Final Results

RNS Number : 5572F

Henderson Intl. Income Trust PLC

29 October 2018

 

HENDERSON INTERNATIONAL INCOME TRUST PLC

Annual Financial Report for the year ended 31 August 2018

This announcement contains regulated information

PERFORMANCE HIGHLIGHTS	2018	2017
Net asset value ('NAV') per share at year end	167.1p	163.0p
Net assets	£296,748,000	£283,972,000
Dividend in respect of year1	5.3p	4.9p
Dividend yield for the year2	3.2%	3.0%
Ongoing charge for year	0.83%	0.88%
Gearing at year end	1.9%	0.3%
Share price at year end	167.50p	163.75p
Shares in issue at year end	177,581,306	174,206,306

¹ Includes the fourth interim dividend in respect of the year ended 31 August 2018 declared on 29 October 2018 to be paid to

  shareholders on 30 November 2018. In the prior year an additional dividend of 0.75p per C share was paid on 31 August 2017.

² Calculated based on the share price as at 31 August 2018

Source: Morningstar, Funddata, Janus Henderson, Datastream

INVESTMENT OBJECTIVE

The Company's investment objective is to provide shareholders with a growing total annual dividend, as well as capital appreciation.

INVESTMENT POLICY

The Company will invest in a focused and internationally diversified portfolio of 50-80 companies that are either listed in, registered in, or whose principal business is in countries that are outside the UK and will be made up of shares (equity securities) and fixed interest asset classes that are diversified by factors such as geography, industry and investment size. A maximum of 25% of gross assets may be invested in fixed interest securities. The Company does not hold investments in unlisted companies unless it is through subsequent delisting of a listed security.

Investment in any single company (including any derivative instruments) will not, in gross terms, exceed 5% of net assets at the time of investment and no more than 15% of gross assets may be invested in other listed investment companies (including investment trusts) or collective investment schemes. No more than 10% of gross assets may be invested in companies that themselves invest more than 15% of their gross assets in UK listed investment companies or collective investment schemes.

The Company may use financial instruments known as derivatives for the purpose of efficient portfolio management, for investment purposes or to generate additional income while maintaining a level of risk consistent with the risk profile of the Company. The Company may hedge exposure to foreign currencies up to a maximum of 20% of gross assets and may generate up to a maximum of 20% of gross income through investment in traded options.

The Company can borrow to make additional investments with the aim of achieving a return that is greater than the cost of borrowing. The Company's articles of association allow borrowings up to 100% of net asset value. In normal circumstances, the Manager may only utilise gearing up to 25%  of net assets at the time of drawdown or investment (as appropriate) in accordance with the board's policy and for these purposes 'gearing' includes implied gearing through the use of derivatives.

CHAIRMAN'S STATEMENT

Performance and markets

The net asset value ('NAV') per ordinary share (on a total return basis) has increased by 5.9%. The return on the ordinary share price (on the same basis) was 5.6%. These returns compare to a total return of 13.4% for the MSCI World (ex UK) Index (sterling adjusted).

The global economy has continued its steady growth over the period, which is driving good dividend growth and capital returns from the portfolio.

The impact of rising interest rates in the US does not appear to have slowed economic growth and sentiment has been buoyed by significant cuts in US corporate tax rates.

Global economic growth has strengthened, and political events continue to play a significant part in equity markets' performance. The second half of the Company's year has seen a sharp divergence between the relative performance of the US equity market and the rest of the world. The list of political events is long, ranging from a new Italian political coalition, through to emerging market crises in Argentina and Turkey. The newest challenge to the status quo is the US President's determination to change the terms upon which the US trades with the rest of the world.  Whilst the Company has achieved both capital and income growth over the last twelve months, this uncertainty has impacted the performance of the Company relative to its benchmark as a result of the Company's significant weights in higher yielding non-US equities.

Currency can have an impact on the Company's performance as it reports in sterling but has no sterling assets. In the first half of the year sterling strength was a drag on total return, but subsequent weakness neutralised the impact over the financial year.

 

Strategy, growth and corporate activity

Since your Company's original listing, the board's strategy has been to provide a high and rising level of dividends as well as long-term capital appreciation from a focused and internationally diversified portfolio of securities outside the UK.

We remain willing to issue further shares at appropriate points. This is to provide greater liquidity in our shares, to widen demand for them from wealth managers and to lower our Ongoing Charge. We have made good progress on this during the year, having issued 3,375,000 new shares in response to continuing investor demand. At 31 August 2018 there were 177,581,306 shares in issue. No shares have been issued since the year end and up to the date of the annual report. This increase in size has continued to lead to a fall in the Ongoing Charge (see annual report for details).

On 18 September 2018, your board held a special meeting exclusively to review strategy. Key matters we considered were our existing strategy, our plans for future growth, our approach to gearing, the relevance of our benchmark and our approach to paying dividends. In summary, we concluded that our existing strategy and approach has served shareholders and the Company well and should be retained. We also reviewed the Company's performance and formulated a number of actions to enhance the coordination of our activities and those of our service providers.

Earnings and dividends

We are pleased to announce a dividend increase from 4.90p to 5.30p per ordinary share for the year to 31 August 2018. The year consisted of a first, second and third interim dividend of 1.30p per ordinary share, and a larger than normal fourth interim dividend of 1.40p per ordinary share in the light of our increased earnings. The fourth interim dividend of 1.40p per ordinary share will be paid on 30 November 2018. 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 2019.

The board aims to make progressive and steady increases in annual total dividend payments. However, shareholders must recognise that such increases can never be guaranteed or assumed to be repeated in the future. The dividend is well covered by the income generated by the portfolio. Despite the year-on-year dividend increase, the revenue reserve has increased again, and makes some provision for the risk of less benign conditions in future.

 

Gearing

Well-judged gearing enhances returns to shareholders. The board has reconfirmed its current policy 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 used gearing to invest in specific stock opportunities. At 31 August 2018 the Company had an overdraft with HSBC of £6,227,000 (2017: £nil). There was 1.9% gearing in place at the year-end (2017: 0.3%). 

 

Discount control

The board continues to monitor the premium/discount to NAV and will consider appropriate action if the relationship between the NAV and share price moves and remains out of line with the Company's peer group. Nonetheless there is a distinct limit to the board's ability to influence the premium or discount to NAV. We consider that it is not in shareholders' interests to have a specific issuance or buy-back policy. However, to retain flexibility, we reserve the right to implement share issues or buy-backs within a narrow band relative to NAV, where appropriate, and subject to market conditions.

Ongoing Charge

As a direct result of the reduction in the management fee in 2016, and the growth of the Company, the Ongoing Charge for the year to 31 August 2018, as calculated in accordance with the Association of Investment Companies (the 'AIC') methodology, has fallen to 0.83%

(2017: 0.88%).

Annual general meeting

The eighth annual general meeting of the Company will be held at 2.30 pm on Friday, 7 December 2018 at the Company's registered office, 201 Bishopsgate, London EC2M 3AE. The notice of meeting and the resolutions to be proposed are set out in a separate document which accompanies the annual report. Ben Lofthouse, the fund manager, will give a presentation at the meeting, which will be followed by light refreshments. The directors welcome shareholders' attendance at the meeting and recommend shareholders support all the resolutions to be proposed. Those who cannot attend are encouraged to vote on all resolutions by completing their proxy forms.

The Company's annual general meeting will be broadcast live on the internet. If you are unable to attend in person you can watch the meeting in real time by visiting

www.janushenderson.com/trustslive.

Outlook

It is not an easy environment for investors. Interest rates remain low in most major developed economies, and whilst current economic data suggests continuing, albeit moderate, economic growth, Brexit and political developments both close to home and further afield threaten major changes to trading relationships and economic alliances. However, the Company has a very flexible mandate, allowing it to change sector, geographic and even asset exposure in response to changes in the environment. Unused capacity in the current level of gearing provides the potential to take advantage of any opportunities that present themselves as a result of political uncertainty. In the meantime, we judge that well positioned, cash generating, companies with good dividend yields will remain attractive to investors seeking growing income streams and the potential for capital growth.

Simon Jeffreys

Chairman,

29 October 2018

PORTFOLIO INFORMATION
Ten largest investments at 31 August 2018

Ranking 2018	Ranking 2017	Company	Country	Sector	Market value 2018 £'000	% of portfolio
1	1	Microsoft	US	Technology	13,502	4.5
2	2	Taiwan Semiconductor Manufacturing	Taiwan	Technology	9,386	3.1
3	-	Nestlé	Switzerland	Consumer goods	7,938	2.6
4	4	Chevron	US	Oil & gas	7,272	2.4
5	25	Cisco Systems	US	Technology	6,351	2.1
6	5	Coca-Cola	US	Consumer goods	6,327	2.1
7	17	Pfizer	US	Health care	6,239	2.0
8	-	BASF	Germany	Basic materials	5,893	2.0
9	6	Deutsche Telekom	Germany	Telecommunications	5,731	1.9
10	3	ING	Netherlands	Financials	5,453	1.8
					--------	------
					74,092	24.5
					=====	====

Geographic exposure at 31 August As a percentage of the investment portfolio excluding cash			Sector exposure at 31 August As a percentage of the investment portfolio excluding cash
	2018 %	2017 %			2018 %	2017 %
US	32.7	34.2		Financials	22.1	21.1
Switzerland	8.8	4.9		Technology	13.6	11.7
France	7.2	9.4		Consumer goods	12.1	13.1
China	6.9	9.0		Oil & gas	9.7	6.8
Germany	6.6	8.0		Telecommunications	9.3	13.2
Netherlands	6.4	6.0		Basic materials	7.4	3.6
Canada	4.4	0.9		Industrials	7.3	8.1
Taiwan	4.3	2.8		Health care	6.7	5.7
Sweden	4.0	2.0		Property	5.8	7.8
Australia	2.9	4.8		Consumer services	4.8	7.3
Korea	2.5	3.1		Utilities	1.2	1.6
Italy	2.2	1.6
Finland	1.5	-
Malaysia	1.3	-
Hong Kong	1.2	1.3
Japan	1.2	2.6
Thailand	1.2	-
New Zealand	1.1	1.3
Austria	1.1	-
Spain	0.9	1.0
Singapore	0.8	0.9
Denmark	0.8	-
Norway	-	3.7
Portugal	-	1.3
Israel	-	1.2

Source: Janus Henderson

 

Investment Portfolio as at 31 August 2018

Company	Country	Market value £'000	% of portfolio
Basic materials
BASF	Germany	5,893	2.0
DowDuPont	US	4,699	1.5
UPM-Kymmene	Finland	4,558	1.5
Nutrien Amcor	Canada Australia	4,451 2,686 ---------	1.5 0.9 -----
		22,287	7.4
		---------	-----
Consumer goods
Nestlé	Switzerland	7,938	2.6
Coca-Cola	US	6,327	2.1
Samsung	Korea	4,057	1.3
Anta Sports	China	4,039	1.3
Hanesbrands	US	2,971	1.0
Dali	China	2,566	0.9
General Motors	US	2,497	0.8
Pandora	Denmark	2,344	0.8
Zhengzhou Yutong Bus	China	2,261	0.8
Hasbro	US	1,472 ---------	0.5 -----
		36,472	12.1
		---------	-----
Consumer services
Best Buy	US	5,157	1.7
Royal Caribbean	US	3,695	1.2
CVS Health	US	2,978	1.0
Las Vegas Sands	US	2,690	0.9
		---------	-----
		14,520	4.8
		---------	-----
Financials
ING	Netherlands	5,453	1.8
Nordea	Sweden	4,617	1.5
Manulife Financial	Canada	4,354	1.4
Van Lanschot	Netherlands	4,220	1.4
AXA	France	4,136	1.4
Malayan Banking	Malaysia	4,102	1.3
Cathay Financial	Taiwan	3,801	1.2
Mitsubishi Financial	Japan	3,696	1.2
Bank of China	China	3,539	1.2
Credit Suisse	Switzerland	3,526	1.2
JP Morgan Chase	US	3,339	1.1
Macquarie	Australia	3,336	1.1
Bawag	Austria	3,257	1.1
Swedbank	Sweden	3,183	1.1
Blackstone	US	2,996	1.0
Banca Farmafactoring	Italy	2,932	1.0
Société Générale	France	2,224	0.7
BNP Paribas	France	2,135	0.7
Natixis	France	2,045	0.7
		---------	-----
		66,891	22.1
		----------	-------

 

Health care
Pfizer	US	6,239		2.0
Novartis	Switzerland	5,430		1.8
Roche	Switzerland	5,143		1.7
Medtronic	US	3,578		1.2
		---------		----
		20,390		6.7
		---------		-----
Industrials
Siemens	Germany	5,353		1.8
ABB	Switzerland	4,469		1.5
Jiangsu Expressway	China	3,660		1.2
Watsco	US	2,962		1.0
Deutsche Post	Germany	2,780		0.9
Prosegur Cash	Spain	2,720		0.9
		---------		-----
		21,944		7.3
		---------		-----
Oil & gas
Chevron	US		7,272	2.4
Total	France		4,860	1.6
China Petroleum and Chemical Occidental Vermilion Star Petroleum Refining	China US Canada Thailand		4,627 4,436 4,368 3,739	1.5 1.5 1.5 1.2
			---------	-----
			29,302	9.7
			---------	-----
Property
Eurocommercial	Netherlands		4,006	1.3
Crown Castle	US		3,878	1.3
Scentre	Australia		2,783	0.9
Mapletree Greater China	Singapore		2,519	0.8
Nexity Cyrusone	France US		2,291 2,106	0.8 0.7
			---------	-----
			17,583	5.8
			---------	-----
Technology
Microsoft	US		13,502	4.5
Taiwan Semiconductor Manufacturing	Taiwan		9,386	3.1
Cisco Systems	US		6,351	2.1
Maxim	US		3,175	1.0
Sabre	US		3,016	1.0
ASML BE Semiconductor	Netherlands Netherlands		2,944 2,891	1.0 0.9
			---------	----
			41,265	13.6
			---------	----
Telecommunications
Deutsche Telekom	Germany		5,731	1.9
Tele2	Sweden		4,293	1.4
Orange	France		3,969	1.3
SK Telecom	Korea		3,588	1.2
Verizon Communications	US		3,549	1.2
HKT Trust and HKT Ltd	Hong Kong		3,536	1.2
Spark New Zealand	New Zealand		3,423	1.1
			---------	-----
			28,089	9.3
			---------	-----

 

Utilities
Enel	Italy	3,673	1.2
		--------	----
		3,673	1.2
		--------	----
		-----------	-------
Total investments		302,416	100.0
		======	====

 

FUND MANAGER'S REPORT

Performance review

The portfolio produced positive returns over the period, generating a total return of 5.9% in net asset value ('NAV') per ordinary share, including dividends of 5.3p per share, which increased by 8% as compared to the same period in 2017.

The Company's investment process focuses on companies with attractive dividend yields, strong cash flow generation and the potential to grow both earnings and distributions in the future. The dividend growth from the portfolio has been excellent over the period. The majority of companies in the portfolio have increased or maintained their dividends and the dividend growth has been widely spread across sectors and regions. Dividend growth has been driven by both earnings growth and by increases in the proportion of earnings paid out as dividends. Examples of large increases in dividends include Korean technology company Samsung (60% year-on-year increase in dividends received over the reporting period), Italian utility Enel (30%), US retailer Best Buy (27%), and Finnish paper and packaging company UPM-Kymmene (21%). Whilst each stock has its own circumstances, there are a number of common factors that are driving their dividend growth. Economic growth was experienced across a wide range of countries through 2017 and this fed through to cyclical industries, strengthening, in particular, the earnings of the commodity and industrial sectors. Some industries have seen demand outstripping supply, either for cyclical or structural reasons. China's clamp down on environmental pollution, for example, has been a positive driver of pulp prices. OPEC's supply constraints have been positive for the portfolio's energy stocks (9.7% of the portfolio). Many companies are in the midst of a technological revolution, driven by improved connectivity and enhanced data processing power, and investment is being undertaken in technological capability. Technology is the portfolio's second largest sector (13.6%), and companies such as Taiwan Semiconductor Manufacturing and Samsung have benefited from very strong volume and pricing for their chips and computer memory. For the US holdings specifically, the US government passed a tax reform at the start of 2018 which lowers the US corporate tax rates and encourages the repatriation of earnings and cash that have been generated outside the US. This change in taxation has increased the earnings for many of the US holdings, which represent 33% of the portfolio, and has the potential to result in faster dividend growth as the full benefit of the change takes effect.

All of the factors mentioned above are driving cash flow, and in some cases significantly reducing company debt levels or increasing cash levels. All of the Company's holdings contribute to income generation, and diversification across sectors and geographies is designed to enhance the portfolio's dividend stability. Based on the underlying trends within the portfolio the outlook for dividend growth

remains good.

The Company's portfolio is relatively concentrated consisting typically of 60-80 positions, performance can thus be impacted by stock specific news and events, as well as regional equity market movements and sector news. The team's investment process is driven by stock selection, based on fundamental qualitative analysis and a strong valuation discipline. Dividends from these companies allow investors to be paid to remain invested until a valuation anomaly is corrected.

The table in the annual report highlights the most significant stock contributors to performance over the year. It shows relative return versus the benchmark, so registers the impact of both stocks held in the portfolio and those not held but which have been significant drivers of the benchmark. There are three stocks detailed that were not held in the portfolio. The portfolio has not held tobacco stocks, and in this period has benefited from not holding Philip Morris, which has been impacted by concerns around new competitors in the industry. Apple and Amazon were not held in the portfolio and have performed strongly. Technology shares have been particularly strong over the last few years and have become a much larger driver of the US market. Whilst the portfolio has not held the above specific stocks, it has benefited from sizeable holdings in Microsoft and Cisco Systems, which are exposed to increased information technology spending in response to technological advances, in particular cloud computing trends. Shares of printer manufacturer HP rallied as a result of its restructuring plans and subsequent earnings improvement. The portfolio has a significant exposure to the oil and gas sector. These holdings have benefited from a renewed focus on efficiency and the recovery in the oil price. The positions were added on the understanding that management teams were focusing on restructuring and cash flows, which is starting to bear fruit. The sector has benefited recently from a strong oil price due to supply constraints. Norwegian integrated oil company Equinor (previously Statoil) and oil services company Tenaris have rerated significantly over the last year as a result of these factors. Anta Sports, a Chinese sportswear manufacturer and retailer, is benefiting from growth in the disposable income of the Chinese consumer.

Regional equity market performance has not been as broadly spread as dividend growth. Several of the most significant relative performance detractors have been impacted by geographical exposure rather than to corporate news flow. The chart in the annual report highlights the divergence between the US equity market and the rest of the World since April (simplified here to Emerging Markets and Europe, Africa and the Far East ('EAFE')).

There has been no significant change in relative economic trends between the regions, but there is evidence of substantial loss of confidence in their perceived future paths of growth. This loss of confidence has been caused by a number of factors. The US President's focus on trade terms and the introduction of trade tariffs has impacted investor sentiment regarding net exporting regions, including Europe and China. With regard to European markets the new Italian coalition government's desire to use fiscal policy to stimulate growth has raised questions about European stability. The portfolio has a significant exposure to European companies on the basis that many of them trade at more attractive valuations than counterparts listed elsewhere in the world, and have significantly higher dividend yields. During the second half of the year this asset allocation has been the biggest single detractor to performance relative to the benchmark. Although the portfolio has not held any Italian financial companies, banks have been sensitive to developments in Italy and the broader sector sell off has impacted positions such as ING and Nordea. Defensive companies such as Deutsche Telekom and utility Enel, have also been affected by the sell off in European markets. Since the Company's 2011 launch we have seen similar periods of uncertainty, which have generated good opportunities for patient investors to buy good companies at attractive valuations. Some of the detractors have more stock specific causes such as Pandora and Prosegur Cash.

Portfolio positioning

The geographic weightings of the portfolio have not changed significantly over the period. Gearing remains low. Profits have been taken in a number of companies that have performed strongly in order to invest in new opportunities. Positions closed included printer manufacturer HP, oil company Equinor, and oil services company Tenaris. New positions initiated include Nestlé, ABB and BASF, which have sold off with the European market and are attractively valued compared to global peers. The largest change in sector positioning is the increased exposure to the oil sector. The fall in the price of oil in recent years has forced a previously generally undisciplined sector to focus on cash flow and profitability. Positions added include oil exploration and production companies Occidental Petroleum and Vermilion. The increased exposure was funded by the sale of certain telecommunication holdings, including Telenor, China Mobile and Portuguese operator NOS.

Ben Lofthouse

Fund Manager

29 October 2018

 

PRINCIPAL RISKS AND UNCERTAINTIES

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 or liquidity. In carrying out this assessment, the board has considered the market uncertainty arising from the UK negotiations to leave the European Union. 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, which have not changed from last year, and the steps taken by the board to mitigate these, and whether the board considers the impact of such risks has changed over the past year, are as follows:

Risk	Mitigation
Investment activity and performance risks 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 its borrowings when in use.
Portfolio and market price risks 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. Most of the Company's assets, liabilities, income and expenses are denominated in currencies other than sterling (the Company's functional currency and presentational currency). As a result, movements in exchange rates may affect the sterling value of those items.	The Manager seeks to maintain a diversified portfolio to mitigate against this risk. The board regularly reviews the portfolio, activities and performance. The fund manager monitors the Company's exposure to foreign currencies daily and reports to the board at each meeting. The fund manager measures the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value and total return of a movement in the exchange rate to which the Company's assets, liabilities, income and expenses are exposed. The board has set an investment limit on currency hedging to a maximum of 25% of gross assets to mitigate against this risk.
Tax and regulatory risks A breach of section 1158 of the Corporation Tax Act 2010 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 UK Listing Rules could result in suspension of the Company's shares, while a breach of the Companies Act could lead to criminal proceedings, or financial or reputational damage.	The Manager has contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The board receives internal control reports produced by Janus Henderson on a quarterly basis, which confirm regulatory compliance.
Operational risks Disruption to, or failure of, Janus 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 and cyber risk that one or more of its service providers may not provide the required level of service.	The board monitors the services provided by the Manager and its other suppliers and receives reports on the key elements in place to provide effective internal control. The board also monitors the principle business risks faced by the Company which are recorded in a risk map which 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.

The board considers these risks to have remained unchanged throughout the year under review.

Borrowings

Where the fund manager believes that gearing will enhance returns to shareholders, the Company may borrow up to 25% of its gross assets at the time of drawdown or investment (as appropriate). Borrowings for these purposes would include implied gearing through the use of derivatives. The Company's gearing facility allows borrowing in sterling and other currencies. In the year under review the Company borrowed in both sterling and euros.

Viability statement

The directors have assessed the viability of the Company over a three year period, taking account of the Company's current position and the potential impact of the principal risks and uncertainties documented in the strategic report.

The assessment has considered the impact of the likelihood of the principal risks and uncertainties facing the Company. In particular, investment activity and performance, portfolio, market and currency risks, in severe but plausible scenarios, and the effectiveness of any mitigating controls in place.

The directors also took into account the liquidity of the portfolio, the gearing and the income stream from the portfolio in considering the viability of the Company over the next three years and its ability to meet liabilities as they fall due. This included consideration of how the forecast income stream, expenditure and levels of reserves could impact on the Company's ability to pay dividends to shareholders over that period in line with its current dividend policy. Whilst detailed forecasts are only made over a shorter time frame, the nature of the Company's business as an investment trust means that such forecasts are equally valid to be considered over the longer three year period as a means of assessing whether the Company can continue in operation. This included consideration of the duration of the Company's overdraft facility and how a breach of the overdraft facility covenants could impact on the Company's net asset value and share price.

The directors conducted this review for a period of three years. They consider this to be an appropriate period over which they do not expect there to be any significant change in the current principal risks and adequacy of the mitigating controls in place. The directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period because the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust. Only a substantial financial crisis affecting the global economy could have an impact on this assessment. Whilst there is currently uncertainty in the markets due to the UK's negotiations to leave the European Union, the board does not believe that this will have a long term impact on the viability of the Company and its ability to continue in operation.

The directors recognise that there is a continuation vote that is due to take place at the annual general meeting following the 31 August 2020 year end. The directors currently support the continuation of the Company and expect that the Company will continue to exist for the foreseeable future, and at least for the period of assessment. However if such a vote were not passed, the directors would follow the provisions in the articles of association to the effect that the Company be wound up, liquidated, reorganised or unitised.

Based on this assessment, the directors expect that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three year period.

Related party transactions

The Company's current related parties are its 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 expenses and remuneration for which there were no outstanding amounts payable at the year end.

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 provision of marketing services) there have been no material transactions with the Manager affecting the financial position or performance of the Company during the year under review.

Statement under Disclosure Guidance and Transparency Rule 4.1.12

Each of the directors confirms that, to the best of their knowledge:

• 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

• 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

Simon Jeffreys

Chairman

29 October 2018

 

INCOME STATEMENT

		Year ended 31 August 2018			Year ended 31 August 2017
Notes		Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
	Gains from investments held at fair value through profit or loss	-	7,481	7,481	-	35,101	35,101
3	Income from investments held at fair value through profit or loss	12,500	-	12,500	10,882	-	10,882
	Profit/(loss) on foreign exchange	-	85	85	-	(170)	(170)
	Other income	220	-	220	297	-	297
		---------	-------	---------	---------	---------	---------
	Gross revenue and capital gains	12,720	7,566	20,286	11,179	34,931	46,110
	Management fee	(458)	(1,374)	(1,832)	(409)	(1,229)	(1,638)
	Other administrative expenses	(559)	-	(559)	(530)	-	(530)
		----------	--------	--------	----------	---------	----------
	Net return before finance costs and taxation	11,703	6,192	17,895	10,240	33,702	43,942
		----------	--------	--------	--------	--------	--------
	Finance costs	(25)	(31)	(56)	(28)	(40)	(68)
		------	--------	----------	---------	---------	---------
	Net return before taxation	11,678	6,161	17,839	10,212	33,662	43,874
		--------	--------	----------	--------	--------	--------
	Taxation on net return	(1,456)	3	(1,453)	(1,116)	78	(1,038)
		---------	--------	--------	--------	--------	--------
	Net return after taxation	10,222	6,164	16,386	9,096	33,740	42,836
		=====	=====	=====	====	=====	=====
4	Return per ordinary share	5.80p	3.50p	9.30p	5.76p	21.36p	27.12p

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.

 

STATEMENT OF CHANGES IN EQUITY

Notes	Year ended 31 August 2018	Called up share capital £'000	Share premium account £'000	Special reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
	At 31 August 2017	1,742	159,102	45,732	71,655	5,741	283,972
7, 8	New shares allotted	34	5,529	-	-	-	5,563
	Net return for the year	-	-	-	6,164	10,222	16,386
5	Dividends paid	-	-	-	-	(9,173)	(9,173)
		-------	----------	----------	---------	--------	----------
	At 31 August 2018	1,776	164,631	45,732	77,819	6,790	296,748
		====	=====	=====	=====	=====	======

Notes	Year ended 31 August 2017	Called up share capital £'000	Share premium account £'000	Special reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
	At 31 August 2016	1,561	131,328	45,732	37,915	4,368	220,904
7, 8	New shares allotted	44	6,778	-	-	-	6,822
	Issue of ordinary shares from C share conversion	137	20,996	-	-	-	21,133
	Net return for the year	-	-	-	33,740	9,096	42,836
5	Dividends paid	-	-	-	-	(7,723)	(7,723)
		-------	----------	---------	---------	--------	----------
	At 31 August 2017	1,742	159,102	45,732	71,655	5,741	283,972
		====	=====	=====	=====	=====	======

 

STATEMENT OF FINANCIAL POSITION

Notes		At 31 August 2018 £'000	At 31 August 2017 £'000
	Fixed asset investments held at fair value through profit or loss	302,416	284,920
		----------	----------
	Current assets
	Debtors	1,420	1,375
	Cash and cash equivalents	-	4,099
		--------	--------
		1,420	5,474
		--------	--------
	Creditors: amounts falling due within one year	(7,088)	(6,422)
		---------	---------
	Net current liabilities	(5,668)	(948)
		----------	----------
	Total net assets	296,748	283,972
		======	======
	Capital and reserves
7	Called up share capital	1,776	1,742
8	Share premium account	164,631	159,102
	Special reserve	45,732	45,732
	Other capital reserves	77,819	71,655
	Revenue reserve	6,790	5,741
		----------	----------
	Total shareholders' funds	296,748	283,972
		======	======
6	Net asset value per ordinary share	167.1p	163.0p

 

CASH FLOW STATEMENT

	Year ended 31 August 2018 £'000	Year ended 31 August 2017 £'000
Cash flows from operating activities
Net return  before taxation	17,839	43,874
Add back: finance costs	56	68
Less: gains on investments held at fair value through profit or loss	(7,481)	(35,101)
Add: (gain)/loss on foreign exchange	(85)	170
Withholding tax on dividends deducted at source	(1,617)	(1,318)
Taxation recovered	55	75
Decrease/(increase) in debtors	386	(303)
Decrease in creditors	(9)	(209)
	--------	--------
Net cash inflow from operating activities	9,144	7,256
	--------	--------
Cash flows from investing activities
Purchase of investments	(123,621)	(112,706)
Sale of investments	107,765	82,907
	--------	--------
Net cash outflow from investing activities	(15,856)	(29,799)
	--------	--------
Cash flows from financing activities
Equity dividends paid (net of refund of unclaimed distributions and reclaimed distributions)	(9,173)	(7,723)
Proceeds from issue of ordinary shares	5,530	6,840
Proceeds from issue of ordinary shares from C share conversion	-	21,106
Interest paid	(56)	(68)
	--------	--------
Net cash (outflow)/inflow from financing activities	(3,699)	20,155
	--------	--------
Net decrease in cash and cash equivalents	(10,411)	(2,388)
Cash and cash equivalents at start of year	4,099	6,657
Effect of foreign exchange rates	85	(170)
	--------	--------
Cash and cash equivalents at end of year	(6,227)	4,099
	=====	=====
Comprising:
Cash at bank	-	4,099
Bank overdraft	(6,227)	-
	--------	--------
	(6,227)	4,099
	=====	=====

NOTES TO THE FINANCIAL STATEMENTS

1.   Accounting policies

Basis of accounting

The Company is a registered investment company as defined in Section 833 of the Companies Act 2006 and is incorporated in the United Kingdom. It operates in the United Kingdom and is registered at 201 Bishopsgate, London EC2M 3AE.

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland and with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts ('the SORP') issued in November 2014 and updated in February 2018 with consequential amendments.

The principal accounting policies applied in the presentation of these financial statements are set out in the annual report. These policies have been consistently applied to all the years presented.

The financial statements have been prepared under the historical cost basis except for the measurement at fair value of investments. In applying FRS102, financial instruments have been accounted for in accordance with sections 11 and 12 of the standard. All of the Company's operations are of a continuing nature.

2.    Going concern

The assets of the Company consist of securities that are readily realisable and, accordingly, the directors believe that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. 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.    Income from investments held at fair value through profit or loss

	2018 £'000	2017 £'000
Dividend income	12,500	10,882
	---------	---------
	12,500	10,882
	======	======

4.    Return per ordinary share

	2018		2017
	£'000	pence	£'000	pence
Revenue return	10,222	5.80	9,096	5.76
Capital return	6,164	3.50	33,740	21.36
	---------	--------	---------	-------
Total return	16,386	9.30	42,836	27.12
	=====	=====	=====	====
Weighted average number of ordinary shares	176,164,731		157,944,441

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

		Ex-dividend date	Record date	Payment date	2018 £'000	2017 £'000
4th interim dividend	1.20p	27 October 2016	28 October 2016	30 November  2016	-	1,879
1st interim dividend	1.20p	9 February 2017	10 February 2017	28 February 2017	-	1,879
2nd interim dividend	1.20p	27 April 2017	28 April 2017	31 May 2017	-	1,879
3rd interim dividend	1.20p	27 July 2017	28 July 2017	31 August 2017	-	1,925
4th interim dividend	1.30p	26 October 2017	27 October 2017	30 November 2017	2,275	-
1st interim dividend	1.30p	8 February 2018	9 February 2018	28 February 2018	2,291	-
2nd interim dividend	1.30p	3 May 2018	4 May 2018	31 May 2018	2,298	-
3rd interim dividend	1.30p	9 August 2018	10 August 2018	31 August 2018	2,309	-
					-------	-------
					9,173	7,562
					====	====

Dividends paid on C shares for the year ended 31 August

		Ex-dividend date	Record date	Payment date	2018 £'000	2017 £'000
Interim dividend	0.75p	10 August 2017	11 August 2017	31 August 2017	-	161
					-------	-------
					-	161
					====	====

A fourth interim dividend in respect of the year ended 31 August 2018 of 1.40p per share was declared on 29 October 2018 and will be paid to shareholders on 30 November 2018 with the record date 9 November 2018. The Company's shares will go ex-dividend on 8 November 2018.

All dividends have been paid or will be paid out of revenue profits.

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

	2018 £'000	2017 £'000
Revenue available for distribution by way of dividend for the year	10,222	9,096
First three interim dividends totalling 3.90p paid (2017: 4.35p)	(6,898)	(5,844)
Fourth interim dividend for the year ended 31 August 2018 of 1.40p (based on 177,581,306 ordinary shares in issue as at 29 October 2018) (2017: 1.30p)	(2,486)	(2,275)
	--------	---------
Undistributed revenue for section 1158 purposes1	838	977
	====	===

¹ Comprises 7.2% of taxable income (2017: 9.9%).

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:

	2018	2017
Net assets attributable (£'000)	296,748	283,972
Number of ordinary shares in issue	177,581,306	174,206,306
Net assets per ordinary share (pence)	167.1	163.0

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

	2018 £'000	2017 £'000
Net assets at start of the year	283,972	220,904
Total net return after taxation	16,386	42,836
Dividends paid	(9,173)	(7,723)
Issue of ordinary shares less issue costs	5,563	27,955
	----------	----------
Total net assets attributable to the ordinary shares at 31 August	296,748	283,972
	======	======

7.    Called up share capital

2018	Number of shares	Number of shares entitled to dividend	£'000
Ordinary shares 1p each
At 31 August 2017	174,206,306	174,206,306	1,742
New shares allotted in year	3,375,000	3,375,000	34
	----------------	-----------------	-------
At 31 August 2018	177,581,306	177,581,306	1,776
	=========	=========	====

During the year, the Company issued 3,375,000 ordinary shares for a total consideration of £5,530,000 after deduction of issue costs of £22,000. In addition, £33,000 was written back following the removal of a provision for issue costs relating to the issue of C shares which was not utilised.

2017	Number of shares	Number of shares entitled to dividend	£'000
Ordinary shares 1p each
At 31 August 2016	156,080,606	156,080,606	1,561
New shares allotted in year	4,370,000	4,370,000	44
New shares allotted from conversion of C shares	13,755,700 ---------------	13,755,700 ---------------	137 -----
At 31 August 2017	174,206,306	174,206,306	1,742
	=========	=========	====

During 2017, the Company issued 4,370,000 ordinary shares for a total consideration of £6,822,000 after deduction of issue costs of £64,000.

During 2017, the Company also issued 21,500,000 C shares for a total consideration of £21,133,000 after deduction of issue costs of £367,000. These were converted into 13,755,700 new ordinary shares on 18 August 2017.

8.    Share premium account

	2018 £'000	2017 £'000
At the start of the year	159,102	131,328
Ordinary shares allotted in year	5,518	6,842
Issue costs	(22)	(64)
Ordinary shares allotted from C share issue	-	20,996
Write back provision for C share issue costs	33 ----------	- ----------
At 31 August	164,631	159,102
	======	======

9.    2018 Financial information

The figures and financial information for the year ended 31 August 2018 are extracted from the Company's annual financial statements for that year and do not constitute statutory financial statements for that year. The Company's annual financial statements for the year ended 31 August 2018 have been audited but have not yet been delivered to the Registrar of Companies. The auditors' report on the 2018 financial statements was unqualified and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.

10.   2017 Financial information

The figures and financial information for the year ended 31 August 2017 are extracted from financial statements for that year and do not constitute statutory financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain any statements under sections 498(2) or 498(3) of the Companies Act 2006.

 

11.   Annual report and financial statements

The annual report and financial statements for the year ended 31 August 2018 will be posted to shareholders in November 2018 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, 7 December 2018 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 Head and Director of Investment Trusts Henderson Investment Funds Limited Telephone: [phone]	Laura Thomas Investment Trust PR Manager Janus Henderson Investors Telephone: [phone]

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

 

 

FR FESFEUFASEES