Henderson Int. Regulatory News (HINT)

RNS Number : 1381V

Henderson Intl. Income Trust PLC

31 October 2017

 

 

HENDERSON INTERNATIONAL INCOME TRUST PLC

 

Annual Financial Report for the year ended 31 August 2017

 

 

This announcement contains regulated information

PERFORMANCE HIGHLIGHTS	2017	2016
NAV per share at year end	163.0p	141.5p
Net assets	£283,972,000	£220,904,000
Dividend in respect of year1	4.90p	4.65p
Dividend yield for the year2	3.0%	3.3%
Ongoing charge for year	0.88%	1.01%
Gearing at year end	0.3%	0.0%
Share price at year end	163.75p	141.75p
Shares in issue at year end	174,206,306	156,080,606

 

1 Includes the fourth interim dividend in respect of the year ended 31 August 2017 declared on 17 October 2017 to be paid to

shareholders on 30 November 2017. In addition, a dividend of 0.75p per C share was paid on 31 August 2017

2 Calculated based on the share price as at 31 August 2017

 

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 per cent. 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 per cent. of net assets at the time of investment and no more than 15 per cent. of gross assets may be invested in other listed investment companies (including investment trusts) or collective investment schemes. No more than 10 per cent. of gross assets may be invested in companies that themselves invest more than 15 per cent. 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 per cent. of gross assets and may generate up to a maximum of 20 per cent. 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 per cent. of net asset value. In normal circumstances, the Manager may only utilise gearing up to 25 per cent. 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  

I am delighted to report on another year in which our investors have achieved double digit total returns. The net asset value per ordinary share (on a total return basis) has increased by 18.8%. The return on the ordinary share price (on the same basis) was 19.3%. These returns compare to a total return of 19.1% for the MSCI World (ex UK) Index (sterling adjusted).

 

After a few years of considerable economic turmoil, the last twelve months have seen synchronised growth around the world. Political uncertainty is almost always with us and an inevitable worry for investors. Nonetheless in the last twelve months monetary policy has remained supportive of economic growth. Interest rates continue unchanged at very low rates in many economies. Equity markets have remained strong and aggregate corporate earnings have risen.

 

In these circumstances we believe that satisfactory long term performance demands skilful asset allocation and stock selection. In our case, asset allocation decisions include selection between different parts of the world as well as between industrial sectors. Furthermore, technological advances are taking place which are changing the face of many industries and challenging their traditional business models. Investment in these opportunities further underlines the need for effective asset allocation and stock selection methods.

 

Growth and corporate activity

Since your Company's original listing, the board's strategy has been to increase the market capitalisation of the Company. We have given three consistent reasons for this; greater liquidity in our shares, widening demand for them from wealth managers, and lowering our ongoing charge. We have made good progress to this end during the year by way of an issue of C shares, which when converted in August, increased our issued ordinary share capital by 13,755,700 ordinary shares.

 

In addition during the year the Company issued 4,370,000 new shares in response to continuing shareholder demand. A further 775,000 ordinary shares have been issued between 1 September 2017 and 26 October 2017, the latest practicable reporting date prior to the publication of the annual report. At 31 August 2017 there were 174,206,306 shares in issue and at 26 October 2017 there were 174,981,306 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 the economies of scale I have mentioned above.

 

Earnings and dividends

We are pleased to announce a dividend increase from 4.65p to 4.90p per ordinary share for the year to 31 August 2017. The year consisted of a first, second and third interim dividend of 1.20p per ordinary share and an increased fourth interim dividend of 1.30p per ordinary share. The fourth interim dividend of 1.30p per ordinary share will paid on 30 November 2017. In addition, a dividend of 0.75p per C share representing the earnings of the C share portfolio up to conversion was paid on 31 August 2017 to holders of the C shares at the record date. 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 2018.

 

Gearing

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

 

To date the Company has used gearing to invest in specific stock opportunities. At 31 August 2017 the Company had an overdraft with HSBC of £nil (2016: £5,526,000). There was 0.3% gearing in place at the year end (2016: 0.0%).

 

Discount control

The board is pleased that the Company has reverted to its record of trading at a premium. 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; accordingly we believe 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 issue 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 last year and C share issuance, the ongoing charge to the Company for the year to 31 August 2017, as calculated in accordance with the Association of Investment Companies (the 'AIC') methodology is down to 0.88% (2016: 1.01%).

 

Board changes

The Company announced on 15 August 2017 that I had decided to retire from the chairmanship at the conclusion of the forthcoming annual general meeting. I have served as chairman since the Company's launch and feel that now is the appropriate time for me to retire from the board and thereby ensure an orderly succession. I am delighted that Simon Jeffreys is to succeed me as chairman. He is well known to our shareholders as chairman of the audit committee and brings significant business experience, particularly in financial services, to his new role. The board has appointed Kasia Robinski as a new director from 1 November this year. She has over 25 years' experience in private equity and investment banking, having served on a number of international boards in both executive and non-executive roles. The board intends that Kasia will become chairman of the audit committee when Simon Jeffreys resigns this role on his appointment as chairman of the Company.

 

Janus Henderson

Henderson Group plc and Janus Capital Group Inc. announced at the end of May that the merger between the two companies had been completed.

 

Annual general meeting

The seventh annual general meeting of the Company will be held at 2.30 pm on Thursday, 7 December 2017 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 the 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.

 

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.janushenderson.com/trustslive.

 

Outlook

Equity markets have performed well in recent years. This raises inevitable questions about the cycle peaking, but within the headline numbers there is much divergence in performance between stocks and between geographies. One of the great strengths of your Company is its global diversification. This enables us to participate as countries around the world react to the different stages of their economic cycles. For instance, the United States and China have shown some signs of reducing stimulus in the last six months, which if continued may temper growth rates in the future. At the same time Brazil, Japan and Europe continue to ease monetary conditions. The rationale for the Company is to be well placed to deal with these competing global influences. To achieve this we have a clear strategy and a well respected management team, each of which has served our shareholders well since the Company's launch in 2011. As I leave the chair of your Company I want to pay tribute to the high quality of the work done for shareholders by our fund manager, Ben Lofthouse. He has displayed consistent good judgement in his geographic and stock selection for our portfolio; much of the performance we have achieved is thanks to him. I have also had the advantage of a skilled and mature board with whom to steer the Company's development. I thank them for their consistency and shrewd decision taking.

 

I wish Simon Jeffreys good fortune in his time as your new chairman, and remain confident that a holding in our shares has a sensible part to play in a broadly based portfolio.

 

Christopher Jonas, CBE

Chairman

31 October 2017

 

 

PORTFOLIO INFORMATIONTen largest investments at 31 August 2017

Ranking 2017	Ranking 2016	Company	Country	Sector	Market value 2017 £'000	% of portfolio
1	3	Microsoft	US	Technology	10,477	3.7
2	4	Taiwan Semiconductor Manufacturing	Taiwan	Technology	8,026	2.8
3	7	ING	Netherlands	Financials	7,646	2.7
4	13	Chevron	US	Oil & gas	6,660	2.3
5	12	Coca-Cola	US	Consumer goods	6,521	2.3
6	5	Deutsche Telekom	Germany	Telecommunications	6,462	2.3
7	10	Telenor	Norway	Telecommunications	6,078	2.1
8	-	Nordea	Sweden	Financials	5,802	2.0
9	26	Las Vegas Sands	US	Consumer services	5,793	2.0
10	1	Novartis	Switzerland	Health care	5,544	2.0
					--------	------
					69,009	24.2
					=====	====

 

 

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
	2017 %	2016 %			2017 %	2016 %
US	34.2	34.4		Financials	21.1	19.6
France	9.4	14.5		Telecommunications	13.2	16.5
China	9.0	6.0		Consumer goods	13.1	3.3
Germany	8.0	7.8		Technology	11.7	9.8
Netherlands	6.0	4.4		Industrials	8.1	10.8
Switzerland	4.9	8.6		Property	7.8	9.9
Australia	4.8	5.9		Consumer services	7.3	8.1
Norway	3.7	2.3		Oil & gas	6.8	4.9
Korea	3.1	2.4		Health care	5.7	12.9
Taiwan	2.8	2.7		Basic materials	3.6	1.9
Japan	2.6	1.1		Utilities	1.6	2.3
Sweden	2.0	-
Italy	1.6	-
Portugal	1.3	1.7
New Zealand	1.3	1.6
Hong Kong	1.3	2.5
Israel	1.2	1.9
Spain	1.0	-
Singapore	0.9	1.0
Canada	0.9	-
Thailand	-	1.2

 

Source: Janus Henderson

 

 

 

Investment Portfolio as at 31 August 2017

Company	Country	Market value £'000	% of portfolio
Basic materials
Bayer	Germany	4,919	1.7
Dow Chemical	US	2,861	1.0
Agrium	Canada	2,395	0.9
		--------	-----
		10,175	3.6
		--------	-----
Consumer goods
Coca-Cola	US	6,521	2.3
Samsung	Korea	5,470	1.9
Coca-Cola European Partners	US	5,202	1.8
Dali	China	3,866	1.4
General Motors	US	3,857	1.3
Anta Sports	China	3,711	1.3
Toyota	Japan	3,604	1.3
Hanesbrand	US	2,736	1.0
Zhengzhou Yutong	China	2,301	0.8
		--------	-----
		37,268	13.1
		--------	-----
Consumer services
Las Vegas Sands	US	5,793	2.0
Nielsen	US	4,326	1.5
NOS	Portugal	3,728	1.3
Best Buy	US	3,548	1.3
Fairfax Media	Australia	3,297	1.2
		---------	-----
		20,692	7.3
		---------	-----
Financials
ING	Netherlands	7,646	2.7
Nordea	Sweden	5,802	2.0
Natixis	France	5,437	1.9
AXA	France	4,778	1.7
Van Lanschot	Netherlands	4,421	1.6
Bank of China	China	4,168	1.5
Wells Fargo	US	4,085	1.4
Macquarie	Australia	3,993	1.4
Mitsubishi Financial	Japan	3,775	1.3
Deutsche Börse	Germany	2,962	1.0
BNP Paribas	France	2,781	1.0
Credit Suisse	Switzerland	2,766	1.0
Blackstone	US	2,680	0.9
JP Morgan Chase	US	2,674	0.9
Ares Capital	US	2,316	0.8
		--------	-----
		60,284	21.1
		--------	-----
Health care
Novartis	Switzerland	5,544	2.0
Roche	Switzerland	5,499	1.9
Pfizer	US	5,143	1.8
		---------	----
		16,186	5.7
		---------	-----
Industrials
Siemens	Germany	5,437	1.9
Jiangsu Expressway	China	3,572	1.3
Amcor	Australia	3,358	1.2
Deutsche Post	Germany	3,193	1.1
Prosegur Cash	Spain	2,941	1.0
Lockheed Martin	US	2,710	0.9
General Electric	US	1,955	0.7
		--------	-----
		23,166	8.1
		--------	-----

 

Oil & gas
Chevron	US	6,660	2.3
Statoil	Norway	4,588	1.6
Star Petroleum Refining	US	4,141	1.5
Total	France	4,040	1.4
		--------	-----
		19,429	6.8
		--------	-----
Property
Eurocommercial	Netherlands	4,807	1.7
Crown Castle	US	3,718	1.3
Iron Mountain	US	3,013	1.0
Icade	France	2,906	1.0
Scentre	Australia	2,883	1.0
Nexity	France	2,534	0.9
Mapletree Greater China	Singapore	2,508	0.9
		--------	-----
		22,369	7.8
		--------	-----
Technology
Microsoft	US	10,477	3.7
Taiwan Semiconductor Manufacturing	Taiwan	8,026	2.8
HP	US	5,182	1.8
Cisco Systems	US	4,322	1.5
Autohome	China	4,085	1.5
Maxim	US	1,146	0.4
		--------	----
		33,238	11.7
		--------	----
Telecommunications
Deutsche Telekom	Germany	6,462	2.3
Telenor	Norway	6,078	2.1
Orange	France	4,186	1.5
Spark New Zealand	New Zealand	3,672	1.3
HKT Trust and HKT Ltd	Hong Kong	3,563	1.3
SK Telecom	Korea	3,522	1.2
China Mobile	China	3,502	1.2
Bezeq The Israeli Telecommunication Corporation	Israel	3,454	1.2
Verizon Communications	US	3,158	1.1
		--------	-----
		37,597	13.2
		--------	-----
Utilities
Enel	Italy	4,516	1.6
		--------	----
		4,516	1.6
		--------	----
		----------	-------
Total investments		284,920	100.0
		======	====

 

FUND MANAGER'S REPORT

 

Performance review

The portfolio produced positive returns over the year, generating a total return of 18.8% in net asset value ('NAV') per ordinary share, including the dividends of 4.90p per share, which increased by 5.4% as compared to the same period in 2016.

 

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.

 

Income generation from the portfolio during the year continues to be strong. 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 increases in the proportion of earnings paid out as dividend. Some of the largest increases in dividends have come from financial services companies held in the portfolio, such as Netherlands bank Van Lanschot, and French banks Natixis and BNP Paribas. The combination of stronger balance sheets and clearer regulatory requirements regarding capital levels are allowing these companies to distribute larger dividends. Other companies that significantly increased dividend pay-outs include technology company Samsung, logistics operator Deutsche Post, soft drink distributor Coca-Cola European Partners and US retailer Best Buy. The dividend growth in these companies is being driven by earnings growth. All of the Company's holdings contribute to income generation and the diversification across sectors and geographies is designed to enhance the dividend stability within the portfolio. The weighted average income yield on the portfolio at year end was over 4.0%. Based on the underlying trends within the portfolio the outlook for dividend growth remains good.

 

The Company's portfolio is relatively concentrated consisting of 50-80 positions. Therefore performance is particularly impacted by stock specific news and events as well as regional equity market performances and sector news. The portfolio has generated double digit capital returns over the year.

 

The team's investment process is driven by company analysis and a strong valuation discipline. Dividends from portfolio investments allow investors to be paid to remain invested until the valuation anomaly corrects. This valuation discipline often leads to a contrarian bias in the portfolio, with investments in out-of-favour sectors and regions. Europe has definitely been out-of-favour for some years and was the largest regional exposure in the portfolio. Europe's economic recovery has been slow since the financial crisis, but has started to pick up over the last twelve months. As a result many of the strongest performers in the portfolio are European stocks, particularly economically sensitive ones such as banks ING, Natixis and Van Lanschot. Another strong performer was Italian utility, Enel, which is in the process of being turned around by new management. The turnaround has taken a few years but this year it is starting to reflect in the share price.

 

China is another region that investors have had concerns about, and where equity valuations had become very depressed. The team added exposure over the year, and some of the new positions have already been amongst the top contributors. Sportswear manufacturer and retailer Anta Sports has performed very strongly as sales and earnings have accelerated, as has the online auto marketing company Autohome.

 

As mentioned in the Chairman's report, technological development is driving changes in many industries. As a result the demand for some electronic components has risen dramatically and the portfolio has benefited from this via holdings such as Taiwan Semiconductor Manufacturing, one of the world's largest semiconductor companies, and Samsung, which not only manufacturers phones but also is a world leader in screens and memory.

 

Not all of the portfolio has benefited as much as we hoped from these changes in technology. The portfolio has significant exposure to the telecommunications sector. The need for reliable communication is greater than ever and data volumes are increasing dramatically, unfortunately a combination of regulation and undisciplined competition is impacting companies' ability to monetise this demand. This has kept a cap on share price performance for the likes of Portuguese telecom operator NOS, and Israeli operator Bezeq. The holdings are delivering high dividend yields and remain attractively valued therefore exposure to the sector has been maintained. Nielsen, which helps companies record the popularity of TV programmes and consumer goods has also been more impacted than expected by the changes in customer's behaviour as they try to adapt to ways of marketing and consumption of products.

 

Portfolio positioning

The composition of the portfolio has not changed dramatically over the year. The most significant change has been the increase in emerging markets exposure from 7.5% to 15.4%. The increase was driven primarily by new Chinese investments, such as Autohome and food manufacturer Dali. Profits were taken in a number of long held positions after several years of strong performance in order to invest in new opportunities; positions closed include Chinese internet gaming company Netease, Japanese electronics conglomerate Panasonic, logistics company UPS, and US theme park operator Six Flags.

 

Markets have risen considerably since the Company was launched but there are still a great number of interesting investment opportunities. Slow sales growth continues to encourage companies to focus on improving earnings and returns on capital via management action. New positions opened included industrial engineer Siemens, European private banks Van Lanschot and Credit Suisse, and US retailer Best Buy, all of which have turnaround plans in place to improve their businesses.

 

The board

Christopher Jonas is retiring from the board at the annual general meeting having been the chairman since the launch of the Company in April 2011. I am indebted to him for the constant encouragement and support he has given me over that time. His clear, calm and measured approach to business has enabled us to steer successfully through challenging market conditions whilst also successfully growing the Company from £42m at launch to around £300m at the time of writing. I wish him well for the future.

 

 

Ben Lofthouse

Fund Manager

 

 

 

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 result of the UK referendum 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 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.

 

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 annual 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 the duration of the Company's long term borrowings, and 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 following last year's referendum results, 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 on 7 December this year. 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 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 his 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

 

Christopher Jonas, CBE

Chairman

31 October 2017

 

 

 

 

INCOME STATEMENT

		Year ended 31 August 2017			Year ended 31 August 2016
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	-	35,101	35,101	-	31,899	31,899
3	Income from investments held at fair value through profit or loss	10,882	-	10,882	7,684	-	7,684
	Loss on foreign exchange	-	(170)	(170)	-	(50)	(50)
	Other income	297	-	297	325	-	325
		-----	------	------	-----	------	------
	Gross revenue and capital gains	11,179	34,931	46,110	8,009	31,849	39,858
	Management fee	(409)	(1,229)	(1,638)	(244)	(731)	(975)
	Other administrative expenses	(530)	-	(530)	(395)	-	(395)
		-------	--------	--------	-------	--------	--------
	Net return before finance costs and taxation	10,240	33,702	43,942	7,370	31,118	38,488
		--------	--------	--------	--------	--------	--------
	Finance costs	(28)	(40)	(68)	(49)	(58)	(107)
		------	--------	--------	------	--------	--------
	Net return before taxation	10,212	33,662	43,874	7,321	31,060	38,381
		--------	--------	--------	--------	--------	--------
	Taxation on net return	(1,116)	78	(1,038)	(800)	(11)	(811)
		--------	--------	--------	--------	--------	--------
	Net return after taxation	9,096	33,740	42,836	6,521	31,049	37,570
		====	=====	=====	====	=====	=====
4	Return per ordinary share	5.76p	21.36p	27.12p	6.12p	29.14p	35.26p

 

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 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	6,842	-	-	-	6,886
	Issue costs	-	(64)	-	-	-	(64)
	Issue of ordinary shares from C share conversion	137	21,363	-	-	-	21,500
	Issue costs on C Share	-	(367)	-	-	-	(367)
	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
		====	=====	=====	=====	=====	======

 

 

Notes	Year ended 31 August 2016	Called up share capital £'000	Share premium account £'000	Special reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
	At 31 August 2015	793	35,796	45,732	6,866	2,407	91,594
7, 8	New shares allotted	768	95,933	-	-	-	96,701
	Issue costs	-	(401)	-	-	-	(401)
	Net return for the year	-	-	-	31,049	6,521	37,570
5	Dividends paid	-	-	-	-	(4,560)	(4,560)
		-------	----------	---------	---------	--------	----------
	At 31 August 2016	1,561	131,328	45,732	37,915	4,368	220,904
		====	=====	=====	=====	=====	======

 

 

STATEMENT OF FINANCIAL POSITION

Notes		At 31 August 2017 £'000	At 31 August 2016 £'000
	Fixed asset investments held at fair value through profit or loss	284,920	214,168
		----------	----------
	Current assets
	Debtors	1,375	831
	Cash and cash equivalents	4,099	12,183
		--------	--------
		5,474	13,014
		--------	--------
	Creditors: amounts falling due within one year	(6,422)	(6,278)
		---------	---------
	Net current (liabilities)/ assets	(948)	6,736
		----------	----------
	Total net assets	283,972	220,904
		======	======
	Capital and reserves
7	Called up share capital	1,742	1,561
8	Share premium account	159,102	131,328
	Special reserve	45,732	45,732
	Other capital reserves	71,655	37,915
	Revenue reserve	5,741	4,368
		----------	----------
	Total shareholders' funds	283,972	220,904
		======	======
6	Net asset value per ordinary share	163.0p	141.5p

 

 

 

 

CASH FLOW STATEMENT

	Year ended 31 August 2017 £'000	Year ended 31 August 2016 £'000
Cash flows from operating activities
Net return before taxation	43,874	38,381
Add back: finance costs	68	107
Less: gains on investments held at fair value through profit or loss	(35,101)	(31,899)
Add: loss on foreign exchange	170	50
Withholding tax on dividends deducted at source	(1,318)	(1,136)
Taxation recovered	75	193
Increase in debtors	(303)	(291)
(Decrease)/increase in creditors	(209)	463
	--------	--------
Net cash inflow from operating activities	7,256	5,868
	--------	--------
Cash flows from investing activities
Purchase of investments	(112,706)	(139,050)
Sale of investments	82,907	148,976
	--------	--------
Net cash (outflow)/inflow from investing activities	(29,799)	9,926
	--------	--------
Cash flows from financing activities
Equity dividends paid	(7,723)	(4,560)
Proceeds from issue of ordinary shares	6,840	1,618
Proceeds from issue of ordinary shares from C share conversion	21,106	-
Interest paid	(68)	(107)
	--------	--------
Net cash inflow/(outflow) from financing activities	20,155	(3,049)
	--------	--------
Net (decrease)/increase in cash and cash equivalents	(2,388)	12,745
Cash and cash equivalents at start of year	6,657	(6,030)
Effect of foreign exchange rates	(170)	(58)
	--------	--------
Cash and cash equivalents at end of year	4,099	6,657
	=====	=====
Comprising:
Cash at bank	4,099	12,183
Bank overdraft	-	(5,526)
	--------	--------
	4,099	6,657
	=====	=====

 

 

 

 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 (which is effective for periods commencing on or after 1 January 2015), 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 January 2017 with consequential amendments. The Company has early adopted the amendments to FRS 102 in respect of fair value hierarchy disclosures as published in March 2016.

 

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 FRS 102, 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. The validity of the going concern basis depends on the outcome of the continuation vote on which the board is recommending that shareholders vote in favour. In particular, no provision has been made for the cost of winding-up the Company or liquidating its investments in the event that the resolution is not passed. 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

	2017 £'000	2016 £'000
Dividend income	10,882	7,684
	-------	-------
	10,882	7,684
	====	====

 

4. Return per ordinary share

	2017		2016
	£'000	pence	£'000	pence
Revenue return	9,096	5.76	6,521	6.12
Capital return	33,740	21.36	31,049	29.14
	---------	--------	---------	-------
Total return	42,836	27.12	37,570	35.26
	=====	=====	=====	====
Weighted average number of ordinary shares	157,944,441		106,540,906

 

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

		Record date	Payment date	Ex-dividend date	2017 £'000	2016 £'000
4th interim dividend	1.15p	6 November 2015	27 November 2015	5 November 2015	-	920
1st interim dividend	1.15p	5 February 2016	26 February 2016	4 February 2016	-	923
2nd interim dividend	1.15p	15 April 2016	31 May 2016	14 April 2016	-	923
3rd interim dividend	1.15p	29 July 2016	31 August 2016	28 July 2016	-	1,794
4th interim dividend	1.20p	28 October 2016	30 November 2016	27 October 2016	1,879	-
1st interim dividend	1.20p	10 February 2017	28 February 2017	9 February 2017	1,879	-
2nd interim dividend	1.20p	28 April 2017	31 May 2017	27 April 2017	1,879	-
3rd interim dividend	1.20p	28 July 2017	31 August 2017	27 July 2017	1,925	-
					-------	-------
					7,562	4,560
					====	====

  

Dividends paid on C shares for the year ended 31 August

		Record date	Payment date	Ex-dividend date	2017 £'000	2016 £'000
Interim dividend	0.75p	11 August 2017	31 August 2017	10 August 2017	161	-
					-------	-------
					161	-
					====	====

 

A fourth interim dividend in respect of the year ended 31 August 2017 of 1.30p per share was declared on 17 October 2017 and will be paid to shareholders on 30 November 2017 with record date 27 October 2017. The Company's shares will go ex-dividend on 26 October 2017.

 

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:

	2017 £'000	2016 £'000
Revenue available for distribution by way of dividend for the year	9,096	6,521
Interim dividends of 4.35p paid (2016: 3.45p)	(5,844)	(3,640)
Fourth interim dividend for the year ended 31 August 2017 of 1.30p (based on 174,981,306 ordinary shares in issue as at 26 October 2017) (2016: 1.20p)	(2,275)	(1,879)
	--------	------
Undistributed revenue for section 1158 purposes1	977	1,002
	====	===

1 Comprises 9.9% 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:

 

	2017 £'000	2016 £'000
Net assets attributable	283,972	220,904
Number of ordinary shares in issue	174,206,306	156,080,606
Net assets per ordinary share	163.0p	141.5p

 

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

 

	2017 £'000	2016 £'000
Net assets at start of the year	220,904	91,594
Total net return after taxation	42,836	37,570
Dividends paid in the year	(7,723)	(4,560)
Issue of ordinary shares less issue costs	27,955	96,300
	----------	----------
Total net assets attributable to the ordinary shares at 31 August	283,972	220,904
	======	======

 

 

7. Called up share capital

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 the year, 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 the year, 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.

 

2016	Number of shares	Number of shares entitled to dividend	£'000
Ordinary shares 1p each
At 31 August 2015	79,246,550	79,246,550	793
New shares allotted in year	76,834,056	76,834,056	768
	---------------	---------------	-----
At 31 August 2016	156,080,606	156,080,606	1,561
	=========	=========	====

During the year, the Company issued 76,834,056 ordinary shares for a total consideration of £96,300,000 after deduction of issue costs.

 

Included within the issue of 76,834,056 ordinary shares during the year were 75,234,056 shares issued following the liquidation of Henderson Global Trust plc ("HGT") whereby investors in HGT were given the option of receiving shares in either The Bankers Investment Trust PLC or Henderson International Income Trust plc.

 

8. Share premium account

	2017 £'000	2016 £'000
At the start of the year	131,328	35,796
Ordinary shares allotted in year	6,842	95,933
Issue costs	(64)	(401)
Ordinary shares allotted from C share issue	20,996	-
	----------	----------
At 31 August	159,102	131,328
	======	======

 

9. 2017 Financial information

The figures and financial information for the year ended 31 August 2017 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 2017 have been audited but have not yet been delivered to the Registrar of Companies. The auditors' report on the 2017 financial statements was unqualified and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.

 

10. 2016 Financial information

The figures and financial information for the year ended 31 August 2016 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 2017 will be posted to shareholders in November 2017 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 Thursday, 7 December 2017 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: 020 7818 5187
James de Sausmarez Head and Director of Investment Trusts Henderson Investment Funds Limited Telephone: 020 7818 3349	Sarah Gibbons-Cook Investor Relations and PR Manager Janus Henderson Investors Telephone: 020 7818 3198

 

 

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.

 

This information is provided by RNS

The company news service from the London Stock Exchange