Half Yearly Report

RNS Number : 2042R

Henderson Intl. Income Trust PLC

31 October 2011

 



31 October 2011                                                                                                                 Page 1 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

This announcement contains regulated information

FINANCIAL HIGHLIGHTS

	(Unaudited) 31 August 2011	(Launch) 28 April 2011
Net asset value per Ordinary share	89.2p	98.1p
Ordinary share price	93.0p	100.0p
Premium	4.3%	1.9%
Subscription share price	8.4p	n/a
Total loss per Ordinary share	-8.3p	n/a
Revenue return per Ordinary share	2.5p	n/a
Capital loss per Ordinary share	-10.8p	n/a
Dividend per Ordinary share	0.6p	n/a

PERFORMANCE

	3 months to 31 August 2011		Since launch to 31 August 2011
Net asset value per Ordinary share total return (1)	-7.3		-8.3
Ordinary share price total return (1)	-7.2		-8.9
MSCI World ex UK Index (sterling adjusted) (2)	-9.1		-9.6

Source: (1) Fund Data (2) Datastream

Total return assumes net dividends are reinvested and excludes transaction costs

CHAIRMAN'S STATEMENT

Interim Management Report

This is the first report to Shareholders since the Company was incorporated on 2 March 2011 and it covers the period to 31 August 2011. The Company was listed on the London Stock Exchange on 28 April 2011. A second interim report will be produced for the six months ending 28 February 2012, prior to our first full accounting period end on 31 August 2012. The Board and Manager would like to take this opportunity to thank Shareholders for their support, which enabled the launch of this Company.

Market

The short period since the Company launched on 28 April 2011 has seen a sharp reassessment by investors of the outlook for global growth. This has been a period of exceptional stock market volatility for most equity markets around the globe with severe market swings being experienced by investors. Since the period end market volatility has continued although we have seen some recovery in the Net Asset Value ("NAV") at the time of writing. The principal cause is an increasing concern about sovereign debt and the international private sector's exposure to it. There was an uneasy return to more stable markets following the Lehmann crisis, driven mainly by successful if short-term inter-government collaboration. The concern now is whether a comparable solution can be devised at the global level.

The political situation in Europe is driven by different influences from those in the United States, but the outcome is broadly the same: a breakdown in market confidence in governments' ability to reach a credible strategy for the financial system. Eurozone members are exposing the currency area's essential weakness of it having so many parliaments to satisfy. In the United States perceived political manoeuvring over the extension of the debt ceiling highlighted the risk that local divisions between the two main political parties may hamper the legislature's financial responsibilities.

Page 2 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

Against this background and in general, companies have continued to report strong earnings, improved balance sheets, and importantly for us, continued dividend growth. A general lack of confidence however has had its effect on market levels. As a result many of the equity market metrics are looking attractive relative to their long run averages.

Company Performance

During the four months since the Company was listed the NAV per Ordinary share (total return) fell by 8.3% whilst the Company's Ordinary share price decreased by 7.0% compared with a decrease of 9.6% in the MSCI World ex UK Index (sterling adjusted).

The Company's share price premium to NAV per Ordinary share remained buoyant increasing from 1.9% at launch to 4.3% at 31 August 2011.

Earnings and Dividends

The revenue earnings per Ordinary share were 2.48p. As stated within the Prospectus, the Company has adopted a progressive dividend policy with the aim of returning 5.4p to Shareholders over the period from launch to 31 August 2012. The first interim dividend of 0.6p per Ordinary share was paid on 31 August 2011 to Shareholders on the register on 12 August 2011, the second interim dividend of 0.8p per Ordinary share will be paid on 30 November 2011 to Shareholders on the register on 11 November 2011, the shares will go ex-dividend on 9 November 2011. Future dividends are expected to be paid on or around 28 February, 31 May, 31 August, and 30 November in each year.

Related Party Transactions

Since the launch of the Company, no transactions with related parties have taken place which materially affected the financial position or performance of the Company during the period.

Outlook

In the coming phase much will depend on how managements react at company level to the concern about sovereign debt internationally. After the recent utilisation of corporate capacity we would normally expect to see an upturn in capital expenditure programmes. Balance sheets, cash balances and earnings are all stronger than present market levels would imply. The question for the coming half-year is the degree to which managements will have the confidence to put them to work.

Christopher Jonas CBE

Chairman

31 October 2011

MANAGER'S REPORT

Portfolio Positioning

The majority of the Company's capital was invested shortly after it was received and the investment portfolio has been constructed to enable the Company's income objective to be met, whilst maintaining the potential for capital appreciation. Holdings have been selected on the basis of their fundamental attributes, with the focus on the payment of sustainable dividends.

The Company's portfolio of investments is widely diversified on both a geographic and a sector basis.The portfolio is held across North & South America representing 36.7% of investments, Continental Europe 31.7% and Asia Pacific including Australasia 31.6%. It is generally defensively positioned, with overweight positions in sectors whose earnings and cash flows have a low sensitivity to changes in economic growth, such as the Telecommunications, Utilities and Consumer Staples sectors. Whilst the portfolio is defensively positioned, it is not without growth, and we expect companies like US Utility Dominion Resources, tobacco company Reynolds, and Brazilian beverage company Ambev to continue growing earnings and dividends in future years. On a sector basis the largest position is in Telecommunications.

Page 3 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

This is not a top down driven decision; these companies are held in the belief that their dividends and valuations are attractive on a stock by stock basis, and the position is diversified across eight companies, each of which operates in different geographies, which reduces the economic and regulatory risks across the sector.

The second largest sector exposure is to the Financial sector, which includes holdings in property REITs. The portfolio has no direct holdings in European banks, which has been beneficial to performance, and direct exposure to euro zone bonds, where the greatest market concerns lie, is low and consists of life and non-life insurers Allianz (a 2.7% position) and Scor (a 1.5% position), both of which are well capitalised and whose dividends are well covered by their earnings.

The remainder of the portfolio is well diversified across a number of different sectors as indicated on page 4. Although market conditions are difficult, it is an interesting time for equity income investors because there is a larger than normal universe of high yielding stocks across a wider range of sectors as a result of depressed share prices.

Performance

As detailed in the Chairman's Statement the Company outperformed its index over the period since launch and the Ordinary shares have continually traded above the Company's Net Asset Value ("NAV"). Whilst it is pleasing to have outperformed the index we were disappointed to see the NAV fall to the extent that it did during the period.

Stock selection was positive and the regional portfolios all outperformed their respective benchmarks. Performance was helped by the out performance of more defensive, higher yielding sectors and stocks as concerns about a slow down in global growth resurfaced. There was also some evidence, particularly in the United States, of investors buying higher yielding equities to compensate for the low interest rates on offer to savers from bank accounts and bonds. As a result the most significant positive contributors included Telecoms companies Chunghwa, Telstra, and BCE, and US utility Dominion Resources.

Although stock selection was good, performance was impacted by the Company's overweight position to Europe relative to the index. The general de-rating of companies across Europe, where there was some indiscriminate selling as investors reduced exposure to the region on debt concerns, was a particularly disappointing aspect of the market during the period and it led to the MSCI Europe ex UK Index falling by 17.9% over the period compared to a fall of 9.6% for the MSCI World ex UK Index (sterling adjusted). The Company's European listed holdings were not immune to this de-rating, however many of the companies held are global and in time we expect their ratings to recover.

Outlook

Investors are in general risk averse at the moment and small changes in companies' operating environments and macro economic events are being met with significant share price reactions, which are often reversed in following periods. There is still along way to go before investors can be confident that the financial positions of some of the euro zone countries will not give the markets more cause for concern, however whilst equity markets are likely to continue to be volatile the portfolio is well positioned for income and capital growth in the medium term. The potential for dividend growth is important at a time when investors are being impacted by the high levels of inflation currently being experienced in the UK, and when there is no certainty that inflation will recede in the medium term. The Company's objective is to provide investors with the opportunity to invest in an overseas portfolio of income generating equities to address their income requirements, and is able to invest in companies exposed to countries with high levels of economic growth in regions such as Asia and Latin America to achieve this aim. We will use volatility in the market to invest the Company's remaining cash, and have a borrowing facility in place which will provide scope to gear as we become more confident in the sustainability of global economic growth.

Ben Lofthouse

Fund Manager

31 October 2011

Page 4 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

TWENTY LARGEST INVESTMENTS BY VALUE

Company	Country	Valuation £'000	% of Total Portfolio
Dominion Resources	United States	1,317	3.63
Telstra	Australia	1,278	3.53
Reynolds	United States	1,267	3.50
Pfizer	United States	1,144	3.16
Ambev De Bebidas	Brazil	1,143	3.16
AT&T	United States	1,128	3.11
New York Community Bancorp	United States	1,125	3.10
Vivdeni	France	1,048	2.89
ENI	Italy	988	2.73
KT Corp	Korea	965	2.66
Allianz	Germany	955	2.64
BCE	Canada	896	2.47
Kraft Foods	United States	865	2.39
Exelon	United States	862	2.38
Philippines Long Distance Telephone	Philippines	839	2.32
Abbott Laboratories	United States	838	2.31
Deutsche Telekom	Germany	795	2.19
Bank of Montreal	Canada	771	2.13
United Parcel Service	United States	753	2.08
Home Depot	United States	742	2.05
Twenty Largest Investments		19,719	54.43
Remaining Investments (40)		16,508	45.57
Total		36,227	100.00

as at 31 August 2011

GEOGRAPHICAL ANALYSIS

North and South America	36.7%
Continental Europe (excl. UK)	31.7%
Far East and Australasia	31.6%
	100.0%

SECTOR ANALYSIS

Telecommunications	20.3%
Financials	16.4%
Industrials	12.4%
Consumer Services	11.6%
Consumer Goods	11.3%
Oil & Gas	8.4%
Utilities	7.5%
Health Care	7.0%
Technology	3.6%
Basic Materials	1.5%
	100.0%

Page 5 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

INCOME STATEMENT

for the period from 2 March 2011 (incorporation) to 31 August 2011 (unaudited)

	Notes	Revenue return £'000	Capital return £'000	Total £'000
Losses from investments held at fair    value through profit or loss		-	(4,391)	(4,391)
Income from investments held at fair    value through profit or loss		1,313	-	1,313
Gross revenue and capital losses		1,313	(4,391)	(3,078)
Management fees		(27)	(81)	(108)
Other administrative expenses	3	(106)	-	(106)
Net return/(loss) on ordinary activities    before finance costs and taxation		1,180	(4,472)	(3,292)
Finance costs		(1)	(2)	(3)
Net return/(loss) on ordinary activities    before taxation		1,179	(4,474)	(3,295)
Taxation on net return/(loss) on    ordinary activities		(148)	-	(148)
Net return/(loss) on ordinary activities after    taxation		1,031	(4,474)	(3,443)
Basic and diluted return/(loss) per    Ordinary share	4	2.48p	(10.78)p	(8.30)p

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.

Page 6 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

STATEMENT OF CHANGES IN EQUITY

for the period from 2 March 2011 (incorporation) to 31 August 2011 (unaudited)

	Called up Share capital £'000	Share premium account £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At the start of the period	-	-	-	-	-
Ordinary shares issued	415	41,085	-	-	41,500
Issue costs	-	(777)	-	-	(777)
	415	40,308	-	-	40,723
Net (loss)/return for the period	-	-	(4,474)	1,031	(3,443)
Dividend paid	-	-	-	(249)	(249)
As at 31 August 2011	415	40,308	(4,474)	782	37,031

BALANCE SHEET

as at 31 August 2011 (unaudited)

	Note	31 August 2011 £'000
Investments held at fair value through profit or loss		36,227
Current assets
Debtors		303
Cash at Bank		619
		922
Creditors: amounts falling due within one year		(118)
Net current assets		804
Total net assets		37,031
Capital and reserves
Called up share capital	6	415
Share premium account		40,308
Other capital reserves		(4,474)
Revenue reserve		782
Shareholders' funds		37,031
Net asset value per Ordinary share		89.23p

Page 7 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

CASH FLOW STATEMENT

for the period from 2 March 2011 (incorporation) to 31 August 2011 (unaudited)

	Period ended  31 August 2011 £'000
Net cash inflow from operating activities	783
Net cash outflow from servicing of finance	(3)
Net cash outflow from financial investment	(40,222)
Equity dividends paid	(249)
Net cash inflow from financing	40,723
Net taxation suffered on investments	(17)
Increase in cash	1,015
Reconcilliation of operating revenue to net cash inflow from operating activities
Net total loss before finance costs and taxation	(3,292)
Add: Capital loss before finance and taxation	4,472
Net revenue return before finance costs and taxation	1,180
Movement in accrued income	(218)
Movement in other debtors	(68)
Movement in creditors	118
Expenses charged to capital	(81)
Overseas withholding tax suffered	(148)
Net cash inflow from operating activities	783
Reconcilliation of net cashflow to movements in net cash
Increase in cash above	1,015
Exchange movements	(396)
Net cash at 31 August	619

Page 8 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

Notes to the Financial Statements

The interim fiancial statements cover the period from 2 March 2011 (incorporation) to 31 August 2011 and have not been either audited or reviewed by the Auditors.

1.	Principal activity
	The Company is an investment company as defined in section 833 of the Companies Act 2006 and operates as an investment trust in accordance with section 1158 of the Corporation Taxes Act 2010. The Company was incorporated on 2 March 2011 and the Ordinary and Subscription shares were listed on the London Stock Exchange on 28 April 2011.
2.	Accounting policies
	(a) Basis of accounting
	The financial statements have been prepared on a going concern basis and under the historical cost basis of accounting, as modified to include the revaluation of investments at fair value. The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice and with the Statement of Recommended Practice ("the SORP") for investment trusts issued by the Association of Investment Companies ("the AIC") in January 2009. All the Company's operations are of a continuing nature.
	(b) Valuation of investments held at fair value through profit or loss
	The Company's investments are classified as held at fair value through profit or loss in accordance with FRS 26 - Financial Instruments: Recognition and Measurement and are managed and evaluated on a fair value basis in accordance with its investment strategy. All investments are designated upon initial recognition as held at fair value through profit or loss. Purchases of investments are recognised on a trade date basis. The sale of assets are recognised at the trade date of the disposal. Proceeds are measured at fair value which will be regarded as the proceeds of sale less any transaction costs. The fair value of the financial investments is based on their quoted bid price at the balance sheet date, without deduction for the estimated selling costs.
	(c) Capital gains and losses
	Profits or losses on disposal of investments and investment holding gains or losses are taken to the capital column in the income statement and transferred to other capital reserves.
	(d) Income
	Dividends receivable (including overseas withholding taxes) from equity shares are taken to the revenue return on an ex-dividend basis except where, in the opinion of the directors, the dividend is capital in nature, in which case it is taken to the capital return.
	(e) Expenses
	All expenses and finance charges are accounted for an accruals basis. On the basis of the Board's expected long-term split of total returns in the form of capital and revenue returns of 75% and 25%, respectively, the Company charges 75% of its finance costs and investment management fee to capital. Any performance fee would be allocated 100% to capital. All other administrative expenses are charged to the revenue column of the income statement.
	(f) Taxation
	In line with the recommendations of the SORP, the tax effect of different items of expenditure is allocated between the capital return and revenue return using the 'marginal basis'. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue column of the income statement, then no tax relief is transferred to the capital return column. Deferred taxation is provided on all timing differences that have originated but not been reversed by the balance sheet date, other than those differences regarded as permanent. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Any liability to deferred tax is provided at the current rate of tax. Deferred tax assets and liabilities are not discounted to reflect the time value of money. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Page 9 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

2.	Accounting policies (continued)
	(g) Foreign currency
	The results and financial position of the Company are expressed in pounds sterling, which is the functional and presentational currency of the Company. Sterling is the functional currency because it is the currency of the primary economic environment in which the Company operates. Transactions recorded in foreign currencies during the period are translated into sterling at the appropriate daily exchange rates. Monetary assets and liabilities and equity investments held at fair value through profit or loss which are denominated in foreign currencies at the balance sheet date are translated into sterling at the exchange rates ruling at that date.

3.	Other administrative expenses
		Revenue return £'000	Capital return £'000	Total £'000
	Auditors' remuneration	21	-	21
	Directors' fees	48	-	48
	Other expenses*	37	-	37
		106	-	106
	* Including: Custody, registrar and bank charges, insurance, marketing and other advisory services.

4.	Return/(loss) per Ordinary share
	The total loss per share is based on the net loss attributable to the Ordinary shares of £3,443,000 and on 41,500,000 shares in issue during the period. The total loss can be further analysed as follows:
		£'000
	Revenue return	1,031
	Capital loss	(4,474)
	Total	(3,443)
	Number of Ordinary shares	41,500,000
	Revenue return per Ordinary share	2.48p
	Capital loss per Ordinary share	(10.78)p
	Loss per Ordinary share	(8.30)p
	The Subscription shares are not dilutive at 31 August 2011 as the average Ordinary share price was below the exercise price of 100p.

5.	Dividends per Ordinary share
	A first interim dividend of 0.6p per Ordinary share was paid on 31 August 2011 to Shareholders registered at the close of business on 12 August 2011.
		£'000
	Revenue available for distribution	1,031
	First interim dividend of 0.6p	(249)
	Undistributed revenue as at 31 August 2011	782
	The Board proposes to pay a second interim dividend of 0.8p per Ordinary share, payable on 30 November 2011 to Shareholders registered at the close of business on 11 November 2011.

Page 10 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

6.	Called up share capital
		£'000
	Allotted issued and fully paid: 41,500,000 Ordinary shares of 1p each	415
	The Company was incorporated on 2 March 2011 with an authorised share capital of £415,000 divided into 41,500,000 Ordinary shares of 1p each which are all issued and fully paid. The Company issued Subscription shares to all subscribers on the basis of one Subscription share for every five Ordinary shares subscribed. Each Subscription share confers the right to subscribe for one Ordinary share on payment of the subscription price of 100p. Notice to exercise the subscription rights may be given by Subscription Shareholders during the 30 days prior to the subscription date of 31 August 2014, after which the subscription right will lapse. At 31 August 2011 there were 8,300,000 Subscription shares in issue.

7.	Transaction costs
	Purchase and sale transaction costs for the period ended 31 August 2011 were £34,000 and £5,000 respectively, which comprise mainly stamp duty and commission.

8.	Financial information
	The financial information contained in this financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

9.	Going concern
	The Directors consider that it is appropriate to adopt the going concern basis in preparing the financial statements. The assets of the Company consist almost entirely of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in existence for the foreseeable future.

10.	Annual General Meeting
	The Annual General Meeting will be held on Thursday 15 December 2011 at 2.30pm at 201 Bishopsgate London EC2M 3AE.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that, to the best of their knowledge:
(a)	the set of financial statements has been prepared in accordance with the applicable accounting standards and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
(b)	the Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c)	the Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

Page 11 of 11

HENDERSON INTERNATIONAL INCOME TRUST PLC

Unaudited Results for the period ended 31 August 2011

DIRECTORS' RESPONSIBILITY STATEMENT (continued)

The Board detailed the risks and uncertainties associated with initial and continued investment in the Company within the Prospectus issued by the Company in March 2011. In the opinion of the Board the principal risks and uncertainties remain unchanged for the period ahead.

For and on behalf of the Board of Directors

Christopher Jonas CBE,

Chairman of Henderson International Income Trust plc

31 October 2011

For more information please contact:

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

- ENDS -

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

IR WGGMPUUPGGMG