Henderson High Income Trust Regulatory News (HHI)

Total return performance to

31 December

One year

%

Five years

%

Benchmark1

14.1

28.5

NAV2

19.8

30.1

Share price3

27.9

29.1

2021

2020

NAV per share4

177.92p

157.25p

Mid-market price per share

177.50p

147.00p

Revenue return per share

9.44p

8.58p

Net assets

£236.2m

£211.4m

Dividend for the year

9.95p

9.90p

Dividend yield5

5.6%

6.7%

Ongoing charge for the year6

0.84%

0.93%

Gearing

22.4%

22.9%

1 The benchmark is a composite of 80% of the FTSE All-Share Index (total return) and 20% of the ICE BofAML

Sterling Non-Gilts Index (total return) rebalanced annually

2 Net asset value with debt at fair value 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 and Refinitiv DataStream. All data is either as at 31 December 2021 or for the year-ended 31 December 2021.

CHAIRMAN'S STATEMENT

I am pleased to be reporting on a period of very good investment performance for Henderson High Income Trust in 2021: the Company's Net Asset Value ('NAV') with debt at fair value increased by 19.8% whilst the Company's share price (total return including dividends reinvested) increased by 27.9%.

Performance

2021 was a positive year for the world's equity markets with companies continuing to adapt and respond successfully to the impact of Covid-19. Policy makers around the globe were intent on providing sufficient liquidity to ensure that economies could function effectively and aggregate demand recovered strongly in response to fiscal stimulus provided by governments. As lockdowns began to unwind, however, the rapid demand led recovery caused some supply side problems and there was a substantial increase in price inflation, particularly in energy markets. UK Consumer Price inflation reached 5.4% in December 2021 on an annualised basis, the highest level of UK inflation in almost 30 years. The surge in inflation also led to a marked disparity in the returns produced by equity and bond markets, with the former substantially outperforming the latter.

In 2021 the Company enjoyed a very good period of investment performance both in absolute terms and relative to the Company's investment benchmark. The Company's NAV total return (with debt at fair value) was 19.8% compared with the benchmark return of 14.1%, an outperformance of 5.7%. The Company's share price performed even better, rising by 27.9% (total return including dividends reinvested) during the year. This was driven primarily by the fact that the share price started the year trading at a discount of 6.5% to the Company's NAV, whilst by the end of the year the discount had largely disappeared, with the share price trading almost in line with NAV at the end of 2021.

A number of factors contributed to the outperformance versus the benchmark return. In particular, the Company's asset allocation was helpful due to an overweight position in equities and an underweight position in bonds relative to the benchmark. The Company's gearing was also beneficial during a period of positive returns for the UK equity market (the FTSE All-Share Index rose by 18.3% in 2021) as was the bond portfolio, which outperformed its benchmark by an impressive 5.8% in 2021 due to good stock selection.

During the course of the year markets generally experienced periods of high volatility, due not least to the ever-changing pandemic environment. It is therefore gratifying that the Company's investment return both in absolute and relative terms was so positive during the period and I would like to pay tribute to the Company's investment managers and in particular David Smith for managing the Company's portfolio so successfully in 2021.

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 we enter a period of higher inflation, that strategy will become even more important for our shareholders. During 2021 it was encouraging to see a good recovery in dividends as companies became more confident in their ability to cope with the pandemic and dividends which had been suspended or reduced during the previous year were in many cases reinstated. In particular, sectors such as Metals, Mining and Financials saw a strong recovery in payouts, while the Company's shareholdings in more defensive and non-cyclical areas of the market continued to support our overall income levels as dividends from these companies proved more resilient throughout the pandemic.

As shareholders will be aware, one of the distinct advantages of the Company's structure as a UK investment trust is that it is able to put aside income received in good years to help to pay dividends in more difficult years. During the pandemic the Board has consistently made it clear that it intends to utilise these reserves in order to support payments to shareholders. At the start of 2021 the Company held almost £9 million in revenue reserves which had been built up during previous years. In 2021 we utilised a relatively modest £587,000 of those reserves to help support dividends meaning that the Company still retained a robust reserve of around £8.4 million as we ended the year, equivalent to approximately 8 months of dividend cover.

During the course of the year the Board continued to monitor carefully the level and sustainability of dividends from our investee companies. David Smith runs frequent stress tests of the Company's revenue account under different scenarios looking several years ahead. Although it will take time for overall income levels to return to those prevailing in 2019, the improving trend in dividends together with the Company's current level of reserves continues to give the Board confidence in the Company's ability to continue to deliver a high level of income to shareholders.

In this regard, during 2021 the Board recommended the payment of dividends totalling 9.95 pence per share, an increase of 0.5% over the payment in 2020. Whilst this increase was relatively modest, it does represent the ninth consecutive year of dividend growth for the Company.

Gearing

The Company's policy on gearing is provided in the Annual Report. As previously mentioned, the gearing in 2021 served to enhance the Company's overall investment return primarily due to the very positive absolute returns produced by UK equities generally, with the majority of the Company's assets being invested in UK equities throughout the period.

At the end of 2021 the Company had drawn down approximately £37.6 million of its £45 million floating rate loan facility with Scotiabank, combined with the long-term fixed rate senior unsecured note of £20 million. Over time, the Company's borrowing structure is intended to generate additional income in excess of the cost of borrowing to help provide an enhanced level of total income for shareholders.

During the course of the year the total level of borrowings increased by £7.7 million with the majority of the extra borrowings being allocated towards equities. As a percentage of net assets the overall level of gearing actually fell a little during the year from 22.9% to 22.4% at the end of 2021 due to the increase in the net asset value of the Company. The Board reviews the level of gearing with the Fund Manager on a regular basis throughout the year.

Fee Arrangements

As previously announced, from 1 January 2022 the performance fee arrangement with the Fund Manager has been removed. This brings the Company into line with other UK income focused trusts. The level at which the management fee falls from 0.5% to 0.45% has been amended from £250 million to £325 million of average adjusted gross assets. The Board believes that the fee arrangements remain competitive.

The Board

The Company welcomed Penny Lovell as a Director at the start of 2021. Penny was, until recently, CEO of Sanlam Private Wealth and has extensive experience in wealth management and financial advice for private investors. She has held several senior positions in sales and marketing across the investment management industry and will be able to provide a valuable insight to the Board as it strives to ensure that the Company competes successfully in a market place where the modes of communication and dialogue with investors have changed rapidly.

In May 2021 Margaret Littlejohns retired from the Board as Chairman after many years of distinguished service. On your behalf I would once again like to thank Margaret for the most valuable contribution she made to the Company during her tenure.

Over the last few years the Board has undergone substantial change with the retirement and appointment of directors and that process is now complete. I am confident that it has the necessary balance of skills and experience to continue to successfully administer the Company's business.

Responsible Investing

Responsible investing relates to how environmental, social and corporate governance ('ESG') factors impact a company's long-term sustainability. Analysis of the sustainability 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 on an annual basis a report on the Company's voting pattern.

Growth

Each year the Company seeks shareholder approval to authorise the allotment of new shares at a premium to NAV. In recent years the shares have tended to trade at a discount to NAV, but more recently, as highlighted earlier in my report, the discount has narrowed and indeed from time to time the shares have traded at a small premium.

The Board continues to believe that it is in the best interests of shareholders for the Company to issue new shares to grow. It will help to improve the liquidity in the Company's shares and spread the cost base over a larger number of shares.

It is pleasing to report that, as previously announced, the Company has recently been able to allot new shares. The authority to issue new shares will expire at the forthcoming Annual General Meeting ('AGM') and the Board will seek approval from shareholders to renew the authority so that the Company can continue to grow further if and when appropriate.

AGM

We look forward to seeing as many of you as possible at our AGM which will be held at 12 noon on Tuesday, 24 May 2022 at the offices of Janus Henderson at 201 Bishopsgate, London, EC2M 3AE. In addition to the formal business of the meeting, David Smith, our Fund Manager, will give a presentation on the Company's portfolio and performance, and you will have the opportunity to talk to the Board, David and other Janus Henderson representatives. We very much welcome your comments and questions. We encourage those of you who are unable to attend to use your proxy votes and to watch the Meeting live by logging on to www.janushenderson.com/trustslive. We will also be holding a similar presentation in Guernsey on 8 June 2022 to enable our Guernsey based shareholders to meet David and myself.

Prospects and Outlook

As we entered 2022 with seemingly the worst impact of the pandemic behind us, there was surely reason to be somewhat more optimistic about prospects for the global economy. The invasion of Ukraine, however, has been a truly shocking development and I am sure I speak for all shareholders in saying that we must hope for a swift resolution. From an economic standpoint, it has of course triggered a further surge in energy prices which has reinforced the rise in inflation and it remains to be seen just how far global monetary policy will be tightened in response. In the UK, the Bank of England has started to raise rates a little and together with the upcoming increase in both employer and employee national insurance, it will undoubtedly become a more challenging environment for both companies and consumers.

That being said, there are also reasons, I believe, to be positive about the prospects for your Company. The valuation of the UK equity market still appears to be relatively low in comparison with other global markets and there are some initial signs that international investors are beginning to increase exposure to the UK, having reduced positions to historically very low levels. Moreover, there has been a substantial increase in corporate activity amongst UK companies with both overseas and private equity investors taking the view that many quoted UK companies are attractively valued and therefore appealing targets.

Against that backdrop the focus and attention of the Company's fund manager, David Smith, will remain the same as always, to continue to focus on managing the portfolio to generate the high levels of income required by our shareholders, whilst of course also seeking to produce long-term capital growth.

Jeremy Rigg

Chairman

31 March 2022

FUND MANAGER'S REPORT

Review of the Year

2021 was a strong year for equity markets, with the FTSE All-Share Index rising by 18.3% on a total return basis. This was despite continued disruption from the pandemic, as the UK started the year in its third lockdown and ended it with significantly higher Covid-19 infections due to the Omicron variant of the virus. However, the rapid roll out of vaccines and latterly booster jabs meant that the harshest of government restrictions could be lifted, supporting a sharp rebound in economic activity and strong corporate earnings growth. Equity markets were further aided by continued loose monetary policy and fiscal stimulus from central banks and governments.

The Company's NAV returned 19.8% on a total return basis, significantly outperforming the benchmark's rise of 14.1%. The overweight position in equities relative to bonds versus the benchmark contributed to performance, while gearing further enhanced returns given the strong market backdrop.

UK GDP growth rebounded by 7.1% in 2021 as the UK economy continued to recover from the pandemic. Increased global demand for energy and constraints in the supply of oil and gas saw energy prices rise significantly, contributing to a surge in inflation. Additional pressure on prices came from a tight labour market and shortages of materials, leading to the UK's Consumer Price Index reaching 5.4% in December, its highest level for over 30 years. In December, the Bank of England, having earlier considered inflationary trends as "transitory", increased interest rates from 0.1% to 0.25%, the first increase in over three years.

Sectors that traditionally benefit in a rising inflation and interest rate environment, such as oil & gas, mining and banks all performed strongly during the year, while more defensive sectors, such as tobacco, telecoms and food producers underperformed. The FTSE 100 Index (+18.4%) outperformed the FTSE 250 Index (+16.9%) but lagged the FTSE Small Cap Index (+23.0%).

Although the equity portfolio performed well in absolute terms, up 16.8% on a total return basis during the year, it lagged the even stronger performance of the FTSE All-Share Index. Holdings in St. James's Place, self storage company Big Yellow and Sage were particularly positive for performance: wealth manager St. James Place reinstated its previously suspended dividend, announced strong new business flows and updated its long-term guidance with an increased focus on cost control. Big Yellow continued to benefit from accelerating trends towards self storage, driven by housing renovations creating a need for space amongst consumers and business customers using self-storage for last mile delivery. Software provider Sage released good results which showed encouraging recurring revenue growth in its cloud based products, an area of significant investment in the last few years.

Elsewhere the holdings in Tesco, NatWest and Anglo American also benefitted performance. Tesco reported full year profits ahead of expectations and stated its intention to start returning excess cashflow to shareholders via share buybacks which was supportive for the share price. The recovering economy was good for banks with NatWest reporting significantly lower impairments than expected, while a rising interest rate environment improved sentiment for the sector given that this should translate into higher profits thanks to higher net interest margins. Anglo American benefitted from the strong commodity price environment, especially iron ore and copper, which led to a significant increase in dividend payouts to shareholders.

Although the banking sector outperformed in 2021, other financial holdings fared worse, with Sabre Insurance, Ashmore and Lancashire detracting from returns. Weak pricing and lower volumes impacted Sabre's profits given the delayed recovery in the auto insurance market from the pandemic. Specialist Emerging Market asset manager Ashmore disappointed during the year as volatile markets impacted the performance of their funds and led to outflows. Lloyds insurer Lancashire's profits were significantly impacted by the high loss events of Hurricane Ida and European floods. Elsewhere, the portfolio's under-representation in the oil & gas sector relative to the benchmark was detrimental to relative performance, given the strong share price returns from the likes of BP and Royal Dutch Shell, where the portfolio is underweight.

The fixed income portfolio performed well, returning 4.4% on a total return basis, outperforming the 3.0% fall in the ICE BofAML Sterling Non-Gilts Index. Government bond yields rose during the year, with the UK 10 year gilt yield reaching 1.0% as at the end of December from 0.2% a year earlier. Despite this rise in gilt yields, high yield bonds produced a positive return, benefitting the fixed income portfolio as credit spreads compressed due to economic data showing a stronger than expected recovery from the pandemic. Bonds issued by financials performed particularly well, especially Nationwide, Barclays and Direct Line. Nationwide and Barclays reported lower impairments and better capital ratios while Direct Line was supported by the release of the final FCA General Insurance Review which was in line with expectations.

Income

After the significant fall in market dividends in 2020 due to the pandemic, it was pleasing to see a good recovery in market income with previously suspended dividends in the banking sector returning and strong growth in dividends from the mining sector. According to the Link UK Dividend Monitor, market dividends in aggregate in the UK rose by 21.9% on an underlying basis (excluding special dividends), recovering to 2015 levels. They remained, however, 23.0% below the levels of 2019, before the pandemic struck.

The income received by the Company in 2021 also showed good recovery, increasing to 9.44p per share, from 8.58p in 2020. The Company benefitted from its holdings in miners Rio Tinto and Anglo American, both significantly increasing their ordinary dividends last year and also paying special dividends, given the strong underlying commodity environment. It is unlikely that the magnitude of these payments will be sustained going forward, however, given that any fall in commodity prices will reduce the companies' abilities to pay dividends given their set dividend payout ratios. In total, the Company earned just over £900,000 in special dividends during the year with payments received from Volvo, PageGroup, B&M European Value Retail and Sabre Insurance.

During the year there was a return to dividend payments from Lloyds, NatWest and Paragon in the banking sector and Burberry and Next within retail. The Company still maintains a holding in three companies that had yet to return to the dividend register in 2021, National Express, Informa and Whitbread, where we continue to see significant recovery potential in their share prices despite a lack of income in the short term. There was good underlying dividend growth from some of the Company's longer term holdings, such as Hilton Food (+22%), Cranswick (+16%) and Intermediate Capital (+10%).

With underlying dividends recovering and the Company's strong revenue reserves, the Board was able to marginally increase the dividend in 2021, despite a modest revenue shortfall of £587,000. The fourth interim dividend was raised to 2.525p, resulting in a full year dividend of 9.95p, modest growth of 0.5% on 2020 (9.90p). The Company has now raised its total dividend for the 9th year in succession. Revenue reserves as at 31 December 2021 were £8.4 million, providing 66% cover over the Company's current level of dividend.

Portfolio Activity

During the first half of the year the allocation to bonds was reduced by around £7 million, given that bond yields and credit spreads had fallen to very low levels. Specifically, bonds in Lloyds, Tesco, telecom towers owner Arqiva and US business services company Cintas were sold as their respective yields had fallen to unattractive levels. The bond portfolio represented 8.8% and 11.0% of gross and net assets respectively as at the end of 2021.

Within the equity portfolio, we increased the Company's exposure to banks. When interest rates and bond yields are rising this generally presents a good environment for banks' profitability and we added to the existing positions in Lloyds and NatWest after the Bank of England removed all dividend restrictions. Both companies have strong capital positions and trade on attractive valuations. The Company also initiated new positions in Nordea and Paragon. Nordea is a leading bank in each of the four Nordic markets offering retail, business and wholesale banking along with asset and wealth management. The company operates in attractive markets, with strong loan growth and margins expected in Sweden and Norway. The company already pays an attractive dividend, with future growth supported by further management action on cost and an improvement in returns. Paragon specialises in Buy-to-Let mortgages and commercial lending with a focus on strong credit quality. Loan pricing in these areas is attractive, given the lack of competition from the main high street banks, which should lead to further upside in its net interest margin.

Elsewhere the Company initiated new holdings in PageGroup, the specialist recruitment consultancy and B&M European Value Retail ('B&M'). PageGroup provides mostly permanent recruitment services for executives, qualified professionals and clerical professionals across a broad range of industries and geographies. The business is capital light with good cash generation and a strong balance sheet that should lead to attractive dividend returns (both ordinary and specials) now that profitability has recovered strongly. With labour markets tight globally, solid wage growth inflation is likely to translate into higher margins for the company in this cycle. B&M is the UK's leading discount retailer with around 700 stores in the UK and an increasing presence in France. B&M's low cost, limited assortment and direct sourcing business model leads to very competitive pricing within value retail, an already attractive market segment. With consumers' disposable income likely to come under pressure this year from rising inflation, there could be an accelerated shift toward value retail, supporting higher profits, while the company's strong cash generation and robust balance sheet could result in further special dividend payments to shareholders.

During the year we sold out of holdings in Reckitt Benckiser, Abrdn (previously known as Standard Life Aberdeen) and RWE. Worries over the sustainability of demand for Reckitt Benckiser's hygiene products as the impact of the pandemic started to subside led us to sell the holding. Abrdn's turnaround strategy under the new management has large execution risk given its increased focus on growing areas that are not considered the company's core competencies, while the strategy also includes very ambitious long-term targets in terms of revenue growth and the cost to income ratio, which would require a significant improvement in growth compared to what the company has achieved historically. German utility RWE is exposed to the development of renewable power generation. With large oil companies now bidding for seabed rights to develop their own offshore wind farms, returns for new projects are likely to come down in the long term.

Outlook

Just as the impact of the pandemic subsides and the severity of the virus reduces, increased volatility has returned to equity markets following Russia's invasion of Ukraine. While both countries' economies are small in terms of their contribution to global GDP, the ramifications of Russia's shocking actions and the sanctions applied have already been felt in commodity markets, and could weaken the outlook for the global economy and sentiment more generally.

Inflation is likely to remain elevated, at least in the first half of the year, caused by surging oil, gas and wheat prices. This is likely to put further pressure on consumers and corporate profits and slow the economic recovery from the pandemic. However, central banks may now apply caution to the further tightening of monetary policy while for the consumer, wages are generally rising in nominal if not real terms, debt levels are relatively low and savings have been built up during the pandemic.

Although increased geopolitical tensions have created new uncertainties, the starting valuation of the UK market is attractive both in absolute terms and relative to global indices. In addition, companies generally have robust balance sheets and strong cash flows which will help support the continued recovery in market dividends. Increased market volatility will likely present challenges and opportunities, but my focus will, as ever, remain on finding good quality businesses, that are in strong financial health and can pay and grow an attractive dividend.

David Smith

Fund Manager

31 March 2022

Principal Risk

Mitigating Measures

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 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.

This could result in 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 Continuity 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 s.1158/9 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. The emerging risks identified below are currently being evaluated and monitored.

Emerging Risk

Mitigating Measures

Risks Associated with the conflict between Russia and Ukraine

The impact that the Russian invasion of Ukraine could have on the global economy and the Company's investments and the potential for various disruptive scenarios, including cyber threats and market events.

The Fund Manager actively monitors and assesses market conditions and the Manager's Risk team monitors liquidity, performance and portfolio construction to continue to minimise the impact on the Company. Procedures are in place to ensure any applicable sanctions imposed are implemented quickly.

The Manager has taken additional measures to reinforce its information security processes and systems including continuous contact with security threat intelligence agencies, increased monitoring of its external network/firewall configurations and third-party connectivity and enhanced application of critical security patches, including its anti-phishing defences.

The Board monitors the services provided by the Manager, the Depositary and its other service providers to ensure that services are managed appropriately throughout this period of uncertainty.

Risks Associated with the Legacy of Covid-19

The unknown duration and severity of the impact of Covid-19 on the economy and society, including any permanent structural changes that might occur.

During 2021 the Company's income has proven relatively resilient in comparison with the UK market, due to the Fund Manager's careful construction of a well-diversified portfolio.

The Company's revenue reserves remain strong with approximately 8 months' of dividend cover brought forward to support shareholders' income requirements. The portfolio is run by an experienced and competent Fund Manager who has demonstrated throughout the year under review that the portfolio can be adapted and positioned to meet the challenges the pandemic has presented, whilst protecting income and the opportunity for capital appreciation in the future.

Risks Associated with Climate Change

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.

Please refer to Environmental, Social and Governance Matters in the Annual Report for further details.

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 (0.84% for the year-ended 31 December 2021 (2020: 0.93%)); 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 8.4% of net assets as at 31 December 2021, 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 an additional, conservative stress-tested revenue forecast at least once a year to assist the Board with its dividend decision making. The Company's revenue reserves remain strong and there is now approximately 8 months' worth of dividend cover which gives 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 ongoing impact of the legacy of Covid-19 and risks associated with the conflict between Russia and Ukraine. 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 2021 the Board received feedback from the Fund Manager and the Janus Henderson Investment Trust Sales Team from meetings held with shareholders. The feedback suggested that the shareholders were supportive of the Company continuing in operation for a further five-year period and beyond. 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 2026.

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

Having taken advice from the Audit and Risk Committee, the directors consider that the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy. 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

31 March 2022

Year-ended

31 December 2021

Year-ended

31 December 2020

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)

-

27,188

27,188

-

(36,256)

(36,256)

Income from investments held at fair value through profit or loss (note 3)

13,470

-

13,470

11,959

-

11,959

Other interest receivable and similar income

98

-

98

669

-

669

----------

----------

----------

----------

----------

----------

Gross revenue and capital gains/(losses)

13,568

27,188

40,756

12,628

(36,256)

(23,628)

Management and performance fees (note 5)

(564)

(846)

(1,410)

(572)

(858)

(1,430)

Other administrative expenses

(460)

-

(460)

(483)

-

(483)

----------

----------

----------

----------

----------

----------

Net return before finance costs and taxation

12,544

26,342

38,886

11,573

(37,114)

(25,541)

Finance costs

(295)

(885)

(1,180)

(307)

(920)

(1,227)

----------

----------

----------

----------

----------

----------

Net return before taxation

12,249

25,457

37,706

11,266

(38,034)

(26,768)

Taxation on net return

(104)

(7)

(111)

(231)

-

(231)

----------

----------

----------

----------

----------

----------

Net return after taxation

12,145

25,540

37,595

11,035

(38,034)

(26,999)

======

======

======

======

======

======

Return/(loss) per ordinary share (note 6)

9.44p

19.79p

29.23p

8.58p

(29.58p)

(21.00p)

======

======

======

======

======

======

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.

Notes

Year-ended 31 December 2021

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 2021

6,430

126,783

26,302

42,865

8,991

211,371

Net return after taxation

-

-

-

25,450

12,145

37,595

8

Dividends paid

-

-

-

-

(12,732)

(12,732)

--------

-----------

---------

---------

---------

----------

At 31 December 2021

6,430

126,783

26,302

68,315

8,404

236,234

=====

======

======

=====

=====

======

Year-ended 31 December 2020

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 2020

6,430

126,783

26,302

80,899

10,674

251,088

Net return after taxation

-

-

-

(38,034)

11,035

(26,999)

8

Dividends paid

-

-

-

-

(12,718)

(12,718)

--------

-----------

---------

---------

---------

----------

At 31 December 2020

6,430

126,783

26,302

42,865

8,991

211,371

=====

======

======

=====

=====

======

Notes

At 31 December 2021

£'000

At 31 December 2020

£'000

Fixed assets

Investments held at fair value through profit or loss

289,091

259,844

----------

----------

Current assets

Debtors

1,934

1,897

Cash at bank and in hand

3,942

595

----------

----------

5,876

2,492

----------

----------

Creditors: amounts falling due within one year

(38,884)

(31,126)

----------

----------

Net current liabilities

(33,008)

(28,634)

Total assets less current liabilities

256,083

231,210

----------

----------

Creditors: amounts falling due after more than one year

(19,849)

(19,839)

----------

----------

Net assets

236,234

211,371

======

======

Capital and reserves

Called up share capital

6,430

6,430

Share premium account

126,783

126,783

Capital redemption reserve

26,302

26,302

Other capital reserves

68,315

42,865

Revenue reserve

8,404

8,991

----------

----------

Total shareholders' funds

236,234

211,371

======

======

Net asset value per ordinary share (basic and diluted)

183.70p

======

164.37p

======

Year-ended

31 December 2021

Year-ended

31 December 2020

£'000

£'000

Cash flows from operating activities

Net return before taxation

37,706

(26,768)

Add back: finance costs

1,180

1,227

Less: (gains)/losses on investments held at fair value through profit or loss

(27,188)

 36,256

Withholding tax on dividends deducted at source

(111)

(231)

(Increase)/decrease in debtors

(37)

 172

Increase in creditors

38

 303

----------

----------

Net cash inflow from operating activities1

11,588

10,959

----------

----------

Cash flows from investing activities

Sales of investments held at fair value through profit or loss

46,326

 104,095

Purchases of investments held at fair value through profit or loss

(48,879)

 (95,538)

----------

----------

Net cash (outflow)/inflow from investing activities

(2,553)

8,557

----------

----------

Cashflows from financing activities

Equity dividends paid

(12,732)

 (12,718)

Drawdown/(repayment) of loans

8,231

 (8,463)

Interest paid

(1,171)

 (1,216)

----------

----------

Net cash outflow from financing activities

(5,672)

(22,397)

----------

----------

Net increase/(decrease) in cash and cash equivalents

3,363

 (2,881)

Cash and cash equivalents at beginning of year

595

 2,701

Exchange movements

(16)

 775

----------

----------

Cash and cash equivalents at end of year

3,942

595

----------

----------

Comprising:

Cash at bank

3,942

595

======

======

Notes to Financial Statements:

1a) Basis of Accounting

The Company is a registered investment Company as defined in section 833 of the Companies Act 2006. 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 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 judgement but not deemed to be material. The allocation of expenses as income or capital is not material but has an impact on distributable reserves. Other than these exceptions the directors 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 impact of the legacy of Covid-19 and the risks associated with the conflict between Russia and Ukraine, as well as considering 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.

2021

£'000

2020

£'000

Gains/(losses) on the sale of investments based on historical cost

4,396

(4,172)

Revaluation losses recognised in previous years

(1,803)

(5,034)

---------

---------

Gains/(losses) on investments sold in the year based on carrying value at previous Statement of Financial Position date

2,593

(9,206)

---------

---------

Net movement on revaluation of investments

24,069

(27,489)

Effective yield movement

32

32

Exchange gains

494

407

-----------

-----------

27,188

(36,256)

======

======

2021

£'000

2020

£'000

UK dividend income - listed

9,546

8,142

UK dividend income - special dividends

686

108

----------

----------

10,232

8,250

----------

----------

Interest income - listed

915

1,354

Overseas and other dividend income - listed

2,100

2,355

Overseas and other dividend income - special dividends

223

-

-------

-------

3,238

3,709

----------

----------

13,470

11,959

======

======

2021

£'000

2020

£'000

Deposit interest

-

1

Traded option premiums

79

653

Underwriting commission

19

15

-----

-----

98

669

===

===

2021

2020

Revenue return £'000

Capital return

£'000

Total

£'000

Revenue return £'000

Capital return

£'000

Total

£'000

Management fee

564

846

1,410

572

858

1,430

Performance fee

-

-

-

-

-

-

------

-------

-------

------

-------

-------

Total fee

564

846

1,410

572

858

1,430

===

====

====

===

====

====

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 within the Annual Report. No performance fee was earned during the year (2020: £nil).

6. Total Return/(Loss) per Ordinary Share

The return/(loss) per ordinary share figure is based on the gain attributable to the ordinary shares of £37,595,000 (2020: loss of £26,999,000) and on the 128,596,278 weighted average number of ordinary shares in issue during the year (2020: 128,596,278).

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:

2021

£'000

2020

£'000

Net revenue return

12,145

11,035

Net capital return

25,450

(38,034)

----------

----------

Total return

37,595

(26,999)

======

======

Weighted average number of ordinary shares

128,596,278

128,596,278

Revenue return per ordinary share

9.44p

8.58p

Capital return/(loss) per ordinary share

19.79p

(29.58p)

----------

----------

Total return/(loss) per ordinary share

29.23p

(21.00p)

======

======

Shares entitled

 to dividend

Total shares

in issue

Nominal value in issue

£'000

Issued ordinary shares of 5p each

At 1 January 2021

128,596,278

128,596,278

6,430

--------------

--------------

-------

At 31 December 2021

128,596,278

128,596,278

6,430

==========

==========

=====

During the year the Company issued nil shares (2020: nil shares) for net proceeds of £nil (2020: £nil). Since the year end, the Company has issued 325,000 new shares for a total consideration of £594,000.

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 £236,234,000 (2020: £211,371,000) and on the 128,596,278 ordinary shares in issue at 31 December 2021 (2020: 128,596,278).

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

2021

£'000

2020

£'000

Net assets at start of year

211,371

251,088

Total net return after taxation

37,595

(26,999)

Dividends paid in the year

(12,732)

(12,718)

-----------

-----------

236,234

211,371

=======

=======

Payment date

2021

£'000

2020

£'000

Fourth interim dividend (2.475p per share) for the year-ended

31 December 2019

31 January 2020

-

3,183

First interim dividend (2.475p per share) for the year-ended

31 December 2020

24 April 2020

-

3,183

Second interim dividend (2.475p per share) for the year-ended

31 December 2020

31 July 2020

-

3,183

Third interim dividend (2.475p per share) for the year-ended

31 December 2020

30 October 2020

-

3,182

Fourth interim dividend (2.475p per share) for the year-ended

31 December 2020

29 January 2021

3,183

-

First interim dividend (2.475p per share) for the year-ended

31 December 2021

30 April 2021

3,183

-

Second interim dividend (2.475p per share) for the year-ended

31 December 2021

30 July 2021

3,183

-

Third interim dividend (2.475p per share) for the year-ended

31 December 2021

29 October 2021

3,183

-

Unclaimed dividends

-

(13)

----------

----------

12,732

12,718

======

======

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:

2021

£'000

2020

£'000

Revenue available for distribution by way of dividend for the year

12,145

11,035

First interim dividend of 2.475p (2020: 2.475p)

(3,183)

(3,183)

Second interim dividend of 2.475p (2020: 2.475p)

(3,183)

(3,183)

Third interim dividend of 2.475p (2020: 2.475p)

(3,183)

(3,182)

Fourth interim dividend 2.525p (2020: 2.475p)

(3,247)

(3,183)

--------

--------

(651)

(1,696)

=====

=====

All dividends have been paid or will be paid out of revenue profit and the revenue reserves.

10. 2021 Financial Information

The figures and financial information for the year-ended 31 December 2021 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 2021 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditors' Report on the 2021 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. 2020 Financial Information

The figures and financial information for the year-ended 31 December 2020 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 2020 have been audited and delivered to the Registrar of Companies. The Independent Auditors' Report on the 2020 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 for the year-ended 31 December 2021 will be posted to shareholders in April 2022 and will be available thereafter at www.hendersonhighincome.com or from the Corporate Secretary at the Company's registered office, 201 Bishopsgate, London EC2M 3AE.

13. Annual General Meeting

The AGM will be held on Tuesday, 24 May 2022 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 and will be available on the Company's website shortly.