Henderson High Income Trust – Final Results

PERFORMANCE HIGHLIGHTS

Total return performance to 31 December	One year %	Five years %
Benchmark1	7.9	20.6
NAV2	9.4	25.1
Share price3	10.8	16.5
FINANCIAL HIGHLIGHTS	2024	2023
NAV per share4,7	174.72p	169.58p
Mid-market price per share	162.50p	156.50p
Revenue return per share	10.74p	10.39p
Net assets	£303.2m	£222.3m
Dividend for the year	10.60p	10.35p
Dividend yield5,7	6.5%	6.6%
Ongoing charge for the year6,7	0.74%	0.86%
Gearing7	21.0%	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.
7. Alternative Performance Measure, see pages 83 to 84 in the Annual Report.

CHAIRMAN’S STATEMENT

Performance

I am pleased to be reporting on a positive year of investment performance for Henderson High Income Trust. In 2024, the Company’s Net Asset Value (NAV) total return was +9.4% compared with the benchmark return of +7.9%, outperformance of +1.5%. The Company’s share price total return was a little higher at +10.8% with the share price ending the year at a discount of 7.0% to NAV, compared with the average discount for the UK equity income sector of 5.6% at the end of 2024.

The year was characterised by continuing volatility in financial markets, ongoing geopolitical turmoil and of course the outcome of both the UK general election in July and the US Presidential Election in November. Global inflationary pressures abated as the year progressed which enabled policy makers to lower interest rates and provide a boost to financial asset valuations. Overall equity returns were better than bond returns although from a geographical perspective the returns from UK equities were lower than those from the US.

The Company’s outperformance during 2024 versus the benchmark (80% FTSE All-Share Index, 20% ICE BofA Sterling Non-Gilts Index) was mainly due to asset allocation, gearing and a good relative return from the fixed interest portfolio.

Dividends

The Company’s investment objective is to provide investors with a high dividend income stream while also maintaining the prospect of capital growth. In 2024, company dividend payouts remained robust given the strength of corporate balance sheets and healthy ongoing profitability. I am pleased to report that the Company’s overall earnings during the year were sufficient to cover the full year dividend and a small amount was added to the revenue reserves. At the year-end reserves were sufficient to cover approximately six months of the full year dividend.

During 2024 the Board recommended the payment of dividends totalling 10.6 pence per share, an increase of 2.4% over the payment in 2023. This increase represented the 12^th consecutive year of dividend growth from the Company. As usual the Board focused carefully on the revenue projections provided by the Fund Manager throughout the year and as we look forward the Board remains confident that the Company’s portfolio will be able to generate a continuing high level of income for shareholders.

Gearing

The Company’s policy on gearing is provided on page 23 of the Annual Report. Given higher interest rates and the increased cost of borrowing, the Board spent a good deal of time during the year discussing and evaluating with the Fund Manager the appropriate level of gearing to reflect the increased cost burden whilst ensuring that the overall capital structure could continue to deliver the required levels of income.

During 2024 the overall level of gearing remained in line with the level prevailing at the end of 2023 although the absolute level of borrowings increased due to the growth in the Company’s size following the combination with Henderson Diversified Income Trust plc in January 2024 (see below). As a percentage of net assets, gearing finished the year at 21.0% which was a little lower than the level at the start of 2024, and gearing is expected to remain around this level in the near term.

Overall, asset allocation saw the Company continue to prefer equities over fixed interest investments with approximately 89% in equities and 11% in bonds at the year end (compared with the benchmark of 80% equities/20% bonds).

In December 2024 the Company renewed its loan facility of up to £85 million with BNP Paribas, London Branch. The facility has a duration of 12 months and the terms on which the facility was renewed remain competitive.

Combination with Henderson Diversified Income Trust plc (HDIV)

As previously reported the Company was able to issue some £72.1 million of new shares in January 2024 to shareholders in HDIV. The increase in size of the Company will help to improve the liquidity and marketability in the Company’s shares and help to spread the Company’s fixed costs across a larger shareholder base which is in the interests of all our shareholders.

In this respect I am pleased to say that the ongoing charge ratio for 2024 reflects the benefits of the Company’s larger size at 0.74% versus the ongoing charge of 0.86% in 2023.

Continuation Vote

The Company’s Articles of Association provide that shareholders should have the opportunity every fifth year to vote on whether they wish to continue the life of the Company or to wind it up. Shareholders will, therefore, be asked to vote on this at the forthcoming AGM, as an ordinary resolution, which requires a majority vote in favour to pass. The Board strongly recommends that you vote in favour so the Company can continue its objective of providing a regular high level of income while maintaining the prospect of capital growth over time. If the resolution fails to pass, the Board would be required to wind up the Company. If you are in any doubt as to what action you should take, please consult your financial advisor. The Directors will be voting their own holdings in favour and encourage all other shareholders to do the same.

Management Fee Arrangements

The Board regularly reviews the fee arrangements with the Company’s Fund Manager to ensure that they remain competitive, particularly in the context of fees payable by similar UK equity income focused trusts.

In this respect the Company has agreed with the Manager that the fee scale will be lowered to a flat 0.45% of average adjusted gross assets per annum (previously 0.5% on the first £325 million of assets, 0.45% on assets above £325 million). The amended fee scale will apply from 1 January 2025.

Share buybacks

During the course of 2024 the Board regularly reviewed the Company’s share price discount to NAV, particularly in the context of discounts prevailing across the wider UK equity income sector. The Company’s discount at the start of 2024 was 7.7% and finished the year at 7.0%, compared with the average discount at the end of 2024 of 5.6% for the UK equity income sector. During the course of the year the discount widened, then narrowed in as the year drew to a close, but in the early part of 2025 had widened out again. In line with other trusts in the sector the Board has commenced buying back shares and as at 24 March 2025 the Company has purchased 960,130 shares representing 0.56% of the issued share capital. The shares will be held in treasury. The Board will continue to monitor closely the prevailing discount to NAV and the Company will continue to buy back shares if in the opinion of the Board it is appropriate to do so in the best interests of shareholders.

The Board

Zoe King will be retiring as a Director in May at the conclusion of the Company’s AGM. Zoe joined the Board in April 2016 and has served as the Senior Independent Director since June 2020. During that time the Company has undertaken two successful corporate transactions with Threadneedle UK Select in 2017 and the recent HDIV combination in 2024 and of course has negotiated the challenging COVID period. On behalf of shareholders and directors past and present I would like to thank Zoe for her commitment, diligence and wise counsel during her tenure and we wish her well in her future endeavours. Francesca Ecsery who joined the Board in December 2022 will become the Senior Independent Director and Chairman of the Nominations and Remuneration Committee on Zoe’s departure.

At the end of 2024 the Company welcomed Preeti Rathi as a Director. Preeti has 15 years’ experience in wealth management as an Investment Director/Discretionary Portfolio Manager with Bank of America Merrill Lynch, Kleinwort Benson Private Bank and Investec Wealth & Investment across a broad range of asset classes. Her appointment will ensure that the Board retains the right balance of skills and expertise to successfully administer the Company’s business.

Responsible investing

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 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 Responsibility Report and Responsible Investing Policy 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, 13 May 2025 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/hhi-agm.

Prospects and outlook

As we entered 2025 with continuing volatility in financial markets, the re-election of President Trump to the White House has provided a rather unpredictable backdrop to the global economy. In particular, the widespread imposition of tariffs on America’s trading partners has caused inflation and interest rate expectations to remain higher with a potentially negative impact on global economic activity and there has been a significant financial impact across Europe from the decision to substantially increase defence spending commitments in light of the situation in Ukraine.

Closer to home in the UK, the growth mantra of the recently elected Labour government appears at odds with the substantial tax increase for the corporate sector announced in the Budget, and the cost of government borrowing has increased as investors worry about higher debt levels to fund investment and spending amid a further decline in productivity. The Bank of England has continued to trim interest rates in the early part of 2025 to support the economy as growth prospects have been lowered but they will have to tread a fine line between lowering interest rates further and keeping inflationary pressures under control.

Whilst the backdrop remains challenging, there is some good news for UK listed companies which retain healthy balance sheets and many are buying back their own shares, highlighting the relatively attractive valuation of UK companies versus their overseas peers. It is also important to remember that quoted UK companies derive a substantial proportion of their earnings from overseas activities providing good protection against the risk of weaker UK activity. Within the Company’s portfolio, there continues to be a good balance between larger companies with more international exposure and attractively valued smaller and medium sized companies where our Fund Manager believes the share prices are reflecting too pessimistic a view of future prospects.

Overall, and as usual, the Board and the Company’s Fund Manager remain steadfast in the commitment and objective of continuing to deliver the high level of income required by shareholders whilst also mindful of the longer term target of delivering capital growth.