Final Results

Henderson High Income Trust PLC 26 March 2008 Page 1 of 12 26 March 2008 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Highlights of the year: 31 December 31 December Change Per ordinary share 2007 2006 % Net asset value 166.9p 181.7p -8.1 Market price 147.8p 177.3p -16.6 Revenue return 8.26p 8.09p +2.1 Annual dividend 8.18p 7.91p +3.4 Extracts from the Chairman's Statement The last year has been particularly challenging for income investors, as both bonds and higher yielding equities have fallen in value. In anticipation of more difficult conditions, the Trust's gearing was reduced to the lowest level for more than 10 years. Despite this, the Trust has not been immune from markets and the net asset value has fallen over the year, albeit appreciably less than the average for the Association of Investment Companies' UK High Income sector. Importantly however, the current outlook for income remains robust and the dividend was increased by 3.4% over the year. Assets and performance Despite having warned in my recent statements that it was unlikely to be plain sailing, I must admit to not having expected quite the severity of the storm that hit us and continues to do so. An initial problem of defaults amongst US sub-prime borrowers has spiralled rapidly outwards to touch seemingly unrelated investment markets, so that the second half of 2007 witnessed a sharp sell-off in UK equities, prompted by the evolving credit crunch and associated fears of slowing economic growth in the UK. As if this were not bad enough, it turned out that 2007 was a very bad year in particular to be a high yield investor like ourselves, or indeed any type of income investor. In a similar way to the 'dot com' boom in the late 1990's, there has been a reducing number of very low yielding sectors driving the UK market forward. Sectors such as mining and oil have been the dominant factor in the FTSE All-Share Index's rise; these sectors contain companies with low dividend yields and are, therefore, not sectors that we would currently invest much in. By comparison, companies in sectors such as banks and property, which traditionally provide high dividend yields, have nearly halved in value over the year, although we were able to mitigate some of the worst effects by being underweight in these sectors. This narrow breadth to the market is clearly illustrated by the fact that if the mining sectors was taken out of the FTSE All-Share Index, then it actually fell in value over 2007 and the FTSE 350 High Yield Share Index, which contains many of the stocks in which we invest, was 3.0% lower. - MORE - Page 2 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Extracts from the Chairman's Statement (continued) Unusually, our fixed interest portfolio provided few benefits as it was partly affected by the adverse issues within the debt market as spreads widened across all bond categories, an outcome we expect to reverse in the coming year for the better quality issues which we typically hold. The consequence of all this was that over the year our portfolio underperformed the market as a whole. However, this is the first year since 1999 that the total return of the net asset value (NAV) per ordinary share (-4.6%) has lagged either the total return of the FTSE All-Share Index (5.3%) or the benchmark index (5.3%). The total return of the share price per ordinary share fell further, being down 12.7%, as a result of the discount to the NAV having widened to 11.4% at the year end. The Company repurchased some shares for treasury during this period and since the year end the discount has narrowed significantly. We can take some comfort from not being alone in facing demanding market conditions for income investing. The Association of Investment Companies' UK High Income sector, of which we are part, recorded an average NAV total return of -7.6% over the year, compared to our 4.6% decline. In anticipation of difficult market conditions, our gearing was reduced during the year to levels last seen in the mid 1990's, with the result that our bond portfolio now exceeds the value of our borrowings, implying negative equity gearing. Our borrowing facilities remain in place, and with the dividend yields currently available there is a considerable opportunity for income generation going forward. Whilst we clearly could have done better, I think that in these difficult circumstances, our Portfolio Manager, supported by the Board, deserves some credit for steering us through these choppy waters, in particular by reducing gearing and retaining resources in hand so we are able to take advantage of the opportunities as they appear and hopefully benefit when markets improve. Dividends Dividend growth has continued across all sectors in the UK and, with a greater proportion of our income now coming from bonds, the Board considered the position secure enough to increase our distribution further. So, for the second year running since we reverted to a single share structure, we were able to increase our quarterly dividend payments by 3% to 2.075p, as we announced in November 2007. Whilst clearly the value of our capital is important to us as shareholders, it is the level of the dividend that usually has the most immediate effect on our pockets. It is therefore encouraging that, despite all the recent ravages of the markets, we have been able to increase it again and we remain committed to growing it further in the future, as conditions permit. - MORE - Page 3 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Extracts from the Chairman's Statement (continued) Board and other matters This year at the end of our AGM in May, Christopher Dunkerley will retire as a director of the Company after 19 years' service. We will miss his wise counsel and his thoughtful contributions to our discussions. The process to find his replacement is already underway, and when completed will conclude a succession plan put in place by my predecessor to ensure a smooth and gradual rebuilding of the Board for the next phase of the Company's life. I reported in my half year statement on the judgment by the European Court of Justice in relation to VAT on our management fees. Subsequently, HM Revenue & Customs accepted the verdict, so making it possible not only for us to reclaim VAT paid on our fees in previous years, but to cease paying VAT on future fees with a consequent benefit to our income statement. The process of reclaiming VAT is likely to be slow and it is not clear when it will be repaid. However, we have recognised in the year end accounts a figure of £1,030,000, which is the amount that we currently consider to be the best estimate of the likely reclaim. Outlook The volatility of this past year will hopefully provide opportunities for the future. Yields on corporate bonds and equities in certain sectors are at their highest levels for 20 years, but confidence amongst investors is still low. Although we have seen little respite so far in 2008, it is salutary to consider that a significant part of our investable universe has been in a bear market (having witnessed price falls of over 20%), which started nearly a year ago, even if the rest of the market has not been so until recently. Although 'first in' does not guarantee 'first out', it does mean that much of the deterioration has already, hopefully, largely been priced into these stocks. This view is underlined by the increasing number of good quality stocks that are yielding significantly more than the market, as well as being on lower price/ earnings ratios, so providing us with judicious opportunities to buy them and immediately improve our income account, even if the improvement to our capital account may take a little longer to materialise. Therefore, although we may have to weather some more storms in the coming months, we are in good shape to do so and to take advantage of the opportunities as they appear, so that I am hopeful we will come to look back on this period as having provided us with some rewarding opportunities. Hugh Twiss, Chairman - MORE - Page 4 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Income Statement for the year ended 31 December 2007 Year ended 31 December 2007 Year ended 31 December 2006 (Unaudited) (Audited) Revenue Capital Revenue Capital return return Total return return Total £'000 £'000 £'000 £'000 £'000 £'000 (Losses)/gains on investments held at fair value through profit or loss (note 2) - (12,251) (12,251) - 21,069 21,069 Income from investments held at fair value through profit or loss (note 3) 7,901 - 7,901 6,838 - 6,838 Other interest receivable and similar income (note 4) 50 - 50 66 - 66 ---------- ---------- ---------- ---------- ---------- --------- Gross revenue and capital (losses)/gains 7,951 (12,251) (4,300) 6,904 21,069 27,973 Management and performance fees (note 5) (366) (715) (1,081) (308) (1,691) (1,999) Write-back of prior years' VAT (note 8) 230 800 1,030 - - - Other administrative expenses (270) - (270) (276) - (276) ---------- ---------- ---------- ---------- ---------- --------- Net return/(loss) on ordinary activities before finance costs and taxation 7,545 (12,166) (4,621) 6,320 19,378 25,698 Finance costs (484) (1,453) (1,937) (500) (1,500) (2,000) ---------- ---------- ---------- ---------- ---------- --------- Net return/(loss) on ordinary activities before taxation 7,061 (13,619) (6,558) 5,820 17,878 23,698 Taxation on net return on ordinary activities (414) 408 (6) (199) 185 (14) ---------- ---------- --------- ---------- ---------- --------- Net return/(loss) on ordinary activities after taxation 6,647 (13,211) (6,564) 5,621 18,063 23,684 ====== ====== ====== ====== ====== ===== Return/(loss) per ordinary share (note 6) 8.26p (16.42)p (8.16)p 8.09p 25.99p 34.08p ====== ====== ====== ====== ====== ===== The total columns of this statement represent the income statements 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 recognised gains or losses other than those recognised in the Income Statement. - MORE - Page 5 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Reconciliation of Movements in Shareholders' Funds for the year ended 31 December 2007 Share Capital Other premium redemption capital Share account reserve reserves Revenue capital reserve Year ended 31 December 2007 Total (Unaudited) £'000 £'000 £'000 £'000 £'000 £'000 At 31 December 2006 3,484 28,288 26,302 64,773 3,790 126,637 Net (loss)/return on ordinary activities after taxation - - - (13,211) 6,647 (6,564) Issue of new shares 807 28,761 - - - 29,568 Issue costs - (172) - - - (172) Shares repurchased - - - (596) - (596) Third interim dividend (2.015p per share) for the year ended 31 December 2006 paid 31 Jan 2007 - - - - (1,404) (1,404) Fourth interim dividend (2.015p per share) for the year ended 31 December 2006 paid 30 April 2007 - - - - (1,404) (1,404) First interim dividend (2.015p per share) for the year ended 31 December 2007 paid 31 July 2007 - - - - (1,730) (1,730) Second interim dividend (2.015p per share) for the year ended 31 December 2007 paid 31 Oct 2007 - - - - (1,730) (1,730) --------- --------- --------- --------- --------- --------- At 31 December 2007 4,291 56,877 26,302 50,966 4,169 142,605 ===== ===== ===== ===== ===== ===== Share Capital Other premium redemption capital Share account reserve reserves Revenue capital reserve Year ended 31 December 2006 Total (Audited) £'000 £'000 £'000 £'000 £'000 £'000 At 31 December 2005 3,433 26,620 26,302 46,710 3,540 106,605 Net return on ordinary activities after taxation - - - 18,063 5,621 23,684 Issue of new shares 51 1,668 - - - 1,719 Third interim dividend (1.9375p per share) for the year ended 31 December 2005 paid 31 January 2006 - - - - (1,329) (1,329) Fourth interim dividend (1.9375p per share) for the year ended 31 December 2005 paid 28 April 2006 - - - - (1,342) (1,342) First interim dividend (1.9375p per share) for the year ended 31 December 2006 paid 28 July 2006 - - - - (1,350) (1,350) Second interim dividend (1.9375p per share) for the year ended 31 December 2006 paid 31 October 2006 - - - - (1,350) (1,350) --------- --------- --------- --------- --------- --------- At 31 December 2006 3,484 28,288 26,302 64,773 3,790 126,637 ===== ===== ===== ===== ===== ===== - MORE - Page 6 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Balance Sheet at 31 December 2007 2007 2006 (Unaudited) (Audited) £'000 £'000 Fixed asset investments held at fair value through profit or loss 173,662 155,910 ---------- ---------- Current assets Debtors 2,604 2,161 Cash at bank 58 4,205 ---------- ---------- 2,662 6,366 Creditors: amounts falling due within one year (33,719) (35,639) ---------- ---------- Net current liabilities (31,057) (29,273) ---------- ---------- Total assets less current liabilities 142,605 126,637 ====== ====== Capital and reserves Share capital 4,291 3,484 Share premium account 56,877 28,288 Capital redemption reserve 26,302 26,302 Other capital reserves 50,966 64,773 Revenue reserve 4,169 3,790 ---------- ---------- Equity shareholders' funds 142,605 126,637 ====== ====== Net asset value per ordinary share (note 7) 166.91p 181.72p ====== ====== - MORE - Page 7 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Cash Flow Statement for the year ended 31 December 2007 2007 2006 (Unaudited) (Audited) £'000 £'000 £'000 £'000 Net cash inflow from operating activities (note 9) 5,195 5,092 Servicing of finance Bank overdraft and loan interest paid (1,940) (2,008) Financial investment Purchases of investments (37,541) (27,435) Sales of investments 36,871 33,354 ----------- ----------- Net cash (outflow)/inflow from financial investment (670) 5,919 Equity dividends paid (6,268) (5,371) ----------- ----------- Net cash (outflow)/inflow before financing (3,683) 3,632 Financing Issue of shares 1,233 1,719 Share issue expenses (172) (17) Repurchase of shares (596) - Repayment of loans (999) (2,977) ---------- ----------- Net cash outflow from financing (534) (1,275) ---------- ---------- (Decrease)/increase in cash in the year (4,217) 2,357 ====== ====== Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash as above (4,217) 2,357 Cash outflow from repayment of loans 999 2,977 Exchange movements 35 14 ---------- ---------- Movement in net debt (3,183) 5,348 Net debt at 1 January (29,876) (35,224) ---------- ---------- Net debt at 31 December (33,059) (29,876) ====== ====== - MORE - Page 8 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Notes: 1. Basis of accounting This announcement has been prepared on the historical cost basis of accounting, modified to include the revaluation of investments. The accounts have been prepared in accordance with applicable accounting standards and with the Statement of Recommended Practice Financial Statements of Investment Trust Companies ("the SORP") dated December 2005. All of the Company's operations are of a continuing nature. 2. (Losses)/gains from investments held at fair value through profit or loss 2007 2006 (Unaudited) (Audited) £'000 £'000 Realised gains based on historical cost 2,582 10,494 Less: amounts recognised as unrealised in previous years (5,566) (4,263) --------- --------- Realised (losses)/gains based on carrying value at previous balance sheet date (2,984) 6,231 Net movement in unrealised appreciation (9,302) 14,824 Net foreign exchange movement 35 14 --------- --------- (12,251) 21,069 ===== ===== 3. Income from investments held at fair value through profit or loss 2007 2006 (Unaudited) (Audited) £'000 £'000 Franked: Listed - dividends 5,709 5,191 --------- --------- Unfranked: Listed - interest income 1,558 1,280 - dividend income 634 367 --------- --------- 2,192 1,647 --------- --------- 7,901 6,838 ===== ===== 4. Other interest receivable and similar income 2007 2006 (Unaudited) (Audited) £'000 £'000 Bank interest 48 35 Underwriting commission 2 31 --------- --------- 50 66 ====== ====== - MORE - Page 9 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Notes (continued) 5. Management and performance fees 2007 2006 (Unaudited) (Audited) Revenue Capital Revenue Capital return return Total return return Total £'000 £'000 £'000 £'000 £'000 £'000 Management fee 166 499 665 133 399 532 Accounting, secretarial and administration 166 - 166 133 - 133 Performance fee - 165 165 - 1,046 1,046 Irrecoverable VAT thereon 34 51 85 42 246 288 ------- -------- ------- ------- ------- --------- 366 715 1,081 308 1,691 1,999 ==== ==== ==== ==== ==== ===== 6. (Loss)/return per ordinary share The (loss)/return per ordinary share is based on the loss attributable to the ordinary shares of £6,564,000 (2006: return of £23,684,000) and on the 80,453,000 weighted average number of ordinary shares in issue during the year (2006: 69,489,647). The Company had no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted earnings per ordinary share are the same. The (loss)/return per ordinary share figure detailed above can be further analysed between revenue and capital, as below: 2007 2006 (Unaudited) (Audited) £'000 £'000 Net revenue return 6,647 5,621 Net capital (loss)/return (13,211) 18,063 ---------- ---------- Net total (loss)/return (6,564) 23,684 ====== ===== Weighted average number of ordinary shares in issue during the year 80,453,000 69,489,647 Pence Pence Revenue return per ordinary share 8.26 8.09 Capital (loss)/return per ordinary share (16.42) 25.99 ---------- --------- Total (loss)/return per ordinary share (8.16) 34.08 ====== ===== 7. Net asset value per ordinary share The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £142,605,000 (2006: £126,637,000) and on the 85,435,744 ordinary shares of 5p in issue (excluding treasury shares) at 31 December 2007 (2006: 69,687,798 ordinary shares of 5p). - MORE - Page 10 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Notes (continued) 8. Value Added Tax In 2004 the Association of Investment Companies (the "AIC"), together with JPMorgan Claverhouse Investment Trust plc, launched a case against HM Revenue & Customs ("HMRC") to challenge whether Value Added Tax ("VAT") should have been charged on fees paid for management services provided to investment trust companies. On 28 June 2007 the European Court of Justice delivered its judgment on the case in favour of the AIC. Since then, HMRC has accepted that the provision of investment management services to investment trust companies is VAT exempt and has acknowledged its liability to pay claims in respect of VAT borne by investment companies. The Manager (Henderson Global Investors Limited) will now be able to reclaim from HMRC the amount of VAT charged to the Company in respect of investment management services from 1 October 2000 to 30 June 2007, to the extent that such VAT was paid by the Manager to HMRC. VAT has not been applied to investment management fees invoiced in respect of periods since June 2007. Consequently, some of the VAT borne by the Company on investment management fees invoiced in the period from 1 October 2000 to 30 June 2007 has been written back, in accordance with a standstill agreement reached between the Manager and the Company. In respect of the period from 1 October 2000 to 31 December 2003, the Manager has undertaken to reclaim the VAT paid to it by the Company, to the extent that this was paid by the Manager to HMRC, and repay the money it receives to the Company. In the opinion of the Board, the Company is virtually certain of receiving this amount to the extent that it has been borne by the Company. Accordingly, an amount of £227,000 has been recognised in respect of this period. In respect of the period from 1 January 2004 to 30 June 2007, the Manager has undertaken to reclaim the VAT paid to it by the Company, to the extent that this was paid by the Manager to HMRC, and repay the money it receives to the Company. The Manager has undertaken also to repay to the Company the balance of the VAT paid to it by the Company in respect of this period. In the opinion of the Board, the Company is virtually certain of receiving these amounts to the extent that they have been borne by the Company. Accordingly, an amount of £803,000 has been recognised in respect of this period. The Board is therefore satisfied that a total amount of £1,030,000 is virtually certain to be recovered. The write-back has been allocated between revenue return and capital return according to the allocation of the amounts originally paid. In addition, the Company will receive from the Manager any interest paid by HMRC on the amounts eventually recovered. The Company may be able to recover further amounts of the VAT charged on investment management fees in the years back to 1990. However, the Board considers that currently there are too many uncertainties for a reasonable estimate of such amounts to be made. -MORE- Page 11 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 Notes (continued) 9. Reconciliation of net (loss)/return on ordinary activities before finance costs and taxation to net cash inflow from operating activities 2007 2006 (Unaudited) (Audited) £'000 £'000 Net (loss)/return before finance costs and taxation (4,621) 25,698 Losses/(gains) on investments held at fair value through profit or loss 12,251 (21,069) (Increase)/decrease in accrued income and debtors of a revenue nature (1,472) 50 (Decrease)/increase in creditors (959) 424 Withholding tax recovered 9 9 Tax on investment income (13) (20) -------- --------- Net cash inflow from operating activities 5,195 5,092 ===== ===== 10. Proposed dividends A third interim dividend of 2.075p per ordinary share of 5p (2006: 2.015p per ordinary share of 5p) was paid on 31 January 2008. A fourth interim dividend of 2.075p per ordinary share of 5p (2006: 2.015p per ordinary share of 5p) will be paid on 30 April 2008 to shareholders on the register on 4 April 2008. The shares will be quoted ex-dividend from 2 April 2008. 11. Status of preliminary announcement The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 December 2007 or 2006. The figures and financial information for the year ended 31 December 2006 are derived from the latest published accounts of the Company. Those accounts have been delivered to the Registrar of Companies and received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 237(2) and (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2007 have not yet been delivered to the Registrar of Companies, nor have the auditors yet reported on them. The statutory accounts for the year ended 31 December 2007 will be finalised on the basis of the information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies. 12. Annual report and Annual General Meeting The full Annual Report and Accounts will be posted to shareholders in April 2008 and copies will be available from the Secretary at the Company's Registered Office, 4 Broadgate, London EC2M 2DA. The Annual General Meeting will be held on Tuesday 13 May 2008. - MORE - Page 12 of 12 HENDERSON HIGH INCOME TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2007 For further information please contact: Alex Crooke Portfolio Manager Henderson High Income Trust plc Telephone: 020 7818 4447 James de Sausmarez Head of Investment Trusts Henderson Global Investors Telephone: 020 7818 3349 Sarah Gibbons-Cook Investor Relations and PR Manager Investment Trusts Henderson Global Investors Telephone: 020 7818 3198 - ENDS - This information is provided by RNS The company news service from the London Stock Exchange

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