Final Results

RNS Number : 6970C

Henderson Intl. Income Trust PLC

19 October 2015

 



19 October 2015                                                                                                                       

HENDERSON INTERNATIONAL INCOME TRUST PLC

Annual Financial Report for the year ended 31 August 2015

This announcement contains regulated information

PERFORMANCE HIGHLIGHTS	2015	2014
Diluted NAV per share at year end1	115.6p2	117.5p
Undiluted NAV per share at year end1	115.6p	118.4p
Dividend in respect of the year end3	4.50p	4.25p
Dividend yield for the year ended3	3.8%	3.9%
Ongoing charge for the year	1.11%	1.09%
Gearing at year end	6.3%	2.7%
Share price at year end	118.75p	109.80p
Shares in issue at year end	79,246,550	76,371,550

¹ Calculated using published daily NAVs including current year revenue

² As the remaining subscription shares were exercised on 4 September 2014, there is no dilutive effect on the net assets per ordinary

share as at 31 August 2015 and therefore the diluted NAV and undiluted NAV as at that date are the same. In the prior year, the diluted

NAV was calculated in accordance with guidelines issued by the AIC and assumed that all outstanding subscription shares were

converted into ordinary shares at the year end

³ Includes the fourth interim dividend in respect of  the year-ended 31 August 2015 declared on 12 October 2015 to be paid to shareholders on 27 November 2015 and is based on the share price at the year end date

Source: M3rningstar Funddata, Henderson, Datastream

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 2015 the return on the diluted net asset value ('NAV') per ordinary share (on a total return basis) was 2.1%. The Company's return on the ordinary share price (on the same basis) was 12.2%. These returns compare to a total return of 5.0% in the MSCI World (ex UK) Index (sterling adjusted).

In the international markets where we operate, the past year has been particularly difficult to read, with lack of any clear trend leading to volatile conditions. Share price total return has been good and above our broader benchmark. This reflects credit on our managers given the unreliable nature of our markets.

The positive benchmark returns hide a sizeable dispersion between different stock markets around the world. Equity markets in developed economies have been generally positive, driven by a combination of gradual economic recovery and further Central Bank monetary policy action. However emerging markets have been weak, influenced by a combination of currency weakness, commodity price declines, and poor Chinese growth.

After strong NAV growth in the first half of the Company's financial year, markets have sold off primarily on concerns regarding China. While growth there has been slowing for some years, government intervention in both the stock and currency markets has unnerved investors and created considerable uncertainty.

It is reassuring to report therefore that the Company's portfolio avoided much of the turmoil in equity and currency markets by being mainly focused on developed economies.  Against this the portfolio has been underweight in the best performing markets of the United States and Japan, which has led to underperformance against our NAV benchmark.

Market uncertainty over the take up of our subscription shares in August 2014 resulted in our starting the year at discount of 6.6%. This returned to a premium of 2.7% at the year end.

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 improve liquidity in our shares, and spread fixed costs over a larger base. Progress has been made over the year as the Company took advantage of ongoing demand from investors to issue shares periodically on an ad hoc basis.

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 continue to make the Company's shares attractive to a wider audience. So we shall remain alert for all opportunities to grow the Company. 

During the year we increased our issued ordinary share capital by 6,795,962 ordinary shares and a further 500,000 ordinary shares have been issued between 1 September 2015 and 15 October 2015 being the last practicable date prior to the issue of this report. At 31 August 2015 there were 79,246,550 shares in issue.

Your board and the fund manager review conditions in our markets on a regular basis. When conditions allow we intend to bring forward a further share issue to enable the Company and its shareholders to benefit from economies of scale and the other benefits mentioned above.

Earnings and dividends

The Company has performed well, achieving a dividend increase from 4.25p to 4.50p per ordinary share in respect of the year to 31 August 2015. The year consisted of a first and second interim dividend of 1.10p per ordinary share and an increased third interim dividend of 1.15p per ordinary share. The fourth interim dividend of 1.15p per ordinary share will paid on 27 November 2015. Given the earnings growth being produced by the portfolio, and in the absence of any change in conditions, the board intends to maintain the quarterly dividend at its new level during the year to 31 August 2016.

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. The gearing at the year end was 6.3% (2014: 2.7%).

Discount control

On expiry of the 8,300,000 subscription shares on 31 August 2014 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. On 1 September 2014 4,379,038 shares were exercised, issued and allotted and on 4 September 2014 the remaining 3,920,962 shares were exercised, issued and allotted.

The board is pleased that the Company has returned to trading at a premium after the expiry of the subscription shares. 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, so we believe it is not in shareholders' interests to have a specific issuance or 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.

Annual general meeting

The fifth annual general meeting of the Company will be held at 2:30 pm on Friday, 20 November 2015 at the 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 this annual report. Ben Lofthouse, the fund manager, will give a presentation to the meeting which will be followed by light refreshments.

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.

For the first time 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 as it happens by visiting www.henderson.com/trustslive.

Outlook

Economic growth in developed economies remains stable and interest rates remain at very low levels. Major countries are more aligned politically on policies to deal with the remainder of the 2007 induced recession, even if the rise in strongly left or right wing groupings within them presents a new challenge. Public debate about whether or when Central Banks should raise interest rates discloses a general belief in growth continuing for the near term, even if this growth may be patchy. Against this background, we judge that well positioned, cash generating companies with good dividend yields will remain attractive to investors looking for growing income streams and the potential for capital growth.

Our portfolio is spread globally and excludes UK listed stocks. Our managers have built a good reputation for selection between both markets and sectors. In order to balance risks in the portfolio, your board and our managers pay a lot of attention to limiting the downside while seeking out growth opportunities. Risk management measures include keeping a close eye on sterling movements, monitoring domestic market movements in different countries, reviewing gearing policy, and an investment process that builds a safety margin into stock pricing decisions.

In the relatively short life of the Company there have been several periods during which equity markets have corrected. On each occasion our portfolio had already been positioned defensively and from the disruption new investment opportunities have presented themselves. The Company has a manager with a growing reputation; we have a flexible mandate for geographical and sector allocations, and the ability to use leverage to enhance return when judged to be prudent.

Christopher Jonas, CBE

Chairman

19 October 2015

Portfolio Information
Ten largest investments at 31 August

Ranking 2015	Ranking 2014	Company	Country	Sector	Market value 2015 £'000	% of portfolio
1	1	Reynolds American	US	Consumer goods	2,830	2.9
2	5	Novartis	Switzerland	Health care	2,649	2.7
3	9	Lockheed Martin	US	Industrials	2,577	2.7
4	3	Microsoft	US	Technology	2,526	2.6
5	6	Roche	Switzerland	Health care	2,464	2.5
6	30	General Electric	US	Industrials	2,351	2.4
7	-	Verizon Communications	US	Telecommunications	2,325	2.4
8	2	SK Telecom	Korea	Telecommunications	2,162	2.2
9	25	Six Flags Entertainment	US	Consumer services	2,094	2.2
10	-	Nielsen	US	Consumer services	2,077	2.1
					--------	------
					24,055	24.7
					=====	====
Top 10 = 24.7% of the portfolio

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

	2015	2014
	%	%
Financials	22.7	19.7
Industrials	16.7	18.5
Technology	12.2	9.6
Telecommunications	11.6	4.4
Property	11.6	11.8
Health care	9.1	7.0
Consumer services	8.7	8.6
Oil & gas	4.5	9.6
Consumer goods	2.9	5.8
Utilities	-	3.4
Basic materials	-	1.6

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

	2015 %	2014 %
US	42.0	32.7
France	13.1	10.3
Switzerland	7.9	10.2
Australia	5.9	5.5
Germany	5.5	8.9
Hong Kong	4.3	4.2
China	3.7	9.1
Japan	3.2	1.7
Taiwan	2.7	3.5
Korea	2.2	3.0
Netherlands	2.1	0.9
Israel	1.7	-
Thailand	1.4	1.1
New Zealand	1.2	1.4
Italy	1.2	2.3
Canada	1.0	1.8
Singapore	0.9	2.3
Norway	-	1.1

Gearing levels over the year

	%
September 2014	1.7
October 2014	6.7
November 2014	6.2
December 2014	8.7
January 2015	7.7
February 2015	8.5
March 2015	5.8
April 2015	6.3
May 2015	6.6
June 2015	6.8
July 2015	3.9
August 2015	6.3

Source: Henderson

Investment Portfolio as at 31 August 2015

Company	Country	Market value £'000	% of portfolio
CONSUMER GOODS
Reynolds American	US	2,830	2.9
		--------	-----
		2,830	2.9
		--------	----
CONSUMER SERVICES
Six Flags Entertainment	US	2,094	2.2
Nielsen	US	2,077	2.1
RTL Group	Germany	1,941	2.0
Las Vegas Sands	US	1,322	1.4
Aimia	Canada	1,020	1.0
		--------	-----
		8,454	8.7
		--------	----
FINANCIALS
Ares Capital	US	1,910	2.0
JP Morgan Chase	US	1,839	1.9
KKR	US	1,822	1.9
Mizuho Financial	Japan	1,792	1.8
Zurich Insurance	Switzerland	1,514	1.5
Deutsche Boerse	Germany	1,510	1.5
AXA	France	1,460	1.5
Suncorp	Australia	1,437	1.5
National Australia Bank	Australia	1,347	1.4
Scor Se	France	1,346	1.4
PNC Financial Services	US	1,343	1.4
Daiwa Securities	Japan	1,342	1.4
Cembra Money Bank	Switzerland	1,135	1.2
Bank of China	China	1,135	1.2
Och-Ziff Capital Management	US	1,106	1.1
		---------	-----
		22,038	22.7
		---------	-----
HEALTH CARE
Novartis	Switzerland	2,649	2.7
Roche	Switzerland	2,464	2.5
Pfizer	US	1,989	2.1
Johnson & Johnson	US	1,783	1.8
		--------	-----
		8,885	9.1
		--------	----
INDUSTRIALS
Lockheed Martin	US	2,577	2.7
General Electric	US	2,351	2.4
Deutsche Post	Germany	1,920	2.0
Compagnie de Saint-Gobain	France	1,764	1.8
Eaton	US	1,484	1.5
Rexel	France	1,480	1.5
Amcor	Australia	1,470	1.5
United Parcel Service	US	1,368	1.4
CK Hutchison	Hong Kong	1,039	1.1
Shanghai Industrial	China	823	0.8
		---------	----
		16,276	16.7
		---------	-----

OIL & GAS
Chevron	US	1,998	2.0
Total	France	1,279	1.3
ENI	Italy	1,125	1.2
		--------	----
		4,402	4.5
		--------	----
PROPERTY
Eurocommercial	Netherlands	2,052	2.1
Icade	France	1,918	2.0
Nexity	France	1,625	1.6
Scentre	Australia	1,431	1.5
Iron Mountain	US	1,400	1.4
Cheung Kong	Hong Kong	1,031	1.1
China Resources Land	China	1,005	1.0
Mapletree Greater China	Singapore	853	0.9
		---------	-----
		11,315	11.6
		--------	----
TECHNOLOGY
Microsoft	US	2,526	2.6
Cisco Systems	US	1,782	1.8
Seagate Technology	US	1,621	1.6
Intouch	Thailand	1,384	1.4
Garmin	US	1,350	1.4
Taiwan Semiconductor Manufacturing	Taiwan	1,338	1.4
Advanced Semiconductor Engineering	Taiwan	1,236	1.3
NetEase	China	651	0.7
		---------	-----
		11,888	12.2
		--------	----
TELECOMMUNICATIONS
Verizon Communications	US	2,325	2.4
SK Telecom	Korea	2,162	2.2
HKT Trust and HKT Ltd	Hong Kong	2,048	2.1
Orange	France	1,948	2.0
Bezeq The Israeli Telecommunication Corporation	Israel	1,581	1.7
Spark New Zealand	New Zealand	1,176	1.2
		--------	----
		11,240	11.6
		--------	----
		--------	------
Total Investments		97,328	100.0
		=====	====

FUND MANAGER'S REPORT

Performance review

The portfolio delivered positive returns over the period, generating a total return of 2.1% (diluted NAV per ordinary share) and a dividend of 4.50p, an increase of 5.9% year on year. The general increase in developed world equity markets over the period masks the fact that it has continued to be a tough operating environment for many companies; economic growth remains subdued, inflation low, and there has been considerable volatility in currencies and commodity prices, to say nothing of geopolitical concerns. To some extent the avoidance of problem areas has been almost as important as investing in 'winners' in this environment.

Across the portfolio dividend growth has been strong which has allowed the Company to grow its dividend again this year. One of the key investment criteria for the Company's investments is the ability to at least sustain, and preferably grow dividends, in what is potentially a relatively low economic growth environment.

The strongest dividend growth has come from some of the portfolio's technology companies, driven by strong balance sheets and excellent cash generation. After coming through a period of significant investment in new capacity, Taiwan Semiconductor Manufacturing increased its dividend by 50%, computer storage device manufacturer Seagate Technology raised its pay-out by 25%, and following several years of double digit growth Microsoft continued its progressive dividend policy with an 11% dividend increase. The portfolio has a significant weighting to financial services companies where the normalisation of dividend payments across the sector is ongoing. Within the portfolio French insurance giant AXA increased its dividend by 17% year on year, Swiss lender Cembra Money Bank increased its dividend by 9%, US retail bank PNC Financial Services provided an increase of 6%, and life and non-life insurer Scor Se announced an 8% increase. Other notable increases from some of the largest positions in the portfolio included theme park operator Six Flags Entertainment with an increase of 11% in its quarterly dividend, media company Nielsen - 12%, Reynolds American - 7%, Lockheed Martin - 13% and Novartis - 6%.

As alluded to in the opening paragraph of this report, it has not been plain sailing and integrated oil producer ENI announced that it would be reducing its dividend by almost 30% for 2015 in response to falling oil prices. The exposure to oil and oil services companies has been reduced significantly over the last twelve months from over 10% to less than 5%, and the position in ENI was 1.2% at the year end so it represents a small exposure in the portfolio.

The outlook for dividend growth from the portfolio remains good, driven by a combination of earnings growth and the ability to raise pay-out ratios.

Portfolio

The Company's portfolio is relatively concentrated consisting typically of 60 positions, so performance is impacted by stock specific news and events as well as regional equity market performances and sector news.

The strongest regional portfolio was North America, returning 8.7% over the period, followed by Europe which returned 5.6%, and then Asia-Pacific which generated a -7.6% return. Gearing enhanced the capital returns by 0.6% over the year. The MSCI World (ex UK) Index (sterling adjusted) returned 5% over the period.

All of the regional portfolios have outperformed their respective benchmarks, but performance relative to the benchmark has been held back by the portfolio's large weight in Asia-Pacific relative to the index (30% exposure on average over the year). Currency played a significant part in the weak performance of the region in a global context; the Australian, New Zealand, and Korean currencies fell 17%, 18% and 7% respectively against sterling over the year, offsetting some good stock selection at a country level.

In the US portfolio the strongest performers were Reynolds American, which is in the process of further consolidating in the US tobacco industry, theme park operator Six Flags Entertainment which is seeing good attendance growth and price increases at its sites, and defence company Lockheed Martin whose restructuring activities are being well received by the market. The weakest performers include Macau Casinos, which have been hit by Chinese government action to crack down on corruption and the positions in Las Vegas Sands and SJM Holdings were weak as a result. The position in SJM Holdings was sold during the period. Loyalty programme operator Aimia was impacted by worse than expected contract terms with one of its key partners.

The threat of deflation in Europe has spurred the European Central Bank into action and its launch of quantitative easing ('QE') has had the result of weakening the currency significantly whilst driving equities higher. The overall effect to the portfolio has been positive and holdings such as securities exchange operator Deutsche Boerse, insurance company Scor Se, and French house builder Nexity have all appreciated significantly even in sterling terms, despite the 8% depreciation of the euro over the year. Only time will tell whether QE will be effective, but in the short term the fall in currency, precipitous fall in energy prices, and fall in interest costs across the Eurozone over the last eighteen months are all likely to be positive drivers of economic activity in the coming months, which I hope will drive many of the Company's holdings earnings growth higher. Whilst weak energy prices will benefit energy users and importers they are not good for power generating utilities or oil producers and unsurprisingly German utility RWE and oil companies Total, PetroChina and ENI were weak as a result. These positions were initiated on the view that management were more focused on investor returns and cash generation, an investment case that was playing out, but unfortunately the fall in energy prices will undoubtedly make this harder to achieve. The position in RWE was closed in April when it became apparent that the dividend cover was going to be lower than we expected. The energy sector exposure was reduced significantly in the first half of the year through sales of oil services operators Sembcorp Marine and Seadrill, and integrated oil company PetroChina. The average sector position in energy was significantly lower than that of the index and this was one of the most significant positives to relative performance at a sector level.

In the Asia-Pacific region a number of the strongest contributors to performance were Chinese holdings, including online gaming company NetEase, which saw strong earnings growth during the year. During the first half of the year the Chinese stock markets rallied significantly in response to Central Bank action to address falling inflation and slowing growth. The portfolio's exposure to Chinese equities had been increased in 2014 on valuation grounds. The sharp rally resulted in a realisation of much of the value in some positions and some positions were reduced or closed completely including NetEase, Bank of China, property companies Wharf Holdings and Shimao Property, and conglomerate NWS Holdings. With the benefit of hindsight this was well timed because subsequent actions to dampen the stock market have unfortunately resulted in a sharp market correction.

Portfolio positioning

The Company has taken advantage of the fall in euro denominated interest rates by converting some of its gearing facility in to euros and as at 31 August 2015 was borrowing €6.5m. In addition to reducing borrowing costs this reduces some of the portfolio's currency exposure to the euro. The exposure to companies listed in euros represents 23% of the portfolio.

The biggest change to the portfolio was in regional allocation. Over the year there has been an increase in the US exposure from 32% to 42% of the portfolio, and reductions in Chinese exposure from 9% to 3.7%, and European exposure from 35% to 32%. These changes were predominantly driven by valuation differentials between regions. The European and Chinese stock markets were both driven higher over the year by Central Bank announcements regarding financial stimulus from the European Central Bank and People's Bank of China respectively. Whilst these announcements were welcome given the slow growth in these regions, they did lead to a somewhat indiscriminate rally in some areas of the market and profits were taken in some positions. In contrast the US stock market has seen net selling by investors for much of the year. Some dividend stocks have been particularly poor performers, in part due to fears regarding potential interest rate hikes by the Federal Reserve. This has provided an opportunity to invest in many companies that the investment team consider to be world leaders in their respective fields at attractive valuations and dividend yields versus both their own trading histories and those of similar global peers. Positions initiated that fit this description include technology company Cisco, telecommunications operator Verizon Communications, pharmaceutical company Johnson & Johnson, consumer services company Nielsen, document storage company Iron Mountain and global financial services company JP Morgan Chase. Whilst the portfolio's returns over the last twelve months have benefited from having limited exposure to commodity producing regions and sectors, a new position was opened in energy company Chevron at the end of the year. Whilst the outlook for oil prices is very hard to determine, Chevron is a well invested resource company with numerous growth assets coming on stream over the next few years. It has traditionally traded at a premium to many of its global peers and the recent sector sell-off provided the opportunity to purchase it at a discount.

The most significant change in sector exposure during the year was the increase in the telecommunications sector from 4.4% to 11.6% and the reduction in the energy sector from 10% to 5%. The telecommunications sector increase has been done on a case by case investment by adding five new positions in five different regions. In many of these regions consolidation is happening or being considered, which should improve market dynamics. In addition data use by customers is increasing and helping to stabilise earnings. The cash flow generation for the sector has significantly improved compared to previous years which support both their dividend payments and investment needs.

A number of positions across a range of sectors and geographies were closed over the last six months. There are stock or industry specific reasons for each closed position but there is a general, overarching theme which is that growth outlook for some of these companies has deteriorated and in some cases new supply is coming in to their markets. Positions closed on this basis included chemicals company BASF, oil services companies SembCorp Marine and Seadrill, Asian construction company Taiwan Cement, and technology company Tong Hsing Electronic. In addition the positions in Eutelsat, Dominion Resources, Nestlé and Hong Kong property company Wharf Holdings were sold on valuation grounds having performed strongly.

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 are 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 will take advantage of volatility in markets to enhance this potential by investing in undervalued companies.

Ben Lofthouse

Fund Manager

19 October 2015

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, market price and currency

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.

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 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 30% 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 Listing Rules could result in suspension of the Company's shares, while a breach of the Companies Act 2006 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 measures 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

The Company's current related parties are its directors and Henderson. There have been no material transactions between the Company and its directors during the year and 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 Henderson, 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 Henderson affecting the financial position of the Company during the year under review.

STATEMENT OF DIRECTORS' RESPONSIBILITIES UNDER DTR 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

19 October 2015

INCOME STATEMENT

		Year ended 31 August 2015			Year ended 31 August 2014
Notes		Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
2	(Losses)/gains from investments held at fair value through profit or loss	-	(2,010)	(2,010)	-	4,058	4,058
3	Income from investments held at fair value through profit or loss	4,821	-	4,821	4,276	-	4,276
	Profit on foreign exchange	-	310	310	-	147	147
	Other income	192	-	192	76	-	76
		-----	---	----	-----	---	----
	Gross revenue and capital gains/(losses)	5,013	(1,700)	3,313	4,352	4,205	8,557
	Management fee	(177)	(532)	(709)	(146)	(437)	(583)
	Other administrative expenses	(350)	-	(350)	(302)	-	(302)
		-------	---	--------	-------	---	--------
	Net return on ordinary activities before finance charges and taxation	4,486	(2,232)	2,254	3,904	3,768	7,672
		--------	--------	--------	--------	--------	--------
	Finance charges	(23)	(70)	(93)	(35)	(104)	(139)
		------	--------	--------	------	--------	--------
	Net return on ordinary activities before taxation	4,463	(2,302)	2,161	3,869	3,664	7,533
		--------	--------	--------	--------	--------	--------
	Taxation on net return on ordinary activities	(493)	-	(493)	(456)	-	(456)
		--------	---	--------	--------	---	--------
	Net return on ordinary activities after taxation	3,970	(2,302)	1,668	3,413	3,664	7,077
		====	====	====	====	====	====
4	Basic return per ordinary share	5.14p	(2.98p)	2.16p	5.59p	5.99p	11.58p
4	Diluted return per ordinary share	5.14p	(2.98p)	2.16p	5.55p	5.95p	11.50p

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.

RECONCILIATION OF MOVEMENTS IN SHAREHOLDER'S FUNDS

Notes	Year ended 31 August 2015	Called up share capital £'000	Share premium account £'000	Special reserve £'000	Other capital reserve £'000	Revenue reserve £'000	Total £'000
	At 31 August 2014	764	28,239	45,732	9,168	1,884	85,787
7 and 8	New shares allotted	29	3,654	-	-	-	3,683
	Issue costs	-	(18)	-	-	-	(18)
8	Ordinary shares issued following conversion of subscription shares	-	3,921	-	-	-	3,921
	Net return for the year	-	-	-	(2,302)	3,970	1,668
5	Dividends paid	-	-	-	-	(3,447)	(3,447)
		-----	----------	----------	--------	--------	----------
	At 31 August 2015	793	35,796	45,732	6,866	2,407	91,594
		===	=====	=====	====	====	=====

Notes	Year ended 31 August 2014	Called up share capital £'000	Share premium account £'000	Special reserve £'000	Other capital reserve £'000	Revenue reserve £'000	Total £'000
	At 31 August 2013	581	2,958	45,732	5,504	954	55,729
7 and 8	New shares allotted	5	510	-	-	-	515
	Issue costs	-	(5)	-	-	-	(5)
8	Ordinary shares 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
		===	=====	=====	====	=====	=====

BALANCE SHEET

Notes		At 31     August         2015 £'000	At 31 August 2014 £'000
	Fixed asset investments held at fair value through profit or loss	97,328	88,126
		--------	--------
	Current assets
	Debtors	4,153	4,621
		4,153	4,621
		--------	--------
	Creditors: amounts falling due within one year	(9,887)	(6,960)
		---------	---------
	Net current liabilities	(5,734)	(2,339)
		---------	---------
	Total net assets	91,594	85,787
		=====	=====
	Capital and reserves
7	Called up share capital	793	764
8	Share premium account	35,796	28,239
	Special reserve	45,732	45,732
	Other capital reserves	6,866	9,168
	Revenue reserve	2,407	1,884
		--------	--------
	Total shareholders' funds	91,594	85,787
		=====	=====
6	Net asset value per ordinary share (basic)	115.6p	118.4p
6	Net asset value per ordinary share (diluted)	115.6p	117.5p

CASH FLOW STATEMENT

	For the year ended 31 August  2015		For the year ended 31 August  2014
	£'000	£'000	£'000	£'000
Net cash inflow from operating activities		3,311		2,942
Servicing of finance
Interest paid	(93)		(141)
	------		------
Net cash outflow from servicing of finance		(93)		(141)
Net tax recovered		61		58
Financial investment
Purchases of investments	(51,170)		(63,689)
Sales of investments	39,743		43,127
	----------		----------
Net cash outflow from financial investment		(11,427)		(20,562)
Equity dividends paid		(3,447)		(2,483)
		----------		----------
Net cash outflow before financing		(11,595)		(20,186)
Financing
Proceeds from issue of ordinary shares	12,014		515
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	(18)		(5)
Net cash inflow from financing		11,996		21,054
		-----------		-----------
Increase in cash		401		868
		===		===
Reconciliation of net cash flow to movement in net debt
Increase in cash as above		401		868
Exchange movements		309		175
Net debt at start of the year		(6,740)		(7,783)
		---------		---------
Net debt at 31 August		(6,030)		(6,740)
		=====		=====
Represented by:
Bank overdraft		(6,030)		(6,740)
		----------		----------
		(6,030)		(6,740)
		=====		=====

NOTES TO THE FINANCIAL STATEMENTS

1.   Accounting policies

Basis of preparation

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.   (Losses)/gains from investments held at fair value through profit or loss

	2015 £'000	2014 £'000
Gains on investments sold in the year	2,395	250
Revaluation of investments held at 31 August	(4,405)	3,808
	--------	--------
	(2,010)	4,058
	=====	====

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

	2015 £'000	2014 £'000
Overseas dividend income	4,738	4,276
Scrip dividends	83	-
	-------	-------
	4,821	4,276
	====	====

4.   Return per ordinary share

	2015		2014
	£'000	pence	£'000	pence
Basic
Revenue return	3,970	5.14	3,413	5.59
Capital return	(2,302)	(2.98)	3,664	5.99
	-------	------	-------	------
Total return	1,668	2.16	7,077	11.58
	====	====	====	====
Weighted number of ordinary shares		77,267,337		61,101,252
Diluted
Revenue return	3,970	5.14	3,413	5.55
Capital return	(2,302)	(2.98)	3,664	5.95
	-------	-----	-------	-----
Total return	1,668	2.16	7,077	11.50
	====	====	====	====
Number of dilutive shares		-		425,315
Diluted shares in issue for return per share		77,267,337		61,526,567
		========		========

As detailed in note 7, the remaining subscription shares were exercised on 4 September 2014. On the basis set out in Financial Reporting Standard 22 'Earnings per Share', there is no dilutive effect on net revenue or net capital return per share in the current year arising from the exercise.

In the prior year, for the purposes of calculating diluted total, revenue and capital returns per ordinary share, the number of ordinary shares was 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 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 2015

		Record date	Payment date	Ex-dividend date	2015 £'000
4th interim dividend	1.10p	10 October 2014	31 October 2014	9 October 2014	840
1st interim dividend	1.10p	6 February 2015	27 February 2015	5 February 2015	843
2nd interim dividend	1.10p	8 May 2015	29 May 2015	7 May 2015	853
3rd interim dividend	1.15p	7 August 2015	28 August 2015	6 August 2015	911
					-------
					3,447
					====

A fourth interim dividend in respect of the year ended 31 August 2015 was declared on 12 October 2015 and will be paid to shareholders on 27 November 2015 with record date 6 November 2015. The Company's shares will go ex-dividend on 5 November 2015.

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:

	2015 £'000	2014 £'000
Revenue available for distribution by way of dividend for the year	3,970	3,413
Interim dividends of 3.35p paid (2014: 3.15p)	(2,607)	(1,957)
Interim dividend for the year ended 31 August 2015 of 1.15p (based on 79,746,550 ordinary shares in issue as at 15 October 2015) (2014: 1.10p)	(917)	(840)
	------	------
Undistributed revenue for section 1158 purposes1	446	616
	===	===

¹ Comprises 9.3% 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:

	2015 £'000	2014 £'000
Basic:
Net assets attributable	91,594	85,787
Number of ordinary shares in issue	79,246,550	72,450,588
Net assets per ordinary share	115.6p	118.4p

	2015 £'000	2014 £'000
Diluted:
Net assets attributable assuming exercise of subscription shares	91,594	89,708
Number of potential ordinary shares in issue	79,246,550	76,371,550
Net assets per ordinary share	115.6p	117.5p

The diluted net asset per ordinary share for the prior year was calculated in accordance with guidelines issued by the Association of Investment Companies, and assumed 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:

	2015 £'000	2014 £'000
Net assets at start of the year	85,787	55,729
Total net return on ordinary activities after taxation	1,668	7,077
Dividends paid on ordinary shares in the period	(3,447)	(2,483)
Issue of ordinary shares less issue costs	7,586	25,464
	----------	----------
Total net assets attributable to the ordinary shares at 31 August	91,594	85,787
	=====	=====

7.   Called up share capital

2015	Number of shares	Number of shares entitled to dividend	£'000
Ordinary shares of 1p each
At 31 August 2014	72,450,588	72,450,588	725
New shares allotted in the year	2,875,000	2,875,000	29
New shares allotted from exercise of subscription shares	3,920,962	3,920,962	39
	---------------	---------------	-----
At 31 August 2015	79,246,550	79,246,550	793
	=========	=========	===
Subscription shares of 1p each
At 31 August 2014	3,920,962	-	39
Exercise of subscription shares	(3,920,962)	-	(39)
	---------------	---	-----
At 31 August 2015	-	-	-
	========	==	===

During the year, the Company issued 2,875,000 ordinary shares for a total consideration of £3,665,000 after deduction of issue costs.

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. There are no longer any subscription shares in issue following the exercise of the remaining 3,920,962 shares by Equiniti Financial Services Limited, the Company's appointed trustee, on 4 September 2014.

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.

During the year, 4,379,038 subscription shares were exercised and allotted into ordinary shares for a total consideration of £4,374,000 after deduction of issue of costs.

8.   Share premium account

	2015 £'000	2014 £'000
At the start of the year	28,239	2,958
Ordinary shares allotted in year	3,654	510
Issue costs	(18)	(5)
Ordinary shares allotted from C share issue	-	20,822
Issue costs - C share issue	-	(420)
Ordinary shares allotted from exercise of subscription shares	3,921	4,379
Issue costs	-	(5)
	----------	----------
At 31 August	35,796	28,239
	======	=====

9.   Going concern statement

The Company's articles of association require that at every third annual general meeting of the Company an ordinary resolution be put to shareholders asking them to approve the continuation of the Company; the next such resolution will be proposed at the annual general meeting in 2017.

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. For these reasons, 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.  2015 Financial information

The figures and financial information for the year ended 31 August 2015 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 2015 have been audited but have not yet been delivered to the Registrar of Companies. The auditors' report on the 2015 financial statements was unqualified and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.

11.  2014 Financial information

The figures and financial information for the period ended 31 August 2014 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 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 2015 will be posted to shareholders in late October 2015 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, 20 November 2015 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]

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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