Interim Management Statement

RNS Number : 7901R

Henderson Diversified Income Ltd

27 August 2010

 



HENDERSON DIVERSIFIED INCOME LIMITED

27 AUGUST 2010

HENDERSON DIVERSIFIED INCOME LIMITED

Interim Management Statement

Review of the period from 1 May 2010 to 31 July 2010

MATERIAL EVENTS OR TRANSACTIONS DURING THE PERIOD

Dividends: a second interim dividend of 1.15p per ordinary share in respect of the year ended 31 October 2010, was paid on 30 June 2010 to holders registered on 11 June 2010.

A third interim dividend of 1.15p per ordinary share in respect of the year ended 31 October 2010, was declared on 27 August 2010 and will be paid on 30 September 2010 to holders registered on 10 September 2010.

Share Price:  Over the period the share price declined from 77.3p to 73.0p whilst the share price discount to net asset value widened from -6.8% to -8.0%.

Review: 

Over the three months to 31 July 2010, three month sterling LIBOR increased marginally from 0.68% to 0.75%. The income target of 1.25% over LIBOR continues to be exceeded and as and when interest rates are finally raised in the UK the distributable income will increase to reflect this. Over the period markets were buffeted by concerns about the creditworthiness of certain European governments and signs of a slowing in the US growth rate. The consequent rise in volatility affected credit markets considerably although they regained their poise and in the second half of the period under review were well and truly open to new issuance from even high yield rated credits. The positioning of the Company's holdings continue to reflect a preference for credit risk as a rapidly declining default rate supports the valuations at the lower end of the credit spectrum. During the period the Company made a modest allocation to high yielding equities through purchases of Vodafone, National Grid, GlaxoSmithKline and British American Tobacco reflecting a view that both the income yield and the prospects for capital growth are superior to that of the investment grade bonds that these companies have in issue. This initial equity allocation is capped at 5% of the fund's assets.

There are no other material events or transactions to report.

PERFORMANCE AND FINANCIAL HIGHLIGHTS

Performance to 31 July 2010

	1 month	3 months	Since launch
Net Asset Value Total Return per ordinary share	2.90	-2.85	1.13
Share Price Total Return per ordinary share	4.28	-3.65	-10.03

The Fund was launched in July 2007

Source:   Datastream

Financial Position

	at 30 April 2010	at 31 July 2010
Net assets	£69m	£66m
Net asset value (cum income)	82.9p	79.4p
Ordinary share price	77.3p	73.0p
Premium/Discount	-6.8%	-8.0%
Gearing	16%	15%
Target Yield	3 month LIBOR + 1.25%*	3 month LIBOR + 1.25%*
Total Expense Ratio (Source: Henderson fact sheet)	1.43%	1.43%

*3 month £ LIBOR was 0.68% on 30 April 2010 and 0.75% on 31 July 2010

Dividends Paid/Declared in Financial Year to date

	Amount	Pay Date	Record Date
Fourth Interim	1.25p	31 December 2009	11 December 2009
First Interim	1.15p	31 March 2010	12 March 2010
Second Interim	1.15p	30 June 2010	11 June 2010
Third Interim	1.15p	30 September 2010	10 September 2010

THE PORTFOLIO

Top 10 Investments	Country	% of portfolio	% of portfolio
		at 30 Apr 2010	at 31 Jul 2010
ISS 11% 15/06/2014, 8.875% 15/05/2016 and FRN 15/05/2018 Second Lien	Denmark	2.6%	2.7%
Kabel BW (secured loan B & C)	Germany	2.2%	2.2%
Infonxx (secured loan term B)	United States	2.0%	2.1%
Bauch & Lomb (secured loan term B)	United States	2.1%	2.1%
Nycomed (secured loan C & D)	Denmark	2.0%	2.1%
BNP Paribas FRN 7.436%	France	2.0%	2.0%
XSYS Flint (secured loan B)	Luxembourg	2.0%	2.0%
Prosieben (secured loan B)	Germany	2.0%	2.0%
Barclays Bank (10.179% and 6%)	UK	1.9%	1.9%
UPC Germany (secured loan B)	Germany	1.9%	1.9%

Sector Breakdown	% at 30 April 2010	% at 31 July 2010
Secured Loans	53.0	51.8
Investment Grade Bonds	26.0	22.7
High Yield Corporate Bonds	21.0	22.7
Credit Default Swaps**	0.0	0.0
Unit Trust	0.0	0.1
Equities	0.0	2.7

**The total gross exposure to short and long risk positions in credit default swaps at 31 July 2010 was £4.4 million (30 April 2010: £9.4 million).

The objective of Henderson Diversified Income Limited is to provide Shareholders with a high level of income and capital growth over the long term.

The Company aims to deliver these objectives for Shareholders by investing selectively across the full spectrum of fixed income asset classes including, but not limited to, secured loans, asset-backed securities, investment grade corporate bonds, high yield corporate bonds, unrated bonds, gilts, preference and selective high yield equity shares, hybrid securities, convertible bonds and floating rate notes.

Further information on the Company, including an up to date NAV and share price information, can be found at http://www.hendersondiversifiedincome.com

For further information, please contact:

Jeremy Hamon Company Secretary Telephone: [phone]	James de Sausmarez Director Head of Investment Trusts Henderson Global Investors Telephone: [phone]
Sarah Gibbons-Cook Investor Relations and PR Manager Henderson Global Investors Telephone: [phone]

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