Final Results

RNS Number : 2719W

Henderson Intl. Income Trust PLC

05 November 2014

 



HENDERSON INTERNATIONAL INCOME TRUST PLC

Annual Financial Report for the year ended 31 August 2014

5 November 2014

This announcement contains regulated information

PERFORMANCE HIGLIGHTS                                                                                                                

	2014	2013
Diluted NAV per share at year end1	117.5p	110.2p
Undiluted NAV per share at year end1	118.4p	111.9p
Dividend in respect of the year end2	4.25p	4.05p
Dividend yield at year end3	3.9%	3.5%
Ongoing charge for the year	1.09%	1.39%
Gearing at year end	2.7%	11.1%
Share price at year end	109.8p	114.1p
Shares in issue4	76,371,550	49,803,050

¹Calculated using published daily NAVs including current year revenue

²Based on ordinary dividends paid, excludes 1st interim dividend payment for the year-end 2014 and includes the 1st interim dividend payment for the year-end 2015

³ Quarterly dividends announced and paid

⁴This includes the 8,300,000 subscription shares that were exercised, issued and allotted on 1 September 2014 (4,379,038 shares) and 4 September 2014 (3,920,962 shares)

Source: Henderson

INVESTMENT OBJECTIVE

The Company's investment objective is to provide a high and rising level of dividends as well as capital appreciation over the long-term from a focused and internationally diversified portfolio of securities outside the UK.

INVESTMENT POLICY

The Company will invest in a diversified global portfolio consisting predominantly of listed equities and fixed interest asset classes. The portfolio is diversified by factors such as geography, industry sub-sector and investment size. The Company does not invest in issuers whose securities are, at the time of investment, listed only in the UK.

CHAIRMAN'S STATEMENT

Performance and markets

During the year to 31 August 2014 the return on the net asset value ("NAV") per ordinary share (on a total return basis) was 9.7 %. The Company's return on the ordinary share price (on the same basis) was (0.3)%. The diluted NAV total return per ordinary share, which accounted for the subscription shares in issue until the year end was 10.6%. These returns compare to a total return of 13.7% in the MSCI World ex UK Index (sterling adjusted).

The overall results demonstrate a good total return on net assets despite being 4% behind the MSCI World ex UK Index (sterling adjusted).  The lower share price return was largely due to the fall from trading at a premium to trading at a discount over the period.

During the Company's financial year uneven global economic recovery and ongoing geopolitical risks affected market confidence. Some developed markets such as the US, UK and some parts of Europe continued to recover well, whilst there was a weaker recovery for the larger part of Europe and emerging markets.

There are some real signs of recovery from the financial crisis with unemployment falling in the majority of developed countries. International co-operation on monetary policy has stimulated credit growth and maintained oversight of interest rates as a basis for further recovery.

Despite this backdrop the Company has performed well delivering an increased dividend from 4.05p to 4.25p per ordinary share for the year. During the year we increased our issued ordinary share capital by 22,647,538 ordinary shares and a further 3,920,962 ordinary shares were issued on 4 September 2014. The flexible nature of the Company's mandate allows the fund manager to spread investments around the globe to enhance returns to investors. This was achieved most prominently by selling down holdings in Europe for more attractive, yield enhancing assets, in the Asia-Pacific region.

Growth and corporate activity

The board believes it is in the interest of all shareholders that the Company widens its investor base and increases its size as opportunities arise. This should lead to improved liquidity in our shares and also spread fixed costs over a larger base. Progress has been made over the year as the Company took advantage of ongoing demand from investors. 18,268,500 ordinary shares were issued during the financial year and a further 4,379,038 ordinary shares, at the year end, on the expiry of the subscription shares issued at launch. On 4 September 2014 the remaining 3,920,962 subscription shares were converted and the resulting number of shares in issue was 76,371,550, up from 49,803,050 at the start of the year.

Your board and the fund manager believe that the unique nature of the Company, the only international income investment trust that invests exclusively outside the UK, should make the Company's shares attractive to a wider audience. In the light of this and the clear economic advantages to shareholders, the board plans to bring forward a further share issue for shareholder approval once market conditions allow.

Earnings and dividend

For the year to 31 August 2014, the Company has paid three interim dividends of 1.05p per ordinary share. The fourth interim dividend of 1.10p per ordinary share was paid on 31 October 2014. Given the earnings growth being produced by the portfolio and in the absence of an adverse change in conditions, the board intends to maintain the quarterly dividend at its new level during the year to 31 August 2015.

The board also intends to return to paying quarterly dividends in line with the Company's year end date. The quarterly dividend in respect of the period ended 30 November 2014 will be paid once again in February 2015, following which, it is expected that dividends will be paid at the end of February, May, August and November each year.

Gearing

Well-judged gearing enhances returns to shareholders. The board's current policy is to permit the fund manager to gear up to 25% of net assets at the time of drawdown or investment as appropriate. Borrowing limits for this purpose include implied gearing through the use of derivatives.

To date the Company has utilised its overdraft facility to invest in specific stock opportunities. At 31 August 2014 the Company had an overdraft with HSBC of £6,740,000 (2013: £7,783,000). The gearing at the year end was 2.7%.

Discount control

On expiry of the subscription shares, the ordinary shares were trading at a material premium to the subscription share exercise price of 100p per share. As a result, all the subscription shares were exercised.

The board continues to monitor the premium/discount to NAV closely and will consider appropriate action if the relationship between the NAV and share price remains out of line with the Company's peer group. There is a distinct limit to the board's ability to influence the premium or discount to NAV, so we believe it is not in shareholders' interests to have a specific issuance and buy-back policy. We believe it sensible to retain flexibility; accordingly we shall consider issuance and/or buy-backs within a narrow band relative to NAV where appropriate and subject to market conditions.

Ongoing charge

The ongoing charge to the Company for the year to 31 August 2014, as calculated in accordance with the Association of Investment Companies (the "AIC") methodology is 1.09% (2013: 1.39%). With effect from 1 November 2013, the management fee was reduced from 0.80% to 0.75% of net assets and the performance fee removed.

Continuation vote

The Company's articles of association give shareholders the opportunity every three years to vote on whether they wish to continue the life of the Company, or to wind it up. Such a resolution will therefore be put to shareholders at this year's annual general meeting.

The Company is well positioned to take advantage of increased demand for its shares and to build on the strong portfolio of investments our fund manager has built since the Company was incorporated. The board recommends that all shareholders vote in favour of continuing the Company. All directors intend to do so in respect of their own beneficial holdings.

Annual general meeting

The fourth annual general meeting of the Company will be held at 2:30 pm on Friday, 12 December 2014 at the registered office, 201 Bishopsgate, London EC2M 3AE.

The directors welcome shareholders' attendance at the meeting and recommend shareholders support the resolutions to be proposed. Those who cannot attend are encouraged to vote on all resolutions by completing their proxy forms. Ben Lofthouse, the fund manager, will give a presentation to the meeting which will be followed by light refreshments.

Outlook

The Company's portfolio is invested across the main markets of the globe and specifically excludes stocks listed in London. This provides investors with diversity between markets and removes much of the local UK impact from our share price. 

With a gradual return to global growth and increasing employment the outlook continues to improve, although with some hesitation at times. Globally more needs to be done to reduce country level deficits; failure to make real progress on that will eventually cause another serious disruption. There is the ever present risk of one or more of the points of international political tension escalating quite suddenly with the almost inevitable downward pressure that would place on markets.

Your board maintains a strategic watch over investment policy in order to take advantage of the overall outlook, while trying to limit the impact of more negative events. This involves attention to opportunities in the main markets across the globe; the relative level of sterling; policy on financial gearing; an investment process that builds a safety margin into the price paid for a stock to protect against random market volatility; and more generally, holding a portfolio that can be expected to increase in value over the longer term.

Our portfolio has a broad international spread and our skilled investment team has the ability to select the most attractive markets. We acknowledge that there are shorter term challenges, but we continue to expect to deliver a growing income, and longer term growth in asset value.

Christopher Jonas, CBE

Chairman

5 November 2014

Portfolio Information
10 Largest investments at 31 August 2014

Ranking 2014	Ranking 2013	Company	Country	Sector	Market value 2014 £'000	% of portfolio
1	1	Reynolds American	US	Consumer goods	2,727	3.1
2	12	SK Telecom	Korea	Telecommunications	2,633	3.0
3	7	Microsoft	US	Technology	2,367	2.7
4	-	PetroChina	China	Oil & gas	2,356	2.7
5	9	Novartis	Switzerland	Health care	2,252	2.6
6	4	Roche	Switzerland	Health care	2,229	2.5
7	49	Bank of China	China	Financials	2,145	2.4
8	20	Zurich Insurance	Switzerland	Financials	2,094	2.4
9	45	Lockheed Martin	US	Industrials	2,064	2.3
10	2	Deutsche Post	Germany	Industrials	2,002	2.3
					----------	------
					22,869	26.0
					=====	===
Top 10 = 26% of the portfolio

Sector exposure at 31 August as a percentage of the investment portfolio excluding cash

	2014	2013
	%	%
Financials	19.7	16.1
Industrials	18.5	16.2
Property	11.8	6.4
Oil & gas	9.6	10.3
Technology	9.6	5.6
Consumer services	8.6	13.5
Health care	7.0	7.7
Consumer goods	5.8	9.5
Telecommunications	4.4	10.1
Utilities	3.4	2.9
Basic materials	1.6	1.7

Geographic exposure at 31 August as a percentage of the investment portfolio excluding cash

	2014 %	2013 %
United States	32.7	28.7
France	10.3	5.5
Switzerland	10.2	6.8
China	9.1	5.6
Germany	8.9	10.7
Australia	5.5	3.9
Hong Kong	4.2	2.1
Taiwan	3.5	3.8
Korea	3.0	2.0
Singapore	2.3	2.3
Italy	2.3	2.0
Canada	1.8	5.1
Japan	1.7	-
New Zealand	1.4	1.2
Norway	1.1	3.4
Thailand	1.1	0.8
Netherlands	0.9	5.0
Brazil	-	3.5
Sweden	-	3.3
Luxembourg	-	1.9
Malaysia	-	1.4
Indonesia	-	1.0

Gearing levels over the year to 31 August 2014

	%
September 2013	10.6
October 2013	10.7
November 2013	7.1
December 2013	7.0
January 2014	10.2
February 2014	10.0
March 2014	11.1
April 2014	16.5
May 2014	10.5
June 2014	7.3
July 2014	9.7
August 2014	2.7

Source: Henderson

Investment Portfolio as at 31 August 2014

Company	Country	Market value £'000	% of portfolio
BASIC MATERIALS
BASF	Germany	1,451	1.6
		--------	----
		1,451	1.6
		--------	----
CONSUMER GOODS
Reynolds American	US	2,727	3.1
Nestlé	Switzerland	1,444	1.6
Charoen Pokphand	Thailand	945	1.1
Foods		--------	-----
		5,116	5.8
		--------	----
CONSUMER SERVICES
RTL Group	Germany	1,693	1.9
Six Flags Entertainment	US	1,574	1.8
Aimia	Canada	1,559	1.8
Las Vegas Sands	US	1,481	1.7
SJM	Hong Kong	1,229	1.4
		--------	-----
		7,536	8.6
		--------	----
FINANCIALS
Bank of China	China	2,145	2.4
Zurich Insurance	Switzerland	2,094	2.4
National Australia Bank	Australia	1,776	2.0
AXA	France	1,672	1.9
PNC Financial Services	US	1,633	1.9
Och-Ziff Capital Management	US	1,628	1.9
Mizuho Financial	Japan	1,540	1.7
Deutsche Boerse	Germany	1,511	1.7
Ares Capital	US	1,342	1.5
Scor Se	France	1,086	1.2
Cembra Money Bank	Switzerland	1,006	1.1
		---------	-----
		17,433	19.7
		---------	-----
HEALTHCARE
Novartis	Switzerland	2,252	2.6
Roche	Switzerland	2,229	2.5
Pfizer	US	1,682	1.9
		--------	-----
		6,163	7.0
		--------	----
INDUSTRIALS
Lockheed Martin	US	2,064	2.3
Deutsche Post	Germany	2,002	2.3
Eaton	US	1,681	1.9
Rexel	France	1,571	1.8
United Parcel Services	US	1,565	1.8
General Electric	US	1,548	1.8
Amcor	Australia	1,495	1.7
NWS Holdings	China	1,153	1.3
Taiwan Cement	Taiwan	1,139	1.3
Shanghai Industrial	China	1,040	1.2
Covanta	US	1,011	1.1
		---------	----
		16,269	18.5
		---------	-----
OIL & GAS
PetroChina	China	2,356	2.7
ENI	Italy	2,000	2.3
Total	France	1,914	2.2
Sembcorp Marine	Singapore	1,194	1.3
Seadrill	Norway	984	1.1
		--------	----
		8,448	9.6
		--------	----
PROPERTY
Corrections Corp of America	US	1,825	2.1
Wharf	Hong Kong	1,669	1.9
Nexity	France	1,577	1.8
Scentre	Australia	1,573	1.8
Icade	France	1,260	1.4
Mapletree Greater China	Singapore	907	1.0
Cheung Kong	Hong Kong	822	0.9
Eurocommercial	Netherlands	803	0.9
		---------	-----
		10,436	11.8
		--------	----
TECHNOLOGY
Microsoft	US	2,367	2.7
Seagate Technology	US	1,639	1.9
NetEase	China	1,351	1.5
Taiwan Semiconductor	Taiwan	1,304	1.5
Manufacturing
Garmin	US	1,112	1.3
Tong Hsing Electronic	Taiwan	653	0.7
Industries		---------	-----
		8,426	9.6
		--------	----
TELECOMMUNICATIONS
SK Telecom	Korea	2,633	3.0
Spark New Zealand	New Zealand	1,270	1.4
		--------	----
		3,903	4.4
		--------	----
UTILITIES
Dominion Resources	US	1,734	2.0
RWE	Germany	1,211	1.4
		2,945	3.4
		--------	----
Total Investments		88,126	100.0
		=====	====

FUND MANAGER'S REPORT

Introduction

The portfolio delivered good returns over the period, generating a total return of 9.7% (NAV per ordinary share (basic)) including a dividend of 4.25p, an increase of 4.9% year on year.

Across the portfolio dividend growth has generally been strong, and has come from a variety of different sectors and geographies. In the United States the gradual economic recovery has translated into healthy dividend growth from holdings including General Electric (16% increase in quarterly dividend), United Parcel Services (8%) and US retail bank PNC Financial (9%). Despite the slower than expected economic recovery across Europe a number of holdings increased their dividends including pharmaceutical companies Novartis (7%) and Roche (6%), and German logistics and mail operator Deutsche Post (14%). Whilst European companies with overseas sales have continued to grow, some domestic European companies have struggled against a background of slow growth and overcapacity, and there were some holdings that cut dividends, notably telecommunication companies Deutsche Telekom and Vivendi. Although these cuts were not surprises as they were either announced last year or anticipated as these are both restructuring stories. We have taken advantage of the strong performance in these companies' share prices over the last twelve months as a result of their restructuring activity to close the positions in order to fund new investments which have stronger dividend growth potential. On a more positive note a number of the portfolio's Asia-Pacific holdings have seen a strong pick up in dividend growth, including Bank of China (12%), Hong Kong conglomerate Cheung Kong (10% plus a special dividend), and  Australian packaging company Amcor (8%). Sterling was generally strong against many other currencies around the world, which has reduced the underlying income growth in sterling terms over the year, but strong underlying dividend growth has enabled the Company to pay an increased dividend year on year whilst continuing to add to revenue reserves.

In terms of the outlook for dividend growth, whilst economic growth feels subdued for both investors and the man on the street, and geopolitical issues dominate the headlines, global economic growth has actually increased year on year (the IMF forecasts GDP growth of 3.3% in 2014 compared to 3% in 2013), which has given many boards of directors of companies more confidence to commit to increased dividend payments despite ongoing geopolitical issues. In addition to a more supportive growth environment, interest rates remain very low, both at the short and long ends of the interest rate curve, which is reducing many companies' refinancing costs. Against this background our expectations are for further dividend growth from the portfolio, and one of the key investment criteria for the Company's investments is the ability to sustain, and preferably to grow dividends in what is likely to be a relatively low economic growth environment for the foreseeable future.

Principal contributors	Relative return%
PetroChina	0.67
SK Telecom	0.45
Lockheed Martin	0.44
Wharf	0.37
Spark New Zealand	0.32
Sanitec Corporation	0.32
Deutsche Telekom	0.27
Giant Interactive	0.26
Seagate Technology	0.24
Vivendi	0.23

Principal detractors	Relative return %
Myer Holdings	(0.29)
PT Perusahaan Gas Negara	(0.31)
China Mobile	(0.31)
Ambev	(0.32)
Mizuho Financial	(0.36)
SINOPEC Engineering	(0.38)
Apple Inc.	(0.40)
Seadrill	(0.57)
Electrolux	(0.67)
Rexel	(0.69)

Portfolio

The Company's portfolio is relatively concentrated consisting of on average 60 positions, so performance is impacted by stock specific news and events as well as regional equity market performance and sector news. The principal contributors and detractors to performance are listed above.

The strongest performing regional portfolio was Asia-Pacific, returning 16% over the period, followed by North America which returned 12.9%, and then Europe which generated a 9% return. The MSCI World Index ex UK (sterling adjusted) returned 13.7% over the period. The portfolio has generated good capital and income returns, but has under-performed the index over the year. Asset allocation was a positive contributor to relative performance as the underweight US position was offset by being underweight Japan, a poor performer over the year, and being significantly overweight Asia, which performed well and where the stock selection was particularly strong. Gearing was also used actively over the year averaging 11%, which generated a positive contribution to performance. Whilst there have been stock specific reasons for some of the portfolio's performance position's, the general pattern amongst a number of under-performers has been that economic growth has either been slower than we expected or has not filtered down to improved sales and/or profitability as quickly as expected at the time of investment. Holdings that this applies to include electronics appliance manufacturer Electrolux, where better than expected US growth was more than offset by weak European and emerging market demand and currencies, component distributor Rexel, operating well but in an environment that has not improved yet, and Australian department store Myer, which has been impacted by slower growth than anticipated. The positions in Electrolux and Myer Holdings were sold during the year to finance more attractive investment opportunities.

The strongest performers have been those that have either proven the market's expectations to be too pessimistic, or have announced actions to improve profitability. Lockheed Martin, for example, has performed strongly as the investor fears about the severity of cuts to the US defence budget have diminished. Hong Kong property company Wharf was added to the portfolio at a significant discount to the book value of its assets after falling during 2013 on concerns regarding slowing Chinese growth, but has continued to report solid results. Subdued economic growth around the world is driving many companies across different sectors and geographies to address profitability issues themselves rather than relying on sales growth. Chinese integrated oil company PetroChina, Korean telecommunications company SK Telecom and New Zealand telecommunications company Spark have rallied on reforms, either internal or industry wide, that should result in improved future profitability.

Activity

Whilst the Company has a diverse investment portfolio covering many sectors and geographies many of the positions have common characteristics; the investment team favour established, cash generative business models with high barriers to entry, sustainable dividends with a preference for earnings and dividend growth potential over yield alone, and generally an attractive valuation on various financial metrics. The low prevailing interest rates coupled with, and arguably driven by, monetary expansion in many major world economies have caused an increased demand for income generating assets, including higher yielding equities in some parts of the world. Whilst we do not see this demand diminishing until interest rates are considerably higher than they are currently, it has led to demanding valuations in some sectors. The team's valuation discipline has resulted in quite significant asset allocation changes over the year in response to market movements, the main change being the reduction of the portfolio's exposure to Europe from over 44% to 34% of the portfolio between February and the year end. The Asia-Pacific portfolio was increased over the same period from 26% to 32%, with the majority of new money being invested in Chinese companies. The reduction in the European exposure was a product of value realisation in the underlying holdings, many of which had performed very strongly in the last twelve to eighteen months as investor confidence in Europe increased, rather than pessimism about the region. The portfolio retains a significant exposure to European companies. The exposure to Asia, and in particular China, was increased after a period of several years during which the Chinese market had underperformed many developed and emerging markets as the government implemented measures to moderate economic growth and its accompanying inflation pressures. During this period valuations had fallen to the point where the market was trading at a significant discount to many other equity markets, and its own history.

Positions have been added on a selective basis using the methodology mentioned earlier, including PetroChina, Wharf and Chinese online game developer NetEase. The North American exposure was maintained at 35%, over the period. Gearing fell 2.7% at the year end largely due to the new shares issued to the subscription shareholders.

Outlook

The economic recovery since the financial crisis several years ago has been slower than expected, but unemployment is generally falling in most developed markets which is an important measure of progress. Economic policy remains accommodative, with even the European Central Bank acting to stimulate credit growth, and the fact that some central banks are considering when to raise rates is a sign that economic growth is on the right path. Whilst there remain significant risks to economic growth that we remain vigilant about, we are optimistic that the portfolio has the potential to grow investors' capital and dividend income in coming years, and we will take advantage of volatility in markets to enhance this potential by investing in undervalued companies.

Ben Lofthouse

Fund Manager

5 November 2014

PRINCIPAL RISKS AND UNCERTAINTIES

The board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy, in order to mitigate these risks as far as practicable. The principal risks which have been identified and the steps taken by the Board to mitigate these are as follows:

Investment activity and performance

An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may result in underperformance against the Company's benchmark index and the companies in its peer group. The board monitors investment performance at each board meeting and regularly reviews the extent of borrowings when in use.

Portfolio and market price

Although the Company invests almost entirely in securities that are listed on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely. A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds. Henderson seeks to maintain a diversified portfolio to mitigate against this risk. The Board regularly reviews the portfolio, activities and performance.

Tax and regulatory

A breach of section 1158 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the Listing Rules could result in suspension of the Company's shares, while a breach of the Act could lead to criminal proceedings, or financial or reputational damage. Henderson has contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The board receives internal control reports produced by Henderson on a quarterly basis, which confirm regulatory compliance.

Operational risks

Disruption to, or failure of, Henderson's accounting, dealing or payment systems or the custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service. The board monitors the services provided by Henderson and its other suppliers and receives reports on the key elements in place to provide effective internal control.

The Board also monitors all business risks faced by the Company which are recorded in a risk map and is reviewed regularly. Systems are in operation to safeguard the Company's assets and shareholders' investments, to maintain proper accounting records and to ensure that financial information used within the business, or published, is reliable.

RELATED PARTY TRANSACTIONS

Other than the relationship between the Company and its directors, the provision of services by Henderson is the only related party arrangement currently in place. Other than fees payable by the Company in the ordinary course of business and the provision of marketing services, there have been no material transactions with this related party affecting the financial position or the performance of the Company during the year under review.

STATEMENT OF DIRECTORS' RESPONSIBILITIES UNDER DTR 4.1.12

In accordance with Disclosure and Transparency Rule 4.1.12, each of the directors confirms that, to the best of his knowledge:

(a) the Company's financial statements, which have been prepared in accordance with UK Accounting Standards on a going concern basis, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

(b) the strategic report, report of the directors 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

Christopher Jonas, CBE

Chairman

5 November 2014

AUDITED INCOME STATEMENT

		Year ended 31 August 2014			Year ended 31 August 2013
Notes		Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
2	Gains from investments held at fair value through profit or loss	-	4,058	4,058	-	6,705	6,705
3	Income from investments held at fair value through profit or loss	4,276	-	4,276	2,846	-	2,846
	Profit on foreign exchange	-	147	147	-	133	133
	Other income	76	-	76	37	-	37
		-----	---	----	----	---	----
	Gross revenue and capital gains	4,352	4,205	8,557	2,883	6,838	9,721
	Management fees	(146)	(437)	(583)	(104)	(314)	(418)
	Other administrative expenses	(302)	-	(302)	(302)	-	(302)
		-------	---	--------	--------	---	--------
	Net return on ordinary activities before finance charges and taxation	3,904	3,768	7,672	2,477	6,524	9,001
		--------	--------	--------	--------	--------	--------
	Finance charges	(35)	(104)	(139)	(22)	(64)	(86)
		------	--------	--------	-----	-----	-----
	Net return on ordinary activities before taxation	3,869	3,664	7,533	2,455	6,460	8,915
		--------	--------	--------	--------	--------	--------
	Taxation on net return on ordinary activities	(456)	-	(456)	(285)	-	(285)
		--------	---	--------	--------	--	--------
	Net return on ordinary activities after taxation	3,413	3,664	7,077	2,170	6,460	8,630
		====	====	====	====	====	====
4	Basic return per ordinary share	5.59p	5.99p	11.58p	4.57p	13.62p	18.19p
4	Diluted return per ordinary share	5.55p	5.95p	11.50p	4.50p	13.38p	17.88p

The total column of this statement represents the Income Statement of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All revenue and capital items derive from continuing operations. The Company had no recognised gains or losses other than those disclosed in the Income Statement.

AUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

Notes	Year ended 31 August 2014	Called up share capital £'000	Share premium account £'000	Special reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
7	At 31 August 2013	581	2,958	45,732	5,504	954	55,729
	New shares allotted	5	510	-	-	-	515
	Issue costs	-	(5)	-	-	-	(5)
	Ordinary shares to be issued following conversion of subscription shares	-	4,379	-	-	-	4,379
	Issue costs	-	(5)	-	-	-	(5)
7	Issue of ordinary shares from C share conversion	178	20,822	-	-	-	21,000
	Issue costs	-	(420)	-	-	-	(420)
	Net return for the year	-	-	-	3,664	3,413	7,077
5	Dividends paid	-	-	-	-	(2,483)	(2,483)
		-----	----------	----------	--------	--------	----------
	At 31 August 2014	764	28,239	45,732	9,168	1,884	85,787
		===	=====	=====	====	====	=====

Notes	Year ended 31 August 2013	Called up share capital £'000	Share premium account £'000	Special reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
	At 31 August 2012	539	43,988	-	(956)	697	44,268
7	New shares allotted in the year	42	4,739	-	-	-	4,781
	Issue costs	-	(37)	-	-	-	(37)
	Cancellation of share premium account	-	(45,732)	45,732	-	-	-
	Net return for the year	-	-	-	6,460	2,170	8,630
5	Dividends paid	-	-	-	-	(1,913)	(1,913)
		---	---	---	---	---------	---------
	At 31 August 2013	581	2,958	45,732	5,504	954	55,729
		===	====	=====	====	===	=====

AUDITED BALANCE SHEET

Notes		At 31 August         2014 £'000	At 31 August 2013 £'000
	Fixed asset investments held at fair value through profit or loss	88,126	61,959
		--------	--------
	Current assets
	Debtors	4,621	2,153
		4,621	2,153
		--------	--------
	Creditors: amounts falling due within one year	(6,960)	(8,383)
		---------	---------
	Net current liabilities	(2,339)	(6,230)
		---------	---------
	Total net assets	85,787	55,729
		=====	=====
	Capital and reserves
7	Called up share capital	764	581
8	Share premium account	28,239	2,958
	Special reserve	45,732	45,732
	Other capital reserves	9,168	5,504
	Revenue reserve	1,884	954
		--------	--------
	Total Shareholders' funds	85,787	55,729
		=====	=====
6	Net asset value per ordinary share (basic)	118.4p	111.9p
6	Net asset value per ordinary share (diluted)	117.5p	110.2p

AUDITED CASH FLOW STATEMENT

	For the year ended 31 August  2014		For the year ended 31 August  2013
	£'000	£'000	£'000	£'000
Net cash inflow from operating activities		2,942		1,900
Servicing of finance
Interest paid	(141)		(73)
	------		------
Net cash outflow from servicing of finance		(141)		(73)
Net tax recovered		58		29
Financial investment
Purchases of investments	(63,689)		(40,259)
Sales of investments	43,127		27,618
	----------		-----------
Net cash outflow from financial investment		(20,562)		(12,641)
Equity dividends paid		(2,483)		(1,913)
		----------		----------
Net cash outflow before financing		(20,186)		(12,698)
Financing
Proceeds from issue of ordinary shares	515		4,781
Proceed from issue of ordinary shares from C share conversion	21,000		-
Issue costs from C share conversion	(456)		-
Expenses paid in respect of shares issued	(5)		(42)
Net cash inflow from financing		21,054		4,739
		-----------		---------
Increase/(decrease) in cash		868		(7,959)
		===		=====
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash as above		868		(7,959)
Exchange movements		175		174
Net (debt)/funds at start of the year		(7,783)		2
		---------		---------
Net debt at 31 August		(6,740)		(7,783)
		=====		=====
Represented by:
Bank overdraft		(6,740)		(7,783)
		----------		----------
		(6,740)		(7,783)
		=====		=====

The notes to the accounts form part of these financial statements

NOTES TO THE FINANCIAL STATEMENTS

1.   Accounting policies

Basis of accounting

The Company's shareholders are asked every three years to vote for the continuation of the Company. An ordinary resolution to this effect will be put to shareholders at the AGM to be held on 12 December 2014 and the board has no reason to believe that this resolution will not be passed. Therefore the financial statements have been prepared on a going concern basis and under the historical cost basis of accounting, modified to include the revaluation of investments at fair value through profit or loss.

The financial statements have been prepared in accordance with applicable accounting standards in the United Kingdom and with those parts of the Companies Act 2006 (the "Act") applicable to companies reporting under the standards and with the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies (the "AIC") in January 2009.

2.   Gains from investments held at fair value through profit or loss

	2014 £'000	2013 £'000
Gains on investments sold in the year	250	3,046
Revaluation of investments held at 31 August	3,808	3,659
	--------	--------
	4,058	6,705
	====	====

3. Income from investments held at fair value through profit or loss

	2014 £'000	2013 £'000
Overseas dividend income	4,276	2,846
	====	====

4. Return per ordinary share

	2014		2013
	£'000	pence	£'000	pence
Basic
Revenue return	3,413	5.59	2,170	4.57
Capital return	3,664	5.99	6,460	13.62
	-------	------	-------	-------
Total return	7,077	11.58	8,630	18.19
	====	====	====	====
Weighted average number of ordinary shares in issue		61,101,252		47,434,946
Diluted
Revenue return	3,413	5.55	2,170	4.50
Capital return	3,664	5.95	6,460	13.38
	-------	-----	-------	-------
Total return	7,077	11.50	8,630	17.88
	====	====	====	====
Number of dilutive shares		425,315		822,186
Diluted shares in issue for return per share		61,526,567		48,257,132
		========		========

For the purposes of calculating diluted total, revenue and capital returns per ordinary share, the number of ordinary shares is the weighted average used in the basic calculation plus the number of ordinary shares deemed to be issued for no consideration on exercise of all outstanding subscription shares at the year end date by reference to the average share price of the ordinary shares during the period.

5.   Dividends paid on ordinary shares for the year ended 31 August

		Register date	Payment date	Ex-dividend date	2014 £'000	2013 £'000
Interim dividend	1.00p	16 November 2012	30 November 2012	14 November 2012	-	461
1st interim dividend	1.00p	8 February 2013	28 February 2013	6 February 2013	-	469
2nd interim dividend	1.00p	10 May 2013	31 May 2013	8 May 2013	-	484
3rd interim dividend	1.00p	9 August 2013	30 August 2013	7 August 2013	-	499
4th interim dividend	1.05p	15 November 2013	29 November 2013	13 November 2013	526	-
1st interim dividend	1.05p	10 January 2014	31 January 2014	8 January 2014	527	-
2nd interim dividend	1.05p	11 April 2014	30 April 2014	9 April 2014	715	-
3rd interim dividend	1.05p	11 July 2014	31 July 2014	9 July 2014	715	-
					-------	-------
					2,483	1,913
					====	====

The total dividends payable in respect of the financial period which form the basis of section 1158 of the Corporation Tax Act 2010 are set out below:

	2014 £'000	2013 £'000
Revenue available for distribution by way of dividend for the year	3,413	2,170
Interim dividends of 3.15p paid (2013: 3.00p)	(1,957)	(1,452)
Interim dividend for the year ended 31 August 2014 of 1.10p (based on 76,371,550 ordinary shares in issue at 10 October 2014) (2013: 1.05p)	(840)	(526)
	------	------
	616	192
	===	===

¹Undistributed revenue comprises 14.4% based on taxable income

6. Net asset value per ordinary share

The net asset value per ordinary share and the net assets attributable to ordinary shares at the end of the year were as follows:

	2014 £'000	2013 £'000
Basic:
Net assets attributable	85,787	55,729
Number of ordinary shares in issue	72,450,588	49,803,050
Net assets per ordinary share	118.4p	111.9p

	2014 £'000	2013 £'000
Diluted:
Net assets attributable assuming exercise of subscription shares	89,708	64,029
Number of potential ordinary shares in issue	76,371,550	58,103,050
Net assets per ordinary share	117.5p	110.2p

The diluted net asset value per ordinary share has been calculated in accordance with guidelines issued by the Association of Investment Companies, and assumes that all outstanding subscription shares were converted into ordinary shares at the year end.

The movements during the year of the assets attributable to the ordinary shares were as follows:

	2014 £'000	2013 £'000
Net assets at start of the year	55,729	44,268
Total net return on ordinary activities after taxation	7,077	8,630
Dividends paid on ordinary shares in the year	(2,483)	(1,913)
Issue of ordinary shares less issue costs	25,464	4,744
	----------	----------
Total net assets attributable to the ordinary shares at 31 August	85,787	55,729
	=====	=====

7. Called up share capital

2014	Number of shares	Number of shares entitled to dividend	£'000
Ordinary shares of 1p each
At 31 August 2013	49,803,050	49,803,050	498
New shares allotted in the year	450,000	450,000	5
New shares allotted from conversion of C shares	17,818,500	17,818,500	178
New shares to be allotted from exercise of subscription shares	4,379,038	4,379,038	44
	-----------------	-----------------	------
At 31 August 2014	72,450,588	72,450,588	725
	=========	=========	===
Subscription shares of 1p each
At 31 August 2013	8,300,000	-	83
Exercise of subscription shares	(4,379,038)	-	(44)
	----------------		-----
At 31 August 2014	3,920,962	-	39
	=======	==	==

During the year, the Company issued 450,000 ordinary shares for a total consideration of £510,000 after deduction of issue costs.

During the year, the Company issued 21,000,000 C shares for a total consideration of £20,580,000 after deduction of issue costs (capped at £420,000). These were converted into 17,818,500 new ordinary shares on 22 January 2014.

At launch the Company issued subscription shares to all subscribers on the basis of one subscription share for every five ordinary shares subscribed. Each subscription share conferred the right to subscribe for one ordinary share on payment of the subscription price of 100p. Notice to exercise the subscription rights was given by subscription shareholders during the 30 days prior to the subscription date of 31 August 2014 after which the subscription rights lapsed.

On 31 August 2014 the Company received requests from subscription shareholders to exercise 4,379,038 subscription shares. The remaining 3,920,962 shares were exercised by Equiniti Financial Services Limited, the Company's appointed Trustee, on 4 September 2014.

2013	Number of shares	Number of shares entitled to dividend	£'000
Ordinary shares of 1p each
At 31 August 2012	45,550,000	45,550,000	456
New shares allotted in the year	4,253,050	4,253,050	42
	----------------	----------------	------
At 31 August 2013	49,803,050	49,803,050	498
	========	========	===
Subscription shares of 1p each
At 31 August 2012	8,300,000	-	83
	---------------
At 31 August 2013	8,300,000	-	83
	========	==	==

During the year, 4,253,050 ordinary shares were allotted for a total consideration of £4,744,000.

8.   Share premium account

	2014 £'000	2013 £'000
At the start of the year	2,958	43,988
Ordinary shares allotted in year	510	4,739
Issue costs	(5)	(37)
Ordinary shares allotted from C share issue	20,822	-
Issue costs - C share issue	(420)	-
Ordinary shares to be allotted from exercise of subscription shares	4,379	-
Issue costs	(5)	-
Cancellation of share premium on 28 February 2013	-	(45,732)
	----------	-----------
At 31 August	28,239	2,958
	=====	=====

At the annual general meeting of the Company held on 12 December 2012, a special resolution was passed approving the cancellation of the amount standing to the credit of the Company's share premium account. On 28 February 2013, following approval of the Court order with the Registrar of Companies, the cancellation became effective. Approximately £45.7 million, held in the share premium account was transferred to the distributable reserves of the Company.

9.   Going concern statement

The Company's articles of association require that at every third AGM of the Company an ordinary resolution be put to shareholders asking them to approve the continuation of the Company. This is the first year that shareholders will be asked to continue the life of the Company. The directors therefore propose an ordinary resolution to the shareholders that the Company continues in existence as an investment trust at this year's AGM and the directors are recommending that shareholders should vote in favour of the resolution, as they shall do in respect of their own shareholdings. The directors have no reason to believe that the resolution will not be passed however if such resolution is not passed, proposals for the Company's liquidation or reconstruction will be put to shareholders.

The ongoing viability of the Company and the validity of the going concern basis depends on the outcome of the continuation vote, on which the board is recommending that shareholders vote in favour. In particular, no provision has been made for the costs of winding-up the Company or liquidating its investments in the event that the resolution is not passed.

The assets of the Company consist mainly of a portfolio of diversified securities that are readily realisable, and the Company has adequate financial resources to meet its liabilities and continue in operational existence for the foreseeable future.

The directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. In reviewing the position as at the date of this report, the board has considered "Going Concern and Liquidity Risk: Guidance for directors of UK Companies 2009" published by the Financial Reporting Council.

10.  2014 Financial information

The figures and financial information for the year ended 31 August 2014 are extracted from the Company's annual financial statements for that period and do not constitute statutory financial statements for that period. The Company's annual financial statements for the year ended 31 August 2014 have been audited but have not yet been delivered to the Registrar of Companies. The auditors' report on the 2014 financial statements was unqualified, did not include a reference to any matter which the auditors drew attention without qualifying the report and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.

11.  2013 Financial information

The figures and financial information for the period ended 31 August 2013 are extracted from financial statements for that period and do not constitute statutory financial statements for that period. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report and did not contain any statements under sections 498(2) or 498(3) of the Companies Act 2006.

12.  Annual report and financial statements

The annual report and financial statements for the period ended 31 August 2014 will be posted to shareholders in mid November 2014 and copies will be available on the Company's website www.hendersoninternationalincometrust.com or in hard copy format from the Company's registered office, 201 Bishopsgate, London EC2M 3AE.

The annual general meeting will be held at the registered office on Friday, 12 December 2014 at 2:30 pm. The notice of the annual general meeting will be posted to shareholders with the annual report and financial statements.

For more information please contact:

Ben Lofthouse Fund Manager Henderson International Income Trust plc Telephone: [phone]
James de Sausmarez Director of Investment Trusts Henderson Global Investors Telephone: [phone]	Sarah Gibbons-Cook Investor Relations and PR Manager Henderson Global Investors Telephone: [phone]

- ENDS -

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.

 

END

 

 

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