Final Results

RNS Number : 2066P

Henderson High Income Trust PLC

20 March 2009

 



Page 1 

20 March 2009 

HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

This announcement contains regulated information

Performance Summary:

Per ordinary share	31 December 2008	31 December  2007	% Change
Net asset value ("NAV")	102.73p	166.91p	-38.5
Market price	95.00p	147.75p	-35.7
Revenue return	8.90p	8.26p	+7.7
Annual dividend	8.30p	8.18p	+1.5

Chairman's Statement

Assets and performance

Few chairmen have good news to give their shareholders at this time; indeed it is not easy to find words which adequately describe the events of the last year or express the pain which we as shareholders have had to endure. Much has and more will undoubtedly be written about the events in financial markets and the world economies over the last year or so. Phrases such as "once in a lifetime", "a black swan event", "the end of capitalism" and other equally dramatic ones are being used, whilst comparisons are made to the Great Depression of the 1930s. It all seems justified when most markets, other than for government debt, have recorded their greatest annual falls ever or since the 1930s. Our NAV has fallen by 38.5% over the last year, although the decline in the total return is less, as we were able to make a small increase in the dividend paid over the previous year. It is of some comfort to know that we have not been alone in this nightmare and that others have fared worse than us, not that we should be drawing comfort from their misfortune as we are all in this together. We have been active in recognising the difficult investment conditions and took the decision to reduce the size of our bank loan facility in light of the fall in the value of our assets. Furthermore, we have renegotiated the facility in order to give us even greater leeway over our bank covenants which we currently meet comfortably.

As I prepared to write this report, I was still amazed as I looked back at the sheer scale of the events of this last year and the speed with which key economic indicators fell. It is still difficult to come to terms with the rapid humbling of once great banking giants, car manufacturers or iconic retailers and to believe that earlier in the year we were facing an oil price of nearly $150, with inflation being driven higher.  How quickly we have gone from a fight against rising inflation to one of avoiding deflation, with the consequent dramatic cut in the Bank of England's Base Rate. I realise how grateful I am that I have retired from running investment portfolios, but at the same time I am reminded what a very difficult job our, and indeed all, portfolio managers have in these times. Our Portfolio Manager gives greater details in his review about what has been happening in markets and, importantly, what he has been doing with the portfolio to steer it through these difficult times. 

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Chairman's Statement (continued)

With the benefit of hindsight, some of our investment decisions could have been different, but the significant unwinding of leverage in all financial markets has made safe investments hard to find. Although it may not appear so, some of our big calls have been correct, such as the fund being negatively geared to equities. Unfortunately our bond holdings, which one could normally expect to protect the portfolio in the conditions that have pertained, have not helped us as they are predominantly corporate bonds, with a sizeable exposure to financials. Liquidity in this market has disappeared, so adversely affecting prices and making it almost impossible to trade out of our positions. This is the principal reason for our significant underperformance against our benchmark which includes government bonds that have held up well. The Board spends a great deal of time at our meetings 'holding our Portfolio Manager to account' and understanding his strategy and his actions.  We continue to have great confidence in him and his ability to steer us safely through these stormy times.

Dividends

Against the disappointment with our capital value, it is pleasing to be able to report that we have declared a fourth interim dividend for the year of 2.075p, so making a total for 2008 of 8.3p, a slight increase over the total for 2007.  We know how very important the dividend is to our shareholders and its maintenance is one of our top priorities. However, we must recognise that the environment has now deteriorated dramatically with significant cuts in dividends, particularly from the all-important bank sector, being reported and overall the amount of dividend income available from the UK market is down 20% on 2008. Although our Portfolio Manager will continue to manage our portfolio so that he generates as much income as he safely can, our ability to pay dividends does depend principally on the amount of income which we actually receive from our equity and bond investments, so I can make no definite forecast about the future level of the dividend. However, the Board's current aim is to maintain the dividend, using some of our reserves, if appropriate. This aspiration will be kept under regular review during the year in light of our actual experience and the investment conditions at the time.

Board and other matters

I am glad to be able to report that we have made very satisfactory progress in our reclaim of VAT as a result of the earlier European Court judgement. We have now received a repayment of all of the VAT that we paid in the period from 2000 to 2007. The majority of this amount was recognised in our accounts last year, but an additional £97,000 has been credited to these latest accounts, together with an amount of £184,000, which is our estimate of the interest we will receive.  We are still awaiting confirmation of the amounts that can be reclaimed from earlier years, although the amounts involved are smaller and have not been recognised in the accounts. 

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Chairman's Statement (continued)

In my last interim statement I reported that we had appointed Margaret Littlejohns and Anthony Newhouse to the Board and we have benefitted from their presence.  This completes the rebuilding of the Board for the foreseeable future and we have a Board which, I believe, has the skills to guide the Company successfully through the challenging times ahead.  I hope that as many of you as possible will come to the AGM on 5 May when you will have the opportunity to meet Margaret and Anthony, as well as the other directors, and our Portfolio Manager who will as usual give you an update.  I look forward to welcoming you.

Outlook 

I am very wary of making any predictions about the future. Although I have tried to be guarded in my last few statements and point out that there were uncertainties ahead, I have also tried to hold out hope too. Sadly my fears did not prove pessimistic enough and my optimism has proved illusory so far.  Although the outlook currently may appear very dark with a deep global economic recession underway, we must not lose sight of the massive measures which governments around the world have been taking to try and mitigate the effects, and the fact that many markets are by various measures very lowly valued compared with their history.  As I was reminded by an old colleague the other day, "the darkest part of the night is just before dawn". Politicians may be derided for talking about seeing "the light at the end of the tunnel" or "emerging green shoots", but there is no reason to believe that they will not eventually be proved correct. Their problem is whether they will still be in power when it happens. I have no desire to be similarly derided, as we may have to endure more pain yet, but, despite the current darkness, I do believe that dawn will eventually come. Indeed, we must all be careful not to allow ourselves to become too depressed and so run the risk of missing the first signs of dawn. We should not forget that history also shows us that markets usually start to recover well before economies bottom, and although we do not yet know when the latter will happen, we can take comfort from the former and, perhaps, should start to view any further setbacks in markets as possible buying opportunities with an eye to the longer term.

Our trust is well placed to benefit from this "early dawn sunlight" when it reappears and both the Board and particularly the Portfolio Manager remain alert for this and focused on our objective of providing a high income stream with prospects of capital growth, when conditions permit.  Recent events have underlined the benefits of seeking a high income stream, as our Company provides, since it has been income (as our Portfolio Manager points out in his review) which has provided the major part of the total return over the longer term. Even if some of this income does come under pressure in the short term, it will still provide a positive return which is not what can always be said of capital.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Chairman's Statement (continued)

As a postscript, I remember that earlier in my career I was able to call myself a 'banker', and the main benefit of this was that I was able to get cheaper car insurance, so boring and conservative were bankers then considered to be. I guess that today a person describing himself as a banker would probably struggle to get car insurance at all. However, I suspect that one result of the recent dramas in the banking sector is that bankers may well be heading back to a time when they will be able to get cheaper car insurance again. Banking may become boring and conservative once more, but hopefully it will be safer for all concerned!

Hugh Twiss

Chairman

Statement under DTR 4.1.12 

To the best of our knowledge: 

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of assets, liabilities, financial position and profit or loss of the Company; and 

• the management 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 

Hugh Twiss 

Chairman

20 March 2009

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Investment Review 

Review of the Year to 31 December 2008

The year under review saw a continuation of the difficult and frustrating environment for equity income investors. In 2007 conditions were tough because of the narrow range of sectors that performed well.  2008 was characterised by a complete lack of safe havens in which to invest, other than government gilts, which yielded very little. Economic news deteriorated throughout the year and steadily eroded confidence, pushing investors to withdraw assets toward the safety of cash and government bonds. Equities bore the brunt of this selling because of their liquidity with good trading volumes compared to the illiquidity of property, commodities and even bonds.

We have all lived with the benefits of increasing gearing or borrowings, driving up property prices and allowing companies to expand and take over competitors. All this relied on cheap and available credit, which evaporated quickly once asset prices started to fall and lenders grew fearful of defaults and the quality of pledged assets. This unwinding of credit has proved to be more widespread and rapid than predicted and probably has further to go. At first the effects were limited to closely held financial instruments but quickly the de-leveraging began to contaminate assets over ever wider circles.  Iceland was probably the highest profile victim, forced to call on the aid of the IMF to bail out their economy.

The measures currently being taken to restore stability are unprecedented in scale and will help in due course, but the unexpected consequences of recent government actions will have to be carefully considered. Previous periods of monetary expansion have driven inflation higher, while increased regulation could stifle enterprise. Interest rates have been cut to nominal levels and yet there is little appetite to borrow; companies in particular are desperate to reduce debt in order to restore investors' confidence in their survival.

With regard to the portfolio, the impact has been felt in lower equity and bond prices. The equities in the portfolio have actually outperformed the FTSE All-Share over the year, admittedly only a small achievement in the face of the absolute falls in prices but it is clear that dividend paying shares are coming back into favour. The underperformance of smaller and mid-sized companies has eased towards the end of the year and now they are rated at a significant valuation discount to the larger companies. Valuation measures based on dividend yield and P/E are proving difficult to rely on because of the dramatic downgrades to earnings. Analysts have recently been too optimistic of future prospects and have now turned resolutely pessimistic, and could be similarly wrong in their current outlook.

The two major reasons for underperforming our benchmark by such a large degree this year have been the collapse in value of corporate debt compared with government gilts and our gearing. In more normal economic slowdowns, the bonds would be expected to increase in value as interest rates are cut. Much of the corporate debt market (two-thirds) is issued by financial companies and our portfolio mirrors this mix. Financial debt has fallen to levels not witnessed before and assumes that defaults rise above 50%, twice the level of failure during the 1930s.  

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Investment Review (continued)

Liquidity in corporate bonds has completely dried up, as new issues are either government guaranteed or rank above existing debt. We feel there is a great store of value in our bond portfolio but that it will take some time for confidence to return to the market and for yield spreads to narrow. The timely payments of the coupons on the bond investments are critical to supporting our dividends and it has proved difficult to reduce our risk that these payments are deferred, particularly on the banking corporate bonds and preference shares.

A consequence of falling net assets is that gearing rises; however, we have been aiming to keep gearing at the lowest possible levels while not impacting our ability to generate distributable income. We have frequently sold assets to keep gearing around 25% and the absolute level of borrowings (less cash) has reduced from £33m to £21m over the year. Furthermore, we renegotiated our net asset covenant to lower levels and reduced the overall size of our borrowing facility to £45m. Gearing has in the past enhanced both capital and income generation for shareholders but current market conditions have meant that gearing has undermined the Company's capital despite our efforts to reduce borrowings and purchase portfolio protection. 

Portfolio activity

As mentioned earlier, our major concern was not to let gearing rise as the stock market fell and we steadily liquidated assets to reduce borrowings. In an effort to dampen further the effect of falling markets toward the year end we decided to purchase a limited amount of portfolio protection. Buying protection is very expensive, given the recent volatility of markets, and to offset the high cost of FTSE 100 index puts we sold FTSE 100 index call options at higher strike prices than the market level. These put options should increase in value if the FTSE 100 falls and will partially act to offset a further fall in asset prices. At the year end, the value of these derivative hedges was £57,000. They expired in January and we rolled some of them into March and June 2009. 

There has been limited activity in the bond portfolio, although we have broadened the list to include more non-financial names such as Rexam and Imperial Tobacco. The corporate bond market has traded very little over the year and this has limited our ability to reduce financial bond exposure, but we made sales when we could in the second half of the year. We recognised that we were carrying significant overall exposure to UK banks and heavily reduced equity exposure via sales of all UK names (HSBC, Barclays, HBOS and Royal Bank of Scotland). The UK banks have traditionally been the core of income funds, but those days have gone and we only retain a Barclays convertible (yielding 9.75%), HSBC and a small Lloyds position. The economy needs banks to be profitable in order to lend money but their capital base continues to erode and it is difficult to second guess what action the government intends to take with regard to their capital structure.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Investment Review (continued)

Also within financials we have kept faith in our positions of both life assurance and general insurance. The latter has been easiest to justify, with insurance rates across most lines of business rising again. The withdrawal of capital, bigger than expected hurricane losses and the demise of AIG have provided a great opportunity for Lloyds of London to return to its dominant position for global insurance. The great risk is that the sector raises too much capital as premium rates rise but hopefully there will be significant growth opportunities. We increased positions in Catlin, an insurance company, and also Jardine Lloyd Thompson, the insurance broker. The life assurance sector has been more difficult, as investors have feared that their capital positions will come under pressure if corporate bond defaults rise. Our faith in this sector is certainly being tested in these markets and we have been rotating the positions to take advantage of the volatility and tried to reinvest at lower prices when they arise.

In a market where capital was becoming scarce and increasingly expensive, any sector that relied on the availability of cheap capital was going to suffer. We took the view that the property sector was just such a case and that property values would be under considerable pressure. The conversion of most UK property companies to tax advantaged REITs was supposed to increase dividends but the increased profits were ploughed back into new developments. We made sales of holdings in Great Portland, Land Securities and Mapeley over the year and retained only a small exposure to UK property. The sector has struggled with excessive levels of debt and needs to be recapitalised with new equity before it becomes attractive, at which point we would hope to find dividend yields above 7%.

Finding reliable dividends has been challenging and we have been quick to reduce holdings when dividends are cut or passed. Companies where we expect dividends to be maintained should ultimately attract investors and re-rate positively. We have favoured companies such as Vodafone, where cash flow has held up well and debt has been reduced significantly from the acquisition days earlier in the decade.  Other sectors where we feel dividends should be maintained include tobacco, utilities and the oil majors. However, the poor economic environment and in particular the difficulty in refinancing debt, is forcing difficult decisions on even good companies, an example being our holding in Wetherspoon (J.D.), the pub operator, which is trading well but has a debt refinancing shortly that may prove expensive to roll over and therefore management have decided to stop dividends in order to repay debt. Ultimately the group will be on a stronger financial footing and indeed the share price has recovered but sadly we no longer have a dividend. It may be that others follow this example but we encourage management to strike a balance between dividends, debt reduction and sustaining capital expenditure for growth.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Investment Review (continued)

There has been a temptation to buy back into industrials and cyclicals, as yields look high but these sectors have experienced the largest number of dividend cuts. There is great value appearing in these areas, particularly when evaluated against a measure such as price to sales but profitability is low, as would be expected at this point in the economic cycle. It is likely that economic activity remains subdued for longer than expected and as such we are maintaining a watching brief on economically sensitive investment opportunities rather than trying to catch them early. We remain nervous of the mining sector but note that capacity is being cut and more discipline being shown. Nevertheless, dividend yields are not quite at attractive levels yet.

Outlook

Share prices can be explained as a function of fundamentals and sentiment. Fundamentals reflect the prospects for a company: its ability to grow, generate profits and increase dividends. Sentiment, meanwhile, is far more difficult to quantify and has a wide range swinging between greed and fear, at times obscuring the fundamentals. We currently exist in a world driven by fear of economic depression and a collapse of confidence in the banking system. Fundamentals have undoubtedly deteriorated rapidly but economies do recover over time and have done in the past from far tougher economic conditions than we are experiencing today. The decade encapsulating the 1930s depression and collapse in share prices was truly painful for investors, just as this decade is proving to be, but the decade following the 1930s produced average annualised returns of 9% in the USA and the world did not end despite a World War involving most nations.

Long-term studies of share price returns over many decades show that dividends and their reinvestment make up over two-thirds of investors' returns from equity investment. Our investment strategy is being tested by the cuts to dividends but we remain convinced that a portfolio of companies which continue to pay dividends will be rewarding. Our shorter-term strategy is currently orientated to maintain, as best we can, the generation of income by the portfolio without taking on increased levels of risk. However, we can only distribute the income we receive before dipping into our revenue reserves to make up any shortfall, and the payments of the coupons on our fixed interest holdings are vital to maintaining sufficient distributable income. We believe that share prices based purely upon fundamentals are cheap, but that the current fearful state of investors will prevail until signs of a bottom to the economic downturn are apparent.  If stability, or at least an easing in the pace of earnings downgrades, can be found, then the upward movement in share prices could surprise many, as liquidity is currently scarce and there will be few sellers into rising prices.

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Investment Review (continued)

It is tempting fate to say that we see green shoots of recovery, as corporate failures and bad news historically peak well after markets have usually risen from their lows. There is much to fear but we are now nearly two years into this downturn and there are pockets of optimism: the housing market is showing early signs of buyers returning and surveys of manufacturing indicate that December was the low point with modest recovery since. Finally, governments do at last understand that it is solvency and not liquidity that is the root problem in the financial system and many more programmes will be announced to improve the solvency of the banks. There is value in our investments and we hope it is sooner rather than later that markets stabilise and share prices recover, reflecting fundamentals rather than fear.

Alex Crooke

Portfolio Manager

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Related party transactions

Investment management, accounting, company secretarial and administration services and UK custody services are provided to the Company by wholly-owned subsidiary companies of Henderson Global Investors (Holdings) plc ("Henderson") and by BNP Paribas Securities Services. These are the only related party transactions currently in place. There have been no material transactions with these related parties affecting the financial position or performance of the Company during the year under review. Overseas custody services are provided by J P Morgan Chase Bank N.A.

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.

● Portfolio and market

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.

● Regulatory risks

A breach of Section 842 of the Income and Corporation Taxes Act 1988 could 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 Acts 1985 and 2006 could lead to criminal proceedings, or financial or reputational damage. The Manager has contracted to provide investment, company secretarial administration and accounting services through qualified professionals. The Board receives internal control reports produced by the Manager on a quarterly basis, which confirm regulatory compliance.

● 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. Details of these risks and how they are managed are contained in note 13 in the annual report.

● 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 2008

Income Statement

for the year ended 31 December 2008

	Year ended 31 December 2008			Year ended 31 December 2007
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Losses on investments held  at fair value through  profit or loss (note 2)	-	(54,313)	(54,313)	-	(12,251)	(12,251)
Income from investments held  at fair value through  profit or loss (note 3)	9,062	-	9,062	7,901	-	7,901
Other interest receivable and  Similar income (note 4)	289	-	289	50	-	50
	----------	----------	----------	----------	----------	----------
Gross revenue and capital losses	9,351	(54,313)	(44,962)	7,951	(12,251)	(4,300)
Management and performance fees (note 5)	(358)	(537)	(895)	(366)	(715)	(1,081)
Write-back of prior years' VAT (note 8)	39	58	97	230	800	1,030
Other administrative expenses	(276)	-	(276)	(270)	-	(270)
	----------	----------	----------	----------	----------	----------
Net return/(loss) on ordinary activities before finance costs and taxation	8,756	(54,792)	(46,036)	7,545	(12,166)	(4,621)
Finance costs	(428)	(1,285)	(1,713)	(484)	(1,453)	(1,937)
	----------	----------	----------	----------	----------	----------
Net return/(loss) on ordinary  activities before taxation	8,328	(56,077)	(47,749)	7,061	(13,619)	(6,558)
Taxation on net return on ordinary activities	(724)	724	-	(414)	408	(6)
	----------	----------	----------	----------	----------	---------
Net return/(loss) on ordinary  activities after taxation	7,604	(55,353)	(47,749)	6,647	(13,211)	(6,564)
	======	======	======	======	======	======
Return/(loss) per ordinary share (note 6)	8.90p	(64.79p)	(55.89p)	8.26p	(16.42)p	(8.16)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 2008

Reconciliation of Movements in Shareholders' Funds

for the year ended 31 December 2008

Year ended 31 December 2008	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
	=====	=====	=====	=====	=====	=====
Year ended 31 December 2007	Share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 31 December 2006	3,484	28,288	26,302	64,773	3,790	126,637
Net (loss)/return on ordinary activities  after taxation	-	-	-	(13,211)	6,647	(6,564)
Issue of new shares	807	28,761	-	-	-	29,568
Issue costs	-	(172)	-	-	-	(172)
Shares repurchased	-	-	-	(596)	-	(596)
Third interim dividend (2.015p per share) for the year ended 31 December 2006 paid 31 January 2007	-	-	-	-	(1,404)	(1,404)
Fourth interim dividend (2.015p per share) for the year ended 31 December 2006 paid 30 April 2007	-	-	-	-	(1,404)	(1,404)
First interim dividend (2.015p per share) for the year ended 31 December 2007 paid 31 July 2007	-	-	-	-	(1,730)	(1,730)
Second interim dividend (2.015p per share) for the year ended 31 December 2007 paid 31 October 2007	-	-	-	-	(1,730)	(1,730)
	---------	---------	---------	---------	---------	---------
At 31 December 2007	4,291	56,877	26,302	50,966	4,169	142,605
	=====	=====	=====	=====	=====	=====

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Balance Sheet

at 31 December 2008

	2008 £'000	2007 £'000
Fixed asset investments held at fair value  through profit or loss	106,000	173,662
	----------	----------
Current assets
Debtors	3,018	2,604
Cash at bank	3,198	58
	----------	----------
	6,216	2,662
Creditors: amounts falling due within one year	(24,452)	(33,719)
	----------	----------
Net current liabilities	(18,236)	(31,057)
	----------	----------
Total assets less current liabilities	87,764	142,605
	======	======
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	(4,387)	50,966
Revenue reserve	4,681	4,169
	----------	----------
Equity shareholders' funds	87,764	142,605
	======	======
Net asset value per ordinary share (note 7)	102.73p	166.91p
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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Cash Flow Statement

for the year ended 31 December 2008

	2008 £'000	2008 £'000	2007 £'000	2007 £'000
Net cash inflow from operating activities (note 9)		7,772		5,195
Servicing of finance
Bank overdraft and loan interest paid		(1,750)		(1,940)
Financial investment
Purchases of investments	(32,229)		(37,541)
Sales of investments	45,434		36,871
	-----------		-----------
Net cash inflow/(outflow) from financial investment		13,205		(670)
Equity dividends paid		(7,092)		(6,268)
		-----------		-----------
Net cash inflow/(outflow) before financing		12,135		(3,683)
Financing
Issue of shares for cash	-		1,233
Share issue expenses	-		(172)
Repurchase of  shares	-		(596)
Repayment of loans	(8,997)		(999)
	----------		-----------
Net cash outflow from financing		(8,997)		(534)
		----------		----------
Increase/(decrease) in cash in the year		3,138		(4,217)
		======		======
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash as above		3,138		(4,217)
Cash outflow from repayment of loans		8,997		999
Exchange movements		37		35
		----------		----------
Movement in net debt		12,172		(3,183)
Net debt at 1 January		(33,059)		(29,876)
		----------		----------
Net debt at 31 December		(20,887)		(33,059)
		======		======

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  Page 15

HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Notes:

1.    Basis of accounting

This announcement has been prepared on the historical cost basis of accounting, modified to include the revaluation of investments. The accounts have been prepared in accordance with applicable accounting standards and with the Statement of Recommended Practice Financial Statements of Investment Trust Companies ("the SORP") dated December 2005. All of the Company's operations are of a continuing nature.

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

	2008 £'000	2007 £'000
Realised (losses)/gains based on historical cost	(4,306)	2,582
Less: amounts recognised as unrealised in previous years	(6,915)	(5,566)
	---------	---------
Realised losses based on carrying value at the previous balance    sheet date	(11,221)	(2,984)
Net movement in unrealised appreciation	(43,129)	(9,302)
Net foreign exchange movement	37	35
	---------	---------
	(54,313)	(12,251)
	=====	=====

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

	2008 £'000	2007 £'000
Franked:
Listed - dividends	5,751	5,709
	---------	---------
Unfranked:
Listed - interest income	1,822	1,558
- dividend income	1,462	634
- stock dividends	27	-
	---------	---------
	3,311	2,192
	---------	---------
	9,062	7,901
	=====	=====

4. Other interest receivable and similar income

	2008 £'000	2007 £'000
Bank interest	40	48
Underwriting commission	65	2
Interest on VAT repayment (see note 8)	184	-
	---------	---------
	289	50
	======	======

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Notes (continued)

5. Management and performance fees

	2008			2007
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Management fee	179	537	716	166	499	665
Accounting, secretarial  and administration	179	-	179	166	-	166
Performance fee	-	-	-	-	165	165
Irrecoverable VAT thereon	-	-	-	34	51	85
	-------	--------	-------	-------	-------	---------
	358	537	895	366	715	1,081
	====	====	====	====	====	=====

6.    Loss per ordinary share

The loss per ordinary share is based on the loss attributable to the ordinary shares of £47,749,000 (2007: £6,564,000) and on the 85,435,744 weighted average number of ordinary shares in issue during the year (2007: 80,453,000).

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

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

	2008 £'000	2007 £'000
Net revenue return	7,604	6,647
Net capital loss	(55,353)	(13,211)
	----------	----------
Net total loss	(47,749)	(6,564)
	======	=====
Weighted average number of ordinary shares in issue during the year	85,435,744	80,453,000
	Pence	Pence
Revenue return per ordinary share	8.90	8.26
Capital loss per ordinary share	(64.79)	(16.42)
	----------	---------
Total loss per ordinary share	(55.89)	(8.16)
	======	=====

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 £87,764,000 (2007: £142,605,000) and on the 85,435,744 ordinary shares of 5p in issue (excluding treasury shares) at 31 December 2008 (2007: 85,435,744 ordinary shares of 5p).

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HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Notes (continued)

8.    Value Added Tax

In 2004 the Association of Investment Companies (the "AIC"), together with JPMorgan Claverhouse Investment Trust plc, launched a case against HM Revenue & Customs ("HMRC") to challenge whether the 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 judgement 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. 

In accordance with a standstill agreement reached between the Manager and the Company the Manager (Henderson Global Investors Limited) has reclaimed from HMRC the amount of VAT charged to the Company in respect of investment management services from 1 October 2000 to 30 June 2007. An amount of £1,030,000 was written back in the accounts for the previous year.  

Since year end the Manager has now reached agreement with HMRC and the Company has received an amount of £1,127,000 in respect of the above period. Accordingly, an additional £97,000 has been recognised in this year's income statement.  This write-back has been allocated between revenue return and capital return according to the allocation of the amounts originally paid.

The Company will receive from the Manager any interest paid by HMRC on the amounts recovered. The Board has therefore included an estimate of £184,000 in "Other interest receivable and similar income" in the income statement.  This has been allocated to revenue return.

The Company expects to be able to reclaim VAT paid in respect of the period from 1 January 1990 to 4 December 1996, following the judgement of the House of Lords in a case concerning the time limits applicable to VAT claims. However, the Board considers that it is premature to incorporate an estimate of repayment at this stage.  At this stage the potential for recovery of VAT paid in the period from December 1996 to September 2000 appears remote. 

9. Reconciliation of net loss on ordinary activities before finance costs and taxation to net cash

   inflow from operating activities

	2008 £'000	2007 £'000
Net loss before finance costs and taxation	(46,036)	(4,621)
Losses on investments held at fair  value through  profit or loss	54,313	12,251
Increase in accrued income and debtors of a revenue nature	(443)	(1,472)
Decrease in creditors	(35)	(959)
Withholding tax recovered	-	9
Tax on investment income	-	(13)
Stock dividends included in investment income	(27)	-
	--------	---------
Net cash inflow from operating activities	7,772	5,195
	=====	=====

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  Page 18

HENDERSON HIGH INCOME TRUST PLC

Annual Financial Results for the year ended 31 December 2008

Notes (continued)

10. Proposed dividends

A third interim dividend of 2.075p per ordinary share of 5p (2007: 2.075p per ordinary share of 5p) was paid on 30 January 2009.

A fourth interim dividend of 2.075p per ordinary share of 5p (2007: 2.075p per ordinary share of 5p) will be paid on 30 April 2009 to shareholders on the register on 3 April 2009. The shares will be quoted ex-dividend from 1 April 2009.

11. 2008 Financial Information

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

12. 2007 Financial Information

The figures and financial information for 2007 are extracted from the published Annual Report and Accounts for the year ended 31 December 2007 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.

13. Annual Report and Accounts

The Annual Report and Accounts will be posted to shareholders on 30 March 2009 and will be available on the Company's website (www.hendersonhighincome.com) or in hard copy format from the Company's Registered Office, 201 Bishopsgate, London, EC2M 3AE. 

The Annual General Meeting will be held on Tuesday 5 May 2009 at 12.00 noon.

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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