Annual Financial Report

Henderson High Income Trust PLC

28 March 2024

 

LEGAL ENTITY IDENTIFIER: 213800OEXAGFSF7Y6G11

HENDERSON HIGH INCOME TRUST PLC

Financial results for the year ended 31 December 2023

This announcement contains regulated information

PERFORMANCE HIGHLIGHTS
Total return performance to 31 December	One year %	Five years %
Benchmark1	8.1	31.0
NAV2	9.8	43.6
Share price3	0.9	33.6
FINANCIAL HIGHLIGHTS	2023	2022
NAV per share4	169.58p	164.24p
Mid-market price per share	156.50p	165.25p
Revenue return per share	10.39p	10.37p
Net assets	£222.3m	£214.3m
Dividend for the year	10.35p	10.15p
Dividend yield5	6.6%	6.1%
Ongoing charge for the year6	0.86%	0.84%
Gearing	21.4%	21.4%

1	The benchmark is a composite of 80% of the FTSE All-Share Index (total return) and 20% of the ICE BofA Sterling Non-Gilts Index (total return) rebalanced annually
2	Net asset value with debt at fair value per ordinary share total return (including dividends reinvested and excluding transaction costs)
3	Includes dividends reinvested
4	Net asset value with debt at fair value as published by the Association of Investment Companies (AIC)
5	Based on the dividends paid or announced for the year and the share price at the year-end
6	Calculated using the methodology prescribed by the AIC
	Sources: Morningstar Direct, Janus Henderson Investors. All data is either as at 31 December 2023 or for the year-ended 31 December 2023.

CHAIRMAN'S STATEMENT Performance 2023 was generally a positive year for investment returns. The Company's Net Asset Value (NAV) Total Return was +9.8% compared with the benchmark return of +8.1%, an outperformance of +1.7%. The Company's share price total return was less impressive at +0.9%, with the share price ending the year at a discount to NAV of 7.7% (having started 2023 at a small premium of +0.6%), compared with the average discount for the UK equity income sector of 5.7% at the end of 2023. The year was characterised by considerable volatility within financial markets. Centre stage were elevated inflation levels and correspondingly higher interest rates as policy makers around the globe focused on trying to tame pricing pressure and strong wage settlements. As the year unfolded it became clear that inflation may have peaked and investors began to focus on the likelihood that interest rates could start to fall during 2024. The backdrop of rising geopolitical tensions also contributed to the volatility in markets, not least due to the impact of continuing energy price pressure and firmer global shipping costs. However as 2023 progressed energy prices started to fall significantly which helped inflation forecasts to soften. Against this volatile backdrop, returns from equities were generally superior to fixed interest investments as company profits and dividend payouts remained robust and investors were focused more on the ability of equities to provide greater protection against the impact of inflation. The Company's outperformance during the year of +1.7% versus the benchmark (80% FTSE All-Share Index, 20% ICE BofA Sterling Non-Gilts Index) was mainly due to good equity stock selection and a positive contribution from gearing. Dividends The Company's investment objective is to provide investors with a high dividend income stream while also maintaining the prospect of capital growth. As highlighted in my statement in 2022, a period of higher inflation makes this objective even more important for shareholders. The relatively resilient performance of UK companies, which continue to represent the large majority of the Company's investments, in 2023 and their ability to pay out healthy dividends ensured that the Company was able to provide a high level of income to shareholders during the year whilst also enabling a small amount to be added to reserves. At the end of 2023, the Company held approximately £8.9 million in revenue reserves which equates to 6 months of cover over the full year dividend on the enlarged shareholder base (following the combination with Henderson Diversified Income Trust plc, the details of which are below). During 2023 the Board recommended the payment of dividends totalling 10.35 pence per share, an increase of 2.0% over the payment in 2022. This increase represented the 11th consecutive year of dividend growth from the Company. The Board spends a considerable amount of time throughout the year focusing on the prospects for future income levels and the impact on dividends, based on detailed forecasts which the Company's Fund Manager regularly updates. The Board remains confident that the Company can continue to deliver a high level of income to shareholders. Gearing The Company's policy on gearing is provided in the Annual Report. With the cost of borrowing increasing sharply in 2023, the Board regularly reviewed the level of gearing with the Fund Manager during the course of the year to evaluate whether it remained appropriate and at a level commensurate with achieving targeted income levels. During 2023 overall borrowings and gearing remained consistent with 2022. As a percentage of net assets, gearing finished the year at 21.4%, in line with the level at the start of the year. Overall asset allocation changed little during the year with the Company continuing to favour equities over fixed interest investments. Compared with its benchmark of 80% equities/20% bonds, the Company had a weighting of around 89% in equities and 11% in bonds at the year end. In December 2023 the Company renewed its bank borrowings, agreeing a committed loan facility of £45 million with BNP Paribas, London Branch. This facility included the option to increase borrowings by a further £25 million, up to £70 million, of which an extra £15 million was utilised in January 2024 following the combination with Henderson Diversified Income Trust plc. The facility has a duration of 12 months and the terms on which the facility was agreed were competitive. Combination with Henderson Diversified Income Trust plc In October the Board announced that it had agreed terms with the Board of Henderson Diversified Income Trust plc (HDIV) in respect of a proposed combination of HDIV with the Company, which if approved by each company's shareholders, would be effected by way of a Scheme of reconstruction and winding up of HDIV under Section 110 of the Insolvency Act 1986. I am very pleased to say that the combination was approved by both companies' shareholders and as a result investors representing approximately 55% of HDIV's shares became shareholders in the Company in January 2024. This meant that the Company was able to issue some £72 million of new shares which will improve the liquidity and marketability in the Company's shares and also help to spread the Company's fixed costs across a larger shareholder base which is in the interests of all our shareholders. On behalf of the Board, I would like to extend a warm welcome to new shareholders. Responsible Investment Responsible investing relates to how environmental, social and corporate governance (ESG) factors impact a company over the long term.  Analysis of the resilience of a business and its profits has always been at the core of the Company's investment strategy, and ESG factors are fully integrated into the investment processes employed by the Fund Manager. The Board believes that voting the Company's shareholdings at general meetings is essential to good corporate stewardship and is an effective means of expressing its views on the policies and practices of its investee companies. Voting decisions reflect the provisions of Janus Henderson's ESG Corporate Statement and ESG Investment Principles which are publicly available at www.janushenderson.com and records the high standards of corporate behaviour that are expected. Ultimately, however, our Fund Manager makes the final decision after consultation with the Board, as necessary. Janus Henderson will actively engage with those companies that fall below such expectations to encourage improvement over time. The final sanction is the divestment of those holdings that fail to make an acceptable transition and adapt sufficiently. The Board monitors the process by reviewing a report on the Company's voting pattern on an annual basis. For an overview on how Janus Henderson engaged with companies in which the Company is invested, please refer to the ESG Section in the Annual Report. AGM We look forward to seeing as many of our shareholders as possible at our AGM which will be held at 12 noon on Tuesday, 14 May 2024 at the offices of Janus Henderson at 201 Bishopsgate, London EC2M 3AE. David Smith, the Company's Fund Manager, will give a presentation on the Company's portfolio and performance, and you will, as usual, have the opportunity to talk to the Board, David and other Janus Henderson representatives. We very much welcome your comments and questions at the AGM and we would encourage those of you who are unable to attend in person to use your proxy votes and to watch the AGM live by logging onto www.janushenderson.com/trustslive. Prospects and Outlook The key drivers for investment markets in 2024 will be the path of global interest rates in response to the level of inflation and the outlook for corporate profits as companies respond to rising costs. Generally, global economic activity remains relatively robust against the backdrop of higher borrowing costs, with overall levels of corporate profitability and consumer demand resilient, albeit China's recovery from the pandemic continues to disappoint. Investors believe that inflation will soften appreciably by the middle part of the year, driven not least by lower energy costs, enabling policy makers to begin reducing interest rates and helping to achieve a relatively soft landing for global economies. Policy makers are, however, continuing to caution against a rapid reduction in interest rates as service sector inflation remains too high in the West, and increasing geopolitical tensions may lead to persistently higher shipping costs. In addition, there are upcoming electoral issues to be mindful of, particularly in the US and of course the UK. Your Company holds the large majority of its investments in UK companies. The relative valuation of the UK equity market continues to look attractive when set against other global equity markets and both international and domestic investors have by historic standards a very low exposure to UK assets with the scope for that weighting to increase. Within the portfolio, there is a good balance between larger companies with more international exposure and attractively valued smaller and medium sized UK companies which stand to benefit if the outlook for UK activity starts to improve.  As ever the Board and the Fund Manager remain focused on the Company's primary investment objective of continuing to deliver a high level of income for shareholders while also targeting longer term capital growth. Jeremy Rigg Chairman 27 March 2024

Fund Manager's Report Market review The UK equity market produced positive returns during the year, with the FTSE All-Share Index up by 7.9% on a total return basis. Falling inflation and a pause in interest rate hikes by central banks, especially the US, UK and Europe, were the main driving forces for equity returns in 2023. Inflation in the UK (as measured by CPI), which started the year at 9.2%, fell to 4.2% by December, benefitting from lower energy prices, the loosening of supply chains and fading food price inflation. The Bank of England increased interest rates five times in the year to reach 5.25% by August, before pausing. The UK economy weakened during the year and slipped into a technical recession in the fourth quarter, albeit GDP growth was only modestly negative. The UK market performance was fairly broad based with the mid-cap FTSE 250 (+8.0%) marginally outperforming the larger-cap FTSE 100 (+7.9%). However, the vast majority of performance from medium sized companies came in the fourth quarter as markets reacted positively to inflation falling more than expected in October. Despite the recent rebound in that area of the market, it has still significantly underperformed mega cap companies (the largest 20 companies in the UK) over the past two years. Cyclical sectors performed best over the year with financials, industrials and consumer discretionary outperforming, while defensive sectors such as health care, consumer staples and telecommunications lagged. Despite the fall in the oil price during the year, due to concerns over Chinese demand given its weakening economy, the oil & gas sector outperformed. The mining sector underperformed in contrast, despite iron ore and copper prices rising, as production issues and cost inflation weighed on sector profits. Bonds were volatile during the year with yields initially rising in the first half of the year to reflect stubbornly high inflation and increased interest rates. The UK 10-year gilt yield rose from 3.7% at the start of the year to reach a peak of 4.7% in August. Despite the hawkish narrative from central bankers globally, bond yields fell dramatically in the fourth quarter as the market started to price in rate cuts in early 2024 given that inflation began to decline below expectations, particularly in North America. The 10-year gilt yield finished the year at 3.5%, albeit it has since risen as markets have had to reassess their estimates of when the first rate cut may come. Both government and corporate bonds produced positive returns for the year after negative returns in the previous two years. Performance review The Company's NAV (debt at fair value) returned 9.8% on a total return basis, outperforming the benchmark's gain of 8.1%. Good stock selection within the equity portfolio drove the outperformance, while gearing also contributed positively. The equity portfolio gained 10.4% on a total return basis during the year, outperforming the FTSE All-Share Index return of 7.9%. The portfolio's holdings in financials 3i and Intermediate Capital were positive for performance. Private equity group 3i benefitted from its portfolio holding in Action, the European discount retailer, which delivered strong profit growth underpinned by its value proposition and its store roll out strategy. Despite a more difficult macro environment, alternative asset manager Intermediate Capital continued to attract inflows with the company delivering its 4-year fundraising target a year ahead of expectations. The portfolio's positions in other consumer stocks that offer value to customers also performed well. B&M European Value Retail saw good growth in volumes benefitting from more cost-conscious consumers given the "cost of living" crisis. Tesco also outperformed with the company's drive to become the cheapest full line grocer producing market share gains, good profit growth and attractive cash flow.  Elsewhere, holdings in Hilton Food Group and RELX also aided performance. Hilton Food Group reported resilient trading in its core meat division, while management action to improve its troubled seafood business showed progress with the business back in profit by the end of the year. RELX announced strong organic growth ahead of its historic average, benefitting from its continued investment in technology tools and analytics. On the negative side the portfolio's holdings in British American Tobacco, Anglo American and NatWest detracted from returns. British American Tobacco announced a payout of $635 million to resolve investigations by the US Department of Justice into the company's historical business activities in North Korea. It also disappointed the market with weaker trading, the suspension of the share buyback and a non-cash impairment charge of £25 billion relating to the Reynolds acquisition in 2017. Anglo American shares were impacted by falling PGM (Platinum Group Metals) prices, while the announced reduction in production guidance towards the end of the year also disappointed investors. Despite higher interest rates, NatWest reported weaker margins given increased competition in savings and mortgage products. The fixed income portfolio rose 4.6% on a total return basis during the year, but this lagged the 8.6% return from the ICE BofA Sterling Non-Gilts Index. The portfolio's exposure to short duration government bonds was detrimental to relative performance given the underperformance of gilts relative to UK corporate bonds. The weakness in the US dollar also created a headwind to relative performance for the US bond holdings. Holdings in high yield bonds, such as Direct Line, Bupa, CenterParcs and Virgin Media, were positive for performance given the more resilient UK economy saw credit spreads tighten during the year. Income review On a headline basis UK market dividends fell 3.7% (according to the Computershare UK Dividend Monitor), however, this was driven by a decline in special dividends versus 2022, and the strength of sterling during the year given the number of large companies that declare their dividends in dollars. On an underlying dividend basis (ex special dividends), aggregate UK market dividends grew 5.4% at constant currency. This was primarily due to good growth in dividends from banks and oil & gas companies. The income return for the Company in 2023 marginally increased to 10.39p per share, from 10.37p in 2022.  Despite income from underlying dividends in the equity portfolio growing 6.8% in the year, there were a number of headwinds which offset this. Special dividends were significantly down from the prior year with only £241,000 earned by the Company versus £1.1 million in 2022.  Given the rise in interest rates during the period, the Company's interest costs charged to income from its revolving credit facility also increased, although income from the bond portfolio also rose given the higher yields available which helped dampen this impact. During the year the Board declared a full year dividend of 10.35p which was fully covered by earnings with £128,000 being added to revenue reserves. This was an increase of 2.0% over the dividend in 2022 (10.15p) and represents the eleventh consecutive year of dividend growth, maintaining the Company's status as an AIC Next Generation Dividend Hero. The dividend has grown at a compound annual growth rate of 2.0% over those 11 years. Revenue reserves as at 31 December 2023 were £8.9 million. Portfolio Activity As at the end of the year gearing was 21.4%, in line with the level as at the end of 2022. A net £4.4 million was added to the bond portfolio taking advantage of the move higher in yields. New positions were initiated in both investment grade and high yield bonds but in typically higher quality, non-cyclical businesses such as Électricité de France (EDF) (European utility), Allwyn Entertainment (European lottery operator) and Banijay Entertainment (TV content creator). In the middle of the year, some of the lowest yielding investment grade bonds in the portfolio were sold, where credit spreads were particularly tight, and reinvested in short dated government bonds, both a UK gilt and a US treasury bond. The bond portfolio represented 12.3% and 14.9% of gross and net assets respectively as at the end of December.  New positions initiated in the equity portfolio included DCC, Conduit Re and Engie. DCC is an international sales, marketing and distribution company operating in the LPG, oil, technology and health care sectors. It is a resilient business with strong free cash flow, high returns and a robust balance sheet which should support further accretive bolt on acquisitions. Engie is a French integrated utility and is a diversified business involved in the generation, distribution and supply of energy in Europe and Latin America. The company has a credible business plan with the build out of its renewable energy project pipeline likely to lead to good earnings growth. Conduit Re is a specialist property and casualty reinsurer with a diversified portfolio of reinsurance risks. Given the capacity that has come out of the reinsurance market after a number of years of large losses, the market is entering a period of strong premium rate rises which should underpin high returns over the medium term. The valuation is attractive with the company trading at a discount to its net asset value. In the second half of the year we started to position the equity portfolio for a cyclical recovery, taking advantage of attractive valuations in more domestic and cyclical businesses on the assumption that interest rates were near peak levels for this cycle. New holdings were initiated in Genuit, Taylor Wimpey and British Land. Genuit is the UK's leading provider of plastic piping systems for residential, commercial and infrastructure sectors. The company is exposed to a number of structural tailwinds enforced by government regulation while new management are restructuring the business to drive cost efficiencies and higher margins over the longer term. Although the outlook for the UK housing market is uncertain, we believed this was already discounted with Taylor Wimpey's share trading at a discount to its book value. The company has a very strong balance sheet and with mortgage rates starting to fall, transaction volumes should start to recover. British Land is a diversified UK commercial real estate company with exposure to London office campuses and wider UK retail exposure. After a number of years of falling prices, we believe that property values have now troughed, especially in retail, while the company is also experiencing a return of rental growth. The valuation is attractive with the shares trading at a significant discount to its net asset value. During the year there was a general trend to lower the Company's exposure to overseas stocks, recognising the relative attractiveness of valuations in the UK market. Holdings in McDonalds and Deutsche Post were sold after a period of outperformance and where we believed the valuations had reached a full level. Also the position in Scandinavian bank Nordea was exited given the fears we had over the health of economies in the region and its exposure to commercial real estate. Elsewhere the holdings in Sage Group, United Utilities and Vistry were also sold. Accounting software company Sage Group had performed well, with the valuation fully discounting a continuation of the company's strong organic growth, which could come under pressure from a slowing macro-economic environment. We believe the next regulatory review period could be difficult for United Utilities given the significant investment needed in waste water infrastructure at a time when there is increased scrutiny on consumer bills, debt levels and dividend payments by the sector, especially with a general election likely this year, which could weigh on the share price. The Company sold its holding in housebuilder Vistry after a change in strategy and capital allocation policy. While we agreed with the change in strategy to focus solely on its Partnership division, which builds affordable housing on a contracted basis, we disagreed with the company's decision to suspend the dividend in favour of buying back shares.  Outlook Over the past two years, global market returns, both equity and bonds, have been shaped by inflation and the sharp rise in interest rates. Now that inflation is falling, the pressure on central banks to keep monetary policy tight is easing which suggests rates could be cut over the next 12 months. While the impact of the significant rise in interest rates on economic growth needs to be carefully watched, consumer borrowings are historically low, corporate balance sheets are robust and the banking sector is well capitalised. With wage growth also likely to outstrip inflation this year, the outlook for the UK economy could be better than current low expectations, albeit still below trend. Similar to the UK, global economic growth is likely to be better this year than expectations a year ago, given that the US economy has proved more resilient. Offsetting this has been China, where economic growth has disappointed despite the government introducing stimulus measures. The US economy should avoid recession this year given manufacturing lead indicators are now recovering and unemployment, albeit rising, is still at low levels.  While a more subdued economic environment, along with higher interest rates and higher costs, is likely to be a headwind for earnings growth, equity valuations in the UK are attractive both versus their own history and relative to global equity markets and we have continued to see overseas buyers make approaches to quoted UK companies. Although one has to be mindful of geopolitical risks, we remain cautiously optimistic that equities can make positive progress over the medium term. As ever the focus remains on finding good quality businesses at a compelling valuation that can pay and grow an attractive dividend. David Smith Fund Manager 27 March 2024

PRINCIPAL RISKS
Principal Risk	Mitigating Measures
Climate Change Risk Risk that investee companies within the Company's portfolio fail to respond to the pressures of the growing climate emergency and fail to limit their carbon footprint to regulated targets, resulting in reduced investor demand for their shares and falling market values.	ESG considerations are a fully integrated component of the investment process. The Fund Manager seeks to understand how a company is managing ESG risks through its policies and processes and where its investments are targeted, to ensure that its business model remains sustainable over the longer term. Please refer to Environmental, Social and Governance Matters in the Annual Report for further details.
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 persistent discount to net asset value and/or reduced liquidity in the Company's shares. Risk that insufficient income generation could lead to a cut in the dividend.	The Manager provides the Board with regular investment performance statistics against the benchmark and the peer group. The implementation of the investment strategy and results of the investment process for which the Fund Manager is responsible, are discussed with the Manager and reviewed at each Board meeting. The premium/discount to net asset value and the trading volume of the Company's shares are also regularly reviewed, taking account of market conditions. The Board regularly reviews and monitors the investment in marketing activities with the Manager. Both the Manager and the Board maintain close contact with the Company's Broker to understand the supply of and demand for shares. The Board reviews the Income Statement and revenue forecasts at each meeting and continually monitors the Company's revenue reserves.
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. Risks associated with rising interest rates and their impact on the broader financial system. These could result in a loss of capital value for shareholders and/or a cut in the dividend payment.	The Board reviews the Company's compliance with its loan covenants (for both the short-term and long-term facilities) on a monthly basis and additional covenant testing is undertaken in extreme market conditions to give comfort that the Company can meet its financial liabilities. 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. The Board reviews the portfolio on a monthly basis. The Manager operates within investment limits and restrictions set by the Board, including limits for gearing and derivatives and confirms compliance with these each month. Any particularly high risks are highlighted and discussed, and appropriate follow up action is taken where necessary. A detailed analysis of the Company's financial risk management policies and procedures can be found in the Financial Risk Management Policies and Procedures note in the Annual Report. The Board reviews the Income Statement and revenue forecasts at each meeting and continually monitors the Company's revenue reserves.

Operational Risks including cyber risks, pandemic risks and epidemic risks and risks relating to terrorism and international conflicts Risk of loss through inadequate or failed internal procedures, policies, processes, systems or human error. This includes risk of loss to the Company's third-party service providers. Risk of financial loss, disruption or damage to the reputation of the Company, the Manager and the Company's other key third-party service providers, as a result of failure of information technology systems. Risk of loss as a result of external events outside of the Board's control such as pandemic and/or epidemic risks and risks relating to terrorism and/or international conflicts that disrupt and impact the global economy. This includes the risk of loss to the Company's third-party service providers that are also disrupted and impacted by such events.

The Board receives a quarterly internal control report from the Manager to assist with the ongoing review and monitoring of the internal control and risk management systems it has in place. The Board regularly receives reports from the Manager's Internal Audit, Risk, Compliance, Information Security and Business Resilience teams. This provides assurance that the Manager has appropriate policies and procedures in place to be able to continue in operation and maintain stability in times of such risks. In particular, the Board asks the Manager to confirm that the Fund Manager can continue to manage the portfolio in these circumstances. The Board makes similar enquiries of its other key third-party service providers to gain assurance that they too have appropriate policies and procedures in place to be able to continue in operation and maintain stability in times of such risks. Please refer to the Internal Control and Risk Management section in the Annual Report for further details.

Tax, 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 1158/9 Corporation Tax Act 2010 which exempts capital gains from being taxed within investment trusts.

The Manager has been 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 tax, legal and regulatory compliance.

Emerging Risks With the help of the Manager's research resources and using its own market intelligence, the Board continually monitors the changing risk landscape and any emerging and increasing threats to the Company's business model. Such emerging risks could cause disruption for the Company if ignored, but if identified could provide business opportunities. Should an emerging risk become sufficiently clear, it may be moved to a principal risk.

VIABILITY STATEMENT The Company seeks to provide superior income generation and long-term capital growth for its shareholders. The Board aims to achieve this by implementing the Company's business model and strategy through the investment objective and policy. The Board will continue to consider and assess how it can adapt the business model and strategy of the Company to ensure its long-term viability in relation to its principal and emerging risks. The Board also considers: ·      the prospects for the Company including the liquidity of the portfolio (which is mainly invested in readily realisable listed securities); ·      the level of borrowings (which are restricted); ·      the closed-end nature as an investment company (therefore there are no issues arising from unexpected redemptions); ·      a low ongoing charge 0.86% for the year-ended 31 December 2023 (2022: 0.84%)); and ·      long-term borrowings in place in the form of the 3.67% senior unsecured loan note which matures in July 2034 (the value of this long-term borrowing is at 8.9% of net assets as at 31 December 2023, relatively small in comparison to the value of total net assets). Furthermore, the Company retains title to all assets held by the Custodian (under the terms of the formal agreement with the Depositary), cash is held with approved banks and revenue and expenditure forecasts are reviewed at each Board meeting. The Fund Manager provides revenue scenario analysis at each Board meeting, modelling revenue forecasts over a five-year time horizon under pessimistic, conservative and optimistic scenarios. This assists the Board in assessing the impact of any dividend decision over the short, medium and long term in various different scenarios. The Company's revenue reserves remain strong with approximately £8.9 million in revenue reserves as at 31 December 2023 providing additional comfort for any difficult years that may arise in the future. The Board believes it is appropriate to assess the Company's viability over a five-year period in recognition of its long-term horizon and taking account of the Company's current position and the assessment factors detailed above. When assessing the viability of the Company over the next five years the Directors considered its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's borrowing facilities and how a breach of any loan covenants could impact on the Company's net asset value and share price. The Directors also considered the impact of a global recession, rising inflation and risks associated with geopolitical conflicts. Whilst these currently present uncertainty and volatility in financial markets, they do not threaten the Company's viability. The Board does not envisage any change in strategy or investment objective, or any events that would prevent the Company from continuing to operate over the next five years as the Company's assets are liquid, its commitments are limited, and the Company intends to continue to operate as an investment trust. The Board notes the Company's next continuation vote is due to take place at the AGM in 2025. In 2023 the Board received feedback from the Fund Manager and the Janus Henderson Investment Trust Sales Team on meetings held with shareholders. The feedback suggested that the shareholders were supportive of the Company continuing in operation. The Board remains confident that shareholders remain supportive of the Company. The Board takes comfort in the robustness of the Company's position, performance, liquidity and the well-diversified portfolio, as well as the Fund Manager's monitoring of the portfolio and therefore has a reasonable expectation that the Company will continue in operation and meet its liabilities as they fall due up to and including the year-ending 31 December 2028. RELATED PARTY TRANSACTIONS The Company's transactions with related parties in the year were with the Directors and the Manager. There have been no material transactions between the Company and its Directors during the year. The only amounts paid to them were in respect of remuneration for which there were no outstanding amounts payable at the year-end. Directors' interests in shares are disclosed in the Directors' Remuneration Report in the Annual Report. In relation to the provision of services by the Manager (other than fees payable by the Company in the ordinary course of business and the provision of marketing services) there have been no material transactions with the Manager affecting the financial position or performance of the Company during the year under review. More details on Transactions with Janus Henderson and Related Parties including amounts outstanding at the year-end, are given in Note 21 to the financial statements within the Annual Report. STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS Each of the Directors, whose names and functions are listed in the Board of Directors section within the Annual Report confirm that, to the best of their knowledge: ·      the Company's financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102, give a true and fair view of the assets, liabilities, financial position and profit 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 Jeremy Rigg Chairman 27 March 2024

AUDITED INCOME STATEMENT

	Year-ended 31 December 2023			Year-ended 31 December 2022
	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Gains/(losses) on investments held at fair value through profit or loss (note 2)	-	10,620	10,620	-	(22,469)	(22,469)
Income from investments held at fair value through profit or loss (note 3)	14,859	-	14,859	14,632	-	14,632
Other interest receivable and similar income	538	-	538	307	-	307
	-----------	-----------	-----------	-----------	-----------	-----------
Gross revenue and capital gains/(losses)	15,397	10,620	26,017	14,939	(22,469)	(7,530)
	-----------	-----------	-----------	-----------	-----------	-----------
Expenses
Management fee (note 5)	(565)	(846)	(1,411)	(557)	(836)	(1,393)
Other administrative expenses	(456)	-	(456)	(498)	-	(498)
	-----------	-----------	-----------	-----------	-----------	-----------
Net return before finance costs and taxation	14,376	9,774	24,150	13,884	(23,305)	(9,421)
Finance costs	(646)	(1,938)	(2,584)	(380)	(1,140)	(1,520)
	-----------	-----------	-----------	-----------	-----------	-----------
Net return before taxation	13,730	7,836	21,566	13,504	(24,445)	(10,941)
Taxation on net return	(247)	101	(146)	(81)	-	(81)
	-----------	-----------	-----------	-----------	-----------	-----------
Net return after taxation	13,483	7,937	21,420	13,423	(24,445)	(11,022)
	-----------	-----------	-----------	-----------	-----------	-----------
Return/(loss) per ordinary share (note 6)	10.39p	6.11p	16.50p	10.37p	(18.89p)	(8.52p)
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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.

AUDITED Statement of CHANGES IN EQUITY

Year-ended 31 December 2023	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 2023	6,490		128,827		26,302		43,870		8,788		214,277
Net return after taxation	-		-		-		7,937		13,483		21,420
Dividends paid (note 9)	-		-		-		-		(13,355)		(13,355)
	--------		-----------		---------		---------		-----------		----------
At 31 December 2023	6,490		128,827		26,302		51,807		8,916		222,342
	=====		======		======		=====		=====		======
Year-ended 31 December 2022	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 2022	6,430		126,783		26,302		68,315		8,404		236,234
Net return after taxation	-		-		-		(24,445)		13,423		(11,022)
Issue of new shares (note 7)	60		2,044		-		-		-		2,104
Dividends paid (note 9)	-		-		-		-		(13,039)		(13,039)
	--------		-----------		---------		---------		---------		----------
At 31 December 2022	6,490		128,827		26,302		43,870		8,788		214,277
	=====		======		======		=====		=====		======

AUDITED STATEMENT OF FINANCIAL POSITION

	At 31 December 2023 £'000		At 31 December 2022 £'000
Fixed assets
Investments held at fair value through profit or loss	270,007		260,053
	--------------		--------------
Current assets
Debtors	2,092		1,928
Cash at bank and in hand	1,990		2,873
	--------------		--------------
	4,082		4,801
	--------------		--------------
Creditors: amounts falling due within one year	(31,880)		(30,719)
	--------------		--------------
Net current liabilities	(27,798)		(25,918)
Total assets less current liabilities	242,209		234,135
	--------------		--------------
Creditors: amounts falling due after more than one year	(19,867)		(19,858)
	--------------		--------------
Net assets	222,342		214,277
	========		========
Capital and reserves
Called up share capital (note 7)	6,490		6,490
Share premium account	128,827		128,827
Capital redemption reserve	26,302		26,302
Other capital reserves	51,807		43,870
Revenue reserve	8,916		8,788
	--------------		--------------
Total shareholders' funds	222,342		214,277
	========		========
Net asset value per ordinary share (basic and diluted) (note 8)	171.30p ========		165.09p ========

AUDITED Statement of Cash Flows

	Year-ended 31 December 2023 £'000	Year-ended 31 December 2022 £'000
Cash flows from operating activities
Net return before taxation	21,566	(10,941)
Add back: finance costs	2,584	1,520
(Less)/add: (gains)/losses on investments held at fair value through profit or loss	(10,620)	22,469
Withholding tax on dividends deducted at source	(146)	(81)
(Increase)/decrease in debtors	(164)	6
(Decrease)/increase in creditors	(337)	287
	--------------	--------------
Net cash inflow from operating activities1	12,883	13,260
	--------------	--------------
Cash flows from investing activities
Sales of investments held at fair value through profit or loss	66,925	60,179
Purchases of investments held at fair value through profit or loss	(67,282)	(51,435)
	--------------	--------------
Net cash (outflow)/inflow from investing activities	(357)	8,744
	--------------	--------------
Cash flows from financing activities
Issue of ordinary share capital	-	2,104
Equity dividends paid	(13,355)	(13,039)
Drawdown/(repayment) of loans	1,649	(11,330)
Interest paid	(2,575)	(1,512)
	--------------	--------------
Net cash outflow from financing activities	(14,281)	(23,777)
	--------------	--------------
Net decrease in cash and cash equivalents	(1,755)	(1,773)
Cash and cash equivalents at beginning of year	2,873	3,942
Exchange movements	872	704
	--------------	--------------
Cash and cash equivalents at end of year	1,990	2,873
Comprising:	--------------	--------------
Cash at bank and in hand	1,990	2,873
	========	========
1 Cash inflow from dividends was £13,528,000 (2022: £13,729,000) and cash inflow from interest was £1,395,000 (2022: £1,093,000).

NOTES TO THE FINANCIAL STATEMENTS 1a. Accounting policies: basis of accounting The Company is an investment company as defined in Section 833 of the Companies Act 2006 and is incorporated in the UK. It operates in England and Wales 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 AIC Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (SORP). 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 Sections 11 and 12 of the standard. All of the Company's operations are of a continuing nature. 1b. Significant judgments and estimates The decision to allocate special dividends as income or capital is a judgment but not deemed to be material. The allocation of expenses as income or capital is not material but has an impact on distributable reserves. The Directors do not consider these to be significant judgments or estimates and do not believe that any accounting judgments or estimates have been applied to this set of financial statements that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. 1c. Going concern 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 23 June 2020. The Directors have considered the risks associated with rising interest rates and its impact on the broader financial system, as well as the risks arising from the wider ramifications of geopolitical conflicts, including cash flow forecasting, a review of covenant compliance including the headroom above the most restrictive covenants and an assessment of the liquidity of the portfolio. They have concluded that they are able to meet their financial obligations, including the repayment of the bank loan, as they fall due for a period of at least twelve months from the date of issuance. Having assessed these factors, the principal risks and other matters discussed in connection with the viability statement, the Board has determined that it is appropriate for the financial statements to be prepared on a going concern basis. 2. Gains/(losses) on Investments Held at Fair Value through Profit or Loss Management fees are charged in accordance with the terms of the management agreement which are set out in the Company's Annual Report for the year-ended 31 December 2023.
										2023 £'000			2022 £'000
Gains on the sale of investments based on historical cost										4,360			1,102
Revaluation gains recognised in previous years										(2,523)			(3,655)
										------------			------------
Gains/(losses) on investments sold in the year based on carrying value at previous Statement of Financial Position date										1,837			(2,553)
										------------			------------
Net movement on revaluation of investments										7,722			(17,748)
Effective yield movement										38			6
Exchange gains/(losses)										1,023			(2,174)
										------------			------------
										10,620			(22,469)
										=======			=======
3.  Income from Investments Held at Fair Value through Profit or Loss										2023 £'000			2022 £'000
UK dividend income - listed										10,612			10,198
UK dividend income - special dividends										119			1,016
										----------			----------
										10,731			11,214
										----------			----------
Interest income - listed										1,328			1,082
Overseas and other dividend income - listed										2,678			2,245
Overseas and other dividend income - special dividends										122			91
										----------			----------
										4,128			3,418
										----------			----------
										14,859			14,632
										======			======
4.   Other Interest Receivable and Similar Income										2023 £'000			2022 £'000
Deposit interest										84			18
Traded option premiums										454			289
										-----			-----
										538			307
										===			===
5.  Management Fee
	2023							2022
	Revenue return £'000	Capital return £'000		Total £'000				Revenue return £'000		Capital return £'000			Total £'000
Management fee	565	846		1,411				557		836			1,393
	=====	=====		=====				=====		=====			=====
A summary of the terms of the Investment Management Agreement is given in the Annual Report. An explanation of the split between revenue and capital is contained in Note 1g to the financial statements in the Annual Report.
6.  Profit/(loss) for the year Profit/(loss) attributable per ordinary share figure is based on the return attributable to the ordinary shares of £21,420,000 (2022 loss: £11,022,000) and on the 129,796,278 weighted average number of ordinary shares in issue during the year (2022: 129,401,141). 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:
										2023 £'000			2022 £'000
Net revenue return										13,483			13,423
Net capital return/(loss)										7,937			(24,445)
										------------			------------
Profit/(loss) for the year										21,420			(11,022)
										=======			=======
Weighted average number of ordinary shares										129,796,278			129,401,141
Revenue return per ordinary share										10.39p			10.37p
Capital return/(loss) per ordinary share										6.11p			(18.89p)
										------------			------------
Profit/(loss) attributable per ordinary share										16.50p			(8.52p)
										=======			=======
7.  Called Up Share Capital
			Shares entitled  to dividend		Total shares in issue				Nominal value in issue £'000
Issued ordinary shares of 5p each At 1 January 2023			129,796,278		129,796,278				6,490
			---------------		----------------				--------
At 31 December 2023			129,796,278		129,796,278				6,490
			---------------		----------------				--------
			Shares entitled  to dividend		Total shares in issue				Nominal value in issue £'000
Issued ordinary shares of 5p each At 1 January 2022			128,596,278		128,596,278				6,430
Issued during the year			1,200,000		1,200,000				60
			---------------		----------------				--------
At 31 December 2022			129,796,278		129,796,278				6,490
			---------------		----------------				--------
During the year the Company issued nil shares (2022: 1,200,000 shares) for net proceeds of £nil (2022: £2,104,000). On 16 January 2024 the Company issued 42,345,422 new shares to Henderson Diversified Income Trust plc (HDIV) shareholders in consideration of the £72.1 million of net assets acquired from HDIV in accordance with the scheme of reconstruction and winding up of HDIV under section 110 of the Insolvency Act 1986. Between 18 January and 27 March 2024, no further shares have been issued. Accordingly, the number of shares in issue with voting rights as at 27 March 2024 was 172,141,700.
8.   Net Asset Value Per Ordinary Share (Basic and Diluted) The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £222,342,000 (2022: £214,277,000) and on the 129,796,278 ordinary shares in issue at 31 December 2023 (2022: 129,796,278). The movements during the year of the assets attributable to the ordinary shares were as follows:
										2023 £'000			2022 £'000
Net assets at start of year										214,277			236,234
Total net return/(loss) after taxation										21,420			(11,022)
Dividends paid in the year										(13,355)			(13,039)
Issue of ordinary shares less issue costs										-			2,104
										------------			------------
										222,342			214,277
										=======			=======
9.   Dividends Paid on Ordinary Shares
							Payment date		2023 £'000			2022 £'000
Fourth interim dividend (2.525p per share) for the year-ended 31 December 2021							28 January 2022		-			3,247
First interim dividend (2.525p per share) for the year-ended 31 December 2022							29 April 2022		-			3,255
Second interim dividend (2.525p per share) for the year-ended 31 December 2022							29 July 2022		-			3,275
Third interim dividend (2.525p per share) for the year-ended 31 December 2022							28 October 2022		-			3,277
Fourth interim dividend (2.575p per share) for the year-ended 31 December 2022							27 January 2023		3,342			-
First interim dividend (2.575p per share) for the year-ended 31 December 2023							28 April 2023		3,342			-
Second interim dividend (2.575p per share) for the year-ended 31 December 2023							28 July 2023		3,342			-
Third interim dividend (2.575p per share) for the year-ended 31 December 2023							27 October 2023		3,342			-
Unclaimed dividends									(13)			(15)
									----------			----------
									13,355			13,039
									======			======
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:
										2023 £'000			2022 £'000
Revenue available for distribution by way of dividend for the year										13,483			13,423
First interim dividend of 2.575p (2022: 2.525p)										(3,342)			(3,255)
Second interim dividend of 2.575p (2022: 2.525p)										(3,342)			(3,275)
Third interim dividend of 2.575p (2022: 2.525p)										(3,342)			(3,277)
Fourth interim dividend 2.625p (2022: 2.575p)										(3,407)			(3,342)
										----------			----------
										50			274
										======			======
In accordance with FRS 102, interim dividends payable to equity shareholders are recognised in the Statement of Changes in Equity when they have been paid to shareholders. All dividends have been paid out of revenue reserves or current year revenue profits and at no point during the year did the revenue reserve move to a negative position.
10. 2023 Financial Information The figures and financial information for the year-ended 31 December 2023 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year-ended 31 December 2023 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditors' Report on the 2023 Financial Statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) and 498(3) of the Companies Act 2006.
11. 2022 Financial Information The figures and financial information for the year-ended 31 December 2022 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year-ended 31 December 2022 have been audited and delivered to the Registrar of Companies. The Independent Auditors' Report on the 2022 Financial Statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) and 498(3) of the Companies Act 2006.
12. Annual Report The Annual Report will be posted to shareholders in April 2024 and will be available at www.hendersonhighincome.com or in hard copy from the Corporate Secretary at the Company's registered office, 201 Bishopsgate, London EC2M 3AE.
13. Annual General Meeting (AGM) The AGM will be held on Tuesday, 14 May 2024 at 12 noon at the Company's registered office, 201 Bishopsgate, London EC2M 3AE. The Notice of Meeting will be posted to shareholders with the Annual Report.
14. General Information a) Company Status The Company is a UK domiciled investment trust company with registered number 02422514. SEDOL/ISIN number: 0958057/GB0009580571 London Stock Exchange (TIDM) Code: HHI Global Intermediary Identification Number (GIIN): JBA08I.99999.SL.826 Legal Entity Identifier (LEI): 213800OEXAGFSF7Y6G11 b) Directors, Corporate Secretary and Registered Office The Directors of the Company are Jeremy Rigg (Chairman), Jonathan Silver (Chairman of the Audit & Risk Committee), Zoe King (Senior Independent Director), Richard Cranfield and Francesca Ecsery. The Corporate Secretary is Janus Henderson Secretarial Services UK Limited, represented by Samantha McDonald, ACG. The registered office is 201 Bishopsgate, London EC2M 3AE.  c) Website Details of the Company's share price and net asset value, together with general information about the Company, monthly factsheets and data, copies of announcements, reports and details of general meetings can be found at www.hendersonhighincome.com
For further information please contact:
David Smith Fund Manager Janus Henderson Investors Telephone: [phone]
Dan Howe Head of Investment Trusts Janus Henderson Investors Telephone: [phone] Harriet Hall PR Director, Investment Trusts Janus Henderson 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) are incorporated into, or form part of, this announcement.

 

END