JANUS HENDERSON FUND MANAGEMENT UK LIMITED

HENDERSON INTERNATIONAL INCOME TRUST PLC

LEGAL ENTITY IDENTIFIER: 2138006N35XWGK2YUK38

HENDERSON INTERNATIONAL INCOME TRUST PLC

Annual Financial Report for the year ended 31 August 2024

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 FOR THE YEAR TO 31 AUGUST 2024

PERFORMANCE TO/AT 31 AUGUST

Your Company has been recognised by the Association of Investment Companies as a "next generation dividend hero", reflecting its record of having consistently grown its dividend for at least 10 consecutive years.

1 Includes the fourth interim dividend in respect of the year ended 31 August 2024 to be paid to shareholders on 29 November 2024

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

After a few volatile years for global equity markets, I am happy to be able to report that equity markets appreciated over the year and delivered steady dividend growth. This gain has occurred despite ongoing conflicts in some parts of the world, numerous elections, and against a backdrop of high interest rates and inflation, although both are now on a declining trend.

It has been another year where there has been a significant variation between the performance of different regions and sectors which will be covered more fully in the fund manager's report. The USA has continued to lead the way in the developed world but there may be a degree of rotation now occurring following the decision of the Chinese Government to reflate its economy. Depending on the success of this change of policy, emerging markets may benefit too.

The objective of your Company is to provide shareholders with a growing total annual dividend, as well as capital appreciation through a diversified portfolio of global stocks outside of the UK. The Company has continued to deliver a growing annual dividend as highlighted below with a total net asset value ("NAV") return of 10.4% (with debt at par). Whilst attractive in absolute terms, this has lagged the Company's benchmark total return. In light of this, and given the prevailing discount at which the Company's shares have traded, the board has spent some time this year reviewing investment strategy and how this can be enhanced to provide a better balance between income and capital generation. The details of this review and its outcome are discussed later in this statement, in addition to the customary analysis of the earnings, dividends and performance of the Company.

Earnings and dividends

We are pleased to announce a total dividend increase from 7.47p to 7.71p per ordinary share for the year to 31 August 2024, a rise of 3.2%. The total dividend for the year consists of a first, second and third interim dividend of 1.92p per ordinary share, and a fourth interim dividend of 1.95p which will be paid on 29 November 2024 to shareholders on the register at 8 November 2024.

The Company's revenue returns were 7.5% lower year-on-year at £13.2m. This was due to a combination of lower special dividends, the appreciation of sterling over the period and a slightly lower dividend yield from the portfolio. This has resulted in £1.9m being drawn from revenue reserves to cover the dividend.

We continue to recognise the importance of progressive dividend income to our shareholders and 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 are £97.6m at the year end. This provides a significant cushion to support the continued growth of the dividend.

In line with our long-term objective to provide shareholders with a growing total annual dividend, we have increased the dividend each year since launch and we are very pleased this achievement has now been recognised by the Association of Investment Companies ("AIC"), naming us as a "next generation dividend hero". This positive growth trend is demonstrated in the graph in the table above.

Capital performance and markets

Our second objective is to provide long-term capital appreciation. The portfolio has delivered attractive absolute growth this year; the NAV total return per ordinary share rose by 10.4% (debt at par) and by 9.8% (debt at fair value). However, this underperformed the Company's performance comparator, the MSCI ACWI (ex UK) High Dividend Yield Index (sterling adjusted), which generated a 14.2% total return over the same period.

The total return on the ordinary share price was 6.5%, this figure includes total paid dividends of 7.68p per ordinary share, an increase of 3.7% on the previous year.

A more detailed analysis of performance, portfolio and positioning is provided in the fund manager's report.

Investment strategy

Over the past few years, while the Company has consistently achieved its income objective, the total annual return has slowed when compared to earlier years, and has lagged the performance comparator and the wider global equity market. In recent years, there have been times when non-dividend paying stocks have significantly outperformed high dividend paying stocks.  This outperformance is exemplified in the US market in general versus global markets in 2021 and 2023.

During the year the board carried out a review of the Company's investment strategy, in particular in its ability to meet its objectives and taking into consideration the desire of shareholders for both income and growth of capital. It concluded, after considerable consultation with shareholders, to make an enhancement to the Company's investment strategy. Dividends from the portfolio will remain the primary contributor to the Company's distributions, but when there are compelling opportunities in stocks, regions or sectors that would otherwise be excluded due to their yield, the board is willing to utilise distributable reserves to supplement dividends paid to investors. This will expand the potential universe of stocks in which the investment team can invest. It will also allow the manager to be more opportunistic and flexible through the cycle to deliver on the objectives of your Company.

Your Company benefits from an experienced investment team. The board is delighted to confirm the appointment of Faizan Baig, who has worked closely with Ben Lofthouse, as deputy fund manager.

Shareholders will see from the annual report that the fund manager has been managing the portfolio in line with the enhancements noted above. Further detail can be found in the fund manager's report.

Gearing

Well-judged gearing can enhance returns to shareholders. The board's current policy permits the fund manager to gear up to 25% of net assets at the time of drawdown. The fund manager has maintained total gearing well within this limit, with gearing at the year end of 4.7% (31 August 2023: 3.9%). Borrowing limits for this purpose include implied gearing using derivatives. The Company's senior unsecured notes (€30m at 2.43% due 2044) provide low-cost debt financing and have helped to insulate shareholders from rising interest rates over the period.

Liquidity and discount management

The Company's share price has traded at a discount to NAV of between 6% to 14% over the period and was 11.7% (with debt at par) at 31 August 2024. 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 factors that usually influence the discount most are the performance of the Company and that of world stock markets. Both of these are covered fully, later on in the fund manager's review, and as noted above the board has taken action to further enhance the investment strategy to improve performance.

Two other factors have also been at work, but these are more technical. There have been concerns over current legislation that show the costs of managing an investment trust to be much higher in theory than in reality and these concerns have led the average discount of the UK investment trust sector to rise markedly over the past 12 months. The government is addressing this matter with recently published legislation, so we hope it should become less of an issue in due course. Secondly, with higher interest rates than in the recent past, bonds have become a more attractive alternative to higher yielding investment trusts where prices have weakened in response. When interest rates, in due course, start to decline we would expect discounts to start to narrow too.

As I wrote in my last report to shareholders, there is a distinct limit to the board's ability to influence and maintain the premium or discount of the Company's share price to NAV over the short term. Further, your board continues to believe that it is not in shareholders' interests to have a specific share buy-back or issuance policy, but that we should retain flexibility to consider share buy-backs and/or issuance where appropriate (and actively do so). We shall therefore continue with this policy but remain willing to take appropriate action subject to market conditions.

Ongoing charge

The ongoing charge for the year to 31 August 2024, as calculated in accordance with the AIC methodology, was 0.77% (2023: 0.72%). The slight rise in the ongoing charge largely reflects an increase in administration costs for the year. The spend on marketing and advertising was increased (see the annual report for details) and total directors' fees were also higher as there was a period last year when there were only four directors on the board.

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 and managing the portfolio.

Board composition

Lucy Walker has indicated that, due to the increasing demands of her other business commitments, she will be retiring at the 2024 AGM and will not be standing for re-appointment. I would like to take this opportunity to thank her for the contribution she has made during her time on the board. On the retirement of Mrs Walker, Mrs Parfrey will become the senior independent director.

Two directors, myself and Aidan Lisser, will reach nine years of service in 2025. In order to provide an orderly succession, it is proposed that Mr Lisser will retire following publication of the Company's half year results. It is then my intention to retire at the conclusion of the 2025 AGM.

The board considers that a board of five directors remains the optimal number for the Company. The directors have commenced steps to recruit three new directors, with recruitment to be staggered over the next 12 to 18 months. This will allow the changing dynamics of the board to settle with each new appointment and provide time to consider the desired background and experience of the next director to ensure the board remains balanced, with an appropriate spread of skills and experience.

Annual general meeting

The thirteenth annual general meeting ("AGM") of the Company will be held at 2.30pm on Tuesday, 10 December 2024 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, 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.

In addition to the routine business to be considered at this year's AGM, the Company is also proposing a resolution to shareholders to cancel the amount standing to the credit of the Company's share premium account which, subject to the confirmation of the Court, will be credited to a special distributable reserve. Cancelling the amount standing to the credit of the share premium account (which is a non-distributable reserve) is a routine procedure that is undertaken by many investment trusts and was last carried out by the Company in February 2013. The cancellation of this reserve (as explained in more detail in the notice of meeting) in order to create a distributable reserve is an administrative matter which will provide the board with flexibility to use such distributable reserve, should it wish to do so, in the future.

Outlook

It seems rather trite to say that there is a good deal of uncertainty in the world. This is always the case, but perhaps all the more so than even a few years ago. Elections, and currently wars in particular, often have a knock-on effect on the price of crude oil. Higher oil prices dampen demand and lower growth in consuming nations, which in turn impacts global investment markets. If the war in the Middle East escalates further this could therefore lead to a recession in the West.

On the other hand, inflation and interest rates are falling globally and positive noises from the US Federal Reserve are encouraging. The Chinese authorities have decided to stimulate their domestic economy, which should in due course be reflected in a stronger global economy.

If the world can avoid a full-scale war in the Middle East, which is more driven by political than economic considerations, then there seems to be a good chance that falling interest rates will win the day and global stock markets will continue to move ahead.

The implementation of the review of the investment strategy, together with a lower interest rate environment, should benefit the Company. Your Company remains in a strong position to continue to grow the annual dividend and with a more flexible investment approach we expect to see better capital performance too.

Richard Hills

Chairman

30 October 2024

PORTFOLIO INFORMATION

Ten largest investments at 31 August 2024

Source: Janus Henderson

Investment portfolio as at 31 August 2024

FUND MANAGER'S REPORT

This report contains a summary of the trends in equity markets around the world and the drivers of their returns, the performance of the Company's portfolio over the period, and the positioning and outlook going forward. This year the investment team has also been working with the board on measures to improve the total return of the Company going forward. This report discusses the enhancements made to the investment process which have been designed to achieve this.

Market commentary

Equity markets have performed well over the period under review. At the start of the year, investors were concerned about inflation and the need for high interest rates to bring this under control. After a period of abnormally high inflation for much of 2022 and 2023, inflation has shown signs of moderating in recent months. As the year has progressed investors have become more confident that central banks do not need to raise rates but should be able to reduce them in the event of an economic slowdown. Early in the year equity markets started to rally in anticipation of a better economic environment because of the hoped-for cuts. During that period cyclical stocks outperformed defensive ones.

Interest rates have started to fall in some economies (for example, Switzerland, Canada, Sweden). However, as the chart in the annual report shows, they have hardly moved from their peaks in many other major developed economies. Both equity and bond markets remain very sensitive to inflation trends. Expectations for the number of potential interest rate cuts have varied significantly over the last few months, resulting in increased market volatility towards the end of the year. During this period more defensive sectors, such as utilities and telecommunications, outperformed while cyclical and technology stocks sold off.

Despite the lack of immediate interest rate cuts, the global economy has generally weathered higher interest rates better than expected. Although one area of the world that has continued to struggle economically has been China. The Chinese economy has continued to grow but ongoing concerns remain around the property market and weak consumer sentiment. These concerns have weighed on commodity and emerging markets as a result. As shown in the chart in the annual report, the US market has significantly outperformed this year, followed by the other developed markets, while the Asia Pacific region has lagged.

Whilst the equity market rally has become more broadly based as the year has progressed, it has still been led by a relatively small number of low or zero yielding mega cap technology stocks at the forefront of generative Artificial Intelligence ("AI") innovation. These have become known as the 'Magnificent Seven' (Nvidia, Microsoft, Meta, Amazon, Alphabet, Apple and Tesla). The extent to which these companies are generating actual revenues from AI varies. Nvidia and Microsoft are already reporting revenues from AI, for the others the opportunities are more speculative. 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 relative underperformance of an equal weighted S&P Index.

Technology stocks and other companies associated with AI across all industries have been a significant contributor to the difference in returns. Value has continued to underperform growth as a factor, but over the year the market has started to show some signs of broadening out.

Performance review

The Company's portfolio has appreciated in value over the year. The portfolio produced a total return of 9.8% in NAV per ordinary share over the period (debt at fair value), and the dividend has been increased again. Whilst we are pleased to report the dividend growth and capital appreciation, the performance was behind that of the MSCI ACWI (ex UK) High Dividend Yield Index. Given the dual objectives of the Company of generating income growth and capital appreciation, we will discuss the two elements of returns separately below.

Income trends and performance

The Company's investment process focuses on companies with 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 investment team also ensures that the portfolio is spread by sector and region to diversify risks.

The dividend growth of the portfolio has been good, reflecting the earnings growth of the underlying holdings. Local currency dividend growth from the top ten holdings averaged 6.5% during the period, while the weighted average of the portfolio was over 10%, coming from a wide range of sectors and regions. The technology sector is not well known for paying dividends but it is the sector that is seeing the fastest dividend growth and that is reflected in the portfolio's holdings. Microsoft has been a consistent dividend grower for many years and its 10% increase this year continued that trend. Other companies like Oracle and Taiwan Semiconductor Manufacturing also increased their dividends by over 10% reflecting their confidence in future earnings growth. A notable development this year has been the significant increase in dividend and buyback announcements coming from Korean and Japanese companies. The governments of these countries have implemented programmes to improve shareholder returns, which includes encouraging companies to pay out more in dividends. Portfolio holdings such as Hyundai, Samsung Fire & Marine Insurance, Dai-ichi Life and Sony all increased their dividends by over 10% during the year.

The underlying dividend growth from the portfolio's holdings has been good but the income return for the period is lower than last year (£14.9m in 2024 compared to £16.6m in 2023). One of the reasons for this is that there have been fewer special dividends from companies. In recent years the portfolio has benefited from approximately £1m of special dividends annually. These payments have come largely from companies that paused payments during the Covid period but have since paid catch up payments, in particular many financial services companies. These payments have not been repeated this year. The other reason for the fall in income is that more opportunities have presented themselves in some lower yielding areas of the market and the team is using the flexibility of the investment structure to hold some lower yielding stocks with more capital upside potential.

Currency has also had a slight negative impact on dividend income. Over the year, sterling appreciated 3.7% against the US dollar and 1.7% against the euro. In a global portfolio, currencies often move in different and uncorrelated directions thus cancelling each other out to a degree. Note 17.1.2 of the financial statements provides some analysis of the portfolio's foreign currency sensitivity.

Capital trends and performance

The Company produced a net asset value total return of 9.8% (debt at fair value), which was 4.4% behind the MSCI ACWI (ex UK) High Dividend Yield Index. 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 NAV over the year.

Estimated performance attribution (relative to the MSCI ACWI (ex UK) High Dividend Yield Index)

Against the benchmark the main detractor was stock selection. Asset allocation was neutral, and the positive impact of gearing in a rising market was reduced by the fair value increase of the debt due to falling interest rate expectations. Each of these components of return are discussed below.

The average exposures and total returns for each region are detailed below.

Portfolio exposures and returns by region

After the last few years of market volatility it is good to see that all regions generated positive returns. The turnaround in the performance of the Asia Pacific (ex Japan) portfolio has been notable since the exposure was changed early in the financial year to gain more exposure to structural growth and reduce exposure to the domestic Chinese economy. The returns for the region improved from 3.3% at the half year to 13.9% at the year end. The European returns came from a broad range of stocks and sectors, ranging from financials to utilities. The return from the North American holdings, however, is disappointing. The portfolio returned 7.1% while the benchmark stocks in the region returned 14.8%. The portfolio was impacted by some of the market volatility late in the year when technology stocks sold off and defensive sectors such as tobacco and utilities rallied. There were some stock specific reasons for the underperformance (the largest stock contributors to performance are shown and discussed below) and the focus on higher yielding stocks has not aided performance over the period or the last few years. In response to the underperformance the investment team has made changes in the portfolio over the year to improve the balance between income delivery and capital growth by using the investment trust structure more fully. Details of these changes are set out in the investment strategy section of this report.

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

Source: Janus Henderson. Based on Total Effect Relative to MSCI ACWI (ex UK) High Dividend Yield Index, as at 31 August 2024.

*Not owned, but positive for performance by not owning

Technology, financial services and communications (telecoms) were the strongest performing sectors, all generating over 20% returns. 

Technology stocks represent 19.6% of the portfolio and have provided the greatest absolute and relative performance over the period. Many of the holdings are lower yielding dividend growers, rather than high dividend payers. The exposure of the portfolio was increased throughout the year. The largest position, Microsoft, a longstanding holding, has emerged as one of the leaders in AI by virtue of its investment in OpenAI, the creator of ChatGPT, and its leading positions in cloud computing and business software. Semiconductor companies Qualcomm and Taiwan Semiconductor Manufacturing were also significant positive contributors to performance because of accelerating demand for semiconductors. AI activity is starting to broaden out from demand for semiconductor chips to computing infrastructure investment. A wide range of companies are starting to see customer orders increasing, from the likes of database provider Oracle to server manufacturer Hon Hai Precision and Indian IT services provider Infosys Technologies, which all performed strongly as a result. Not all technology stocks have participated in the rally yet. Portfolio companies Samsung, which is one of the world's largest computer memory design and manufacturers, Infineon Technology, a leading analogue semiconductor company, and Cisco Systems and Lenovo, computer hardware manufacturers, were negative contributors to performance. Whilst they are seeing some AI-related sales they are not yet significant enough to offset weakness elsewhere in their businesses. We believe this will change over time and that they are undervalued on that basis.

Technology stocks have not been the only good performers. The portfolio's second largest sector exposure is the financial sector (17.5% of the portfolio) and it was one of the best performers over the period. It is one of the higher yielding sectors and one that we have considered was significantly undervalued for some years. Many companies in the sector benefit from higher interest rates, and higher rates coupled with low credit losses are driving strong profit growth across much of the sector. Fund management company Amundi performed strongly due to the recovery in asset values. The portfolio's insurance companies benefited from rising insurance premiums and improving profitability. US insurer Travelers Companies was one of the top performers and the positions in AXA, Zurich and Swiss Re also performed well. Asian insurers Dai-ichi Life and Samsung Fire & Marine Insurance rose due to the previously mentioned focus on improving shareholder returns in Japan and South Korea.

The communications and utility sectors have ended up being great performers this year. This was driven partly by interest rates peaking and by a growing acknowledgement that the utility sector is likely to see a higher growth rate in the future due to the heavy investment needed to transform the way energy is generated and consumed globally.

Whilst there has been much to celebrate in the portfolio over the year, the underperformance of some stocks held it back. In general, the portfolio has been overly exposed across all the regions to companies with Chinese revenues. The country has not seen the recovery from the easing of Covid lockdown that the rest of the world experienced and which we had expected. As a result we repositioned the Asia Pacific portfolio significantly in the first half of the year.  Insurer AIA and retailer Li-Ning were sold. Anta Sports, Pernod-Ricard and Samsonite were retained as we believed that their valuations did not reflect their longer-term growth potential. It is worth noting that some of the Chinese holdings have performed well, such as Nari Technology and Midea, and the others have seen a recovery post year end on the stimulus announcements.

Another common theme that has detracted from returns over the period has been our investments in companies that are going through transformations and that are increasing investments to accelerate future earnings growth. Examples of this include US companies Air Products & Chemicals, pharmaceutical company Bristol-Myers Squibb and car parts supplier Aptiv. These companies have raised their investment budgets to invest in new technologies and maintain their competitive positions. They are attractively valued compared to their peers and in our view their improving earnings growth is not reflected in their share prices but the market has not yet been willing to give them credit for this improvement. Industrial gases company Air Products & Chemicals, for example, is investing heavily in low carbon hydrogen projects (known as green and blue hydrogen technologies) but the projects will not be ready for a few years and the market would like to see evidence of demand before rewarding the company for investment. It has signed some contracts for green hydrogen recently, which has seen some of the underperformance reversed. In these cases we have learned a lesson about being too early to invest.

The performance from the health care industry has been mixed in recent years. There is a great deal of innovation in the sector and in some cases cheap valuations, but the stocks are very sensitive to drug pipeline news. Novartis and Novo Nordisk have outperformed significantly due to positive drug trials, but Roche and Bristol-Myers Squibb have underperformed on the back of disappointing trial data. We have sold Roche and maintained the holding in Bristol-Myers Squibb.

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 the potential for total return gains to shareholders.

The single largest change in the portfolio during the year was the increase in the technology sector exposure from 8.4% to 19.6%. This was discussed earlier in the report and in the case study on technology innovation. This increase was funded from a range of stocks and sectors that have less upside potential. We have found that some companies in the portfolio that benefited from competitors' supply chain problems during Covid are starting to see their pricing power erode. Positions sold on this basis included stocks in the energy sector, where increased supply is meeting lower than expected demand, and stocks in the consumer staples sector, including the sales of Mondelez and Ambev.

The financial sector exposure was gradually reduced during the year. Initially, a large exposure had been held in the belief that the market was overly pessimistic on the outlook for companies' profits, and that it would benefit from higher interest rates. In some cases, such as ING, this has happened and the position has been sold.

The Asia portfolio was significantly changed to reduce the exposure to the domestic Chinese economy and to increase the exposure to companies that can benefit from structural global growth. These areas include technology innovation, infrastructure capital spending, and decarbonisation efforts. Positions purchased included Nari Technology, Midea and Infosys Technologies. These were funded via sales including SK Telekom, HKT Trust and HKT Ltd and China Yongda Automobiles.

Some economically sensitive stocks were sold in areas where we are not seeing demand recovering as expected, despite depressed activity levels. Notably, auto exposure has been reduced by selling Mercedes and BMW, and machine tool manufacturer Sandvik.

The largest individual stock changes are shown below:

Case study - accessing technological innovation

Some technologists describe technological innovation as happening in waves. The advent of generative AI has been described as the 4^th wave of computing, coming after the 3^rd wave which was 'Mobile Cloud'. Advancing semiconductor technology over the past three decades has enabled these breakthroughs. It fits with a general theme we have seen over the last five years, which is that the implementation of digital technology and cloud computing adoption has broadened out from what was initially consumer focused (digital streaming of TV, music, advertising) to be more industry focused. This digital implementation can take many different forms: higher levels of driver-aids in cars, perhaps ending in self-driving capabilities, digital 'twins' in industry where sensors monitor a machine and create a digital version of it for engineers to monitor in real time. To drive it all, enormous data centres are required with enhanced cooling systems, needing more electricity, connectors and equipment. These trends have been in place for a while, but the advent of generative AI has turbo-charged them.

The portfolio has invested in companies that will see higher growth rates because of the spending needed to create the infrastructure to facilitate this technological innovation. Microsoft needs no introduction as a brand, but it is one of the largest cloud operators in the world and is offering businesses an increasingly AI-driven range of software to enhance productivity. The investment team has taken advantage of the post Covid slump in some areas of technology spending to add to the companies that will help facilitate this 4^th wave. Oracle, for example, is a world leader in databases and it is seeing increased demand because the first step to using AI effectively is to have easy access to a businesses' data. Siemens is an engineering company but it is also the leader in a number of the world's industrial software categories. nVent and TE Connectivity provide some of the crucial cabling, connectivity and cooling systems for datacentres, cars and industry. These are just some of the businesses in the portfolio that are gaining sales from the new wave of technical innovation.

Impact of gearing

We have not used gearing much this year having been cautious that the sharp rise in interest rates could cause either an economic slow-down or problems for indebted companies and consumers. Such outcomes might give rise to opportunities to invest at more attractive prices. The fact that interest rates are higher also means that the Company earns interest on its cash, which offsets the cost of debt. We did see some market volatility towards the end of the financial year and have used that to add to existing holdings using gearing.

Since the Company has long-term debt, we provide both a fair value and par value return (see note 17.4 in the annual report for details). The fair value of the debt reflects a theoretical market price which reflects interest rate expectations. The reduction in interest rate expectations during the period has increased the fair value of the debt by £1,076,000, reducing 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 £424,000 over the year, as a result of sterling strengthening slightly against the euro.

Investment strategy

Since inception, the Company has offered investors a yield that was significantly higher than global equity markets and a dividend that has grown consistently over time. Higher income stocks are often value stocks (lower valuation than the market combined with higher dividend yields), and although value investing has worked for long periods in the past, this investment style has been out of favour in recent years, as illustrated by the chart in the annual report.

A focus on dividend and value has at times made it hard to gain exposure to exciting new growth areas, or be opportunistic in times of market dislocation. The investment team has a record of successfully identifying and investing in companies that have grown in value considerably. The top performers since launch have, for example, included Microsoft, Taiwan Semiconductor Manufacturing and obesity drug creator Novo Nordisk. The board and manager have reviewed the investment strategy and concluded that additional flexibility to invest in these types of opportunities when they are attractively priced can contribute to the overall total return. The Company will continue to offer investors the income they desire but when appropriate will use more of the flexibility provided by the investment trust structure to distribute dividends from distributable reserves to generate higher total returns for investors.

The investment team has started to implement this investment strategy. We restructured the existing exposure to the Asia Pacific holdings in October last year to focus more on structural growth beneficiaries. This has had a positive impact; the Asian portfolio return improved from 3.3% return in the first half of the year to 13.9% despite ongoing Chinese market weakness. In the US the increased flexibility has been used to continue to own some lower yielding stocks such as Microsoft, but also to add others like Oracle which has helped to improve performance.

Whilst the market rotation experienced recently has impacted short-term sentiment we feel confident that the increased flexibility now being employed will help improve total returns over time. Exposure to slower growing sectors that were primarily held for income, including telecommunications and energy, were reduced to fund these changes.

Outlook

Now that global inflation appears to be under control, central banks have proceeded to ease monetary policy around the world. This year real wage growth has been positive and while wages continue to rise, this should provide support to the consumer and aid the global economy in 2025. Since the end of the period under review the US Federal Reserve has cut interest rates by 0.5% (a larger cut than their normal 0.25%) and the Chinese government has announced a number of stimulus measures in an effort to contain the severe property market downturn and provide support to the broader economy. If China succeeds in turning around its domestic consumption growth, it could be an additional positive for equity markets.

Long-term structural trends such as technological innovation, decarbonisation and supply-chain security are driving an increase in capital spending across a range of industries. While risks persist, in the form of a weakening employment picture and geopolitical tensions, the health of the global economy at this stage looks better than it has over the past year.

We are confident that the companies held in the portfolio have the ability to benefit from the long-term structural trends and to navigate the current conditions well, aided by their strong balance sheets and cash generating abilities. Shareholder returns being announced in terms of both dividends and share buybacks remain positive which suggests that management teams share our confidence in the long-term outlooks for their companies.

Ben Lofthouse

Fund Manager

30 October 2024

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 and emerging 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 17 to the financial statements in the annual report.

The risk register has been updated during the year to reflect increasing risk arising from the continued consolidation of the investment trust sector, together with reflecting the lower interest rate and inflationary environment. The risk arising from artificial intelligence ("AI") has been added as an emerging risk.

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:

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:

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

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. The scenarios considered by the directors in coming to this conclusion included the heightened macroeconomic uncertainties, 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 2026 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 2027.

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 £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. There were no amounts drawn down under this facility at 31 August 2024.

On 30 April 2019, your 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 2024 was 4.7% of net asset value (2023: 3.9%).

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 directors 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 22 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

Richard Hills

Chairman

30 October 2024

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 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 1 i) 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. An ordinary resolution to this effect was passed by the shareholders at the annual general meeting held on 12 December 2023. 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

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 2024 of 1.95p per share has been declared and will be paid to shareholders on 29 November 2024 with record date 8 November 2024. The Company's shares will go ex-dividend on 7 November 2024.

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 reserves brought forward, out of which total amount the dividend is to be paid.

¹ The deficit of £1,938,000 (2023: deficit of £396,000) has been transferred 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 (2023: same).

10.   Share premium account

11.   2024 financial information

The figures and financial information for the year ended 31 August 2024 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 2024 have been audited but have not yet been delivered to the Registrar of Companies. The auditors' report on the 2024 financial statements was unqualified and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.

12.   2023 financial information

The figures and financial information for the year ended 31 August 2023 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 2024 will be posted to shareholders in early November 2024 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, 10 December 2024 at 2.30pm at the offices of Janus Henderson Investors, 201 Bishopsgate, London EC2M 3AE, or alternatively, shareholders can join the meeting via Zoom webinar. 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.