TIDMHINT
RNS Number : 1158S
Henderson Intl. Income Trust PLC
02 November 2023
JANUS HERSON FUND MANAGEMENT UK LIMITED
HERSON INTERNATIONAL INCOME TRUST PLC
LEGAL ENTITY IDENTIFIER: 2138006N35XWGK2YUK38
HERSON INTERNATIONAL INCOME TRUST PLC
Annual Financial Report for the year ended 31 August 2023
This announcement contains regulated information
INVESTMENT OBJECTIVE
The Company's investment objective is to provide shareholders
with a growing total annual dividend, as well as capital
appreciation.
HIGHLIGHTS
-- We are pleased to announce an increase in dividends of 3.0% to 7.47p
per share for the year, continuing the track record of having increased
the dividend for each of the eleven years since launch. The dividend
has grown at an average annualised rate of 5.8% compared to CPI
growth of 2.9% during this time.
-- M ost companies in the portfolio increased their dividends, supporting
the robustness of the income stream.
-- NAV total return rose by 0.8% (debt at par) and 1.4% (debt at fair
value) over the year.
-- We continue to maintain and follow the Company's existing strategy
of identifying companies that have the capacity to grow their earnings
and dividends over the medium to long term while being attractively
valued.
PERFORMANCE TO/AT 31 AUGUST
2023 2022
----------------------------------- --------- ------
Dividend in respect of the year 7.47p(1) 7.25p
Dividend yield at the year end(2) 4.6% 4.2%
Dividend growth year-on-year 3.0% 15.1%
10-year compound dividend growth 5.8% 6.0%
----------------------------------- --------- ------
Dividend growth since launch to 31 August 2023
2011(3) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
------------- -------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
dividend
(pence
per share) 1.40 4.00 4.05 4.25 4.50 4.65 4.90 5.30 5.70 6.00 6.30 7.25 7.47
------------- -------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
2023 2022
Dividend yields at 31 August % %
------------------------------------ ------ -----
Company(2) 4.6 4.2
Benchmark(4) 3.9 3.9
AIC Global Equity Income sector(5) 3.6 3.4
------------------------------------ ------ -----
2023 2022
Total return performance for year to 31 %
August %
------------------------------------------ ------ -----
NAV(6) (debt at par) 0.8 3.8
NAV(6) (debt at fair value) 1.4 6.3
Share price(7) (1.9) 7.8
Benchmark(4) 2.3 6.6
AIC Global Equity Income sector (NAV)(5) 5.7 3.6
------------------------------------------ ------ -----
Performance to/at 31 August 2023 2022
------------------------------------------ ------- -------
NAV per share at year end (debt at par) 175.7p 181.5p
Discount (debt at par)(8) (8.1)% (5.3)%
NAV per share at year end (debt at fair
value)(8) 178.6p 183.4p
Discount (debt at fair value)(8) (9.6)% (6.3)%
Share price at year end 161.5p 171.8p
NAV total return (debt at fair value)(8) 1.4% 6.3%
Ongoing charge for year(8,9) 0.72% 0.83%
Gearing at year end(8) 3.9% 6.5%
------------------------------------------ ------- -------
1 Includes the fourth interim dividend in respect of the year
ended 31 August 2023 to be paid to shareholders on 30 November
2023
2 Calculated based on the closing share price at 31 August
3 Four-month period from launch on 28 April 2011 to 31 August
2011
4 MSCI ACWI (ex UK) High Dividend Yield Index (sterling
adjusted)
5 Excludes British & American Investment Trust plc
6 Net asset value ("NAV") total return (including dividends
reinvested, net of fees)
7 The Company's share price total return (assuming the
reinvestment of all dividends excluding dealing expenses). Since
inception share price return - launch price including discount
(97.25p)
8 Alternative performance measure
9 Calculated using the methodology prescribed by the Association
of Investment Companies ("AIC")
Source: Morningstar Direct, Janus Henderson
CHAIRMAN'S STATEMENT
This is my first annual statement since taking over as chairman
from Simon Jeffreys. I would like to thank Simon for his hard work
as chairman during the past five years and especially during the
testing period of the Covid pandemic. His attention to detail is
remarkable and he did much to improve the quality of the Company's
annual report and accounts.
We are building on this legacy and aim to further simplify the
narrative where possible and to highlight the primary objective of
the Company, which is to provide a rising annual income to
shareholders. To this end I am beginning my statement by talking
about earnings and the dividend.
Earnings and dividends
We are pleased to announce a total dividend increase from 7.25p
to 7.47p per ordinary share for the year to 31 August 2023, a rise
of 3.0%. The total dividend for the year consists of a first,
second and third interim dividend of 1.85p per ordinary share, and
a fourth interim dividend of 1.92p which will be paid on 30
November 2023 to shareholders on the register at 10 November
2023.
After a significant increase of 23% in 2022, the revenue return
of the Company this year is 1% lower than last. This slight decline
is primarily the result of sterling's appreciation against several
currencies, particularly the US, Hong Kong and Australian dollars
against which it has rallied 10%. Most companies held in the
portfolio increased their dividends, supporting the robustness of
the income stream during this period. A small portion of the
dividend was not covered by earnings and so it was necessary to
draw on our reserves to meet the shortfall.
We continue to recognise the importance of progressive dividend
income to our shareholders. We will employ the flexibility of the
investment trust structure to utilise both our strong revenue and
capital reserves to support dividend growth when necessary. The
distributable reserves of the Company increased by GBP15m to
GBP107m at the year-end. If required, this provides a significant
cushion to support the continued growth of the dividend.
We have increased the dividend for each of the eleven years
since launch and this positive growth trend is demonstrated in the
graphs in the annual report.
Capital performance and markets
Our secondary objective is to provide long-term capital
appreciation. Over the year, the net asset value ("NAV") total
return per ordinary share rose by 0.8% (debt at par) and by 1.4%
(debt at fair value). The total return on the ordinary share price
was -1.9%, this figure includes total dividends of 7.47p per
ordinary share, an increase of 3.0% on the previous year. The
Company's performance comparator, the MSCI ACWI (ex UK) High
Dividend Yield Index (sterling adjusted), generated a 2.3% total
return over the same period.
A more detailed analysis of performance, portfolio and
positioning is provided in the Fund Manager's Report below.
Gearing
Well-judged gearing can enhance 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. Borrowing limits for
this purpose include implied gearing using derivatives. The
Company's senior unsecured notes (EUR30m at 2.43% due 2044) provide
low-cost debt financing and have helped to insulate shareholders
from rising interest rates over the period. Total gearing at the
year end was 3.9% (31 August 2022: 6.5%).
Liquidity and discount management
The Company's share price has traded at a discount to NAV of
between 1% to 10% over the period and was 8.1% (with debt at par)
at 31 August 2023. The board continues to monitor the Company's
premium/discount to NAV and will consider appropriate action if
this moves and remains out of line with the Company's peer group.
The board's ability to influence the premium or discount over
anything but the short term is limited and accordingly we believe
it is not in shareholders' interests to have a specific share
issuance or buy-back policy. It is sensible to retain flexibility
however, and we shall therefore consider share issuance and/or
buy-backs where appropriate and subject to market conditions.
Ongoing charge
The ongoing charge for the year to 31 August 2023, as calculated
in accordance with the Association of Investment Companies ("AIC")
methodology, was 0.72% (2022: 0.83%). It is pleasing that costs
have fallen year on year primarily because of the management fee
reduction which took effect from 1 September 2022. This reduction
has improved the Company's overall cost position making it a more
attractive proposition.
Environmental, Social and Governance
The board pays close attention to the importance of
Environmental, Social and Governance ("ESG") matters and, together
with the investment team, is conscious that investors' interest in
ESG matters will continue to grow. The fund manager carefully
considers ESG related risks and opportunities when investing. This
year we have enhanced disclosures about the manager's and
investment team's approach to ESG and these are contained in the
annual report.
Continuation vote
The Company's articles of association give shareholders the
opportunity every three years to vote on whether they wish to
continue the life of the Company, or to wind it up. Such a
resolution will be put to shareholders at this year's annual
general meeting.
Given that the Company has achieved its primary objective of
producing a rising annual income for its shareholders, the board
recommends that all shareholders vote in favour of continuing the
Company. All directors intend to do so in respect of their own
beneficial holdings and recent contact with larger shareholders
suggests to the board that they will do likewise.
Board composition
I am delighted to welcome Mai Fenton to the board. Mai was
appointed on 1 June 2023. She has a wealth of marketing expertise,
having spent over 25 years in this area, focused on high-growth
companies. Most recently, Mai was Chief Marketing Officer at
Superscript, an SME insurance provider, where she was responsible
for all aspects of their brand, digital and partnerships marketing
activity. She brings to the board an understanding of, and focus
on, the consumer; the key target when creating retail demand for
the Company's shares.
The board is fully compliant with the FCA listing rules in
relation to targets for board composition and diversity and the
directors will endeavour to ensure that it remains so.
Annual general meeting
The twelfth annual general meeting ("AGM") of the Company will
be held at 2.30pm on Tuesday, 12 December 2023 at the offices of
Janus Henderson Investors, 201 Bishopsgate, London EC2M 3AE. The
notice of meeting and details of the resolutions to be proposed are
set out in a separate document which accompanies this annual
report. Ben Lofthouse, our fund manager, will give a presentation
at the meeting.
As an alternative, I invite shareholders to join by Zoom webinar
and details of how to register are set out in the notice of
meeting. As is our normal practice, there will be live voting for
those physically present at the AGM. However, due to technical
restrictions, we cannot offer live voting by Zoom. We therefore
request all shareholders, particularly those who cannot attend
physically, to submit their votes by proxy to ensure that their
votes are included.
Outlook
The interest rate environment across the world has changed
markedly during the past year in response to higher inflation. By
having raised interest rates vigorously over the past 20 months,
central banks hope to dampen down economic growth and thus contain
inflation without precipitating a major recession. For inflation to
fall back to previous levels, interest rates must either be raised
further, which may lead to a recession, or be kept at or around
current levels for longer. It is therefore unlikely that the very
low and, in some cases, negative interest rates of recent years
will return in the foreseeable future. A more likely consequence of
this interest rate scenario is that stock markets will mark time
until the valuations of their underlying companies decline to more
attractive levels. This will occur as company earnings continue to
grow, albeit slowly, but their share prices do not rise.
Eventually, valuations will reach fair value, fully reflecting the
inflation background. At this point stock markets can begin to rise
again.
Meanwhile, investors will have to rely more on the dividend
income from their investments, than they have in recent years, to
generate a higher proportion of their total return. Here the
relationship between the Company's investment trust status and its
dividend is particularly important. This status allows the Company
to draw on its reserves to sustain and even grow dividend payments
in the most difficult period of an interest rate/inflationary
cycle.
We cannot control the macroeconomic background but we can
maintain and follow the Company's existing strategy of identifying
companies that have the capacity to grow their earnings and
dividends over the medium to long term while being attractively
valued.
Richard Hills
Chairman
1 November 2023
PORTFOLIO INFORMATION
Ten largest investments at 31 August 2023
Market
value
Market at time
value of investment Income Yield(1)
Rank Rank % of
2023 2022 Company Country Sector GBP'000 portfolio GBP'000 GBP'000 %
------ ----- ---------- ------------ ------------------- ---------- ----------- -------------- ---------- ----------
1 2 Sanofi France Health care 13,665 3.8 11,269 497 3.6
2 1 Microsoft US Technology 13,637 3.8 1,530 135 1.0
Merck &
3 8 Co US Health care 10,845 3.0 7,526 287 2.6
Cisco
4 7 Systems US Telecommunications 10,380 2.9 6,235 286 2.8
5 6 Roche Switzerland Health care 10,367 2.9 10,245 372 3.6
nVent
6 18 Electric US Industrials 10,098 2.8 5,024 133 1.3
Air
Products
&
7 10 Chemicals US Basic materials 9,356 2.6 8,244 209 2.2
8 13 Novartis Switzerland Health care 9,224 2.6 6,947 437 4.7
Zurich
9 - Insurance Switzerland Financials 8,908 2.5 8,972 520 5.8
10 4 Coca-Cola US Consumer staples 8,738 2.5 6,033 286 3.3
---------- ----------- -------------- ----------
Top 10 105,218 29.4 72,025 3,162
---------- ----------- -------------- ----------
(1) Dividend yields as at 31 August 2023 are based upon historic dividends,
including special dividends where known, and are not representative of future
yield
Geographic exposure at 31 Sector exposure at 31 August
August As a percentage of the investment
As a percentage of the investment portfolio
portfolio excluding cash
excluding cash
2023 2022 2023 2022
% % % %
-------------------- --------- ------- ------------------------ ------ -----
US 34.8 35.6 Financials 18.7 19.6
Switzerland 11.3 8.7 Health care 17.9 16.0
France 9.4 8.9 Consumer staples 11.8 9.4
China 5.4 4.4 Industrials 10.0 7.0
Germany 4.9 2.6 Telecommunications 9.7 9.8
Hong Kong 4.9 4.7 Consumer discretionary 9.2 8.5
Korea 3.3 4.7 Technology 8.4 13.4
Australia 3.2 5.2 Basic materials 4.3 5.4
Netherlands 2.7 2.0 Energy 3.9 4.5
Sweden 2.6 2.9 Real estate 3.1 4.0
Italy 2.2 2.9 Utilities 3.0 2.4
Singapore 1.9 2.3
Indonesia 1.9 0.9
Brazil 1.8 -
Spain 1.8 1.6
Canada 1.5 2.5
Japan 1.4 1.2
Denmark 1.1 1.4
Norway 1.1 1.3
Taiwan 1.0 3.6
Finland 0.9 2.6
India 0.9 -
Source: Janus Henderson
Investment portfolio as at 31 August 2023
Market value % of
Company Country GBP'000 portfolio
------------------------------------- ------------- ------------- -----------
Basic materials
Air Products & Chemicals US 9,356 2.6
UPM-Kymmene Finland 3,235 0.9
Pilbara Minerals Australia 2,864 0.8
-------------
15,455 4.3
------------- -----------
Consumer discretionary
Sony Japan 4,817 1.4
Alibaba China 4,046 1.1
Midea China 3,981 1.1
Compagnie Financière Richemont Switzerland 3,422 0.9
Mercedes-Benz Germany 3,248 0.9
Samsonite Hong Kong 3,064 0.9
BMW Germany 3,052 0.9
JD.Com China 2,973 0.8
Li-Ning China 2,856 0.8
China Yongda Automobiles China 1,442 0.4
32,901 9.2
------------- -----------
Consumer staples
Coca-Cola US 8,738 2.5
Nestlé Switzerland 8,524 2.4
Mondelez US 8,394 2.3
Pepsico US 6,595 1.8
Ambev Brazil 6,453 1.8
Pernod-Ricard France 3,461 1.0
42,165 11.8
------------- -----------
Energy
TotalEnergies France 5,321 1.5
Woodside Energy Australia 4,555 1.3
Aker Norway 4,151 1.1
14,027 3.9
------------- -----------
Financials
Zurich Insurance Switzerland 8,908 2.5
Amundi France 6,678 1.9
CME US 6,067 1.7
ING Netherlands 5,928 1.6
Travelers Companies US 5,055 1.4
Bank Mandiri Indonesia 4,350 1.2
AXA France 4,172 1.2
CITIC Securities Hong Kong 4,163 1.2
Macquarie Australia 4,048 1.1
ASR Nederland Netherlands 4,034 1.1
AIA Hong Kong 3,546 1.0
BFF Bank Italy 3,538 1.0
United Overseas Bank Singapore 3,397 0.9
HDFC Bank India 3,073 0.9
66,957 18.7
------------- -----------
Health care
Sanofi France 13,665 3.8
Merck & Co US 10,845 3.0
Roche Switzerland 10,367 2.9
Novartis Switzerland 9,224 2.6
Bristol-Myers Squibb US 6,667 1.9
Medtronic US 5,326 1.5
Johnson & Johnson US 3,971 1.1
Novo Nordisk Denmark 3,948 1.1
64,013 17.9
------------- -----------
Industrials
nVent Electric US 10,098 2.8
Honeywell International US 6,722 1.9
Daimler Truck Germany 5,738 1.6
Sandvik Sweden 5,448 1.5
LG Corp Korea 3,487 1.0
Nari Technology Co China 3,030 0.8
China National Building Material China 1,380 0.4
35,903 10.0
------------- -----------
Real estate
Crown Castle US 3,869 1.1
CapitaLand Integrated Commercial
Trust Singapore 3,656 1.0
Sun Hung Kai Properties Hong Kong 3,466 1.0
10,991 3.1
------------- -----------
Technology
Microsoft US 13,637 3.8
Qualcomm US 5,114 1.4
Samsung Korea 4,084 1.1
Fidelity National Information US 3,775 1.1
Taiwan Semiconductor Manufacturing Taiwan 3,560 1.0
30,170 8.4
------------- -----------
Telecommunications
Cisco Systems US 10,380 2.9
Deutsche Telekom Germany 5,406 1.5
Telus Canada 5,003 1.5
SK Telecom Korea 4,291 1.2
Tele2 Sweden 3,979 1.1
HKT Trust and HKT Ltd Hong Kong 2,999 0.8
Telekomunikasi Indonesia 2,477 0.7
34,535 9.7
------------- -----------
Utilities
Iberdrola Spain 6,302 1.8
Enel Italy 4,252 1.2
-----------
10,554 3.0
------------- -----------
Total investments 357,671 100.0
------------- -----------
FUND MANAGER'S REPORT
-- Equity markets have absorbed a rapid increase in interest rates.
Portfolio companies are generally coping well and earnings and dividend
growth have been stronger than many investors and commentators expected.
-- The portfolio slightly outperformed the MSCI ACWI (ex UK) High Dividend
Yield Index but after fees the NAV (with debt at fair value) has
lagged by 0.9%. There has been a significant regional dispersion
of returns and the strong performance of the portfolio's European
stocks has been offset by the weak performance from the Asia Pacific
holdings.
-- We are in a period of incredible innovation and change which is
not reflected in current valuations due to macro-economic concerns.
-- The diversified nature of the portfolio helps to protect against
particular earnings shocks to any one sector or region that might
impact dividends in any one year.
Over the period some factors that had suppressed economic growth
in recent years have abated. The energy crisis precipitated by
Russia's invasion of Ukraine was less severe than anticipated while
the remaining Covid-impacted countries abandoned their zero Covid
policies and opened to the world. Both of these factors have
allowed supply chains to continue their recovery and goods and
services have become more available.
The chart in the annual report shows the performance of some of
the major regions' equity markets over the period. European equity
markets have recovered well from a difficult 2022, but Asia Pacific
has been weak despite moving on from measures implemented to
contain Covid.
These developments have benefited economic growth but supply
chain improvements have not been reflected in price reductions. As
a result, inflation has proved to be more persistent than policy
makers had expected, forcing central banks to react by raising
interest rates to higher levels than markets predicted. The chart
in the annual report illustrates the increases by some of the major
central banks this year.
This is a significant moment for financial markets. Since the
financial crisis of 2008, inflation has been lower than the levels
that central banks perceived to be healthy and economic growth has
been 'below trend' too. Central banks, as a result, have maintained
a highly stimulative monetary environment, employing new tools that
have included quantitative easing and sub-zero interest rates. This
period lasted so long that some market participants began to
believe that rates would remain permanently lower. This year put
paid to that theory.
Inflation has spiked to historically high levels and central
banks have been forced to respond by increasing interest rates at
the fastest rate in 40 years. This change has disrupted businesses
that relied on plentiful debt at low interest rates to enhance
their returns or fund their cash flow. These businesses include
property, renewables, infrastructure, and early-stage companies
with little or no net cash flows. A combination of these effects
has resulted in problems for regional banks in the United States,
leading to the collapse of some relatively large financial
institutions.
However, despite the fears and expectations of many observers,
the rise in interest rates has so far not caused a significant
economic slowdown, increase in unemployment, or recession. The rise
in inflation has caused problems for some companies that have not
been able to pass on input cost increases, but many other companies
that have been able to have benefited from higher pricing. The rise
in inflation has also harmed large parts of society where the cost
of living has risen faster than wages. Recently wage growth has
picked up due to low unemployment and tough labour union
negotiations, so some of the cost-of-living crisis is now
abating.
In the US, the world's largest stock market, it is notable that
macro-economic news has been overshadowed by advances in Artificial
Intelligence ("AI"). Excitement around new AI systems that can
generate content and the technology infrastructure needed to power
them has driven a strong rise in a narrow group of stocks. Many of
these companies are already large constituents of the US equity
market, including Microsoft, Nvidia, Facebook, Amazon and Apple.
The rally in these stocks has masked a general weakness in the US
market and reignited the tech/growth equity performance that
faltered last year. The chart in the annual report shows that these
large companies have had a disproportionately large impact in
driving the market upwards compared to the average company, as
represented by the equal weighted S&P Index.
Performance review
The portfolio produced a total return of 1.4% in NAV per
ordinary share over the period (debt at fair value). This return
includes dividends totalling 7.47p per share, a 3.0% increase year
on year. Income growth has not been matched by capital appreciation
in recent years. Whilst disappointing, it is perhaps understandable
that against a background of a sharp rise in interest rates, asset
prices have stagnated.
Dividend performance
Investors sometimes ask about dividend trends, and how stable
they may be in the face of a recession. Research over long time
periods show dividends are significantly less volatile than
earnings and tend to reflect the medium-term outlook for companies
rather than being overly driven by short-term earnings. The
diversified nature of the portfolio helps to protect against
earnings shocks in any one sector or region, while the focus on
companies' long-term prospects is designed to identify those that
can grow through the cycle.
The Company's investment process focuses on companies with
attractive dividend yields, strong cash flow generation and the
potential to grow. They are often leaders in their respective
industries, with established competitive advantages. In a higher
interest rate environment these characteristics are increasingly
important because they allow companies to continue to invest in
their businesses and pay dividends despite higher financing costs.
The underlying dividend growth of the portfolio has been solid,
reflecting the earnings growth of the underlying holdings.
After a significant increase of 23% in 2022, the revenue return
of the Company this year is 1% lower than last year. This slight
decline is primarily the result of sterling's appreciation against
several currencies, particularly the US, Hong Kong and Australian
dollars against which it has rallied 10%. In a global portfolio,
currencies often move in different, uncorrelated directions,
cancelling each other out. Note 16.1.2 of the financial statements
provides some analysis of the portfolio's foreign currency
sensitivity.
Local currency dividend growth from the top ten holdings
averaged 5.2% during the period, while the weighted average of the
portfolio was over 8%, coming from a wide range of sectors and
regions. The three largest sectors in the portfolio are financials,
health care and consumer staples, where dividend growth has
exceeded our expectations.
Several of the financial sector holdings were among the fastest
dividend growers: Asia Pacific banks United Overseas Bank, Bank
Mandiri and Macquarie all grew their dividends by over 20%, and
European insurers Zurich Insurance, ASR Nederland and AXA grew in
the region of 10%. This has been driven by increased regulatory
clarity about balance sheet requirements and higher interest and
insurance rates.
Earnings in the health care sector are less impacted by
short-term factors like interest rates or price trends but more by
new treatment approvals and competition for specific medicines.
Despite concerns about drug pricing reform in the United States all
the health care holdings in the portfolio announced dividend
increases this year. The fastest growth has come from Novo Nordisk
and Sanofi, which have some blockbuster drugs still in the early
stages of their adoption and with little competition. Holdings such
as Merck & Co, Novartis and Roche are growing but their drugs
are more mature, and their dividend growth is more conservative to
fund investment in their development pipeline.
Consumer staples is the third largest sector, and the portfolio
companies have also benefited from a supportive pricing environment
and good demand for their products. They have generally been
increasing their dividends. Beverage company Pernod-Ricard
increased its dividend by 23% and food company Mondelez by 10%.
Their growth is less cyclical and comes more from their exposures
to emerging markets where consumption is increasing and consumers
are trading up as GDP per capita increases.
Special dividends were received from TotalEnergies, exchange
operator CME, and luxury goods company Richemont.
Capital performance
The Company's portfolio is relatively concentrated, consisting
of 50-80 positions, so performance can be impacted by
stock-specific news as well as regional equity market performance
and sector news. The investment process focuses on identifying
businesses that are attractively valued and where the dividends
both add to shareholders' total return and reward them for being
invested until the value is realised by capital appreciation.
Portfolio construction ensures the portfolio is diversified to
reduce concentration risks, and the portfolio is organised in
regional sleeves: North America, Europe and Asia Pacific.
The Company produced a net asset total return of 1.4% (debt at
fair value), which was 0.9% behind the MSCI ACWI (ex UK) High
Dividend Yield Index. The portfolio's performance was 2.8%. An
estimated attribution of the portfolio's performance between asset
allocation and stock selection is given below, which also includes
the impact of other factors to explain the movement of the net
asset value over the year.
Estimated performance attribution (relative to the MSCI ACWI (ex
UK) High Dividend Yield Index)
%
Stock selection -1.3
Asset allocation +1.5
Gearing +0.3
Expenses -0.7
Timing residual* -0.7
Total -0.9
------------------ ----
* Refer to glossary in the annual report
There has been a considerable dispersion between the returns of
different regions and sectors this year. The average exposures and
total returns for each region are detailed below. The positive
asset allocation was primarily driven by the overweight position in
Europe, as well as the underweight in North America. Stock
selection in Europe and North America was positive but was offset
by weak stock selection in the Asia Pacific region.
Portfolio exposures and returns by region
Average exposure Total return
% %
Europe (ex UK) 33.6 +17.1
North America 40.9 +1.5
Asia Pacific (ex Japan) 24.4 -12.1
Other* 2.5 -6.5
* Other represents holdings in Japan and Latin America
The overweight exposure to European stocks, which represented on
average a third of the portfolio, contributed most to performance.
Due to concerted efforts by European governments to increase gas
inventory levels and by consumers to reduce consumption, energy
prices gradually abated over the period.
Many of the portfolio's financial holdings have been significant
positive contributors to performance aided by rising interest rates
and an improving economic environment. In recent years the
portfolio has maintained a significant exposure to financial
companies because their valuations have not reflected their
profitability or dividend sustainability, both of which have
endured despite the low interest rate environment of the last
decade. European financial companies BFF Bank, ING and AXA, and
asset managers Van Lanschot and Amundi were amongst the most
positive individual contributors to performance.
The pharmaceutical sector was also a positive contributor. Novo
Nordisk has developed its diabetes treatment to also target
obesity, where it is proving remarkably effective and seeing a
surge in demand. Sanofi was sold off by the market last year due to
litigation concerns that have proved unfounded (our position was
added to at the time), and revenues have grown faster than the
market expected.
North America returned 1.5% and was a poor performing region for
higher yielding stocks. The top performers were those with
additional demand related to AI: Microsoft, Cisco and nVent.
Microsoft is a leader in AI through its investment in OpenAI, the
creator of ChatGPT, and has been one of the first companies to
monetise generative AI. nVent is benefiting from AI albeit in a
much more moderate way via demand for its data centre cooling
systems. Whilst the portfolio avoided exposure to real estate or
regional banks, the worst hit sectors from rising interest rates,
telecommunications has derated as bond yields have risen and Crown
Castle (telecom towers) and Canadian telecoms operator Telus have
both fallen in value. Broadcom appears as the largest single
detractor. We had held the company for several years and took
profit from it. It has subsequently rallied on the excitement
around AI, causing a relative underperformance against the index.
Fidelity National Information Services is a payments company that
has suffered from lower transactions than expected because of a
more price competitive market. It has been sold post year-end to
invest in other opportunities.
The most significant negative contributor to performance has
been the overweight to the Asia Pacific region. The region makes up
approximately 25% of the portfolio and the return for the period
was -12.1%. Despite high levels of consumer savings, the opening up
of the Chinese economy after Covid has not yet triggered the pickup
in economic and consumer activity that the rest of the world
experienced post Covid. Whilst Chinese exposure is relatively low
(5.4%), it has disproportionately impacted performance despite the
general avoidance of companies involved in property construction.
Consumer facing companies including leisure wear retailer Li-Ning,
auto dealer China Yongda Automobiles, and JD.Com were some of the
largest underperformers. The companies held in the region are all
leaders in their respective industries, and in many cases have cash
balance sheets, but this has not stopped them falling to very low
valuations. Often the best investments are made when sentiment in a
particular stock, sector or region is depressed and it certainly
feels like sentiment regarding China is now very low.
The table below highlights the most significant stock
contributors to performance over the year measured by contribution
to absolute return.
The table below highlights the most significant stock
contributors to performance over the year measured by contribution
to absolute return.
%
------------------------------- -----
nVent Electric +1.1
Sanofi +0.7
Microsoft +0.6
Novo Nordisk +0.6
ING +0.6
JD.Com -0.7
Fidelity National Information -0.7
Li-Ning -0.7
Crown Castle -0.9
Broadcom -1.2
Source: Janus Henderson. Based on Total Effect Relative MSCI
ACWI (ex UK) High Dividend Yield Index, as at 31 August 2023
Impact of gearing
Since the Company has long-term debt we provide both a fair
value and par value return (see note 16.4 in the annual report for
details). The fair value of the debt reflects a theoretical market
price which reflects interest rate expectations. The rise in
interest rate expectations during the period has reduced the fair
value of the debt by GBP2,196,000, enhancing the fair value net
asset value return of the Company by 0.6%. The par value of the
debt is only changed by currency movements and has fallen by
GBP224,000 over the year, as a result of sterling slightly
strengthening against the euro.
ESG and company engagement
Integration of environmental, social and governance factors into
investment decision making and ownership is detailed in the annual
report. During the period under review the investment team
continued to actively engage with investee companies. Recent
discussions have focused on climate related areas, including how
forestry products manufacturer UPM-Kymmene has assessed the
potential impact of climate change on its forestry assets. Also,
how consumer staples companies such as Nestlé and Mondelez are
addressing deforestation and traceability of their supply chain.
Elsewhere, the team has engaged with TotalEnergies about their
progress on methane emission reductions, and industrial gas company
Air Products & Chemicals' investments in hydrogen generation to
help the sector decarbonise.
Portfolio positioning
Stock selection is driven by a combination of the attractiveness
of the company (leading competitive positioning, positive
supply/demand outlook, good cash flow generation, long-term
sustainability of business model) and its valuation.
In recent years we have been concerned about two potential
macro-economic risks when analysing companies: the risk that
interest rates may rise and the ability for companies to deal with
cost inflation. The risk of higher interest rates has largely been
realised, and new opportunities are being presented as valuations
become more attractive in some parts of the market. The main risk
now is that the sharp rise in interest rates may slow growth more
than expected.
The reduction in the Company's technology and financial sector
weightings reflects that many of these stocks have recovered well
and could be vulnerable to economic weakness. Financial services
positions closed on this basis included Taiwanese financial
conglomerate CTBC Financial, insurers Sampo and Manulife, and asset
manager Van Lanschot. Where new positions in the sector were
initiated, they have less credit exposure and earnings are driven
more by volume growth than interest rate movements. These include
derivative exchange operator CME, Zurich Insurance and Indian bank
HDFC. CME is one of the largest providers of interest rate
derivatives, used by investors and financial companies to help
manage interest rate risk, especially in times of interest rate
uncertainty. Zurich Insurance is benefiting from tightness in
insurance markets due to higher-than-expected losses by competitors
who have mispriced inflation and natural catastrophe related
events.
In the technology sector semi-conductor companies MediaTek and
Broadcom were sold, along with glass-focused technology business
Corning and consumer gaming company Nintendo. A position in
Qualcomm was purchased. Qualcomm designs and manufactures
communication technology and software, including for mobile phones,
modems and PCs. Although it is well known for supplying the
smartphone industry, it is a much more diversified business that it
was in the past. The company is seeing growth from new markets
including the auto sector which is using more technology on each
new car designed, and potentially the AI industry. The increased
penetration of technology into society remains one of the most
exciting themes for the coming decade and the portfolio continues
to own leaders in the area including Microsoft, Taiwan
Semiconductor Manufacturing and Samsung.
If the interest rate environment remains high it will be
important for companies to be able to grow despite that
environment. Some of the changes in the portfolio also reflect the
opportunity of falling valuations to invest in companies with more
structural growth. A new position was initiated in Sony, which has
superior and more diversified long-term growth drivers than many
competitors, yet trades at a similar or lower valuation. Emerging
markets have been out of favour due to interest rate and currency
concerns, which provided an opportunity to initiate new positions
in consumer staples companies Pernod-Ricard and Ambev. Both have
material exposure to Asian and Latin American markets and the
potential to grow earnings and dividends throughout the economic
cycle.
The largest individual stock changes are shown below:
Purchases %
Zurich Insurance +2.6
Ambev +1.9
CME +1.8
Daimler Truck +1.7
Qualcomm +1.5
Sales %
Verizon Communications -2.1
Panasonic -2.1
Texas Instruments -1.8
Quanta Computer -1.7
Swire Pacific -1.3
Outlook
The portfolio remains well diversified by region and sector with
North America and Europe the largest regional exposures. The
proportion of the portfolio in the Asia Pacific region has been
maintained. In the long term, this region has attractive economic
characteristics with many technology leaders listed there. With
regard to China and Hong Kong, exposure remains relatively low in a
portfolio context, at 9%.
If consensus economic forecasts are correct, the Asia Pacific
region could see more investor interest next year.
Global gross domestic product (GDP) growth and consensus
forecasts
GDP growth (%) 2022 2023e 2024e
World 3.4 2.8 2.6
US 2.1 2.4 1.0
UK 4.3 0.4 0.4
Eurozone 3.3 0.5 0.8
Asia Pacific (ex Japan) 3.2 4.5 4.6
Japan 1.1 1.8 1.0
China 3.0 5.0 4.5
Source: Bloomberg, as at 16 October 2023
Note: 2023-2024 are estimates
It is hard to know the impact of higher interest rates on
economies, but as discussed earlier there are interesting long-term
demand trends for many companies and sectors that have, if
anything, strengthened over the last few years. These include
decarbonisation spend, the relocation of supply chains and
technological innovation. There is still a very wide divergence
between the performance of different regions, stocks and sectors.
As the chart in the annual report shows, the relative
underperformance of value versus growth stocks remains at levels
unprecedented in recent history. While stock selection remains
important to avoid value traps, there remain many undervalued
opportunities.
Ben Lofthouse
Fund Manager
1 November 2023
INVESTMENT POLICY
The Company will invest in a focused and internationally
diversified portfolio of 50-80 companies that are either listed in,
registered in, or whose principal business is in countries that are
outside the UK and will be made up of shares (equity securities)
and fixed interest asset classes that are diversified by factors
such as geography, industry and investment size. A maximum of 25%
of gross assets may be invested in fixed interest securities. The
Company does not hold investments in unlisted companies unless it
is through subsequent delisting of an existing investment.
Investment in any single company (including any derivative
instruments) will not, in gross terms, exceed 5% of net assets at
the time of investment and no more than 15% of gross assets may be
invested in other listed investment companies (including investment
trusts) or collective investment schemes. No more than 10% of gross
assets may be invested in companies that themselves invest more
than 15% of their gross assets in UK listed investment companies or
collective investment schemes.
The Company may use financial instruments known as derivatives
for the purpose of efficient portfolio management, for investment
purposes or to generate additional income while maintaining a level
of risk consistent with the risk profile of the Company. The
Company may hedge exposure to foreign currencies up to a maximum of
20% of gross assets and may generate up to a maximum of 20% of
gross income through investment in traded options.
The Company can borrow to make additional investments with the
aim of achieving a return that is greater than the cost of
borrowing. The Company's articles of association allow borrowings
up to 100% of net asset value. In normal circumstances, the manager
may only utilise gearing up to 25% of net assets at the time of
drawdown or investment (as appropriate) in accordance with the
board's policy and for these purposes 'gearing' includes implied
gearing through the use of derivatives.
PRINCIPAL RISKS AND UNCERTAINTIES
The board, with the assistance of Janus Henderson, has carried
out a robust assessment of the principal risks and uncertainties,
including emerging risks, facing the Company, including those that
would threaten its business model, future performance, solvency or
liquidity and reputation.
The board regularly considers the principal risks facing your
Company and has drawn up a matrix of risks. The board has also put
in place a schedule of investment limits and restrictions,
appropriate to your Company's investment objective and policy. The
principal risks which have been identified and the steps taken by
the board to mitigate these are set out in the table below. The
principal financial risks are detailed in note 16 to the financial
statements in the annual report.
The risk register has been updated during the year to reflect
increasing geopolitical and political risks and increased cyber
security risks. The risk arising from the continued consolidation
of the wealth management industry has been moved from an emerging
risk to a principal risk.
Risk Trend Mitigation
Geopolitical risks
Geopolitical risks, including the The fund manager is active in
Russian invasion of Ukraine and the review of geographic and
the conflict in the Middle East, sector allocations, including
are causing political and economic an understanding of underlying
volatility. Supply chains, energy impacts of trade with Russia.
supply and consequential price At each board meeting, the allocation
increases are among the risks. of the assets across the geographic
markets and the sector relative
weightings are discussed with
the fund manager, with a focus
on the current market context.
------ -----------------------------------------
Political risks
Political and economic uncertainty, The board actively engages in
including the political climate dialogue with the fund manager
in China, could give rise to market to ensure an ongoing review
volatility. This could affect foreign of the portfolio and reallocation,
exchange movements and impact the if considered appropriate, to
valuation of your Company's portfolio adjust stocks or geographical
and dividend income. allocations.
The fund manager monitors political
and economic issues and regularly
reviews geographic and sector
allocation. The risk is spread
through holding a diverse portfolio.
------ -----------------------------------------
Investment activity and performance
risks The board monitors investment
An inappropriate investment strategy performance at each board meeting,
(for example, in terms of asset including performance relative
allocation or the level of gearing) to the benchmark. It also regularly
may result in underperformance reviews the extent of its borrowings,
against your Company's benchmark when in use.
index and the companies in its
peer group. The fund manager actively monitors
the level of gearing in the
Further increases in interest rates stocks across the portfolio
could materially affect the performance and adjusts exposure where necessary.
of stocks with high levels of gearing. This is discussed on a regular
This could impact their cashflows basis with the board.
and ability to pay dividends, and
thus affect the performance of
the Company's portfolio.
------ -----------------------------------------
Portfolio and market price risks
Although your Company invests almost The manager seeks to maintain
entirely in securities that are a diversified portfolio to mitigate
listed on recognised markets, share against this risk. The board
prices may move rapidly. The companies regularly reviews the portfolio,
in which investments are made may activities and performance.
underperform or fail entirely with
a potential impact on their share The fund manager monitors your
price and/or dividend yield. A Company's exposure to foreign
fall in the market value of your currencies daily and reports
Company's portfolio would have to the board at each meeting.
an adverse effect on shareholders' The fund manager measures the
funds. risk to the Company of the foreign
currency exposure by considering
Most of your Company's assets, the effect on the Company's
liabilities, income and expenses net asset value and total return
are denominated in currencies other of a movement in the exchange
than sterling (the Company's functional rates to which your Company's
currency and presentational currency). assets, liabilities, income
As a result, movements in exchange and expenses are exposed.
rates may affect the sterling value
of those items. The board has set an investment
limit on currency hedging to
Increasing inflation could impact a maximum of 25% of gross assets
the performance of markets internationally, to mitigate against this risk.
with greater market price volatility
having a consequential impact on
the performance of the portfolio.
------ -----------------------------------------
Tax and regulatory risks
A breach of section 1158/9 of the The manager has been contracted
Corporation Tax Act 2010 could to provide investment, company
lead to a loss of investment trust secretarial, administration
status, resulting in capital gains and accounting services through
realised within the portfolio being suitably qualified professionals.
subject to corporation tax. A breach The board receives internal
of the Listing Rules could result control reports produced by
in suspension of your Company's Janus Henderson on a quarterly
shares, while a breach of the Companies basis, which confirm legal and
Act could lead to criminal proceedings, regulatory compliance.
or financial or reputational damage.
------ -----------------------------------------
Operational and cyber risks
Disruption to, or failure of, Janus The board monitors the services
Henderson's accounting, dealing provided by the manager and
or payment systems or the custodian's its other third-party suppliers
records could prevent the accurate and receives reports on the
reporting and monitoring of the key elements in place to provide
Company's financial position. Your effective internal controls.
Company is also exposed to the The board also receives assurances
operational and/or cyber risk that from the manager's chief information
one or more of its service providers security officer that the manager
may not provide the required level maintains robust cyber and information
of service in the event of a cyber security policies, processes
attack. and procedures.
The manager maintains appropriate
policies and procedures, together
with a robust firewall, to mitigate
any such attacks.
The board also monitors the
principal business risks faced
by your Company which are recorded
in a risk map which is reviewed
regularly. Systems are in operation
to safeguard the Company's assets
and shareholders' investments,
to maintain proper accounting
records and to ensure that financial
information used within the
business, or published, is reliable.
------ -----------------------------------------
Consolidation of the wealth management
industry
Continued consolidation of the A key focus is on performance
wealth management industry may and to ensure that your Company
result in a narrower customer base meets buy list requirements
and the increasing importance of of institutional investors.
being on the 'buy list'. The manager makes use of PR
and marketing in order to reach
individual buyers. The board
is enhancing your Company's
marketing strategy to ensure
the growing needs of individual
self-directed investors are
met to help stimulate ongoing
demand for your Company's shares.
------ -----------------------------------------
Emerging risks
In addition to the principal risks facing your Company, the
board also regularly considers potential emerging risks, which are
defined as potential trends, sudden events or changing risks which
are characterised by a high degree of uncertainty in terms of the
probability of them happening and the possible effects on the
Company. Should an emerging risk become sufficiently clear, it may
be moved to a significant risk.
The board has identified the following as potential emerging
risks:
Emerging risk Mitigation
Consolidation of the investment The board regularly reviews the
trust sector leading to a greater market to identify and participate
average size of investment trusts in consolidation opportunities
becoming the norm. and looks to the manager to provide
performance to improve the Company's
chances for growth.
--------------------------------------------
Unfavourable regulatory changes, The board and the manager monitor
including tax changes and the possible potential changes on an ongoing
imposition of a wealth tax. basis.
--------------------------------------------
Increased regulation and focus The board, through the manager
by investors on climate change and corporate broker, maintains
and ESG developments. a regular dialogue with major shareholders
and discusses the Company's objectives
with them. The feedback from this,
together with the investment strategy
in the context of performance,
is regularly reviewed by the board.
--------------------------------------------
VIABILITY AND GOING CONCERN
The AIC Code of Corporate Governance includes a requirement for
the board to assess the future prospects for your Company, and to
report on the assessment within the annual report. The board
considers that certain characteristics of your Company's business
model and strategy are relevant to this assessment:
-- the board looks to ensure that your Company seeks to deliver long-term
performance;
-- the Company's investment objective, strategy and policy, which
are subject to regular board monitoring, mean that your Company
is invested mainly in readily realisable listed securities and
that the level of borrowings is restricted;
-- your Company is a closed-end investment company and therefore does
not suffer from the liquidity issues arising from unexpected redemptions;
and
-- the Company has an ongoing charge of 0.72% (2022: 0.83%).
Also relevant were a number of aspects of your Company's
operational agreements:
-- your Company retains title to all assets held by the custodian
under the terms of the formal agreement with the depositary;
-- long-term borrowing is in place, being the 2.43% senior unsecured
notes 2044, which are also subject to a formal agreement, including
financial covenants with which your Company complied in full during
the period since issuance. The value of long-term borrowing is
relatively small in comparison to the value of net assets, being
7.4% at 31 August 2023 (2022: 7.2%);
-- revenue and expenditure forecasts are reviewed by the directors
at each board meeting; and
-- cash is held with an approved bank.
In addition, the directors carried out a robust assessment of
the principal risks and uncertainties which could threaten your
Company's business model, including future performance, liquidity
or solvency and reputation and considered emerging risks that could
have a future impact on your Company.
The principal risks identified as relevant to the viability
assessment were those relating to investment activity and
performance, portfolio and market price risks. The board took into
account the liquidity of your Company's portfolio, the existence of
the long-term fixed rate borrowings, the effects of any significant
future falls in investment values and income receipts on the
ability to repay and re-negotiate borrowings, grow dividend
payments and retain investors and the potential need for share
buy-backs in order to maintain a narrow share price discount.
The directors assess viability over three-year rolling periods,
taking account of foreseeable severe but plausible scenarios. In
coming to this conclusion, the directors have considered the
heightened macroeconomic uncertainty following Russia's invasion of
Ukraine, the conflict in the Middle East and the political climate
in China, in particular, the potential impact on income and your
Company's ability to meet its investment objective, and the impact
on loan covenants. The directors do not believe that they will have
a long-term impact on the viability of your Company and its ability
to continue in operation, notwithstanding the short-term
uncertainty that these events have caused in the markets and
specific short-term issues, such as to energy, supply chain
disruption, inflation and labour shortages.
The directors believe that a rolling three-year period best
balances your Company's long-term objective, its financial
flexibility and scope with the difficulty in forecasting economic
conditions affecting your Company and its shareholders.
The directors recognise that there is a continuation vote that
is due to take place at the 2023 AGM. The directors currently
believe that your Company will continue to exist for the
foreseeable future, and at least for the period of assessment.
Based on their assessment, and in the context of your Company's
business model, strategy and operational arrangements set out
above, the directors have a reasonable expectation that your
Company will be able to continue in operation and meet its
liabilities as they fall due over the three-year period to 31
August 2026.
The directors consider your Company has adequate resources to
continue in operational existence for at least twelve months from
the date of approval of the financial statements and that it is
appropriate to adopt the going concern basis of accounting in
preparing the financial statements (see below for further
details).
BORROWINGS
Your Company's short-term gearing facility allows borrowing of
up to GBP30m in sterling and other currencies by way of an
overdraft facility with HSBC Bank plc. Under this facility the
Company borrowed in both sterling and euros in the year under
review.
On 30 April 2019, your Company issued EUR30m fixed rate 25-year
senior unsecured notes at an annualised coupon of 2.43%. This
long-term fixed rate euro denominated financing was obtained at a
price that the board considered attractive. The senior unsecured
notes are expected to enhance long-term investment performance.
Within the terms of the senior unsecured notes are clauses that
would be enacted in certain scenarios should the notes be prepaid
by the Company before maturity. These clauses could impact the
total amount repayable. The directors have assessed these and have
concluded that these clauses are highly unlikely to occur.
The level of gearing at 31 August 2023 was 3.9% of net asset
value (2022: 6.5%).
RELATED PARTY TRANSACTIONS
The Company's transactions with related parties in the year were
with the directors and the manager. There have been no material
transactions between the Company and its directors during the year.
The only amounts paid to them were in respect of expenses and
remuneration for which there were no outstanding amounts payable at
the year end.
In relation to the provision of services by the manager (other
than fees payable by the Company in the ordinary course of business
and the provision of marketing services) there have been no
material transactions with the manager affecting the financial
position or performance of the Company during the year under
review. More details on transactions with the manager, including
amounts outstanding at the year end, are given in note 21 of the
annual report.
DIRECTORS' RESPONSIBILITY STATEMENT
Each of the directors, who are listed below, confirms that, to
the best of their knowledge:
-- the Company's financial statements, which have been prepared in
accordance with UK Accounting Standards, give a true and fair view
of the assets, liabilities, financial position and return of the
Company; and
-- the annual report 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.
On behalf of the board
Richard Hills
Chairman
1 November 2023
INCOME STATEMENT
Year ended 31 August Year ended 31 August 2022
2023
Revenue Capital Revenue Capital
return return Total return return Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------------------- --------- --------- ---------- --------- --------- ----------
(Losses)/gains
from investments
held at fair
value through
profit or loss - (8,984) (8,984) - 1,834 1,834
Income from
investments
held at fair
value through
3 profit or loss 16,641 - 16,641 16,431 - 16,431
Loss on foreign
exchange - (84) (84) - (337) (337)
4 Other income 894 - 894 852 - 852
--------- --------- ---------- --------- --------- ----------
Gross revenue
and capital
(losses)/gains 17,535 (9,068) 8,467 17,283 1,497 18,780
Management
fee (500) (1,502) (2,002) (563) (1,690) (2,253)
Other administrative
expenses (609) - (609) (682) - (682)
--------- --------- ---------- --------- --------- ----------
Net return
before finance
costs and taxation 16,426 (10,570) 5,856 16,038 (193) 15,845
Finance costs (162) (488) (650) (158) (475) (633)
--------- --------- ---------- --------- --------- ----------
Net return
before taxation 16,264 (11,058) 5,206 15,880 (668) 15,212
Taxation on
net return (2,020) - (2,020) (1,439) (128) (1,567)
--------- --------- ---------- --------- --------- ----------
Net return
after taxation 14,244 (11,058) 3,186 14,441 (796) 13,645
--------- --------- ---------- --------- --------- ----------
Return per
6 ordinary share 7.27p (5.64p) 1.63p 7.37p (0.41p) 6.96p
--------- --------- ---------- --------- --------- ----------
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
Called
up Share Other
share premium Special capital Revenue
Notes Year ended capital account reserve reserves reserve Total
31 August 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ------------------ --------- --------- ---------- ---------- ---------- ----------
At 31 August
2022 1,960 194,550 45,732 105,977 7,468 355,687
Net return for
the year - - - (11,058) 14,244 3,186
7 Dividends paid - - - - (14,503) (14,503)
--------- --------- ---------- ---------- ---------- ----------
At 31 August
2023 1,960 194,550 45,732 94,919 7,209 344,370
--------- --------- ---------- ---------- ---------- ----------
Called
up Share Other
share premium Special capital Revenue
Notes Year ended capital account reserve reserves reserve Total
31 August 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ------------------ --------- --------- ---------- ---------- ---------- ----------
At 31 August 2021 1,960 194,550 45,732 106,773 7,137 356,152
Net return for
the year - - - (796) 14,441 13,645
7 Dividends paid - - - - (14,110) (14,110)
--------- --------- ---------- ---------- ---------- ----------
At 31 August 2022 1,960 194,550 45,732 105,977 7,468 355,687
--------- --------- ---------- ---------- ---------- ----------
STATEMENT OF FINANCIAL POSITION
At At
31 August 31 August
Notes 2023 2022
GBP'000 GBP'000
-------- ------------------------------------------- ----------- -----------
Fixed asset investments held at fair value
through profit or loss 357,671 378,931
Current assets
Debtors 3,588 3,039
Cash at bank and in hand 18,028 6,590
----------- -----------
21,616 9,629
Creditors: amounts falling due within one
year (9,375) (7,107)
----------- -----------
Net current assets 12,241 2,522
----------- -----------
Total assets less current liabilities 369,912 381,453
Creditors: amounts falling due after more
than one year (25,542) (25,766)
----------- -----------
Total net assets 344,370 355,687
----------- -----------
Capital and reserves
9 Called up share capital 1,960 1,960
10 Share premium account 194,550 194,550
Special reserve 45,732 45,732
Other capital reserves 94,919 105,977
Revenue reserve 7,209 7,468
----------- -----------
Total shareholders' funds 344,370 355,687
----------- -----------
8 Net asset value per ordinary share 175.7p 181.5p
----------- -----------
STATEMENT OF CASH FLOWS
Year ended Year ended
31 August 31 August
2023 2022
GBP'000 GBP'000
--------------------------------------------------- ----------- -----------
Cash flows from operating activities
Net return before taxation 5,206 15,212
Add back: finance costs 650 633
Losses/(gains) on investments held at fair
value through profit or loss 8,984 (1,834)
Losses on foreign exchange 84 337
Withholding tax on dividends deducted at
source (2,432) (2,553)
Taxation recovered 56 439
(Increase)/decrease in debtors (189) 76
Decrease in creditors (104) (5)
----------- -----------
Net cash inflow from operating activities 12,255 12,305
Cash flows from investing activities
Purchase of investments (105,273) (117,656)
Sale of investments 119,914 105,417
Proceeds from capital dividends 2 4,206
----------- -----------
Net cash inflow/(outflow) from investing
activities 14,643 (8,033)
Cash flows from financing activities
Equity dividends paid (net of refund of unclaimed
distributions and reclaimed distributions) (14,503) (14,110)
Interest paid (644) (628)
----------- -----------
Net cash outflow from financing activities (15,147) (14,738)
Net increase/(decrease) in cash at bank
and in hand 11,751 (10,466)
Cash at bank and in hand at start of year 6,590 17,199
Effect of foreign exchange rates (313) (143)
----------- -----------
Cash at bank and in hand at end of year 18,028 6,590
----------- -----------
Comprising:
Cash at bank and in hand 18,028 6,590
18,028 6,590
----------- -----------
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
Basis of accounting
The Company is a registered investment company as defined in
section 833 of the Companies Act 2006 and is incorporated in the
United Kingdom. It operates in the United Kingdom and is registered
at 201 Bishopsgate, London EC2M 3AE.
The financial statements have been prepared in accordance with
the Companies Act 2006, FRS 102, the Financial Reporting Standard
applicable in the UK and Republic of Ireland, and with the
Statement of Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital Trusts (the "SORP")
issued in July 2022 by the Association of Investment Companies.
The principal accounting policies applied in the presentation of
these financial statements are set out in the annual report.
Following the issue of the senior unsecured notes on 30 April
2019 it was determined that the Company would adopt the recognition
and measurement provisions of IFRS 9 (Financial Instruments), as
permitted by sections 11 and 12 of FRS 102. This was determined to
better reflect the directors' assessment of the carrying value of
the senior unsecured notes and has no impact on the carrying value
of the Company's financial assets.
The financial statements are prepared under the historical cost
basis except for the measurement at fair value of investments.
The preparation of the Company's financial statements on
occasion requires the directors to make judgements, estimates and
assumptions that affect the reported amounts in the primary
financial statements and the accompanying disclosures. These
assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amounts of assets or
liabilities affected in current and future periods, depending on
circumstances. The directors have considered the accounting
treatment of the senior unsecured notes as set out in accounting
policy 1i) in the annual report to be an area of judgement, in
particular with reference to clauses that would be enacted should
the notes be prepaid before maturity and concluded the adoption of
IFRS 9 described above is the most appropriate and complies with
accounting standards. The decision to allocate special dividends as
income or capital is a judgement but not deemed to be material.
The directors do not believe that any accounting judgements or
estimates have been applied to this set of financial statements
that have a significant risk of causing a material adjustment to
the carrying amount of assets and liabilities within the next
financial year.
2. Going concern
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
forthcoming annual general meeting. The directors believe that the
Company will continue to exist for the foreseeable future. The
assets of the Company consist of securities that are readily
realisable and, accordingly, the directors believe that the Company
has adequate resources to continue in operational existence for at
least twelve months from the date of approval of the financial
statements. Having assessed these factors, the principal risks, as
well as considering the heightened macroeconomic uncertainties 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
2023 2022
GBP'000 GBP'000
----------------- --------- ---------
Dividend income 16,641 16,431
16,641 16,431
--------- ---------
4. Other income
2023 2022
GBP'000 GBP'000
----------------------- --------- ---------
Bank interest 318 16
Option premium income 576 836
--------- ---------
894 852
--------- ---------
5. Management fee
2023 2022
Revenue Capital Revenue Capital
return return Total return return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ----------- --------- -------------
Management fee 500 1,502 2,002 563 1,690 2,253
--------- --------- --------- ----------- --------- -------------
A summary of the terms of the management agreement is given in
the strategic report in the annual report.
6. Return per ordinary share
2023 2022
GBP'000 pence GBP'000 pence
--------- ------- -------- -------
Revenue return 14,244 7.27 14,441 7.37
Capital return (11,058) (5.64) (796) (0.41)
--------- ------- -------- -------
Total return 3,186 1.63 13,645 6.96
--------- ------- -------- -------
Weighted average number of ordinary
shares 195,978,716 195,978,716
------------------ -----------------
7. Dividends paid on ordinary shares for the year to 31 August
Dividends on ordinary Ex-dividend 2023 2022
shares date Record date Payment date GBP'000 GBP'000
------------------------ -------------- -------------- ---------------- --------- ---------
4(th) interim dividend 3 November 4 November 30 November 3,626
- 1.85p 2022 2022 2022 -
1(st) interim dividend 2 February 3 February 28 February 3,626
- 1.85p 2023 2023 2023 -
2(nd) interim dividend 3,625
- 1.85p 11 May 2023 12 May 2023 31 May 2023 -
3(rd) interim dividend 3,626
- 1.85p 27 July 2023 28 July 2023 31 August 2023 -
4(th) interim dividend 4 November 5 November 30 November
- 1.80p 2021 2021 2021 - 3,527
1(st) interim dividend 3 February 4 February 28 February
- 1.80p 2022 2022 2022 - 3,527
2(nd) interim dividend
- 1.80p 5 May 2022 6 May 2022 31 May 2022 - 3,528
3(rd) interim dividend
- 1.80p 28 July 2022 29 July 2022 31 August 2022 - 3,528
---------
14,503 14,110
--------- ---------
A fourth interim dividend in respect of the year ended 31 August
2023 of 1.92p per share has been declared and will be paid to
shareholders on 30 November 2023 with record date 10 November 2023.
The Company's shares will go ex-dividend on 9 November 2023.
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. At the point of declaring each dividend,
the directors consider the revenue earned during the financial
period to date as well as the distributable revenue reserves
brought forward, out of which total amount the dividend is to be
paid.
2023 2022
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Revenue available for distribution by way of
dividend for the year 14,244 14,441
Interim dividends of 5.55 p paid (2022: 5.40p) (10,877) (10,583)
Fourth interim dividend for the year ended 31
August 2023 of 1.92p (based on 195,978,716 ordinary
shares in issue as at 30 October 2023) (2022:
1.85p) (3,763) (3,626)
--------- ---------
Transfer (from)/to revenue reserve(1) (396) 232
--------- ---------
(1) The deficit of GBP396,000 (2022: surplus of GBP232,000) has
been transferred (from)/to the revenue reserve
8. 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:
2023 2022
--------------------------------------- ------------ ------------
Net assets attributable (GBP'000) 344,370 355,687
Number of ordinary shares in issue 195,978,716 195,978,716
Net assets per ordinary share (pence) 175.7 181.5
The movements during the year of the assets attributable to the
ordinary shares were as follows:
2023 2022
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Net assets at start of the year 355,687 356,152
Total net return after taxation 3,186 13,645
Dividends paid on ordinary shares in the period (14,503) (14,110)
Total net assets attributable to the ordinary
shares at 31 August 344,370 355,687
--------- ---------
9. Called up share capital
Number Number of shares
Ordinary shares 1p each of shares entitled to dividend GBP'000
--------------------------- ------------ ---------------------- ----------
At 31 August 2023 195,978,716 195,978,716 1,960
------------ ---------------------- ----------
At 31 August 2022 195,978,716 195,978,716 1,960
------------ ---------------------- ----------
No shares were issued or bought back during the year (2022:
same).
10. Share premium account
2023 2022
GBP'000 GBP'000
-------------------------- --------- ---------
At the start of the year 194,550 194,550
At 31 August 194,550 194,550
--------- ---------
11. 2023 financial information
The figures and financial information for the year ended 31
August 2023 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 2023 have been audited but have not
yet been delivered to the Registrar of Companies. The auditors'
report on the 2023 financial statements was unqualified and did not
contain any statements under sections 498(2) and 498(3) of the
Companies Act 2006.
12. 2022 financial information
The figures and financial information for the year ended 31
August 2022 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.
13. Annual report and financial statements
The annual report and financial statements for the year ended 31
August 2023 will be posted to shareholders in early November 2023
and will be available on the Company's website
www.hendersoninternationalincometrust.com . Copies will be
available in hard copy format from the Company's registered office,
201 Bishopsgate, London EC2M 3AE.
14. Annual general meeting
The annual general meeting will be held on Tuesday, 12 December
2023 at 2.30pm at the offices of Janus Henderson Investors, 201
Bishopsgate, London EC2M 2AE. The notice of the annual general
meeting will be posted to shareholders with the annual report and
financial statements.
15. General information
Company Status
Henderson International Income Trust plc is a UK domiciled investment
trust company.
SEDOL/ISIN number: ordinary shares: B3PHCS8/GB00B3PHCS86
London Stock Exchange (TIDM) Code: HINT
Global Intermediary Identification Number (GIIN): WRGF5X.99999.SL.826
Legal Entity Identifier (LEI): 2138006N35XWGK2YUK38
Company Registration Number: 7549407
Registered Office
201 Bishopsgate, London EC2M 3AE
Directors and Secretary
The directors of the Company are Richard Hills (chairman), Jo Parfrey
(audit committee chair), Lucy Walker (senior independent director),
Mai Fenton and Aidan Lisser.
The corporate secretary is Janus Henderson Secretarial Services UK
Limited, represented by Sally Porter, ACG.
Website
Details of the Company's share price and net asset value, together
with general information about the Company, monthly factsheets and
data, copies of announcements, reports and details of general meetings
can be found at www.hendersoninternationalincometrust.com .
For more information please contact:
Ben Lofthouse
Fund Manager
Henderson International Income
Trust plc
Telephone: 020 7818 5187
Dan Howe Harriet Hall
Head of Investment Trusts Investment Trusts PR Manager
Janus Henderson Investors Janus Henderson Investors
Telephone: 020 7818 4458 Telephone: 020 7818 2919
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.
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END
FR FSLEFFEDSESF
(END) Dow Jones Newswires
November 02, 2023 03:00 ET (07:00 GMT)
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