submitting instructions to CDN to appoint you or your representative as proxy. Your representative can be the Chairman. You can direct your representative how to vote on each of the Resolutions in respect of your Existing Henderson CDIs at the EGM.

 

Who can be a proxy?

 

You may instruct the CDN to appoint yourself or any other person (including the Chairman of the EGM) as its proxy in respect of your Existing Henderson CDIs. A proxy need not be a Henderson Shareholder or Henderson CDI Holder.

 

How do you submit your proxy instructions?

 

·                                          By internet via the Henderson website at www.henderson.com/EGM2017. To use this facility, you will need your Securityholder Reference Number (SRN) or Holder Identification Number (HIN), which is shown on your CDI Voting Instruction Form, and your registered post code or country of residence if outside Australia. We will assume you have signed the CDI Voting Instruction Form if you lodge it in accordance with the instructions on the website;

 

·                                          By mail by sending the CDI Voting Instruction Form to Computershare Investor Services Pty Limited, GPO Box 4578, Melbourne, VIC 3001, Australia or Private Bag 92119, Auckland 1142, New Zealand using the reply-paid envelope provided; or

 

·                                          By facsimile by faxing the CDI Voting Instruction Form to 03 9473 2555 in Australia or 09 488 8787 in New Zealand.

 

What is the last date for submitting your voting instructions or instructing CDN to appoint a proxy on your behalf?

 

If you are directing CDN to vote on your behalf, the latest time for receipt of CDI Voting Instruction Forms (and any necessary supporting documents) via post or by fax or voting instructions by internet, is 5.30 p.m. (Sydney time) on 24 April 2017.

 

If you are directing CDN to appoint you, the Chairman or someone else as proxy in relation to your Existing Henderson CDIs, the latest time for receipt of CDI Voting Instruction Forms (and any necessary supporting documents) via post or by fax or voting instructions by internet is 5.30 p.m. (Sydney time) on 24 April 2017.

 

If your CDI Voting Instruction Form (and any necessary supporting documents) is not received by then, your proxy appointment will not be effective.

 

What if voting instructions are submitted under a power of attorney or other authority?

 

Voting instructions given under authority on behalf of a Henderson CDI Holder must be submitted by mailing or faxing the CDI Voting Instruction Form.

 

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If the CDI Voting Instruction Form is signed under a power of attorney or other authority on behalf of a Henderson CDI Holder, then the attorney must make sure that either the original power of attorney or other authority, or a certified copy, is sent to the Registrar so as to arrive no later than 5.30 p.m. (Sydney time) on 24 April 2017 unless it has been previously lodged with the Registrar or Henderson.

 

How does a Henderson CDI Holder that is an Australian or New Zealand company execute the CDI Voting Instruction Form?

 

If the Henderson CDI Holder executing voting instructions is an Australian or New Zealand company, then it must execute the CDI Voting Instruction Form in one of the following ways:

 

·                                          by having two directors or a director and a secretary of the company sign the CDI Voting Instruction Form;

 

·                                          if the company has one director who is also the company secretary of the company (or the company does not have a secretary), by having that director sign it;

 

·                                          by having a duly authorised officer or attorney sign the CDI Voting Instruction Form (in which case the Henderson CDI Holder must send with the CDI Voting Instruction Form the original, or a certified copy, of the document authorising the attorney or representative); or

 

·                                          if the company has a common seal, by affixing the common seal in accordance with the company’s constitution.

 

Does a proxy have to vote?

 

Your proxy can decide whether or not to attend the EGM and, if he or she attends, can decide whether or not to vote. Therefore, you should nominate someone you can trust.

 

Can a proxy vote in favour or against, as he or she wishes?

 

If a proxy decides to attend the EGM, and the appointing Henderson CDI Holder directs the proxy how to vote on an item of business, then the proxy should only vote on that item of business in the way the Henderson CDI Holder directed. Or, if the Henderson CDI Holder does not direct the proxy how to vote on an item of business, then the proxy may vote in favour, against or abstain on that item.

 

The proxy will also have discretion to vote as he or she thinks fit on any other business which may properly come before the EGM including amendments to any Resolution, and at any adjourned or postponed meeting.

 

How will the Chairman vote as proxy if he has not been directed how to vote?

 

If a Henderson CDI Holder appoints the Chairman of the EGM as proxy and does not direct the Chairman how to vote on an item of business, then when the Chairman votes as proxy on a poll, his current intention is to vote in favour of each of the proposed Resolutions. The Chairman’s intention necessarily expresses his intention at the Latest Practicable Date and therefore, in exceptional circumstances, the Chairman’s intention may change subsequently. In such circumstances, Henderson would notify Henderson Shareholders of the change in the Chairman’s intentions through the LSE and ASX.

 

Further information

 

If you have any questions about this document, the EGM or the completion and return of the CDI Voting Instruction Form, please call the shareholder helpline between 8.30 a.m. and 5.00 p.m. (Sydney time) Monday to Friday (except Australian national public holidays) on 1300 651 710 or +61 3 9415 4037. Please note that calls may be monitored or recorded and the helpline cannot provide financial, legal or tax advice or advice on the merits of the Merger.

 

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PART III

 

RISK FACTORS

 

Prior to making any decision to vote in favour of the proposed Resolutions at the EGM, Henderson Shareholders should carefully consider, together with all other information contained in this document, the specific factors and risks described below. All material risks relating to the Merger of which the Henderson Directors are aware are set out below, although these risks should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties. There may be other risks of which the Henderson Directors are not aware or which they believe to be immaterial which may have an adverse effect on the business, financial condition, results or future prospects of the Combined Group following Completion.

 

Because the Henderson Group’s and the Janus Group’s respective businesses are of a similar nature in many respects, the risks set out below (other than those relating to the Merger itself) will not be new risks for Henderson, which arise only on Completion. Rather, the potential impact of existing risk factors will be materially increased (in absolute terms) from Completion, as a result of the enhanced scale of the business of the Combined Group.

 

The information given is as of the date of this document and, except as required by the FCA, ASX, the LSE, the Listing Rules, the Disclosure Guidance and Transparency Rules, the ASX Listing Rules or any other law or regulation, will not be updated. You should read the whole of this document and not rely solely on the information set out in this Part III.

 

1.             Risks relating to the Merger

 

The Combined Group may fail to realise the anticipated benefits of the Merger.

 

The success of the Merger will depend on, among other things, the Combined Group’s ability to combine the Henderson and Janus businesses in a manner that realises anticipated synergies and meets the projected standalone revenue and cost trends anticipated by each company. On a combined basis, Janus Henderson expects to benefit from recurring annual run rate pre-tax net cost synergies, expected to be fully executed within three years post-Completion, that will exceed the cost reductions that could be achievable by Henderson and Janus through stand-alone cost reduction programmes. Such cost synergies are expected to be realised by reducing combined headcount in internal support functions, investment management and trading functions and distribution and marketing functions and consolidation of offices in overlapping locations and other actions.

 

If the Combined Group is not able to achieve these objectives successfully, or the cost to achieve these synergies is greater than expected, then the anticipated benefits of the Merger may not be realised fully or at all or may take longer to realise than expected.

 

Combining the businesses of Henderson and Janus may be more difficult, costly or time-consuming than expected, which may adversely affect the Combined Group’s results and negatively affect the value of the New Janus Henderson Shares following the Merger.

 

Henderson and Janus have entered into the Merger Agreement because each believes that the Merger will be beneficial to itself and its shareholders or stockholders, as applicable, and that combining the businesses of Henderson and Janus will produce cost synergies and other benefits. However, Henderson and Janus have historically operated as independent companies and will continue to do so until Completion. Following Completion, the Combined Group’s management will need to integrate Janus’s and Henderson’s respective businesses. The combination of two independent businesses of the size and scale of Henderson and Janus is a complex, costly and time-consuming process and the management of the Combined Group may face significant challenges in implementing such integration, some of which may be beyond their control including, without limitation:

 

·                                          difficulties in achieving, in a timely manner, anticipated cost synergies, business opportunities and growth prospects;

 

·                                          difficulties in managing the larger Combined Group, addressing differences in historical business culture and retaining key personnel;

 

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·                                          the diversion of Henderson’s and Janus’s respective management teams’ attention from ongoing business operations as a result of the Merger;

 

·                                          the possibility of incorrect assumptions underlying expectations regarding the integration process;

 

·                                          unanticipated difficulties in integrating information technology, communications programmes, financial procedures and operations, and other systems (including those provided by third party service providers), procedures and policies;

 

·                                          unanticipated changes in applicable laws and regulations;

 

·                                          managing tax costs or inefficiencies associated with integrating the operations of the Combined Group;

 

·                                          coordinating geographically separate organisations; and

 

·                                          any other unforeseen expenses or delays associated with the Merger.

 

Some of these factors will be outside of the control of Henderson and Janus and any one of them could result in increased costs or decreased revenue which could materially impact the Combined Group’s business, financial conditions and results of operations, as well as increase the risk of operational errors due to management teams being diverted from ongoing business concerns which could have negative reputational or regulatory impacts. The integration process and other disruptions resulting from the Merger may also adversely affect the Combined Group’s relationships with employees, customers, and others with whom Henderson and Janus have business or other dealings, and difficulties in integrating the businesses or regulatory functions of Henderson and Janus could harm the reputation of the Combined Group.

 

If the Combined Group is not able to combine the businesses of Henderson and Janus successfully in an efficient, cost-effective and timely manner, the anticipated benefits and cost synergies of the Merger may not be realised fully, or at all, or may take longer to realise than expected, and the value of New Janus Henderson Shares, the revenue, levels of expenses and results of operations of the Combined Group may be affected adversely. If the Combined Group is not able to adequately address integration challenges, the Combined Group may be unable to successfully realise the anticipated benefits of the Merger.

 

Henderson and Janus have incurred, and the Combined Group expects to incur, additional significant costs in connection with the Merger and the integration of the Combined Group.

 

Henderson has incurred and expects to continue to incur significant non-recurring costs associated with the Merger. These costs and expenses include financial advisory, legal, accounting, consulting and other advisory fees and expenses, reorganisation and restructuring costs, severance/employee benefit-related expenses, public company filing fees and other regulatory expenses, printing expenses and other related charges. Some of these costs are payable by Henderson regardless of whether the Merger is completed.

 

In addition, there are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Merger. While both Henderson and Janus have assumed that a certain level of expenses would be incurred in connection with the integration process following Completion, there are many factors beyond their control that could affect the total amount of, or the timing of, anticipated expenses with respect to the integration of the Combined Group and the Combined Group may not recoup such costs. These costs and expenses could reduce the benefits and additional income Henderson and Janus expect to achieve from the Merger. Although Henderson and Janus expect that the benefits of the Merger will offset the transaction expenses and integration costs over time, no assurance can be given that any benefits will be achieved in the near term, if at all.

 

Following Completion, the Combined Group may launch branding or rebranding initiatives that may involve substantial costs and may not be favourably received by customers.

 

At Completion, Henderson Group plc will change its name to Janus Henderson Group plc. Following this, the Combined Group may incur substantial costs in rebranding its products and services, and the Combined Group may not be able to achieve or maintain brand name recognition or status under the new Combined Group brand that is comparable to the recognition and status previously enjoyed by Henderson and Janus separately. The failure of any such rebranding initiative could adversely affect the Combined Group’s ability to attract and retain customers after Completion, which could cause the Combined Group not to realise some or all of the benefits contemplated by Henderson and Janus to result from Completion.

 

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An impairment of goodwill or other intangible assets would adversely affect Janus Henderson’s financial condition and results of operations.

 

Upon Completion, a significant portion of the difference between the purchase price, Janus’s net assets at that date and the allocation of costs of the Merger to the assets acquired and the liabilities assumed will be recorded as goodwill. In addition, other intangible assets will be recorded as a result of the purchase price allocation. At 31 December 2016, Henderson’s goodwill and intangible assets totalled US$1.1 billion and the additional goodwill and intangible assets arising on the Merger is provisionally estimated to be approximately US$3.2 billion.

 

Under US GAAP, which will be the accounting principles of the Combined Group following Completion, goodwill and intangible assets with indefinite lives are not amortised but are tested for impairment annually, or more often if an event or circumstance indicates that an impairment loss may have been incurred. Other intangible assets with a finite life are amortised on a straight-line basis over their estimated useful lives and reviewed for impairment whenever there is an indication of impairment. In particular, if the combination of the businesses meets with unexpected difficulties, or if the Combined Group’s business does not develop as expected, impairment charges may be incurred in the future which could be significant and which could have an adverse effect on the Combined Group’s financial condition and results of operations.

 

Henderson may waive one or more of the conditions to Completion without seeking further shareholder approval.

 

Henderson may determine to waive, in whole or in part, one or more of the conditions to Completion. The Henderson Board currently expects to evaluate the materiality of any waiver and its effect on Henderson Shareholders in light of the facts and circumstances at the time to determine whether further shareholder approval is required. Any determination whether to waive any condition to the Merger or whether to seek further shareholder approval as a result of a waiver will be made by the Henderson Board at the time of such waiver based on the facts and circumstances as they exist at that time. However, if the Henderson Board determines that no further approval of Henderson Shareholders is required, Completion would occur following waiver of the relevant condition in accordance with the terms of the Merger Agreement. Depending on the nature of the condition that was waived, this could have a negative impact on the financial condition of the Combined Group or on the value of the New Janus Henderson Shares following Completion.

 

The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.

 

Completion is subject to the satisfaction or waiver of a number of conditions. Those conditions include: (i) approval of the Merger by Janus Stockholders at the Janus Stockholder Meeting; (ii) approval of the Merger, the increase of Henderson’s share capital to permit the issuance of New Janus Henderson Shares in connection with the Merger, the change of name of Henderson Group plc to Janus Henderson Group plc, the New Janus Henderson Memorandum and the New Janus Henderson Articles and the London De-listing by Henderson Shareholders at the EGM; (iii) the approval of the final dividend of 7.30 pence for the year ended 31 December 2016 by Henderson Shareholders at the 2017 AGM; (iv) the receipt of the remaining customary regulatory approvals, in respect of the Merger, being approvals from FINRA, the Hong Kong SFC and the CBI; (v) the New Janus Henderson Shares having been approved for listing on the NYSE; (vi) the absence of judgments, orders or decrees preventing or making Completion illegal; (vii) approval by the boards of trustees and shareholders of Janus-advised US mutual funds of new investment advisory agreements with Janus to take effect at Completion representing at least 67.5% of the assets under management of those funds as at 30 September 2016; and (viii) the absence of breach of the representations and warranties by Henderson and Janus (subject to materiality and “material adverse effect” qualifications in certain cases) and material compliance by each of Henderson and Janus with its covenants. These conditions to Completion may not be fulfilled and, accordingly, the Merger may not be completed.

 

If the Merger is not completed by 30 September 2017, either Janus or Henderson may choose not to proceed with the Merger. In addition, the parties can mutually decide to terminate the Merger Agreement at any time prior to Completion, before or after receipt of the required Henderson and Janus shareholder approvals. In addition, Janus or Henderson may elect to terminate the Merger Agreement in certain other circumstances.

 

If the Merger Agreement is terminated and Completion does not occur, the ongoing business of Henderson may be adversely affected. Henderson’s businesses may be adversely impacted by the failure to pursue other beneficial opportunities during the period while the Merger is pending, by the failure to obtain the anticipated benefits of completing the Merger, by payment of certain costs relating to the Merger, and by the focus of its management on

 

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the Merger for an extended period of time rather than on normal business operations or opportunities or by the loss of certain senior managers and other key personnel as a consequence of Completion not occurring. The market price of the Existing Henderson Shares might decline as a result of any such failures to the extent that the current market prices reflect a market assumption that the Merger will be completed. Any of these factors, among others, could have a material impact on the business, prospects, financial condition and results of operations of Henderson.

 

In addition, if the Merger Agreement is terminated under certain circumstances, Janus or Henderson, as applicable, may be required to pay the other party a termination fee of US$34 million in cash or to pay the other party’s expenses in the amount of up to US$10 million in cash, depending on the circumstances surrounding the termination (and in each case subject to certain adjustments that may be required in respect of VAT).

 

Henderson or the Combined Group may be subject to litigation in relation to the Merger.

 

Henderson or, following Completion, the Combined Group may be negatively impacted if it becomes subject to litigation related to entering into or, in the case of Henderson, failing to complete, the Merger. This may include direct actions by Henderson Shareholders or, following Completion, Janus Henderson Shareholders against the directors and/or officers for breaches of fiduciary duty and derivative actions brought by such shareholders in the name of Henderson or, following Completion, Janus Henderson.

 

The investment advisory agreements of the Janus US mutual funds are subject to termination as a result of the Merger, and no assurance can be given that approval of new investment advisory agreements will be obtained.

 

Under the Investment Company Act, each of the investment advisory agreements for Janus-advised US mutual funds that are registered as an “investment company” under the Investment Company Act automatically terminate in the event of its “assignment”, as defined under the Investment Company Act. An assignment may occur under the Investment Company Act if, among other things, Janus undergoes a change of control. In order for Janus to continue to act as an investment adviser to any such Janus-advised US mutual fund, Janus must obtain approval of such fund’s board and shareholders of a new investment advisory agreement. Alternatively, in the event that the approval of a new investment advisory agreement by the shareholders of a Janus-advised US mutual fund is not obtained prior to the Completion Date, Janus may continue to act as investment adviser, subject to certain conditions, for any such Janus-advised US mutual fund for a period of 150 days following an assignment of the applicable investment advisory agreement if such fund’s board approves an “interim contract” (within the meaning of Section 15a-4 of the Investment Company Act).

 

The Merger is expected to result in the assignment of the investment advisory agreements with each such Janus-advised US mutual fund under the Investment Company Act and an assignment of the investment advisory agreements with each of Janus’s other clients under the Investment Advisers Act of 1940. Janus is currently in the process of seeking the necessary approvals for new registered fund investment advisory agreements and consents from its other clients. It is a condition to Completion that Janus receive approval of the boards of trustees or shareholders of Janus-advised US mutual funds of new investment advisory agreements with Janus to take effect at the closing of the Merger representing at least 67.5% of the assets under management of those funds as at 30 September 2016. No assurance can be given that Janus will be able to obtain the necessary approvals from the boards and shareholders of the Janus-advised US mutual funds. The decrease in revenue that could result from a failure to obtain such approvals, even if the Merger Agreement condition is satisfied, could have a material adverse effect on the business, financial condition and results of operations of Janus Henderson.

 

Henderson and Janus will be subject to business uncertainties while the Merger is pending.

 

Uncertainty about Completion or the effect of the Merger may affect the relationship between Henderson and Janus and their respective customers, including through reduced net flows while the Merger is pending. This uncertainty may also affect the relationship between Henderson and Janus and their respective business counterparties. Any such impact may have an adverse effect on Henderson and/or Janus, and consequently on the Combined Group. These uncertainties may cause parties that deal with Henderson and/or Janus to seek to change existing business relationships with them and to delay or defer decisions concerning Henderson or Janus. Changes to existing business relationships, including termination or modification, could negatively affect each of Janus’s and Henderson’s assets under management, revenue, earnings and cash flow, as well as the market price of Janus Shares and Existing Henderson Shares.

 

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Henderson and Janus may face challenges in attracting and retaining key personnel while the Merger is pending.

 

Each of Henderson and Janus is dependent on the experience and industry knowledge of their respective officers, key management personnel and other key employees to operate their businesses and execute their respective business plans. The Combined Group’s success after the Merger will depend in part upon the ability of Henderson and Janus to retain key management personnel and other key employees and to attract new management personnel and other key employees. Current and prospective employees of Henderson and Janus may experience uncertainty about their roles within the Combined Group during and following the Merger, which may have an adverse effect on the ability of each of Henderson and Janus to attract or retain key management personnel and other key employees. If key employees depart because of issues related to the uncertainty and difficulty of integration or a desire not to remain with the businesses, the Combined Group’s business following Completion could be negatively impacted. Accordingly, no assurance can be given that the Combined Group will be able to attract or retain key management personnel and other key employees of Henderson and Janus to the same extent that Henderson and Janus have previously been able to attract or retain their employees. Adverse effects arising from the period prior to Completion could be exacerbated by any delays in Completion or termination of the Merger Agreement.

 

Henderson and Janus will be subject to certain contractual restrictions while the Merger is pending.

 

The Merger Agreement restricts each of Henderson and Janus from making certain acquisitions and divestments, entering into certain contracts, incurring certain indebtedness and expenditures, repurchasing or issuing securities outside of existing equity awards, and taking other specified actions without the consent of the other party until the earlier of Completion and the termination of the Merger Agreement. These restrictions may prevent Henderson and/or Janus from pursuing attractive business opportunities that may arise prior to Completion and could have the effect of delaying or preventing other strategic transactions. Adverse effects arising from the period while the Merger is pending could be exacerbated by any delays in Completion or termination of the Merger Agreement.

 

Third parties may terminate or alter existing contracts or relationships with Janus or Henderson.

 

Each of Henderson and Janus has contracts with customers, vendors, distributors, affiliates, landlords, licensors, joint venture partners, and other business partners which may require Janus or Henderson, as applicable, to obtain consent from these other parties in connection with the Merger. If these consents cannot be obtained, the counterparties to these contracts and other third parties with which Henderson and/or Janus currently have relationships may have the ability to terminate, reduce the scope of or otherwise materially adversely alter their relationships with either or both parties in anticipation of the Merger, or with the Combined Group following the Merger. The pursuit of such rights may result in Janus, Henderson or the Combined Group suffering a loss of potential future revenue or incurring liabilities in connection with a breach of such agreements and losing rights that are material to its business. Any such disruptions could limit the Combined Group’s ability to achieve the anticipated benefits of the Merger. Such disruptions could also result from a delay in Completion.

 

The Merger Agreement contains provisions that may discourage other companies from trying to enter into a strategic transaction with Henderson for greater consideration.

 

Notwithstanding that such provisions are to be disregarded in respect of both parties to the extent that the UK Panel on Takeovers and Mergers determines that they are prohibited by Rule 21.2 of the City Code, certain provisions of the Merger Agreement may discourage third parties from submitting business combination proposals to Henderson during the period while the Merger is pending that might have otherwise resulted in greater value to Henderson Shareholders than the Merger. These provisions include a general prohibition on Henderson, its controlled affiliates, directors, officer employees and representatives, from soliciting, initiating or knowingly encouraging, or, subject to certain exceptions, entering into discussions with any third party regarding any alternative transactions, subject to limited exceptions.

 

If, in certain permitted circumstances, the Henderson Board: (i) withdraws, qualifies or modifies, or proposes publicly to withdraw, qualify or modify, or fails to make, in each case in any manner adverse to Janus, its approval or recommendation of the required Henderson Shareholder approvals, as applicable; or (ii) approves or recommends, or proposes publicly to approve or recommend, any alternative transaction, Henderson will still be required to submit the Merger to a vote of Henderson Shareholders at the EGM unless the Merger Agreement is terminated by Janus in accordance with its terms.

 

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In addition, Henderson must pay to Janus a termination fee equal to US$34 million in immediately available funds pursuant to the Merger Agreement, upon a termination of the Merger Agreement:

 

·                                          by Henderson or Janus because of a failure to obtain the requisite approvals of Henderson Shareholders at a time when there was an offer or proposal for an alternative transaction with respect to Henderson, such offer or proposal has not been withdrawn prior to the EGM and Henderson enters into or completes such alternative transaction within 12 months following the date of such termination;

 

·                                          by Janus because of a material breach by Henderson at a time when there was an offer or proposal for an alternative transaction with respect to Henderson, such offer or proposal has not been withdrawn on or prior to the time of such breach by Henderson, and Henderson enters into or completes such alternative transaction within 12 months following the date of such termination;

 

·                                          by Henderson or Janus because of a failure to complete the Merger by the Outside Date at a time when there was an offer or proposal for an alternative transaction with respect to Henderson, such offer or proposal has not been withdrawn on or prior to the Outside Date, and Henderson enters into or completes an alternative transaction within 12 months from the Outside Date; or

 

·                                          by Janus upon the occurrence of a triggering event at any time prior to the receipt of the required Henderson Shareholder approvals in relation to the Merger in the case of a termination.

 

In addition, if either Janus or Henderson terminates the Merger Agreement in the event the required Henderson Shareholder approvals are not obtained, Henderson is required to pay Janus’s expenses up to an amount equal to US$10 million. The expense reimbursement is credited against any termination fee payable as described above.

 

The arrangements described above in relation to termination fees are reciprocal and Janus would be required to make the equivalent payments to Henderson if the Merger Agreement were terminated and the circumstances described above applied in respect of Janus.

 

If the Merger Agreement is terminated and Henderson determines to seek another strategic transaction, Henderson may not be able to negotiate a transaction on terms comparable to, or more favourable than, the terms of the Merger Agreement.

 

2.             Risks relating to the Combined Group as a result of the Merger

 

The Combined Group’s results of operations and financial condition will be, primarily dependent on the value, composition and relative investment performance of their collective investment products.

 

Following Completion, the Combined Group will have increased exposure to certain equity markets, certain types of securities and to the performance of a broader range of funds. Any decrease in the value, relative investment performance or amount of assets under management will cause a decline in revenue and negatively impact operating results and the financial condition of the Combined Group. Assets under management may decline for various reasons, many of which will not be under the control of Janus Henderson.

 

In particular, the factors that could cause assets under management and revenue to decline include the following:

 

·                                          Declines in equity markets. Following Completion, the Combined Group will have a greater exposure to the US equity markets than Henderson on a stand-alone basis, as Janus’s assets under management are concentrated in the US equity markets (approximately 66% of Janus’s assets under management at 31 December 2016). Equity securities may decline in value as a result of many factors, including an issuer’s actual or perceived financial condition and growth prospects, investor perception of an industry or sector, changes in currency exchange rates, changes in regulations and geopolitical and economic risks. Any such decline in value may cause assets under management of the Combined Group to decrease.

 

·                                          Declines in fixed income markets. Following Completion, the Combined Group will have a greater exposure to US fixed income securities than Henderson on a stand-alone basis, as Janus has significant assets under management in US fixed income securities (approximately 24% of Janus assets under management at 31 December 2016). Fixed income investment products may decline in value as a result of many factors, principally increases in interest rates, changes in currency exchange rates, changes in relative yield among instruments with different maturities, geopolitical and general economic risks, available liquidity the markets in which a security trades, an issuer’s actual or perceived creditworthiness, or an issuer’s ability to meet its obligations.

 

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·                                          Relative investment performance. Janus’s and Henderson’s investment products are often judged on their performance as compared to benchmark indices or peer groups, as well as being judged on an absolute return basis. Any period of underperformance of investment products relative to peers may result in the loss of existing assets and affect the ability of Henderson and Janus to attract new assets. Following Completion, the Combined Group will have a larger number and wider range of funds than Henderson on a stand-alone basis, increasing the risk that such funds underperform relative to peers. The integration process may increase the risk of underperformance if management teams and/or fund managers are diverted from ongoing business operations. In addition, at 31 December 2016 approximately 34% of Janus’s assets under management and 29% of Henderson’s assets under management were subject to performance fees. Performance fees are based either on each product’s investment performance as compared to an established benchmark index or on its positive absolute return over a specified period of time. If Janus or Henderson investment products subject to performance fees underperform their respective benchmark index or produce a negative absolute return for a defined period, the revenue and thus results of operations and financial condition of Janus or Henderson, respectively, may be adversely affected. In addition, performance fees subject Janus’s and Henderson’s revenue to increased volatility. Further, certain of Janus’s US mutual fund contracts, representing approximately 20% of Janus’s assets under management at 31 December 2016 (which is a subset of the 34% figure cited above), are subject to fulcrum performance fees and as a result, performance fees earned can be negative as well as positive. Such fulcrum performance fees will continue to apply to the Combined Group following Completion.

 

Janus Henderson may fail to achieve the goals and objectives of the Combined Group, which could negatively impact the Combined Group’s assets under management, results of operations and financial condition.

 

Through the combination of Henderson and Janus, the Combined Group intends to establish an independent, active asset manager with a globally relevant brand, footprint, investment proposition and client service. No assurance can be given that the Combined Group will successfully achieve this objective or that this objective will lead to increased revenue and net income, or to the creation of shareholder value. The failure to successfully implement a strategy for Janus Henderson could adversely affect the Combined Group’s assets under management, results of operations and financial condition.

 

Janus Henderson’s revenue and profitability would be adversely affected by any reduction in assets under management as a result of redemptions and other withdrawals from the funds and accounts managed.

 

Redemptions or withdrawals may be caused by investors as a result of the uncertainty caused by the Merger, underperformance of funds due to management teams and/or fund managers being diverted from ongoing business operations during the integration process or as a consequence of damage to Janus Henderson’s reputation during the integration process following Completion (among other factors). In addition, the Combined Group will be more exposed to any change in investor appetite in relation to the US securities markets, which could lead to investors choosing to redeem or withdraw investments from actively managed US equity funds or US fixed income funds. Any such withdrawals or redemptions could have a material adverse effect on the results of operations and financial condition of the Combined Group.

 

Janus Henderson will operate in a highly competitive environment and revenue from fees may be reduced.

 

The investment management business is highly competitive and has relatively low barriers to entry. In addition, established firms as well as new entrants to the asset management industry have, in recent years, expanded their application of technology, including through the use of robo-advisers, in providing services to clients. Janus’s and Henderson’s traditional fee structures may be subject to downward pressure due to these factors. Moreover, in recent years there has been a trend toward lower fees in the investment management industry, as evidenced by the movement toward passively managed mutual funds and the growth of lower cost funds such as exchange traded, smart beta and quant funds. Fees for actively managed investment products may come under increased pressure if such products fail to outperform returns for comparable passively managed products or as a consequence of regulatory intervention. Fee reductions on existing or future new business as well as changes in regulations pertaining to fees could adversely affect the Combined Group’s results of operations and financial condition. Additionally, Janus Henderson will compete with investment management companies on the basis of investment performance, fees, diversity of products, distribution capability, reputation and the ability to develop new investment products to meet the changing needs of investors. Failure to adequately compete could adversely affect the Combined Group’s assets under management, results of operations and financial condition.

 

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The Combined Group’s results will be dependent on its ability to attract and retain key personnel.

 

The investment management business is highly dependent on the ability to attract, retain and motivate highly skilled and often highly specialised technical, executive, sales and investment management personnel. The market for qualified investment and sales professionals is extremely competitive and is characterised by the frequent movement of portfolio managers, analysts and salespeople among different firms. Any changes to management structure, shifts in corporate culture, changes to corporate governance authority, or adjustments or reductions to compensation, any of which may occur as a result of the Merger, could affect the Combined Group’s ability to retain key personnel and could result in legal claims. If Janus Henderson is unable to retain key personnel, particularly those personnel responsible for managing client funds that account for a high proportion of Janus Henderson’s revenue, it could adversely affect the Combined Group’s assets under management, results of operations and financial condition.

 

The Combined Group will be dependent upon third-party distribution channels to access clients and potential clients.

 

Janus Henderson’s ability to market and distribute its investment products is significantly dependent on access to the client base of insurance companies, defined contribution plan administrators, securities firms, broker-dealers, financial advisors, multi-managers, banks and other distribution channels. These companies generally offer their clients various investment products in addition to, and competitive with, products offered by Henderson and Janus. Further, Janus’s separate account business uses referrals from financial planners, investment advisers and other professionals. Henderson and Janus cannot be certain that the Combined Group will continue to have access to these third-party distribution channels or have an opportunity to offer some or all of its investment products through these channels. In addition, Janus’s and Henderson’s existing relationships with third-party distributors and access to new distributors could be adversely affected by recent consolidation within the financial services industry. Consolidation may result in increased distribution costs, a reduction in the number of third parties distributing Janus’s and Henderson’s investment products or increased competition to access third-party distribution channels. The inability to access clients through third-party distribution channels could adversely affect the Combined Group’s business prospects, assets under management, results of operations and financial condition.

 

Illiquidity in certain securities in which Janus Henderson invests may negatively impact the financial condition of the Combined Group’s investment products, and may impede the ability of Janus Henderson funds to effect redemptions.

 

Janus Henderson is exposed to the risk that some of its funds or mandates invest in certain securities or other assets in which the secondary trading market is illiquid or in which there is no secondary trading market at all. Illiquidity may occur with respect to the securities of a specific issuer, of issuers within a specific industry or sector, of issuers within a specific geographic region or regions, with respect to an asset class or an investment type, or with respect to the market as a whole. An illiquid trading market may increase market volatility and may make it impossible for funds or mandates to sell investments promptly without suffering a loss. This may have an adverse impact on the investment performance of such funds and mandates and on the assets under management, revenues and results of operations of Janus Henderson.

 

Investors in certain funds managed by Janus Henderson have contractual terms that provide for a shorter notice period than the time period during which these funds may be able to sell underlying investments within the fund. This liquidity mismatch may be exacerbated during periods of market illiquidity and, in circumstances in which there are high levels of investor redemptions, it may be necessary for Janus Henderson to impose “gates” on redeeming investors, suspend redemptions or create “sidepockets”. Such actions may increase the risk of legal claims by investors, regulatory investigation and/or fines and adversely affect the reputation of Janus Henderson.

 

INTECH’s investment process is highly dependent on key employees and proprietary software.

 

INTECH’s investment process (which relates to approximately 24% of Janus’s assets under management as at 31 December 2016) is based on complex and proprietary mathematical models that seek to outperform various indices by capitalising on the volatility in stock price movements while controlling trading costs and overall risk relative to the index. The maintenance of such models for current products and the development of new products is highly dependent on certain key INTECH employees. If INTECH is unable to retain key personnel or properly transition key personnel responsibilities to others, if the mathematical investment strategies developed by INTECH fail to produce the intended results, or if errors occur in the development or implementation of INTECH’s mathematical models, INTECH may not be able to maintain its historical level of investment

 

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performance, which could adversely affect Janus Henderson’s assets under management, results of operations and financial condition and could also result in legal claims against Janus Henderson or regulatory investigations in respect of its operations.

 

Changes in the value of seeded investment products could affect Janus Henderson’s non-operating income or earnings and could increase the volatility of its earnings.

 

Henderson and Janus periodically add new investment strategies to their respective investment product offerings and provide the initial cash investment or “seeding” to facilitate the launch of the product. Janus or Henderson may also provide substantial supplemental capital to an existing investment product in order to accelerate the growth of a strategy and attract outside investment in the product.

 

Janus Henderson’s interests in seed capital investments will be greater than those of Henderson on a stand-alone basis. As at 31 December 2016, Henderson had interests in seed capital investments of US$153.0 million and Janus had interests in seed capital investments of US$254.6 million. A decline in the valuation of these seeded investments could negatively impact Janus Henderson’s earnings and financial condition.

 

The increased global scope of Janus Henderson’s business will subject the Combined Group to exchange rate risk that may adversely impact the Combined Group’s revenue and income.

 

Henderson generates, and, following Completion, Janus Henderson will generate, a substantial portion of its revenue in pounds sterling, euro and Australian dollars. As a result, Janus Henderson will be subject to foreign currency exchange risk relative to the US dollar, Janus Henderson’s financial reporting currency, through its non-US operations. Fluctuations in the exchange rates to the US dollar may affect Janus Henderson’s financial results from one period to the next. In addition, the Combined Group will have increased risk associated with the foreign exchange revaluation of balances held by certain subsidiaries for which the local currency is different than the Combined Group’s functional currency.

 

The increased global scope of Janus Henderson’s business will subject the Combined Group to market-specific political, economic and other risks that may adversely impact the Combined Group’s revenue and income generated overseas.

 

The Combined Group’s increased global portfolios and revenue derived from managing these portfolios will be subject to significant risks of loss as a result of political, economic, and diplomatic developments, currency fluctuations, social instability, changes in governmental policies, expropriation, nationalisation, asset confiscation and changes in legislation. Political events in any country or region could result in significant declines in equity and/or fixed income securities exposed to such a country or region and, to the extent that Janus Henderson has a concentration of assets under management in such a country or region could result in a material adverse effect on the assets under management, results of operations and financial condition of the Combined Group. In addition, international trading markets, particularly in some emerging market countries, are often smaller, less liquid, less regulated and significantly more volatile than those in the UK, Europe, Australia or the US. As the Combined Group’s business grows in these emerging markets, any ongoing and future business, political, economic or social unrest affecting these markets may have a negative impact on the long-term investment climate in these and other areas and, as a result, on Janus Henderson’s assets under management and the corresponding revenue and income generated from these markets may be negatively affected.

 

Janus Henderson will operate in an industry that is highly regulated in many geographies, and any enforcement action or adverse changes in the laws or regulations governing its business could adversely affect its results of operations or financial condition.

 

Like all investment management firms, Janus Henderson’s activities will be highly regulated in almost all geographies in which it conducts business. In particular, the Combined Group will be more exposed to regulation in the US than Henderson on stand-alone basis, including regulation by the SEC, FINRA, the Commodities Future Trading Commission and the National Futures Association, whilst continuing to be exposed to regulation in the UK, Europe, Australia and in other international markets, including regulation by the Australian Securities and Investments Commission in Australia and the FCA in the UK.

 

Laws and regulations applied at the national, state or provincial and local level generally grant governmental agencies and industry self-regulatory authorities broad administrative discretion over Janus Henderson’s activities, including the power to limit or restrict its business activities, conduct examinations, risk assessments, investigations and capital adequacy reviews, and impose remedial programmes to address perceived deficiencies.

 

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As a result of regulatory oversight, Janus Henderson could face requirements which negatively impact the way in which it conducts business, increase compliance costs, impose additional capital requirements and/or involve enforcement actions which could lead to sanctions up to and including the revocation of licenses to operate certain businesses, the suspension or expulsion from a particular jurisdiction or market of any of its business organisations or key personnel, or the imposition of fines and censures on it or its employees. Judgments or findings of wrongdoing by regulatory or governmental authorities, or in private litigation against Janus Henderson, could affect its reputation, increase its costs of doing business and/or negatively impact revenues, any of which could have an adverse impact on Janus Henderson’s results of operations or financial condition.

 

Janus Henderson may also be adversely affected as a result of new or revised legislation or regulations, or by changes in the interpretation or enforcement of existing laws and regulations. The costs and burdens of compliance with these and other current and future reporting and operational requirements and regulations have increased significantly and may continue to increase the cost of offering mutual funds and other investment products, which could adversely affect Janus Henderson’s assets under management, results of operations and financial condition.

 

The regulatory environment in which Janus Henderson operates frequently changes and has seen a significant increase in regulation in recent years. Various changes in laws and regulations have been enacted or otherwise developed in multiple jurisdictions globally in response to the crisis in the financial markets that began in 2007. Various other proposals remain under consideration by legislators, regulators, and other government officials and other public policy commentators. Certain enacted provisions and certain other proposals are potentially far reaching and, depending upon their implementation, could have a material impact on Janus Henderson’s business. While certain of these provisions appear to address perceived problems in the banking sector, some will or may be applied more broadly and affect other financial services companies, including investment managers. Janus Henderson may be adversely affected as a result of the new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations.

 

Proposed changes in the US regulatory framework

 

In the US, the Dodd-Frank Act, was signed into law in July 2010. Certain provisions have required Henderson and/or Janus, and other provisions will or may require Janus Henderson, to change or impose new limitations on the manner in which it conducts business; they also have increased regulatory burdens and related compliance costs, and will or may continue to do so. Moreover, the Dodd-Frank Act mandated many regulatory studies, some of which pertain directly to the investment management industry, which could lead to additional legislation or regulation.

 

In December 2014, the Chairperson of the SEC announced a comprehensive agenda for regulatory change governing the US asset management industry and directed SEC staff to develop a five-part series of new regulations addressing the topics of enhanced portfolio reporting, liquidity risk management, leverage and use of derivatives, adviser wind up and stress testing for funds and advisers. When finalised during 2016 or later, these new industry rules can be expected to add additional reporting and compliance costs and may affect the development of new products. Janus Henderson believes these proposals could increase operational and compliance costs.

 

The US Department of Labor has adopted regulations that, when effective on 10 April 2017, will treat as fiduciaries any person who provides investment advice or recommendations to employee benefit plans, plan fiduciaries, plan participants, plan beneficiaries, Individual Retirement Accounts (“IRA”), or IRA owners. The proposal will have wide-ranging consequences for Janus Henderson and its US distribution partners and product line. Under the new rules, firms and individuals who recommend financial products to retirement investors would be required to act in the best interest of the investor and, to receive variable compensation, would be required to enter into a contract with clients and produce complex disclosure documents intended to highlight financial conflicts of interest that may arise from the compensation the financial adviser receives from firms like Janus Henderson. In addition, the recent presidential election in the US has created uncertainty as to the future regulatory environment and how it may impact Janus Henderson.

 

The full impact of potential legal and regulatory changes or possible enforcement proceedings on the Janus Henderson business cannot be predicted. Such changes have imposed, and may continue to impose, new compliance costs and/or capital requirements, including costs related to information technology systems, or may impact Janus Henderson in other ways that could have an adverse impact on Janus Henderson’s results of operations or financial condition. Similarly, regulatory enforcement actions which impose significant penalties or compliance obligations or which result in significant reputational harm could have similar adverse effects on

 

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Janus Henderson. Moreover, certain legal or regulatory changes could require Janus Henderson to modify its strategies, businesses or operations, and it may incur other new constraints or costs, including the investment of significant management time and resources in order to satisfy new regulatory requirements or to compete in a changed business environment. In recent years, certain regulatory developments have also added pressures regarding fee levels.

 

To the extent that existing or future regulations affecting the sale of Janus Henderson products and services or investment strategies cause or contribute to reduced sales or increased redemptions of its products, impair the investment performance of its products or impact its product mix, Janus Henderson’s aggregate assets under management, results of operations or financial condition might be adversely affected.

 

Janus Henderson’s increased indebtedness or any inability to access the debt capital markets could impair Janus Henderson’s ability to return capital or pay dividends to Janus Henderson Shareholders or to pursue capital expenditure, acquisitions or other business opportunities.

 

It is possible that Janus Henderson’s increased indebtedness following Completion could limit its ability to obtain additional financing to pursue acquisitions, voluntary capital expenditure or other expenditure outside the ordinary course, limiting the potentially value enhancing opportunities available to Janus Henderson.

 

In addition, each of Janus and Henderson has utilised in the past and Janus continues to utilise the debt capital markets as a source of finance. An inability to raise money in the debt markets could also limit the Combined Group’s ability to secure additional financing (if required). The Combined Group’s access to the debt markets could be impaired as a result of various factors, some of which are not specific to the Combined Group, such as a severe disruption of the financial markets and interest rate fluctuations.

 

The costs and availability of financing from the debt capital markets will also be dependent on the creditworthiness of members of the Combined Group. The level and quality of the Combined Group’s earnings, operations, business and management, among other things, will impact its creditworthiness and potentially any credit ratings assigned by rating agencies to members of the Combined Group. A decrease in credit ratings assigned to members of the Combined Group by the ratings agencies may, to the extent that the Combined Group wishes to secure further borrowing, negatively impact the Combined Group’s access to the debt capital markets and increase the Combined Group’s cost of borrowing. It may also impact investor confidence in the Combined Group and consequently reduce the level of assets under management or affect sales. There can be no assurance that the Combined Group will have a credit rating assigned to it by rating agencies or maintain the current credit rating of Janus on a stand-alone basis. Any actual or anticipated changes or downgrades in such credit ratings may have a negative impact on the Combined Group.

 

Debt servicing requirements following Completion may also increase Janus Henderson’s vulnerability to adverse economic, market and industry conditions, limit Janus Henderson’s flexibility in planning for or reacting to changes in business operations or to the asset management industry overall and may place Janus Henderson at a disadvantage in relation to competitors that have lower debt levels. Any or all of the above events and factors could adversely affect Janus Henderson’s assets under management, results of operations and financial condition.

 

Janus Henderson may have increased regulatory capital requirements imposed on it by regulators which could negatively impact the Combined Group’s ability to return capital or pay dividends to Janus Henderson Shareholders or to pursue capital expenditure, acquisitions or other business opportunities.

 

Janus’s and Henderson’s regulators typically have broad discretion to impose increased regulatory capital requirements on the regulated entities in their respective groups. It is possible that the regulatory capital requirements that the Henderson and Janus businesses are subject to currently may be subject to change. Without prejudice to the working capital statement in paragraph 17 of Part IX (Additional Information) of this document, it is possible that the imposition of increased regulatory capital requirements in the future could negatively impact the Combined Group’s ability to return capital or pay dividends to Janus Henderson Shareholders or restrict its ability to make potentially value-enhancing future acquisitions or deploy other capital expenditure.

 

Harm to Janus Henderson’s reputation could reduce the level of assets under management or affect sales, potentially negatively impacting the Combined Group’s revenue and net income. Janus Henderson’s reputation is critical to the success of the Combined Group.

 

Henderson and Janus believe that their respective brand names have been, and continue to be, well received both in the asset management industry and with their respective clients, reflecting the fact that their brands, like their

 

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businesses, are based in part on trust and confidence. If the reputation of Janus or Henderson is harmed by the process of integrating and rebranding the two businesses following Completion, existing clients may reduce amounts held in, or withdraw entirely from, funds advised by Janus Henderson or funds may terminate or reduce assets under management under their management agreements with Janus Henderson, which could reduce the amount of assets under management of the Combined Group and cause the Combined Group to suffer a corresponding loss in revenue and income. The reputation of Janus Henderson could also be damaged by factors such as litigation, regulatory action, loss of key personnel, misconduct, operational failures (including any failures during the integration process), mismanagement, loss of client data, fraud (by employees or third parties), failure to manage conflicts of interest or satisfy fiduciary responsibilities, and negative publicity or press speculation (whether or not any such allegations or claims are valid or ultimately disproved, dismissed or withdrawn). The risk of some or all of these factors occurring and damaging the reputation of Janus Henderson may be increased during integration as Janus Henderson works to combine and rationalise the policies, systems and processes relied upon by each of Janus and Henderson. Reputational harm may cause Janus Henderson to lose current clients and it may be unable to continue to attract new clients or develop new business. If Janus Henderson fails to address, or appears to fail to address, successfully and promptly the underlying causes of any reputational harm, it may be unsuccessful in repairing any existing harm to its reputation or performance and the Combined Group’s future business prospects would likely be affected.

 

Failure to properly address conflicts of interest could harm Janus Henderson’s reputation, business and results of operations.

 

Janus Henderson’s business will require continuously managing actual and potential conflicts of interest, including situations where the Combined Group’s services to a particular client conflict, or are perceived to conflict, with the interests of another client or those of Janus Henderson. The risk of actual or potential conflicts of interest occurring may be increased as a result of the Merger and it is possible that conflicts between aspects of Henderson’s and Janus’s existing businesses will be identified during the integration process. The willingness of clients to enter into transactions in which such a conflict might arise may be affected if Janus Henderson fails, or appears to fail, to deal appropriately with conflicts of interest. In addition, potential or perceived conflicts could give rise to litigation or regulatory enforcement actions.

 

Failure in the Combined Group’s operational or risk management processes, systems or infrastructure could harm Janus Henderson’s reputation, business and results of operations.

 

Janus Henderson’s business is highly dependent on the successful and timely execution of complex investment management, operational, risk management and financial processes. Any operational errors or negligence by the employees of, or others acting on behalf of, Janus Henderson or weaknesses in the internal controls over those processes could result in losses for Janus Henderson, a requirement for Janus Henderson to compensate clients for losses suffered and/or regulatory fines. The risk of such operational errors or of weaknesses in internal controls may be increased during the integration process as the businesses of Janus and Henderson are combined and the processes, systems and controls are rationalised.

 

The Janus Henderson business is also highly dependent on the integrity, security and reliability of its information technology systems and infrastructure. If any of the critical systems or infrastructure do not operate properly or are disabled, the ability of Janus Henderson to perform effective investment management on behalf of its clients could be impaired. The risk of such systems and infrastructure failing to operate properly will be increased during the integration process while such systems and infrastructure are combined or replaced.

 

Failure to maintain adequate infrastructure could impede Janus Henderson’s productivity and ability to support business growth.

 

Janus Henderson’s infrastructure, including its technological capacity, data centres and office space, will be vital to the operations and competitiveness of its business. The failure to maintain an infrastructure commensurate with the increased size and scope of Janus Henderson’s business, including any expansion, could impede the Combined Group’s productivity and growth, which could negatively impact assets under management, results of operations and financial condition and increase operational risk.

 

Failure to maintain adequate business continuity plans could have a material adverse impact on Janus Henderson and its products.

 

Significant portions of Janus Henderson’s business operations and those of its critical third-party service providers will be concentrated in a few geographic areas, including the UK, US, Luxembourg and Australia. Should Janus

 

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Henderson, or any of its critical service providers, experience a significant local or regional disaster or other business continuity problem, the Combined Group’s continued success will depend in part on the safety and availability of its personnel, its office facilities, and the proper functioning of its computer, telecommunication and other related systems and operations. The failure by Janus Henderson, or any of its critical service providers, to maintain updated adequate business continuity plans, including backup facilities, which will be more difficult during the integration process due to the changing nature of the business during that period, could impede the Combined Group’s ability to operate in the event of a disruption. This could negatively impact the Combined Group’s assets under management, results of operations and financial condition.

 

Henderson and Janus have developed various backup systems and contingency plans but no assurance can be given that they will be adequate in all circumstances that could arise or that material interruptions and disruptions will not occur. In addition, Janus Henderson will rely to varying degrees on outside vendors for disaster contingency support, and, notwithstanding any due diligence or oversight carried out by Janus Henderson, no assurance can be given that these vendors will be able to perform in an adequate and timely manner. If Janus Henderson, or any of its critical service providers, is unable to respond adequately to such an event in a timely manner, the Combined Group may be unable to continue its business operations, which could lead to a damaged reputation and loss of customers that results in a decrease in assets under management, lower revenue and reduced net income.

 

Janus Henderson could be subject to losses and reputational harm if the Combined Group, or its agents, fail to properly safeguard sensitive and confidential information or as a result of cyber attacks.

 

Janus Henderson will be dependent on the continued effectiveness of its information and cyber security policies, procedures and capabilities to protect its computer and telecommunications systems and the data that resides in or is transmitted through such systems. The risk of weaknesses in such policies, procedures and capabilities may be increased during the integration process as the businesses of Janus and Henderson are combined and the policies, procedures and systems are rationalised.

 

As part of Janus Henderson’s normal operations, the Combined Group will maintain and transmit confidential information about its clients and employees as well as proprietary information relating to its business operations. Henderson and Janus maintain, and Janus Henderson will maintain, a system of internal controls designed to provide reasonable assurance that fraudulent activity, including misappropriation of assets, fraudulent financial reporting and unauthorised access to sensitive or confidential data, is either prevented or detected on a timely basis. Nevertheless, all technology systems remain vulnerable to unauthorised access and may be corrupted by cyber attacks, computer viruses or other malicious software code, the nature of which threats are constantly evolving and becoming increasingly sophisticated. In addition, authorised persons could inadvertently or intentionally release confidential or proprietary information. Although Janus Henderson will take precautions to password protect and encrypt its mobile electronic hardware, if such hardware is stolen, misplaced or left unattended, it may become vulnerable to hacking or other unauthorised use, creating a possible security risk and resulting in potentially costly actions by Janus Henderson.

 

Breach or other failure of Janus Henderson’s technology systems, including those of third parties with which the Combined Group does business, or failure to timely and effectively identify and respond to any such breach or failure, could result in the loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by the incident, additional security costs to mitigate against future incidents and litigation costs resulting from the incident. Moreover, loss of confidential customer identification information could harm Janus Henderson’s reputation, result in the termination of contracts by the Combined Group’s existing customers and subject the Combined Group to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenue. The increasing prevalence and sophistication of cyber attacks generally and the heightened profile of Janus Henderson as a result of its increased scale and breadth of global activities may result in an increase in the volume and sophistication of cyber attacks on Janus Henderson specifically. This may increase the amount of investment that the Combined Group will need to make to minimise the risk of harm to its business and potentially increase the risk that, despite such investment, the Combined Group will be a victim of a successful cyber attack. Recent well-publicised security breaches at other companies have exposed failings by companies to keep pace with the threats posed by cyber attackers and have led to enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyber attacks, and may in the future result in heightened cyber security requirements, including additional regulatory expectations for oversight of vendors and service providers which could lead to increased costs or fines or public censure which could lead to a damaged reputation and loss of customers (and a decrease in assets under management, lower revenue and reduced net income) as a result.

 

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Failure to comply with client contractual requirements and/or investment guidelines could negatively impact the Combined Group’s assets under management, results of operations and financial condition.

 

Many of the investment management agreements under which the Combined Group will manage assets or provide services will specify investment guidelines or requirements that Janus Henderson will be required to observe in the provision of its services. Laws and regulations will also impose similar requirements for certain accounts. A failure to follow these guidelines or requirements could result in damage to Janus Henderson’s reputation or in clients seeking to recover losses, withdrawing their assets or terminating their contracts, any one of which could cause revenues and profitability to decline. In addition breach of these investment guidelines or requirements could result in regulatory investigation, censure and/or fine. The risk of breach of such investment guidelines or requirements may be increased during the integration process as the businesses of Janus and Henderson are combined.

 

Janus Henderson’s business may be vulnerable to failures of support systems and client service functions provided by third-party vendors or the failure of such third-party vendors or service providers to fulfil their obligations.

 

Janus Henderson will depend on third-party service providers and other key vendors for various fund administration, accounting, custody, risk analytics, market data, market indices and transfer agent roles, and other distribution and operational needs. As a result, Janus Henderson’s client service capabilities as well as its ability to obtain prompt and accurate securities pricing information and to process client transactions and reports will be significantly dependent on the communication and information systems and services provided by such third-party service provides and key vendors. The ability to consistently and reliably obtain securities pricing information, process client transactions and provide reports and other client services to the shareholders of funds and other investment products managed by Janus Henderson will be essential to the Combined Group’s operations. If Janus Henderson’s third-party service providers or other key vendors fail to fulfil their obligations, experience service interruptions or otherwise provide inadequate service, it could lead to operational and regulatory problems, delays, errors or inaccuracies in obtaining pricing information, processing client transactions or providing reports, and other inadequacies in other client service functions, which could impact client relationships, result in financial loss and potentially give rise to regulatory action and claims against Janus Henderson. A failure of third-party systems or services could adversely affect Janus Henderson’s assets under management, results of operations and financial condition. During the integration process Janus Henderson will be particularly vulnerable to such failures as it will be undertaking additional transitions between such third-party systems and, following integration, the Combined Group may have a greater exposure to certain third-party vendors or service providers.

 

Janus’s and Henderson’s businesses are dependent on investment management agreements that are subject to termination, non-renewal or reductions in fees.

 

Henderson and Janus derive revenue from investment management agreements with investment funds and institutional and other investors. With respect to investment management agreements with US mutual funds, these agreements may be terminated by either party with notice, or in the event of an “assignment” (as defined in the Investment Company Act), and must be approved and renewed annually by the independent members of each fund’s board of directors or trustees or its shareowners, as required by law. In addition, the board of directors or trustees of certain investment funds and institutional and other investors generally may terminate their investment management agreements upon written notice for any reason and without penalty. Such US mutual funds, investments funds or other investors may choose to exercise such termination rights as a result of the uncertainty caused by the Merger or if the employees with whom they have a relationship leave the business during or following the integration process. The termination of or failure to renew one or more of these agreements or the reduction of the fee rates applicable to such agreements could have a material adverse effect on the Combined Group’s assets under management, results of operations and financial condition.

 

Janus Henderson could be impacted by counterparty or client defaults.

 

In periods of significant market volatility, the deteriorating financial condition of one financial institution may materially and adversely impact the performance of others. Henderson and Janus, and the funds and accounts they manage, have exposure to many different counterparties, and routinely execute transactions with counterparties across the financial industry. Following Completion, Janus Henderson will have a greater exposure to such counterparties than Henderson on a stand-alone basis and, following the integration process, the concentration of its exposure to certain of those counterparties may increase. Janus Henderson, and the funds and accounts it manages, may be exposed to credit, operational or other risk in the event of a default by a counterparty or client, or in the event of other unrelated systemic market failures.

 

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The Henderson Group and the Janus Group are periodically involved in various legal proceedings and regulatory matters and the Combined Group may be involved in such proceedings in the future.

 

Henderson and Janus and their respective employees are periodically involved in various legal proceedings and regulatory investigations. Among other things, such matters may result in fines, censure, suspension of personnel and revocation of licenses. Any of these outcomes could adversely affect Janus Henderson’s assets under management, results of operations and financial condition. Additionally, Henderson and Janus and their respective employees have received and may receive in the future requests for information in connection with certain investigations or proceedings from various governmental and regulatory authorities. Following Completion, the Combined Group will be subject to any legal proceedings and regulatory investigations that either Henderson or Janus were involved in prior to Completion, and may be subject to new proceedings or investigations relating to facts or circumstances that occurred in respect of Henderson or Janus prior to Completion. Without prejudice to the statements in paragraph 14 of Part IX (Additional Information) of this document, these investigations or proceedings may result in increased costs or reputational harm to the Combined Group, which may lower sales and increase redemptions.

 

Insurance may not be available on a cost-effective basis to help protect Janus Henderson from potential liabilities.

 

Janus Henderson faces the inherent risk of liability related to litigation from clients, third-party vendors or others. To help protect against these potential liabilities, Henderson and Janus have, and Janus Henderson will in the future, purchase insurance in amounts, and against risks, that Janus Henderson considers appropriate, where such insurance is available at prices it deems acceptable. There can be no assurance, however, that a claim or claims will be covered by insurance or, if covered, will not exceed the limits of available insurance coverage, that any insurer will remain solvent and will meet its obligations to provide Janus Henderson with coverage or that insurance coverage will continue to be available with sufficient limits at a reasonable cost. Insurance costs are impacted by market conditions and the risk profile of the insured, and may increase significantly over relatively short periods. In addition, certain insurance coverage may not be available or may only be available at prohibitive costs. Renewals of insurance policies may expose Janus Henderson to additional costs through higher premiums or the assumption of higher deductibles or co-insurance liability.

 

Additional tax liabilities could have a material impact on Janus Henderson’s financial condition, results of operations and/or liquidity.

 

The members of the Combined Group operate in a number of territories, and will accordingly be subject to tax in several jurisdictions. The tax rules to which the members of the Combined Group are subject are complex, and each member, and the group as a whole, must make judgments (including certain judgments based on external advice) as to the interpretation and application of these rules.

 

The tax affairs of members of the Combined Group will in the ordinary course be reviewed by tax authorities, which may disagree with certain positions that Henderson and/or Janus have taken, or that members of the Combined Group have taken or will take in the future, and assess additional taxes. Henderson and Janus regularly assess the likely outcomes of such tax inquiries, investigations or audits in order to determine the appropriateness of their respective tax provisions. However, there can be no assurance that Janus or Henderson will accurately predict the outcomes of these inquiries, investigations or audits, and the actual outcomes of these inquiries, investigations or audits could have a material impact on Janus Henderson’s financial results.

 

Henderson and Janus are subject to ongoing routine tax inquiries, investigations or audits in various jurisdictions.

 

The IRS may not agree with the conclusion that Janus Henderson is to be treated as a foreign corporation for US federal income tax purposes following the Merger or may assert that Janus Henderson is subject to certain adverse consequences for US federal income tax purposes following the Merger.

 

Although Henderson is incorporated and registered in Jersey and is treated as (and Janus Henderson after the Merger is expected to be treated as) tax resident in the UK, the IRS may assert that Janus Henderson, as a result of the Merger, should be treated as a US corporation (and, therefore, a US tax resident) for US federal income tax purposes pursuant to section 7874 of the Code (“section 7874”). Under current US federal income tax law, a corporation will generally be considered to be resident for US federal income tax purposes in its place of organisation or incorporation. Accordingly, under the generally applicable US federal income tax rules, Janus Henderson would generally be classified as a non-US corporation (and, therefore, not a US tax resident).

 

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Section 7874 and the US Treasury regulations promulgated thereunder, however, contain specific rules that may cause a non-US corporation to be treated as a US corporation for US federal income tax purposes under certain circumstances.

 

Section 7874 provides that if, following an acquisition of a US corporation by a non-US corporation, at least 80% of the acquiring non-US corporation’s stock (by vote or value) is considered to be held by former shareholders of the US corporation by reason of holding stock of such US corporation (such percentage referred to as the “ownership percentage” and such test referred to as the “ownership test”), and the “expanded affiliated group” which includes the acquiring non-US corporation does not have substantial business activities in the country in which the acquiring non-US corporation is created or organised, then the non-US corporation would be treated as a US corporation for US federal income tax purposes even though it is a corporation created and organised outside the US (the “80% test”).

 

Based on currently available data, the parties do not expect section 7874 — either the 60% test (as described below) or the 80% test — to apply to the Merger. Whether the ownership test has been satisfied, however, is determined only after the closing of the Merger. For example, for purposes of determining the ownership percentage of the former Janus Stockholders, the former Janus Stockholders will be deemed to own an amount of Janus Henderson ordinary shares in respect of certain prior distributions (including stock repurchases) by Janus prior to Completion. Further, there is limited guidance regarding the application of section 7874, and changes in law between the date of this document and Completion could also alter this analysis.

 

If Janus Henderson were treated as a US corporation for US federal income tax purposes, it could be liable for substantial additional US federal income tax on its operations and income following Completion. Additionally, if Janus Henderson were treated as a US corporation for US federal income tax purposes, non-US Janus Henderson Shareholders would generally be subject to US withholding tax on the gross amount of any dividends paid by Janus Henderson to such shareholders.

 

In addition, if the ownership percentage is equal to or greater than 60% but less than 80%, then the US corporation and its affiliates could be prohibited from using their foreign tax credits or other attributes to offset the income or gain recognised by reason of the transfer of property to a non-US related person or any income received or accrued by reason of a license of any property by such US entity to a non-US related person. Further, under US Treasury temporary regulations, Janus Henderson’s ability to integrate certain non-US operations or to access cash earned by non-US subsidiaries may be limited. This test is referred to herein as the “60% test”.

 

Janus has requested that its legal counsel, Skadden, Arps, Slate, Meagher & Flom (UK) LLP, render an opinion, which will be dated on or after the Completion Date and which will be based on certain facts, representations, covenants, and assumptions, that the Merger should not be subject to section 7874. Whether such opinion can be given will depend on the facts as of Completion. Moreover, if such opinion is rendered, there can be no assurance that the IRS will agree with the position that Janus Henderson is to be treated as a non-US corporation or that Janus Henderson is not to be subject to the other adverse tax consequences associated with having an ownership fraction that is equal to or greater than 60% but less than 80%. In addition, the receipt of such opinion with respect to section 7874 is not a condition to Completion.

 

Janus Henderson will have a greater sensitivity to changes to tax laws in the US.

 

Following Completion, the Combined Group will have a proportionately greater exposure to US tax laws than Henderson on a stand-alone basis.

 

As discussed above, under current law, Janus Henderson is expected to be treated as a non-US corporation for US federal income tax purposes. In addition to the potential application of section 7874, however, recent legislative proposals have also aimed to expand the scope of US corporate tax residence, including in such a way as would cause Janus Henderson to be treated as a US corporation if the management and control of the Combined Group were determined to be located primarily in the US.

 

Furthermore, the US Congress and the current administration under President Trump have indicated a desire to reform the US corporate income tax. There is a substantial lack of clarity around the likelihood, timing and details of any such tax reform. At this time, it is not possible to determine whether such reform could adversely affect the Combined Group’s assets under management, results of operation, or financial condition.

 

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If Henderson is, or if Janus Henderson were to become, a passive foreign investment company (a “PFIC”) for US federal income tax purposes, US holders of New Janus Henderson Shares would be subject to certain adverse US federal income tax consequences.

 

In general, a non-US corporation will be a PFIC for any taxable year if (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. Henderson believes that it was not a PFIC for its taxable year prior to the Merger, and Henderson does not expect Janus Henderson to be a PFIC for its first taxable year that includes the Merger or in the foreseeable future. There can be no assurance, however, that Janus Henderson will not be considered a PFIC for any taxable year. If Janus Henderson were a PFIC for any taxable year during which a US investor held New Janus Henderson Shares, such investor would generally be subject to certain adverse US federal income tax consequences, such as ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, the application of additional taxes equal to interest charges generally applicable to underpayments of tax on certain distributions and sales, and additional reporting requirements under US federal income tax laws and regulations.

 

Henderson is, and Janus Henderson intends to be, tax resident in the UK and nowhere else. However, were Janus Henderson to be treated as tax resident in an alternative and/or additional jurisdiction, this could increase the aggregate tax burden on Janus Henderson and its shareholders.

 

Janus Henderson is and will remain incorporated and registered in Jersey so will not be presumed automatically to be UK resident for tax purposes. The senior management of Janus Henderson intends to meet all requirements to establish UK tax residency by establishing that central management and control of the Combined Group rests in the UK. If UK tax residency is not established or maintained, this could increase the amount of tax payable or suffered by the Combined Group.

 

3.             Risks relating to the New Janus Henderson Shares, the London De-listing and NYSE Listing

 

The market price of the New Janus Henderson Shares may be particularly volatile in the period following Completion, and holders of the New Janus Henderson Shares could lose a significant portion of their investment due to drops in the market price of the New Janus Henderson Shares.

 

The market price of the New Janus Henderson Shares may be particularly volatile in the period following Completion due to the potential for increased flowback as a result of the London De-listing, the NYSE Listing and the impact of the Merger on index inclusion. Janus Henderson Shareholders may not be able to resell their New Janus Henderson Shares at or above their value at Completion due to fluctuations in the market price during such period.

 

There has been no prior public market for the New Janus Henderson Shares on the NYSE, and an active market for such securities may not develop or be sustained and trading prices may vary.

 

Upon Completion the New Janus Henderson Shares will be registered with the SEC and Henderson will apply for the New Janus Henderson Shares to be listed on the NYSE, and will commence trading on the NYSE on a conditional “when issued” basis, subject to the official notice of issuance, following Completion. Although Existing Henderson Shares are currently listed and admitted to trading on the LSE, prior to Completion there will be no public market for Existing Henderson Shares on the NYSE. Upon listing and trading on the NYSE, there can be no assurance that an active market for New Janus Henderson Shares will develop or be sustained if it does develop. The failure of an active and liquid trading market to develop would likely have a material adverse effect on the value of the New Janus Henderson Shares.

 

The market price for the New Janus Henderson Shares may be affected by factors different from those that historically have affected Janus Shares and Existing Henderson Shares.

 

Upon Completion, Henderson Shareholders and Janus Stockholders will become holders of New Janus Henderson Shares. Henderson and Janus each have businesses that differ from each other. Accordingly, the results of operations of the Combined Group will be affected by some factors that are different from those currently affecting the results of operations of each of Henderson and Janus.

 

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PART IV

 

FINANCIAL INFORMATION ON JANUS

 

The financial statements for the financial years ended 31 December 2016, 2015 and 2014, together with the independent audit opinion in respect of those financial statements, are set out on the following pages. The financial information relating to Janus in this document has been prepared in accordance with US GAAP and has been extracted without material adjustment from Janus’s audited accounts for the relevant financial years.

 

Following an analysis of the accounting policies of the Janus Group for the financial years ended 31 December 2016, 31 December 2015, and 31 December 2014, Henderson concluded that there were no material differences between the accounting policies to be adopted by the Henderson Group from and including the financial year ending 31 December 2017 (being US GAAP) and the accounting policies adopted by the Janus Group for the period covered by the historical financial information. Consequently, the Henderson Directors consider that no material adjustment needs to be made to the historical financial information for the Janus Group, set out in this Part IV, in order to achieve consistency with the accounting policies of the Henderson Group.

 

Shareholders should read the whole of this document and not rely solely on the financial information in this Part IV (Financial information on Janus).

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Janus Capital Group Inc.

Denver, CO

 

We have audited the accompanying consolidated balance sheets of Janus Capital Group Inc. and subsidiaries (the “Company”) as of December 31, 2016, 2015 and 2014, and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Janus Capital Group Inc. and subsidiaries as of December 31, 2016, 2015 and 2014 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ DELOITTE & TOUCHE LLP

 

Denver, CO

February 16, 2017

 

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JANUS CAPITAL GROUP INC.

 

CONSOLIDATED BALANCE SHEETS

(Dollars in Millions, Except Share Data)

 

 

 

December 31,

 

December 31,

 

December 31,

 

 

 

2016

 

2015

 

2014

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

485.9

 

$

364.4

 

$

452.5

 

Investment securities

 

212.1

 

327.1

 

344.0

 

Investment management fees and other receivables

 

129.6

 

137.8

 

130.9

 

Other current assets

 

37.4

 

40.0

 

59.8

 

Assets of consolidated VIEs:

 

 

 

 

 

 

 

Cash and cash equivalents

 

6.1

 

 

 

Investment securities

 

91.6

 

 

 

Accounts receivable

 

0.3

 

 

 

Total current assets

 

963.0

 

869.3

 

987.2

 

Non-current assets:

 

 

 

 

 

 

 

Property, equipment and software, net

 

34.2

 

38.7

 

31.1

 

Intangible assets, net

 

1,339.0

 

1,352.5

 

1,257.4

 

Goodwill

 

601.9

 

602.8

 

509.7

 

Other non-current assets

 

11.8

 

4.4

 

7.8

 

Total assets

 

$

2,949.9

 

$

2,867.7

 

$

2,793.2

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

92.7

 

$

81.1

 

$

86.8

 

Accrued compensation and benefits

 

138.5

 

145.3

 

142.8

 

Current portion of long-term debt

 

 

107.5

 

 

Liabilities of consolidated VIEs:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

0.5

 

 

 

Total current liabilities

 

231.7

 

333.9

 

229.6

 

Non-current liabilities:

 

 

 

 

 

 

 

Long-term debt

 

406.3

 

294.8

 

450.5

 

Deferred income taxes, net

 

502.8

 

498.9

 

478.4

 

Other non-current liabilities

 

46.7

 

46.2

 

41.2

 

Total liabilities

 

1,187.5

 

1,173.8

 

1,199.7

 

Commitments and contingencies (See Note 18)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REDEEMABLE NONCONTROLLING INTERESTS

 

43.1

 

21.8

 

5.4

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Preferred stock ($1.00 par, 10,000,000 shares authorized, none issued)

 

 

 

 

Common stock ($0.01 par, 1,000,000,000 shares authorized; 182,671,008, 183,660,673, and 185,153,490 shares outstanding, respectively)

 

1.8

 

1.8

 

1.9

 

Retained earnings

 

1,636.5

 

1,589.8

 

1,540.3

 

Accumulated other comprehensive loss, net of tax

 

(7.9

)

(8.9

)

(1.4

)

Total JCG shareholders’ equity

 

1,630.4

 

1,582.7

 

1,540.8

 

Noncontrolling interests

 

88.9

 

89.4

 

47.3

 

Total equity

 

1,719.3

 

1,672.1

 

1,588.1

 

Total liabilities, redeemable noncontrolling interests and equity

 

$

2,949.9

 

$

2,867.7

 

$

2,793.2

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

55



Table of Contents

 

JANUS CAPITAL GROUP INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in Millions, Except per Share Data)

 

 

 

Year ended December 31,

 

 

 

2016

 

2015

 

2014

 

Operating revenues:

 

 

 

 

 

 

 

Investment management fees

 

$

878.2

 

$

913.7

 

$

849.1

 

Performance fees

 

(36.6

)

(9.8

)

(48.0

)

Shareowner servicing fees and other

 

169.1

 

172.3

 

152.1

 

Total operating revenues

 

1,010.7

 

1,076.2

 

953.2

 

Operating expenses:

 

 

 

 

 

 

 

Employee compensation and benefits

 

344.0

 

352.5

 

322.8

 

Long-term incentive compensation

 

78.9

 

76.8

 

51.3

 

Marketing and advertising

 

23.0

 

22.0

 

19.5

 

Distribution

 

133.0

 

141.0

 

131.0

 

Depreciation and amortization

 

35.5

 

33.0

 

25.6

 

General, administrative and occupancy

 

134.7

 

128.6

 

113.3

 

Total operating expenses

 

749.1

 

753.9

 

663.5

 

Operating income

 

261.6

 

322.3

 

289.7

 

Interest expense

 

(20.8

)

(27.7

)

(33.1

)

Investment losses, net

 

(6.3

)

(8.2

)

(1.9

)

Investment gains within consolidated VIEs, net

 

3.8

 

 

 

Other income, net

 

3.9

 

3.2

 

3.0

 

Loss on early extinguishment of debt

 

 

(36.3

)

 

Income before taxes

 

242.2

 

253.3

 

257.7

 

Income tax provision

 

(90.9

)

(94.0

)

(102.3

)

Net income

 

151.3

 

159.3

 

155.4

 

Net income attributable to noncontrolling interests

 

(5.2

)

(3.5

)

(1.0

)

Net income attributable to JCG

 

$

146.1

 

$

155.8

 

$

154.4

 

 

 

 

 

 

 

 

 

Earnings per share attributable to JCG common shareholders:

 

 

 

 

 

 

 

Basic

 

$

0.79

 

$

0.84

 

$

0.82

 

Diluted

 

$

0.78

 

$

0.80

 

$

0.81

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Net unrealized gain (loss) on available-for-sale securities

 

$

1.1

 

$

(2.2

)

$

1.9

 

Foreign currency translation adjustment

 

(1.2

)

(4.3

)

 

Reclassifications for items included in net income

 

0.5

 

(1.0

)

(2.2

)

Total other comprehensive income (loss), net of tax

 

0.4

 

(7.5

)

(0.3

)

Comprehensive income

 

151.7

 

151.8

 

155.1

 

Comprehensive income attributable to noncontrolling interests

 

(4.6

)

(3.5

)

(1.0

)

Comprehensive income attributable to JCG

 

$

147.1

 

$

148.3

 

$

154.1

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

56



Table of Contents

 

JANUS CAPITAL GROUP INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Millions)

 

 

 

Year ended December 31,

 

 

 

2016

 

2015

 

2014

 

CASH FLOWS PROVIDED BY (USED FOR):

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

Net income

 

$

151.3

 

$

159.3

 

$

155.4

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

35.5

 

33.0

 

25.6

 

Deferred income taxes

 

3.3

 

23.9

 

20.1

 

Amortization of stock-based compensation

 

56.2

 

52.2

 

19.8

 

Investment losses, net

 

6.3

 

8.2

 

1.9

 

Investment gains within consolidated VIEs, net

 

(3.8

)

 

 

Amortization of debt discounts, premiums and deferred issuance costs

 

4.5

 

4.3

 

8.1

 

Loss on extinguishment of debt

 

 

36.3

 

 

Payment of deferred commissions, net

 

(6.2

)

(11.4

)

(7.2

)

Other, net

 

7.4

 

5.2

 

0.5

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Investment management fees and other receivables

 

8.2

 

(2.5

)

(20.8

)

Other assets

 

9.1

 

(25.4

)

(13.0

)

Accounts payable and accrued liabilities

 

(1.7

)

(4.2

)

(5.4

)

Accrued compensation and benefits

 

(6.6

)

(0.6

)

20.0

 

Other liabilities

 

(1.3

)

(3.9

)

13.4

 

Net operating activities

 

262.2

 

274.4

 

218.4

 

Investing activities:

 

 

 

 

 

 

 

Acquisitions, net of cash acquired of $0, $7.3 million and $4.3 million, respectively

 

 

(81.4

)

(28.4

)

Purchase of property, equipment and software

 

(9.3

)

(13.7

)

(11.4

)

Purchases and settlements of investment securities

 

(67.6

)

(91.0

)

(168.6

)

Purchases and settlements of investments by consolidated VIEs

 

(54.8

)

 

 

Proceeds from sales, settlements and maturities of investment securities

 

89.1

 

67.6

 

336.8

 

Proceeds from sales, settlements and maturities of investments by consolidated VIEs

 

48.6

 

 

 

Sales (purchases) of securities by consolidated seeded investment products, net

 

7.3

 

(32.2

)

(60.9

)

Net investing activities

 

13.3

 

(150.7

)

67.5

 

Financing activities:

 

 

 

 

 

 

 

Repayment of long-term debt

 

 

(380.3

)

(98.9

)

Proceeds from issuance of debt

 

 

297.1

 

 

Debt issuance costs

 

 

(2.6

)

 

Purchase of noncontrolling interests

 

 

(0.4

)

(1.5

)

Distributions to noncontrolling interests

 

(6.6

)

(6.7

)

(1.6

)

Contingent consideration

 

 

(8.6

)

 

Third-party investments (redemptions) in consolidated seeded investment products, net

 

(7.3

)

32.2

 

60.9

 

Proceeds from stock option exercises and employee stock purchases

 

8.1

 

11.0

 

8.4

 

Excess tax benefit from equity-based compensation

 

3.2

 

9.1

 

2.1

 

Principal payments under capital lease obligations

 

(1.4

)

(1.0

)

(1.2

)

Repurchase of common stock

 

(72.1

)

(91.8

)

(87.2

)

Dividends paid to JCG shareholders

 

(77.2

)

(65.2

)

(58.4

)

Net financing activities

 

(153.3

)

(207.2

)

(177.4

)

Cash and cash equivalents:

 

 

 

 

 

 

 

Effect of foreign exchange rate changes

 

(0.7

)

(4.6

)

(0.5

)

Net change

 

121.5

 

(88.1

)

108.0

 

At beginning of year

 

364.4

 

452.5

 

344.5

 

At end of year

 

$

485.9

 

$

364.4

 

$

452.5

 

Supplemental cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

 

$

15.5

 

$

17.2

 

$

27.2

 

Cash paid for income taxes, net of refunds

 

$

74.1

 

$

90.4

 

$

89.7

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

57



Table of Contents

 

JANUS CAPITAL GROUP INC.

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in Millions)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

other

 

Nonredeemable

 

 

 

 

 

 

 

Common

 

Retained

 

comprehensive

 

noncontrolling

 

Total

 

 

 

Shares

 

stock

 

earnings

 

income (loss)

 

interests

 

equity

 

Balance at December 31, 2013

 

188.6

 

$

1.9

 

$

1,496.0

 

$

(1.1

)

$

13.7

 

$

1,510.5

 

Net income

 

 

 

154.4

 

 

1.1

 

155.5

 

Other comprehensive income (loss)

 

 

 

 

(0.3

)

 

(0.3

)

Amortization of stock-based compensation

 

 

 

25.9

 

 

1.6

 

27.5

 

Issuance and forfeitures of restricted stock awards, net

 

2.7

 

 

 

 

 

 

Stock option exercises and employee stock purchases

 

0.9

 

 

8.4

 

 

 

8.4

 

Changes in noncontrolling interests in consolidated investment products

 

 

 

 

 

32.2

 

32.2

 

Distributions to noncontrolling interests

 

 

 

 

 

(1.0

)

(1.0

)

Change in fair value of INTECH redeemable noncontrolling interests

 

 

 

1.2

 

 

 

1.2

 

Vesting of nonredeemable noncontrolling interests

 

 

 

 

 

0.6

 

0.6

 

Purchase of noncontrolling interests

 

 

 

 

 

(0.9

)

(0.9

)

Repurchase of common stock

 

(7.0

)

 

(87.2

)

 

 

(87.2

)

Dividends paid to JCG shareholders

 

 

 

(58.4

)

 

 

(58.4

)

Balance at December 31, 2014

 

185.2

 

1.9

 

1,540.3

 

(1.4

)

47.3

 

1,588.1

 

Net income

 

 

 

155.8

 

 

2.4

 

158.2

 

Other comprehensive income (loss)

 

 

 

 

(7.5

)

(4.1

)

(11.6

)

Amortization of stock-based compensation

 

 

 

35.0

 

 

1.2

 

36.2

 

Issuance and forfeitures of restricted stock awards, net

 

2.9

 

 

 

 

(0.6

)

(0.6

)

Stock option exercises and employee stock purchases

 

1.4

 

 

11.0

 

 

 

11.0

 

Tax impact of stock-based compensation

 

 

 

3.9

 

 

 

3.9

 

Noncontrolling interest from the acquisition of Kapstream

 

 

 

 

 

85.7

 

85.7

 

Changes in noncontrolling interests in consolidated investment products

 

 

 

 

 

(41.1

)

(41.1

)

Distributions to noncontrolling interests

 

 

 

 

 

(1.0

)

(1.0

)

Change in fair value of INTECH redeemable noncontrolling interests

 

 

 

0.7

 

 

 

0.7

 

Purchase of noncontrolling interests

 

 

 

 

 

(0.4

)

(0.4

)

Repurchase of common stock

 

(5.8

)

(0.1

)

(91.7

)

 

 

(91.8

)

Dividends paid to JCG shareholders

 

 

 

(65.2

)

 

 

(65.2

)

Balance at December 31, 2015

 

183.7

 

1.8

 

1,589.8

 

(8.9

)

89.4

 

1,672.1

 

Net income

 

 

 

146.1

 

 

5.5

 

151.6

 

Other comprehensive income (loss)

 

 

 

 

1.0

 

(0.6

)

0.4

 

Amortization of stock-based compensation

 

 

 

40.1

 

 

0.5

 

40.6

 

Amortization of INTECH appreciation rights

 

 

 

 

 

0.1

 

0.1

 

Issuance and forfeitures of restricted stock awards, net

 

3.1

 

 

 

 

 

 

Stock option exercises and employee stock purchases

 

1.2

 

 

8.1

 

 

 

8.1

 

Tax impact of stock-based compensation