Final Results

RNS Number : 7887A

Henderson High Income Trust PLC

28 March 2017

 

28 March 2017

HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2016

Legal Entity Identifier: 213800OEXAGFSF7Y6G11

This announcement contains regulated information

Performance Highlights:

Total return performance to 31 December 2016	One year %	Five years %
Benchmark1	15.5	58.4
NAV2	8.9	99.0
Share price	7.1	101.4

	2016	2015
NAV per share (debt at par value)3	185.56p	177.47p
Mid-market price per share	183.63p	180.50p
Revenue return per share	9.93p	9.96p
Net assets	£207.7m	£197.1m
Dividend for the year	9.15p	8.90p
Dividend yield4	5.0%	4.9%
Ongoing charge for the year5	0.81%	0.79%
Gearing	21.8%	22.7%

¹ The benchmark is a composite of 80% of the FTSE All-Share Index (total return) and 20% of the Merrill Lynch Sterling Non-Gilts Index
 
(total return) rebalanced annually

² Net asset value per share total return (including dividends reinvested and excluding transaction costs) with debt at fair value

³ Net asset value with debt at amortised cost

⁴ Based on the dividends paid or recommended for the year and the share price at the year end

⁵ The ongoing charge excludes the performance fee. There was no performance fee for the year ended 31 December 2016. The ongoing
 
charge including performance fee was 1.42% for the year ended 31 December 2015.

Sources: Morningstar Direct, Henderson, DataStream and AIC. All data is either as at 31 December 2016 or for the year ended 31 December 2016.

Chairman's Statement

Performance

2016 was an eventful year, to say the least, and a challenging one for the Company. Not only did we have to contend with the Brexit vote in June and its potential impact on our domestic economy but we also had to take account of Donald Trump's surprise victory in the US presidential elections in November and its ramifications for the world as a whole. Notwithstanding, the FTSE All-Share index has surged ahead, primarily propelled by the larger companies within the FTSE 100. This has contributed to strong positive returns for the Company's portfolio in the second half of the year, delivering a total net asset value return of 8.9% for the full year.

Despite this positive annual return, the share price significantly underperformed our benchmark's total return of 15.5%. It is important to remember, however, that the Company's long term performance remains strong with a share price total return of 101.4% over the last 5 years compared with the benchmark's 58.4% return. As I explained in our half year report, the Company's portfolio comprised a greater proportion of domestically focussed medium and small sized companies than the benchmark, as their potential for total returns was viewed as more attractive. Their share prices were severely impacted by the UK's decision to exit the EU, with investors initially fearful of a UK recession. Larger companies with global operations and foreign earnings, the main constituents of the FTSE 100, drove the strong equity market returns during the year. These companies benefited greatly from sterling weakening following Brexit and the dollar strengthening on the back of a US interest rate rise and the anticipation of President Trump's stated policies to generate growth. Indeed, the five best performing stocks of the FTSE 100 in 2016 were mining companies which recovered very strongly from their low valuations at the start of the year as fears of falling Chinese growth diminished and optimism about the prospects for the global economy continued to improve.

About 10% of the Company's portfolio was invested in corporate bonds throughout the year, less than the 20% bond component of our benchmark. Although the 30 year bull run for bonds seems to be nearing its end and investors are rotating into equities, bonds still play a necessary, but lesser, role in our portfolio. They contribute to increasing the overall yield of the Company and help provide a high income stream to shareholders.

Dividends

In our half year report we were confident that we could sustain the level of quarterly dividend for the rest of the year in spite of increased economic uncertainty following the EU referendum. I am pleased to report that we increased our fourth interim dividend to 2.325p, making a total of 9.15p per share for 2016, growth of 2.8% on the previous year. This total was more than covered by total revenue of 9.93p per share for the full year. The dividend yield on the Company's share price as at year end was 5%, significantly higher than the yield of our benchmark of 3.3%.

While steadily increasing our annual dividend each year over the last four years, we have also managed to replenish our revenue reserves, providing us with a larger cushion and flexibility for the future. It remains the Board's objective to increase the Company's dividend gradually, subject to investment conditions at the time and whether we determine such an increase to be sustainable in the years ahead. In order to assess this, we will continually monitor the level of income received by the Company, our investments' ability to grow dividends and the level of our own revenue reserves.

A first interim dividend of 2.325p per ordinary share in respect of the year ending 31 December 2017 was announced on 14 March 2017. This will be paid on 28 April 2017 to holders registered at close of business on 7 April 2017. The Company's shares will go ex-dividend on 6 April 2017.

Gearing

The level of gearing employed through the year has remained more or less constant at 23%, and ended the year slightly lower at 21.8%. It is this ability to borrow that differentiates us from unit trusts, allowing us to enhance total returns to shareholders; for the Company this is particularly useful for generating additional income. Shareholders may remember that in 2015 we issued a £20 million fixed rate 19 year senior unsecured note at a rate of 3.67% to provide us with future security. This year we took the decision to report two different net asset values per share, one with this fixed rate debt valued at par (at its original price less amortised issuance costs) and the other with this fixed rate debt at fair value (its current estimated market price). With bond yields now lower than at issuance, the fair value of the debt is higher as there is an inverse relationship between price and yield. For the time being, this results in a 1.1% reduction in the net asset value per share. Although the senior unsecured note was issued at a higher coupon than the prevailing rate, we consider it prudent to have locked in a relatively low fixed rate for the long term which we believe will prove beneficial for our shareholders.

Growth

As a result of ongoing investor demand, our shares have continued to trade at a premium for most of the year. Within the authority granted to the Board by shareholders at our last Annual General Meeting, we issued 875,000 new shares at a premium to net asset value (with debt at par value).

On 17 March 2017 we were delighted to announce that the Board of Threadneedle UK Select Trust Limited ('Threadneedle UK Select') had chosen the Company as the roll-over option for their shareholders under a scheme of reconstruction to become effective by the end of June. Under the proposed scheme, their shareholders will have the opportunity to exchange their investment for Henderson High Income Trust plc shares on a NAV for NAV basis (with debt at par value). In the light of ongoing investor demand for the Company's ordinary shares, the Board are also using this opportunity to put in place, within the same prospectus, a 12 month share issuance programme, enabling the Company to issue new ordinary shares at a small premium to NAV (with debt at par value). The Board intends to commence this issuance programme with an initial offer of new ordinary shares at a 1% premium to net asset value (with debt at par value) to complete at the same time as the Threadneedle UK Select Scheme. Our existing shareholders will not bear any of the costs of either of these proposals as a result of a costs contribution by Henderson. For further details of the Scheme, the share issuance programme and the initial offer, please consult the announcement, released on 17 March 2017 and in due course, the related documentation which will be posted to shareholders. The proposals will be subject to shareholder approval by both companies and a general meeting of the Company will be convened for this purpose.

The Board is fully supportive of the proposed transaction with Threadneedle UK Select. We believe it is in the best interest of all of our shareholders for the Company to grow and widen its shareholder base as this should ultimately provide the benefit of increased liquidity in the Company's shares and reduced ongoing charges per share by spreading the Company's fixed costs over a larger capital base.

In the meantime, we will be asking shareholders at the forthcoming Annual General Meeting to renew the Board's existing authority to issue shares and disapply pre-emption rights.

Annual General Meeting ('AGM')

The Annual General Meeting will be held at the office of Henderson Global Investors at 201 Bishopsgate, London, EC2M 3AE on Tuesday 9 May 2017 at 12 noon. In addition to the formal part of the meeting, there will be a presentation from our Fund Manager, David Smith, on the portfolio and its performance. There will also be the opportunity to meet the Board, the Fund Manager and other representatives of Henderson after the meeting. We look forward to seeing as many of you as possible. We encourage those of you who are unable to attend this meeting to use your proxy votes.

Prospects and outlook

After last year's unexpected events, it would be foolish to make any predictions for 2017, other than to suggest it will be yet another period of uncertainty both within the UK and beyond. At this stage it is unclear how Brexit negotiations will progress and what effect they might have on domestic economic growth, inflation and employment in either the short or long run. We also need to wait and see if President Trump's campaign promises of US job creation, tax cuts and infrastructure spending will materialise and boost growth or if protectionist measures will restrict global trade. In addition, there remains considerable political risk within Europe, as France and Germany go to the polls during the course of 2017 and the future of the European Union remains under close scrutiny.

After many years of quantitative easing, there appears to be a shift from loose monetary policy by central banks to more fiscal stimulus by governments, resulting in a steepening yield curve in the UK and US as expectations of inflation increase. Despite potential volatility in the equity markets, dividend income will continue to be highly valued by investors given the low income returns available from cash and bonds which are unlikely to change in the near term in the absence of short term hikes in interest rates.

Against this backdrop of uncertainty, there are still many investible companies with robust balance sheets and excellent management that deliver superior products and services, generate strong cash flow and pay out attractive dividends to their investors. I am confident that our Fund Manager, David Smith, will use his active stock picking abilities to hunt out the best of these for the portfolio in pursuit of the high income stream that is appreciated by our shareholders.

 

Fund Manager's Report

Review of the year

There were two significant political events that impacted markets during the year; the UK's vote to leave the European Union and Donald Trump's surprise US Presidential election victory. Despite both events, the UK stock market was up strongly during the year with the FTSE All-Share returning 16.8%. Sterling weakness in the aftermath of the Brexit vote lead to the outperformance of large multinational companies within the FTSE 100, which pushed the index to all-time highs at the end of the year.

The market has taken the initial view that President Trump's proposed fiscal policy of increased infrastructure and defence spending and cuts to corporation tax will be good for economic growth and inflation. Although bond yields had started to rise from their historical lows in the summer, this accelerated in November causing a steepening of the yield curve globally and a sector rotation within equities. Defensives or so called 'bond proxies', for example utilities and consumer staples, came under pressure in favour of miners and financials.

The downturn seen in commodity markets over the last few years ended, as better economic growth from China, and supply side reductions from listed resource companies led to a sharp recovery in prices. Furthermore, the Organization of the Petroleum Exporting Countries ('OPEC') and non-OPEC countries finally came to an agreement to cut oil production, which supported the oil price.

Although the Company made positive returns over the year, with a NAV total return (with debt at fair value) of 8.9%, this lagged the very strong performance of the benchmark, up 15.5%.

The equity portfolio rose 9.5% during the year which underperformed the strong return of the FTSE All-Share. The best performing sectors during 2016 were Mining and Oil & Gas. While the Company has some exposure to these sectors, via Rio Tinto, BP and Royal Dutch Shell, it did not have enough given the very strong performance from these types of companies. Low commodity prices had put pressure on dividend payments in these sectors which made it hard for the Company to be fully weighted. In fact the Mining sector in aggregate has now cut dividends by £3.3bn in the last two years. However, the sharp recovery in commodity prices over 2016 drove the Mining and Oil & Gas sectors to outperform strongly in capital terms thereby creating a headwind to the Company's relative performance.

The UK's decision to leave the EU had a significant impact on UK domestic companies during the year, as the market was quick to assume the economy would fall into recession. Although economic data has so far proved resilient, the sharp share price falls over the period from the Company's holdings in domestically exposed companies, such as ITV, Greene King and Galliford Try were detrimental to performance. Despite the uncertain outlook, the three companies delivered attractive dividend growth of 24%, 8% and 21% respectively.

Given the weakness in sterling, the Company's position in certain overseas holdings, such as US telecom Verizon Communications and European professional publisher RELX, aided performance. Elsewhere the Company's holding in De La Rue was also positive for performance with the company making good progress on its turnaround strategy.

The fixed income portfolio returned 13.8%, outperforming the 10.6% gain from the Merrill Lynch Sterling Non-Gilts Index. The portfolio's holdings in large, non-cyclical companies, such as cable company Virgin Media and the RAC, aided performance. As bond yields troughed in August, the portfolio's exposure to short dated high yield bonds proved less volatile than investment grade corporate bonds, which benefited performance.

The revenue per share return over the year was a good result at 9.93p per share, in line with last year (9.96p), given that some of the Company's holdings, BHP Billiton, Rio Tinto and Barclays, cut their dividends in the year. These cuts were offset by good underlying dividend growth from the rest of the portfolio and another robust year of special dividends from Intermediate Capital, ITV and Jupiter Fund Management. Some of the Company's largest holdings continued to deliver strong dividend growth with BT, Imperial Brands and Lloyds Banking Group all increasing their dividends by more than 10%. The Company raised its own full year dividend for the fourth year running to 9.15p, an increase of 2.8%. Given the uncertain outlook surrounding the UK's relationship with the EU post Brexit, the level of market dividend growth is likely to slow while the amount of special dividends is also likely to be lower. Despite this I remain confident in the revenue return for the forthcoming year. The portfolio is well diversified, focuses on good quality companies with strong balance sheets and has rebuilt its revenue reserves.

Portfolio activity

Throughout 2016 the Company maintained its preference for equities over bonds with 90% of the investment portfolio in equities. The UK equity market outperformed both government and corporate bonds during the year and given the attractive yields on equities relative to bonds, this position has been maintained.

In the equity portfolio new holdings in Whitbread and Pets at Home were initiated. Whitbread owns market leading brands Premier Inn and Costa Coffee, has a well-invested property estate and a robust balance sheet. The company is expanding the business both domestically and overseas which, together with other initiatives, should drive strong earnings and dividend growth. Pets at Home's retail division is a clear market leader that has proved resilient to previous downturns while the roll out and maturity of its services business (vets and groomers) should provide good long term earnings growth. Both companies had been weak due to Brexit and we used this as an opportunity to acquire holdings in two good quality businesses on attractive valuations.

Towards the end of the year the portfolio's exposure to the bank sector was increased through adding to the Lloyds Banking Group position. A new holding in European retail bank, ING, which has a strong capital position, good geographical diversification, solid asset quality and an attractive dividend yield, was also purchased. The management team has a good track record of growing net interest income despite low interest rates and has a clear plan to lower costs further and support margins. Elsewhere new holdings were established in specialty chemical company Johnson Matthey and European pharmaceutical company Roche, which is the world's leading oncology company with a strong pipeline of new drugs. Growth should accelerate in the next few years as recently approved drugs, treating breast cancer and leukaemia, commercialise while late stage pipeline assets focusing on immuno-oncology have the potential to increase substantially sales in the longer term.

Sales in the year included Marston's and Moneysupermarket.com. With pressure on household disposable income, increased cost inflation and a leveraged balance sheet, Marston's dividend may not be sustainable hence I sold the position. After a period of strong performance the holding in Moneysupermarket.com was sold. The valuation reached a level which fully reflected the company's growth prospects in an increasingly competitive industry. The overweight positions in National Grid and Legal & General were also lowered during the year, taking some profits after strong long term performance from both companies. A position has been maintained in each, given the dividend yields remain appealing.

Within the fixed income portfolio new positions were initiated in the global storage and information management company Iron Mountain and the RAC. The yield on the Iron Mountain corporate bonds reached an attractive level for a well-managed and stable cash generative business. RAC has a strong position in the consolidated UK breakdown recovery market, high barriers to entry and stable cash flow which can sustain the current capital structure. Given the new position in the RAC we participated in a tender offer by the AA; the company effectively bought back the bonds at a premium to the market price. We also trimmed our holding in the long dated Verizon bonds after spreads fell to a level where we felt there was better risk/reward elsewhere.

Outlook

Global economic growth is forecast to be solid in 2017 due to robust developed market economies and fading recessionary fears in several large Emerging Market countries. Further upside could be supported by a move from governments to fiscal stimulus, especially in the US, however political risk remains given President Trump's protectionist overtones and further elections across Europe.

Thus far, the UK economy has remained resilient despite the vote to leave the EU, with confidence indicators recovering quickly to exceed pre-referendum levels. However, headwinds are growing as sterling weakness and a recovery in commodity prices are likely to push inflation above wage growth thereby putting pressure on household disposable income. Also with uncertainty surrounding the UK's access to the single market, corporate investment intentions are seemingly on hold. Despite higher inflation the Bank of England is likely to keep interest rates at historic lows until the impact of Brexit is better known.

Although fears around growing protectionism and political tensions are hard to ignore, higher growth and inflation should be good for equities, at least in the short term. With approximately two thirds of the FTSE All-Share earnings derived overseas, the pound's depreciation along with a recovery in resources and banks' profitability should produce double-digit aggregate market earnings growth this year. This together with a starting dividend yield of over 3% for the UK market would give some reasonable upside to equities if growth comes through as forecast even with market valuations above their long term average. Markets are likely to remain volatile as sentiment fluctuates but I would expect to use any weakness as an opportunity to continue to find good quality companies that I believe can grow their dividends into the longer term.

Principal risks and uncertainties

The Board, with the assistance of Henderson, has carried out a robust assessment of the principal risks facing the Company including those that would threaten its business model, future performance, solvency or liquidity. In carrying out this assessment, the Board has considered the market uncertainty arising from the result of the UK referendum to leave the European Union and the US Presidential election. 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 objectives 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 as far as practicable, are as follows:

Principal Risks	Mitigation
Investment Risk Risk of long term underperformance of the Company against the benchmark and/or peer group. This could result in the shares of the Company trading at a discount and reduced liquidity in the Company's shares.	Henderson provides the Directors with regular investment management information including investment performance statistics against the benchmark and the peer group. The implementation of investment strategy and results of the investment process for which the Fund Manager is responsible are discussed with Henderson and reviewed at each Board meeting. The premium/discount and the trading volume of the Company's shares are also regularly reviewed, taking account of market conditions. The Directors maintain close contact with the Company's brokers to understand and regulate the supply and demand of shares.
Market/Financial Risk Risk that market conditions lead to a fall in the value of the portfolio (magnified by any gearing) and/or a reduction of income. This could result in loss of capital value for shareholders and/or a cut in the dividend payment.	The Directors review the portfolio regularly. The portfolio is diverse, containing a sufficient range of investments to ensure that no single investment puts undue risk on the sustainability of the income generated by the portfolio or indeed the capital value. Regard is also given to having a broad mix of companies in the portfolio, as well as a spread across a range of economic sectors. Henderson operates within investment limits and restrictions set by the Board, including limits for gearing and derivatives. A monthly schedule of current positions against all established limits is reviewed by the Directors and Henderson confirms adherence to them each month. Any particularly high risks are highlighted and discussed. The Directors review the income statement and income forecasts at each Board meeting and monitor the Company's revenue reserves.
Operational Risk Risk of losses through inadequate or failed internal processes, systems, human error or external events. This includes the risk of loss arising from failing to manage key outsourced service providers properly, and the risk arising from major disruptions to their businesses and their markets.	Control systems of Henderson are designed and tested to ensure that operational risks are mitigated to an acceptable level. Business continuity plans are maintained and tested to ensure that, in the event of business disruption, operations can be maintained. Henderson has introduced cyber security measures to protect against attacks. Agreements are in place with all other key service providers and their controls are monitored by Henderson's assurance functions. The Directors receive a quarterly internal controls report from Henderson to assist with the ongoing review of risks and control procedures used to manage those risks.
Legal and Regulatory Risk Risk that a breach of or a change in laws and regulations could materially affect the viability and appeal of the Company, in particular Section 1158 Corporation Tax Act 2010 which exempts capital gains from being taxed within investment trusts.	The Company's legal and regulatory obligations are delegated to Henderson Secretarial Services Limited and are monitored by Henderson's Compliance and Audit functions. Henderson regularly reviews and confirms compliance with Section 1158 to protect the Company's status as an investment trust. Henderson actively and constructively engages with regulators, tax and industry bodies in order to understand and influence future developments. The Directors receive a quarterly internal controls report from Henderson which confirms regulatory compliance.

The Board considers these risks to have remained unchanged throughout the year under review.

Viability statement

The Company is a long term investor. The Board believes it is appropriate to assess the Company's viability over a five year period in recognition of our long term horizon and what we believe to be investors' time horizons, taking account of the Company's current position and the potential impact of the principal risks and uncertainties as documented in the Annual Report.

The assessment has considered the impact and the likelihood of the principal risks and uncertainties facing the Company in severe but reasonable scenarios, and the effectiveness of any mitigating controls in place. The Directors consider this to be an appropriate period over which they do not expect there to be any significant change in the current principal risks and adequacy of the mitigating controls in place. Also the Directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period.

The Directors have also taken into account the liquidity of the portfolio, the income stream from the portfolio and the Company's ability to meet liabilities as they fall due. This included consideration of how the forecast income stream, expenditure and levels of reserves could impact on the Company's ability to pay dividends to shareholders over that period in line with its dividend policy. Whilst detailed forecasts are only made over a shorter timeframe, the nature of the Company's business as an investment trust means that such forecasts are equally valid to be considered over the longer five year period as a means of assessing whether the Company can continue in operation.

The Directors recognise that there is a continuation vote due to take place at the Annual General Meeting following the 31 December 2019 year end. The Directors support the continuation of the Company and expect that the Company will continue to exist for the foreseeable future, at least for the period of the assessment. The Directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period as the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust. Based on this assessment the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five year period.

Related party transactions

The Company's transactions with related parties in the year were with the Directors and Henderson. There have been no material transactions between the Company and its Directors during the year. The only amounts paid to the Directors were in respect of remuneration for which there were no outstanding amounts payable at the year end. In relation to the provision of services by Henderson, other than fees payable by the Company in the ordinary course of business and the provision of sales and marketing services, there have been no material transactions with Henderson affecting the financial position of the Company during the year under review.

Statement of Directors' Responsibilities

Statement under DTR 4.1.12

Each of the Directors confirms that, to the best of his or her knowledge:

•     the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards comprising FRS 102 and applicable law) give a true and fair view of the assets, liabilities, financial position and net return of the Company; and

•     the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Margaret Littlejohns

Chairman

28 March 2017

 

 

Income Statement

	Year ended 31 December 2016			Year ended 31 December 2015
	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)	-	9,561	9,561	-	5,376	5,376
Income from investments held at fair value through profit or loss (note 3)	12,306	-	12,306	12,067	-	12,067
Other interest receivable and similar income (note 4)	57	-	57	27	-	27
	----------	----------	----------	----------	----------	----------
Gross revenue and capital gains	12,363	9,561	21,924	12,094	5,376	17,470
Management and performance fees (note 5)	(481)	(721)	(1,202)	(469)	(1,949)	(2,418)
Other administrative expenses	(378)	-	(378)	(385)	-	(385)
	----------	----------	----------	----------	----------	----------
Net return on ordinary activities before finance costs and taxation	11,504	8,840	20,344	11,240	3,427	14,667
Finance costs	(279)	(836)	(1,115)	(206)	(616)	(822)
	----------	----------	----------	----------	----------	----------
Net return on ordinary activities before taxation	11,225	8,004	19,229	11,034	2,811	13,845
Taxation on net return on ordinary activities	(159)	72	(87)	(97)	67	(30)
	----------	----------	----------	----------	----------	----------
Net return on ordinary activities after taxation	11,066	8,076	19,142	10,937	2,878	13,815
	======	======	======	======	======	======
Return per ordinary share (note 6)	9.93p	7.25p	17.18p	9.96p	2.62p	12.58p
	======	======	======	======	======	======
The total columns of this statement represent the income statement of the Company. All capital and revenue items derive from continuing operations. No operations were acquired or discontinued during the year. The Company has no other comprehensive income other than those items recognised in the income statement.

 

Statement of Changes in Equity

Year ended 31 December 2016	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 1 January 2016	5,553	94,038	26,302	64,581	6,637	197,111
Net return on ordinary shares after taxation	-	-	-	8,076	11,066	19,142
Issue of new shares	44	1,557	-	-	-	1,601
Fourth interim dividend (2.275p per share) for the year ended 31 December 2015, paid 29 January 2016	-	-	-	-	(2,527)	(2,527)
First interim dividend (2.275p per share) for the year ended 31 December 2016, paid 29 April 2016	-	-	-	-	(2,531)	(2,531)
Second interim dividend (2.275p per share) for the year ended 31 December 2016, paid 29 July 2016	-	-	-	-	(2,531)	(2,531)
Third interim dividend (2.275p per share) for the year ended 31 December 2016, paid 28 October 2016	-	-	-	-	(2,542)	(2,542)
	--------	---------	---------	---------	---------	----------
At 31 December 2016	5,597	95,595	26,302	72,657	7,572	207,723
	=====	=====	=====	=====	=====	======
Year ended 31 December 2015	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 1 January 2015	5,444	90,198	26,302	61,703	5,340	188,987
Net return on ordinary shares after taxation	-	-	-	2,878	10,937	13,815
Issue of new shares	109	3,840	-	-	-	3,949
Fourth interim dividend (2.175p per share) for the year ended 31 December 2014 paid 30 January 2015	-	-	-	-	(2,368)	(2,368)
First interim dividend (2.175p per share) for the year ended 31 December 2015 paid 30 April 2015	-	-	-	-	(2,378)	(2,378)
Second interim dividend (2.175p per share) for the year ended 31 December 2015 paid 31 July 2015	-	-	-	-	(2,383)	(2,383)
Third interim dividend (2.275p per share) for the year ended 31 December 2015 paid 30 October 2015	-	-	-	-	(2,511)	(2,511)
	--------	---------	---------	---------	---------	----------
At 31 December 2015	5,553	94,038	26,302	64,581	6,637	197,111
	=====	=====	=====	=====	=====	======

 

Statement of Financial Position

	At 31 December 2016 £'000	At 31 December 2015 £'000
Fixed assets
Investments held at fair value through profit or loss	252,990	241,912
	----------	----------
Current assets
Debtors	1,340	1,349
Cash at bank and in hand	1,742	1,223
	----------	----------
	3,082	2,572
	----------	----------
Creditors: amounts falling due within one year	(28,543)	(27,577)
	----------	----------
Net current liabilities	(25,461)	(25,005)
Total assets less current liabilities	227,529	216,907
	----------	----------
Creditors: amounts falling due after more than one year	(19,806)	(19,796)
	----------	----------
Net assets	207,723	197,111
	======	======
Capital and reserves
Share capital	5,597	5,553
Share premium account	95,595	94,038
Capital redemption reserve	26,302	26,302
Other capital reserves	72,657	64,581
Revenue reserve	7,572	6,637
	----------	----------
Total shareholders' funds	207,723	197,111
	======	======
Net asset value per ordinary share (basic and diluted) (note 7)	185.56p	177.47p
	======	======

Cash Flow Statement

	2016	2015
	£'000	£'000
Cash flows from operating activities
Net return on ordinary activities before taxation	19,229	13,845
Add back: finance costs	1,115	822
Less: gains on investments held at fair value through profit or loss	(9,561)	(5,376)
Withholding tax on dividends deducted at source	(87)	(29)
Taxation recovered	5	1
Decrease in prepayments and accrued income	4	12
(Decrease)/increase in accruals and deferred income	(1,396)	121
	----------	----------
Net cash inflow from operating activities	9,309	9,396
	----------	----------
Cash flows from investing activities
Sales of investments held at fair value through profit or loss	46,171	39,240
Purchases of investments held at fair value through profit or loss	(46,468)	(43,905)
	----------	----------
Net cash outflow from investing activities	(297)	(4,665)
	----------	----------
Cash flows from financing activities
Issue of ordinary share capital	1,601	3,949
Equity dividends paid	(10,131)	(9,640)
Drawdown/(repayment) of loans	1,191	(18,664)
Issue of senior unsecured note	-	19,796
Interest paid	(1,105)	(822)
	----------	----------
Net cash flow from financing activities	(8,444)	(5,381)
	----------	----------
Net increase/(decrease) in cash and cash equivalents	568	(650)
Cash and cash equivalents at beginning of year	1,223	1,860
Exchange movements	(49)	13
	----------	----------
Cash and cash equivalents at end of year	1,742	1,223
	----------	----------
Comprising:
Cash at bank	1,742	1,223
	======	======

 

Notes to Financial Statements:

1.  Basis of preparation

The Company is a registered investment company as defined in Section 833 of the Companies Act 2006. It operates in the United Kingdom and is registered at 201 Bishopsgate, London EC2M 3AE.

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland, and with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts ('the SORP') issued in November 2014. The Company has early adopted the amendments to FRS 102 in respect of fair value hierarchy disclosures as published in March 2016.

The principal accounting policies applied in the presentation of these financial statements are set out below. These policies have been consistently applied to all the years presented.

The financial statements have been prepared under the historical cost basis except for the measurement at fair value of investments. In applying FRS 102, financial instruments have been accounted for in accordance with Section 11 and 12 of the standard. All of the Company's operations are of a continuing nature.

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

	2016 £'000	2015 £'000
Gains on the sale of investments based on historical cost	4,517	8,721
Revaluation gains recognised in previous years	(4,933)	(7,551)
	---------	---------
(Losses)/gains on investments sold in the year based on carrying value at previous statement of financial position date	(416)	1,170
	---------	---------
Net movement on revaluation of investments	11,197	4,277
Exchange losses	(1,220)	(71)
	---------	---------
	9,561	5,376
	=====	=====

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

	2016 £'000	2015 £'000
UK dividend income - listed	8,720	8,521
UK dividend income - special dividends	581	761
	-------	-------
	9,301	9,282
	-------	-------
Interest income - listed	1,288	1,236
Overseas dividend income - listed	1,717	1,549
	-------	-------
	3,005	2,785
	-------	-------
	12,306	12,067
	=====	=====

4.   Other interest receivable and similar income

	2016 £'000	2015 £'000
Underwriting commission (allocated to revenue)	57	27
	-----	-----
	57	27
	===	===

5.   Management and performance fees

	2016			2015
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Management fee	481	721	1,202	469	703	1,172
Performance fee	-	-	-	-	1,246	1,246
	------	-------	-------	------	-------	-------
Total fee	481	721	1,202	469	1,949	2,418
	===	====	====	===	====	====

No performance fee was earned during the year (2015: £1,246,000).

6.  Return per ordinary share

The return per ordinary share figure is based on the gains attributable to the ordinary shares of £19,142,000 (2015: £13,815,000) and on the 111,434,989 weighted average number of ordinary shares in issue during the year (2015: 109,794,009).

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

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

	2016 £'000	2015 £'000
Net revenue return	11,066	10,937
Net capital return	8,076	2,878
	----------	----------
Total return	19,142	13,815
	======	======
Weighted average number of ordinary shares	111,434,989	109,794,009
Revenue return per ordinary share	9.93p	9.96p
Capital return per ordinary share	7.25p	2.62p
	----------	----------
Total return per ordinary share	17.18p	12.58p
	======	======

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 £207,723,000 (2015: £197,111,000) and on the 111,942,365 ordinary shares in issue at 31 December 2016 (2015: 111,067,365).

The movements during the year of the assets attributable to the ordinary shares were as follows:

	2016 £'000	2015 £'000
Net assets at start of year	197,111	188,987
Total net return on ordinary activities after taxation	19,142	13,815
Dividends paid on ordinary shares in the period	(10,131)	(9,640)
Issue of ordinary shares less issue costs	1,601	3,949
	----------	----------
	207,723	197,111
	======	======

8.   Dividends

The total dividends payable in respect of the financial year which form the basis of the test under Section 1158 of the Corporation Tax Act 2010 are set out below:

	£'000
Revenue available for distribution by way of dividend for the year	11,066
First interim dividend (2.275p) paid on 29 April 2016	(2,531)
Second interim dividend (2.275p) paid on 29 July 2016	(2,531)
Third interim dividend (2.275p) paid on 28 October 2016	(2,542)
Fourth interim dividend (2.325p) paid on 27 January 2017	(2,603)
Undistributed revenue for Section 1158 purposes	--------
	859
	=====

All dividends have been paid or will be paid out of revenue profits.

9. Subsequent events

Since the year end, the Board declared a first interim dividend of 2.325p per ordinary share, in respect of the year ending 31 December 2017. This will be paid on 28 April 2017 to holders registered at the close of business on 7 April 2017. This dividend is to be paid from the Company's revenue account. The Company's shares will go ex-dividend on 6 April 2017.

On 17 March 2017, the Company announced that it had agreed terms with Threadneedle UK Select Trust Limited ('UKT') in respect of the issue of new ordinary shares to shareholders in UKT who elect to roll-over their investment, to be effected by way of a scheme of reconstruction of UKT (the "Scheme"). The Company intends, in addition to the issue of new ordinary shares in connection with the Scheme, to put in place a prospectus for a 12 month share issuance programme (the "Issuance Programme"), which will enable the Company to issue further new ordinary shares at a small premium to net asset value, commencing with an initial offer of new ordinary shares at a 1% premium to net asset value to complete at the same time as the Scheme.

It is currently envisaged that a shareholder circular, prospectus and notice of general meeting setting out details of the Scheme and seeking shareholder approval for the Scheme and Issuance Programme will be sent to shareholders at the end of May 2017 and that the Scheme and first issue under the Issuance Programme will become effective by the end of June 2017.

The Scheme will be conditional on, amongst other things, the recommendation of the Boards of both companies, the necessary shareholder approvals by the shareholders of both companies and the appropriate regulatory and tax approvals in due course.

10.   Going concern statement

The assets of the Company consist of securities that are readily realisable and, accordingly, the Directors believe that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. The Company's shareholders are asked every five years to vote for the continuation of the Company. An ordinary resolution to this effect was passed by the shareholders at the Annual General Meeting held on 5 May 2015. Having assessed these factors, the principal risks and other matters discussed in connection with the viability statement, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

11.   2016 Financial information

The figures and financial information for 2016 are extracted from the Annual Report and Financial Statements for the year ended 31 December 2016 and do not constitute the statutory accounts for the year. The Annual Report and Financial Statements includes the Independent Auditors' 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.

12.   2015 Financial information

The figures and financial information for 2015 are extracted from the Annual Report and Financial Statements for the year ended 31 December 2015 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. 

13.   Annual Report and Financial Statements

The Annual Report and Financial Statements for the year ended 31 December 2016 will be posted to shareholders in early April 2017 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.

14.    Annual General Meeting

The Annual General Meeting will be held on Tuesday 9 May 2017 at 12.00 noon at the Company's registered office, 201 Bishopsgate, London EC2M 3AE. The notice convening the Annual General Meeting will shortly be available on the Company's website www.hendersonhighincome.com 

For further information please contact:

David Smith

Fund 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]

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

 

 

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