JANUS HENDERSON FUND MANAGEMENT UK LIMITED

HENDERSON INTERNATIONAL INCOME TRUST PLC

LEGAL ENTITY IDENTIFIER: 2138006N35XWGK2YUK38

27 October 2022

HENDERSON INTERNATIONAL INCOME TRUST PLC

Annual Financial Report for the year ended 31 August 2022

This announcement contains regulated information

PERFORMANCE TO/AT 31 AUGUST

1 Net asset value ("NAV") total return per share (including dividends per share reinvested)

2 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)

3 On 26 April 2022, the benchmark index was changed from the MSCI World (ex UK) Index to the MSCI ACWI (ex UK) High Dividend Yield Index. See chairman's statement for details

4 Four-month period from launch on 28 April 2011 to 31 August 2011

5 MSCI World (ex UK) Index in US$

6 Includes the fourth interim dividend in respect of the year ended 31 August 2022 declared on 27 October 2022 to be paid to shareholders on 30 November 2022

7 Calculated based on the closing share price at 31 August

8 Calculated using the methodology prescribed by the Association of Investment Companies ("AIC")

Source: Morningstar Direct, Funddata, Janus Henderson, Refinitiv Datastream

INVESTMENT OBJECTIVE

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

INVESTMENT POLICY

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

CHAIRMAN'S STATEMENT

It is very difficult to summarise the events of the last year into a specific theme or trend. What started out as a period with the hope of the Covid pandemic abating and supply bottlenecks easing, ended with ongoing conflict in the Ukraine and persistently high inflation globally. In this complex economic environment, the Company's diversified portfolio and value conscious approach has helped smooth some of the market turbulence.

Performance and markets

Over the year, the net asset value ("NAV") total return per ordinary share has risen by 3.8% (debt at par) and by 6.3% (debt at fair value). The total return on the ordinary share price was 7.8%, this figure includes total dividends of 7.25p per ordinary share, an increase of 15% on the previous year. To represent better the objectives of the Company, the Company's performance comparator has been changed to the MSCI ACWI (ex UK) High Dividend Yield Index (sterling adjusted), which generated 6.6% total return over the period. For comparative purposes, the previous benchmark, the MSCI World (ex UK) Index (sterling adjusted), returned 0.6%.

While the portfolio had no direct exposure to the conflict in Ukraine, in terms of Russian or Eastern European listed companies, the war has particularly impacted the valuation of European equity markets and, therefore, some portfolio holdings. The inability of China to find a solution to the pandemic has meant that Far East growth is lower than we expected, which has been a drag on the Far East exposure in the portfolio.

Equity markets have rotated towards less economically sensitive companies, including those in the pharmaceutical, consumer staples and telecommunications sectors, to which the portfolio has significant exposures. These defensive stocks have been the strongest performers. The increased energy exposure has also been a strong contributor to absolute performance. The decision taken a few years ago to take on a tranche of low fixed-rate debt to 2044 is looking increasingly prudent now that interest rates are rising.

Despite all the economic and political uncertainty, the portfolio's income generation has been very strong. During the period, financial services regulators removed recent restrictions regarding dividend distributions, which allowed many companies to pay the dividends that were suspended in 2020/21. Commodity prices have generally been higher than expected over the year, which has benefited the portfolio's materials and energy holdings' earnings, and this has translated into higher than expected dividends. Currency trends have also been positive for dividends as sterling has weakened against a number of currencies, particularly during the second half of the year, and dividends are all paid in foreign currencies.

The board gives due focus to Environmental, Social and Governance ("ESG") matters. Whilst the Company does not have an explicit mandate, the board and investment team are conscious that investors' interest in ESG matters continues to grow. Details about the manager's and investment team's approach to ESG have been included in the annual report, please see the Business Model in the annual report.

Strategy, growth and corporate activity

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

During the year, the board considered alternative benchmarks to ascertain whether there was a more appropriate index by which to assess the Company's performance in relation to its objectives. The board concluded that, given the Company's income objective, the MSCI ACWI (ex UK) High Dividend Yield Index (sterling adjusted) is a more appropriate performance comparator than the MSCI World (ex UK) Index, and has now adopted the former as its benchmark. This will provide a more relevant guide for investors to help understand the relative performance of the Company in the context of its objective.

The board has also reviewed the management fee arrangements and is pleased to have agreed with Janus Henderson a reduction in the management fee to a single rate of 0.575% per annum with effect from 1 September 2022, the first day of your Company's new financial year. The previous fee was 0.65% per annum of net assets equal to or below £250m, and 0.60% for net assets above £250m. Since inception, management fee reductions combined with the increase in the size of the Company have been the two principal factors that have led to a fall in the ongoing charge from 1.38% (as at 31 August 2012) to 0.83% this year. We remain willing to issue further shares at appropriate times to provide greater liquidity in our shares, and to lower further our fixed costs per share.

Earnings and dividends

We are pleased to announce a total dividend increase from 6.30p to 7.25p per ordinary share for the year to 31 August 2022, a rise of 15%. The year's pay out consisted of a first, second and third interim dividend of 1.80p per ordinary share, and a fourth interim dividend of 1.85p, which will be paid on 30 November 2022 to shareholders on the register at 4 November 2022.

The revenue returns increased year-on-year by 23% to £14,441,000. A combination of strong underlying dividend growth and currency appreciation when compared to sterling means that £232,000 has been added to revenue reserves.

The long-term objective of your Company since launch has been to provide shareholders with a growing total annual dividend, as well as capital appreciation. To date, we have increased the dividend each year and this positive growth trend is demonstrated in the table in the annual report. We continue to recognise the importance of dividend income to our shareholders, and if need be, we will utilise the Company's reserves in the event of any temporary shortfall between the Company's distributions and portfolio income.

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. Borrowing limits for this purpose include implied gearing using derivatives. The gearing at the period end was 6.5% (31 August 2021: 4.5%). 

Liquidity and discount management

The Company's share price has traded at a discount to NAV of between 2-10% over the period and was 5.3% (with debt at par) at 31 August 2022. The uncertainty caused by the pandemic, and now the conflict in Ukraine has caused discounts to open up for many sectors and trusts over the last two years. The board continues to monitor the premium/discount to NAV and will consider appropriate action if it moves and remains out of line with the Company's peer group. However, there is a limit to the board's ability to influence the premium or discount. Accordingly, we believe it is not in shareholders' interests to have a specific share issuance or buy-back policy. However, it is sensible to retain flexibility 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 2022, as calculated in accordance with the Association of Investment Companies ("AIC") methodology was unchanged at 0.83% (2021: 0.83%).

Annual general meeting

The eleventh annual general meeting ("AGM") of the Company will be held on Wednesday, 7 December 2022 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 the annual report. Ben Lofthouse, the 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, and we therefore request all shareholders, and particularly those who cannot attend physically, to submit their votes by proxy to ensure that their votes are included.

Board composition

As previously reported, I will be standing down as chairman of the board and a director of the Company at the conclusion of the 2022 AGM. This will conclude five years' service as chairman of the board, following six years' service as audit committee chairman. The board is pleased to announce that, following a rigorous process, it has been agreed that Richard Hills will succeed me as chairman. Richard was appointed as a non-executive director of the Company in 2016 and has considerable experience in financial services. His succession will ensure a smooth transition of the chairmanship.

Outlook

The Company has a flexible mandate with which to achieve the aim of offering investors income and capital growth, with protection through diversification by sector and geography. This year has proved the benefits of that diversification in terms of both regions and currencies. The nature of an investment company gives it some advantages over other investment vehicles. These include a fixed pool of assets so sales are not forced at the wrong time, the ability to maintain distributions through the cycle and the ability to utilise gearing to enhance returns.

Economic growth is slowing and, until inflation peaks, central banks look likely to have to keep raising interest rates. It is not an easy investment environment for investors to navigate. The events of this year have surprised everyone, but to some extent they are now known, and the question is what happens next? If, in a year's time, China has found a way to deal with Covid, the conflict in Ukraine has ceased and the Federal Reserve has finished raising rates, then things could feel very different, although the pain getting there may remain very uncomfortable. 

Despite ongoing change, the Company will continue following its existing strategy of identifying attractively valued companies that have the capacity to grow their earnings and dividends over the medium to long term. The investment team remains vigilant for opportunities that might arise during these difficult times.

Simon Jeffreys

Chairman

27 October 2022

PORTFOLIO INFORMATION

Ten largest investments at 31 August 2022

Source: Janus Henderson

Investment portfolio as at 31 August 2022

FUND MANAGER'S REPORT

To say that the year has not unfolded as we expected would be an understatement. For the last decade, one of the most discussed themes in the corporate world has been the disruption of industries and business models by technological innovation. Over the last twelve months, the world has experienced disruptions of a very different kind. 2022 has the potential to be a year that is remembered as one where a significant number of long-held assumptions were challenged, and maybe changed forever. 

The Russian invasion of Ukraine has shaken politicians' and investors' expectations that disagreements between major countries would be settled by diplomacy, and in the process has up-ended Europe's energy and defence policies. In financial markets, persistent inflation has challenged the central bank orthodoxy that inflation would be muted and transitory due to long-term structural issues. Central banks have been forced to unwind easy monetary policies despite slowing growth, leading to higher levels of interest rates that were unthinkable at the start of this year. All this is happening at the same time that Covid continues to linger, particularly in China.

Against this background, generating capital growth has been difficult, but the Company has, over time, generated positive total returns and growth in dividends significantly above inflation. Share price volatility belies the fact that the operating performances of the companies in the portfolio have in many cases exceeded our expectations in what has been another very difficult environment.

Performance review

Despite the challenges, the portfolio produced a total return of 6.3% in NAV per ordinary share over the period (debt at fair value). This return includes covered dividends totalling 7.25p per share, a 15% increase year on year. As noted in the chairman's statement, the performance comparator for the Company has been changed to the MSCI ACWI (ex UK) High Dividend Yield Index from the MSCI World (ex UK) Index to better reflect the objectives of the Company. The two indices have diverged over the period, generating 6.6% and 0.6% respectively, highlighting the outperformance of higher yielding companies over the last 12 months.

Dividend performance

The revenue return for the Company has risen by 23% year on year, more than covering the increased dividend paid to investors. Several factors have driven the increase.

The dividend growth from the portfolio has been good, reflecting the earnings growth of the holdings. Over the medium term, the most important drivers of the dividends paid by companies are their earnings growth, profitability, balance sheet position and cash flows. The Company's investment process focuses on companies with attractive dividend yields, strong cash flow generation and the potential to grow capital values via earnings and dividends in the future. They are often leaders in their respective industries, with established competitive advantages. This last characteristic, competitive strength, determines the ability to pass on rising costs and has become very important in an environment where supply chain issues abound and cost inflation is rife. As an illustration of this, the top ten holdings on average announced dividend increases during the year of 4.7%, ranging from 11% from Microsoft to 1.8% from Nestlé.

For many years, technology companies have generated the most significant dividend growth in the portfolio. This year the biggest dividend increases year-on-year were from the financial sector. Some companies in the portfolio were asked by regulators to suspend payments in 2020 and 2021 until the outcome of the pandemic was clearer. Having come through the pandemic with strong capital positions and profitability, these companies have been allowed to pay the suspended dividends this year. These were mainly European financial services companies including insurers AXA and Sampo and diversified financials BFF Group, Van Lanschot and ING Group. During the year, these delayed dividends contributed approximately £900,000 to the net revenue return of £14,441,000.

Sterling's general weakness has benefited the Company's revenue returns this year. The dividends from the portfolio companies are received in their local currencies and then translated into sterling at the rate prevailing at the time of their receipt. Several currencies, including the US dollar, the Taiwan dollar and the Swiss franc have appreciated by over 10% against sterling as the year has progressed. However, not all currencies have appreciated; the euro and Swedish krona exchange rates to sterling have been relatively stable over the period. In a global portfolio, currencies often move in different, uncorrelated directions at times and can cancel each other out. For this reason and others we do not try and predict currency movements. If sterling remains at the current level, all things being equal, the impact on next year's revenue would also be positive. Note 16.1.2 of the financial statements in the annual report provides some analysis of foreign currency sensitivity.

Investors are starting to ask questions about dividend trends, and how stable they may be in the face of a recession. Research based on long periods of time show that 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 moves. We expect dividend growth in the portfolio to moderate as the post-pandemic recovery fades.

Capital performance

The Company's portfolio is relatively concentrated consisting typically of 50-80 positions, so performance can be impacted by stock specific news and events 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 they pay both add to shareholders' total return and reward them for being invested until the value is realised by capital appreciation. Portfolio construction ensures that the portfolio is diversified to reduce concentrated risks if events do not go as planned. This approach has helped preserve capital in what has turned out to be another very unpredictable year. Going into the year some of the primary concerns of the investment team were the risk posed by the potential normalisation of interest rates, supply chain issues and input cost inflation. These concerns have all turned out to be realised, but additional unforeseen events have also unfolded and the portfolio diversification has proved beneficial.

The table below highlights the most significant stock contributors to performance over the year measured by contribution to absolute return.

Most significant positive and negative contributors to performance (%)

Source: Janus Henderson, as at 31 August 2022

Portfolio companies' results have generally been good. Our companies have reported satisfactory underlying demand despite the uncertain environment, and this has facilitated their ability to raise prices to offset inflation. Commodity prices have risen significantly over the period. Both natural gas and oil prices rose initially on stronger than expected demand and an inability (or unwillingness in the case of OPEC+) for supply to respond in a timely manner. The invasion of Ukraine and subsequent sanctioning of Russia has raised concerns that high prices will persist for longer. The portfolio's energy exposure was increased in 2021, and it has been the strongest positive contributor to performance over the period. The portfolio's energy stocks, Woodside, Aker BP (the holding in Lundin was acquired by Aker during the year for a combination of cash and shares, and a residual equity called Orron Energy) and TotalEnergies, have delivered the largest absolute returns over the period, benefiting from high oil and gas prices. The positions all generated returns well over 30%.

The market has understandably become more cautious over the year and this has been reflected in improved relative performance from defensive sectors, including health care, consumer staples and telecommunications companies. These sectors all contributed positively to returns over the period. The companies that have performed most strongly are those that have shown the most ability to increase prices to pass on costs, examples of this include Coca-Cola, Pepsi and Nestlé. Novo Nordisk continues to experience growth for its new, novel diabetes and obesity treatments.

In response to the cautious shift, the consumer discretionary and industrial sectors have underperformed. This caused a derating in the shares of China Yongda, a premium car distributor in China, and VF Corp, the owner of brands such as Vans and North Face. Both have also seen their Chinese operations impacted by rolling lockdowns. Semiconductor companies have also underperformed; demand has been very strong for semiconductors, but the market is concerned about the impact of a slowing economy on the sector. Samsung and Taiwan Semiconductor Manufacturing have underperformed as a result of these concerns.

Higher energy prices have side effects and have become a political issue in many countries due to their impact on consumers, particularly on lower income households. The value of Enel, for instance, has been impacted by negative sentiment due to government intervention in retail energy prices in Spain and Italy. In the medium to long term the company should benefit from an accelerated push towards electrification and decarbonisation of energy via renewables and electricity grid infrastructure investment. In the short term, this has been offset by near-term concerns and the stock has underperformed.

Some companies continue to be impacted from ongoing outbreaks of Covid, including payments processor Fidelity National Information Services ("FIS"), and medical equipment manufacturer Medtronic. For FIS, the Covid restrictions that were in place for much of the year have depressed travel spend, a material driver of their revenues, and for Medtronic, the availability of parts and the resulting costs have impacted their results. We expect both companies to recover in time, but it is taking longer than the market expected.

Stock selection was a positive contributor to performance of 2.9% and gearing contributed 2.9%, but asset allocation had a negative impact on performance of 5.3%, primarily as a result of being underweight the US market and US dollar.

For the first six months of the year, the developed markets were closely correlated but, post the invasion of Ukraine, Europe, Asia and Japan have underperformed North America and the UK. The Asia Pacific region has also been impacted by the ongoing zero Covid policy being pursued by China, which has depressed economic growth at a time when it is also trying to restructure its housing market.

The portfolio is organised in regional sleeves: North America, Europe and Asia Pacific. The return from all regions was positive: North America generated 9.7% total return, Europe 2.2%, and Asia Pacific 0.4%. We have been overweight Asia Pacific by 4% versus the benchmark, and 16% overweight Europe (no Russian or Eastern European companies were held during the year). Why is the portfolio overweight these regions? At the start of the year the valuations of many companies in these regions relative to their peers around the world were attractive due to longer periods of pandemic lockdowns. We saw the potential for them to benefit from opening up their economies post the pandemic. In addition, many companies in these regions have taken on less leverage in response to low interest rates so have fewer headwinds when rates normalise, and they often have higher dividend yields than their US peers. These investment cases remain in place, but the war in Europe and China's ongoing zero Covid policy have impacted the outlook and we are monitoring the allocation.

The Company's long-term financing means that a fair value and par value return is quoted (see note 16.4 in the annual report for details). The fair value of the debt reflects a theoretical market price and is impacted by changes in interest rate expectations in the financial markets. The rise in interest rate expectations during the period has reduced the fair value of the debt by £8,203,000, enhancing the fair value net asset value return by 2.5%. This movement is the result of the rise in interest rate expectations (the reference rate for the fair value calculation increased from 0.32% to 2.275% at the year end).

Portfolio positioning

Stock selection for the portfolio is driven by a combination of the attractiveness of the company in question (competitive positioning, supply/demand outlook, cash flow generation, sustainability of business model) combined with its valuation.

The largest individual stock changes are shown below:

Source: Janus Henderson, as at 31 August 2022

In response to the deteriorating economic conditions, positions have been reduced in companies that might be more cyclical than the market thinks, but where it is not reflected in the price. Panasonic, Texas Instruments and Quanta fall into this category. The position in Taiwan Semiconductor was also reduced. On the other side of this coin, there are two areas we are looking at closely: oversold cyclical companies and oversold growth companies (fallen angels that could be future winners in their sectors) where the long-term earnings power of the companies is not reflected in current valuations. European asset manager Amundi and US payment processing company FIS were invested in on this basis.

Verizon was sold due to a deteriorating competitive position compared to peers after many years of relative strength. The company that is winning in the US market is T-Mobile, whose parent is Deutsche Telekom. A position was initiated in Deutsche Telekom after it fell when European markets sold off in February. The valuation does not reflect the underlying strength of its businesses in Germany and the US.

The most significant asset allocation changes in the portfolio over the period were the increase in the oil and gas exposure by 4.5%, the reduction in technology exposure by 5.8%, and the reduction in the proportion of the portfolio invested in Hong Kong by 3.8%.

Many parts of the world have high Covid vaccination rates that are facilitating a return to more normal life. China and Hong Kong seem to be an exception and have continued to follow a zero Covid policy. Positions in Bank of China Hong Kong, sportswear retailer Anta Sports, and conglomerate Swire Pacific were closed to fund opportunities less hampered by Covid restrictions. New positions initiated included FIS, one of the world leaders in processing transactions in physical stores and internet sales. The business has performed well over the last few years, but lower levels of leisure and travel activity have dampened demand and revenue growth, causing the business to derate to an attractive entry valuation. A new position was initiated in luxury goods company Richemont, which has several iconic brands, including Cartier. The company has lagged the sector in terms of share price performance in recent years but there are signs that the new strategy will deliver enhanced returns. Another new position is European Asset Manager Amundi, which is well diversified by asset class, has economies of scale that allow it to offer competitively priced products, and is growing. The valuation is depressed due to current sentiment, but the attractive dividend yield provides an income to investors who are prepared to be patient.

Three new positions were initiated in the energy sector: Lundin, Woodside Energy and TotalEnergies. Lundin subsequently was bought by Aker BP in a cash and shares transaction, and a small remaining listed entity called Orron Energy. Oil and gas prices have been volatile in recent years, and the volatility of cash flows has made dividends unreliable. Prices have stabilised at a level at which many restructured energy companies are very cash flow generative and profitable. We expect natural gas to be used as a transition fuel to help lower emissions as economies reduce coal, oil and diesel usage in electricity generation. Woodside and TotalEnergies have significant gas reserves and opportunities. Lundin operates in Norway and has completed a large development that will support significant dividends. It is also one of the most advanced energy companies in reducing controllable emissions (scope 1 & 2). Post purchase, Woodside announced a merger with BHP's energy business, which has enhanced their earnings. These energy companies all demonstrate a commitment to decarbonisation having set targets to be at least carbon neutral within their own operations by 2050 at the latest, with these targets considered in conjunction with the International Energy Agency's scenario analysis. To meet these targets, the companies will use a range of initiatives to decarbonise operations, including reducing flaring to cut methane emissions, increasing use of renewables and utilising carbon capture for the hardest to decarbonise areas.

Gearing has averaged around 4% over the year, but was increased towards the year-end as equity valuations became more attractive.

ESG and company engagement

When employing fundamental security analysis, the investment team takes a long-term view. The longevity and adaptability of business models is crucial to the Company's investment strategy. As such, a considerable amount of time is spent by the fund manager identifying fundamental factors, including ESG, which may impact profits, cash flow and dividends, and ensuring that investee companies have robust policies and processes in place to manage these. The integration of environmental, social and governance factors into investment decision making and ownership is detailed in the Business Model section of the annual report.

During the period under review, the investment team continued to actively engage with investee companies. Engagement continued with pharmaceutical holdings Sanofi and Bristol-Myers Squibb to ensure a fully representative level of clinical diversity in drug trials. Progress is being made and both companies plan to improve disclosure in this area in future company reports together with improved environmental disclosures. The team also continued to engage with Microsoft around the approach to responsible Artificial Intelligence and facial recognition policies, and improved disclosure of gender/ethnicity pay gap reporting. New areas of engagement included discussions with Mondelez and Nestlé regarding their actions to address supply chain issues including biodiversity protection, especially with regard to palm oil, and efforts being made to improve working conditions at their suppliers. There have been improvements in disclosure in these areas and some encouraging initiatives to improve living conditions of workers, but there is a lot of potential for further improvement.

Outlook

Since the Company launched, disruption has been an ongoing trend, and this year has been an extreme example of that. It is encouraging to see strong dividend growth across the portfolio. The portfolio is diverse and has a mix of sectors and regions. They will not all be impacted by current events in the same way, and many have structural growth drivers of earnings that are less sensitive to the economy. Overall, we expect dividends to continue to grow, and we also believe the holdings are undervalued in relation to their long-term earnings potential. The flexibility provided by the investment trust structure and the mandate of the Company also provides tools to support its dividends, and be selective about the investments it makes.

The long-term impact of 2022's events will likely be felt for years to come. From a financial market perspective, they have certainly caused volatility and uncertainty and markets are in the process of digesting this. Interest rate expectations have increased significantly, and the valuations of many assets have fallen as a result. This has presented some opportunities, but the impact on consumers and companies has still to be fully recognised. As a result, consensus earnings forecasts have not yet been significantly downgraded, nevertheless many sectors and companies have already seen substantial falls and some very attractive valuations are starting to appear. We intend to use any volatility to invest in companies that enhance the long-term capital and income growth potential of the portfolio.

Ben Lofthouse

Fund Manager

27 October 2022

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 the 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 the Company's investment objective and policy, in order to mitigate these risks as far as practicable. The principal risks which have been identified and the steps taken by the board to mitigate these are set out in the table below. The principal financial risks are detailed in note 16 to the financial statements in the annual report.

The following changes have been made to the principal risks since last year:

Emerging risks

In addition to the principal risks facing the 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:

VIABILITY STATEMENT AND GOING CONCERN

The AIC Code of Corporate Governance includes a requirement for the board to assess the future prospects for the Company, and to report on the assessment within the annual report. The board considers that certain characteristics of the Company's business model and strategy are relevant to this assessment:

Also relevant were a number of aspects of the Company's operational agreements:

In addition, the directors carried out a robust assessment of the principal risks and uncertainties which could threaten the Company's business model, including future performance, liquidity or solvency and reputation and considered emerging risks that could have a future impact on the 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 the 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 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 aftermath of the Covid pandemic and heightened macroeconomic uncertainty following Russia's invasion of Ukraine, in particular the impact on income and the 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 the 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 the Company's long-term objective, its financial flexibility and scope with the difficulty in forecasting economic conditions affecting the Company and its shareholders.

The directors recognise that there is a continuation vote that is due to take place at the annual general meeting in 2023. The directors currently believe that the 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 the Company's business model, strategy and operational arrangements set out above, the directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period to 31 August 2025.

The directors consider the 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

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), as set out in the investment policy. Borrowings for these purposes would include implied gearing through the use of derivatives. The Company's short-term gearing facility allows borrowing of up to £30m 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, the Company issued €30m 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 2022 was 6.5% of net asset value (2021: 4.5%).

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. Directors' shareholdings are disclosed in the annual report.

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:

On behalf of the board

Simon Jeffreys

Chairman

27 October 2022

INCOME STATEMENT

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

STATEMENT OF FINANCIAL POSITION

STATEMENT OF CASH FLOWS

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 April 2021.

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 directors do not believe there are any other accounting judgements or estimates that 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 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 aftermath of the Covid-19 pandemic and heightened macroeconomic uncertainty following Russia's invasion of Ukraine, 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

4.    Other income

5.    Management fee

A summary of the terms of the management agreement is given in the strategic report in the annual report.

6.    Return per ordinary share

7.   Dividends paid on ordinary shares for the year to 31 August

A fourth interim dividend in respect of the year ended 31 August 2022 of 1.85p per ordinary share was declared on 27 October 2022 and will be paid to shareholders on 30 November 2022 with record date 4 November 2022. The Company's shares will go ex-dividend on 3 November 2022.

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.

¹ The surplus of £232,000 (2021: deficit of £614,000) has been transferred to/(from) 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:

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

9.    Called up share capital

No shares were issued or bought back during the year.

No shares were issued or bought back during the year.

10.   Share premium account

11.   2022 financial information

The figures and financial information for the year ended 31 August 2022 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 2022 have been audited but have not yet been delivered to the Registrar of Companies. The auditors' report on the 2022 financial statements was unqualified and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.

12.   2021 financial information

The figures and financial information for the year ended 31 August 2021 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 2022 will be posted to shareholders in early November 2022 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.

14.   Annual general meeting

The annual general meeting will be held on Wednesday, 7 December 2022 at 2.30pm at the offices of Janus Henderson, 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

For more information please contact:

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.