Annual Financial Report

RNS Number : 8458U

Henderson High Income Trust PLC

31 March 2023

 

LEGAL ENTITY IDENTIFIER: 213800OEXAGFSF7Y6G11

HENDERSON HIGH INCOME TRUST PLC

Financial results for the year ended 31 December 2022

This announcement contains regulated information

PERFORMANCE HIGHLIGHTS
Total return performance to 31 December	One year %	Five years %
Benchmark1	-3.3	11.6
NAV2	-1.9	12.6
Share price3	-1.1	17.5
FINANCIAL HIGHLIGHTS	2022	2021
NAV per share4	164.24p	177.92p
Mid-market price per share	165.25p	177.50p
Revenue return per share	10.37p	9.44p
Net assets	£214.3m	£236.2m
Dividend for the year	10.15p	9.95p
Dividend yield5	6.1%	5.6%
Ongoing charge for the year6	0.84%	0.84%
Gearing	21.4%	22.4%

1 The benchmark is a composite of 80% of the FTSE All-Share Index (total return) and 20% of the ICE BofA Sterling Non-Gilts Index (total return)   rebalanced annually 2 Net asset value with debt at fair value per ordinary share total return (including dividends reinvested and excluding transaction costs) 3 Includes dividends reinvested 4 Net asset value with debt at fair value as published by the Association of Investment Companies (AIC) 5 Based on the dividends paid or announced for the year and the share price at the year-end 6 Calculated using the methodology prescribed by the AIC

Sources: Morningstar Direct, Janus Henderson and Refinitiv DataStream. All data is either as at 31 December 2022 or for the year-ended 31 December 2022 .

INTERIM MANAGEMENT REPORT CHAIRMAN'S STATEMENT After the strong investment performance from Henderson High Income Trust plc in 2021, 2022 was a more challenging period. The Company's Net Asset Value (NAV) with debt at fair value fell by 1.9% during the year whilst the Company's share price (total return including dividends reinvested) fared a little better, falling by 1.1%. Performance 2022 was a difficult year for the world's financial markets. The war in Ukraine, the surge in global energy prices and considerable disruption to supply chains around the world led to the highest rates of general inflation in 40 years. As a consequence, central banks announced significant increases in interest rates which caused a sharp sell off in both global equity and bond markets as yields rose. Investors were concerned about the impact on real economic activity and the prospect of lower corporate profits, while rising interest rates also caused a devaluation of those profits. Both equity and bond markets produced negative returns during the year with the former particularly impacted by the de-rating of growth stocks given higher interest (discount) rates, and the latter undermined by the impact of inflation on nominal returns. Within the UK market the additional impact of the mini-budget announcement in the Autumn was significant and caused a sharp fall in UK government bonds and alternative assets as pension funds were forced to raise liquidity. Of some comfort given the overall widespread negative returns during 2022 was the relatively resilient performance of the UK equity market, with the FTSE 100 Index generating a positive return, albeit medium-sized and smaller companies fared less well. Against this backdrop the Company's NAV fell 1.9% compared with the 3.3% fall in the composite benchmark (80% FTSE All-Share Index, 20% ICE BofA Sterling Non-Gilts Index), meaning that the Company outperformed by 1.4%. The Company's share price performance during the year was also relatively strong; having started the year at a very small discount to NAV of 0.2%, the share price closed 2022 at a small premium to NAV of 0.6%. A number of factors helped investment performance versus the benchmark, in particular asset allocation, with an overweight position in equities and an underweight position in bonds of benefit as bonds generally produced poorer returns than equities during 2022. Dividends The Company's investment objective is to provide investors with a high dividend income stream while also maintaining the prospect of capital growth. The current period of high inflation makes this objective even more important. Although financial markets were volatile in 2022, the Board was encouraged to see a continuing recovery in company dividends and the total income received by the Company during 2022 exceeded the total dividends paid to shareholders, enabling the Company to increase its revenue reserves. At the end of 2022, the Company held £8.8 million of reserves, equating to around 8 months of current dividend cover, a healthy position with which to start 2023. During the course of the year the Board continued to monitor carefully the level and sustainability of dividends from the Company's investee companies. David Smith, the Company's Fund Manager, regularly evaluates prospective income levels under various scenarios looking several years ahead. Whilst at this stage of the financial year and particularly given the uncertain economic backdrop it is sensible to be cautious about overall income levels for 2023, the current level of reserves continues to give the Board confidence in the Company's ability to deliver a high level of income to shareholders. During 2022 the Board recommended the payment of dividends totalling 10.15 pence per share, an increase of 2.0% over the payment in 2021. This increase represented the 10th consecutive year of dividend growth from the Company. Gearing The Company's policy on gearing is provided in the Annual Report. During the course of 2022, overall borrowings decreased by approximately £8 million, predominantly due to sales of equities as the Board, in conjunction with the Fund Manager, took a slightly more cautious view of prospects as the year unfolded. As a percentage of net assets, gearing finished the year at 21.4%, a reduction of approximately 1% from the start of the year. Overall asset allocation changed a little during the year with the Company adding around £7 million to its fixed interest investments, although the bias in favour of equities versus bonds (and versus the Company's investment benchmark of 80% equities/20% bonds) remained, with a weighting of around 89% in equities and 11% in bonds at the year end. In December 2022 the Company renewed its committed loan facility of £45 million with the Bank of Nova Scotia (Scotiabank), London Branch. This facility also includes the option to increase borrowings by a further £12 million up to a total of £57 million. The facility has been renewed for a further period of 12 months and the terms on which the facility was renewed were competitive. The Board In September Penny Lovell stepped down from the Board due to other business commitments. Penny had joined as a Director in January 2021 and whilst her tenure was relatively short, she made a valuable contribution during her time on the Board. Having instigated an external search to find a successor, I am delighted to report that Francesca Ecsery was appointed as a Director at the end of 2022. Francesca has extensive experience in marketing, branding and commercial strategies and currently serves on the Boards of F&C Investment Trust PLC and the Association of Investment Companies. Her background and experience will be of significant benefit to the Company as it seeks to compete effectively in today's marketplace. Responsible Investment Responsible investing relates to how environmental, social and corporate governance (ESG) factors impact a company's long-term sustainability. Analysis of the sustainability of a business and its profits has always been at the core of the Company's investment strategy, and ESG factors are fully integrated into the investment processes employed by the Fund Manager. The Board believes that voting the Company's shareholdings at general meetings is essential to good corporate stewardship and is an effective means of expressing its views on the policies and practices of its investee companies. Voting decisions reflect the provisions of Janus Henderson's ESG Corporate Statement and ESG Investment Principles which are publicly available at www.janushenderson.com and records the high standards of corporate behaviour that are expected. Ultimately, however, our Fund Manager makes the final decision after consultation with the Board, as necessary. Janus Henderson will actively engage with those companies that fall below such expectations to encourage improvement over time. The final sanction is the divestment of those holdings that fail to make an acceptable transition and adapt sufficiently. The Board monitors the process by reviewing a report on the Company's voting pattern on an annual basis. Growth Each year the Company seeks shareholder approval to authorise the allotment of new shares at a premium to NAV. The Board continues to believe that it is in the best interests of shareholders for the Company to issue new shares to grow; it serves to improve the liquidity in the Company's shares and spreads the cost base over a larger number of shares which is of benefit to all shareholders. Notwithstanding the difficult market conditions in 2022 it was pleasing that there was robust demand for the Company's shares enabling it to issue 1.2 million new shares during the course of the year, raising approximately £2.1 million of net proceeds. AGM We look forward to seeing as many of our shareholders as possible at our AGM which will be held at 12 noon on Tuesday 16 May 2023 at the offices of Janus Henderson at 201 Bishopsgate, London EC2M 3AE. As usual David Smith, the Company's Fund Manager, will give a presentation on the Company's portfolio and performance, and you will, as usual, have the opportunity to talk to the Board, David and other Janus Henderson representatives. We very much welcome your comments and questions at the AGM and we would encourage those of you who are unable to attend in person to use your proxy votes and to watch the AGM live by logging onto www.janushenderson.com/trustslive . Prospects and Outlook Whilst the near-term economic outlook remains uncertain, particularly given the strains within the global banking sector, there are some early signs that inflationary pressures are abating and whilst interest rates have continued to move higher with policy makers determined to dampen price rises and wage settlements, investors have started to believe that the peak of the tightening cycle may be in sight, even if we should expect interest rates generally to remain at slightly more normalised levels. At the corporate level, company balance sheets are in generally robust shape, the UK banking system appears well capitalised and continuing tight labour markets should help to support the economy. Key will be the upcoming results season, to establish how well UK companies are coping with supply side pricing pressure and softer end markets. That said, the valuation of the UK equity market in particular remains low in an international context and there has been some corporate takeover activity which should help to sustain the market. The Company holds the majority of its assets in UK quoted companies and David Smith, our Fund Manager, will continue to focus on finding stocks with the best dividend and dividend growth prospects to enable the Company to deliver high levels of income for our shareholders, while also seeking to invest in companies capable of capital growth. Jeremy Rigg Chairman 30 March 2023

Fund Manager's Report Market Review The FTSE All-Share Index returned 0.3% on a total return basis in 2022, which was particularly resilient given the economic and political backdrop. Inflation in the UK peaked in October at 11.1% (as measured by CPI), a 40 year high, the Bank of England increased interest rates from 0.25% to 3.5%, the highest level since 2008, energy prices soared, Russia invaded Ukraine and there was political instability in the UK as the Government was led by three different Prime Ministers and four different Chancellors in the year. However, the resilience of the FTSE All-Share Index masked a significant divergence in returns within the equity market. The surge in the oil price and other commodities due to the Russo-Ukraine war saw a significant outperformance by oil & gas (+47.2%) and mining (+31.6%) companies, while the rise in interest rates led to strong performances from banking shares (+12.4%). Elsewhere, concerns about the potential impact of tightening monetary policy and inflation on economic growth, consumer discretionary spending and profit margins saw cyclical businesses perform poorly, with real estate (-32.1%), retailers (-32.0%) and industrials (-14.7%) significantly underperforming. The extreme nature of the dispersion of returns within the market could also be seen by the extent to which the FTSE 100 Index (+4.7%) outperformed the FTSE 250 Index (-17.4%) in 2022, its greatest annual outperformance on record. Dissecting the FTSE 100 Index further shows that the performance of the UK market was even more skewed: the top 20 largest companies in the UK market returned 15.7% on a weighted basis for the year, whereas the other 80 stocks in the FTSE 100 Index declined by 17.2%, much more in line with UK mid and small cap companies and global equity indices generally. It has been very unusual to see performance dominated by so few large companies. Higher inflation and rising interest rates saw bond yields spike, and prices fall sharply. UK government bonds fell by 23.8% in 2022, the worst annual return for gilts since 1974. Although bond yields rose globally, the move higher in the UK was exacerbated by political instability, especially during Liz Truss's short reign as Prime Minister. The unfunded tax cuts that were central to the "mini-budget" caused turmoil in the UK bond market and prompted the Bank of England (BoE) to announce a £65 billion emergency plan to provide financial stability. The appointment of Rishi Sunak as her successor and the U-turns on the tax-cutting policies helped to alleviate concerns, and saw stability return to the bond market and Sterling. Performance Review The Company's NAV (debt at fair value) returned -1.9% on a total return basis, outperforming the benchmark's fall of -3.3%. The overweight position in equities relative to bonds versus the benchmark contributed to relative performance, as did the outperformance of the individual stocks within the bond portfolio. The equity portfolio fell 1.3% on a total return basis during the year, underperforming the FTSE All-Share Index return of 0.3%. Although the portfolio includes shares in oil majors BP and Shell, the percentage invested in oil companies is less than that in the benchmark index, hence the significant outperformance of the oil majors was detrimental to relative performance. The portfolio's positions in Hilton Food Group, Intermediate Capital and Big Yellow were also detrimental to performance. All three companies have been successful long-term holdings for the Company, but saw their share prices underperform in 2022. Hilton Food Group's profitability was impacted by cost inflation in its seafood business, which it was unable to pass through to customers. Despite reporting strong results in the period, Intermediate Capital underperformed over fears that rising interest rates and slowing economic growth would lead to the company being forced to mark down the value of its investments in private credit markets. Finally, self storage company Big Yellow also reported good results during the year but the share price was impacted by the significant rise in bond yields, which led to a de-rating across the entire real estate sector. The equity portfolio also suffered from its exposure to more domestic cyclical businesses, such as housebuilders Persimmon and Vistry. Both shares underperformed during the year as investors feared that higher interest rates and the end of 'Help to Buy' would slow demand for housing, and this was exacerbated in the aftermath of the "mini-budget" in September, which saw mortgage rates surge and cancellation rates rise. On the positive side, the portfolio's holdings in British American Tobacco and Imperial Brands were positive for performance. Both shares benefited as investors sought out companies with relatively defensive earnings, amid fears over slowing economic growth. Imperial Brands was further supported by better operational performance after a number of disappointing years, and its intention to start buying back its own shares. The Company's overweight position in NatWest benefited performance after the company announced good results with better net interest income given higher than expected interest rate sensitivity. The company also upgraded its medium-term profit targets and announced a £1.75 billion special dividend. Elsewhere, holdings in Burberry, Anglo American and Devro aided performance. The announcement of Daniel Lee as Burberry's new Creative Director was well received, while the share price was further supported by rumours that China could relax its zero Covid policy which had curtailed growth for the company in the region. Anglo American also benefited from optimism that Chinese economic growth could accelerate, supporting commodity prices. Food casings manufacturer Devro, a new holding in 2022, saw its shares surge after the company was subject to a bid approach by Saria Nederland at a 65% share price premium. Although the fixed income portfolio fell by 7.7% on a total return basis during the year, it significantly outperformed the 17.8% fall in the ICE BofA Sterling Non-Gilts Index. The portfolio benefited from its exposure to US investment grade credit, given its outperformance versus UK corporate bonds, while the Dollar's strength increased the value of the bonds to Sterling investors. The portfolio was also aided by its holdings in some short duration high yield bonds, such as Crown Americas (packaging), Aramark (food services) and Service Corp (death care services), which were less sensitive to interest rate moves. Income Review It was another positive year in terms of UK market income with aggregate dividends growing by 16.5% in 2022 on an underlying dividend basis (ex special dividends) according to the Link UK Dividend Monitor. This was primarily driven by strong growth in dividends from banks and oil & gas companies, albeit overall dividend payments for both are still below their pre-pandemic levels. The income return for the Company in 2022 also showed good growth, increasing to 10.37p per share, from 9.44p in 2021. While dividend payments from mining companies Rio Tinto and Anglo American reduced in line with falling commodity prices in the first half of the year, this was offset by good dividend growth from Lloyds and NatWest in the banking sector, and from oil majors BP and Shell. NatWest also paid a large special dividend in the year, as did Victrex, Volvo and PageGroup. In total, the Company earned £1.1 million in special dividends in 2022. After the last two years of funding a small portion of the dividend from revenue reserves, it was pleasing to cover the  dividend fully with underlying earnings in 2022, with an excess £384,000 being added to the Company's reserves. During the year, the Board increased the dividend to 10.15p, growth of 2% over 2021 (9.95p). The Company has now raised its dividend for ten consecutive years at a compound average growth rate of 2.0%, in line with the long-term historical average for UK inflation (as measured by CPI). Revenue reserves as at 31 December 2022 were £8.8 million, providing 67% cover over the Company's dividend as at 31 December 2022. Portfolio Activity During the year a net £6.6 million was added to the bond portfolio, specifically US investment grade credit, taking advantage of the move higher in yields and widening of credit spreads. Bonds were purchased in typically higher quality, non-cyclical businesses such as Abbvie (pharma), Amazon and T-Mobile (telecommunications). Further additions were made to the bond portfolio in October after the move higher in UK gilt yields caused by the "mini-budget", including high quality UK investment grade credit from issuers such as Brown Forman, AB Inbev (both beverage companies), Nestlé and Sky. The bond portfolio represented 11.0% and 13.6% of gross and net assets respectively as at the end of December. Gearing was reduced during the year with approximately £8 million of borrowings paid down. This was funded by the sale of more cyclical businesses within the equity portfolio, including Ashmore, Informa, Volvo and TI Fluids. Investment performance at emerging market debt manager Ashmore has been poor, and with fears that Russia's invasion of Ukraine could cause more volatility in Emerging Markets debt markets and further outflows, the position was sold. Informa shares had performed well since the pandemic lows and the valuation had risen to discount a full recovery in its events business, but we were concerned about the potential of further lockdowns in China and slowing economic growth further afield and decided to capitalise on that recent outperformance. European truck manufacturer Volvo is a well-managed business but has high operational gearing, hence any slowdown in the trucking and construction markets could have a significant impact on its profitability and limit cash returns to shareholders. Finally, TI Fluids supplies parts to the automobile market, and the position was sold due to fears about the long term sustainability of its fuel tanks division given the long term transition to electric vehicles. With the company having a set dividend pay-out ratio based on annual cash flow, a fall in profits would likely lead to a cut in the dividend. Within the pharmaceutical sector we made a number of changes. Following its demerger from GSK, we sold the position in Haleon, its consumer health division. The company's balance sheet is stretched and with the dividend yield low as the company prioritises debt reduction, we feel this does not fairly compensate shareholders for the elevated risks. The holding in GSK was also reduced to an underweight position when news of potential Zantac (medication for indigestion) liabilities started to emerge. We added a new position in Sanofi, the French pharmaceutical company, given its low valuation relative to its potential future earnings growth (supported by the success of Dupixent, its treatment for eczema), and continued cost rationalisation. Elsewhere we initiated new positions in Woodside Petroleum, Spectris and HSBC. Following Woodside's merger with BHP's oil & gas assets, the business is well positioned in low-cost, long-life LNG (Liquefied Natural Gas) assets in Australia and high margin oil production in the US Gulf of Mexico. Woodside's leverage to LNG is particularly attractive as it is seen as a "transition" energy due to it emitting less carbon than coal or oil but being more efficient than renewables, which means that it should continue to be in demand from emerging markets over the long term. Spectris develops precision instrumentation and controls for various industries. The company has a strong franchise in specialist niche markets and following the sale of a number of low growth and low margin divisions, the remaining business is better quality, with higher and more stable margins and returns. HSBC has strong franchises in retail and commercial banking in the UK and Asia (ex Japan); the company also has a strong capital position, with profits benefiting from an increased net interest rate margin on its large deposit base and supporting good dividend growth. Outlook Markets had rallied from their October lows as inflation has shown signs of slowing, leading to hopes that central banks may pare back further increases to interest rates. In addition, falling European gas prices have eased fears about an impending recession, and China has relaxed its stringent zero Covid policy.  However, the impact of the rapid rise in interest rates globally is starting to be felt with some weaker banks in the US and Europe getting into financial difficulty. This will undoubtably lead to a higher level of volatility within equity and bond markets even though consumer and corporate balance sheets are strong, UK banks are well capitalised and unemployment remains low. Although disinflationary forces are emerging, there are reasons to believe that inflation will settle at levels higher than we have been used to and be more volatile in the years ahead. Labour markets remain tight, putting upward pressure on wages, while the move away from globalisation towards protectionism, the reshoring of manufacturing facilities and the move to net zero will all add to inflation in the developed world. Hence it is our belief that the age of ultra-low interest rates is over, and that the global economy is moving to a new more normalised world for interest rates. After an extended period where investors sought growth irrespective of value, now that the era of "free money" is over, asset valuations will become increasingly important once again. Although the macro economic outlook is uncertain and concerns within the banking sector need to be monitored, the UK equity market is attractively valued. The focus remains on finding good quality businesses at compelling valuations that can pay and grow attractive dividends. David Smith Fund Manager 30 March 2023

PRINCIPAL RISKS
Principal Risk	Mitigating Measures
Climate Change Risk Risk that investee companies within the Company's portfolio fail to respond to the pressures of the growing climate emergency and fail to limit their carbon footprint to regulated targets, resulting in reduced investor demand for their shares and falling market values.	ESG considerations are a fully integrated component of the investment process. The Fund Manager seeks to understand how a company is managing ESG risks through its policies and processes and where its investments are targeted, to ensure that its business model remains sustainable over the longer term. Please refer to Environmental, Social and Governance Matters in the Annual Report for further details.
Investment Risk Risk of long-term underperformance of the Company against the benchmark and/or peer group. This could result in the shares of the Company trading at a persistent discount to net asset value and/or reduced liquidity in the Company's shares. Risk that insufficient income generation could lead to a cut in the dividend.	The Manager provides the Board with regular investment performance statistics against the benchmark and the peer group. The implementation of the investment strategy and results of the investment process for which the Fund Manager is responsible, are discussed with the Manager and reviewed at each Board meeting. The premium/discount to net asset value and the trading volume of the Company's shares are also regularly reviewed, taking account of market conditions. The Manager and the Board maintain close contact with the Company's Broker to understand the supply of and demand for shares. The Board reviews the Income Statement and revenue forecasts at each meeting and continually monitors the Company's revenue reserves.
Market/Financial Risk Risk that market conditions lead to a fall in the value of the portfolio (magnified by any gearing) and/or a reduction of income. Risks associated with rising interest rates and its impact on the broader financial system. This could result in loss of capital value for shareholders and/or a cut in the dividend payment.	The Board reviews the Company's compliance with its loan covenants (for both the short-term and long-term facilities) on a monthly basis and additional covenant testing is undertaken in extreme market conditions to give comfort that the Company can meet its financial liabilities. The portfolio is diverse, containing a sufficient range of investments to ensure that no single investment puts undue risk on the sustainability of the income generated by the portfolio or indeed the capital value. Regard is also given to having a broad mix of companies in the portfolio, as well as a spread across a range of economic sectors. The Board reviews the portfolio on a monthly basis. The Manager operates within investment limits and restrictions set by the Board, including limits for gearing and derivatives and confirms compliance with these each month. Any particularly high risks are highlighted and discussed, and appropriate follow up action is taken where necessary. A detailed analysis of the Company's financial risk management policies and procedures can be found in the Financial Risk Management Policies and Procedures note in the Annual Report. The Board reviews the Income Statement and revenue forecasts at each meeting and continually monitors the Company's revenue reserves.

Operational Risks including cyber risks, pandemic risks and epidemic risks and risks relating to terrorism and international conflicts Risk of loss through inadequate or failed internal procedures, policies, processes, systems or human error. This includes risk of loss to the Company's third-party service providers. Risk of financial loss, disruption or damage to the reputation of the Company, the Manager and the Company's other key third-party service providers, as a result of failure of information technology systems. Risk of loss as a result of external events outside of the Board's control such as pandemic and/or epidemic risks and risks relating to terrorism and/or international conflicts that disrupt and impact the global economy. This includes the risk of loss to the Company's third-party service providers that are also disrupted and impacted by such events.

The Board receives a quarterly internal control report from the Manager to assist with the ongoing review and monitoring of the internal control and risk management systems it has in place. The Board regularly receives reports from the Manager's Internal Audit, Risk, Compliance, Information Security and Business Continuity teams. This provides assurance that the Manager has appropriate policies and procedures in place to be able to continue in operation and maintain stability in times of such risks. In particular, the Board asks the Manager to confirm that the Fund Manager can continue to manage the portfolio in these circumstances. The Board makes similar enquiries of its other key third-party service providers to gain assurance that they too have appropriate policies and procedures in place to be able to continue in operation and maintain stability in times of such risks. Please refer to the Internal Control and Risk Management section in the Annual Report for further details.

Tax, Legal and Regulatory Risk Risk that a breach of, or a change in laws and regulations, could materially affect the viability and appeal of the Company, in particular section 1158/9 Corporation Tax Act 2010 which exempts capital gains from being taxed within investment trusts.

The Manager has been contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The Board receives internal control reports produced by the Manager on a quarterly basis, which confirm tax, legal and regulatory compliance.

Emerging Risks With the help of the Manager's research resources and using its own market intelligence, the Board continually monitors the changing risk landscape and any emerging and increasing threats to the Company's business model. Such emerging risks could cause disruption for the Company if ignored, but if identified could provide business opportunities. Should an emerging risk become sufficiently clear, it may be moved to a principal risk.

VIABILITY STATEMENT The Company seeks to provide superior income generation and long-term capital growth for its shareholders. The Board aims to achieve this by implementing the Company's business model and strategy through the investment objective and policy. The Board will continue to consider and assess how it can adapt the business model and strategy of the Company to ensure its long-term viability in relation to its principal and emerging risks. The Board also considers: ·     the prospects for the Company including the liquidity of the portfolio (which is mainly invested in readily realisable listed securities); ·     the level of borrowings (which are restricted); ·     the closed-end nature as an investment company (therefore there are no issues arising from unexpected redemptions); ·     a low ongoing charge (0.84% for the year-ended 31 December 2022 (2021: 0.84%)); and ·     long-term borrowings in place in the form of the 3.67% senior unsecured loan note which matures in July 2034 (the value of this long-term borrowing is at 9.3% of net assets as at 31 December 2022, relatively small in comparison to the value of total net assets). Furthermore, the Company retains title to all assets held by the Custodian (under the terms of the formal agreement with the Depositary), cash is held with approved banks and revenue and expenditure forecasts are reviewed at each Board meeting. The Fund Manager provides an additional, conservative stress-tested revenue forecast at least once a year to assist the Board with its dividend decision making. The Company's revenue reserves remain strong with approximately 8 months' worth of dividend cover, which gives additional comfort for any difficult years that may arise in the future. The Board believes it is appropriate to assess the Company's viability over a five-year period in recognition of its long-term horizon and taking account of the Company's current position and the assessment factors detailed above. When assessing the viability of the Company over the next five years the Directors considered its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's borrowing facilities and how a breach of any loan covenants could impact on the Company's net asset value and share price. The Board does not envisage any change in strategy or investment objective, or any events that would prevent the Company from continuing to operate over the next five years as the Company's assets are liquid, its commitments are limited, and the Company intends to continue to operate as an investment trust. The Board notes the Company's next continuation vote is due to take place at the AGM in 2025. In 2022 the Board received feedback from the Fund Manager and the Janus Henderson Investment Trust Sales Team on meetings held with shareholders. The feedback suggested that the shareholders were supportive of the Company continuing in operation. The Board remains confident that shareholders remain supportive of the Company. The Board takes comfort in the robustness of the Company's position, performance, liquidity and the well-diversified portfolio, as well as the Fund Manager's monitoring of the portfolio and therefore has a reasonable expectation that the Company will continue in operation and meet its liabilities as they fall due up to and including the year-ending 31 December 2027. 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 remuneration for which there were no outstanding amounts payable at the year-end. Directors' interests in shares are disclosed in the Directors' Remuneration Report 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 Janus Henderson and Related Parties including amounts outstanding at the year-end, are given in Note 21 to the financial statements within the Annual Report. STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS Having taken advice from the Audit and Risk Committee, the Directors consider that the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy. Each of the Directors, whose names and functions are listed in the Board of Directors section within the Annual Report confirm that, to the best of their knowledge: ·     the Company's financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and ·     the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board Jeremy Rigg Chairman 30 March 2023

AUDITED INCOME STATEMENT

	Year-ended 31 December 2022 (Audited)			Year-ended 31 December 2021 (Audited)
	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
(Losses)/gains on investments held at fair value through profit or loss (note 2)	-	(22,469)	(22,469)	-	27,188	27,188
Income from investments held at fair value through profit or loss (note 3)	14,632	-	14,632	13,470	-	13,470
Other interest receivable and similar income	307	-	307	98	-	98
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Gross revenue and capital (losses)/gains	14,939	(22,469)	(7,530)	13,568	27,188	40,756
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Expenses
Management fees (note 5)	(557)	(836)	(1,393)	(564)	(846)	(1,410)
Other administrative expenses	(498)	-	(498)	(460)	-	(460)
	-----------	-----------	-----------	-----------	-----------	-----------
Net return before finance costs and taxation	13,884	(23,305)	(9,421)	12,544	26,342	38,886
Finance costs	(380)	(1,140)	(1,520)	(295)	(885)	(1,180)
	-----------	-----------	-----------	-----------	-----------	-----------
Net return before taxation	13,504	(24,445)	(10,941)	12,249	25,457	37,706
Taxation on net return	(81)	-	(81)	(104)	(7)	(111)
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Net return after taxation	13,423	(24,445)	(11,022)	12,145	25,450	37,595
	-----------	-----------	-----------	-----------	-----------	-----------
Return/(loss) per ordinary share (note 6)	10.37p	(18.89p)	(8.52p)	9.44p	19.79p	29.23p
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The total columns of this statement represent the Income Statement of the Company. All capital and revenue items derive from continuing operations. No operations were acquired or discontinued during the year. The Company has no other comprehensive income other than those items recognised in the Income Statement.

AUDITED Statement of CHANGES IN EQUITY

Year-ended 31 December 2022	Called up share capital £'000		Share premium account £'000		Capital redemption reserve £'000		Other capital reserves £'000		Revenue reserve £'000		Total £'000
At 1 January 2022	6,430		126,783		26,302		68,315		8,404		236,234
Net return after taxation	-		-		-		(24,445)		13,423		(11,022)
Issue of new shares (note 7)	60		2,044		-		-		-		2,104
Dividends paid (note 9)	-		-		-		-		(13,039)		(13,039)
	--------		-----------		---------		---------		---------		----------
At 31 December 2022	6,490		128,827		26,302		43,870		8,788		214,277
	=====		======		======		=====		=====		======
Year-ended 31 December 2021	Called  up share capital £'000		Share premium account £'000		Capital redemption reserve £'000		Other capital reserves £'000		Revenue reserve £'000		Total  '000
At 1 January 2021	6,430		126,783		26,302		42,865		8,991		211,371
Net return after taxation	-		-		-		25,450		12,145		37,595
Dividends paid (note 9)	-		-		-		-		(12,732)		(12,732)
	--------		-----------		---------		---------		---------		----------
At 31 December 2021	6,430		126,783		26,302		68,315		8,404		236,234
	=====		======		======		=====		=====		======

AUDITED STATEMENT OF FINANCIAL POSITION

	At 31 December 2022 £'000		At 31 December 2021 £'000
Fixed assets
Investments held at fair value through profit or loss	260,053		289,091
	----------		----------
Current assets
Debtors	1,928		1,934
Cash at bank and in hand	2,873		3,942
	----------		----------
	4,801		5,876
	----------		----------
Creditors: amounts falling due within one year	(30,719)		(38,884)
	----------		----------
Net current liabilities	(25,918)		(33,008)
Total assets less current liabilities	234,135		256,083
	----------		----------
Creditors: amounts falling due after more than one year	(19,858)		(19,849)
	----------		----------
Net assets	214,277		236,234
	======		======
Capital and reserves
Called up share capital (note 7)	6,490		6,430
Share premium account	128,827		126,783
Capital redemption reserve	26,302		26,302
Other capital reserves	43,870		68,315
Revenue reserve	8,788		8,404
	----------		----------
Total shareholders' funds	214,277		236,234
	======		======
Net asset value per ordinary share (basic and diluted) (note 8)	165.09p ======		183.70p ======

AUDITED Statement of Cash Flows

		Year-ended 31 December 2022 £'000	Year-ended 31 December 2021 £'000
Cash flows from operating activities
Net return before taxation		(10,941)	37,706
Add back: finance costs		1,520	1,180
Add/(less): losses/(gains) on investments held at fair value through profit or loss		22,469	(27,188)
Withholding tax on dividends deducted at source		(81)	(111)
Decrease/(increase) in debtors		6	(37)
Increase in creditors		287	38
		--------------	--------------
Net cash inflow from operating activities 1		13,260	11,588
		--------------	--------------
Cash flows from investing activities
Sales of investments held at fair value through profit or loss		60,179	46,326
Purchases of investments held at fair value through profit or loss		(51,435)	(48,879)
		--------------	--------------
Net cash inflow/(outflow) from investing activities		8,744	(2,553)
		--------------	--------------
Cash flows from financing activities
Issue of ordinary share capital		2,104	-
Equity dividends paid		(13,039)	(12,732)
(Repayment)/drawdown of loans		(11,330)	8,231
Interest paid		(1,512)	(1,171)
		--------------	--------------
Net cash outflow from financing activities		(23,777)	(5,672)
		--------------	--------------
Net (decrease)/increase in cash and cash equivalents		(1,773)	3,363
Cash and cash equivalents at beginning of year		3,942	595
Exchange movements		704	(16)
		--------------	--------------
Cash and cash equivalents at end of year		2,873	3,942
Comprising:		--------------	--------------
Cash at bank and in hand		2,873	3,942
		========	========
1 Cash inflow from dividends was £13,729,000 (2021: £12,508,000) and cash inflow from interest was £1,093,000 (2021: £1,016,000).

NOTES TO THE FINANCIAL STATEMENTS 1a. Accounting policies: basis of accounting The Company is an investment company as defined in Section 833 of the Companies Act 2006.   It operates in England and Wales 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 AIC Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (SORP). The principal accounting policies applied in the presentation of these financial statements are set out below. These policies have been consistently applied to all the years presented. The financial statements have been prepared under the historical cost basis except for the measurement at fair value of investments. In applying FRS 102, financial instruments have been accounted for in accordance with Sections 11 and 12 of the standard. All of the Company's operations are of a continuing nature. 1b. Significant judgments and estimates The decision to allocate special dividends as income or capital is a judgment but not deemed to be material. The allocation of expenses as income or capital is not material but has an impact on distributable reserves. The Directors do not consider these to be significant judgments or estimates and do not believe that any accounting judgments 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. 1c. Going concern The assets of the Company consist of securities that are readily realisable and, accordingly, the Directors believe that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. The Company's shareholders are asked every five years to vote for the continuation of the Company. An ordinary resolution to this effect was passed by the shareholders at the annual general meeting held on 23 June 2020. The Directors have considered the risks associated with rising interest rates and its impact on the broader financial system, as well as considering cash flow forecasting, a review of covenant compliance including the headroom above the most restrictive covenants and an assessment of the liquidity of the portfolio. They have concluded that they are able to meet their financial obligations, including the repayment of the bank loan, as they fall due for a period of at least twelve months from the date of issuance. Having assessed these factors, the principal risks and other matters discussed in connection with the viability statement, the Board has determined that it is appropriate for the financial statements to be prepared on a going concern basis. 2. (Losses)/gains on investments held at fair value through profit or loss Management fees are charged in accordance with the terms of the management agreement which are set out in the Company's Annual Report for the year-ended 31 December 2022.
									2022 £'000			2021 £'000
Gains on the sale of investments based on historical cost									1,102			4,396
Revaluation losses recognised in previous years									(3,655)			(1,803)
									---------			---------
(Losses)/gains on investments sold in the year based on carrying value at previous Statement of Financial Position date									(2,553)			2,593
									---------			---------
Net movement on revaluation of investments									(17,748)			24,069
Effective yield movement									6			32
Exchange (losses)/gains									(2,174)			494
									-----------			-----------
									(22,469)			27,188
									======			======
3.  Income from Investments Held at Fair Value through Profit or Loss									2022 £'000			2021 £'000
UK dividend income - listed									10,198			9,546
UK dividend income - special dividends									1,016			686
									----------			----------
									11,214			10,232
									----------			----------
Interest income - listed									1,082			915
Overseas and other dividend income - listed									2,245			2,100
Overseas and other dividend income - special dividends									91			223
									-------			-------
									3,418			3,238
									----------			----------
									14,632			13,470
									======			======
4.   Other Interest Receivable and Similar Income									2022 £'000			2021 £'000
Deposit interest									18			-
Traded option premiums									289			79
Underwriting commission									-			19
									-----			-----
									307			98
									===			===
5.  Management Fee
	2022					2021
	Revenue return £'000	Capital return £'000		Total £'000		Revenue return £'000			Capital return £'000			Total £'000
Management fee	557	836		1,393		564			846			1,410
	------	-------		--------		------			-------			--------
Total fee	557	836		1,393		564			846			1,410
	===	===		=====		===			===			=====
A summary of the terms of the Investment Management Agreement is given in the Annual Report. An explanation of the split between revenue and capital is contained in Note 1g to the financial statements in the Annual Report.
6.  Total (Loss)/Return per Ordinary Share The (loss)/return per ordinary share figure is based on the loss attributable to the ordinary shares of £11,022,000 (2021: gain of £37,595,000) and on the 129,401,141 weighted average number of ordinary shares in issue during the year (2021: 128,596,278). The Company had no securities in issue that could dilute the return per ordinary share. The return per ordinary share can be analysed between revenue and capital as shown below:
									2022 £'000			2021 £'000
Net revenue return									13,423			12,145
Net capital (loss)/return									(24,445)			25,450
									------------			----------
Total (loss)/return									(11,022)			37,595
									=======			======
Weighted average number of ordinary shares									129,401,141			128,596,278
Revenue return per ordinary share									10.37p			9.44p
Capital (loss)/return per ordinary share									(18.89p)			19.79p
									------------			------------
Total (loss)/return per ordinary share									(8.52p)			29.23p
									=======			=======
7.  Called Up Share Capital
			Shares entitled  to dividend			Total shares in issue				Nominal value in issue £'000
Issued ordinary shares of 5p each At 1 January 2022			128,596,278			128,596,278				6,430
Issued during the year			1,200,000			1,200,000				60
			--------------			--------------				-------
At 31 December 2022			129,796,278			129,796,278				6,490
			--------------			--------------				-------
During the year the Company issued 1,200,000 shares (2021: nil shares) for net proceeds of £2,104,000 (2021: £nil). Between 1 January and 30 March 2023, no shares have been issued.
8 .   Net Asset Value Per Ordinary Share (Basic and Diluted) The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £214,277,000 (2021: £236,234,000) and on the 129,796,278 ordinary shares in issue at 31 December 2022 (2021: 128,596,278). The movements during the year of the assets attributable to the ordinary shares were as follows:
									2022 £'000			2021 £'000
Net assets at start of year									236,234			211,371
Total net (loss)/return after taxation									(11,022)			37,595
Dividends paid in the year									(13,039)			(12,732)
Issue of ordinary shares less issue costs									2,104			-
									-----------			-----------
									214,277			236,234
									=======			=======
9.   Dividends Paid on Ordinary Shares
						Payment date		2022 £'000			2021 £'000
Fourth interim dividend (2.475p per share) for the year-ended 31 December 2020						29 January 2021		-			3,183
First interim dividend (2.475p per share) for the year-ended 31 December 2021						30 April 2021		-			3,183
Second interim dividend (2.475p per share) for the year-ended 31 December 2021						30 July 2021		-			3,183
Third interim dividend (2.475p per share) for the year-ended 31 December 2021						29 October 2021		-			3,183
Fourth interim dividend (2.525p per share) for the year-ended 31 December 2021						28 January 2022		3,247			-
First interim dividend (2.525p per share) for the year-ended 31 December 2022						29 April 2022		3,255			-
Second interim dividend (2.525p per share) for the year-ended 31 December 2022						29 July 2022		3,275			-
Third interim dividend (2.525p per share) for the year-ended 31 December 2022						28 October 2022		3,277			-
Unclaimed dividends								(15)			-
								----------			----------
								13,039			12,732
								======			======
The total dividends payable in respect of the financial year which form the basis of the test under Section 1158 of the Corporation Tax Act 2010 are set out below:
									2022 £'000			2021 £'000
Revenue available for distribution by way of dividend for the year									13,423			12,145
First interim dividend of 2.525p (2021: 2.475p)									(3,255)			(3,183)
Second interim dividend of 2.525p (2021: 2.475p)									(3,275)			(3,183)
Third interim dividend of 2.525p (2021: 2.475p)									(3,277)			(3,183)
Fourth interim dividend 2.575p (2021: 2.525p)									(3,342)			(3,247)
									--------			----------
									274			(651)
									=====			======
In accordance with FRS 102, interim dividends payable to equity shareholders are recognised in the Statement of Changes in Equity when they have been paid to shareholders. All dividends have been paid out of revenue reserves or current year revenue profits and at no point during the year did the revenue reserve move to a negative position.
10. 2022 Financial Information The figures and financial information for the year-ended 31 December 2022 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year-ended 31 December 2022 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditors' Report on the 2022 Financial Statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) and 498(3) of the Companies Act 2006.
11. 2021 Financial Information The figures and financial information for the year-ended 31 December 2021 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year-ended 31 December 2021 have been audited and delivered to the Registrar of Companies. The Independent Auditors' Report on the 2021 Financial Statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) and 498(3) of the Companies Act 2006.
12. Annual report The Annual Report will be posted to shareholders in April 2023 and will be available at www.hendersonhighincome.com or in hard copy from the Corporate Secretary at the Company's registered office, 201 Bishopsgate, London EC2M 3AE.
13. Annual General Meeting (AGM) The AGM will be held on Tuesday, 16 May 2023 at 12 noon at the Company's registered office, 201 Bishopsgate, London EC2M 3AE. The Notice of Meeting will be posted to shareholders with the Annual Report.
14. General information a) Company Status The Company is a UK domiciled investment trust company with registered number 02422514. SEDOL/ISIN number: 0958057/ GB0009580571 London Stock Exchange (TIDM) Code: HHI Global Intermediary Identification Number (GIIN): JBA08I.99999.SL.826 Legal Entity Identifier (LEI): 213800OEXAGFSF7Y6G11 b) Directors, Corporate Secretary and Registered Office The Directors of the Company are Jeremy Rigg (Chairman), Jonathan Silver (Chairman of the Audit & Risk Committee), Zoe King (Senior Independent Director), Richard Cranfield and Francesca Ecsery. The Corporate Secretary is Janus Henderson Secretarial Services UK Limited, represented by Samantha McDonald, ACG. The registered office is 201 Bishopsgate, London EC2M 3AE.  c) Website Details of the Company's share price and net asset value, together with general information about the Company, monthly factsheets and data, copies of announcements, reports and details of general meetings can be found at www.hendersonhighincome.com
For further information please contact:
David Smith Fund Manager Janus Henderson Investors Telephone: [phone]					Dan Howe Head of Investment Trusts Janus Henderson Investors Telephone: [phone]
Harriet Hall Investment Trust PR Manager Janus Henderson Investors Telephone: [phone]
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) are incorporated into, or form part of, this announcement.

 

END

 

 

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