Final Results

RNS Number : 3356D

Henderson High Income Trust PLC

21 March 2011

 



Page 1

21 March 2011

HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

This announcement contains regulated information

Performance Summary:

Per ordinary share	31 December 2010	31 December  2009	% Change
Net asset value ("NAV")	126.70p	117.73p	+7.6
Market price	124.75p	114.50p	+9.0
Revenue return	7.37p	7.51p	-1.9

Chairman's Statement

Assets and performance

In my interim statement, which I wrote in July just after the equity market had hit a low for the year, I ventured to suggest that the market would find support at this lower level and so was cautiously optimistic for the outlook for the rest of the year. It is pleasing to be able to report that my optimism was well placed, with the equity market recovering strongly in the second half.  However, it was not an entirely smooth run, with a couple of nervous moments when the market fell back, and uncertainty increased, before recovering its poise and moving ahead again. It must be said that an important element of this latter recovery was driven by the strong performance of the resource stocks; this reflected the strong rise in commodity prices that were being fuelled by the continued strong growth in the economies in China and other emerging countries.

There was also some switching out of gilts into equities as the UK inflation rate continued to rise, partly fuelled by the strong commodity prices, but in addition investors worried that interest rates might have to rise sooner than expected in order to control inflation. Given our limited exposure to the low yielding resource stocks and our exposure to bonds, it is very pleasing to be able to report another year of positive returns, with the share price total return of +19.0% outstripping that of our NAV of +15.4% and well ahead of our benchmark's return of  +12.7%. This further step in recovering some of the lost ground from the previous market falls is to be welcomed and credit must be given to our Portfolio Manager for successfully managing our portfolio in the challenging market conditions. There are more details regarding portfolio activity in the Investment Review section.

In preparing to write this statement, I looked at the chart of the FTSE All-Share Index over the last year and was much struck by how it appeared to have a close resemblance to the outline of the Big Dipper rollercoaster at Blackpool Pleasure Beach and I was reminded how on occasions it has certainly felt like being on it.

Dividends

In last year's report I said that we were hopeful that the worst of the dividend cuts in the market were over and that in this year we would see the restoration of some dividends, and even increases in others. I am glad to be able to report that this almost completely came about but that the benefits of this were, unfortunately, largely offset by BP's suspension of its dividend following its disaster in the Gulf of Mexico.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Chairman's Statement (continued)

As I have outlined in my previous reports, our strategy has been to utilise revenue reserves to bridge the gap created by dividend cuts in recent years, until dividend growth rebuilds our revenue and once more covers our distributions to shareholders.

Whilst we expect further growth in the dividends from our investments this year and, as already announced, BP will resume paying dividends again, albeit at only half its previous level, it is still likely that our dividend will not be entirely covered in 2011.  However, our current forecasts show a reduced requirement to draw on reserves in 2011 to maintain the existing dividends. Clearly we cannot continue like this for ever as our reserves are finite but, on current forecasts the improvement in 2011 is expected to continue in 2012. A maintained dividend is certainly our aspiration, but this will continue to be kept under review in light of actual experience and the investment conditions at the time.

Although we have sufficient revenue reserves overall, because of differences in the timing of our dividend payments and our dividend receipts this year, in accounting terms we have insufficient reserves in the 2010 accounting year to be able to pay the entire fourth interim dividend. We have, therefore, decided to replace the fourth interim dividend for 2010 by bringing forward the payment of the first interim dividend for 2011. This first interim dividend will now be paid to shareholders in April on the same day as the fourth interim dividend would have been, and subsequent quarterly dividends will be paid every three months thereafter. Shareholders will, therefore, not on this account see any change in the payment dates of their dividends nor in the amounts, despite these financial statements only showing three dividend payments in respect of the 2010 financial year.

Gearing

As shareholders will be aware, it is an important feature of this Company that we utilise an element of gearing, principally to enable us to generate additional income, and hopefully also capital growth over time. A year ago it was almost impossible to find long term borrowing facilities, so we took out a facility for just one year. Although conditions have improved in the banking sector and longer term facilities are starting to become available, we have decided in the present circumstances to renew our borrowing facility for another year. We have also taken the opportunity to increase the size of our facility, in light of the additional new shares issued over the past year and the level of our assets.

Custody

During the year the Board carried out a detailed review of our custody arrangements. After careful consideration it was decided to change from BNP Paribas and JPMorgan to HSBC Bank.  This new arrangement will come into effect during 2011. I would like to thank BNP Paribas and JPMorgan for the service they provided to us.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Chairman's Statement (continued)

Management agreement and performance fee

We have also reviewed our Investment Management Agreement with Henderson and have reached a new agreement which is in line with current formats. There are two material changes in the terms of the new agreement compared to the previous one. Firstly, in line with the best practice in the sector, we have agreed a shorter notice period of six months compared to the previous twelve months. Secondly, we have altered the basis of calculation of the performance fee arrangement which we have in place, although the overall cap on the fees payable in any one year has been maintained at its existing level. The main changes are to switch to a yearly calculation period rather than a rolling three year period as previously; to calculate any relative performance in cash terms rather than based on relative percentage changes; the introduction of a high water mark so that no performance fee will be paid until any shortfall in relative performance has been recovered; and to adopt a new benchmark that is more closely aligned to the reality of our underlying portfolio. The full details of the new basis are set out on pages 9 and 10.

We believe that this new basis is fairer to both shareholders and our Manager.

Outlook

It is difficult not to conclude that 2011 is likely to feel like another rollercoaster year on the Big Dipper. Uncertainties abound regarding many issues at present, particularly arising from the awful disaster in Japan, whose full effects are emerging as I write this statement, and these are unlikely to be resolved any time soon. Whether it be about the strength of the economic recovery, the stubbornly high UK inflation rate, the impact of our government's spending cuts, the euro debt problems or the knock on consequences of the demands for real democracy amongst many Arab nations, just to mention a few of the known knowns, let alone the known unknowns or the unknown unknowns (courtesy of the unlamented Donald Rumsfeld). However, there is good news about too and there could be more in the months ahead, particularly if some of the current fears prove to be unfounded. So expect a ride on the Big Dipper as sentiment swings but there are good reasons to believe that we should reach the higher points, even if we have to endure the occasional downward dip to get there.

My cautious optimism comes from the fact that many companies are cash rich and so will either make acquisitions, buy their shares back or increase their dividends from profits which should continue to grow, whilst valuations are still not too demanding.  In addition, given that interest rates are likely to remain low for some time, investors still have enormous amounts of cash looking for higher returns that can only really be found in riskier assets like equities.  Therefore, despite markets likely to continue being volatile, there are probably still good reasons to remain invested and there should continue to be attractive opportunities for investment companies like ours.

Hugh Twiss

Chairman

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Investment Review

Review of the year to 31 December 2010

Given some of the remarkable events, both worldwide and closer to home, that occurred last year, it is encouraging that both bonds and equities continued to find strength.  The bailouts of Greece and Ireland did at times spook investors but as global economic growth continued to pick up, share prices advanced through the year, admittedly with the odd setback.  The portfolio performance broadly mirrored the market's moves, although the equity investments are more defensive and tended to underperform rising markets and preserve value when prices fell.  The corporate bond investments fared better than UK gilts and overall the Company's gearing enhanced the underlying performance of the investments.

The UK experienced an eventful year, with the general election in May ending with no party gaining an overall majority and the first Coalition Government for many decades.  The change of leadership heralded a significant shift in economic policy, taking the country towards austerity and including plans to cut public spending. The Bank of England maintained its low interest rate policy throughout the year but inflationary pressures built as tax rises, commodity price increases and currency effects all fed through into higher levels of retail and consumer prices.  Poor consumer sentiment and limited employment growth began to take its toll on economic recovery in the UK and the slowdown culminated in the economy shrinking in the fourth quarter of 2010, albeit heavily disrupted by poor weather.  Overall, the UK manufacturing and service sectors of the economy showed the best growth although consumer spending has clearly been impacted by higher prices and limited wage inflation.

The brightest spot in the UK has been the continued improvement in corporate profits, especially those companies exposed to commodities or emerging markets growth.  In the periods during the year when companies reported profits (March and September) the stock market generally rose in value, with these results exceeding analysts' expectations.  Companies are now reporting higher levels of sales and sustaining margins because costs are being controlled and debt is being repaid rapidly.  The second half of the year saw a particular acceleration in expectations for future profits, which prompted investors to sell bonds to purchase equities.  Although share prices grew over the year, the rise in profits outstripped the increase in share prices, leaving the overall UK market on a lower Price to Earnings ratio than at the beginning of the year.

The most favoured sector was again the mining sector, benefiting from higher metal prices and steady demand from emerging markets.  However, unlike in 2009, the market broadened out and a wider selection of sectors participated in the move upwards.  For instance, the utilities sector, and water companies in particular, performed well due to the publication of their next five year pricing review and in addition benefiting from increasing inflation which feeds through to higher water rates.  The oil sector was hugely impacted by BP and underperformed despite oil prices increasing.  Shares in BP more than halved at one point, as the company failed to stem the flow of oil into the Gulf of Mexico from its Macondo well.  Once the well was capped, there was a steady recovery in BP's share price; however, the suspension of dividends hit the market hard, effectively cancelling out growth from all the other market constituents. 

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Investment Review (continued)

Corporate bond prices continued their steady improvement from the lows in early 2009 and yield spreads over UK government gilts narrowed.  As the year approached its end, there was increasing speculation that interest rates may need to rise to control inflation despite the sluggish growth in the UK economy.  There was significant new bond issuance in 2010, especially from the banks, seeking to push out maturities and lock in lower yields.  The limited number of corporate failures meant that high yield bonds outperformed better quality government credit and this trend generally benefited the portfolio which had a higher exposure to financials in particular.

Portfolio activity

From late 2009 we started to make adjustments in the mix of bonds and equities, favouring equities.  Initially we reduced the holdings of preference shares which are effectively very long dated bonds and will be most vulnerable when interest rates start rising.  Through 2010 we made further sales of fixed income holdings, reducing preference shares to 2.8% of the whole portfolio and corporate bonds to 13.6%.  This left the total fixed interest holdings at 16.4% of assets and equities at their highest level (83.6%) during my tenure as Portfolio Manager.  The preference for equities from this point is driven by the prospects for dividend growth, while increasing interest rates in the future will limit the capital potential from bonds.  The Company's gearing has been broadly maintained at 23%, as the higher level of borrowings was offset by the increased level of overall assets.  Importantly the equity gearing to net assets has increased relative to fixed interest investments reflecting the shift to favour equities over the medium term.

The portfolio activity over the year has not only been influenced by the move to increase equity exposure but also to reduce the impact upon income from this shift.  Unfortunately the portfolio's income generation was also severely affected by BP's suspension of dividends which reduced income during the year by approximately £380,000.  At the time BP was the largest holding and the events in the Gulf of Mexico were most alarming.  When the company failed to limit the flow of oil after the initial phase, we took the decision to reduce significantly the holding, selling at 535p.  We subsequently repurchased a large portion of these shares below 350p, when it was decided that there was an overreaction and that BP could meet its obligations to clean up the spill.  However, the reduction in BP dividends cancelled out the growth we saw from the other holdings in the portfolio.  Many of the other investments posted good growth in dividends: such as Vodafone, IMI and British American Tobacco.

With the certainty of a further five year regulatory price review for the water sector, we increased holdings that were sold two years ago. Larger positions in Northumbrian Water, United Utilities and Severn Trent were purchased.  Balance sheets appear in better shape and the sector should benefit from higher inflation. There were also further purchases of Centrica and Scottish & Southern, as these multiutilities have been out of favour but we see scope for higher valuations based on good growth in dividends and increased market share.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Investment Review (continued)

There have been selective investments in European companies, as certain sectors in the UK have become very concentrated in terms of available investment opportunities.  New purchases included Terna, the Italian electricity distribution network, and CRH, the global building materials distributor.  We will continue to seek out new European investments in the higher yielding sectors, like pharmaceuticals and telecoms, but do not expect overall direct European holdings to exceed more than 10% of the portfolio value.

The successful holding in Prodesse was redeemed earlier in the year and initially it proved difficult to replace its high level of income. We have subsequently found an opportunity to make two new investment fund holdings in Carador and John Laing Infrastructure Fund.  The latter will yield 6% and has exposure to high quality infrastructure properties, such as hospitals and toll roads, providing rising income over time.  Carador invests in corporate loans and gives exposure to both the recovery in corporate profits but also rising interest rates being reflected in higher payments on loans.

The mix of investments remains fairly defensive and reflects a balance between stable high dividend yields and an exposure to growth of income over the next few years.  We have always struggled to invest in the lower yielding mining and service sectors and this will remain so, unless dividend growth accelerates significantly.  We have continued to reduce exposure to equities and bonds where dividends or coupons may be at risk of being cut but overall the outlook for income is improving and, with a low payout ratio across the UK market, there is scope for dividend growth to pick up across most sectors.

Outlook

The primary objective over the coming twelve months is to restore the Company's revenue to a basis that can sustain the current dividend distributions.  The recession that started in 2008 hit the UK market's dividend payout particularly hard and total dividends fell by 30% from the peak. There has only been a partial recovery in market dividends because BP's suspended dividends wiped out growth elsewhere. The picture is clouded with the more defensive stocks maintaining their payouts but consequently they can not be expected to grow their dividends as strongly as others during the recovery. 

The Company's strategy has been to utilise revenue reserves for as long as justifiable in order to bridge an income shortfall and allow dividends to grow to cover the income requirement once more.  Reserves have been drawn upon in 2009 and 2010, in roughly equal measures.  In 2011, however, we expect a significantly reduced draw down of reserves as company dividends continue to grow; a trend which, barring unforeseen circumstances, is expected to continue in 2012.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Investment Review (continued)

The outlook for capital growth will be influenced by the fight to control inflation and whether the Bank of England decides to increase interest rates soon.  Rising short term rates tend to lead to growth stocks underperforming and overall the equity market struggles to make progress.  The mix of investments in the portfolio may do better though, as both insurance and utilities are beneficiaries of higher interest rates and inflation.  Generally equity valuations are not expensive with many stocks on single figure P/E's and dividend yields above government gilt yields.  There will undoubtedly be further shocks in the world and each will need to be judged against its impact on the global economy but our stock selection remains defensive and is focussed on the preservation of both capital and income.  Corporate profits will continue to grow in 2011 and a modest flow of investors' funds from bonds to equities could produce another hard earned year with higher share prices.

Alex Crooke

Ben Lofthouse

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Principal Risks and Uncertainties

The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy, in order to mitigate these risks as far as practicable. The principal risks which have been identified and the steps taken by the Board to mitigate these are as follows:

● Investment activity and performance

An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may result in underperformance against the Company's benchmark index and the companies in its peer group. The Board monitors investment performance at each Board meeting and regularly reviews the extent of its borrowings.

● Financial

By its nature as an investment trust, the Company's business activities are exposed to market risk (including currency risk, interest rate risk and other price risk), liquidity risk, and credit and counterparty risk.

Although the Company invests almost entirely in securities that are quoted on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely. A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds. The Board reviews the portfolio each month and mitigates this risk through diversification of investments in the portfolio.

Further details of these risks and how they are managed are contained in note 13 in the Annual Report.

● Regulatory

A breach of Section 1158 of the Corporation Tax Act 2010 would lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the UKLA Listing Rules could result in suspension of the Company's shares, while a breach of the Companies Act 2006 could lead to criminal proceedings, or financial or reputational damage. The Manager has contracted to provide investment, company secretarial, accounting and administration services through qualified professionals. The Board receives internal control reports produced by the Manager on a quarterly basis, which confirm regulatory compliance.

● Operational

Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service. Details of how the Board monitors the services provided by the Manager and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal controls section of the corporate governance statement in the annual report.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Related Party Transactions

Investment management, accounting, company secretarial and administration services are provided to the Company by wholly-owned subsidiary companies of Henderson Global Investors Limited and by BNP Paribas Securities Services. These are the only related party transactions currently in place. Other than fees payable by the Company in the ordinary course of business, there have been no material transactions with these related parties affecting the financial position or performance of the Company during the year under review.

New Performance Fee and Benchmark

A new investment management agreement has been agreed with Henderson effective from 1 January 2011.  The main changes are a revised benchmark, a reduced notice period and new performance fee arrangements.

The new benchmark is 80% FTSE All-Share Index (total return) and 20% Merrill Lynch Sterling Non Gilts Index (total return) instead of 75% FTSE All-Share Index and 25% FTA Government All Stocks Index.

The new investment management agreement may be terminated by either party giving six months' notice, a reduction from 12 months in the previous agreement.

From 1 January 2011 performance will be measured over a single financial year.   Performance will be measured by aggregating the 12 monthly differences between the portfolio performance and the benchmark performance.

The portfolio performance is the sum of the cash differences in the value of each holding in the total portfolio over each month after adjusting for purchases, sales and income. 

The benchmark performance is the amount calculated by multiplying the percentage increase in the benchmark over the month by the mean value of the portfolio for that month.

In the event that the aggregate portfolio performance is greater than the benchmark performance over the financial year, a performance fee of 15% of the difference will be payable.

In the event that the aggregate portfolio performance is less than the benchmark performance over the financial year, the negative cash amount will be carried over to the following financial year.   No performance fee will be payable until the future positive performance exceeds the aggregate amount of any negative performance carried over from any previous years.

There is no change to the base management fee, which is still 0.5% of the average value of assets under management on the last business day of each of the two years preceding the calendar year in respect of which the calculation is made, payable quarterly in advance.  Assets under management exclude any Henderson managed funds or Henderson Group plc shares that might be held in the portfolio.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

New Performance Fee and Benchmark (continued)

In addition, a supplemental fee will be paid on any new funds in the year they were raised at the pro rata annual rate.  For the following year any funds raised are added to prior year assets for the purposes of calculating the fee.

The upper limit that may be paid to the Manager in respect of the sum of the base fee plus any supplemental fees and performance fees in any one financial year remains at 1.5% of the average of assets under management over the four quarter ends.   There is therefore no change in the total amount of fees that may be paid to the Manager in any one financial year.   Any excess positive performance above this cap shall be carried over to the following financial year and added to the performance for that year.

Statement of Directors' Responsibilities

Statement under DTR 4.1.12

To the best of our knowledge:

a)         the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

b)         the Report of the Directors 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

Hugh Twiss

Chairman

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

 

Income Statement

for the year ended 31 December 2010

	Year ended 31 December 2010			Year ended 31 December 2009
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Gains on investments held at fair value through profit or loss (note 2)	-	9,152	9,152	-	13,382	13,382
Income from investments held at fair value through profit or loss (note 3)	7,367	-	7,367	7,355	-	7,355
Other interest receivable and similar income (note 4)	48	-	48	372	-	372
	----------	----------	----------	----------	----------	----------
Gross revenue and capital gains	7,415	9,152	16,567	7,727	13,382	21,109
Management fees	(222)	(333)	(555)	(270)	(405)	(675)
Write-back of prior years' VAT	-	-	-	62	83	145
Other administrative expenses	(318)	-	(318)	(275)	-	(275)
	----------	----------	----------	----------	----------	----------
Net return on ordinary activities before finance costs and taxation	6,875	8,819	15,694	7,244	13,060	20,304
Finance costs	(169)	(508)	(677)	(87)	(262)	(349)
	----------	----------	----------	----------	----------	----------
Net return on ordinary activities before taxation	6,706	8,311	15,017	7,157	12,798	19,955
Taxation on net return on ordinary activities	(317)	224	(93)	(732)	718	(14)
	----------	----------	----------	----------	----------	----------
Net return on ordinary activities after taxation	6,389	8,535	14,924	6,425	13,516	19,941
	======	======	======	======	======	======
Return per ordinary share (note 5)	7.37p	9.85p	17.22p	7.51p	15.81p	23.32p
	======	======	======	======	======	======
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 recognised gains or losses other than those recognised in the income statement. - MORE -

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

 

Reconciliation of Movements in Shareholders' Funds

for the year ended 31 December 2010

Year ended 31 December 2010	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 31 December 2009	4,291	56,877	26,302	9,281	4,012	100,763
Net return on ordinary activities after taxation	-	-	-	8,535	6,389	14,924
Sale of shares held in treasury	-	-	-	303	-	303
Issue of new  shares	157	3,685	-	-	-	3,842
Third interim dividend (2.075p per share) for the year ended 31 December 2009 paid 29 January 2010	-	-	-	-	(1,776)	(1,776)
Fourth interim dividend (2.075p per share) for the year ended 31 December 2009 paid 30 April 2010	-	-	-	-	(1,776)	(1,776)
First interim dividend (2.075p per share) for the year ended 31 December 2010 paid 29 July 2010	-	-	-	-	(1,776)	(1,776)
Second interim dividend (2.075p per share) for the year ended 31 December 2010 paid 29 October 2010	-	-	-	-	(1,822)	(1,822)
Refund of unclaimed dividends	-	-	-	-	30	30
	--------	---------	---------	---------	---------	----------
At 31 December 2010	4,448	60,562	26,302	18,119	3,281	112,712
	=====	=====	=====	=====	=====	======
Year ended 31 December 2009	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 31 December 2008	4,291	56,877	26,302	(4,387)	4,681	87,764
Net return on ordinary activities after taxation	-	-	-	13,516	6,425	19,941
Sale of shares held in treasury	-	-	-	152	-	152
Third interim dividend (2.075p per share) for the year ended 31 December 2008 paid 30 January 2009	-	-	-	-	(1,773)	(1,773)
Fourth interim dividend (2.075p per share) for the year ended 31 December 2008 paid 30 April 2009	-	-	-	-	(1,773)	(1,773)
First interim dividend (2.075p per share) for the year ended 31 December 2009 paid 31 July 2009	-	-	-	-	(1,776)	(1,776)
Second interim dividend (2.075p per share) for the year ended 31 December 2009 paid 30 October 2009	-	-	-	-	(1,776)	(1,776)
Refund of unclaimed dividends	-	-	-	-	4	4
	--------	---------	---------	---------	---------	----------
At 31 December 2009	4,291	56,877	26,302	9,281	4,012	100,763
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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Balance Sheet

at 31 December 2010

	2010 £'000	2009 £'000
Investments held at fair value through profit or loss	138,636	122,881
	----------	----------
Current assets
Debtors	1,581	1,509
Cash at bank	3,227	1,345
	----------	----------
	4,808	2,854
Creditors: amounts falling due within one year	(30,732)	(24,972)
	----------	----------
Net current liabilities	(25,924)	(22,118)
	----------	----------
Total assets less current liabilities	112,712	100,763
	======	======
Capital and reserves
Share capital	4,448	4,291
Share premium account	60,562	56,877
Capital redemption reserve	26,302	26,302
Other capital reserves	18,119	9,281
Revenue reserve	3,281	4,012
	----------	----------
Equity shareholders'  funds	112,712	100,763
	======	======
Net asset value per ordinary share (note 6)	126.70p	117.73p
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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Cash Flow Statement

for the year ended 31 December 2010

	2010 £'000	2010 £'000	2009 £'000	2009 £'000
Net cash inflow from operating activities (note 7)		6,215		8,381
Servicing of finance
Bank overdraft and loan interest paid		(675)		(371)
Taxation
Tax recovered		-		12
Financial investment
Purchases of investments	(45,689)		(19,154)
Sales of investments	36,159		18,769
	----------		-----------
Net cash outflow from financial investment		(9,530)		(385)
Equity dividends paid		(7,120)		(7,094)
		----------		-----------
Net cash (outflow)/inflow before financing		(11,110)		543
Financing
Issue of shares	3,842		-
Sale of shares held in treasury	303		152
Drawdown/(repayment) of loans	8,985		(2,556)
	----------		----------
Net cash inflow/(outflow) from financing		13,130		(2,404)
		----------		----------
Increase/(decrease) in cash in the year		2,020		(1,861)
		======		======
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash as above		2,020		(1,861)
Cash (inflow)/outflow from (drawdown)/repayment of loans		(8,985)		2,556
Exchange movements		(138)		8
		-----------		-----------
Movement in net debt		(7,103)		703
Net debt at 1 January		(20,184)		(20,887)
		-----------		-----------
Net debt at 31 December		(27,287)		(20,184)
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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Notes:

1.   Basis of accounting

The financial statements have been prepared on the historical cost basis except for the measurement at fair value of investments.  The financial statements have been prepared in accordance with applicable UK accounting standards and with the Statement of Recommended Practice Financial Statements of Investment Trust Companies ("the SORP") dated January 2009.  All of the Company's operations are of a continuing nature.

2.   Gains from investments held at fair value through profit or loss

	2010 £'000	2009 £'000
Gains/(losses) on sale of investments based on historical cost	383	(10,639)
(Less)/add: revaluation (gains)/losses recognised in previous years	(212)	7,786
	---------	---------
Gains/(losses) on investments sold in the year based on carrying value at the previous balance sheet date	171	(2,853)
Net movement on revaluation of investments	9,119	16,227
Exchange (losses)/gains	(138)	8
	---------	---------
	9,152	13,382
	=====	=====

3.   Income from investments held at fair value through profit or loss

	2010 £'000	2009 £'000
Franked:
Listed - dividends	4,742	4,071
	-------	-------
Unfranked:
Listed -  interest income	1,398	1,996
-  dividend income	1,227	1,288
	-------	--------
	2,625	3,284
	-------	--------
	7,367	7,355
	====	====

4.   Other interest receivable and similar income

	2010 £'000	2009 £'000
Bank interest	9	3
Underwriting commission	39	258
Interest on VAT repayment (see note 7)	-	111
	-----	------
	48	372
	===	===

5.   Return per ordinary share

The return per ordinary share figure is based on the gains attributable to the ordinary shares of £14,924,000 (2009: £19,941,000) and on the 86,654,031 weighted average number of ordinary shares in issue during the year (2009: 85,519,991).

The Company had no securities in issue that could dilute the return per ordinary share.

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Page 16

HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Notes (continued)

5.   Return per ordinary share (continued)

The return per ordinary share can be analysed between revenue and capital, as below:

	2010 £'000	2009 £'000
Net revenue return	6,389	6,425
Net capital return	8,535	13,516
	----------	----------
Net total return	14,924	19,941
	======	======
Weighted average number of ordinary shares in issue during the year	86,654,031	85,519,991
	Pence	Pence
Revenue return per ordinary share	7.37	7.51
Capital return per ordinary share	9.85	15.81
	----------	----------
Total return per ordinary share	17.22	23.32
	======	======

6.   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 £112,712,000 (2009: £100,763,000) and on the 88,960,744 ordinary shares in issue at 31 December 2010 (2009: 85,585,744 ordinary shares).

7.   Reconciliation of net return on ordinary activities before finance costs and taxation to net cash inflow from operating activities

	2010 £'000	2009 £'000
Net return before finance costs and taxation	15,694	20,304
Gains on investments held at fair value through profit or loss	(9,152)	(13,382)
(Increase)/decrease in accrued income and debtors of a revenue nature	(130)	436
Decrease in other debtors	-	1,127
Decrease in creditors	(71)	(58)
Tax deducted on investment income	(126)	(46)
	--------	--------
Net cash inflow from operating activities	6,215	8,381
	=====	=====

8.   Dividends

A third interim dividend of 2.075p per ordinary share (2009: 2.075p per ordinary share) was paid on 31 January 2011.   The Company has not declared a fourth interim dividend for the year to 31 December 2010.

A first interim dividend of 2.075p per ordinary share for the year to 31 December 2011 (2010: 2.075p per ordinary share) will be paid on 28 April 2011 to shareholders on the register on 8 April 2011.  The shares will be quoted ex-dividend from 6 April 2011.

9.   Going concern statement

As the assets of the Company consist mainly of a portfolio of diversified securities that are readily realisable, the Company has adequate financial resources to meet its liabilities and continue in operational existence for the foreseeable future.  The directors therefore believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.  In reviewing the position as at the date of this announcement, the Board has considered the guidance on this matter issued by the Financial Reporting Council in October 2009.

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Page 17

HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2010

Notes (continued)

10.   2010 Financial Information

The figures and financial information for 2010 are extracted from the Annual Report and Financial Statements for the year ended 31 December 2010 and do not constitute the statutory accounts for the year.  The Annual Report and Financial Statements includes the Independent Auditor's Report which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.  The Annual Report and Financial Statements have not yet been delivered to the Registrar of Companies.

11.   2009 Financial Information

The figures and financial information for 2009 are extracted from the published Annual Report and Financial Statements for the year ended 31 December 2009 and do not constitute the statutory accounts for that year.  The Annual Report and Financial Statements has been delivered to the Registrar of Companies and included the Independent Auditor's Report which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

12.   Annual Report and Financial Statements

The Annual Report and Financial Statements will be posted to shareholders on 28 March 2011 and will be available thereafter on the Company's website (www.hendersonhighincome.com) or from the Company's Registered Office, 201 Bishopsgate, London, EC2M 3AE.

13.    Annual General Meeting

The Annual General Meeting will be held on Thursday 28 April 2011 at 12.00 noon at the Company's Registered Office.  The Notice convening the Annual General Meeting will be available on the Company's website from 28 March 2011.

For further information please contact:

Alex Crooke

Portfolio Manager

Henderson High Income Trust plc

Telephone: [phone]

James de Sausmarez

Director and Head of Investment Trusts

Henderson Global Investors

Telephone: [phone]

Sarah Gibbons-Cook

Investor Relations and PR Manager, Investment Trusts

Henderson Global Investors

Telephone: [phone]

- ENDS -

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.

 

END

 

 

FR SEFFIFFFSEDD