15 Jul 2022 18:05
JANUS HENDERSON FUND MANAGEMENT UK LIMITED
HENDERSON DIVERSIFIED INCOME TRUST PLC
LEGAL ENTITY IDENTIFIER: 213800RV2228EO1JEN02
15 JULY 2022
HENDERSON DIVERSIFIED INCOME TRUST PLC
Annual Financial Report for the Year Ended 30 April 2022
This announcement contains regulated information.
PERFORMANCE HIGHLIGHTS
TOTAL RETURN PERFORMANCE FOR THE YEAR
To 30 April 2022 | To 30 April 2021 | |
NAV1 | -9.0% | +13.5% |
Benchmark2 | -7.0% | +15.5% |
Share price3 | -10.4% | +10.7% |
At 30 April 2022 | At 30 April 2021 | |
NAV per share
| 79.55p
| 91.87p |
Share price per share3
| 73.80p
| 88.00p |
Revenue return per share
| 4.65p | 4.61p |
Net assets
| £148.4m | £175.7m |
Dividend per share for year
| 4.40p | 4.40p |
Dividend yield
| 5.96% | 5.00% |
Ongoing charge
| 0.91% | 0.93% |
Financial gearing | 16.71% | 15.04%
|
Carbon intensity | Company: 28.66 tCO2e4/Revenue | Benchmark: 291.94 tCO2e4/Revenue |
1 Net asset value ('NAV') total return (including dividends reinvested)
2 The benchmark is a blend of 60% Global High Yield Credit (ICE Bank of America Global High Yield Constrained Index); 25% Global Investment Grade Corporate Credit (ICE Bank of America Global BBB Corporate Bond Index), and; 15% European Loans (Credit Suisse Western European Leveraged Loan Index)
3 Share price per ordinary share total return using mid-market closing price (including dividends reinvested)
4 tonnes Carbon Dioxide equivalent
Sources: Morningstar, BNP IRP Service, Janus Henderson and Henderson Diversified Income Trust plc Annual Reports
INVESTMENT OBJECTIVE AND POLICY
The Company's investment objective is to provide shareholders with a high level of income and preservation of capital, through the economic cycle.
The Company invests in a diversified portfolio of global fixed income and floating rate asset classes. 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.
The Company has adopted the following allocation limits for each asset class:
· secured loans 0 to 100% of gross assets
· government bonds 0 to 100% of gross assets
· investment grade bonds 0 to 100% of gross assets
· high yield (sub-investment grade) corporate bonds 0 to 100% of gross assets
· unrated corporate bonds 0 to 10% of gross assets
· asset backed securities 0 to 40% of gross assets
· high yielding equities 0 to 10% of gross assets
As a matter of policy, the Company will not invest more than 10% in aggregate of its net assets in a single corporate issue or issuer.
The Company has adopted the following investment restrictions:
· The Company will not make any direct investments in corporate issuers who derive more than 10 per cent. of their revenue from oil and gas generation and production, oil sands extraction, shale energy extraction, thermal coal extraction and power generation, and Arctic oil and gas extraction.
· The Company will not make any direct investments in corporate issuers that the Board, as advised by the investment manager, deems to have failed to comply with the United Nations Global Compact principles.
· The Company will not directly invest in sovereign bond issuers that have been sanctioned by the European Union or United Nations and/or that do not score 'free' by the Freedom House Index (or other such similar index as determined by the Board as advised by the investment manager) that promotes political rights and civil liberties.
· The Company will not make any direct investments in issuers who derive any of their revenue from the production or distribution of fur or from the production or distribution of controversial weapons.
The Company may use financial instruments known as derivatives to enhance returns. They may also be used to reduce risk or to manage the Company's assets more efficiently. The use of derivatives may include credit derivatives (including credit default swaps) in addition to interest rate futures, interest rate swaps and forward currency contracts. The credit derivatives, interest rate futures and swaps are used to take a synthetic exposure to, or to hedge, an investment position where the derivative contract is more efficient or cost effective than a position in the underlying physical asset. The Company's exposure to derivatives is capped at a maximum net long or net short position of 40% of net assets.
The Company may also employ financial gearing for efficient portfolio management purposes and to enhance investment returns, but total gearing (both financial gearing and synthetic gearing combined) may not exceed 40% of net assets. Forward currency contracts are used to hedge other currencies back to sterling.
Any material change to the investment policy of the Company will only be made with the approval of shareholders.
CHAIRMAN'S STATEMENT
Introduction
The year under review has been one of considerable volatility and your Company has not been immune to this. The NAV total return in the year to 30 April 2022 was -9.0%, reflecting a fundamental change in the perception of inflation risk by the market. The dividend was covered by revenues and was maintained at 4.40p.
The shares of the Company have also underperformed, now trading at a wider discount to NAV of 9.5%. It is always disappointing to report a loss, particularly from a fixed income fund. However as discussed below, the absolute returns do not tell the full story and indeed the story of this economic cycle is not yet fully told.
The Fund Managers' commitment to 'sensible income' continues to result in a portfolio focused on larger, less cyclical, modern day facing businesses which have sustainable revenues in the post COVID era. This has meant a continued bias towards investing in the US high yield market rather than companies in the UK and Continental Europe. The capital investment in US dollars is then hedged back into sterling to protect investors from exchange rate volatility.
Performance
I wrote in last year's report that the Fund Managers were 'cautiously optimistic' about the inflation outlook. At that time this seemed a reasonable opinion to hold. I also noted that the Fund Managers had previously demonstrated the flexibility to evolve their thinking as circumstances changed. The impact of unforeseen events such as the invasion of Ukraine and the slower than predicted recovery of supply chains was not anticipated. A consensus is now building for a far bigger inflation shock than previously expected.
This has affected all markets. Last year we introduced a benchmark to allow better comparison of the Company's performance. The benchmark, subject to the same market influences as the fund, fell 7.0% and accounts for much of the decline in NAV. The Fund Managers believe that these losses are temporary: their approach of investing for 'sensible income' focuses on longer term investments in higher quality companies.
This approach accounts for the additional losses in the funds. Greater exposure to shorter dated bonds issued by lower quality companies would have yielded better returns. The managers anticipate a hard landing in both the UK and Europe with a milder recession in the US. If their thesis is proved correct, the wisdom of focusing on higher quality credits should become clearer.
This trust was established with a view that the Fund Managers could increase their holdings of secured loans which should not be as adversely impacted by rate changes as bonds. However, the Fund Managers believe that the credit quality of such instruments has deteriorated in recent years compared to high yield and the cash yield paid insufficient reward.
During the year shareholders approved a number of explicit restrictions on the portfolio related to Environmental Social and Governance objectives. The Board and Fund Managers have a clear commitment to recognising the importance of ESG considerations in making investments. It is important to note that this commitment existed prior to recent high profile discussion of these matters. These restrictions merely formally acknowledge the approach the Fund Managers were already taking. This is discussed in greater detail in their report.
AGM
The lifting of restrictions in response to the pandemic means that we are able to hold our AGM in person this year, and we look forward to seeing shareholders who feel comfortable to attend in person at the offices of Janus Henderson Investors, 201 Bishopsgate, London EC2M 3AE, on 4 October 2022. Your Board recognises, however, that there are those who may not feel comfortable, and with that in mind, the meeting will also be broadcast live on the internet at www.janushenderson.com/trustslive. For those watching the broadcast, you will be able to ask any questions you have of the Fund Managers or the Board, but you will not be able to vote, so I would encourage you to submit your vote via proxy ahead of the meeting if you don't intend to be there in person.
Dividends
For the year ended 30 April 2022, a third interim dividend of 1.10p per ordinary share was paid on 31 March 2022 and a fourth interim dividend of 1.10p per ordinary share was paid on 30 June 2022 making a total of 4.40p per ordinary share for the year, in line with our expectations. These dividends have been paid as interest distributions for UK tax purposes. More information about interest streaming can be found in the Glossary in the annual report.
Buying Back Shares
As previously notified to shareholders, the Board has a policy which gives discretion to the Fund Managers to buy-back the Company's shares, where it is deemed accretive to shareholders to do so. During the year, 4.71 million shares were bought back at an average discount of 8.5%. The Board continues to work with both the Fund Managers and its broker to actively manage the discount.
Outlook
In order to provide the Fund Managers with the greatest possible flexibility to react to what could be very volatile markets, the Board have resolved that if necessary the dividend can be paid in part from reserves rather than current year income.
The portfolio strategy of investing principally in US high quality issuers accords with their thesis of a less severe downturn in the US than Europe and the UK. As the next financial year unfolds, the relative success of this strategy will become clearer.
Angus Macpherson
Chairman
15 July 2022
FUND MANAGERS' REPORT
Performance
The Company's NAV fell by 9.0% over the 12 months to 30 April 2022; underperforming the new benchmark which fell 7.0%. The share price total return was -10.4% reflecting a small widening in the discount. The dividend remains covered and another modest surplus was generated. We remain confident in maintaining the dividend in the medium term. We continue to buy back shares opportunistically if accretive to shareholders.
Macro background
In the last 6 monthly report we said that we felt equities were euphoric, credit spreads were reassuringly expensive and volatility was supressed. We expected a tougher regime going forwards and we have certainly got one! When running a geared Company investing in fixed interest whose primary objective is the consistent generation of a reasonable income stream without permanent capital destruction, throughout the economic cycle, the start of a rising interest rate period and end of a recovery is always going to be challenging. The skill is to avoid defaults and invest in quality resilient businesses which are sustainable in the true meaning of the word. Shareholders will be aware of our sensible income approach which focuses on large, modern day digital businesses at the lower end of investment grade, BBB and the top end of high yield, BB whilst avoiding the heavy cyclicals, analogues, small caps and structural losers. The NAV has fallen but we feel is more temporarily impaired rather than permanently lost. In this period we have underperformed the benchmark. In hindsight we had too little loans which in a relative sense performed very well, and too little lower quality high yield whilst having too much better quality, but more interest rate sensitive BBB investment grade bonds. The issue with loans is because they float over short-term interest rates they did not yield enough to justify a material part of the Company's portfolio. In addition, secured loans have financed more of the marginal and arguably lower quality issuance this cycle, compared to high yield bonds. The average quality (and credit rating) of loans has deteriorated over recent years, whereas the opposite is true for high yield bonds. We expect this deviation in quality of issuance to become apparent in time. This is the first year of using the indicative benchmark and we suggest it should be used over the long-term for sensible appraisal. In addition, and somewhat ironically, the better quality bonds, generally being longer duration performed worse than the lower quality single B and CCC bonds. In this rather bizarre period the heavily cyclicals and of course energy were the relative outperformers! So what has happened?
Sovereign bonds have sold off very aggressively due to the Federal Reserve, amongst other Central Banks having a 'volte-face' regarding inflation not being transitory. The panic that inflation may become entrenched has led to an extraordinarily aggressive and late change in monetary policy reaction function. Bond markets on both sides of the Atlantic are currently pricing in an extraordinary number of rate hikes. This panic was compounded by the exceptionally tight labour markets experienced post pandemic and many workers (particularly those of 50+ years) have chosen not to re-participate in the labour markets (the great resignation). The Ukraine war has of course heightened and extended the inflation scare via the exceptionally high oil price. The Fed was already behind the curve and saw a shrinking window of opportunity to raise rates very quickly into an already slowing economy - they were still buying Treasury and mortgage bonds in March! It is important to highlight that during this period most of the capital loss was experienced in 2022 and was due not to credit spreads widening but due to the aggressive sell off in the underlying sovereign bond (which is an important part of a corporate bond). It is only really in the period post year end that the credit spreads have widened aggressively and the worse credits have underperformed, but this is a story for next year's review.
Policy makers and companies are struggling to assess the new normal of activity post pandemic so this environment was always going to be volatile with massive swings in all economic data. Recent profits warnings from some of America's biggest retailers emphasise how many companies have over-earned, over stocked and over hired on an unsustainable basis. We are now faced with super high energy costs, a strong dollar, a very flat yield curve and slowing growth in money supply - all the ingredients necessary for a recession. We feel a hard landing is almost certain in the UK and Europe, with a less severe downturn expected in America. The bulk of the assets remain in American/global businesses. We are all grappling with the consequences of the war-like response of monetary and fiscal stimulus to boast the economies. Unfortunately, we are now in the tough medicine period - we expect the economic cycles to be shorter and more sine wave than prior periods - the COVID echo could last for some time.
Asset Allocation & Activity
We were conscious of how late cycle it felt this time last year. High yield tends to trade with vintages and the recent crop was not necessarily that bad but worth avoiding on a valuation basis alone, along with other criteria. Thus we have bought limited high yield and been especially focused on avoiding some rather large Sterling issuance namely, Morrisons, Asda and more recently Miller homes. This year we have trimmed high yield in favour of adding to select loan names and investment grade bonds. This is really a defensive trade, upping the quality whilst not jeopardising the income stream. Thus we reduced some of the higher beta names in high yield. Some notable sales include all of the high yield companies exposed to the food industry, including: Pilgrim Pride (US meat processor), Lamb Weston (US producer of frozen potato products), Post Holdings (US manufacturer of cereal products) which we think are all exposed to rising raw material costs that they will struggle to pass through to customers hence impacting profitability. In terms of activity we added names in the primary market including Clarivate Science (global software, data and analytics), Transunion (US credit reporting agency) and Ultimate Kronos Group (Human Resources SaaS provider) which fits in with our theme of modern economy companies with decent organic growth, recurring sales, and conservative balance sheets that define the sector.
The portfolio remains primarily focused around BBB and BB credit in fairly defensive sectors. To generate the income we need to be invested and to be moderately geared. We feel reasonably confident in maintaining the dividend from here accepting we are going into a much tougher environment. Gearing has been set around a level sufficient to marginally cover the dividend but no more. We have and will continue to buy back loose shares in the market if considered accretive for the shareholders.
ESG
During the period a number of ESG restrictions were approved by shareholders. It is important to highlight that by adopting these restrictions there has been no material change in the investment process or strategy. We feel this is more a formal explicit clarification of our existing strategy of lending money to sustainable businesses in the true meaning of the word. Our sensible income approach has always focused on large cap, non-cyclical, reason to exist, high cashflow return on investment businesses. We focus on companies who we consider do the right thing and who are in it for the long term (playing an infinite game) and who look after all their stakeholders; that is not only respect the environment but also their employees, suppliers, bond holders and shareholders amongst others. Only these companies merit our attention and the hard earned capital of our shareholders. Many industries have not only destroyed capital over the years but have also favoured, or indeed polluted, one stakeholder over another. We have no interest in supporting such activity. Further, we have always tried to lend to companies displaying good governance and who do no harm to society. Given our 'sensible income' style bias, our investible universe is significantly reduced. This credit screening approach is demonstrated in the annual report, which includes the fairly modest additional screening undertaken for ESG purposes. By starting with such a quality lens we feel we are starting from a relatively high base. The problem being, of course, it is hard to materially improve the portfolio from here, although we monitor closely using both internal and external resources. The internal and external screening process is discussed in the annual report and a comparison of how this portfolio appears versus our investible universe is shown here - http://www.rns-pdf.londonstockexchange.com/rns/7157S_1-2022-7-15.pdf. Our Carbon intensity is disclosed in the performance highlights.
Outlook
The outlook looks remarkably uncertain and challenging. We remain focused on securing a realistic and reliable dividend stream for our shareholders. The net asset value will remain volatile as the economic downturn progresses. This will no doubt present some opportunities and threats for shareholders.
John Pattullo, Jenna Barnard and Nicholas Ware
Fund Managers
15 July 2022
PORTFOLIO INFORMATION
TEN LARGEST INVESTMENTS AT 30 APRIL 2022
Ranking 2022 (2021) |
Investment | Country | Industry | Market value £'000 |
% of portfolio |
1 (1) | Nationwide Building Society | UK | Financials | 4,374 | 2.53 |
2 (7) | Crown Castle | US | Industrials | 3,867 | 2.23 |
3 (4) | Virgin Media | UK | Communications | 3,852 | 2.22 |
4 (6) | Phoenix | UK | Financials | 3,841 | 2.22 |
5 (-) | BUPA | UK | Financials | 3,639 | 2.10 |
6 (11) | Barclays | UK | Financials | 3,566 | 2.06 |
7 (5) | Co-Operative Group | UK | Consumer non-cyclical | 3,523 | 2.03 |
8 (16) | Service Corp | US | Consumer non-cyclical | 3,327 | 1.92 |
9 (15) | Restaurant Brands International | Canada | Consumer cylical | 3,320 | 1.92 |
10 (9) | Lloyds Group | UK | Financials | 3,234 | 1.87 |
MANAGING RISKS
The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. The Board has considered the ongoing impact of the conflict in Ukraine and of COVID-19 on the Company and concluded that the current portfolio is in a strong position to weather the market with the Fund Managers' long standing philosophy of thematic investing, long-term duration management and 'sensible income' credit investing. The Board will continue to monitor this position.
The Company is an investment trust and the Board is wholly non-executive. The Board has delegated many of its functions to third-party service suppliers including Janus Henderson and BNPPSS. However, certain risks and functions cannot be delegated and are retained by the Board.
The following summary identifies those risks and uncertainties that the Board believes are the most significant and explains whether, and if so how, they are mitigated. This reflects the Company's risk map.
The Board has analysed risk from the perspectives of the markets in which it invests and its operations.
PRINCIPAL MARKET RISKS
The Board has agreed with the Manager that it seeks to provide shareholders with a high level of income and preservation of capital, through the economic cycle. To achieve this the Fund Managers identify risk assets that they believe adequately compensate the Company for the risks that arise. The Board has set limits on the class of debt and equity assets that may be utilised by the Manager and given permission for the Manager to leverage the portfolio through significant on balance sheet and synthetic gearing. As a result investors are exposed to a number of risks which are not mitigated and may give rise to gains and losses which may be significant.
The Board is conscious that predictable dividend distributions are particularly important to shareholders. Dividends are principally declared from net revenue income although the Board does have the power to declare dividends out of capital.
Net revenue income arises in the main from seeking interest rate and credit returns from investments. The selection of such investments is based on the judgment of the Fund Managers as to current and expected market conditions. The Board believes that the principal market risks (set out below) faced by the Company and its shareholders arise from interest rate, credit and currency risks.
Market risk | Mitigation |
Interest rate risk The Company takes on interest rate risk so as to deliver portfolio returns.
Reductions in market interest rates will reduce gross and net revenue income and this effect may be amplified by the use of leverage.
Such falls may be mitigated for a period if the Company has invested in longer term fixed rate assets prior to such market movements.
The Company invests in secured loans. Whilst such secured loans may contain fixed interest rates, they may also contain prepayment provisions that reduce their effectiveness at mitigating interest rate risk.
Increases in market interest rates can reduce net asset value if interest rates rise whilst holding fixed rate assets of longer duration.
Interest rate risk also arises from an investment in interest rate derivatives and the use of rolling forward foreign exchange contracts. | The Board has not set any limits on the amount of interest rate risk that may be taken by the Manager other than to limit the gross on balance sheet and synthetic leverage to 40% of net assets.
The Board discusses interest rate risk with the Fund Managers at each Board meeting and probes their assessment of market conditions and their judgment as to the direction of interest rates and speed of development.
The Board receives a projection of net income on a monthly basis and probes the income realised to date and forecast to the financial year end.
The Board receives a list of the assets in the portfolio which contains details of interest rates and periods to maturity at each Board meeting.
The Board supports the use of interest rate derivatives to increase, as well as manage and mitigate interest rate risk. The interest rate risk profile of the portfolio as at the year end is set out in Note 14.1.3 to the financial statements within the Annual Report.
|
Credit risk The Company takes on credit risk so as to deliver portfolio returns.
Investing in debt securities and secured loans exposes the Company to credit risk from company defaults and restructurings.
Whilst it may be possible to hold a debt instrument to maturity, and be paid out in full, the Fund Managers have discretion to sell a distressed asset which would give rise to realised losses without a default having occurred.
Reductions in credit spreads will reduce gross and net income and this effect may be amplified by leverage.
Reductions in spreads may also reduce the availability of assets which the Manager believes would appropriately compensate the Company and its shareholders for the credit risk assumed leading to reduced flexibility if the portfolio needs to be repositioned.
The Company is also exposed to counterparty credit risk through the use of derivatives. | The Board has not set any limits on the credit quality of the portfolio. The Board relies on the Fund Managers to make investment decisions in this regard given the level of skill and experience in debt securities and secured loan lending within the fund management team.
The Board receives a report of the assets held in the portfolio at each Board meeting and discusses credit quality and default trends with the Fund Managers.
The credit rating table for the portfolio at the year end is disclosed in Note 14.3 to the financial statements within the Annual Report.
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Currency risk The Company invests in assets of fixed amounts denominated in currencies other than sterling which give rise to currency risk.
Significant gains and losses would likely be incurred on the liquidation of such assets when repatriating capital to sterling. Less significant gains and losses are incurred on repatriating interest and other income to sterling.
The Custodian undertakes a rolling programme of forward sales of foreign currency which gives rise to elements of interest rate risk and credit default risk with the counterparty.
| The Board has set a requirement that the capital amount of any investment denominated in a foreign currency be hedged to sterling so as to mitigate currency gains and losses.
The Board receives a report of gross and hedged currency positions at each Board meeting so it can monitor the level of hedging actually undertaken.
Gross and net hedging currency exposures are set out in Note 14.1.2 to the financial statements within the Annual Report.
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PRINCIPAL OPERATIONAL RISKS
In terms of operational risk, the Board has determined that the principal risks arise from its relationship and management of third-party service suppliers and from the nature of the activities of the Company to the degree that they are unusual when compared to other investment trusts.
Operational risk | Mitigation |
Continued interest and commitment of Jenna Barnard, John Pattullo and Nicholas Ware as Fund Managers Jenna and John have directed the portfolio since its launch, Nicholas being appointed as co-manager from 1 January 2022 and the portfolio reflects their assessment of current economic conditions and likely market opportunities and developments.
It may prove difficult to replace any or all of them should they decide to step down or if Janus Henderson allocates them to alternative funds under management. Any replacements may have a different style and different view of how the benchmark return may best be met. | The Board has an extensive and ongoing dialogue with Jenna, John and Nicholas on a quarterly basis and seeks to ensure that they remain interested and committed to the portfolio.
The Board discusses this risk regularly with Janus Henderson management and seeks to ensure that Jenna, John and Nicholas remain allocated to the portfolio and are appropriately rewarded for their services. |
Continued interest and commitment of Janus Henderson as Investment Manager and its operation of effective systems of internal control and management reporting (and execution and settlement of secured loans) The Board appointed Janus Henderson as its Manager at inception and the Group has supported shareholders since listing the predecessor company.
The Board benefits from the extensive knowledge and experience of Janus Henderson who manage a substantial portfolio of investment trusts and the economies of scale from contracting with other investment trusts for services.
The Board relies on the knowledge and expertise of Janus Henderson in ensuring that the Company complies with all relevant laws and regulations which include company law, securities legislation, data protection, anti-bribery and corruption and anti-tax evasion legislation.
It may prove difficult to replace the Manager with an alternative provider that would bring the same knowledge, experience and economies of scale should Janus Henderson decide to exit the investment trust business or to cease trading. | The Board has a regular dialogue with representatives of Janus Henderson about their support for the Company and annually assesses their performance to ensure that economies of scale and other benefits from the relationship are in fact being delivered.
The Board receives regular reports on compliance with laws and regulations and receives regular updates as new legislation is enacted.
The Board receives an annual report on internal controls in operation at Janus Henderson and is promptly made aware of any compliance failings and how they are remediated. The Board also receives an annual report on internal controls at BNPPSS in respect of its collateralized loan obligations and loan administration services and is promptly made aware of any compliance failings and how they are remediated.
On an annual basis the Board reviews the quality of the service it has received and any issues and provides feedback to Janus Henderson.
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ESG reputational risk The Company has transitioned to Article 8 status under SFDR. Decisions on ESG matters can be subjective and criteria may change as knowledge, technology and science evolves. There is a risk that an investment, assessed as appropriate at a point in time, subsequently does not meet ESG criteria, and exposes the Company to reputational risk. | The Company's ESG criteria are considered to be sufficiently clear and measurable. These criteria and the Company's adherence to them are monitored and reviewed on a regular basis. Should the Board or the Manager consider it appropriate to review or alter the criteria, this would be considered on a case by case basis against known factors prevailing at the time. |
Reliance on credit standing and quality of service of BNPPSS/BNP Trust Corporation UK (BNPTCo) as the appointed Depositary and Custodian of assets and their execution and settlement of transactions (other than secured loans) The Board has appointed BNPPSS as its Depositary. BNPPSS acted as Depositary throughout the year under review. This agreement is due to be novated to BNPTCo later in 2022. As Depositary BNPPSS acts as the Company's investment Custodian, with responsibility for transaction execution and settlement. This responsibility will transfer to BNPTCo.
The Company was/is reliant on BNPPSS/BNPTCo operating effective systems to ensure the Company's transactions are undertaken promptly, that they are properly recorded, that assets are kept segregated from those of other clients, and that the credit rating of either BNPPSS or BNPTCo does not deteriorate or the custodian fails such that assets are not immediately recoverable. | The Board assessed the credit standing of BNPPSS on a regular basis and keeps aware of market commentary should adverse events and circumstances begin to appear and will perform the same assessments in respect of BNPTCo.
The Board received an annual report on internal controls in operation at BNPPSS (Fund Administration, Global and Local Custody, Middle Office Functions and Collateralized Loan Obligations), will receive the same in respect of BNPTCo and would be made aware promptly of any compliance failings and how they are remediated.
On an annual basis the Board reviewed the quality of the service received by BNPPSS Depositary and Custodian and discusses any issues. The same reviews will be carried out in respect of BNPTCo going forward. |
Reliance on service providers to manage and control certain features of the portfolio The investment portfolio contains certain assets and liabilities (that are not present in most investment trusts) that require specific procedures and internal controls to be present for the Company, as follows:
The Company invests in secured loans which are individually documented and require additional systems and controls to manage.
The Company uses forward foreign exchange contracts to hedge currency exposure and may use future interest rate agreements to manage interest rate risk which require specialised reports to be produced to monitor net risks.
The Company has borrowed funds and given covenants to the lender regarding certain ratios which require monitoring to ensure they are met. | The Board receives a regular report on net income earned to date and a projection of net income to the end of the year. The Board uses this to obtain comfort that the portfolio and its risks are being managed as intended. It also receives a monthly investment limits and restrictions schedule that confirms that the Manager has complied with the Board set investment limits and restrictions each month that includes borrowing covenants.
On a quarterly basis the Board receives and reviews detailed reports with Janus Henderson including:
- balance sheet - income statement - asset listing including purchases and sales - revenue forecast - gross and net currency position |
CONFLICT IN UKRAINE AND COVID-19
The Board have assessed how the ongoing impact of the conflict in Ukraine and of the COVID-19 pandemic may impact the Company's principal market and operational risks and concluded that the Company is remarkably resilient to these risks.
EMERGING RISKS
The Board have defined emerging risks as "known unknowns" and have concluded that the existing principal market and operational risks capture sufficiently the risks faced by the Company.
VIABILITY STATEMENT
The Company seeks to provide shareholders with a high level of income and preservation of capital, through the economic cycle. The Board aims to achieve this by pursuing the Company's business model and strategy through its investment objective and policy. The current investment objective and policy is set out in full earlier in this announcement.
The Board will continue to consider and assess how it can adapt the business model and strategy of the Company to ensure its long-term viability in relation to the principal risks as detailed above.
In assessing the viability of the Company, the Board also considers the prospects of the Company including the liquidity of the portfolio (which is mainly invested in readily realisable listed securities), the level of borrowings (which are restricted), the closed-ended nature as an investment company (therefore there are no liquidity issues arising from unexpected redemptions) and a low ongoing charge (0.91% for the year ended 30 April 2022 (2021: 0.93%)).
The Company retains title to all assets held by the Custodian under the terms of the formal agreement with the Depositary, cash is held with approved banks and revenue and expenditure forecasts are reviewed monthly by the Board.
The Board therefore believes it is appropriate to assess the Company's viability over a three-year period, taking account of the Company's current position and the assessment factors detailed above.
When assessing the viability of the Company over the next three years the directors have considered its ability to meet liabilities as they fall due. This included consideration of the principal risks as set out above, covenant levels on the loan facility, the cash flow forecast to meet dividend flow and liquidity of the portfolio.
The directors continue to support the Fund Managers investment strategy.
The directors consider the COVID-19 pandemic to have highlighted the advantages of holding an investment trust. The directors do not envisage that any change in strategy or investment objective, or any events, would prevent the Company from continuing to operate over the next three years as the Company's assets are liquid, its commitments are limited, and the Company intends to continue to operate as an investment trust. The Board takes comfort in the robustness of the Company's position, performance, liquidity and the well-diversified portfolio designed by the Fund Managers. The Board is confident that the Company is well equipped to navigate this uncertain inflationary environment and therefore has a reasonable expectation that the Company will continue in operation and meet its liabilities as they fall due up to and including the year ended 30 April 2025.
RELATED PARTY TRANSACTIONS
The Company's transactions with related parties in the year were with the directors and the Manager. There have been no material transactions between the Company and its directors during the year. The only amounts paid to them were in respect of remuneration for which there were no outstanding amounts payable at the year end. Directors' Interests in Shares are disclosed in the Directors' Remuneration Report within the Annual Report. In relation to the provision of services by the Manager (other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties) there have been no material transactions with the Manager affecting the financial position or performance of the Company during the year under review. More details on Transactions with the Manager, including amounts outstanding at the year end, are given in Note 23 to the financial statements within the Annual Report.
The directors confirm that in accordance with Listing Rule 9.8.4(7) there are no further disclosures that need to be made in this regard.
DIRECTORS STATEMENT OF RESPONSIBILITIES
Each of the directors confirm that to the best of his/her knowledge:
● the Company's financial statements, which have been prepared in accordance with UK adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006. 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 IFRS Interpretations Committee (IFRS IC) that remain in effect, to the extent that IFRSs have been adopted by the UK Endorsement Board, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
● the Strategic Report and financial statements include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
For and on behalf of the Board
Angus Macpherson
Chairman
15 July 2022
STATEMENT OF COMPREHENSIVE INCOME
| Year ended 30 April 2022 | Year ended 30 April 2021 | ||||
| Revenue return £'000 | Capital return £'000 | Total £'000 | Revenue return £'000 | Capital return £'000 | Total £'000 |
(Losses)/gains on investments at fair value through profit or loss | - | (26,063) | (26,063) | - | 13,530 | 13,530 |
Gains/(losses) on foreign exchange transactions at fair value through profit or loss | - | 2,887 | 2,887 | - | (58) | (58) |
Investment income (note 3) | 9,953 | - | 9,953 | 10,035 | - | 10,035 |
Other operating income (note 4) | 17 | - | 17 | 10 | - | 10 |
| ---------- | ---------- | -------- | ---------- | ---------- | -------- |
Total income/(loss) | 9,970 | (23,176) | (13,206) | 10,045 | 13,472 | 23,517 |
| ---------- | ---------- | --------- | ---------- | ---------- | --------- |
Expenses |
|
|
| |||
Management fee (note 5) | (543) | (543) | (1,086) | (566) | (565) | (1,131) |
Other expenses (note 6) | (465) | - | (465) | (476) | - | (476) |
---------- | ---------- | -------- | ---------- | ---------- | -------- | |
Profit/(loss) before finance costs and taxation | 8,962 | (23,719) | (14,757) | 9,003 | 12,907 | 21,910 |
|
|
|
| |||
Finance costs | (172) | (172) | (344) | (166) | (166) | (332) |
| ---------- | ---------- | -------- | ---------- | ---------- | -------- |
Profit/(loss) before taxation | 8,790 | (23,891) | (15,101) | 8,837 | 12,741 | 21,578 |
|
|
|
| |||
Taxation (note 6) | (15) | - | (15) | (22) | - | (22) |
| ---------- | ---------- | -------- | ---------- | ---------- | -------- |
Profit/(loss) after taxation | 8,775 | (23,891) | (15,116) | 8,815 | 12,741 | 21,556 |
| ===== | ====== | ===== | ===== | ====== | ===== |
|
|
|
| |||
Earnings/(loss) per ordinary share (note 7) | 4.65p | (12.66p) | (8.01p) | 4.61p | 6.66p | 11.27p |
| ====== | ====== | ====== | ====== | ====== | ====== |
The total columns of this statement represents the Statement of Comprehensive Income, prepared in accordance with UK adopted international accounting standards in conformity with the Companies Act 2006. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. The Company had no other comprehensive income. The loss after taxation is also the total comprehensive income for the year.
STATEMENT OF CHANGES IN EQUITY
|
| Year ended 30 April 2022 | |||||
| Called-up share capital £'000 | Capital redemption reserve £'000 |
Share premium £'000 |
Distributable reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
Total equity at 1 May 2021 | 1,912 |
1 | 1,576 | 165,533 | 3,957 | 2,741 | 175,720 |
|
|
|
|
|
|
|
|
Total comprehensive income: |
|
|
|
|
|
|
|
(Loss)/profit after taxation | - | - | - | - | (23,891) | 8,775 | (15,116) |
Transactions with owners, recorded directly to equity: |
|
|
|
|
|
|
|
Cost of buy-back of shares (note 13) | (38) |
38 | - | - | (3,906) | - | (3,906) |
Dividends (note 8) | - | - | - | - | - | (8,317) | (8,317) |
Proceeds from predecessor company (note 13) | - |
- |
- |
- |
36 |
- |
36 |
| -------- | -------- | ----------- | ----------- | --------- | --------- | ---------- |
Total equity at 30 April 2022 | 1,874 | 39 | 1,576 | 165,533 | (23,804) | 3,199 | 148,417 |
| ===== | ===== | ====== | ======= | ====== | ===== | ====== |
|
| Year ended 30 April 2021 | |||||
Called-up share capital £'000 | Capital redemption reserve £'000 |
Share premium £'000 |
Distributable reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 | |
Total equity at 1 May 2020 | 1,913 |
- | 1,576 | 165,533 | (8,742) | 2,344 | 162,624 |
Total comprehensive income: | |||||||
Profit after taxation | - | - | - | - | 12,741 | 8,815 | 21,556 |
Transactions with owners, recorded directly to equity: |
| ||||||
Cost of buy-back of shares (note 13) | (1) |
1 | - | - | (42) | - | (42) |
Dividends (note 10) | - | - | - | - | - | (8,418) | (8,418) |
-------- | -------- | ----------- | ----------- | --------- | --------- | ---------- | |
Total equity at 30 April 2021 | 1,912 | 1 | 1,576 | 165,533 | 3,957 | 2,741 | 175,720 |
===== | ===== | ====== | ======= | ====== | ===== | ====== | |
STATEMENT OF FINANCIAL POSITION
At 30 April 2022 £'000 | At 30 April 2021 £'000 | |
|
|
|
Non current assets |
|
|
Investments at fair value through profit or loss | 173,224 | 202,152 |
|
| |
Current assets |
| |
Other receivables | 10,558 | 5,464 |
Cash and cash equivalents | 1,806 | 4,197 |
---------- | ---------- | |
12,364 | 9,661 | |
---------- | ---------- | |
Total assets | 185,588 | 211,813 |
| ----------- | ----------- |
Current liabilities |
| |
Other payables | (5,626) | (10,031) |
Bank loan | (31,545) | (26,062) |
---------- | ---------- | |
Total assets less current liabilities | 148,417 | 175,720 |
| ====== | ====== |
Net assets | 148,417 | 175,720 |
| ====== | ====== |
Equity attributable to equity shareholders |
| |
Called-up share capital | 1,874 | 1,912 |
Capital redemption reserve | 39 | 1 |
Share premium (note 11) | 1,576 | 1,576 |
Distributable reserve | 165,533 | 165,533 |
Capital reserve | (23,804) | 3,957 |
Revenue reserve | 3,199 | 2,741 |
---------- | ---------- | |
Total equity | 148,417 | 175,720 |
| ====== | ====== |
Net asset value per ordinary share (note 14) | 79.55p | 91.87p |
| ====== | ====== |
| Year ended 30 April 2022 £'000 | Year ended 30 April 2021 £'000 |
Operating activities |
| |
Net (loss)/profit before tax | (15,101) | 21,578 |
Interest payable | 344 | 332 |
Losses/(gains) on investments at fair value through profit or loss | 26,063 | (13,530) |
(Gains)/losses on foreign exchange transactions at fair value through profit or loss | (2,887) | 58 |
Net (payments)/receipts on settlement of forward foreign exchange contracts | (7,143) | 13,965 |
Net receipts/(payments) on credit default swaps | 206 | (46) |
Net (payments)/receipts on margin accounts | (1,999) | 548 |
Increase in prepayments and accrued income | (186) | (9) |
Increase/(decrease) in other creditors | 267 | (7) |
Purchases of investments | (78,041) | (92,980) |
Sales of investments | 82,981 | 85,747 |
| ---------- | ---------- |
Net cash inflow from operating activities before finance costs1 | 4,504 | 15,656 |
| ---------- | ---------- |
Interest paid | (320) | (343) |
Taxation paid on investment income | (15) | (22) |
---------- | ---------- | |
Net cash inflow from operating activities | 4,169 | 15,291 |
| ---------- | ---------- |
Financing activities |
| |
Equity dividends paid | (8,317) | (8,418) |
Buy-back of ordinary shares | (3,906) | (42) |
Proceeds from predecessor company | 36 | - |
Drawdown/(repayment) of loans | 5,483 | (6,573) |
---------- | ---------- | |
Net cash outflow from financing | (6,704) | (15,033) |
| ----------- | ----------- |
(Decrease)/increase in cash and cash equivalents | (2,535) | 258 |
| ---------- | ---------- |
Cash and cash equivalents at start of year | 4,197 | 3,735 |
Exchange movements | 144 | 204 |
| ---------- | ---------- |
Cash and cash equivalents at 30 April | 1,806 | 4,197 |
| ====== | ====== |
1Cash inflow from interest income was £8,892,000 (2021: £8,888,000) and cash inflow from dividends was £264,000 (2021: £264,000)
NOTES TO THE FINANCIAL STATEMENTS
1. General information
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 the Company. The Company is a registered investment company incorporated and domiciled in the United Kingdom under Companies Act 2006.
2. Accounting policies
a) Basis of preparation
The financial statements have been prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006. 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 IFRS Interpretations Committee (IFRS IC) that remain in effect, to the extent that IFRSs have been adopted by the UK Endorsement Board dated April 2021. Where presentational guidance set out in the Statement of Recommended Practice ('the SORP') for investment companies issued by the Association of Investment Companies ('the AIC') is consistent with the requirements of UK adopted international accounting standards, the directors have sought to prepare the financial statements on a basis consistent with the recommendations of the SORP.
b) Going concern
The directors have considered the impact of the conflict in Ukraine and the ongoing impact of COVID-19, including cash flow forecasting, a review of covenant compliance including the headroom above the most restrictive covenants of the former and renewed loan facility and an assessment of the liquidity of the portfolio. They have concluded that they are able to meet their financial obligations, including the repayment of the bank loans, as they fall due for a period of at least twelve months from the date of issuance. Having assessed these factors, the principal risks and other matters discussed in connection with the viability statement, the Board has determined that it is appropriate for the financial statements to be prepared on a going concern basis.
c) Significant accounting judgments and estimates
The preparation of the Company's financial statements requires management to make judgments, 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 judgments, estimates or assumptions.
3. Investment income
| 2022 £'000 | 2021 £'000 |
Income from investments: |
| |
Dividend income | 264 | 264 |
Bond and loan interest | 8,488 | 8,532 |
Premiums on credit default swaps | 1,201 | 1,239 |
---------- | ---------- | |
9,953 | 10,035 | |
---------- | ---------- |
4. Other operating income
| 2022 £'000 | 2021 £'000 | |
Bank and other interest | 17 | 10 | |
---- | ---- | ||
17 | 10 | ||
---- | ---- |
5. Management fee
|
| 2022 |
| 2021 | ||
| Revenue return £'000 | Capital return £'000 | Total £'000 | Revenue return £'000 | Capital return £'000 | Total £'000 |
Investment management fee | 543 | 543 | 1,086 | 566 | 565 | 1,131 |
------- | ------- | -------- | ------- | ------- | -------- | |
543 | 543 | 1,086 | 566 | 565 | 1,131 | |
A summary of the terms of the management agreement is given in the Annual Report.
6. Taxation
In the opinion of the directors, the Company has complied with the requirements of Section 1158 and Section 1159 of the Corporation Tax Act 2010 and will therefore be exempt from corporation tax on any capital gains reflected in the capital return during the year. The Company has elected to designate all of the proposed and paid dividends as an interest distribution to its shareholders. This distribution is treated as a tax deduction against taxable income in the revenue return and results in a reduction of corporation tax being payable by the Company at 30 April 2022.
The standard rate of corporation tax in the UK was 19% for the year. However, the tax charge in the current year was lower than the standard effective tax rate, largely due to the reduction in corporation tax from the interest distribution noted above. The effect of this and other items affecting the tax charge is shown in note 6 (b) below.
a) Analysis of charge in the year
|
| 2022 |
| 2021 | ||
| Revenue return £'000 | Capital return £'000 | Total £'000 | Revenue return £'000 | Capital return £'000 | Total £'000 |
Current tax: |
|
|
|
|
|
|
Overseas withholding tax | 15 | - | 15 | 22 | - | 22 |
------- | ------- | -------- | ------- | ------- | -------- | |
Total tax charge for the year | 15 | - | 15 | 22 | - | 22 |
==== | ==== | ==== | ==== | ==== | ==== | |
b) Factors affecting the current tax charge for the year |
| 2022 | 2021 | ||||
| Revenue return £'000 | Capital return £'000 | Total £'000 | Revenue return £'000 | Capital return £'000 | Total £'000 |
Net return before taxation | 8,790 | (23,891) | (15,101) | 8,837 | 12,741 | 21,578 |
UK corporation tax charge at 19% | 1,670 | (4,539) | (2,869) | 1,679 | 2,421 | 4,100 |
Effects of: |
|
|
| |||
UK dividends | (50) | - | (50) | (50) | - | (50) |
Currency losses/(gains) | - | 1,329 | 1,329 | - | (2,692) | (2,692) |
Realised/unrealised losses on investments | - | 3,074 | 3,074 | - | 132 | 132 |
Income being paid as interest distribution | (1,520) | - | (1,520) | (1,549) | - | (1,549) |
(Utilised)/excess management expenses and loan relationships | (100) | 136 | 36 | (80) | 139 | 59 |
Irrecoverable overseas withholding tax | 15 | - | 15 | 22 | - | 22 |
------- | ------- | -------- | ------- | ------- | -------- | |
Total tax charge for the year | 15 | - | 15 | 22 | - | 22 |
==== | ==== | ==== | ==== | ==== | ==== | |
c) Provision for deferred taxation
No provision for deferred taxation has been made in the current or previous year.
The Company has not provided for deferred taxation on capital gains or losses arising on the revaluation in investments as it is exempt from tax on these items because of its status as an investment trust company, which it intends to maintain for the foreseeable future.
The Company has not recognised a deferred tax asset totalling £1,037,000 (2021: £803,000) based on the prospective corporation tax rate of 25%. The deferred tax asset arises as a result of having unutilised management expenses and unutilised non-trade loan relationship deficits. These expenses will only be utilised, to any material extent, if the Company has profits chargeable to corporation tax in the future because changes are made either to the tax treatment of the capital gains made by investment trusts or to the Company's investment profile which require them to be used.
d) Factors that may affect future tax charges
With effect from 1 April 2023 the prospective corporation tax rate on which this is based will increase to 25%.
7. (Loss)/earnings per ordinary share
The total loss per ordinary share figure is based on the net loss attributable to the ordinary shares of £15,116,000 and on 188,788,384 ordinary shares (2021: profit of £21,556,000 on 191,312,174 ordinary shares) being the weighted average number of ordinary shares in issue during the period, excluding shares held in treasury.
The total (loss)/earnings can be further analysed as follows:
2022 £'000 | 2021 £'000 | |
Revenue profit | 8,775 | 8,815 |
Capital (loss)/profit | (23,891) | 12,741 |
---------- | ---------- | |
(Loss)/profit for the year | (15,116) | 21,556 |
====== | ====== | |
| ||
Weighted average number of ordinary shares | 188,788,384 | 191,312,174 |
Revenue earnings per ordinary share | 4.65p | 4.61p |
Capital (loss)/earnings per ordinary share | (12.66p) | 6.66p |
---------- | ---------- | |
(Loss)/earnings per ordinary share | (8.01p) | 11.27p |
====== | ====== |
The Company does not have any dilutive securities therefore basic and diluted earnings are the same.
8. Dividends
Dividends on ordinary shares |
Record date |
Payment date | 2022 £'000 | 2021 £'000 |
Fourth interim divided (1.10p) for the year ended 30 April 2021 (2020 - 1.10p) | 4 June 2021 | 30 June 2021 | 2,104 | 2,104 |
First interim dividend (1.10p) for the year ended 30 April 2022 (2021 - 1.10p) | 3 September 2021 | 30 September 2021 | 2,085 | 2,105 |
Second interim dividend (1.10p) for the year ended 30 April 2022 (2021 - 1.10p) | 3 December 2021 | 31 December 2021 | 2,066 | 2,104 |
Third interim dividend (1.10p) for the year ended 30 April 2022 (2021 - 1.10p) | 4 March 2022 | 31 March 2022 | 2,062 | 2,105 |
-------- | -------- | |||
8,317 | 8,418 | |||
-------- | -------- |
The fourth interim dividend has not been included as a liability in these financial statements as it was announced and paid after 30 April 2022.
| 2022 £'000 | 2021 £'000 |
Revenue available for distribution by way of dividends | 8,775 | 8,815 |
First interim dividend | (2,085) | (2,105) |
Second interim dividend | (2,066) | (2,104) |
Third interim dividend | (2,062) | (2,105) |
Fourth interim dividend | (2,052) | (2,104) |
-------- | -------- | |
510 | 397 | |
-------- | -------- |
9. Share capital
| 2022 | ||
| Number of shares entitled to dividend | Total number of shares | Nominal value of shares £'000 |
Ordinary shares of 1p each |
| ||
At start of year | 191,267,033 | 191,267,033 | 1,912 |
Buy-back of shares for cancellation | (3,832,730) | (3,832,730) | (38) |
Buy-back of shares to Treasury | (875,084) | (875,084) | (9) |
---------------- | ---------------- | ---------------- | |
Closing balance at 30 April | 186,559,219 | 186,559,219 | 1,865 |
---------------- | ---------------- | ---------------- | |
Treasury shares: | |||
Buy-back of shares to Treasury | 875,084 | 875,084 | 9 |
Closing balance at 30 April | 187,434,303 | 187,434,303 | 1,874 |
2021 | |||
| Number of shares entitled to dividend | Total number of shares | Nominal value of shares £'000 |
Ordinary shares of 1p each | |||
At start of year | 191,318,240 | 191,318,240 | 1,913 |
Buy-back of shares for cancellation | (51,207) | (51,207) | (1) |
---------------- | ---------------- | ---------------- | |
Closing balance at 30 April | 191,267,033 | 191,267,033 | 1,912 |
---------------- | ----------------- | ---------------- | |
Treasury shares: | |||
Buy-back of shares to Treasury | - | - | - |
Closing balance at 30 April | 191,267,033 | 191,267,033 | 1,912 |
At 30 April 2022, shares held in Treasury represented 0.5% (2021: nil) of the Company's total issued share capital.
During the year to 30 April 2022 4,707,814 ordinary shares were bought back at a cost of £3,906,000 (2021: 51,207 ordinary shares were bought back at a cost of £42,000). 3,832,730 of the shares bought back were cancelled, and 875,084 are held in treasury.
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.
10. Capital redemption reserve
2022 £'000 | 2021 £'000 | |
At start of year | 1 | - |
Buy-back of shares | 38 | 1 |
| ====== | ====== |
At 30 April | 39 | 1 |
| ====== | ====== |
11. Share premium account
2022 £'000 | 2021 £'000 | |
At start of year | 1,576 | 1,576 |
| ====== | ====== |
At 30 April | 1,576 | 1,576 |
| ====== | ====== |
12. Distributable reserve
2022 £'000 | 2021 £'000 | |
At start of year | 165,533 | 165,533 |
| ====== | ====== |
At 30 April | 165,533 | 165,533 |
| ====== | ====== |
13. Capital reserves
| 2022 | ||
| Capital reserve arising on revaluation on investments held £'000 | Capital reserve arising on investments sold £'000 | Total £'000 |
At start of year | 232 | 3,726 | 3,957 |
Exchange movements1 | 9,886 | (6,999) | 2,887 |
Movement in unrealised depreciation1 | (22,529) | - | (22,529) |
Losses on investments | - | (1,495) | (1,495) |
Costs charged to capital | - | (715) | (715) |
Cost of share buy-backs | - | (3,906) | (3,906) |
Movement in credit default swaps | (1,127) | (912) | (2,093) |
Proceeds from predecessor company2 | - | 36 | 36 |
At end of year | (13,696) | (10,108) | (23,804) |
==== | ==== | ==== | |
| 2021 | ||
| Capital reserve arising on revaluation on investments held £'000 | Capital reserve arising on investments sold £'000 | Total £'000 |
At start of year | 7,689 | (16,431) | (8,742) |
Exchange movements1 | (14,227) | 14,169 | (58) |
Movement in unrealised depreciation/appreciation1 | 7,530 | - | 7,530 |
Gains on investments | - | 3,167 | 3,167 |
Costs charged to capital | - | (731) | (731) |
Cost of share buy-backs | - | (42) | (42) |
Movement in credit default swaps | (760) | 3,593 | 2,833 |
At end of year | (232) | 3,725 | 3,957 |
==== | ==== | ==== | |
1There has been a transfer of (£13,051,000) (2021: £12,572,000) foreign exchange movements between these lines to reflect how the foreword foreign exchange contracts hedge the portfolio.
2 During the year the Company received £36,000 additional proceeds following the completion of the liquidation of the predecessor company Henderson Diversified Income Limited
14. 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 30 April 2022 of £148,417,000 (2021: £175,720,000) and on 186,559,219 (2021: 191,267,033) ordinary shares, being the number of ordinary shares in issue at the year end, excluding shares held in treasury.
15. Subsequent events
On 22 June 2022, the Company purchased 965,000 shares at a price of 67.49p each which were placed in treasury. Following this, the Company’s issued ordinary share capital was 187,434,303. A total of 1,840,084 shares are held in Treasury, and the total voting rights in the Company is therefore 185,594,219.
On 1 July 2022, the Company’s loan facility with BNP Paribas was renewed for a two year period.
16. 2022 Financial information
The figures and financial information for the year ended 30 April 2022 are extracted from the Company's Annual Report and financial statements for that year and do not constitute statutory financial statements for that year. The Company's Annual Report and financial statements includes the Independent Auditor's Report which is unqualified and does not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. The Company's Annual Report and financial statements for the year ended 30 April 2022 have not yet been delivered to the Registrar of Companies.
17. 2021 Financial information
The figures and financial information for the year ended 30 April 2021 are extracted from the Company's Annual Report and financial statements for that year and do not constitute statutory financial statements for that period. The Company's Annual Report and financial statements for the year ended 30 April 2021 have been audited and delivered to the Registrar of Companies. The Independent Auditors' Report on the 2020 financial statements was unqualified and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.
18. Annual Report and Annual General Meeting
Copies of the Company's Annual Report and financial statements for the year ended 30 April 2022 and the Notice of Annual General Meeting 2022 will be posted to shareholders at the end of July 2022 and will be available thereafter on the Company's website www.hendersondiversifiedincome.com or you can request a copy from the Corporate Secretary itsecretariat@janushenderson.com.
The AGM will take place at 2.30pm on Tuesday, 4 October 2022 at 201 Bishopsgate, London EC2M 3AE. The Board recognise that COVID-19 remains a concern for some people, and as a result, the meeting will also be broadcast if you do not wish to attend in person. Please visit www.janushenderson.com/trustslive to register. This will allow you to be present for the usual presentation from your Fund Managers, John Pattullo and Jenna Barnard and Nicholas Ware, and will enable you to ask questions and debate with your Fund Managers and Board. Should any change to the format of the AGM become necessary for any reason, this will be notified to shareholders via a Regulatory Information Service announcement and the Company's website. Voting at this year's AGM will be conducted on a show of hands.
For further information please contact:
Dan Howe
Head of Investment Trusts
Janus Henderson Investors
Telephone: 020 7818 4458
Harriet Hall
PR Manager
Janus Henderson Investors
Telephone: 020 7818 2919
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.