Half Yearly Report

RNS Number : 3525N

Henderson Diversified Income Ltd

09 June 2010

 



9 June 2010

This announcement contains regulated information.

HENDERSON DIVERSIFIED INCOME LIMITED

Unaudited Results for the half year ended 30 April 2010

Interim Management Report

Extracts from the Chairman's Statement

I am pleased to report that the recovery in markets that we enjoyed in the second half of last year has continued in the first six months of this year with a rise in the net asset value per ordinary share of 11.4% from 74.4p to 82.9p per ordinary share.  We continued our incremental policy of switching from industrial investment grade bonds into high yield and financial bonds where there is a greater potential for capital appreciation and running yields are high. Despite three month sterling LIBOR remaining low and finishing the period at 0.68%, our income target of 1.25% over three month sterling LIBOR continues to be comfortably exceeded and at the period end the yield on the ordinary shares was an impressive 5.95%.

Performance

The net asset value total return per ordinary share for the six month period under review was 13.5% whilst the share price total return per ordinary share was 12.5%. This reflected a small widening of the discount over the period from 6.6% to 6.8%. Income earnings per share were almost exactly in line with the previous six months at 2.3p reflecting the stability in the level of three month sterling LIBOR.

Dividends and Dividend Policy

On 31 December 2009 a fourth interim dividend of 1.25p per share for the year ended 31 October 2009 was paid. In this financial year, your Board paid a first interim dividend of 1.15p per share on 31 March 2010, and has declared a second interim also of 1.15p per share which will be paid on 30 June 2010.

Material Events or Transactions during the Period

Over the six months under review, the allocation to investment grade bonds was marginally reduced from 31% to 26% whilst high yield bonds rose from 17% to 21% as we continued our policy of recycling cash out of bonds that have performed well, and where capital appreciation is limited by their high government bond sensitivity, into bonds where there is a greater potential for capital appreciation due to declining credit risk and a large yield cushion against government bond yields. Given the modest rally in the gilt market towards the end of the period, we also sold a few more futures contracts and in doing so effectively shortened the duration (interest rate risk) of the portfolio, offsetting the longer dated investment grade holdings that display sensitivity to the gilt market.

Prices of European secured loans have continued to recover over the past six months.  The positive momentum in the market has resulted from discounted loans being redeemed early at par through high yield bond and new loan issuance, as well as IPO activity which has led to partial loan repayments and improved margins on the remaining debt.  Proceeds from these repayments have been invested in discounted assets which we would expect to rally to par over time. Gearing, after adjusting for cash held, was reduced slightly from 15.4% to around 13.1% at the period end. In addition, the further gearing provided by exposure to credit default swaps was reduced from £10.7m to £5.3m (7.7% of net assets). Further details are given in the Managers' Report.

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HENDERSON DIVERSIFIED INCOME LIMITED

Unaudited Results for the half year ended 30 April 2010

Interim Management Report (continued)

Extracts from the Chairman's Statement (continued)

Related Party Transactions

Details of related party transactions are contained in the annual report. There have been no material transactions with our related parties during the six month period under review.

Outlook, risks and uncertainties

We continue to favour credit risk over interest rate risk and will sustain the shorter interest rate risk sensitivity in the portfolio. Bond markets remain vulnerable to the fragility of Greece's sovereign solvency and those of other Southern European states. Corporate default expectations continue to fall, justifying our high yield exposure; however, these sovereign concerns will likely persist and therefore remain a potential source of volatility as does the uncertainty surrounding the extent of measures which the UK's emergency UK Budget on 22 June 2010 will bring. Whilst we have seen stability in the level of three month sterling LIBOR over the last twelve months, it is our belief that interest rates have bottomed and that any increase in rates should lead to higher dividends for shareholders over time.

Paul Manduca

Chairman

9 June 2010

Directors' Responsibility Statement

The Directors confirm that, to the best of their knowledge:

(a)        the set of financial statements has been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports';

(b)        the Interim Management Report includes a fair review of the information required by Disclosure 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 six months of the year); and

(c)        the Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

Paul Manduca

Chairman

9 June 2010

Summary of Portfolio

	%
Secured Loans	53
Investment Grade Bonds	26
High Yield Bonds	21
	--------
	100

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HENDERSON DIVERSIFIED INCOME LIMITED

Unaudited Results for the half year ended 30 April 2010

Consolidated Income Statement

      for the half year ended 30 April 2010

	(Unaudited) Half year ended 30 April 2010			(Unaudited) Half year ended 30 April 2009			(Audited) Year ended 31 October 2009
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Gains/(losses) on investments designated as fair value through profit or  loss	-	6,904	6,904	-	(1,468)	(1,468)	-	16,661	16,661
Gains/(losses) on foreign exchange transactions	-	447	447	-	(4,688)	(4,688)	-	(4,226)	(4,226)
Investment income	2,420	-	2,420	3,005	-	3,005	5,381	-	5,381
Other income	1 _______	- _______	1 ______	24 _______	- _______	24 ______	26 _______	- _______	26 _______
Total income/(loss)	2,421 _______	7,351 _______	9,772 ______	3,029 _______	(6,156) _______	(3,127) ______	5,407 _______	12,435 _______	17,842 _______
Expenses
Management fee	(141)	(141)	(282)	(88)	(89)	(177)	(215)	(216)	(431)
Other expenses	(279) _______	- _______	(279) ______	(290) _______	- _______	(290) ______	(560) _______	- _______	(560) _______
Profit/(loss) before finance costs and taxation	2,001	7,210	9,211	2,651	(6,245)	(3,594)	4,632	12,219	16,851
Finance costs	(54) _______	(54) _______	(108) ______	(56) _______	(56) _______	(112) ______	(107) _______	(106) _______	(213) _______
Profit/(loss) before taxation	1,947	7,156	9,103	2,595	(6,301)	(3,706)	4,525	12,113	16,638
Taxation	- _______	- _______	- ______	(7) _______	- _______	(7) ______	- _______	- _______	- _______
Profit/(loss) for the period	1,947 _______	7,156 _______	9,103 ______	2,588 _______	(6,301) _______	(3,713) ______	4,525 _______	12,113 _______	16,638 _______
Earnings/(loss) per ordinary share (note 3)	2.33p _______	8.55p _______	10.88p ______	3.09p _______	(7.53)p _______	(4.44)p ______	5.41p _______	14.48p _______	19.89p _______

The total column of this statement represents the Consolidated Income Statement of the Group, prepared in accordance with IFRS.  The revenue and capital 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 notes on pages 7 and 8 form an integral part of this condensed interim financial information.

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HENDERSON DIVERSIFIED INCOME LIMITED

Unaudited Results for the half year ended 30 April 2010

Consolidated Statement of Changes in Equity

for the half year ended 30 April 2010

	(Unaudited) Half year ended 30 April 2010
	Stated capital	Distributable reserve	Capital reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000
Balance at 31 October 2009	37,677	39,832	(16,414)	1,141	62,236
Net profit from ordinary activities after taxation	-	-	7,156	1,947	9,103
Dividends paid  (note 5)	-	-	-	(2,008)	(2,008)
	----------	----------	----------	----------	----------
At 30 April 2010	37,677	39,832	(9,258)	1,080	69,331
	======	======	======	======	======

	(Unaudited) Half year ended 30 April 2009
	Stated capital	Distributable reserve	Capital reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000
Balance at 31 October 2008	37,677	39,832	(28,527)	1,718	50,700
Net (loss)/profit from ordinary activities after taxation	-	-	(6,301)	2,588	(3,713)
Dividends paid (note 5)	-	-	-	(3,137)	(3,137)
	----------	----------	----------	----------	----------
At 30 April 2009	37,677	39,832	(34,828)	1,169	43,850
	======	======	======	======	======

	(Audited) Year ended 31 October 2009
	Stated capital	Distributable reserve	Capital reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000
Balance at 31 October 2008	37,677	39,832	(28,527)	1,718	50,700
Net profit from ordinary activities after taxation	-	-	12,113	4,525	16,638
Dividends paid (note 5)	-	-	-	(5,102)	(5,102)
	----------	----------	----------	----------	----------
At 31 October 2009	37,677	39,832	(16,414)	1,141	62,236
	======	======	======	======	======

The notes on pages 7 and 8 form an integral part of this condensed interim financial information.

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HENDERSON DIVERSIFIED INCOME LIMITED

Unaudited Results for the half year ended 30 April 2010

Consolidated Balance Sheet

as at 30 April 2010

	(Unaudited) 30 April	(Unaudited) 30 April	(Audited) 31 October
	2010	2009	2009
	£'000	£'000	£'000
Non current assets
Investments designated as fair value through profit or loss	77,851	48,911	69,537
	---------	----------	---------
Current assets
Other receivables	2,491	1,991	4,489
Cash and cash equivalents	1,995	201	492
	---------	-----------	-----------
	4,486	2,192	4,981
	---------	-----------	-----------
Total assets	82,337	51,103	74,518
	---------	-----------	-----------
Current liabilities
Other payables	(13,006)	(7,253)	(12,282)
	---------	-----------	-----------
Net assets	69,331	43,850	62,236
	======	======	======
Capital and reserves
Stated capital	37,677	37,677	37,677
Distributable reserve	39,832	39,832	39,832
Retained earnings:
Capital reserves	(9,258)	(34,828)	(16,414)
Revenue reserve	1,080	1,169	1,141
	---------	-----------	-----------
Total equity	69,331	43,850	62,236
	======	======	======
Net asset value per ordinary share (note 4)	82.89p	52.43p	74.41p
	======	======	======

The notes on pages 7 and 8 form an integral part of this condensed interim financial information.

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HENDERSON DIVERSIFIED INCOME LIMITED

Unaudited Results for the half year ended 30 April 2010

Consolidated Cash Flow Statement

for the half year ended 30 April 2010

	(Unaudited) Half year ended 30 April 2010	(Unaudited) Half year ended 30 April 2009	(Audited) Year ended 31 October  2009
	£'000	£'000	£'000
Net gain/(loss) before taxation	9,103	(3,706)	16,638
Add back interest paid	108	112	213
(Less)/add: (gains)/losses on investments held at fair value through profit or loss	(7,351)	6,156	(12,435)
Less: exchange movements on forward exchange contracts taken to revenue	-	-	(12)
Increase in prepayments and accrued income	(155)	(125)	(61)
Decrease in other receivables	-	174	143
Increase/(decrease) in other payables	244	(122)	(167)
Net (purchases)/sales of investments	(476)	8,093	4,468
Decrease in sales settlement debtor	852	1,707	946
Decrease in purchase settlement creditor	(848)	(2,665)	(770)
	---------	---------	---------
Net cash inflow from operating activities before finance costs	1,477	9,624	8,963
Interest paid	(108)	(112)	(213)
Taxation on investment income	(11)	(4)	(12)
	---------	---------	---------
Net cash inflow from operating activities	1,358	9,508	8,738
	---------	---------	---------
Financing activities
Equity dividends paid	(2,008)	(3,137)	(5,102)
Drawdown/(repayment) of loan	1,013	(1,061)	2,322
	---------	---------	---------
Net cash outflow from financing	(995)	(4,198)	(2,780)
	---------	---------	---------
Increase in cash and cash equivalents	363	5,310	5,958
Exchange movements	1,140	(6,056)	(6,413)
	---------	---------	---------
Movement in cash and cash equivalents during the period	1,503	(746)	(455)
Cash and cash equivalents at the start of the period	492	947	947
	---------	---------	---------
Cash and cash equivalents at the end of the period	1,995	201	492
	======	======	======

The notes on pages 7 and 8 form an integral part of this condensed interim financial information.

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HENDERSON DIVERSIFIED INCOME LIMITED

Unaudited Results for the half year ended 30 April 2010

Notes to the Consolidated Interim Financial Information:

1.	General Information
	The entity is a closed-ended company, registered as a no par value company under the Companies (Jersey) Law 1991, with its shares listed on the London Stock Exchange.  The Company was incorporated on 5 June 2007.
2.	Accounting Policies: Basis of Preparation
	This condensed interim financial information has been prepared using the same accounting policies as set out in the Company's Financial Statements for the year ended 31 October 2009 and in accordance with International Accounting Standards (IAS) 34 Interim Financial Reporting. The consolidated financial information comprises the financial information of Henderson Diversified Income Limited ('the Company') and its subsidiary undertaking Henderson Diversified Income (Luxembourg) S.à.r.l. ('the Group').
	The condensed interim financial information has not been audited or reviewed by the Company's auditors.

3.	Earnings per ordinary share
	The earnings per ordinary share is based on the net profit after taxation of £9,103,000 (half year ended 30 April 2009: loss of £3,713,000; year ended 31 October 2009: profit of £16,638,000) and on 83,640,877 (83,640,877: half year ended 30 April 2009; 83,640,877: year ended 31 October 2009) ordinary shares, being the weighted average number of ordinary shares in issue during each of the periods.
	The earnings per ordinary share detailed above can be further analysed between revenue and capital, as below:

		(Unaudited)	(Unaudited)	(Audited)
		Half year ended 30 April 2010	Half year ended  30 April 2009	Year ended 31 October 2009
		£'000	£'000	£'000
	Net revenue gain	1,947	2,588	4,525
	Net capital gain/(loss)	7,156	(6,301)	12,113
		---------	---------	---------
	Net total gain/(loss)	9,103	(3,713)	16,638
		=====	=====	=====
	Weighted average number of ordinary shares in issue during the period	83,640,877	83,640,877	83,640,877
		Pence	Pence	Pence
	Revenue earnings per ordinary share	2.33	3.09	5.41
	Capital gain/(loss) per ordinary share	8.55	(7.53)	14.48
		---------	---------	---------
	Total gain/(loss) per ordinary share	10.88	(4.44)	19.89
		=====	=====	=====

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HENDERSON DIVERSIFIED INCOME LIMITED

Unaudited Results for the half year ended 30 April 2010

Notes to the Consolidated Interim Financial Information:

4.	Net Asset Value per ordinary share
	The basic net asset value per ordinary share is based on a net asset value of £69,331,000 (30 April 2009: £43,850,000; 31 October 2009: £62,236,000) and on 83,640,877 (30 April 2009: 83,640,877; 31 October 2009: 83,640,877) ordinary shares, being the number of ordinary shares in issue at each period end.
5.	Dividends paid
	The fourth interim dividend of 1.25p per share in respect of the year ended 31 October 2009 was paid on 31 December 2009. A first interim dividend of 1.15p per share was paid on 31 March 2010.  The second interim dividend of 1.15p per share was declared on 28 May 2010 and will be paid on 30 June 2010 to shareholders on the register on 11 June 2010.  The shares were quoted ex-dividend on 9 June 2010.  The cost of this dividend will be £962,000 based on the number of shares in issue at the ex-dividend date.
6.	Going Concern
	The Directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements. The assets of the Company consists mainly of securities that are readily realisable and, accordingly, the company has adequate financial resources to continue in operational existence for the foreseeable future.
7.	Half Year Report
	The Half year report will be posted to shareholders on 18 June 2010 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

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For further information please contact:

John Pattullo and Jenna Barnard, Portfolio Managers, Henderson Global Investors

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

Company Secretary, BNP Paribas Securities Services Fund Administration Limited

Telephone: [phone]

 

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