Final Results

RNS Number : 8255I

Henderson High Income Trust PLC

18 March 2010

 



Page 1

18 March 2010

HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

This announcement contains regulated information

Performance Summary:

Per ordinary share	31 December 2009	31 December  2008	% Change
Net asset value ("NAV")	117.73p	102.73p	+14.6
Market price	114.50p	95.00p	+20.5
Revenue return	7.51p	8.90p	-15.6
Annual dividend	8.30p	8.30p	-

Chairman's Statement

Assets and Performance

In reading back through my last few annual statements, I realise that references to the weather appear to feature quite often, so it is not surprising that I am tempted to make a  reference to the recent 'big chill' which we have been enduring and the performance of markets which has been anything but a chill!  Indeed the hope for decent weather, which I alluded to in my interim statement, came to pass with an Indian summer and was matched with markets continuing to recover and, at last, giving me some better news to be able to report to shareholders.  Namely, that the share price total return was +31.4% in 2009, so outperforming our benchmark's total return of +22.3%.  Although we have not yet recovered all of the falls suffered in recent years as a result of the global financial crisis, it is still a very welcome step in the right direction and it is encouraging to see that the share price total return over the previous five years was +35.7%, slightly ahead of the benchmark total return of +34.5%.  This is, in light of the market volatility over this five year period, no mean achievement and underlines the benefits of taking a longer term view.

As so often with stock markets, they were quite perky at a time when the economic news, particularly in the UK, was still poor, albeit better than it had been in the nadir of the crisis.  Indeed the UK was the weakest of the developed economies and slowest to emerge from recession, with this much longed for point only being achieved in the last quarter of 2009 with growth of 0.3%.  The sorry state of the UK and other developed economies is in stark comparison to many emerging economies like Brazil, India and China which have all grown strongly, particularly China which has seen growth of over 10%.  This has led to a strong recovery in commodity prices, particularly for metals and oil, which in turn was reflected in a strong recovery of the mining stocks.  These are a major component of the UK stock market but not of our portfolio because of their lack of yield, so making it difficult for our NAV to enjoy the same increase as seen in the FTSE All-Share Index last year.  This was also exacerbated by the 'dash for trash' which is typical of market recoveries when the change in sentiment, as seen in March 2009, encouraged some investors to chase those stocks which were the most distressed, reflecting their near death experiences.  Such stocks do not pay dividends and, therefore, formed no part of our portfolio, and so did not allow us to benefit from this speculative dash.  

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Chairman's Statement (continued)

However, our bond portfolio with its heavy exposure to financial bonds, which had been so volatile previously, recovered very strongly as it became clear that the financial sector would survive.  So it has not been an easy year for income funds like ours, which, as a sector, have lagged the equity market, albeit still making good positive returns.  Our Portfolio Manager in his report will give you more chapter and verse as to what has been happening and tell you what he has been doing to strengthen our position going forward.

Dividends

It is particularly pleasing for your Board and Manager, and will I know be a great relief to all shareholders, that we have been able to maintain the dividend this year, against the background of the savage dividend cuts which had been happening across large parts of the UK stock market and is reflected in a 15.6% fall in our revenue return last year.  We have been able to do this by dipping into our revenue reserve which is, of course, the reason for having it in the first place.  As our portfolio manager alludes to in his report, we are hopeful that the worst of such dividend cuts are behind us and that we will now start to see not only the restoration of some dividends, but also even some increase in others.  This is not to be taken as the start of a great panacea for dividend growth in the UK market, although hopefully over time that will happen, but it does give us more confidence that we will be able to continue to maintain the dividend we pay to our shareholders, even if again this year we have to dip into reserves.  These are, of course, finite and without sustained dividend growth in the market will not last for ever. Our current aim remains to maintain distributions, although this aspiration will continue to be kept under review during the year in light of actual experience and the investment conditions at the time.

Gearing

An important feature of this Company is that we utilise an element of gearing principally to enable us to generate additional income, and hopefully also capital growth over time.  We have for the last five years deployed gearing through bank borrowings, rather than through the previous structural gearing, and have had a five year banking facility in place.  In current conditions in the banking sector, such long term facilities are almost impossible to find.  In consequence, we have decided to renew it with a smaller facility for one year only which we consider is adequate for our current needs, and allows us the flexibility going forward to increase it and/or take advantage of any improvement in the terms being offered.

Continuation Vote

It is in our Articles of Association that shareholders should have the opportunity every fifth year to vote on whether they wish to continue the life of the Company or to wind it up.  Shareholders will, therefore, be asked to vote on this at the forthcoming AGM.  It is very important that all shareholders vote on this important motion which will have a direct impact on each and every shareholder, so should not be left to others to decide by failing to vote.  

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Chairman's Statement (continued)

The Board is strongly recommending that shareholders vote in favour so that the Company can continue to do the important job of providing shareholders with a high level of income (we currently yield 7%) while maintaining the prospect of capital growth over time.  If shareholders should, however, decide to vote against the motion, then the Board would be required to wind the Company up and return the capital to shareholders.  The directors will be voting their own combined holding of 86,425 shares in favour and urge all other shareholders to do the same.

Outlook

Sitting here in the UK, we face probably more uncertainty than others with our weak economic growth, not having been helped by the recent snow, the increase in VAT and the current cessation of quantitative easing by the Bank of England.  This is without worrying about how the huge government borrowings are going to be reduced, the impact they will have and exactly which political party or parties will form the government that will tackle them.  Indeed it is many years since political uncertainty last weighed on the UK stock market, but by the time we meet at our AGM we should at least know the answer.  We could take some comfort from the fact that we are not entirely alone in this predicament; indeed other countries, like Greece and Ireland, appear worse placed than us.  But this may not be wise as in today's global markets and economies we are not immune to contagion elsewhere, so we have as much interest in Greece and other countries successfully overcoming their problems, as we do in our own.  Although a weaker euro would be welcome for those who enjoy holidaying in Europe, and I am sure you will get a very warm welcome in Greece, we really need to support our own economy by holidaying here too, despite the weather.  Hopefully the Met Office's long range forecasting will be more accurate this year, although I suspect they have learned their lesson that it is a practice better avoided.  I too will avoid making any forecasts, but I do remain confident that, despite whatever challenges we may or may not face in the years ahead, we have a well diversified portfolio, an experienced Portfolio Manager and a strong Board, so, with shareholders' support, we will continue to meet our objectives for the next five years.

Hugh Twiss

Chairman

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Investment Review

Review of the Year to 31 December 2009

I commented last year in my outlook statement that the world was in the grip of fear of a depression and a collapse in the banking system but that economies do eventually recover.  The outcome over the past year has broadly borne this out but even a naturally cautious optimist as myself would have hoped that economic recovery would be more robust than the insipid 0.3% growth in the fourth quarter of 2009; the first positive quarter of growth in over 18 months.

During the first two months of 2009, shares and bonds continued to fall rapidly, with rumours of corporate failure and bank insolvencies.  World trade stagnated and letters of credit proved hard to source from banks loathe to have any exposure to counterparties likely to default.  Decisive action was required to restore confidence and in early March the Bank of England cut interest rates to 0.5% and announced that they intended to repurchase gilts in the open market.  However, the turning point was the recapitalisation of banks through the government taking large equity stakes and the rights issue from HSBC.  Slowly confidence returned and the stock market rallied as investors gained confidence in the measures being undertaken.

The year was certainly eventful for the variety and scale of schemes enacted to stimulate the UK economy.  The government introduced a car scrappage scheme, and cut VAT to 15%, while also recapitalising both Royal Bank of Scotland and Lloyds, ending up owning 84% and 41% of the shares in issue of each, respectively.  The Bank of England held interest rates at 0.5% from March onwards and began a programme of quantitative easing (QE), finally injecting £200bn into the economy by buying gilts in the open market, equivalent to almost 20% of the entire stock of gilts in issue.

Despite a considerable pick-up in global trade and the majority of countries pulling out of recession in the third quarter, the UK economy has struggled to recover and gained little momentum from the benefits of historically low levels of interest rates.  Companies continued to cut jobs to maintain profits and rescheduled workers onto reduced working hours, impacting consumption within the economy.  Towards the end of the year, there were more optimistic signs of growth, with retail sales at Christmas being strong and house prices and transactions growing once more, although new mortgages are still difficult to source.

Equities and bonds have both performed very well since early March, recovering some of their lost ground from 2008.  Investment grade (non-financial) bonds in particular are now trading at prices last seen before the collapse of Lehman's, reflecting the exceptionally low government gilt yields.  The performance within the equity market has been mixed with economically sensitive sectors like Mining, Retailers and Industrials performing extremely well at the expense of the defensive sectors like Telecoms, Utilities and Pharmaceuticals.  The large rights issues in 2009, combined with limited inflows into equity funds, have resulted in shares from larger, liquid companies being sold to fund the cash calls.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Investment Review (continued)

The performance at a stock level has largely been a mirror reversal of 2008, in that the bond portfolio has recovered much of its lost ground and materially outperformed UK gilts.  The work done in broadening the portfolio away from financials produced improved performance as the industrial and consumer investment grade bonds turned first and now trade around fair value compared with comparable government bond yields.  The equity portfolio, having outperformed in 2008, continued its recovery in value terms but, through a lack of mining and bank holdings (both low yielding sectors), it did not recover to the same extent as the FTSE All-Share Index.  There were plenty of positives in that the smaller companies in the portfolio performed exceptionally well and the degree of dividend cuts, while undesirable, has been manageable.  The largest income producing positions have been very stable and only HSBC and Aviva from last year's top 10 have cut their dividend payments.

Portfolio Activity

Managing the gearing is always the most difficult aspect of running an investment trust during highly volatile markets.  When markets fall, the gearing can increase dramatically and covenant limits add further tension.  The flexibility of the banking facility has once again shown the benefits of not having structural gearing, as during the market fall we were able to keep gearing under control and maintain equity exposure around 90% of net asset value.  In the recovery phase we have been reducing bond investments to increase equity exposure, while also making sure that we increased investment to maintain gearing around 25%, as markets recovered over the summer.   

Much of the bond portfolio restructuring was achieved in 2008 and during the past year we have benefited from a reduced exposure to financial bonds.  The remaining banking preference shares and bonds experienced a challenging market but the recent banking bond exchanges have broadly been welcomed by the market.  We had to reduce certain bond holdings at Lloyds in order to make sure all the investments produced income but we were better placed with the NatWest (RBS) investments.  Elsewhere in fixed interest, it is pleasing to see the re-emergence of traditional convertible bonds with decent yields above 5%, as these are perfect investments for the Company.  We purchased a newly issued 5 year convertible bond from British Airways, giving exposure to a recovery stock when the underlying equity pays no dividends.  British Airways has many challenges but air travel is recovering and mergers with Iberia and American Airlines would transform the network and cost base.

Within the equity portfolio we reduced Telecom exposure because, despite large dividend yields, the industry fundamentals remain difficult.  Intense competition and regulatory price cuts will create considerable headwinds and have already reduced profits.  Following a recovery in prices we sold the British Telecom and Cable and Wireless holdings.  Some positions, through good appreciation or rights issue, grew to a disproportionate level within the portfolio and we trimmed these holdings back to invest into other sectors.  Catlin remains a firm conviction holding, being an insurance company with a solid underwriting record, operating globally.  Following their recent rights issue to fund growth of the company, we scaled back the investment but it remains in the top 10 holdings.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Investment Review (continued)

Prodesse was also cut back following a strong upward move in the share price, but sadly the management have decided to wind up the company.  It has produced a highly attractive income flow over the years of the investment, yielding over 10%, whilst also growing the capital.  Replacing the investment will bring a new challenge.

Areas of increased or new investment included Pharmaceuticals for defensive growth, Financials for recovery earnings and Industrials on cheap valuations. We increased the GlaxoSmithKline holding and also purchased AstraZeneca.  Both stocks are on very low valuations reflecting declining expectations for their pipeline of new drugs but the market is not adequately reflecting the quality of their cash flow and future ability to cut costs.  New financial investments included the insurer Hiscox and property company Land Securities, while a number of other Financials were sold to reinvest into the rights issues from HSBC, Catlin and Intermediate Capital.

Underwriting the plethora of rights issues in the UK proved an attractive trade last year, with stable fees and deep discounts protecting underwriters.  In total we generated £258,000 in underwriting fees, generally from stocks and sectors to which we were not already exposed. The coming year should feature further rights issues, although there should be fewer rescue issues and more from companies seeking to grow or acquire, as economic growth recovers.

Outlook

In the year ahead we anticipate there will be increasing growth in the economy but it is unlikely to be robust because bank lending is limited and consumers have to contend with higher taxes and lower government stimulus.  A consequence of low growth will be a continuation of the low interest rate policy and rates may be on hold for the remainder of the year.  Rising funding requirements from governments will put upward pressure on the yield of fixed income, but may actually drive more investors into equities, especially those with higher and growing dividends. Equity valuations look fairly priced across the market but hide some wide discrepancies across sectors and stocks.  In addition, there continue to be very attractive yields and ratings from many of the defensive sectors. If economic growth does remain subdued in the coming year, then there should be a rotation back into those stocks with reliable earnings relative to the more cyclical recovery sectors.

The challenge in running the portfolio will be twofold; growing the net asset value and generating income in the year ahead.  We have undertaken a detailed analysis of the gearing requirements and feel that a reduced facility of £35m will be sufficient to allow the generation of income in support of dividends while also allowing flexibility to take advantage of market opportunities.  The smaller facility will also reduce the market level at which covenant levels are reached and reduce costs should we not utilise the whole capacity.  Equity exposure as a percentage of net assets will rise over the coming year as we switch bonds into equities which have greater growth potential and are less likely to be affected by removal of quantitative easing; however, equity gearing is not expected to exceed 120%.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Investment Review (continued)

Low interest rates are likely to remain on hold over 2010.  Therefore, despite a higher margin on the new facility, the overall cost of gearing will be low, and more than covered by new equity investments yielding 4% on average.

The outlook for income is improving from a low point as the number of companies cutting dividends should reduce in 2010, resulting in the overall market dividend turning positive, year on year, sometime in the second half.  However, it is usual that companies are cautious in raising dividends after recessions until economic growth and profit recovery are well established; this especially applies to those that have passed or cut dividends.  The income flows from the portfolio will continue to be impacted by reduced final dividends in the first half of 2010 but there should be a better pattern of recovery apparent in the second half.  The current revenue forecasts project a similar shortfall in 2010 income as there was in 2009; however, we do require dividend growth in 2011 to eradicate this shortfall substantially. Revenue reserves have been built up in recent years and on current forecasts, and if conditions permit, we anticipate drawing on them again in 2010 to maintain current quarterly payments.  This would allow time for a recovery in corporate profits to reduce our reliance on the release of revenue reserves.

Alex Crooke

Ben Lofthouse

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

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 842 of the Income and Corporation Taxes Act 1988 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 2009

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 (Holdings) plc 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.

During the year under review, the Manager used certain services which were paid for, or provided by, various brokers.  In return it placed business with those brokers, which may have included transactions relating to the Company.

UK custody services are provided by BNP Paribas Securities Services; non-UK custody services are provided by JPMorgan Chase Bank N.A.

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 or loss 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 2009

 

Income Statement

for the year ended 31 December 2009

	Year ended 31 December 2009			Year ended 31 December 2008
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Gains/(losses) on investments held at fair value through profit or loss (note 2)	-	13,382	13,382	-	(54,313)	(54,313)
Income from investments held at fair value through profit or loss (note 3)	7,355	-	7,355	9,062	-	9,062
Other interest receivable and similar income (note 4)	372	-	372	289	-	289
	----------	----------	----------	----------	----------	----------
Gross revenue and capital gains/(losses)	7,727	13,382	21,109	9,351	(54,313)	(44,962)
Management fees	(270)	(405)	(675)	(358)	(537)	(895)
Write-back of prior years' VAT (note 7)	62	83	145	39	58	97
Other administrative expenses	(275)	-	(275)	(276)	-	(276)
	----------	----------	----------	----------	----------	----------
Net return/(loss) on ordinary activities before finance costs and taxation	7,244	13,060	20,304	8,756	(54,792)	(46,036)
Finance costs	(87)	(262)	(349)	(428)	(1,285)	(1,713)
	----------	----------	----------	----------	----------	----------
Net return/(loss) on ordinary activities before taxation	7,157	12,798	19,955	8,328	(56,077)	(47,749)
Taxation on net return/(loss) on ordinary activities	(732)	718	(14)	(724)	724	-
	----------	----------	----------	----------	----------	----------
Net return/(loss) on ordinary activities after taxation	6,425	13,516	19,941	7,604	(55,353)	(47,749)
	======	======	======	======	======	======
Return/(loss) per ordinary share (note 5)	7.51p	15.81p	23.32p	8.90p	(64.79)p	(55.89)p
	======	======	======	======	======	======
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 2009

 

Reconciliation of Movements in Shareholders' Funds

for the year ended 31 December 2009

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 31 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 statute-barred dividends	-	-	-	-	4	4
	--------	----------	---------	---------	---------	----------
At 31 December 2009	4,291	56,877	26,302	9,281	4,012	100,763
	=====	=====	=====	=====	=====	=====
Year ended 31 December 2008	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 2007	4,291	56,877	26,302	50,966	4,169	142,605
Net (loss)/return on ordinary activities after taxation	-	-	-	(55,353)	7,604	(47,749)
Third interim dividend (2.075p per share) for the year ended 31 December 2007 paid 31 January 2008	-	-	-	-	(1,773)	(1,773)
Fourth interim dividend (2.075p per share) for the year ended 31 December 2007 paid 30 April 2008	-	-	-	-	(1,773)	(1,773)
First interim dividend (2.075p per share) for the year ended 31 December 2008 paid 31 July 2008	-	-	-	-	(1,773)	(1,773)
Second interim dividend (2.075p per share) for the year ended 31 December 2008 paid 31 October 2008	-	-	-	-	(1,773)	(1,773)
	--------	----------	----------	----------	----------	----------
At 31 December 2008	4,291	56,877	26,302	(4,387)	4,681	87,764
	=====	=====	=====	=====	=====	=====

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Balance Sheet

at 31 December 2009

	2009 £'000	2008 £'000
Investments held at fair value through profit or loss	122,881	106,000
	----------	----------
Current assets
Debtors	1,509	3,018
Cash at bank	1,345	3,198
	----------	----------
	2,854	6,216
Creditors: amounts falling due within one year	(24,972)	(24,452)
	----------	----------
Net current liabilities	(22,118)	(18,236)
	----------	----------
Total assets less current liabilities	100,763	87,764
	======	======
Capital and reserves
Share capital	4,291	4,291
Share premium account	56,877	56,877
Capital redemption reserve	26,302	26,302
Other capital reserves	9,281	(4,387)
Revenue reserve	4,012	4,681
	----------	----------
Equity shareholders'  funds	100,763	87,764
	======	======
Net asset value per ordinary share (note 6)	117.73p	102.73p
	======	======

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Cash Flow Statement

for the year ended 31 December 2009

	2009 £'000	2009 £'000	2008 £'000	2008 £'000
Net cash inflow from operating activities (note 8)		8,381		7,772
Servicing of finance
Bank overdraft and loan interest paid		(371)		(1,750)
Taxation
Tax recovered		12		-
Financial investment
Purchases of investments	(19,154)		(32,229)
Sales of investments	18,769		45,434
	----------		-----------
Net cash (outflow)/inflow from financial investment		(385)		13,205
Equity dividends paid		(7,094)		(7,092)
		----------		-----------
Net cash inflow before financing		543		12,135
Financing
Sale of shares held in treasury	152		-
Repayment of loans	(2,556)		(8,997)
	----------		----------
Net cash outflow from financing		(2,404)		(8,997)
		----------		----------
(Decrease)/increase in cash in the year		(1,861)		3,138
		======		======
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash as above		(1,861)		3,138
Cash outflow from repayment of loans		2,556		8,997
Exchange movements		8		37
		-----------		-----------
Movement in net debt		703		12,172
Net debt at 1 January		(20,887)		(33,059)
		-----------		-----------
Net debt at 31 December		(20,184)		(20,887)
		======		======

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

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 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/(losses) from investments held at fair value through profit or loss

	2009 £'000	2008 £'000
Losses on sale of investments based on historical cost	(10,639)	(4,306)
Add/(less): revaluation losses/(gains) recognised in previous years	7,786	(6,915)
	---------	---------
Losses on investments sold in the year based on carrying value at the previous balance sheet date	(2,853)	(11,221)
Net movement in revaluation of investments	16,227	(43,129)
Exchange gains	8	37
	---------	---------
	13,382	(54,313)
	=====	=====

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

	2009 £'000	2008 £'000
Franked:
Listed - dividends	4,071	5,751
	-------	-------
Unfranked:
Listed -  interest income	1,996	1,822
-  dividend income	1,288	1,462
-  stock dividends	-	27
	-------	--------
	3,284	3,311
	-------	--------
	7,355	9,062
	====	====

4.   Other interest receivable and similar income

	2009 £'000	2008 £'000
Bank interest	3	40
Underwriting commission	258	65
Interest on VAT repayment (see note 7)	111	184
	-----	------
	372	289
	===	===

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Notes (continued)

5.    Return/(loss) per ordinary share

The return per ordinary share figure is based on the gains attributable to the ordinary shares of £19,941,000 (2008: loss of £47,749,000) and on the 85,519,991 weighted average number of ordinary shares in issue during the year (2008: 85,435,744).

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 below:

	2009 £'000	2008 £'000
Net revenue return	6,425	7,604
Net capital return/(loss)	13,516	(55,353)
	----------	----------
Net total return/(loss)	19,941	(47,749)
	======	======
Weighted average number of ordinary shares in issue during the year	85,519,991	85,435,744
	Pence	Pence
Revenue return per ordinary share	7.51	8.90
Capital return/(loss) per ordinary share	15.81	(64.79)
	----------	----------
Total return/(loss) per ordinary share	23.32	(55.89)
	======	======

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 £100,763,000 (2008: £87,764,000) and on the 85,585,744 ordinary shares in issue (excluding treasury shares) at 31 December 2009 (2008: 85,435,744 ordinary shares).

7.  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.  VAT has not been applied to investment management fees invoiced in respect of periods since 1 July 2007.

An estimate of £1,030,000 for VAT borne by the Company on investment management fees invoiced in the period from 1 October 2000 to 30 June 2007 was written back in the 2007 financial statements and a further £97,000 was recognised in 2008.  The Company received £1,127,000 in February 2009.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Notes (continued)

7.  Value Added Tax (continued)

The Company has also been able to recover VAT charged on investment management fees invoiced in the period from 1 January 1990 to 4 December 1996 (following the decision of the House of Lords in the Fleming/Condé Nast case) amounting to £145,000.  That amount has been recognised in these financial statements.

The write-back of VAT has been allocated between revenue and capital return according to the allocation of the amounts originally paid.

The Company has also received from the Manager interest paid by HMRC on the amounts recovered.  During 2009 the Company received £190,000 in interest in respect of the VAT reclaim for the 2000 - 2007 period.  An estimate of £184,000 was recognised in the prior year; therefore the balance of £6,000 has been recognised in these financial statements.  The Company also received £105,000 in interest in respect of the VAT reclaim for the 1990 - 1996 period.  That amount has been recognised in these financial statements.  Interest has been included in "Other interest receivable and similar income" in the Income Statement.

The possibility of recovering any VAT paid on management fees during the period from 5 December 1996 to 30 September 2000 is remote and consequently there is no recognition of VAT reclaims for that period in these financial statements.

8.   Reconciliation of net return/(loss) on ordinary activities before finance costs and taxation to net cash inflow from operating activities

	2009 £'000	2008 £'000
Net return/(loss) before finance costs and taxation	20,304	(46,036)
(Gains)/losses on investments held at fair value through profit or loss	(13,382)	54,313
Decrease/(increase) in accrued income and debtors of a revenue nature	436	(443)
Decrease in other debtors	1,127	-
Decrease in creditors	(58)	(35)
Tax deducted on investment income	(46)	-
Stock dividends included in investment income	-	(27)
	--------	--------
Net cash inflow from operating activities	8,381	7,772
	=====	=====

9.   Dividends

A third interim dividend of 2.075p per ordinary share (2008: 2.075p per ordinary share) was paid on 29 January 2010.

A fourth interim dividend of 2.075p per ordinary share (2008: 2.075p per ordinary share) will be paid on 30 April 2010 to shareholders on the register on 9 April 2010.  The shares will be quoted ex-dividend from 7 April 2010.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2009

Notes (continued)

10.   2009 Financial Information

The figures and financial information for 2009 are extracted from the Annual Report and Financial Statements for the year ended 31 December 2009 and do not constitute the statutory accounts for the year.  The Annual Report and Financial Statements includes the Report of the Independent Auditors 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 Register of Companies.

11.   2008 Financial Information

The figures and financial information for 2008 are extracted from the published Annual Report and Accounts for the year ended 31 December 2008 and do not constitute the statutory accounts for that year.  The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985.

12.   Annual Report and Financial Statements

The Annual Report and Financial Statements will be posted to shareholders on 29 March 2010 and will be available thereafter on the Company's website (www.hendersonhighincome.com) or in hard copy format from the Company's Registered Office, 201 Bishopsgate, London, EC2M 3AE.

13.    Annual General Meeting

The Annual General Meeting will be held on Tuesday 11 May 2010 at 12.00 noon.  The Notice convening the Annual General Meeting will be available on the Company's website from 29 March 2010.

For further information please contact:

Alex Crooke

Portfolio Manager

Henderson High Income Trust plc

Telephone: [phone]

James de Sausmarez

Director, Head of Investment Trusts

Henderson Global Investors

Telephone: [phone]

Sarah Gibbons-Cook

Investor Relations and PR Manager, Investment Trusts

Henderson Global Investors

Telephone: [phone]

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END

 

 

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