TIDMHDIV
RNS Number : 2757Z
Henderson Diversified Income TstPLC
13 December 2017
HERSON INVESTMENT FUNDS LIMITED
HERSON DIVERSIFIED INCOME TRUST PLC
LEGAL ENTITY IDENTIFIER: 213800RV2228EO1JEN02
13 December 2017
Henderson Diversified Income Trust plc (the 'Company')
Unaudited results for the period 23 February 2017 to 31 October
2017
This announcement contains regulated information
Total return performance
6 months 1 year(4) 3 years(4) 5 years(4) 10 years(4)
% % % % %
---------------- --------- ---------- ----------- ----------- ------------
NAV(1) 3.6 7.8 22.1 46.1 79.7
Benchmark(2) 1.2 2.3 7.7 11.5 34.3
Share price(3) 5.8 9.4 23.3 57.0 80.8
(1) Net asset value total return including dividends reinvested
and excluding transaction costs
(2) Benchmark is Libor plus 2.00%
(3) Share price total return using mid-market closing price
(4) Performance prior to 27 April 2017 reflects the performance
of Henderson Diversified Income Limited that was launched on
18 July 2007
Sources: Janus Henderson, Datastream and Morningstar Direct
Investment objective and policy
The Company's investment objective is to seek income and capital
growth such that the total return on the net asset value of the
Company exceeds the average return on a rolling annual basis of
three month sterling LIBOR plus 2.00%.
The Company aims to deliver this outcome by investing in a
diversified portfolio of global fixed and floating rate income
asset classes including secured loans, government bonds, high yield
(sub-investment grade) corporate bonds, unrated corporate bonds,
investment grade corporate bonds and asset backed securities. The
Company may also invest in high yielding equities and
derivatives.
The Company uses a dynamic approach to portfolio allocation
across asset classes and is permitted to invest in a single asset
class if required. The Company seeks a sensible spread of risk at
all times. It can invest in assets of any size, sector, currency or
issued from any country.
Interim Management Report
Chairman's Statement
The period under review has been a mixed one for your Company.
While the share price total return for shareholders in the six
months was 5.8%, comfortably outperforming the benchmark, revenues
were squeezed by a combination of downward repricing of loans and
declining yields on bonds. This has made it harder to re-invest in
similarly yielding assets of similar credit quality. In order to
ensure that the quality of the investments in the portfolio was
maintained, the Board took the decision to rebase the quarterly
dividend from 1.25p to 1.10p per ordinary share. This level is
expected to be at least maintained in the absence of a further
significant fall in market yields. At the period end the ordinary
shares were yielding 4.75%.
I would like to take this opportunity to remind you that the
year-end of your Company is 30 April, which is different to the
predecessor Jersey domiciled company, Henderson Diversified Income
Limited, which had a year end of 31 October. Consequently, we are
publishing this interim report for the period from incorporation to
31 October 2017 and will publish our first annual report and
accounts in July 2018 for the period from incorporation to 30 April
2018. As the Company did not hold any assets or earn any income
prior to 27 April 2017 when it acquired the assets and liabilities
of the predecessor company, these unaudited results principally
reflect the period 27 April 2017 to 31 October 2017. The first
annual general meeting of your Company will be held in August
2018.
Performance
The net asset value total return per ordinary share for the
period 1 May 2017 to 31 October 2017 was 3.6% whilst the share
price total return per ordinary share was 5.8% reflecting a
widening in the premium to net asset value at which the ordinary
shares trade.
Dividends and dividend policy
On 29 September 2017 a first interim dividend of 1.25p per
ordinary share for the period ended 30 April 2018 was paid. A
second interim dividend of 1.10p per ordinary share for the period
ended 30 April 2018 was declared on 21 November 2017 and will be
paid to shareholders on 29 December 2017. These dividends have been
paid as interest distributions for UK tax purposes. More
information about interest distributions can be found on the
Company's website: www.hendersondiversifiedincome.com
On 7 September 2017 the Board announced its intention to rebase
the dividend to no less than 1.10p per ordinary share on a
quarterly basis, effective from the dividend payable in December
2017. This represents a reduction of 12% in the quarterly dividend
and assumes that there is not a further significant fall in market
yields. This dividend target takes into account the revenue
benefits to the Company of the revised fee arrangements described
below and the cost reductions arising from the re-domicile of the
Company into the UK.
Amendment to fee arrangements
The Board and the Manager undertook a formal review of the
management fee arrangements in September 2017 and mutually
concluded that a performance fee is no longer appropriate in this
low yielding environment. With effect from 1 November 2017 the
performance fee was removed; the 18 month performance period to 30
April 2018 was truncated at 31 October 2017 and the performance fee
for this period calculated and any performance fee payable will be
paid; the base management fee has been increased from 0.60% to
0.65% per annum of the Company's net assets. This means that with
effect from 1 November 2017, the cap on total fees payable is 0.65%
per annum of the Company's net assets rather than 1.20%.
The performance fee for the period ending 31 October 2017 has
been calculated and totals GBP995,000.
Material events or transactions during the period
The Board has authority to allot up to 100 million New Shares,
in aggregate, under the Share Issuance Programme detailed in the
Company's Prospectus dated 3 March 2017. In the period 23 February
2017 to 31 October 2017 the Company has issued a further 7,425,000
ordinary shares. As at 31 October 2017 the Company's issued share
capital was 189,618,240 ordinary shares. Between 1 September 2017
and 13 December 2017, no new ordinary shares have been issued. The
Company's issued share capital as at 13 December 2017 is therefore
189,618,240 ordinary shares. Whilst demand for the shares continues
to be strong, your Board will only issue shares at a premium to net
asset value, thereby giving shareholders a modest uplift in the net
asset value per ordinary share, improved liquidity in the shares
and the fixed costs spread over a wider shareholder base, and where
the Fund Managers are confident that the proceeds can be invested
at a yield no less than the average yield on the portfolio.
The Company's subsidiary, Henderson Diversified Income
(Luxembourg) S.a.r.l, which was inherited from the former Jersey
domiciled company, was dissolved by a way of a dissolution deed in
the presence of a Luxembourg Notary on 24 October 2017.
Outlook
The pleasingly high shareholder total return during the period
for the portfolio comprises disproportionate capital gains but
reduced income. This reflects the market's continued appetite for
yield pushing up prices for income producing assets. As the Fund
Managers' report later, it is now difficult to argue bonds are
cheap. If fairly valued, reflecting the current market environment
of low volatility, low defaults, low inflation and modest global
growth, then we can look forward to yields settling at this lower
level for the immediate future.
There are obvious, potentially disruptive, political and
economic threats. To date these have not upset this equilibrium.
However, these risks will persist in 2018 and may yet trigger more
volatile conditions. Consequently, the quality of the assets held
in the portfolio and its income stream will be a particular focus
of the Fund Managers' in the months ahead. This view of the outlook
and the risks we might face informed our decision to rebase the
dividend to give the Fund Managers' greater flexibility in this
regard.
Angus Macpherson
Chairman
13 December 2017
Fund Managers' Report
Portfolio review
Over the half year under review the Company's net asset value
rose by 3.6%. Volatility reached multi decade low levels in both
risk assets and government bonds, reflecting a sense of comfort
(some would argue complacency) with the macro economic outlook. In
this environment, the relatively high yielding loans and corporate
bonds, which are the Company's staple investments, proved popular
with investors seeking out additional credit risk. More challenging
for the Company was maintaining the existing level of income from
its investments. This was largely a function of the loan
investments experiencing a rapid downward repricing in their
coupons over the course of 2017, something that holders of the
loans were powerless to prevent given the lack of call protection
in these instruments. The resulting income levels provided by loans
were no longer sufficient to generate the desired dividend and put
a significant amount of pressure on the income available for
distribution to shareholders. This position was exacerbated by the
declining yields on corporate bonds and, as a consequence, the
Board chose to reduce the quarterly dividend from 1.25p per quarter
to 1.1p. The alternative would have been for us to take on an
uncomfortable level of both credit and capital risk further into
the future.
The period under review includes the second round of the French
Presidential election, an event which was one of the most watched
investor events of the calendar year. The resounding victory for
Emmanuel Macron removed the largest known systemic threats to
markets and set the stage for the huge outperformance of UK &
European financial bonds (both bank and insurance companies) to
which the Company has significant exposure. Banks and insurance
companies have significantly improved their capital bases in the
ten years since the financial crisis and remain under intense
regulatory scrutiny; all good news for bondholders. However, they
remain highly sensitive to any systemic risk of which European
politics remains foremost in our mind. For this reason, the
conclusion of the French elections shortly after the Dutch
election, both of which delivered victories to pro-Europe
candidates, provided the catalyst for a notable rally in the price
of these bonds. One of our favoured sub-sectors (long dated legacy
Tier 1 banking bonds) proved particularly impressive as investors
came around to our existing conclusion that the banks would likely
try to buy these bonds back at a premium before their final
maturity date.
In the corporate sector, our style has remained unchanged,
focused as it is on large cap corporates operating in defensive
industries with relatively predictable cash flows. For this reason,
the Company had no exposure to UK cyclical companies such as the
fashion retailers nor did we have exposure to the bonds of Air
Berlin that defaulted over the period. These are the kind of
industries that disappoint in an almost predictable fashion and
which, as a result, we avoid throughout the economic cycle. What we
did notice over the six month period was an increased level of
industry disruption unrelated to the economic cycle and in sectors
which have previously been relatively stable. Some of this was a
result of technological disruption (retail, telecommunications,
media) but generally he reasons were harder to pinpoint but were
probably a function of a changed attitude to value and consumption
from today's consumers. This is perhaps the most powerful example
of the fact that branded consumer goods began to tangibly lose
pricing power in the developed world. This then fed into
advertising agencies such as WPP due to a reduction in advertising
spend. The equity market was particularly sensitive to a lack of
revenue growth for individual corporates, punishing share prices as
a result. We found the credit market to be far more complacent in
its pricing of riskier bonds. There were one or two stories of
self-help, with our largest position (Tesco) providing an excellent
example of rapid deleveraging which culminated in two separate
attempts to buy back the bonds we hold at a significant premium to
the market price and the face value of the bonds. For the most
part, however, individual catalysts were hard to come by and the
market moved the price of bonds up and down in lockstep.
The Company's asset allocation continued to move towards fixed
coupon and maturity bonds and away from floating rate loans, which
reduced from 23% to 13.7% of the portfolio over the period. The
reason for this was the continued rapid repricing of loan coupon
rates lower, as explained above. Demand for loans continued to
outstrip supply resulting in repricing activity which typically
allowed companies to pay 0.5-1% less in interest than they had
previously been paying. We declined to participate in a number of
the repricing exercises (Diebold, Coveris), and re-leveraging
financings (Klockner Pentaplast) with other businesses sold and
debt repaid (BvD, Evry, Scandlines). Participation rate in new loan
issues was low as they were unattractively priced. However,
additions to existing holdings in large attractively priced
cross-border loans for IT companies (McAfee and Misys) as well as
Euro Garages (forecourt operator) were made.
Outlook
Unless there are signs of a pick-up in inflation or default
rates, neither of which we expect, it is hard to see yields on
corporate bonds or loans rising materially in the short term. This
is a most unusual economic cycle stymied as it is by a combination
of the disinflationary forces of an aging population, some private
sector deleveraging and technological disruption. The low interest
rate and low growth environment may be with us for many years to
come but we are confident that we shall be able to continue to
generate an attractive income stream for shareholders.
John Pattullo & Jenna Barnard
Fund Managers
13 December 2017
Principal risks and uncertainties
Information on the Company's risk factors are set out on pages
13 to 19 of the Prospectus dated 3 March 2017. In summary the
principal risks and uncertainties associated with the Company's
business can be divided into the following main areas:
-- General market risks associated with the Company's investments
-- The Company's investments
-- Interest rate and credit risks
-- Investment management
-- Dividends
-- Borrowings
-- Taxation
Further information on these risks and how they are managed are
given in the Risk Factors Section on pages 13 to 19 of the
Company's Prospectus dated 3 March 2017.
In the view of the Board these principal risks and uncertainties
are as applicable to the remainder of the financial period ending
on 30 April 2018 as they were to the period under review.
Related party transactions
The Company's transactions with related parties in the period 23
February 2017 to 31 October 2017 were with its Directors, Janus
Henderson Investors and Henderson Diversified Income (Luxembourg)
S.à.r.l. (the 'subsidiary'). The subsidiary was dissolved by a way
of a dissolution deed in the presence of a Luxembourg Notary on 24
October 2017 and therefore ceased to be a related party from that
date. There have been no material transactions between the Company
and its Directors during the period under review other than the
amounts paid to the Directors in respect of fees. In relation to
the provision of services by Janus Henderson Investors, other than
fees payable by the Company in the ordinary course of business and
the provision of sales and marketing services there have been no
transactions with Janus Henderson Investors affecting the financial
position of the Company during the period 23 February 2017 to 31
October 2017.
Statement of Directors' responsibilities
The Directors confirm that, to the best of their knowledge:
(a) The set of financial statements has been prepared in
accordance with the International Accounting Standard 34 'Interim
Financial Reporting';
(b) The Interim Management Report includes a fair review of the
information required by Disclosure, Guidance and Transparency Rule
4.2.7R (indication of important events during the six month period
and description of principal risks and uncertainties for the
remaining period of the financial year); and
(c) The Interim Management Report includes a fair review of the
information required by Disclosure, Guidance and Transparency Rule
4.2.8R (disclosure of related party transactions and changes
therein).
For and on behalf of the Board
Angus Macpherson
Chairman
13 December 2017
Summary of portfolio as at 31 October 2017
%
------------------------- -----
High yield bonds(+) 58.7
------------------------- -----
Investment grade bonds 24.8
------------------------- -----
Secured loans 13.7
------------------------- -----
Equities 2.0
------------------------- -----
Asset backed securities 0.8
------------------------- -----
(+) Does not include credit default swaps
Twenty largest investments as at 31 October 2017
Company Principal Currency Geographical Valuation %
activities area GBP'000 of portfolio
------------------ -------------------- ------------- -------------- ---------- --------------
Commercial
Iron Mountain services GBP/US$ US 5,173 2.59
------------------ -------------------- ------------- -------------- ---------- --------------
Tesco Food GBP UK 4,560 2.28
------------------ -------------------- ------------- -------------- ---------- --------------
Packaging
Ardagh and containers GBP/US$/EUR Ireland 4,465 2.24
------------------ -------------------- ------------- -------------- ---------- --------------
Diversified
Barclays banking GBP/US$ UK 4,231 2.12
------------------ -------------------- ------------- -------------- ---------- --------------
Diversified
Lloyds Group banking US$ UK 4,132 2.07
------------------ -------------------- ------------- -------------- ---------- --------------
Credit Suisse Banks US$ Switzerland 4,118 2.06
------------------ -------------------- ------------- -------------- ---------- --------------
Zayo Telecommunications US$ US 4,096 2.05
------------------ -------------------- ------------- -------------- ---------- --------------
Center Parcs Leisure GBP UK 4,087 2.04
------------------ -------------------- ------------- -------------- ---------- --------------
Nationwide
Building
Society Banks GBP UK 4,038 2.02
------------------ -------------------- ------------- -------------- ---------- --------------
UBS Banks US$ Switzerland 3,982 1.99
------------------ -------------------- ------------- -------------- ---------- --------------
Aramark Services Food services US$ US 3,896 1.95
------------------ -------------------- ------------- -------------- ---------- --------------
Virgin Media Cable TV GBP UK 3,870 1.94
------------------ -------------------- ------------- -------------- ---------- --------------
Equinix Telecommunications GBP/US$ US 3,849 1.93
------------------ -------------------- ------------- -------------- ---------- --------------
COTT Food US$ US 3,840 1.92
------------------ -------------------- ------------- -------------- ---------- --------------
Wachovia Banks US$ US 3,832 1.92
------------------ -------------------- ------------- -------------- ---------- --------------
Sirius Media US$ US 3,815 1.91
------------------ -------------------- ------------- -------------- ---------- --------------
AT&T Telecommunications US$ US 3,809 1.91
------------------ -------------------- ------------- -------------- ---------- --------------
PGH Insurance GBP UK 3,603 1.80
------------------ -------------------- ------------- -------------- ---------- --------------
Prudential Insurance GBP/US$ UK 3,589 1.80
------------------ -------------------- ------------- -------------- ---------- --------------
Standard
Life Insurance GBP UK 3,484 1.74
------------------ -------------------- ------------- -------------- ---------- --------------
These investments total GBP80,469,000 or 40.28% of the
portfolio.
Condensed Statement of Comprehensive Income
for the period from 23 February 2017 to 31 October 2017
(unaudited)
(Unaudited)
Period ended
31 October 2017
Revenue Capital
return return Total
GBP'000 GBP'000 GBP'000
Gains on investments held at
fair value through profit or
loss (note 1c) - 2,394 2,394
Gains on foreign exchange transactions
at fair value through profit
or loss - 2,375 2,375
Investment income (note 1e) 4,747 - 4,747
Other operating income 3 - 3
--------- --------- ----------
Total income 4,750 4,769 9,519
--------- --------- ----------
Expenses
Management and performance fees (765) (765) (1,530)
Other expenses (288) - (288)
--------- --------- ----------
Profit before finance costs and
taxation 3,697 4,004 7,701
Finance costs (94) (93) (187)
Profit before taxation 3,603 3,911 7,514
Taxation 48 - 48
Profit for the period 3,651 3,911 7,562
Earnings per ordinary share (note
2) 1.95p 2.08p 4.03p
--------- --------- ----------
The total columns of this statement represent the Statement of
Comprehensive Income of the Company. All capital and revenue items
derive from continuing operations. No operations were acquired or
discontinued during the period. The Company has no recognised gains
or losses other than those recognised in the Statement of
Comprehensive Income.
The accompanying notes form an integral part of this condensed
interim financial information.
Condensed Statement of Changes in Equity
for the period from 23 February 2017 to 31 October 2017
(unaudited)
(Unaudited)
Period ended
31 October 2017
Called-up Share premium Distributable Capital Revenue
share capital GBP'000 reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total equity at 23 February
2017 - - - - - -
Total comprehensive
income: Profit from
ordinary activities
after taxation - - - 3,911 3,651 7,562
Transactions with owners
recorded directly to
equity:
Proceeds from issue
of shares 1,896 166,752 - - - 168,648
Issue costs - (460) - - - (460)
Transfer for cancellation
of share premium - (166,292) 166,292 - - -
Dividends paid - - (474) - (1,896) (2,370)
---------------------------- -------------- ------------- ------------- -------- -------- ---------
Total equity at 31 October
2017 1,896 - 165,818 3,911 1,755 173,380
---------------------------- -------------- ------------- ------------- -------- -------- ---------
The accompanying notes form an integral part of this condensed
interim financial information.
Condensed Statement of Financial Position
for the period from 23 February 2017 to 31 October 2017
(unaudited)
(Unaudited)
At
31 October
2017
GBP'000
Non-current assets
Investments designated as fair value through profit or loss 199,765
Current assets
Other receivables 5,951
Cash and cash equivalents 2,276
-----------
Total assets 207,992
Current liabilities
Other payables (4,554)
Bank loan (30,058)
-----------
Total assets less current liabilities 173,380
Net assets 173,380
-----------
Equity attributable to equity shareholders
Called-up share capital 1,896
Distributable reserve 165,818
Capital reserve 3,911
Revenue reserve 1,755
Total equity 173,380
-----------
Net asset value per ordinary share (note 3) 91.44p
The accompanying notes form an integral part of this condensed
interim financial information.
Condensed Cash Flow Statement
for the period from 23 February 2017 to 31 October 2017
(unaudited)
(Unaudited)
Period
ended
31 October
2017
GBP'000
---------------------------------------------------- -----------
Operating activities
Net profit before tax 7,514
Interest payable 187
Gains on investments held at fair value through
profit or loss (2,394)
Gains on foreign exchange transactions at fair
value through profit or loss (2,375)
Payment on settlement of forward exchange contracts 1,470
Increase in prepayments and accrued income (1,129)
Increase in other creditors 1,484
Purchases of investments (83,942)
Sales of investments 71,799
-----------
Net cash outflow from operating activities before
finance costs (7,386)
-----------
Interest paid (170)
Taxation on investment income 56
-----------
Net cash outflow from operating activities (7,500)
-----------
Financing activities
Equity dividends paid (2,370)
Issue of ordinary shares 6,869
Cash received from Henderson Diversified Income
Limited 5,324
Issue costs (460)
Net drawdown of loans 123
-----------
Net cash inflow from financing 9,486
-----------
Increase in cash and cash equivalents 1,986
Exchange movements 290
-----------
Cash and cash equivalents at the end of the period 2,276
-----------
The accompanying notes form an integral part of this condensed
interim financial information.
Notes to the interim financial information:
Henderson Diversified Income Trust plc (the 'Company') was
incorporated on 23 February 2017.
On 26 April 2017, the Directors of its predecessor company,
Henderson Diversified Income Limited (the 'Jersey Company'), placed
the Jersey domiciled company into a Jersey Summary Winding Up and
transferred the shareholdings and assets and liabilities of the
Jersey Company to Henderson Diversified Income Trust plc.
1. Accounting policies
a) Basis of preparation
The interim accounts have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted by
the European Union.
The accounts have been prepared on a going concern basis and on
the historical cost basis, except for the revaluation of certain
financial instruments through profit and loss. The principal
accounting policies adopted are set out below. Where consistent
with IFRSs the financial statements have also been prepared in
accordance with the guidance set out in the Statement of
Recommended Practice ('SORP') for the Financial Statements of
Investment Trust Companies and Venture Capital Trusts, issued in
November 2014 and updated in January 2017 with consequential
amendments.
b) Significant accounting judgements and estimates
The preparation of the Company's financial statements requires
management to make judgements, estimates and assumptions that
affect the amounts recognised in the financial statements; however,
uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount
of the asset or liability affected in the future. As the majority
of the Company's financial assets are quoted securities, in the
opinion of the Directors, the amounts included as assets and
liabilities in the financial statements are not subject to
significant judgements, estimates or assumptions.
c) Investments designated at fair value through profit or
loss
All investments are designated upon initial recognition as held
at fair value through profit or loss. This is consistent with the
Company's investment strategy and fair value information on these
investments which is provided to the Board. Assets are recognised
at the trade date of acquisition and are de-recognised at the trade
date of the disposal. Proceeds are measured at fair value, which is
regarded as the proceeds of sale less any transaction costs. The
fair value of the financial instruments is based on their quoted
bid price at the Company's Statement of Financial Position date,
without deduction of the estimated future selling costs.
Fair value for quoted investments represents the bid-market
value as at the close of business at the Company's Statement of
Financial Position date. Fair value for unquoted investments or
where a market value is not readily available is based on Janus
Henderson's assessment of the value of the investment. Overseas
investments are translated into sterling at the exchange rate
ruling at the period end.
Changes in the fair value of investments designated at fair
value through profit or loss and gains and losses on disposal are
recognised in the profit or loss as 'gains on investments held at
fair value through profit or loss'. Also included within this
caption are transaction costs in relation to the purchase or sale
of investments, including the difference between the purchase price
of an investment and its bid price at the date of purchase.
d) Subsidiary
The Company had a subsidiary, Henderson Diversified Income
(Luxembourg) S.a.r.l. On the transfer of the assets and liabilities
from the Jersey domiciled company, the Company acquired beneficial
ownership of the investments held through the subsidiary. The
accounts therefore recognise the income and expenditure of the
subsidiary as the Company's income and expenditure. On 24 October
2017 the subsidiary was subject to a deed of dissolution, without
liquidation, with immediate effect in accordance with the
Luxembourg Civil Code. Any remaining assets and liabilities were
transferred to the Company as a result of this dissolution.
e) Income
Income from fixed interest securities is recognised using the
effective interest rate method. Income from equity securities is
recognised on an ex-dividend basis. Bank interest and premiums on
credit default swaps are recognised on an accruals basis within the
revenue return column of the Statement of Comprehensive Income. In
the event of a default, the income for the relevant period is
allocated to capital to reduce the capital loss arising. The
interest rates differential contained within currency forward
exchange contracts that hedge investment positions against currency
risk are recognised within the revenue return, to the extent they
are material, over the life of the contract.
f) Expenses
All administration expenses and interest payable are accounted
for on an accruals basis. Expenses which are incidental to the
purchase or sale of an investment are charged to the capital column
of the Statement of Comprehensive Income and allocated to capital
reserves. On the basis of the Board's expected long term split of
returns equally between capital gains and income, the Company
charges 50% of investment management fees, performance fees and
finance costs to capital.
g) Taxation
The tax expense represents irrecoverable withholding tax
suffered.
In Luxembourg the subsidiary suffered taxation on net gains on
investments and on income.
h) Foreign currency
The results and financial position of the Company is expressed
in pounds sterling, which is the functional currency of the Company
because it is the currency of the primary economic environment in
which the Company operates. Sterling is the currency by which
dividends are returned to shareholders, share buy-backs and share
issues are conducted and is the cost base of the Company.
Transactions recorded in overseas currencies during the period
are translated into sterling at the appropriate daily exchange
rates.
Assets and liabilities denominated in overseas currencies at the
Company's Statement of Financial Position date are translated into
sterling at the exchange rates ruling at that date.
i) Cash and cash equivalents
Cash comprises cash in hand and demand deposits excluding bank
loans. Cash equivalents have a term of three months or less, highly
liquid investments that are readily convertible to known amounts of
cash and that are subject to insignificant risks of changes in
value.
j) Bank borrowings
Interest-bearing bank loans and overdrafts are recorded as the
proceeds are received, net of direct issue costs. After initial
recognition bank loans and overdrafts are subsequently measured at
amortised cost. Finance costs, including direct issue costs and
interest payable on settlement or redemption, are accounted for on
an accruals basis in the Company's Statement of Comprehensive
Income using the effective interest rate method and are added to
the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
Gains and losses are recognised through profit or loss when the
loans are de-recognised, as well as through the amortisation
process.
The Company de-recognises a financial liability when the
obligation under the liability is discharged, cancelled or
expires.
k) Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business, being investment business.
l) Derivative financial instruments
Derivative financial instruments are initially recognised at
fair value on the date on which the derivative contract is entered
into and are subsequently re-measured 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 Statement of Comprehensive Income as they
arise. If capital in nature, the associated change in value is
presented as a capital item in the Statement of Comprehensive
Income.
m) Equity and reserves
Called up share capital represents the nominal value of ordinary
shares issued.
The share premium account represents the premium above nominal
value received by the Company on issuing shares net of issue
costs.
The revenue reserve represents accumulated revenue profits
retained by the Company that has not currently been distributed to
the shareholders as a dividend.
The distributable reserve was created on cancellation of the
share premium account on 20 September 2017.
The following are accounted for in the "capital reserve":
-- Expenses and finance costs charged to capital;
-- Gains and losses on the disposal of investments;
-- Realised foreign exchange differences of a capital nature;
-- Costs of repurchasing ordinary share capital;
-- Increases and decreases in the valuation of investments held at the period end; and
-- Unrealised foreign exchange differences of a capital nature.
n) Distributable reserves
Dividends can be paid from the revenue reserve, the
distributable reserve and realised capital reserves.
o) Dividends payable to shareholders
Dividends payable to shareholders are recognised in the
financial statements when they are paid. Dividends paid are
disclosed in the Statement of Changes in Equity.
2. Earnings per ordinary share
The earnings per ordinary share figure is based on the net
profit for the year after taxation of GBP7,562,000 and on
187,795,092 being the weighted average number of ordinary shares in
issue during the period.
The earnings 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
per ordinary share are the same.
(Unaudited)
Period
ended
31 October
2017
GBP'000
---------------------------------- --------------
Net revenue profit 3,651
Net capital profit 3,911
---------------------------------- --------------
Net total profit 7,562
---------------------------------- --------------
Weighted average number of
ordinary shares in issue during
the period 187,795,092
Revenue earnings per ordinary
share 1.95p
Capital earnings per ordinary
share 2.08p
---------------------------------- --------------
Total earnings per ordinary
share 4.03p
---------------------------------- --------------
3. 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 31 October 2017 of
GBP173,380,000 and on 189,618,240 ordinary shares, being the number
of ordinary shares in issue at 31 October 2017.
4. Share capital
On 27 April 2017, 182,193,240 shares were issued when Henderson
Diversified Income Limited, a closed-ended company registered under
the Companies (Jersey) Law 1991 was subject to a scheme of
reconstruction. All assets and liabilities were transferred to
Henderson Diversified Income Trust plc (the 'Company') a
closed-ended UK resident investment company. The holders of
ordinary shares are entitled to all the capital growth in the
Company and all the income from the Company that is resolved by the
Directors to be distributed. Each shareholder present at a general
meeting has one vote on a show of hands and on a poll every member
present in person or by proxy has one vote for each share held.
During the period to 31 October 2017, the Company issued a
further 7,425,000 ordinary shares for proceeds of GBP6,869,000.
5. Share premium and distributable reserve
On 20 September 2017 the Company announced that the High Court
confirmed the cancellation of the Company's share premium account
and that the Company's distributable reserve can be applied in any
manner in which the Company's profits available for distribution
may be applied.
6. Dividends paid
A dividend of 1.25p per ordinary share was paid to shareholders
of Henderson Diversified Income Limited on 30 June 2017 to members
on the register as at 25 April 2017 by Henderson Diversified Income
Limited (in liquidation).
A first interim dividend payment for the year ending 30 April
2018 of 1.25p per ordinary share was paid to shareholders on 29
September 2017. This dividend was paid as an interest distribution
for UK tax purposes from the Company's revenue account (1.00p) and
its other distributable reserves (0.25p).
On 21 November 2017 the Board declared a second interim dividend
payment for the year ending 30 April 2018 of 1.10p per ordinary
share that will be paid to shareholders on 29 December 2017. This
dividend will be paid as an interest distribution for UK tax
purposes from the Company's revenue account (0.90p) and its other
distributable reserves (0.20p).
7. Financial instruments
The table below sets out the fair value measurements using the
IFRS 13 fair value hierarchy. Categorisation within the hierarchy
has been determined on the basis of the lowest level of input that
is significant to the fair value measurement of the relevant asset
as follows:
Level 1: quoted (unadjusted) market prices in active markets for
identical assets or liabilities;
Level 2: valuation techniques for which the lowest level of
input that is significant to the fair value measurement is directly
or indirectly observable; and
Level 3: valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
The financial assets and liabilities measured at fair value in
the Condensed Statement of Financial Position are grouped into the
fair value hierarchy at the reporting date as follows:
Level Level Level
1 2 3 Total
As at 31 October 2017 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value through
profit or loss:
Investments 172,437 27,328 - 199,765
Credit default swaps - 786 - 786
Total 172,437 28,114 - 200,551
--------- --------- --------- ---------
There have been no transfers between levels of fair value
hierarchy during the period. Transfers between levels of fair value
hierarchy are deemed to have occurred at the date of the event or
change in circumstances that caused the transfer.
Valuation techniques used by the Company are explained in the
accounting policies note.
There were no transfers to or from Level 3 during the
period.
8. Related party transactions
During the period Directors' fees of GBP106,000 relating to the
Company were paid. A further GBP11,000 was paid in fees to the
Directors of the subsidiary.
9. Going concern
Having reassessed the Company's risk factors as set out on pages
13 to 19 of the Prospectus dated 3 March 2017 the directors believe
that it is appropriate to adopt the going concern basis in
preparing the financial statements.
10. General information
a) Company status
Henderson Diversified Income Trust plc is a UK domiciled
investment trust company which was incorporated on 23 February
2017. The Company number is 10635799. The Company is listed on the
London Stock Exchange.
The ISIN/SEDOL number is GB00BF03YC36.
The London Stock Exchange code is HDIV.
The Company's Global Intermediary Identification Number (GIIN)
is QR3G93.99999.SL.826.
The Company's LEI number is 213800RV2228EO1JEN02
b) Directors, Secretary and Registered Office
The Directors of the Company are Angus Macpherson (Chairman),
Ian Wright (Audit Committee Chairman), Roderick Davidson, Denise
Hadgill and Stewart Wood. The Corporate Secretary is Henderson
Secretarial Services Limited, represented by Hannah Gibson, ACIS.
The registered office is 201 Bishopsgate, London EC2M 3AE.
c) Website
Details of the Company's share price and net asset value,
together with general information about the Company, monthly
factsheets and data, copies of announcements, reports and details
of general meetings can be found at
www.hendersondiversifiedincome.com.
11. Financial Report for the period ended 31 October 2017
The Report will shortly be available in typed format on the
Company's website or from the Company's registered office. An
abbreviated version, the 'Update', will be circulated to
shareholders in December and will be available from the Corporate
Secretary at the Company's Registered Office, 201 Bishopsgate,
London EC2M 3AE.
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
For further information contact:
James de Sausmarez
Director and Head of Investment Trusts
Janus Henderson Investors
Telephone: 020 7818 3349
Sarah Gibbons-Cook
Investor Relations and PR Manager
Janus Henderson Investors
Telephone: 020 7818 3198
This information is provided by RNS
The company news service from the London Stock Exchange
END
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