Publication of Circular

RNS Number : 2358U

Henderson Diversified Income Ltd

28 November 2013

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR INTO ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OR BREACH OF ANY APPLICABLE LAW.  PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

This announcement is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information contained in the prospectus (the "Prospectus") expected to be published by Henderson Diversified Income Limited (the "Company") in due course in connection with the admission of ordinary shares in the Company (the "Shares") to the Official List of the Financial Conduct Authority and to trading on the Main Market of the London Stock Exchange (together, "Admission"). A copy of the Prospectus will, following publication, be available on the Company's website www.hendersondiversifiedincome.com

28 November 2013

HENDERSON DIVERSIFIED INCOME LIMITED

Publication of Circular

The Board of Henderson Diversified Income Limited (the "Company") announces that in order to meet the continuing demand for the Company's Shares it has published a Circular to Shareholders (the "Circular") seeking an extension of its authority to issue Shares.

The purpose of the Circular is to convene a general meeting (the ''General Meeting'') at which appropriate new shareholder authorities will be sought. The proposals include a resolution to enable the Directors to issue up to 46,002,482 new Shares, representing 50 per cent. of the total ordinary share capital in issue as at 27 November 2013.

The Board only intends to use such authority where the relevant issue of Shares is at a price which is not less than the cum-income NAV per Share at the relevant time.

Reasons for requiring an extension of the Board's authorities

At the annual general meeting of the Company which was held on 15 March 2013, Shareholders granted the Board standard authority to issue up to an agreed maximum number of Shares on a non pre-emptive basis during the period from that annual general meeting until the Company's next annual general meeting, which is expected to be held in March 2014.

The authority which was granted to the Board included, more specifically, an authority to issue equity securities (as defined in the Company's articles of association) up to a maximum amount of 8,364,087 Shares on a non pre-emptive basis for cash.

This authority is due to expire at the conclusion of the Company's next annual general meeting, unless Shareholders resolve to revoke, vary or extend this authority at an earlier date.

In the period since the Company's annual general meeting, the Board has issued 7,214,087 new Shares at a premium to the prevailing cum-income NAV and the Board believes that this current shareholder authority will be insufficient to allow the Board to continue to satisfy demand for the Company's Shares in the foreseeable future. The Company is therefore seeking a renewed authority to issue Shares on a non pre-emptive basis.

The Company also intends to publish a prospectus in January and, upon publication, will undertake a management roadshow and bookbuild exercise to place new Shares with investors (the ''Initial Placing''). Thereafter, the Board expects to issue Shares on an ad hoc basis in response to market demand, following a similar pattern to that taken by the Company over the course of this year. It is the Manager's intention to swiftly invest the proceeds of any Share issuance so that there is no delay in receipt of income. Credit derivatives will be used to replace any income shortfall as a result of any delays in investment.

Benefits of further Share issuance

The Board believes that a programme of Share issuance should produce the following principal benefits:

·     Maintain the Company's ability to issue Shares tactically, such as to better manage any premium at which the Shares trade to NAV;

·     Enhance the NAV per Share of existing Shares through issuance at a premium to cum income NAV. There are costs associated with publishing this circular and associated prospectus (see ''Prospectus requirement'' below). However, by issuing Shares at a premium to cum-income NAV, the Board believes that the accretive impact of issuing Shares will, over time and in aggregate, offset these costs;

·     Potential to grow the Company beyond the £100 million market capitalisation threshold. A larger company, particularly one in excess of £100 million market capitalisation, has a greater propensity to be considered by a greater number of potential investors;

·     Improve liquidity in the market for Shares; and

·     Allow for the Company's operating costs to be spread across a larger capital base, which, coupled with the reduction in the Company's management fee arrangements described below, should in turn allow the potential for superior returns to investors through a reduction in the ongoing charges ratio.

Managing the short-term risk to income

New Shares will rank pari passu in all respects with the existing issued Shares and the new Shares will therefore have the same entitlement to receive dividends as existing Shares. There are a number of measures that the Board has considered to eliminate the impact on income for existing Shareholders from issuing new Shares.

As stated in the Chairman's statement in the Company's annual report and accounts for the year ended 31 October 2012, the Company's Articles permit the distribution of capital profits. Although this power has never been exercised, the Board will if necessary distribute capital as income to the extent it needs to in order to cover new Shareholders paying capital for current year income on subscribing for new Shares. By doing this, dividends payable to existing Shareholders will not be reduced as a consequence of the issue of new Shares.

Finally, the Company intends to time the issuance of new Shares pursuant to the Initial Placing as close to the beginning of the quarter for earning income as practicable and also not before the Shares have gone ex-dividend, to avoid the new Shares immediately being entitled to the income earned for the prior quarter. The Company therefore intends to bring forward the next ex-dividend date to early February 2014, such that the dividend will be paid earlier in March than usual.

Investment Performance

Set out below is the Company's performance in terms of Share price and NAV over the stated time periods to 31 October 2013. As at the close of business on 27 November 2013, the Company's shares were trading at a 3.9 per cent. premium to the Company's cum-income NAV.

	1 month	3 months	6 months	12 months	3 years
Share price (Total Return)	5.8%	12.2%	7.3%	20.8%	37.9%
NAV (Total Return)	2.9%	3.8%	4.3%	11.9%	26.6%

(1) Performance is cumulative (cum-income).

(2) Data sourced from Morningstar.

Reduction in Management Fees

The management fee arrangements between the Company and the Manager have been formally reviewed. In this regard, the Board continues to believe that it is in the best interests of Shareholders for there to be a performance fee element, subject to a relative performance high watermark provision, and a competitive base fee. However, (subject to any applicable regulatory approval) with effect from 1 February 2014, the base management fee will be reduced from 0.75 per cent. to 0.65 per cent. of net chargeable assets. In addition, a reduction in the cap on fees from 1.75 per cent. to 1.50 per cent. of net assets will take effect for the current financial year. These changes will be subject to annual review in line with market developments and will be reviewed in the event that the value of the net chargeable assets exceeds £150,000,000.

Discount Management

The Board aims to minimise the discount at which the Shares trade relative to the net asset value per Share as well as to reduce volatility and increase liquidity in the Shares. In seeking to achieve this, the Board believes it should maintain flexibility and therefore does not operate a fixed discount management policy. The Board intends, however, subject always to the overall impact on the portfolio, the pricing of other trusts and overall market conditions, to consider Share buy-backs in addition to Share issuance within a narrow band relative to net asset value.

Shares will only be repurchased at a discount to diluted NAV per Share and may be cancelled or alternatively held in treasury. Shares may only be re-issued from treasury at a price which represents not less than the cum-income NAV per Share at the relevant time. The timing and structure of any such purchases is entirely discretionary and no expectation or reliance should be placed on the Board exercising such discretion.

Prospectus requirement

The Prospectus Rules provide that where a company wishes to apply for the admission to trading on a regulated market of shares representing, over a period of 12 months, 10 per cent. or more of that company's shares which are already admitted to trading on that regulated market, then the company concerned is required to issue a prospectus.

The Company anticipates that it will exceed the rolling 12 month 10 per cent. limit on applications for admission to trading in the course of using the existing authorities. On the assumption that the required authority is obtained at the General Meeting, the Company intends to publish a prospectus in relation to the new Shares which are the subject of the authority sought, at the same time as it publishes its annual report for the financial year ended 31 October 2013. In addition to complying with the Prospectus Rules, any such prospectus shall also comply with the Jersey Prospectus Rules.

General Meeting

The notice convening the General Meeting is set out in the Circular. The General Meeting will be held at 11.00 a.m on 17 December 2013 at Liberté House, 19-23 La Motte Street, St. Helier, Jersey JE2 4SY. The following item of business will be proposed at the General Meeting:

A resolution to enable the Directors to issue up to 46,002,482 new Shares representing 50 per cent. of the total ordinary share capital in issue as at 27 November 2013 (the latest practicable date prior to the publication of the circular) for cash without first offering such Shares to existing Shareholders pro rata to their existing shareholdings. This resolution will be proposed as a special resolution.

In order to be passed a special resolution requires at least 75 per cent. of the votes cast to be in favour of it. The quorum for the General Meeting is two members present in person or by proxy (including a member present through a corporate representative).

Shareholder Circular

The Company is posting the Circular to Shareholders. A copy of the full Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at:

www.morningstar.co.uk/uk/nsm.

- ENDS -

For further information please contact:

James de Sausmarez

Director of Investment Trusts, Henderson Global Investors

Telephone: [phone]

Company Secretary

BNP Paribas Securities Services S.C.A., Jersey Branch

Jeremy Hamon

Telephone [phone]

 

END

 

 

NOEEAXFPASPDFFF