Final Results

RNS Number : 2403W

Henderson Diversified Income Ltd

26 January 2012

 



26 January 2012

This announcement contains regulated information.

HENDERSON DIVERSIFIED INCOME LIMITED

Annual Financial Report for the year ended 31 October 2011

	31 October 2011		31 October 2010
	£'000	per share	£'000	per share
Net asset value	65,446	78.2p	69,483	83.1p
Market price	-	76.8p	-	79.3p
	Year ended             31 October 2011		Year ended           31 October 2010
	£'000	per share	£'000	per share
Revenue earnings	4,319	5.16p	3,906	4.67p
(based on weighted average number of shares)
Dividends (paid and payable)	4,016	4.80p	3,848	4.60p

MANAGEMENT REPORT

Extracts from the Chairman's Statement

The failure of European politicians to address the substantial challenges in the Eurozone has led to considerable volatility in bond markets during the financial year. Despite this, we have continued to beat our income target of 1.25% over 3 month sterling LIBOR and have been able to increase the second and fourth interim dividends and place a small amount of income in reserve to underpin future dividends. Your board believes that in the absence of a cut in LIBOR, this level of dividend can be at least maintained.

Performance

Your Company's net asset value fell 5.9% from 83.1p to 78.2p over the year, as secondary prices of both bonds and secured loans weakened. As in the previous year, performance was better in the first half than the second with the net asset value having stood at 85.5p at the end of April 2011. The share price likewise fell over the year from 79.3p to 76.8p but the discount narrowed to just below net asset value at 1.8%. Group net revenue for the year increased however from £3.9 million to £4.3 million or by 10.6%, thereby bolstering the Company's performance on a total return basis.

Dividends

An improved income stream enabled your Board to increase dividends. For the year under review, the four dividends which have been paid total 4.8p, an increase of 4.35% over the prior year and this lifted the yield to 6.25% based on the year end share price of 76.8p.

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HENDERSON DIVERSIFIED INCOME LIMITED

Annual Financial Report for the year ended 31 October 2011

MANAGEMENT REPORT (continued)

Extracts from the Chairman's Statement (continued)

Gearing

During the year the Board put in place a new facility for up to £25.5 million for a two year term at a lower rate providing increased flexibility. At the year end, borrowings were £6.9 million, up from £6.2 million at the previous year end. In addition, your portfolio was geared by a further 11.1% due to exposure to credit derivatives.

Outlook

There are signs that European politicians have accepted the seriousness of the sovereign debt crisis. There is little indication of a definitive solution but we feel markets are bringing events to a head. Whilst it seems inevitable that some volatility will persist we do believe that there continues to be an attractive risk reward ratio in your Company's diversified portfolio.

Annual General Meeting

Our fifth Annual General Meeting will be held on Thursday 8 March 2012 at 11.00am at our registered office in Jersey. Once again we are pleased to invite shareholders to attend our annual open presentation and take the opportunity to meet the Portfolio Managers, and this will be held at 10.30am on Tuesday 20 March 2012 at Henderson's offices in London.

Paul Manduca

Chairman

26 January 2012

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HENDERSON DIVERSIFIED INCOME LIMITED

Annual Financial Report for the year ended 31 October 2011

MANAGEMENT REPORT (continued)

Principal Risks and Uncertainties

The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment  limits and restrictions appropriate to the Company's investment objective and policy, in order to mitigate risks as far as practicable. The principal risks which have been identified and the steps taken by the Board to mitigate these are as follows:

• Investment Strategy

An inappropriate investment strategy, for example, in terms of asset allocation or level of gearing, may result in under performance against the companies in the peer group, and also in the Company's shares trading on a wider discount. The Board manages these risks by ensuring a diversification of investments and a regular review of the extent of borrowings. The Manager operates in accordance with an investment limits and restrictions policy determined by the Board, which includes limits on the extent to which borrowings may be employed. The Board reviews the limits and restrictions on a regular basis and the Manager confirms adherence to them every month. The Manager provides the Board with management information, including performance data and reports and shareholder analyses. The Directors monitor the implementation and results of the investment process with the Manager at each Board meeting and monitor risk factors in respect of the portfolio. Investment strategy is reviewed at each meeting.

• Market

Market risk arises from uncertainty about the future prices of the Company's investments. This is commented on in the Annual Report.

• Accounting, legal and regulatory

The Company must comply with the provisions of the Companies (Jersey) Law, 1991 and since its shares are listed on the London Stock Exchange, the UKLA's Listing and Disclosure Rules. A breach of company law could result in the Company and/or the directors being fined or the subject of criminal proceedings and financial and reputational damage. A breach of the UKLA Rules could result in the suspension of the Company's shares. The Board relies on its Company Secretary and advisers to ensure adherence to company law and UKLA Rules.

• Operational

Disruption to, or the failure of, the Manager's or the Administrator's accounting, dealing, or payment systems or the Custodian's records could prevent the accurate reporting or monitoring of the Company's financial position. The Administrator, BNP Paribas Securities Services Fund Administration Limited sub-contracts some of the operational functions (principally relating to trade processing, investment administration and accounting) to BNP Paribas Securities Services. Details of how the Board monitors the services provided by the Manager and other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal controls section of this report.

• Financial

The financial risks faced by the Company include market price risk, interest rate risk, liability risk and credit risk. Further details are disclosed in Note 14 in the Annual Report.  Disclosures are provided in accordance with IFRS 7, Financial Instruments: Disclosures.

Related Party Transactions

The contracts with Henderson Global Investors (Holdings) plc and BNP Paribas Securities Services Fund Administration  are the only related party transactions currently in place. Other than the fees payable in the ordinary course of business, there have been no material transactions with the related party which have affected the financial position or performance of the Company in the financial year.

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HENDERSON DIVERSIFIED INCOME LIMITED

Annual Financial Report for the year ended 31 October 2011

MANAGEMENT REPORT (Continued)

Statement under Disclosure and Transparency Rules

The Directors, who are listed in the Annual Report, each confirm to the best of their knowledge that:

(a)     the financial statements, prepared in accordance with applicable international financial reporting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and

(b)    the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Helen Green

Director

26 January 2012

Summary of Portfolio

	%
Secured Loans	57.14
High Yield Bonds	21.97
Investment Grade Bonds	18.26
Equities	2.63
	--------
	100.00

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HENDERSON DIVERSIFIED INCOME LIMITED

Annual Financial Report for the year ended 31 October 2011

Twenty Largest Holdings

These twenty investments total £27.643 million (2010: £29.091 million) representing 39.53% (2010: 38.17%) by value of the total investments.

Name of Investment	Category	Value £'000
Alliance Boots	Secured Loan	1,811
Bausch & Lomb	Secured Loan	1,629
RBS Worldpay	Secured Loan	1,620
ISS	Secured Loan	1,612
Infonxx	Secured Loan	1,531
Polyconcept	Secured Loan	1,521
Lavena	Secured Loan	1,471
Lloyds Group	High Yield Bond	1,445
Towergate	Secured Loan	1,380
Springer	Secured Loan	1,370
Weetabix	Secured Loan	1,356
Flint	Secured Loan	1,346
Ziggo	High Yield Bond	1,322
Xerium	Secured Loan	1,295
Delachaux	Secured Loan	1,284
Aviva	Investment Grade Bond	1,207
Firth Rixon	Secured Loan	1,137
Ineos	Secured Loan	1,103
TMF	Secured Loan	1,102
Foncia	Secured Loan	1,101

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HENDERSON DIVERSIFIED INCOME LIMITED

Annual Financial Report for the year ended 31 October 2011

Consolidated Statement of Comprehensive Income

for the year ended 31 October 2011

	Year ended 31 October 2011			Year ended 31 October 2010
	Revenue return	Capital return	Total	Revenue return	Capital return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments at fair value through profit or loss	-	(4,490)	(4,490)	-	6,840	6,840
Gains on foreign exchange transactions at fair value through profit or loss	-	428	428	-	793	793
Investment income (note 2)	5,186	-	5,186	4,854	-	4,854
Other income (note 3)	12	-	12	4	-	4
	---------	-----------	-----------	---------	---------	---------
Total income	5,198	(4,062)	1,136	4,858	7,633	12,491
	---------	-----------	-----------	---------	---------	---------
Expenses
Management fee	(279)	(279)	(558)	(281)	(281)	(562)
Other expenses	(488)	-	(488)	(562)	-	(562)
	---------	-----------	-----------	---------	---------	---------
Profit/(loss) before finance costs and taxation	4,431	(4,341)	90	4,015	7,352	11,367
Finance costs	(83)	(83)	(166)	(109)	(109)	(218)
	---------	-----------	-----------	---------	---------	---------
Profit/(loss) before taxation	4,348	(4,424)	(76)	3,906	7,243	11,149
Taxation	(29)	-	(29)	-	-	-
	---------	-----------	-----------	---------	---------	---------
Profit/(loss) for the year	4,319	(4,424)	(105)	3,906	7,243	11,149
	=====	======	=======	=====	======	======
Earnings/(loss) per ordinary share	5.16p	(5.29)p	(0.13)p	4.67p	8.66p	13.33p
	=====	======	======	=====	=====	=====

The total column of this statement represents the Consolidated Statement of Comprehensive Income, prepared in accordance with IFRS. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations.

All income is attributable to the equity holders of Henderson Diversified Income Limited. There are no minority interests.

The Group does not have any income or expense that is not included in the profit for the year and therefore the 'profit for the year' is also the 'total comprehensive income for the year'.

The net loss of the Group for the year was £105,000 (2010: profit of £11,149,000).

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HENDERSON DIVERSIFIED INCOME LIMITED

Annual Financial Report for the year ended 31 October 2011

Consolidated Statement of Changes in Equity

for the year ended 31 October 2011

	Stated capital	Distributable reserve	Other capital reserves	Revenue reserve	Total
Consolidated year ended 31 October 2011	£'000	£'000	£'000	£'000	£'000
Total equity at 31 October 2010	37,677	39,862	(9,171)	1,115	69,483
Total comprehensive income:
(Loss)/ profit for the year	-	-	(4,424)	4,319	(105)
Transactions with owners, recorded directly to equity:
Dividends paid (note 5)	-	-	-	(3,932)	(3,932)
	---------	---------	---------	---------	---------
Total equity at 31 October 2011	37,677	39,862	(13,595)	1,502	65,446
	=====	=====	=====	=====	=====
	Stated capital	Distributable reserve	Other capital reserves	Revenue reserve	Total
Consolidated year ended 31 October 2010	£'000	£'000	£'000	£'000	£'000
Total equity at 31 October 2009	37,677	39,832	(16,414)	1,141	62,236
Total comprehensive income:
Profit for the year	-	-	7,243	3,906	11,149
Transactions with owners, recorded directly to equity:
Dividends paid (note 5)	-	-	-	(3,932)	(3,932)
Write back of issue costs	-	30	-	-	30
	--------	--------	----------	----------	--------
Total equity at 31 October 2010	37,677	39,862	(9,171)	1,115	69,483
	=====	=====	======	======	=====

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HENDERSON DIVERSIFIED INCOME LIMITED

 Annual Financial Report for the year ended 31 October 2011

Consolidated Balance Sheet

at 31 October 2011

	2011 £'000	2010 £'000
Non current assets
Investments designated as fair value through profit or loss	69,928	76,210
	----------	----------
Current assets
Other receivables	4,444	4,329
Cash and cash equivalents	732	806
	----------	----------
	5,176	5,135
	----------	----------
Total assets	75,104	81,345
	----------	----------
Current liabilities
Other payables	(9,658)	(11,862)
	----------	----------
Net assets	65,446	69,483
	======	======
Equity attributable to equity shareholders
Stated capital (note 6)	37,677	37,677
Distributable reserve	39,862	39,862
Retained earnings:
Other capital reserves	(13,595)	(9,171)
Revenue reserve	1,502	1,115
	----------	----------
Total equity	65,446	69,483
	======	======
Net asset value per ordinary share (note 7)	78.2p	83.1p
	======	======

The financial statements were approved by the Board of Directors and authorised for issue on 26 January 2012 and were signed on its behalf by:

Helen Foster Green                                                                                              Nigel Robert Parker

Director                                                                                                                  Director

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HENDERSON DIVERSIFIED INCOME LIMITED

Annual Financial Report for the year ended 31 October 2011

Consolidated Cash Flow Statement

for the year ended 31 October 2011

	2011 £'000	2010 £'000
Net (loss)/profit before taxation	(76)	11,149
Add back interest paid	166	218
Add/(less): (losses)/gains on investments designated as fair value through profit or loss	4,062	(7,633)
(Increase)/decrease in prepayments and accrued income	(106)	84
Decrease in other receivables	-	1
(Decrease)/increase in other payables	(199)	263
Net sales of investments	2,209	867
(Increase) in sales settlement debtor	(584)	(699)
(Decrease)/increase in purchase settlement creditor	(2,633)	3,209
	----------	----------
Net cash inflow from operating activities before finance costs	2,839	7,459
Interest paid	(166)	(218)
Taxation on investment income	(32)	(28)
	----------	----------
Net cash inflow from operating activities	2,641	7,213
	----------	----------
Financing activities
Equity dividends paid	(3,932)	(3,932)
Loan expenses paid	(109)	-
Drawdown/(repayment) of loan	704	(3,852)
	----------	----------
Net cash outflow from financing	(3,337)	(7,784)
	----------	----------
Decrease in cash and cash equivalents	(696)	(571)
Cash and cash equivalents at the start of the year	806	492
Exchange movements	618	885
Amortisation of loan expenses	4	-
	----------	----------
Cash and cash equivalents at the year end	732	806
	======	======

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HENDERSON DIVERSIFIED INCOME LIMITED

Annual Financial Report for the year ended 31 October 2011

Notes:

1.

Accounting Policies

Basis of preparation

This consolidated financial information for the year ended 31 October 2011 has been prepared in accordance with International Financial Reporting Standards ('IFRS'). These comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ('IASC') that remain in effect, to the extent that IFRS have been adopted by the European Union ('EU'). The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out in the Annual Report. Where consistent with IFRS the financial statements have also been prepared in accordance with the guidance set out in the Statement of Recommended Practice ('SORP') for Investment Companies issued by the Association of Investment Companies ('AIC') as revised in January 2009.

Derivative financial instruments

The Group's activities expose it primarily to the financial risks of changes in market prices, foreign currency exchange rates and interest rates. Derivative transactions which the Group may enter into include forward foreign exchange contracts (the purpose of which is to manage currency risk arising from the Group's investing activities) and interest rate futures and swaps (the purpose of which is to take a position in relation to government bond yields). The Group may also use credit derivatives, for example buying or selling credit default swaps in order to manage credit risk. The use of financial derivatives is governed by the Group's policies as approved by the Board, which has set written principles for the use of financial derivatives. Derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. Changes in the fair value of derivative financial instruments are recognised in the Consolidated Statement of Comprehensive Income as they arise. If capital in nature, the associated change in value is presented as a capital item in the Consolidated Statement of Comprehensive Income.

2.

Investment income

2011

2010

£'000

£'000

Income from investments:

UK dividend income

149

22

Bond and loan interest

4,717

4,470

Premiums on credit default swaps

320

362

---------

---------

5,186

4,854

======

======

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3.

Other income

2011

2010

£'000

£'000

Bank and other interest

12

4

======

======

4.

Earnings/(loss) per ordinary share

The earnings/(loss) per ordinary share figure is based on the net loss for the year after taxation of £0.105 million (year ended 31 October 2010: profit of £11.149 million) and on 83,640,877 (2010: 83,640,877) being the weighted average number of ordinary shares in issue during the year. The earnings/(loss) per ordinary share figure detailed above can be further analysed between revenue and capital, as below. The Company has no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted earnings/(loss) per ordinary share are the same.

2011

2010

£'000

£'000

Net revenue earnings

4,319

3,906

Net capital (loss)/earnings

(4,424)

7,243

-------

-------

Net total (loss)/earnings

(105)

11,149

======

======

Weighted average number of ordinary shares in issue during the year

83,640,877

83,640,877

2011 pence

2010 pence

Revenue earnings per ordinary share

5.16

4.67

Capital (loss)/earnings per ordinary share

(5.29)

8.66

-------

-------

Total (loss)/earnings per ordinary share

(0.13)

13.33

======

======

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5.

Dividends

2011

2010

Record date

Pay date

£'000

£'000

Fourth interim dividend - 1.25p

11 December 2009

31 December 2009

-

1,046

First interim dividend - 1.15p

12 March 2010

31 March 2010

-

962

Second interim dividend - 1.15p

11 June 2010

30 June 2010

-

962

Third interim dividend - 1.15p

10 September 2010

30 September 2010

-

962

Fourth interim dividend - 1.15p

10 December 2010

31 December 2010

962

First interim dividend - 1.15p

10 March 2011

31 March 2011

962

Second interim dividend - 1.20p

10 June 2011

30 June 2011

1,004

Third interim dividend - 1.20p

10 September 2011

30 September 2011

1,004

-------

-------

3,932

3,932

======

======

The fourth interim dividend has not been included as a liability in these financial statements as it was announced and paid after 31 October 2011.

The table below sets out the total dividends paid and to be paid in respect of the financial year. The revenue available for distribution by way of dividend for the year is £4.319 million (2010: £3.906 million).

2011

£'000

First interim dividend for 2011 - 1.15p

962

Second interim dividend for 2011 - 1.20p

1,004

Third interim dividend for 2011 - 1.20p

1,004

Fourth interim dividend for 2011 - 1.25p

1,046

(paid 30 December 2011)

--------

4,016

======

6.

Stated capital

Stated Capital £'000

Number of fully paid shares issued

As at 31 October 2010 and 2011

37,677

83,640,877

======

=========

7.

Net asset value per ordinary share

The net asset value per ordinary share is based on the net asset value attributable to ordinary shareholders at the year end of £65.446 million (2010: £69.483 million) and on 83,640,877 (2010 83,640,877) ordinary shares, being the number of ordinary shares in issue at the year end.

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8.

Going concern statement

The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements as the assets of the Group consist mainly of securities which are readily realisable and, accordingly, the Group has adequate financial resources to continue in operational existence for the foreseeable future. In reviewing the position as at the date of this report, the Board has considered the going concern and liquidity risk 'Guidance for Directors of UK Companies 2009' issued by the Financial Reporting Council in October 2009.

9.

2011 Financial information

The figures and financial information for the year ended 31 October 2011 are compiled from an extract of the latest financial statements and do not constitute statutory accounts. These accounts included the report of the auditors which was unqualified.

10.

2010 Financial information

The figures and financial information for the year 31 October 2010 are compiled from an extract of the latest published accounts and do not constitute the statutory accounts for that year.

11.

Annual Report

The Annual Report and Accounts will be posted to shareholders on 6 February 2011 and copies will be available on the Company's website (www.hendersondiversifiedincome.com) or in hard copy format from the Company's registered office, Liberté House, 19-23 La Motte Street, St Helier, Jersey, JE2 4SY.

For further information please contact:

John Pattullo and Jenna Barnard

Portfolio Manager, Henderson Diversified Income Limited

Telephone: [phone]

James de Sausmarez

Head of Investment Trusts, Henderson Global Investors

Telephone: [phone]

Sarah Gibbons-Cook

Investor Relations and PR Manager, Henderson Global Investors

Telephone: [phone]

Jeremy Hamon

BNP Paribas Securities Services Fund Administration Limited, Company Secretary

Telephone: [phone]

Henderson Diversified Income Limited has its registered office at Liberté House, 19-23 La Motte Street, St Helier, Jersey JE2 4SY and it is regulated by the Jersey Financial Services Commission. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

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