HDIV.L Regulatory News (HDIV)

HENDERSON INVESTMENT FUNDS LIMITED

HENDERSON DIVERSIFIED INCOME TRUST PLC

LEGAL ENTITY IDENTIFIER: 213800RV2228EO1JEN02

5 JULY 2021

HENDERSON DIVERSIFIED INCOME TRUST PLC

Annual Financial Report for the Year Ended 30 April 2021

This announcement contains regulated information

PERFORMANCE HIGHLIGHTS

TOTAL RETURN PERFORMANCE FOR THE YEAR

1 Net asset value ('NAV') total return (including dividends reinvested and excluding transaction costs)

2 The benchmark is the average return on a rolling annual basis of three month sterling LIBOR + 2%

3 The share price total return using mid-market closing price

4 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). Please refer to the Chairman's Statement below for further information.

Sources: Morningstar for the AIC, BNP IRP Service, Janus Henderson and Henderson Diversified Income Trust plc Annual Reports

INVESTMENT OBJECTIVE AND POLICY

The Board has recently undertaken a review of the Company's investment objective and policy, initiated by the regulatory requirement to transition away from LIBOR to alternative reference rates by the end of 2021. The Company's current investment objective is to seek income and capital growth such that the total return on the net asset value of the Company exceeds the average return on a rolling annual basis of three month sterling LIBOR + 2%. It is proposed that this will be amended so that the Company's objective is instead to seek a sustainable level of annual income and capital gains consistent with seeking to reduce the risk of capital losses, by investing in a diversified portfolio of global fixed income and floating rate asset classes.

The Company will therefore seek shareholder approval at the Annual General Meeting (AGM) to be held at 11.00am on Thursday, 16 September 2021 to change the Company's investment objective as set. Other minor amendments to the investment policy are also proposed. There will be no imminent or future change in the Company's investment process or strategy as a result of the amendments to the investment objective and policy.

The current investment objective and policy and the proposed new investment objective and policy are set out in full below:

CHAIRMAN'S STATEMENT

Introduction

It is pleasing to be able to report another strong year for the Company. The NAV total return was 13.5% in the year to 30 April 2021 and the dividend of 4.40p per share has been covered by revenues received from investments. As the Fund Managers later report, major governments provided unprecedented support to key sectors of the economy. The evident will to do whatever was required to avoid a depression contributed to a benign investment environment for even some of the riskier assets.

The Fund Managers' commitment to "sensible income" continues to result in a portfolio focussed 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 the companies in the UK market which the Fund Managers consider to be smaller, illiquid and analogue. The capital investment in US dollars is then hedged back into sterling to protect investors from exchange rate volatility.

There are also a number of other developments which I discuss below. The first is that the Board is proposing to shareholders a change in the benchmark for the Company. This does not reflect any change in investment policy or strategy, but rather a belief that the original benchmark selected does not meaningfully provide a guide to the strength of the Fund Managers' performance.

Secondly, the Board wish to ensure that investments, activities and the activities of service providers are consistent with wider social responsibilities which we believe are a growing priority for our stakeholders. Environmental, social and governance (ESG) issues are a key focus of the Board, and the Board is increasing its oversight of the activities of the Manager in these areas. ESG issues can present both opportunities and threats to long-term investment performance. Constructive engagement with management can be the most effective way of driving meaningful positive change in the behaviour of investee company management, but as the Company is largely invested in debt securities, engagement may be lighter touch than in an equity company. We continue to examine the benefits and risks of including a more explicit ESG objective for our investment portfolio.

Change of Investment Objective and Replacement Benchmark

The Board has recently undertaken a review of the Company's investment objective and policy, initiated by the regulatory requirement to transition away from LIBOR to alternative reference rates by the end of 2021.

The Company's current investment objective is to seek income and capital growth such that the total return on the net asset value of the Company exceeds the average return on a rolling annual basis of three month sterling LIBOR + 2%. It is proposed that this will be amended so that the Company's objective is instead to seek a sustainable level of annual income and capital gains consistent with seeking to reduce the risk of capital losses, by investing in a diversified portfolio of global fixed income and floating rate asset classes.

The Company will therefore seek shareholder approval at the Annual General Meeting (AGM) to be held at 11.00am on Thursday, 16 September 2021 to change the Company's investment objective as set out above. Other minor amendments to the investment policy are also proposed. There will be no imminent or future change in the Company's investment process or strategy as a result of the amendments to the investment objective and policy.

The current investment objective and policy and the proposed new investment objective and policy are set out in full above.

Although not part of the investment objective and policy, following recommendations from the Manager, the Board is also proposing to change the Company's benchmark, effective from the date shareholders approve the new investment objective and policy. The Board believes the proposed replacement benchmark will permit the Board and others to ascertain performance of the Company across more dimensions and assess the value added through active management. The replacement benchmark (which is hedged back to sterling) will therefore be as follows:

· 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)

· 15% European Loans (Credit Suisse Western European Leveraged Loan Index)

The table below shows the five-year annualised returns for the Company to 30 April 2021, the existing benchmark forming part of the Company's investment objective and the proposed replacement benchmark. This shows that the proposed replacement benchmark more closely resembles the risk and reward profile of the Company's investments.

1 Figures rebased to 100. Performance prior to 27 April 2017 reflects the performance of the predecessor company, Henderson Diversified Income Limited, that was launched on 18 July 2007

Sources: Morningstar for the AIC, BNP IRP Service and Janus Henderson Investors

Performance

As mentioned above, the Company's total return NAV rose 13.5% over the 12 months to 30 April 2021. The share price total return was 10.7% underperforming the NAV appreciation due to a widening discount. We continue to maintain the dividend rate of 4.40p per share and managed to add to our modest revenue reserve. The NAV total return outperformed the existing benchmark by 11.3%, however when compared to the replacement benchmark, it underperformed by -2.0%.

This underperformance reflected the timing of the Company's year end. The asset value of the Company's portfolio rallied earlier and further than the benchmark. As a consequence, this outperformance was captured in last year's numbers when the portfolio outperformed the benchmark by 6.8%. The Fund Managers believe they have a bias towards higher quality, sustainable businesses which were better equipped to face the challenge of COVID. In their view much of the performance this year has been driven by late rallying, low quality cyclicals which they do not believe are appropriate for the Company.

Investors should not view the benchmark as a target return for the Company to achieve. Your Fund Managers are committed to active management of the portfolio, concentrating on companies which fit with their objective of generating "sensible income". The benchmark is however useful in demonstrating the relative risk and return characteristics of the portfolio.

Dividends

For the year ended 30 April 2021, a third interim dividend of 1.10p per share was paid on 31 March 2021 and a fourth interim dividend of 1.10p per share was paid on 30 June 2021 making a total of 4.40p per share for the year, in line with our expectations. These dividends have been paid as interest distributions for UK tax purposes.

Buying Back Shares

The Board has set a policy that gives discretion to the Fund Managers to buy-back the Company's shares, if at any stage the shares are trading at a discount to net asset value at a level which is thought to be more attractive than any risk adjusted return they would be able to find in the market.

In March 2021 the Company repurchased 51,207 shares and a further 1,210,000 shares were bought back on 30 June 2021. These buy-backs were in response to acute discount volatility which was exacerbated by the selling down of the Company's shares by some advisory clients.

Share buy-backs in these circumstances are considered by the Board to be in the best interests of shareholders as they reduce the discount to net asset value and provide liquidity to the market in the Company's shares.

AGM and Adoption of New Articles of Association

Given the level of uncertainty surrounding the Delta variant of the virus, and the potential delay this could continue to cause to the UK Government's lifting of restrictions, the Board has taken the decision at this time to restrict attendance at this year's AGM to a small number of attendees comprising only the required quorum and anyone else whose attendance is necessary for the conduct of the meeting. The AGM will take place at 11.00am on Thursday, 16 September 2021 at 201 Bishopsgate, London EC2M 3AE.

The Board therefore invite shareholders to attend a webinar presentation this year using the conferencing software Zoom which will take place at 11.00am on Thursday, 9 September 2021. This will allow you to be present for the usual presentation from your Fund Managers, John Pattullo and Jenna Barnard, and will enable you to ask questions and debate with your Fund Managers and Board.

To attend the webinar presentation please register in advance at this link, entering your shareholder details: https://jhi.zoom.us/webinar/register/WN_-1sgh5K7RVWHd69oWmjGIQ.

You will then receive a dedicated invitation to join the webinar.

Voting at this year's AGM will be conducted on a poll among the directors, rather than on a show of hands, with the Chairman of the AGM holding the proxy votes. We therefore request all shareholders to submit their votes by proxy, ahead of the deadline of 11.00am on Tuesday, 14 September 2021, to ensure that their vote counts. If you hold your shares in a nominee account, such as through a share dealing service or platform, you will need to contact your provider and ask them to submit the proxy votes on your behalf.

The Board commits to holding physical meetings in future when restrictions are not in place and these can be held safely, and the Board would be delighted to hold an in-person AGM this year if circumstances allow.

Any change to the format of the AGM will be notified to shareholders via a Regulatory Information Service announcement and the Company's website.

In case of any further extraordinary crises such as the COVID-19 pandemic, the Company is putting a proposed amendment to the Company's Articles of Association to shareholders this year to give the Company flexibility to hold virtual and/or physical shareholder meetings in future, as necessary.

Outlook

The main focus of currency and fixed income markets is inflation. Expectations differ as to whether the current inflationary pressures spiral into a return of an environment of higher inflation. The market seems happy to price in negative real returns from high quality bonds for the moment, however should policy makers be forced to act this could have a significant impact on asset prices.

The Fund Managers remain cautiously optimistic. Their central thesis is of a return to disinflationary pressures crushing the inflationary impetus. During my time on the Board they have been consistently right on this, however we are once again in uncharted territory. I am comforted that they have shown the ability, should the facts change, to change their mind but in the short-term this could cause considerable volatility in asset prices.

Angus Macpherson

Chairman

5 July 2021 

FUND MANAGERS' REPORT

Performance

The Company's net asset value total return rose 13.5% over the 12 months to 30 April 2021 outperforming the existing benchmark (three month sterling LIBOR + 2%) which returned 2.2% and slightly underperforming the replacement benchmark (60% Global High Yield Credit, 25% Global Investment Grade Corporate Credit and 15% European Loans) which returned 15.5%. The share price total return was 10.7% reflecting a widening discount as private investors favoured equity income over bond income. We continue to maintain the total annual dividend at 4.40p per share and managed to add to our modest revenue reserve.

Macro Background

In many ways the period under review was fairly easy to navigate. The global COVID fiscal and monetary stimulus continued supporting markets fantastically well. The period was entirely about credit repair, recovery and reflation. The war on COVID led to extraordinary support which was hugely beneficial to the corporate bonds we hold in this Company. In fact, given that COVID was not anybody's fault it is arguably unlikely we will ever see such widespread support for corporate bonds ever again. In early April 2020 (before the start of this financial year), the Fed crossed the Rubicon and announced they would start buying corporate bonds and ETFs. This was the ultimate signal to "not fight the Fed."

In reality they only bought a tiny $14bn of corporate bonds as market participants, knowing they had an explicit backstop support, wanted to front run them. Unlike previous crises we have endured this essentially meant that the investment grade and high yield markets were open for business - open at a price, but open.

Many large investment grade businesses tapped the markets for precautionary reasons to bullet proof their balance sheets. 2020 was a period of record issuance and record spread levels and volatility. US investment grade spreads peaked at a scary 4% over Treasury yields in late March 2020 and rallied with frightening speed to only 0.9% - reassuringly expensive, again at 30 April 2021. The snap back in spreads was the fastest on record and was further compounded in the Autumn of 2020 by the exceptionally positive vaccine news and then the market friendly US election result. As mentioned last year we increased gearing where possible to lock in some of these scarily wide corporate bond yields. As the markets matured we then saw more desperate high yield issuers tap the markets - Carnival Cruises has in some ways become the poster child in this crisis for rescue bridging finance - indeed they have raised loans, secured bonds, unsecured bonds, convertible and ordinary equity many times in the last year. Other distressed issues followed suit in names such as AMC Cinemas and Six Flags.

The EU and UK Government's demonstrated extraordinary levels of state support to vital sectors such as autos, airlines, travel companies etc. These businesses were considered too big to fail. There was of course unprecedented support to employees on furlough type schemes. Governments were desperate to avoid a depression and by using enormous transfer payments they kept money moving around the economy. Life was of course much tougher for smaller businesses who do not have access to financing so easily. Unlike "normal" recessions we have not seen a dramatic fall in incomes nor a rise in unemployment. In addition, we have seen significant demand for physical goods for the home offset by the collapse in demand for services. The COVID crisis has widened inequality between large cap and small businesses but also between wealthy and employed and those less fortunate. The wealthy and retired have been forced savers whilst low income groups have had to borrow to survive. US high yield default rates have been surprisingly low - they peaked around 5.9% in May; with many of the problems in highly cyclical and highly levered sectors such as energy and retail. Projected defaults, per Credit Suisse for the next 12 months are a paltry 2.5%.

Asset Allocation and Stock Selection

We tend to run approximately 20-25% gearing as a neutral level being a combination of financial gearing (borrowing money and investing at a better yield than the cost of the debt) and synthetic gearing (the use of credit derivatives). As discussed in last year's review we increased this into the eye of the storm in March/April 2020. We were able to add risk profitably whilst many others were forced to reduce gearing, a benefit of our closed-end structure. The gearing has been run at above average levels for much of the period but was reduced into the summer period as valuations returned to more normal levels. In addition, over the period we broadly rotated our better quality investment grade bonds into shorter duration, but higher yielding, high yield bonds as the recovery progressed.

New high yield bonds were bought in both the primary and secondary markets. In keeping with our sensible income philosophy, we favoured larger, less cyclical modern day facing businesses which have a reason to exist in the post COVID era. Some examples include Virgin Media, Davita, Rackspace Technology, Sirius, Broadcom, Avantor, Black Knight, Crowdstrike & Expedia. A lot of these names tend to be American based global technology companies specialising in the modern economy in areas such as media/cable tv, cloud infrastructure, cyber security and payment processing. These businesses are of significant size and proven for the digital age. We feel shareholders are much better served by our holding the bonds of such companies rather than scrapping around in the much smaller and illiquid, old world analogue UK based high yield market.

There are, of course, obvious exceptions, but as a rule we continue to be attracted to the size, depth, breadth and diversity of the US corporate bond markets. Having said that, certain European financials also offer good value. We added some junior banking and insurance bonds to enhance the yield of the portfolio in names such as RBS, Lloyds, Aviva, Direct Line Insurance, ING, Rabobank and Barclays. The banks have had a remarkably good crisis - they went into this period with record levels of capital; they over-provisioned early in the crisis, making prudent use of the more flexible accounting rules. In addition, they have greatly benefitted from the direct and indirect Government support schemes aimed at the UK housing markets and company support schemes. Finally, we have added a little to our loan holdings - although the all in yield is not overly attractive, they do add some diversification and low beta carry to the portfolio.

Environmental, Social and Governance (ESG)

Shareholders will be aware of our bias to large cap, non-cyclical, reason to exist, high cash flow return companies. This was discussed extensively in last year's Annual Report. In equities language these would be labelled as growth companies. We have always focused on doing the right thing as we allocate shareholders capital. We, as a management team are in it for the long haul. If you like we are playing an infinite game and hence when we invest not only do we want to invest in sustainable companies but also resilient companies, which should survive and prosper going forward. We ensure that the companies we invest in look after all their stakeholders - that is they not only respect the environment but also their employees, suppliers, customers, bond holders and shareholders, amongst others.

Short-term management teams that focus on a quick buck, polluting one stakeholder over another get little attention from us. By only focusing on resilient businesses, we exclude those businesses which have high operational and financial leverage. We have for example always avoided energy, airlines, miners and autos. These businesses rarely achieve a return on capital, higher than their cost of capital and hence do not merit our attention. We monitor and engage regarding ESG. It is one of the largest macro trends we have ever seen. We have an internal rating system to facilitate this. We also take some comfort from an external third-party system as well which shows our portfolio is well positioned in this regard. This is an evolving and growing focus and we will be enhancing our reporting in this area in due course.

Outlook

Volatility and measures of distress in credit markets are at 15 year lows. Credit markets are priced tight but arguably fairly given the remarkably benign outlook. In this market it is more important than ever that we keep focused on sensible income and not get drawn to illusory "fools yield" bonds where the yield is so high you are almost guaranteed to lose capital. We are very mindful of value traps, illiquid, esoteric and exotic credits. The COVID crisis accelerated many of the existing structural themes we have spoken about in previous reports and if anything, in the longer term we see a more deflationary world. We completely understand the markets obsession with inflation but feel it is predominately a cyclical and transitory phenomenon. The modest rise in bond yields may well give us an opportunity to lock in higher yields for shareholders and, reassuringly, in the current environment we feel the annual dividend remains secure.

John Pattullo and Jenna Barnard

Fund Managers

5 July 2021

The charts included in the Fund Managers' Report within the Annual Report for the year ended 30 April 2021 have not been included in this announcement. The Annual Report for the year ended 30 April 2021 will be available on the Company's website shortly. In the meantime you can contact the Company Secretary (itsecretariat@janushenderson.com) to obtain a copy of the charts.

PORTFOLIO INFORMATION

TEN LARGEST INVESTMENTS AT 30 APRIL

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 impact 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 BNP Paribas Securities Services (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 an average total return on a rolling three month basis of LIBOR + 2%. To achieve a return over LIBOR + 2% the Fund Managers identify risk assets that they believe adequately compensate the Company for the risks that arise. It is proposed that this be amended so that the Company's objective is instead to seek a sustainable level of annual income and capital gains consistent with seeking to reduce the risk of capital losses, by investing in a diversified portfolio of global fixed income and floating rate asset classes. This change is subject to shareholder approval at the 2021 AGM on Thursday, 16 September. 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 faced by the Company and its shareholders arise from interest rate, credit and currency risks.

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.

COVID-19 IMPACT

The Board have assessed how 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 income and capital growth such that the total return on the net asset value of the Company exceeds the average return on a rolling annual basis of three month sterling LIBOR + 2%. The Board aims to achieve this by pursuing the Company's business model and strategy through its investment objective and policy. It is proposed that the investment objective and policy will be amended (subject to the approval of shareholders at the 2021 AGM) so that the Company's objective is instead to seek a sustainable level of annual income and capital gains consistent with seeking to reduce the risk of capital losses, by investing in a diversified portfolio of global fixed income and floating rate asset classes. The current investment objective and policy and the proposed new investment objective and policy are set out in full above.

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 (0.93% for the year ended 30 April 2021 (2020: 0.89%)). 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 2024.

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. 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 International Accounting Standards in conformity with the requirements of the Companies Act 2006 and, as regards the financial statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, 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

5 July 2021

STATEMENT OF COMPREHENSIVE INCOME

The total columns of this statement represents the Statement of Comprehensive Income, prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and, as regards the financial statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. 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 profit after taxation is also the total comprehensive income for the year.

STATEMENT OF CHANGES IN EQUITY

STATEMENT OF FINANCIAL POSITION

STATEMENT OF CASH FLOWS

1Cash inflow from interest income was £8,888,000 (2020: £9,302,000) and cash inflow from dividends was £264,000 (2020: £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 (predecessor company), placed the Jersey domiciled company into a Jersey Summary Winding Up and transferred the shareholdings and assets and liabilities of the predecessor company to the Company. The Company is a registered investment company incorporated and domiciled in the United Kingdom under the Companies Act 2006.

2.

a) Basis of preparation

The financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and, as regards the financial statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (IFRSs). 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 European Union.

b) Going concern

The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial instruments held at fair value through profit or loss. The principal accounting policies adopted are set out in full in the Annual Report. These policies have been applied consistently throughout the year. Where presentational guidance set out in the Statement of Recommended Practice (SORP) for investment trusts issued by the Association of Investment Companies (AIC) in October 2019 is consistent with the requirements of IFRSs, the Directors have sought to prepare the financial statements on a basis consistent with the recommendations of the SORP.

The directors have considered the impact of COVID-19, including cash flow forecasting, a review of covenant compliance including the headroom above the most restrictive covenants 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.

3. Investment income

4. Other operating income

5. Management fee

A summary of the terms of the management agreement are 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 2021.

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 6b) below.

a) Analysis of charge in the year

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 of 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 £803,000 (2020: £744,000) based on the prospective corporation tax rate of 19%. 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%.

This change has not been substantively enacted at year end and therefore does not change the value at which the deferred tax asset that has not been recognised has been disclosed.

7. Earnings/(loss) per ordinary share

The total earnings per ordinary share figure is based on the net profit attributable to the ordinary shares of £21,556,000 and on 191,312,174 ordinary shares (2020: £4,775,000 on 190,017,557 ordinary shares) being the weighted average number of ordinary shares in issue during the year.

The total earnings can be further analysed as follows:

The Company does not have any dilutive securities therefore basic and diluted earnings are the same.

8. Dividends

The fourth interim dividend has not been included as a liability in these financial statements as it was announced and paid after 30 April 2021.

9. Share capital

During the year to 30 April 2021 51,207 ordinary shares were bought back at a cost of £42,000 (2020: 1,700,000 ordinary shares were issued for proceeds of £1,593,000). On 30 June 2021 a further 1,210,000 ordinary shares were bought back at a cost of £1,031,000.

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. Share premium account

11. 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 2021 of £175,720,000 (2020: £162,624,000) and on 191,267,033 (2020: 191,318,240) ordinary shares, being the number of ordinary shares in issue at the year end.

12. Subsequent events

On 30 June 2021, the Company re-purchased 1,210,000 shares for cancellation at a price of 85.00p per share. Following the above purchase, the Company's issued ordinary share capital was 190,057,033 ordinary shares of 1p each. No shares are held in Treasury. Therefore, the total number of voting rights in the Company is 190,057,033.

The directors have evaluated the period since the year end and have not noted any other subsequent events.

13. 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 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 2021 have not yet been delivered to the Registrar of Companies.

14. 2020 Financial information

15. Annual Report and Annual General Meeting

Copies of the Company's Annual Report and financial statements for the year ended 30 April 2021 and the Notice of Annual General Meeting 2021 will be posted to shareholders in mid-July 2021 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.

Given the level of uncertainty surrounding the Delta variant of the virus, and the potential delay this could continue to cause to the UK Government's lifting of restrictions, the Board has taken the decision at this time to restrict attendance at this year's AGM to a small number of attendees comprising only the required quorum and anyone else whose attendance is necessary for the conduct of the meeting. The AGM will take place at 11.00am on Thursday, 16 September 2021 at 201 Bishopsgate, London EC2M 3AE.

The Board therefore invite shareholders to attend a webinar presentation this year using the conferencing software Zoom which will take place at 11.00am on Thursday, 9 September 2021. This will allow you to be present for the usual presentation from your Fund Managers, John Pattullo and Jenna Barnard, and will enable you to ask questions and debate with your Fund Managers and Board.

To attend the webinar presentation please register in advance at this link, entering your shareholder details: https://jhi.zoom.us/webinar/register/WN_-1sgh5K7RVWHd69oWmjGIQ.

You will then receive a dedicated invitation to join the webinar.

For further information please contact:

James de Sausmarez

Director and Head of Investment Trusts

Janus Henderson Investors

Telephone: 020 7818 3349

Laura Thomas

PR Manager

Janus Henderson Investors

Telephone: 020 7818 2636

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.