Henderson
High Income
Trust plc
Annual Report 2023
JHI9212/2023Henderson High Income Trust plc – Annual Report 2023
Henderson High Income Trust plc
Registered as an investment company in England and Wales
with registration number 02422514
Registered office: 201 Bishopsgate, London EC2M 3AE
SEDOL number: 0958057
ISIN number: GB0009580571
London Stock Exchange (TIDM) Code: HHI
Global Intermediary Identification Number (GIIN): JBA08I.99999.SL.826
Legal Entity Identifier Number (LEI): 213800OEXAGFSF7Y6G11
Telephone: 0800 832 832
Email: support@janushenderson.com
www.hendersonhighincome.com
JHI9212/2023Designed and typeset by 2112 Communications, London. Printed by Paragon, London.
This report is printed on Revive silk 100% recycled, contains 100% recycled waste and
ismanufactured at a mill certified with ISO 14001 environmental management standard.
The pulp used in this product is bleached using an Elemental Chlorine Free process (ECF).
Seeking superior
income generation
and long-term
capital growth
Henderson High Income Trust plc Annual Report 2023
Strategic Report
Performance Highlights 5
Chairman’s Statement 8
Fund Manager’s Report 11
Portfolio and
Financial Information 16
Business Model 22
Managing Risks 25
Viability Statement 27
Key Performance
Indicators 28
Environmental, Social and
Governance Matters 30
Governance
Board of Directors 35
Corporate Governance
Report 37
Report of the Audit and
Risk Committee 41
Report of the Management
Engagement
Committee 45
Report of the Nominations
and Remuneration
Committee 46
Directors’ Remuneration
Report 47
Report of the Directors 50
Statement of Directors’
Responsibilities 51
Financial
Statements
Independent Auditors’
Report 53
Income Statement 59
Statement of Changes
inEquity 60
Statement of Financial
Position 61
Statement of Cash
Flows 62
Notes to the Financial
Statements 63
Additional
Shareholder
Information
Glossary 80
Alternative Performance
Measures 81
General Shareholder
Information 83
Corporate Information 85
Objective
The Company invests in a prudently
diversified selection of both well-
known and smaller companies to
provide investors with a high dividend
income stream while also maintaining
the prospect of capital growth.
85
Henderson High Income Trust plc Annual Report 2023
Corporate Information
Registered Office
201 Bishopsgate
London
EC2M 3AE
Telephone: 020 7818 1818
Service Providers
Alternative Investment Fund Manager
Janus Henderson Fund Management UK Limited
201 Bishopsgate
London
EC2M 3AE
Corporate Secretary
Janus Henderson Secretarial Services UK Limited
201 Bishopsgate
London
EC2M 3AE
Telephone: 0800 832 832
Email: support@janushenderson.com
Depositary and Custodian
HSBC Bank plc
8 Canada Square
London
E14 5HQ
Stockbrokers
J.P. Morgan Cazenove Limited
25 Bank Street
London
E14 5JP
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Telephone: 0370 707 1039
Email: web.queries@computershare.co.uk
Investors with share certificates (i.e. not those in a share plan or
ISA) can check their holdings at www.computershare.com.
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Financial Calendar
Annual General Meeting Tuesday, 14 May 2024
First interim dividend payment Friday, 26 April 2024
Second interim dividend payment Friday, 26 July 2024
Third interim dividend payment Friday, 25 October 2024
Fourth interim dividend payment Friday, 31 January 2025
Half year results announced September 2024
Senior unsecured note interest payment dates 8 July 2024
8 January 2025
Information Sources
For more information about the Company, visit the website at
www.hendersonhighincome.com.
Follow Janus Henderson Investment Trusts on
Twitter, YouTube andFacebook
Investing
Shares can be purchased in the market via a stockbroker
orthrough share dealing platforms. They can also be held
through share plans, ISAs or pensions and links to various
providers are included on the website.
Potential investors are reminded that the value of investments
and the income from them may go down as well as up and
investors may not receive back the full amount invested.
Taxbenefits may vary as a result of statutory changes and
their value will depend onindividual circumstances.
Nominee Share Code
Where notification has been provided in advance, the Company
will arrange for copies of shareholder communications to be
provided to the operators of nominee accounts. Nominee
investors may attend general meetings and speak at them
when invited to do so by the Chairman.
The Henderson
High Income
Story
1
The Company invests in a prudently diversified selection of both well-known and smaller companies to provide investors with
ahigh dividend income stream while also maintaining the prospect of capital growth. To gain a full understanding of these
companies, the stock selection process places emphasis on examining what each company does, its market position and
thedynamics of that market. Combining this with analysis of the company’s financial health provides valuable insight into the
company’s ability to not only sustain its dividend but grow it in the long-term, a crucial element for generating total returns for
shareholders. The stock selection process is broken down into three key component parts: fundamentals, financials and valuation.
Fundamentals
Understanding a
company’s key
attributes
Financials
Analysing its
financial health
Valuation
Assessing whether
those qualities are
discounted in
share prices
Fundamentals
Analysing a company’s fundamentals is the starting point to
understanding its qualities and whether its business is robust
in the long-term. Emphasis is placed on assessing the
company’s strength of industry position, barriers to entry,
senior management and their ability to sustain or improve a
company’s performance. Greater weight is given to long-term
views over short-term considerations andtrends in the market
or sector.
The following key attributes are typically looked for:
●
Robust and understandable business models
●
Good earnings visibility
●
High barriers to entry
●
Market leadership
●
Strong franchise
●
Good Environmental, Social and Governance (ESG)
riskmanagement
●
Proven management teams
Financials
The second step is to gain a clear understanding of the
company’s financial health and its ability to invest for future
growth, sustain profitability and return value to shareholders.
In particular, focus is given to:
●
Sustainability of profits
●
Robust balance sheets
●
Well-invested asset base
●
Strong cash generation
●
Sensible dividend policy
Valuation
Valuation is the final part of analysing a company but
underpins the whole process. Even when companies with
strong fundamentals and financials are found, their valuations
also need to be attractive, otherwise capital appreciation may
be limited. Various valuation metrics are used, such as price
to earnings ratios, to assess whether the qualities we have
identified in acompany are already discounted in the current
shareprice.
By applying this disciplined stock selection process, the
Company benefits from a well-diversified portfolio of good
quality companies in strong financial health that can pay and
grow their dividends, but also offer the potential for capital
growth over the long-term.
What we look for in companies
Henderson High Income Trust plc Annual Report 2023
2
1 Computershare UK Dividend Monitor
Source: Henderson High Income Trust plc’s Annual Reports
Challenges for UK income investors
Overall market dividends grew by 5.4% in 2023 on an
underlying basis
1
(ex special dividends and at constant
currency). The majority of this growth was driven by good
dividend increases from large dividend paying sectors such as
banks and oil & gas companies. However, this continues to
cause a concentration challenge for UK income investors.
Thetop 20 dividend payers in the UK produced 76% of the
FTSE 100’s income in 2023. This becomes a problem if the
dividends of those top 20 companies are unsustainable.
TheCompany deals with this concentration issue by
constructing a well-diversified portfolio, making sure that the
revenue account is not overly reliant on any one company or
sector for income. Thismaterially lowers income concentration
for the Company, with those same top 20 companies only
contributing around 31% of aggregate income for the Company.
Concentration of income
Henderson High Income
Contribution to income from top 20
paying companies in FTSE 100 Index
Dividend
Yield (RHS)
(%) (%)
0
10
20
30
40
50
60
70
80
FTSE 100 Index
0
1
2
3
4
5
6
7
8
Source: Janus Henderson Investors, Factset and LSEG Datastream
Utilising Henderson High Income’s
unique structure
Henderson High
Income
Bonds
Alternative
Income
Trusts
Gearing
Overseas
Diversified
Portfolio
Revenue
Reserves
Mid-cap
exposure
While maintaining a diversified portfolio is key, the Company
can also utilise its unique structure and invest in fixed interest
securities to diversify further its income generation. Bond
interest paid by companies is usually more sustainable than
dividends during times of economic stress, hence having the
ability to allocate towards bonds provides a valuable source
ofdifferentiated income.
The Company also has a number of other ways to diversify its
income by utilising its structure:
●
It can invest 30% of gross assets in overseas markets.
●
It can invest in listed alternative income investment trusts,
such as renewables infrastructure funds.
●
It can invest a larger proportion in medium sized
companies given its size relative to much larger
competitors.
Revenue reserves
One of the main advantages of investment trusts is the
abilityto retain surplus income to create revenue reserves.
TheCompany can add to these reserves in profitable years
and pay them out in the leaner years, thereby smoothing
thelevel of their dividend payments when appropriate.
TheCompany was able to utilise its reserves in 2020 and
2021to continue to pay and grow its own dividend despite the
significant dividend cuts and suspensions experienced across
the UK market during the pandemic.
In 2023 the Company paid dividends totalling 10.35p, growth
of 2.0% on 2022, its eleventh consecutive year of dividend
growth. TheCompany fully covered the dividend from earnings
with asmall surplus carried to revenue reserves, which
increased to£8.9million. With a diversified portfolio and
healthy level ofrevenue reserves, the Company is in a good
position goingforward.
Eleven years of consecutive dividend growth
2018 2019 2020 2021 2022 202320172012 2013 2014 2015 2016
(Pence per share)
2.0% CAGR
Dividend
6
7
8
9
10
11
12
Source: Janus Henderson Investors, Factset and LSEG Datastream
Diversification of income
Henderson High Income Trust plc Annual Report 2023
3
Performance
Highlights
4
Total return performance to 31December 2023
One year
(%)
0
2
4
6
8
10
Benchmark¹ NAV² Share price
3
8.1
0.9
9.8
Premium/discount over 5 years to 31December 2023
4
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
31 Dec
2018
31 Dec
2023
31 Dec
2019
31 Dec
2020
31 Dec
2022
31 Dec
2021
(%)
Five years
0
10
20
30
40
50
Benchmark¹ NAV² Share price
3
43.6
33.6
31.0
(%)
Dividend yields as at 31December 2023
5
(%)
0
1
2
3
4
5
6
7
FTSE
All-Share
Index
ICE BofA
Sterling
Non-Gilt
Index
6
10 Year
Gilts
6
Cash
7
Henderson
High Income
3.6
4.9
6.6
3.8
5.2
Attribution
8
– explanation of movement in net asset value (total return) in 2023
12.0
10.0
8.0
6.0
4.0
2.0
0.0
(%)
Benchmark
1
Asset
Allocation
Stock
Selection –
Equities
Stock
Selection –
Fixed Income
Gearing Ongoing
Charges
Performance
of Net Asset Value
2
8.1
0.0
-0.4
0.9
-0.8
9.8
2.0
Strategic Report: Performance Highlights
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 Premium/discount based on net asset value with debt at fair value
5 Alternative Performance Measure, see page 82
6 Gross redemption yield
7 Cash based on SONIA (Sterling Overnight Index Average) Interest Rate Benchmark
8 Geometric returns
A Glossary of Terms and Alternative Performance Measures can be found on page 80 and pages 81 to 82 respectively
Sources: Morningstar Direct, Janus Henderson Investors. All data is either as at 31 December 2023 or for the year-ended 31 December 2023
Henderson High Income Trust plc Annual Report 2023
5
NAV per share
1,4
2023169.58p
2022 164.24p
Revenue return per share
2023 10.39p
2022 10.37p
Dividend for the year
2023 10.35p
2022 10.15p
Ongoing charge for the year
3,4
2023 0.86%
2022 0.84%
Mid-market price per share
2023 156.50p
2022 165.25p
Net assets
2023 £222.3m
2022 £214.3m
Dividend yield
2,4
2023 6.6%
2022 6.1%
Gearing
4
2023 21.4%
2022 21.4%
1 Net asset value with debt at fair value as published by the Association of Investment Companies (AIC)
2 Based on the dividends paid or announced for the year and the share price at the year-end
3 Calculated using the methodology prescribed by the AIC
4 Alternative Performance Measure, see pages 81 to 82
A Glossary of Terms and Alternative Performance Measures can be found on page 80 and pages 81 to 82 respectively
Sources: Morningstar Direct, Janus Henderson Investors. All data is either as at 31 December 2023 or for the year-ended 31 December 2023
Strategic Report: Performance Highlights (continued)
Henderson High Income Trust plc Annual Report 2023
6
Chairman’s
Statement
7
Strategic Report: Chairman’s Statement
Performance
2023 was generally a positive year for investment returns.
TheCompany’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%
atthe 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
tofall 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
theprospect 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
11thconsecutive 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.
TheBoard remains confident that the Company can continue
to deliver ahigh level of income to shareholders.
Gearing
The Company’s policy on gearing is provided on page 22
ofthis 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
12months and the terms on which the facility was agreed
werecompetitive.
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
theCompany, 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.
Jeremy Rigg
Chairman
Henderson High Income Trust plc Annual Report 2023
8
Strategic Report: Chairman’s Statement (continued)
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
andits 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
topages 30 to 32 of this Annual Report.
AGM
We look forward to seeing as many of our shareholders
aspossible at our AGM which will be held at 12 noon on
Tuesday, 14 May 2024 at the offices of Janus Henderson
at201 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. Wevery
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
Henderson High Income Trust plc Annual Report 2023
9
Fund
Manager’s
Report
10
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.
UK inflation eased during the year while the Bank
of England hiked interest rates to 5.25% before
pausing
UK Consumer Price Index (y-on-y % change)
Bank of England Base Interest Rate
Jul 21 Nov 21 Mar 22 Mar 23Nov 22Jul 22Mar 21 Nov 23Jul 23
0
2
4
6
8
10
12
(%)
Source: LSEG DataStream as at 31 December 2023
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
overthe year with financials, industrials and consumer
discretionary outperforming, while defensive sectors such
ashealth 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.
A year end rally saw cyclical sectors outperform
defensive sectors
Financials
Industrials Consumer Staples Telecommunications
Mar 23 Jun 23 Sep 23Dec 22
(%)
Dec 23
80
90
100
110
120
130
Sector performance based on MSCI UK sector indices. Rebased to 100 as at
31December 2022
Source: LSEG Datastream as at 31 December 2023
Mid-caps have significantly underperformed
mega-caps over last 2 years
Largest 20 UK companies FTSE 250 Index FTSE All-Share Index
Jun 22 Jun 23Dec 21 Dec 22 Dec 23
70
80
90
100
110
120
130
35%
(%)
Returns shown on a total return basis and rebased to 100 as at
31 December 2021
Source: LSEG DataStream, Bloomberg, Janus Henderson analysis as at
31December 2023
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%,
Strategic Report: Fund Manager’s Report
David Smith
Fund Manager
Henderson High Income Trust plc Annual Report 2023
11
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.
Bond yields were volatile during the year and fell
sharply in the 4th quarter on lower inflation
2.5
3.0
3.5
4.0
4.5
5.0
Mar 23Dec 22
(%)
Jun 23 Sep 23
Dec 23
UK 10-year Gilt Yield
Source: LSEG DataStream as at 31 December 2023
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
toattract 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.
UK market dividends grew during 2023 on an
underlying basis
(£bn)
Regular Dividends
2012 2015 201620142013 2017 2018 2019 2022 202320212020
0
20
40
60
80
100
120
Special Dividends
Source: Computershare UK Dividend monitor as at 31 December 2023
Strategic Report: Fund Manager’s Report (continued)
Henderson High Income Trust plc Annual Report 2023
12
Strategic Report: Fund Manager’s Report (continued)
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
of2.0% over those 11 years. Revenue reserves as at
31December 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).
Inthe 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 inshort
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 ofDecember.
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
itsrenewable 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
isattractive 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
ofeconomies 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,
whichcould 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
ageneral 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.
Henderson High Income Trust plc Annual Report 2023
13
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 12months. 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.
Real wage growth likely to be positive in 2024
Jul 21 Jan 22 Jul 22Jan 21 Jul 23Jan 23
Jan 24
Real wage growth
-4
-2
0
2
4
6
8
Chart shows wage growth adjusted for inflation
Source: ONS, LSEG DataStream, Janus Henderson Analysis as at
31December 2023
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.
The UK market is attractively valued
2002 2006 20101998 2018 20222014
Price Earnings Ratio based on 12 month forward earnings consensus
estimates
6
8
10
12
14
16
18
20
22
24
Source: LSEG DataStream as at 31 December 2023
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
Strategic Report: Fund Manager’s Report (continued)
Henderson High Income Trust plc Annual Report 2023
14
Portfolio and
Financial
Information
15
Investments: Fixed Interest
PREFERENCE SHARES
Total
31December
2023
£’000
General Accident 8.875% 1,036
Middlefield Canadian Income 7% 1,438
National Westminster Bank 9% 319
Nationwide Building Society 10.25% 1,677
Total Preference Shares 4,470
OTHER FIXED INTEREST
Allwyn Entertainment 7.25% 2030 1,046
Amazon 4.8% 2034 (USA) 1,095
Anheuser-Busch 4% 2025 496
Anheuser-Busch 4.75% 2029 (USA) 877
AXA 5.453% Variable Perpetual 838
B&M European Value Retail 8.125% 2030 1,062
Banijay Entertainment 7% 2029 (France) 1,141
Broadcom 4.15% 2030 (USA) 239
Broadcom 4.926% 2037 (USA) 784
Bupa Finance 4.125% 2035 421
Bupa Finance 5% 2026 344
Centene Corporation 4.625% 2029 (USA) 677
Charter Communications 5.05% 2029 (USA) 777
CPUK Finance 4.875% 2025 454
Direct Line Insurance 4.75% Variable Perpetual 381
Électricité De France 6.25% 2028 955
Gartner 3.75% 2030 (USA) 1,526
GLP 5.3% 2029 (USA) 623
Iron Mountain 4.5% 2031 (USA) 665
MSCI 3.875% 2031 (USA) 674
Service Corp Intl 4.625% 2027 (USA) 1,271
UK Treasury 5% 2025 4,943
USA Treasury Bonds 7.5% 2024 (USA) 4,904
VICI Properties 4.95% 2030 (USA) 380
Virgin Media 4.125% 2030 1,472
Ziggo 4.875% 2030 (USA) 699
Total Other Fixed Interest 28,744
TOTAL FIXED INTEREST 33,214
Investments: Equities (including
convertibles and investment funds)
ENERGY
Total
31December
2023
£’000
Oil, Gas and Coal
BP 6,399
Shell 6,310
Woodside (Australia) 2,278
Total Energy 14,987
BASIC MATERIALS
Chemicals
Johnson Matthey 2,693
Victrex 2,000
Industrial Metals and Mining
Anglo American 3,992
Rio Tinto 8,025
Total Basic Materials 16,710
INDUSTRIALS
Construction and Materials
Genuit 2,149
Electronic and Electrical Equipment
Spectris 2,680
General Industrials
Bunzl 3,587
Industrial Engineering
Vesuvius 2,498
Industrial Support Services
DCC 3,607
PageGroup 3,658
Total Industrials 18,179
CONSUMER DISCRETIONARY
Consumer Services
Compass 4,579
Household Goods and Home Construction
Taylor Wimpey 3,573
Media
RELX (Netherlands) 8,221
Personal Goods
Burberry Group 3,222
Retailers
B&M European Value Retail 2,668
Next 3,588
Travel and Leisure
Mobico 1,566
Whitbread 2,927
Total Consumer Discretionary 30,344
Strategic Report: Investment Portfolio
Henderson High Income Trust plc Annual Report 2023
16
Investments: Equities (including
convertibles and investment funds)
HEALTHCARE
Total
31December
2023
£’000
Pharmaceuticals and Biotechnology
AstraZeneca 4,584
GlaxoSmithKline 3,306
Sanofi (France) 3,032
Total Healthcare 10,922
CONSUMER STAPLES
Beverages
Britvic 4,282
Coca-Cola HBC 2,493
Diageo 4,940
Food Producers
Cranswick 3,911
Hilton Food Group 4,406
Personal Care, Drug and Grocery Stores
Tesco 5,374
Unilever 8,747
Tobacco
British American Tobacco 9,545
Imperial Brands 5,927
Total Consumer Staples 49,625
UTILITIES
Electricity
SSE 3,620
Gas, Water and Multiutilities
E.ON (Germany) 2,780
Engie (France) 2,843
National Grid 5,407
Severn Trent 4,243
Total Utilities 18,893
FINANCIALS
Total
31December
2023
£’000
Banks
HSBC 7,737
Lloyds Banking 3,958
NatWest 3,026
Nonlife Insurance
ASR Nederland (Netherlands) 2,320
Conduit Re 2,721
Sabre Insurance 1,612
Life Insurance
Chesnara 2,798
Phoenix 5,379
Investment Banking and Brokerage Services
3i 5,602
Ashmore 3,534
Intermediate Capital 5,323
M&G 5,085
Schroders 2,497
St. James’s Place 1,603
Finance and Credit Services
Paragon Banking Group 3,046
Closed End Investments
Blackstone/GSO Loan Funding (Jersey) 1,629
Greencoat UK Wind 2,632
Tufton Oceanic Assets 1,807
Total Financials 62,309
REAL ESTATE
Real Estate Investment Trusts
Big Yellow 3,764
British Land 2,361
Land Securities 3,617
Total Real Estate 9,742
TECHNOLOGY
Software and Computer Services
Moneysupermarket.com 2,672
Technology Hardware and Equipment
Texas Instruments (USA) 2,410
Total Technology 5,082
TOTAL EQUITIES 236,793
TOTAL 270,007
Strategic Report: Investment Portfolio (continued)
Henderson High Income Trust plc Annual Report 2023
17
Strategic Report: Investment Portfolio (continued)
FIXED INTEREST
Total
31December
2023
%
Total
31December
2022
%
Preference shares 1.7 1.8
Other fixed interest 10.6 9.4
Total Fixed Interest 12.3 11.2
EQUITIES
Energy
Oil, gas and coal 5.6 5.6
Total Energy 5.6 5.6
Basic Materials
Chemicals 1.7 1.6
Industrial metals and mining 4.5 5.7
Total Basic Materials 6.2 7.3
Industrials
Construction and materials 0.8 –
Electronic and electrical
equipment 1.0 0.8
General industrials 1.3 1.2
Industrial engineering 0.9 0.8
Industrial support services 2.7 1.2
Industrial transportation – 0.9
Total Industrials 6.7 4.9
Consumer Discretionary
Consumer services 1.7 1.6
Household goods and home
construction 1.3 1.6
Media 3.0 2.7
Personal goods 1.2 1.4
Retailers 2.3 2.0
Travel and leisure 1.7 2.6
Total Consumer Discretionary 11.2 11.9
Healthcare
Pharmaceuticals and
biotechnology 4.0 4.9
Total Healthcare 4.0 4.9
Consumer Staples
Beverages 4.4 5.1
Food producers 3.0 3.5
Personal care, drug and
grocery stores 5.2 5.8
Tobacco 5.8 6.8
Total Consumer Staples 18.4 21.2
FIXED INTEREST
Total
31December
2023
%
Total
31December
2022
%
Utilities
Electricity 1.3 1.8
Gas, water and multiutilities 5.7 3.8
Total Utilities 7.0 5.6
Financials
Banks 5.5 7.3
Closed end investments 2.3 2.3
Finance and credit services 1.1 1.1
Investment banking and
brokerage services 8.7 7.0
Life insurance 3.0 2.5
Nonlife insurance 2.5 2.6
Total Financials 23.1 22.8
Technology
Software and computer services 1.0 1.2
Technology hardware and
equipment 0.9 0.9
Total Technology 1.9 2.1
Real Estate
Real estate investment trusts 3.6 2.5
Total Real Estate 3.6 2.5
TOTAL INVESTMENTS 100.0 100.0
Distribution of the UK equity portfolio holdings
at31December
2023 2022
% %
Large Companies: 65.6 68.5
Medium-sized Companies: 30.1 26.6
Small Companies: 4.3 4.9
2
0
2
2
2
0
2
3
Large companies = Market Cap of >£5bn
Medium-sized companies = Market Cap of <£5bn and >£500m
Small companies = Market Cap of <£500m
Source: Janus Henderson
Percentage Breakdown of Investments by Sector
Henderson High Income Trust plc Annual Report 2023
18
Sector Exposure at 31December
Excluding cash
Sector
2023
£’000
2023
% of portfolio
2022
£’000
2022
% of portfolio
Preference shares 4,470 1.7 4,585 1.8
Other fixed interest 28,744 10.6 24,491 9.4
Total Fixed Interest 33,214 12.3 29,076 11.2
Financials 62,309 23.1 59,345 22.8
Consumer Staples 49,625 18.4 55,213 21.2
Consumer Discretionary 30,344 11.2 30,933 11.9
Utilities 18,893 7.0 14,541 5.6
Industrials 18,179 6.7 12,667 4.9
Basic Materials 16,710 6.2 19,050 7.3
Energy 14,987 5.6 14,492 5.6
Healthcare 10,922 4.0 12,765 4.9
Real Estate 9,742 3.6 6,438 2.5
Technology 5,082 1.9 5,533 2.1
Total Equities 236,793 87.7 230,977 88.8
Total 270,007 100.0 260,053 100.0
Equity Portfolio Sector Weightings at 31December 2023
0510 15 20 25 30
Telecommunications
Technology
Real Estate
Healthcare
Energy
Basic Materials
Industrials
Utilities
Consumer Discretionary
Consumer Staples
Financials
Company FTSE All-Share Index
(%)
Ten Largest Investments at 31December
Position Company Sector
2023
£’000
2023
% of portfolio
2022
£’000
2022
% of portfolio
1 British American Tobacco Consumer Staples 9,545 3.5 11,775 4.5
2 Unilever Consumer Staples 8,747 3.2 9,628 3.7
3 RELX (Netherlands) Consumer Discretionary 8,221 3.0 7,102 2.7
4 Rio Tinto Basic Materials 8,025 3.0 6,034 2.3
5 HSBC Financials 7,737 2.9 3,943 1.5
6 BP Energy 6,399 2.4 6,114 2.4
7 Shell Energy 6,310 2.3 4,845 1.9
8 Imperial Brands Consumer Staples 5,927 2.2 5,984 2.3
9 3i Financials 5,602 2.1 6,389 2.5
10 National Grid Utilities 5,407 2.0 4,488 1.7
Total 71,920 26.6 66,302 25.5
Strategic Report: Portfolio Information
19
Henderson High Income Trust plc Annual Report 2023
Total Return Performance to 31December
1 year
%
3 years
%
5 years
%
10 years
%
NAV
1
+9.8 +29.1 +43.6 +74.3
Share Price
2
+0.9 +27.7 +33.6 +58.9
Benchmark
3
+8.1 +19.2 +31.0 +62.0
ICE BofA Sterling Non-Gilts Index +8.6 -13.4 +2.4 +31.6
FTSE All-Share Index +7.9 +28.1 +37.7 +68.2
Total Return Performance over 10 years to 31December 2023
NAV
1
Share Price
2
Benchmark
3
(%)
20232013 2014 2015 2016 2020 20222021201920182017
-10
0
10
20
30
40
50
60
70
80
Financial Information as at 31 December
Net assets
£m
NAV per
ordinary share
4
p
Mid-market price per
ordinary share
p
Dividends
per ordinary share
p
2014 189.0 171.4 177.9 8.60
2015 197.1 175.3 180.5 8.90
2016 207.7 181.3 183.6 9.15
2017 257.2 195.7 190.0 9.40
2018 210.8 159.5 159.5 9.60
2019 251.1 189.8 191.8 9.80
2020 211.4 157.3 147.0 9.90
2021 236.2 177.9 177.5 9.95
2022 214.3 164.2 165.3 10.15
2023 222.3 169.6 156.5 10.35
1 Net asset value with debt at fair value total return (including dividends reinvested and excluding transaction costs)
2 Includes dividends reinvested
3 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
4 Based on net assets with debt at fair value as published by the AIC
Source: Janus Henderson, Morningstar Direct and LSEG Datastream
Strategic Report: Historical Performance and
Financial Information
20
Henderson High Income Trust plc Annual Report 2023
Business Model
21
Purpose and Strategy
The Company’s purpose is to deliver consistently to
shareholders a high level of income on a regular basis
whilealso targeting capital growth over the longer term.
Thispurpose is fulfilled by achieving the investment
objectiveand applying theinvestment policy.
The Board has appointed Janus Henderson Investors
(‘theManager’) to manage the investment strategy within
theparameters determined by the Board and approved
byshareholders.
Investment Objective
The Company invests in a prudently diversified selection of
both well-known and smaller companies to provide investors
with a high dividend income stream while also maintaining the
prospect of capital growth.
Investment Policy
In normal circumstances the Company will invest up to 80%
of its gross assets in equities and up to 20% of its gross
assets in fixed income (in companies of any size that are either
listed in, registered in, or whose principal business is in the
UK). Within these limits a maximum of 30% of gross assets
may be invested outside of the UK.
No single investment will exceed 15% of total gross assets at the
time of investment and no more than 15% of gross assets may
be invested in other listed investment companies (including
investment trusts) or collective investment schemes. The
Company may from time to time use financial instruments
known as derivatives for the purpose of efficient portfolio
management or to generate additional income while maintaining
a level of risk consistent with the risk profile of theCompany.
Investment Selection
The selection process seeks to identify companies with strong
balance sheets that are capable of paying dividends. There is
a focus on well-managed companies whose qualities may
have been temporarily overlooked and which offer potential
for capital appreciation over the medium term.
Gearing
1
The Company has an active policy of using appropriate levels
of gearing, both in the form of bank and longer-term
borrowings, with the objective of enhancing income returns
and also achieving capital growth over time. A portion of
gearing is usually employed with respect to the Company’s
fixed interest securities to generate additional income.
The Company can borrow up to 40% of gross assets.
Thedrawdown of floating rate borrowings can be in non-
sterling currencies, provided that these borrowings do not
exceed the market value of non-sterling assets.
Gearing as at 31 December 2023 was 21.4% (2022: 21.4%).
Company Structure
The Company operates as an investment company with a
Board of Directors who appoint specialist third-party service
providers to deliver the operations of the Company. Their
performance is monitored and challenged by the Board who
retain oversight of the Company’s operations. The Board
iscomprised entirely of non-executive directors accountable
toshareholders, who have the ability to remove a director from
office where they deem it to be in the interests of the Company.
The framework of delegation provides a cost-effective
mechanism for achieving the Company’s objectives under
section 1158/9 of the Corporation Tax Act 2010 (“s.1158/9”).
Theclosed-end nature of the Company enables the Fund
Manager to take a longer-term view on investments. It also
supports a fully invested portfolio as the Company does not
have to maintain or create sufficient cash balances to satisfy
investor redemptions.
Investment trusts have two significant advantages over other
investment fund structures: firstly, the ability to pay dividends
out of revenue reserves to support the provision of income to
shareholders, as necessary, and secondly, the ability to borrow
to increase potential returns for shareholders.
Income
The investment objective underpins the Company’s dividend
policy, which is to pay quarterly interim dividends from current
revenue and add to the revenue reserve where possible each
year. The purpose of this reserve is to enable the Company to
support dividend payments in difficult market conditions.
When deciding on whether to pay each quarterly interim
dividend, the Board has regard to a variety of factors, including
current and forecast levels of income (including any special
dividends received) and the historic dividend schedule. The
Board also considers a range of stress tests which forecast
revenue under different scenarios in order to form a view on
the sustainability of the Company’s dividends.
Borrowings
During the year under review, the Company had a committed
loan facility of £45 million with The Bank of Nova Scotia,
London Branch. This facility matured on 20 December 2023
and on that date the Company put in place an unsecured loan
facility of £45 million with BNP Paribas, London Branch to
replace the previous facility. This facility has an accordion of
£25 million allowing the Company to borrow up to £70 million.
As part of the combination with Henderson Diversified Income
Trust plc, the facility was drawn down by approximately
£60million in January 2024.
The Company also has a 19-year £20 million fixed rate senior
unsecured loan note with a sterling coupon of 3.67% which
willmature on 8 July 2034.
Strategic Report: Business Model
1 Please refer to the Alternative Performance Measures on page 81
Henderson High Income Trust plc Annual Report 2023
22
Strategic Report: Business Model (continued)
Section 172(1) Statement
Service Providers
The Directors use their experience and knowledge to select
and engage reputable organisations to carry out operations
on behalf of the Company. The Board is responsible for
effectively monitoring the services provided by the Company’s
third-party suppliers on an ongoing basis. The principal
outsourced arrangement is the investment management
service provided by the Manager.
The Board reviews and monitors the arrangements in place
with all the Company’s third-party service providers at least
annually. As the Manager oversees the overall day-to-day
relationship with the Company’s other third-party suppliers,
the Board places reliance on the Manager and is confident
that the Manager has developed and maintains good working
relationships with them. The Board receives appropriate
information from the Manager to assess the third-party
suppliers’ performance, value for service, approach to ESG
issues and their internal controls and risk management
frameworks, including information security and business
resilience. The Board also meets with representatives of the
Depositary and Custodian on an annual basis, and other
service providers, as and when it is deemed necessary.
Inaddition, J.P. Morgan Cazenove Limited (Broker), Marten &
Co Limited (Sponsored Research), Computershare Investor
Services PLC (Registrar) and HSBC(Depositary and
Custodian) provide an annual self-assessment covering value
for money for the service provided and confirmation of
adherence to the terms and conditions. This report confirms
that each service provider has appropriate corporate
governance and environmental, social and governance
policies, processes and procedures in place.
Values and Culture
The Board expects all Directors to act with integrity and
toapply their skill, care, due diligence and professional
experience in the boardroom. The Board has a strong
relationship with the Manager, in particular with the Fund
Manager and the Company Secretary. The culture of the
Board is one that promotes integrity and openness which
isreciprocated by the Manager.
The Board expects the Company’s third-party service
providers, particularly the Manager who is responsible for the
management of the Company’s portfolio, to uphold the same
values and high standard of conduct as the Board. To this
end, the Board considered the Manager’s corporate culture
and values as part of its overall assessment of the service
provided by them in the year under review.
Engagement and Communication with Stakeholders
The Board has drafted a stakeholder map to identify the relationships the Company has with each stakeholder group.
Thefollowing table sets out how the Manager and/or the Board engages with stakeholders who are deemed to have a high
levelof stakeholder interest in the Company.
Who? Why? How?
Stakeholder Why it is important to engage? How has the Manager and/or the Board engaged?
Shareholders/
Potential Investors
●
To allow investors to make informed
investment decisions.
●
To retain existing shareholders and
attractnew ones.
●
To understand investors’ requirements
and expectations.
●
Annual and Half Year Reports.
●
Monthly factsheets.
●
Fund Manager videos and commentary and webinars
with professional investors.
●
Sponsored research notes.
●
AGM.
●
RNS announcements.
●
Website updates.
●
The Board receives shareholder feedback from its
Broker, the Manager’s Investment Trust Sales and
Marketing Teams and the Fund Manager.
●
The Board and the Fund Manager are also happy to
meet shareholders when requested.
Alternative
Investment Fund
Manager (AIFM)
– Janus Henderson
Fund Management
UK Limited
(“JHFM”)
●
To ensure that the Company complies
with the AIFMD regulation.
●
The AIFM confirms compliance with investment limits
and restrictions each month.
●
Quarterly internal controls reports to provide the Board
with regular reporting on the Manager’s internal
controls in operation over the services delivered to the
Company.
Henderson High Income Trust plc Annual Report 2023
23
Strategic Report: Business Model (continued)
Who? Why? How?
Stakeholder Why it is important to engage? How has the Manager and/or the Board engaged?
Fund Manager–
Janus Henderson
●
To ensure that the investments of the
portfolio and the administration of the
Company are well-managed.
●
The Fund Manager and Company Secretary attend all
meetings and provide specific reports.
Service Providers
(including the
Depositary, Broker,
Registrar and
Auditors)
●
To monitor the quality and cost
effectiveness of the services provided.
●
Quarterly service review meetings with the Depositary
and biannual service review meetings with the Registrar.
●
Self-assessment reports provided to the Board annually.
●
Review and discussion of reports on the effectiveness
of internal controls and risk management.
●
Review of proposed audit plan and audit fee each year,
as well as any audit findings, the auditors’ letter of
engagement and terms of business.
●
Regular attendance at meetings throughout the year
with specialist input provided.
Portfolio Holdings
●
The Fund Manager’s decisions are key
tothe Company achieving its
investmentobjective and policy. Direct
communication with investee companies
can lead to more informed decisions.
●
The Manager votes at shareholder meetings of the
portfolio holdings on behalf of the Company (engaging
with companies as appropriate prior to voting e.g. on
ESG matters/contentious resolutions).
●
The Fund Manager regularly engages with investee
companies.
Lender
●
The Company has an active policy of
using appropriate levels of gearing, both
in the form of bank and longer-term
borrowings, with the objective of
enhancing income returns and also
achieving capital growth over time.
●
The Manager confirms compliance with the loan
covenants (to both the short-term and long-term lender)
each month.
●
The Manager responds to audit requests from its
Lenders.
Board Discussions and Decision Making
The following paragraphs provide some examples of the key
discussions held and decisions made by the Board and its
Committees during the year ended 31 December 2023.
●
Negotiations with the Manager in relation to
Henderson Diversified Income Trust plc’s scheme of
reconstruction and voluntary winding up: In its
discussions and negotiations with the Manager, the Board
focused on the financial terms of the scheme to ensure
that they were in the best interests of the Company’s
existing shareholders. In particular, the Board ensured that
any shares to be issued would be at a premium to net
asset value and that the transaction costs would be
substantially payable by the Manager under any level of
rollover, thereby ensuring that the Company’s existing
shareholders would be protected and there would be no
dilution to the Company’s NAV per share.
The Board considered that the scheme would offer a
number of benefits to the Company’s existing
shareholders, including a lower ongoing charges ratio with
the Company’s fixed costs spread over a larger asset base
and enhanced liquidity as the scale of the enlarged
Company is expected to improve the marketability and
liquidity of the Company’s shares.
●
Dividends paid to shareholders: The Company’s
investment objective is to provide investors with a high
dividend income stream while also maintaining the prospect
of capital growth. At each meeting, the Board carefully
reviews the level of revenue income received and forecast
as well as the available distributable reserves. Forthe year
under review, dividends amounting to 10.35p were
declared, compared to 10.15p in 2022, an increase of 2.0%
and the Company’s 11th consecutive annual increase.
●
Short-term debt: The Board reviewed the Company’s
borrowing position. Taking into consideration the
advantages of gearing for an investment trust, the
Company’s performance record over the longer term, and
that the Company’s £20 million fixed rate senior unsecured
note is due to be repaid in 2034, the Board approved a
one-year loan facility agreement with BNP Paribas,
London Branch, after considering a number of indicative
quotes from potential lenders, to take advantage of the
most competitive rates and terms on offer.
As explained above, the Directors’ overarching duty is to promote
the success of the Company for the benefit of shareholders
with consideration of stakeholders’ interests. TheCompany’s
main stakeholders are the Company’s shareholders, the
Manager, its lenders and other service providers.
Liquidity and Discount Management
The Board’s aim is for the Company’s share price to reflect
closely its underlying net asset value, and for the market in its
shares to be liquid. The ability of the Company to influence this
meaningfully over the longer term is, of course, limited since it is
dependent on the market supply of, and demand for, the
Henderson High Income Trust plc Annual Report 2023
24
Company’s shares. However, the Board considers theissuance
and buyback of the Company’s shares where prudent, subject
always to the overall impact on the portfolio, the pricing of other
comparable investment companies and overall market
conditions. The Board believes that flexibility is important and
that it is not in shareholders’ interests to set specific levels of
premium and discount for its issuance and buyback policy.
Arrangements with the Manager
The Company is an Alternative Investment Fund and has
appointed Janus Henderson Fund Management UK Limited
(‘JHFM’) to act as its AIFM in accordance with an agreement
which has been effective from July 2014 and is terminable on
six months’ notice. JHFM delegates investment management
services to Janus Henderson Investors UK Limited, which acts
as Manager. Both entities are wholly owned subsidiaries of
JanusHenderson Group plc (‘Janus Henderson’) and are
authorised and regulated by the FCA. References to
JanusHenderson and the Manager within this report refer to
the services provided by both entities. The Fund Management
Team is led by David Smith, a portfolio manager on the Global
Equity Income Team at Janus Henderson, a position he has
held since 2008. David has been the Company’s Fund
Manager since July 2015.
Janus Henderson and its subsidiaries also provide
accounting, company secretarial and general administrative
services. Some of the administration and accounting services
are carried out on behalf of the Manager by BNP Paribas S.A.
Janus Henderson Secretarial Services UK Limited acts as the
Corporate Secretary.
Please refer to the Management Engagement Committee
Report on page 45 for further details about how the Directors
consider the continuing appointment of the Manager.
Management Fee
The base management fee is charged at 0.50% of adjusted
average gross assets up to £325 million. A reduced
management fee of 0.45% is applied to average adjusted
gross assets above £325 million.
This average value is calculated by using the values on the last
day of each of the two calendar years preceding the reporting
year. Average adjusted gross assets are gross assets less
current liabilities and less any Janus Henderson managed funds
or Janus Henderson Group plc shares within the portfolio.
Anydebt used for investment purposes, including that recorded
in current liabilities, is not deducted from gross assets.
The base management fee is payable quarterly in arrears.
Inaddition, a supplemental base management fee is paid on
any new funds in relation to share issues in the year they were
raised, at the pro-rata annual rate. For the following year any
funds raised are added to prior year assets for the purposes
of calculating the base management fee.
Managing Risks
In accordance with the AIC Code of Corporate Governance
(AIC Code) and FRC Guidance, the Board has established
procedures to identify and manage the principal and emerging
risks to which the Company is exposed in achieving its
long-term objectives. The Company’s principal risks are
considered to be those that would threaten its business
model, future performance, solvency, liquidity and reputation.
In addition, it is the Board’s responsibility to identify emerging
risks which it defines as events, trends or uncertainties that
are at an early stage of development but could pose a
significant threat to the Company’s future and therefore
require further monitoring and investigation.
Principal Risks
The Board, with the assistance of the Manager, regularly
carries out a robust assessment of the principal and emerging
risks facing the Company and seeks assurance that the risks
are appropriately evaluated and that effective mitigating
controls are in place, where possible. To aid the process,
theCompany has drawn up a detailed risk matrix, where the
individual risks and the application of any relevant controls are
described. Such safeguarding measures may be established
by the Board itself: for example, the Board has put in place a
schedule of investment limits and restrictions, appropriate to
the Company’s investment objective and policy, to which the
Manager must adhere and report upon monthly. In addition,
the design and application of controls may be delegated by
the Board to the Company’s third-party service providers,
who report regularly to the Board on the effectiveness of their
control environments. Using a colour coded traffic light
system, each risk within the matrix is assessed, scored and
prioritised according to the severity of its potential impact on
the Company and its likelihood of occurrence. The principal
risks which have been identified as part of this process, and
the steps taken by the Board to mitigate these, are set out in
the table below.
The Board does not consider these principal risks to have
changed during the year under review and up to the date of
this report.
Principal Risk Mitigating Measures
Climate Change Risk
Risk that investee companies within the
Company’s portfolio fail to respond to
thepressures 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.
TheFund 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 on page 30 for
further details.
Strategic Report: Business Model (continued)
Henderson High Income Trust plc Annual Report 2023
25
Strategic Report: Business Model (continued)
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 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
byany gearing) and/or a reduction
ofincome.
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 on pages 70 to 75.
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
beable 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
togain assurance that they too have appropriate policies and procedures in place
tobe able to continue in operation and maintain stability in times of such risks.
Please refer to the Internal Control and Risk Management section on page 41 for
further details.
Henderson High Income Trust plc Annual Report 2023
26
Strategic Report: Business Model (continued)
Principal Risk Mitigating Measures
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. 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
31December 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
bythe 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
£8.9million in revenue reserves as at 31December 2023
providingadditional comfort for any difficult years that may
arise inthe 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
aninvestment 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.
Henderson High Income Trust plc Annual Report 2023
27
Strategic Report: Business Model (continued)
Key Performance Indicators
Measuring Performance
In order to measure the success of the Company in meeting
its objectives and to evaluate the performance of the Manager,
the Directors consider a number of Key Performance
Indicators (KPIs).
Dividend per share
1
1st Interim 2nd Interim 3rd Interim 4th Interim
2022202120202019
2023
(Pence)
2.15
2.20
2.25
2.30
2.35
2.40
2.45
2.50
2.55
2.60
2.65
1 Based on the dividends paid or announced for the year. See Alternative
Performance Measures on page 82
Source: Henderson High Income Trust plc Annual Reports
The Board places a high level of importance on maintaining
the Company’s quarterly dividend payments. The aim is to
maintain a suitable asset allocation that will permit a
sustainable high level of dividend distributions to shareholders
with the potential to grow the capital value in the longer term.
The Board reviews the Company’s revenue account at each
meeting, along with the appropriateness of its dividend
payments. The Board also compares the yield on the
Company’s shares to other relevant sectors of the AIC.
Shareholders must, however, recognise that dividend
payments can never be guaranteed, and that circumstances
could arise when it would be necessary to reduce or pass a
dividend payment. In 2023 £128,000 was added to revenue
reserves. The Company has built up revenue reserves of
around £8.9 million at the end of the year under review, which
equates to approximately six months’ worth of cover over the
full year dividend on the enlarged shareholder base following
the issue of equity due to the combination with HDIV in
January 2024. This compares with reserves of around
£8.8million at the end of 2022 which represented
approximately eight months’ worth of dividend cover on the
Company’s shareholder base before the merger with HDIV.
Equally, there may be instances when the level of payment
must be increased in order to comply with s.1158/9 which
requires an investment trust not to retain more than 15% of its
total income. Where such instances would result in a payment
going beyond the Board’s policy, one-off special dividend
payments could be announced and paid.
NAV
1
and Share Price per share
Share price (p)NAV per share (p)
31 Dec
2019
31 Dec
2018
31 Dec
2021
31 Dec
2020
31 Dec
2023
31 Dec
2022
100
120
140
160
180
200
(Pence)
1 Net asset value with debt at fair value as published by the AIC
At each meeting, the Board reviews the performance of the
portfolio as well as the Company’s NAV (with debt at par value
and fair value) and share price. The Board also compares the
performance of the Company against its benchmark.
Premium/discount over 5 years to 31December 2023
1
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
31 Dec
2018
31 De
c
2023
31 Dec
2019
31 Dec
2020
31 Dec
2022
31 Dec
2021
(%)
1 Premium/discount based on net asset value with debt at fair value
At each meeting, the Board monitors the level of the
Company’s premium or discount to net asset value per share
and reviews the average premium or discount for companies
from the AIC Equity Income sector.
Ongoing Charge
The Board regularly reviews the ongoing charge and monitors
all Company expenses, with a detailed schedule of expenses
reviewed twice a year in conjunction with the half year and full
year financial results. The ongoing charge for the year-ended
31 December 2023 was 0.86% (2022: 0.84%).
For and on behalf of the Board
Jeremy Rigg
Chairman
27 March 2024
Henderson High Income Trust plc Annual Report 2023
28
Environmental,
Social and
Governance
Matters
29
Our Approach to Environmental, Social
and Governance Matters
The Board believes that integrating environmental, social and
governance (ESG) factors into the investment decision making
and ownership practices is an important element in delivering
the Company’s investment objective. ESG considerations are
a fully integrated component of the investment processes
employed by the Fund Manager and the wider investment
teams at Janus Henderson.
Defining ESG
●
Environmental factors include climate change, energy
efficiency, resource depletion and water and waste
management.
●
Social factors include employee and community
relations,diversity, quality of life, enhancements in
knowledge and advances in supportive technology
forimprovedsustainability.
●
Governance factors include mitigating risks such as
bribery and corruption, questioning board diversity,
executive pay, accounting standards and shareholder
rights, and positively influencing corporate behaviour.
Investment Considerations
Companies that have a resilient business model is at the core
of the investment strategy of the Company and its important
to understand how ESG considerations impact those
business models. As with managing a business’s operational
and financial risks, those companies with good processes for
managing ESG risk factors tend to outperform. While no
company is specifically excluded from investment on ESG
grounds, 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 evolve
itsbusiness model to remain durable over the longer term.
The analysis of ESG factors is integrated into the stock
selection and monitoring process. As with understanding a
company’s fundamentals and financial health, the evaluation
of ESG risks and opportunities is also integral in determining
the value of a business.
When analysing ESG factors the Fund Manager will seek to:
1) Identify the risks and opportunities
Determining the underlying ESG risks and opportunities
acompany is exposed to is the first step in the process.
Companies within similar sectors and industries will have
common ESG risks associated with them but it is important
tounderstand the specific risks to each company.
2) Analyse the controls and actions
Once the key and material ESG risks are identified, it is
important to gain insight into the controls and actions a
company performs to mitigate those risks. ESG risks are
unavoidable for most companies but it is how a business
adapts its processes and operations to minimise the impact
ofthose risks which could have significant implications for a
company’s cash flow and dividend. While companies with
severe ESG risk exposure are likely to be avoided, those
companies that have high ESG risk exposure but demonstrate
strong controls may be considered for investment.
ESG risks and opportunities are broken down into short and
long term considerations:
Short term – Understanding the materiality of a failure in a
company’s operations in regard to ESG issues on its short
term financials, reputation and regulatory backlash.
Companies operating in higher risk sectors, such as oil & gas,
where the materiality of a failure in operations is significant,
require critical safety controls and processes. The use of
third-party ESG research providers, such as MSCI, helps to
identify the short term ESG risks and the level of controls and
processes companies have in place to mitigate those risks.
This is then followed up by detailed stock analysis.
Long term – Understanding how ESG issues could impact
abusiness in the long term and its ability to continue to pay
andgrow a dividend. Those businesses that operate in
contentious industries face structural pressure on their core
products or services as a result of government legislation or
consumer habits and it is important to understand the pace
ofthat structural decline, how a company is investing or
changing and what is currently discounted in the company’s
valuation. For instance, tobacco companies have faced
declining volumes in traditional combustible cigarettes for
many years but have managed that decline through higher
pricing while investing in alternative products, such as vaping
and heated tobacco, which are less harmful.
It is also important to understand how ESG factors could
present an opportunity to companies in the long term.
Clearlybusinesses which have exposure to ESG trends or
thematics, such as renewable energy or recyclable packaging
for example, should benefit but it is important to quantify the
benefits versus what is already discounted in the valuation.
The process of identifying and assessing the longer term
ESGrisks and opportunities forms part of our detailed
stockanalysis.
3) Assessing ESG targets
A resilient business model is imperative to the long-term value
of a company which includes the consideration of ESG
factors. Companies need to adapt their business models to
changes in ESG attitudes and regulation to remain relevant
and have realistic targets verified by independent institutions,
such as the Science Based Targets Initiative (SBTi) for
emissions, helps determine their ability and willingness. It also
gives a good framework to hold management accountable for
the success or failure in delivering on ESG goals. Ideally a
portion of management’s incentives should be linked to the
delivery of short and/or medium term ESG targets.
4) Engage with management
Company engagement forms an important part of the Fund
Manager’s investment process and incorporates a wide range
of topics including business strategy, capital allocation,
Environmental, Social and Governance Matters
Henderson High Income Trust plc Annual Report 2023
30
Environmental, Social and Governance Matters
(continued)
remuneration incentives, business risks, management
succession as well as ESG issues. Senior management teams
of the Company’s portfolio holdings are engaged with on a
regular basis, typically once or twice a year, or on an ad hoc
basis if a specific issue, whether ESG related or not, has
arisen that could potentially impact the value of a business.
The centralised Janus Henderson Responsible & Governance
Team (the R&G Team) also assists with specific engagement
matters, including those of an ESG nature, in respect of the
positions held across the portfolio. The R&G Team screens
portfolios for major ESG issues and works to highlight
important ESG engagement topics ahead of company
meetings or any communications with companies. In addition,
the R&G Team directly engages with companies with or on
behalf of the Fund Manager on a wide range of ESG themes
including key topics such as climate change, social
considerations and natural resource consumption.
Engagement is an ongoing process between the team and
senior management with the team monitoring the progress
made on issues raised.
During the year Janus Henderson conducted 26 meetings
withportfolio companies on dedicated ESG issues. These
engagements were separate to the more regular meetings with
management focusing on financials and business strategy.
ESG engagements during the year took various forms with the
most common being:
1) Engagement on a specific ESG issue;
2) Engagement on an industry wide ESG topic;
3) Engagement to gain insight on a company’s ESG policies.
Examples of each type of engagement during 2023 are
below:
1) Engagement on a specific ESG issue
British American Tobacco (BAT) – Meeting on breaches of
North Korea sanctions
While we continue to have ongoing ESG engagement with the
company on a broad range of topics covering supply chain
management, next generation products, water utilisation and
vaping product waste, we had a separate ESG meeting with
BAT post the announcement the company had paid out
$635million to resolve investigations by the US Department
ofJustice into the company’s historical business activities in
North Korea.
The objective of the meeting was to understand how this
event happened and what has been changed internally
asaresult to ensure such breaches do not occur again.
Wewanted reassurances that better controls and practices
on compliance and governance of subsidiaries in countries
that are deemed high risk have significantly improved.
Due to the terms of the settlement the company could not
gointo details surrounding North Korea but discussed what
policies and processes they have implemented. They were
confident the changes are sufficient to make sure a similar
incident could not happen again. We will continue to monitor
and engage with the company on this.
2) Engagement on an industry wide
ESGtopic
Oil & Gas industry – Meetings on methane emissions
Janus Henderson has consistently engaged with the large
energy companies, including BP and Shell, on issues relating
to energy transition and climate. One area of engagement has
been around the industry’s methane emissions which occur
through flaring, venting or leaks.
This is an area in which the large energy companies are making
some progress. They all have put in place LDAR (leak detection
and repair) programs, have started to use satellite data and are
focusing their efforts on the ‘worst offending’ parts of their
portfolio. Although methane emissions are still asignificant
problem, we are seeing improvement in transparency and
reporting, particularly regarding non-operated assets which
have historically been excluded from scope.
3) Engagement to gain insight on a
company’s ESG policy
Victrex – Meeting on the company’s circular economy
strategy
The objective of the meeting was to gain a better
understanding of the company’s circular economy strategy
and related opportunities.
The nature of the company’s core high performance plastic
PEEK (Polyether ether keytone) product has clear
sustainability advantages compared to metal but presents
difficult challenges from a circular economy perspective
(e.g.currently only 2% is recycled due to the long product life
cycle). Progress is being made in completing life-cycle
assessments across all products which is of increased
importance with customers. The company’s PEEK product
has high stability so lends itself to being re-granulated and
recycled multiple times. There are, however, a number of
challenges to overcome including the volume of recoverable
waste, legislative barriers and provenance of material.
Theyare working closely with Value Added Resellers looking
at various initiatives to improve recycling rates and helping
customers understand the properties of the recycled product.
We will continue to discuss and monitor the company’s
progress on these matters at future meetings.
Henderson High Income Trust plc Annual Report 2023
31
ESG Ratings
Janus Henderson engages MSCI, an independent leading
firmresearching and rating ESG factors globally, to support
investment research. The Company’s portfolio as at
31December 2023 exhibited the following factors, as
definedby MSCI’s analysis.
Overall MSCI ESG quality score
Portfolio
Benchmark
0 12345678
7.8
7.7
Source: MSCI as at 31 December 2023
ESG Quality Score measures the ability of underlying
holdings to manage key medium to long-term risks and
opportunities arising from environmental, social, and
governance factors. It is based on MSCI ESG Ratings and is
measured on a scale of 0 to 10 (worst to best).
ESG Rating Distribution
Laggard Average
Leader
CCC B A AA AAABB BBB
CCC B A AA AAABB BBB
Portfolio
28%
35%
26%
3%
1%
0%0%
Benchmark
Laggard Average Leader
21%
46%
18%
6%
1%
0%0%
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
Source: MSCI as at 31 December 2023
ESG Ratings Distribution represents the percentage of a
portfolio’s market value coming from holdings classified as
ESG Ratings Leaders (AAA and AA), Average (A, BBB and
BB), and Laggards (B and CCC). ESG ratings are calculated
based upon each company’s exposure to key ESG risks
across different components of a business’s value chain:
including core product/business segments, the locations of its
operations, and other relevant measures such as outsourced
production or reliance on government contracts. MSCI
conducts systematic monitoring and quality review of
information, as well as a formal committee review. There are
35 key metrics underlying the rating, each of which is centred
on the intersection between a company’s unique material
issues and industry-specific issues. This means that the MSCI
ESG ratings assess companies on their performance relative
to peers within their industry.
Carbon intensity
Portfolio
Benchmark
020406080 100
74.7
80.1
tCO
2
e/USD million
Source: MSCI as at 31 December 2023
Carbon intensity (Scope 1 and 2) is a metric used to compare
company emissions across industries. MSCI divides the
absolute emissions by total revenue, meaning the figure is
expressed in tonnes of carbon dioxide equivalent per US
Dollar million of total revenue. The Company’s overall portfolio
is 6.7% less carbon intensive than the benchmark.
Stewardship and Company Engagement
Stewardship is an integral and natural part of
JanusHenderson’s long-term, active approach to
investmentmanagement. Strong ownership practices, such
as management engagement and proxy voting, can help
protect and enhance long-term shareholder value.
JanusHenderson entities support a number of stewardship
codes and broader initiatives around the world including being
a founder signatory of the UN Principles for Responsible
Investment. The intensive research of the portfolio managers
and analysts involves conducting on an annual basis
thousands of interviews with senior executives and chairmen
of companies throughout the world. These teams naturally
develop long-term relationships with the management of firms
in which they invest. Should concerns arise over a firm’s
practices or performance, they seek to leverage these
constructive relationships by engaging with company
management or expressing their views through voting on
management or shareholder proposals. Escalation of the
engagement activities depends upon a company’s
individualcircumstances.
Voting
The Board believes that voting at general meetings is an
important aspect of corporate stewardship and a means of
signalling shareholder views on board policy, practices and
performance. The Board has appointed the Manager to vote
the rights attached to the shares held in the Company’s equity
portfolio and the Manager actively votes at shareholder meetings
and engages with companies as part of the voting process.
Environmental, Social and Governance Matters
(continued)
Henderson High Income Trust plc Annual Report 2023
32
Environmental, Social and Governance Matters
(continued)
Voting decisions are taken in keeping with the provisions of
the Manager’s ESG Investment Principles. These can be
found on the Manager’s website www.janushenderson.com.
Corporate governance regimes vary significantly as a function
of factors such as the relevant legal system, extent of
shareholder rights and level of dispersed ownership.
Thevoting and engagement activities vary according to the
market and pay close attention to local market codes of
bestpractice.
However, there are certain core principles that are universal:
●
disclosure and transparency;
●
board responsibilities;
●
shareholder rights; and
●
audit and internal controls.
A key element of the Board’s approach to proxy voting is to
support these principles and to foster the long-term interests
of the Company’s shareholders.
In order to retain oversight of the process, the Board receives
an annual report on how the Manager has voted the shares
held in the Company’s equity portfolio and reviews at least
annually the Manager’s ESG Corporate Statement and ESG
Investment Principles.
In the period under review, investee companies held 72
general meetings. The shares held in the Company’s equity
portfolio were voted in respect of 97.2% of these meetings.
2.8% of the shares held were not voted due to voting
impediments. The level of governance in leading global
companies is generally of a high standard in terms of best
practice which has meant that support in favour of the
resolutions proposed by management was warranted.
However, out of the 70 meetings voted there were eight where
theManager voted against or abstained from at least one
resolution. In terms of the resolutions not supported, the
majority of these related to approving compensation and
environmental proposals.
Voting record
Number of votable meetings 72
Number of meetings voted 70
Number of resolutions voted 1,332
Number of meetings voted (%) 97.22%
Percentage of votes for 99.02%
Percentage of votes against 0.83%
Percentage of votes abstain 0.08%
Number of meetings with at least 1 vote
against, withheld or abstain
11.11%
The Environment
As an investment company, the Company’s own direct
environmental impact is minimal. The Company has no
greenhouse gas emissions to report from its operations, nordoes
it have responsibility for any other emissions producing sources
under the Companies Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013. For the same reasons, the Company
considers itself to be a low energy user under the Streamlined
Energy & Carbon Reporting regulations and therefore is not
required to discloseenergy and carbon information.
The Manager recognises the importance of managing its
operational activities in a sustainable way and minimising any
adverse impact on the environment. In 2019 the Manager
committed to reducing its carbon footprint by 15% per full-time
employee over three years based on 2018 consumption. In
2021 the Manager reached this target and set new five-year
targets in 2022 in line with guidance from the SBTi to reduce
Scope 1 (fuel) and Scope 2 (electricity) emissions by 29.4%, as
well as Scope 3 (business travel, hotel stays, freight, paper
consumption, water, waste) operational emissions by 17.5%.
In addition to this, the Manager has maintained a
CarbonNeutral
®
certification since 2007 and offsets all its
operational Scope 1, Scope 2 and Scope 3 operational
emissions each year. Through this process, the Manager
hasinvested in a variety of offset projects around the world,
delivering financial support to essential renewable energy,
forestry and resource conservation projects that support
reductions in greenhouse gas emissions. All projects the
Manager supports have been classified as ‘additional’ by an
independent third party, meaning that they would not happen
without the sale of carbon credits.
The Manager discloses its carbon emissions annually
throughregulatory and voluntary reporting frameworks,
including Streamlined Energy and Carbon Reporting (SECR)
and theCarbon Disclosure Project (CDP), as well as inits
Annual Report and 2022 Impact Report, which provide
moreinformation.
Business Ethics
As the Company’s operations are delegated to third-party
service providers, the Board seeks assurances at least
annually from its service providers that they comply with the
provisions of the UK Modern Slavery Act 2015 and maintain
adequate safeguards in keeping with the provisions of the
Bribery Act 2010, Criminal Finances Act 2017 and the
sanctions element of the Economic Crime (Transparency
andEnforcement) Act 2022. The Company has received
assurances from its main service providers that they
maintaina zero-tolerance policy towards the provision
ofillegal services.
Henderson High Income Trust plc Annual Report 2023
33
Governance
34
The right balance of skills and knowledge
The Directors appointed to the Board at the date of this report and the specific reasons why each Director’s contribution is, and
continues to be, important to the Company’s long-term sustainable success are set out below.
The Nominations and Remuneration Committee is responsible for ensuring that on appointment each Director receives a letter
ofappointment that setsout, amongst other matters, what isexpected of them in terms of time commitment. The annual board
evaluation also considers the time commitment of the Directors. The Board considers that each Director appointed as at the date
of this report allocates sufficient time to the Company to perform his/her responsibilities effectively.
Jeremy Rigg
(Chairman)
Date of appointment: 1 April 2018
(appointed Chairman of the Board and
Management Engagement Committee on
24 May 2021).
Committees: Chairman of the
Management Engagement Committee
and Member of the Nominations &
Remuneration Committee and Audit &
RiskCommittee.
External appointments: Jeremy is a
Director of Moorland Green Properties
Limited.
Background: Jeremy was a Director of
Schroder Investment Management (UK)
Ltd and a Senior Investment Manager at
Investec Asset Management Limited.
In2004, he was a Founding Partner of
Origin Asset Management LLP, a boutique
equity investment manager which grew
successfully and was acquired by
Principal Global Investors Limited in 2011.
Jeremy graduated from St Andrews
University in 1989.
Skills and experience: Jeremy provides
an objective and broad view to board
discussions and challenges the Manager
on investment decisions. Jeremy has over
25 years’ experience in the investment
management industry and has proven
himself as a key member of the Board.
Richard Cranfield
(Independent Non-Executive
Director)
Date of appointment: 1 March 2020.
Committees: Member of the Nominations
& Remuneration Committee, Management
Engagement Committee and Audit &
RiskCommittee.
External appointments: Richard is Chair
of IntegraFin Holdings plc.
Background: Richard retired as a partner
in law firm Allen & Overy LLP in October
2021 and became Senior Adviser, a role he
held until April 2022. He was previously
Global Chairman of the Corporate Practice
and Co-Head of its Financial Institutions
Group. Richard had been with Allen &
Overy LLP since he joined them from
university in 1978. In 2000, Richard was
appointed Global Head of Corporate and in
2010 took a step back from management
to focus on client relationships. In June
2019, Richard was appointed to the board
of IntegraFin Holdings plc and became
Chair in October 2019. IntegraFin Holdings
plc is a FTSE 250 company, the ultimate
owner of the investment platform provider
Transact.
Skills and experience: Richard has spent
40 years at the highest levels of legal
practice. He has extensive understanding
of corporate governance and understands
financial institutions from his career at
Allen & Overy LLP and as the Chair of
IntegraFin Holdings plc. This has also
given him a good understanding of the
workings of investment platforms which
the Board believes is important as more of
the Company’s shareholders choose to
hold their shares through platforms.
Zoe King
(Senior Independent Director)
Date of appointment: 1 April 2016
(appointed Senior Independent Director
on 23 June 2020).
Committees: Chairman of the
Nominations & Remuneration Committee,
Member of the Management Engagement
Committee and Audit & Risk Committee.
External appointments: Zoe is a director
of Evelyn Partners Investment
Management Limited, specialising in the
management of private client portfolios.
She is also a member of the Trinity
College Oxford Investment Committee,
the Carvetian Capital Fund Investment
Committee and the Stramongate S.A
Shareholder AdvisoryCommittee.
Background: Zoe was formerly Vice
President at Merrill Lynch Mercury Asset
Management and a Fund Manager at
Foreign & Colonial Investment
Management. She graduated from
OxfordUniversity in 1994.
Skills and experience: Zoe is an
experienced investment professional and
a director of Evelyn Partners Investment
Management Limited, which ensures that
her fund management skills and
knowledge remain up to date. Zoe utilises
her fund management background to
bring an objective view to the Manager’s
investment strategy and to challenge the
Manager on investment decisions, while
her years of experience in looking after the
capital of individuals bring a shareholder’s
perspective to Board discussions.
Board of Directors
Henderson High Income Trust plc Annual Report 2023
35
Board of Directors (continued)
All Directors are members of the Insider Committee that meets when required in accordance with the Market Abuse Regulations.
Francesca Ecsery
(Independent Non-Executive
Director)
Date of appointment: 31 December
2022.
Committees: Member of the Nominations
&Remuneration Committee, Management
Engagement Committee and Audit &
RiskCommittee.
External appointments: Francesca is a
non-executive director at the Association
of Investment Companies (AIC), CT
Automotive PLC, HaffnerEnergy SA and
Air France S.A.
Background: Francesca was previously a
non-executive director at F&C Investment
Trust PLC, Marshall Motor Holdings PLC,
Share PLC and Good Energy Group PLC
and has held various senior positions in
consumer-focused industries including
the digital, retail, leisure and travel
sectors. Her previous executive roles
include McKinsey, PepsiCo, Thorn EMI,
Thomas Cook and STA Travel.
Skills and experience: Francesca has
over 30years’ experience working in both
blue-chip companies and start-ups and
has special expertise in multiplatform
consumer marketing, branding and
commercial strategies.
Jonathan Silver
(Chairman of the Audit
andRisk Committee)
Date of appointment: 2 January 2019
(appointed as Chairman of the Audit &
Risk Committee on 8 May 2019).
Committees: Chairman of the Audit &
Risk Committee, Member of the
Nominations & Remuneration Committee
and Management Engagement
Committee.
External appointments: Jonathan is a
non-executive director of Baillie Gifford
China Growth Trust plc and a non-
executive director and Chairman of the
Audit Committee of Spirent
Communications plc, a position he has
held since 2015. Jonathan is also a
non-executive director and Audit
Committee Chair of East and North
Hertfordshire NHS Trust.
Background: Jonathan is a member of
the Institute of Chartered Accountants of
Scotland. He has held various senior
financial positions throughout his career,
including 21 years as Chief Financial
Officer on the main Board of Laird plc
from 1994 until 2015.
Skills and experience: Jonathan is a
qualified accountant and therefore brings
financial and accounting skills and
experience to the Board. He is an
experienced non-executive director and in
particular brings previous investment trust
experience and leadership skills to the
Board from his former and current roles
as Chief Financial Officer of Laird plc, and
as Audit Committee Chairman of Invesco
Income and Growth Trust plc and Spirent
Communications plc. Jonathan has recent
and relevant financial experience, a
principal requirement for the composition
of an Audit Committee under the UK
Corporate Governance Code. The Board
also believes this experience is
fundamental to an effective Board.
Henderson High Income Trust plc Annual Report 2023
36
Corporate Governance Report
Applicable Corporate Governance Codes
The Company maintains a premium listing on the London
Stock Exchange and is therefore required to report on how the
principles of the UK Corporate Governance Code (UK Code)
have been applied. The AIC Code of Corporate Governance
(AIC Code) published in January 2019 has been endorsed by
the Financial Reporting Council. This enables boards to report
against the AIC Code and still meet their obligations in relation
to the UK Code and associated disclosure requirements under
paragraph 9.8.6 of the Listing Rules.
Closed-end investment companies have particular factors
which have an impact on their governance arrangements and
the AIC Code adopts the principles and provisions of the UK
Code to make them relevant for investment companies.
TheBoard has therefore chosen to report under the AIC
Code. The Company is governed entirely by a Board of
non-executive Directors, therefore the Company has no
executive directors or senior management remuneration
packages.
Copies of the AIC Code and the UK Code can be found on
the respective organisations’ websites: www.theaic.co.uk
and www.frc.org.uk.
Statement of Compliance
For the year-ended 31 December 2023 the Company has
complied with all the provisions of the AIC Code with the
exception of provision 9.2.37 to establish a separate
Remuneration Committee. Instead, the Board has established
a combined Nominations and Remuneration Committee
comprising all the independent non-executive Directors.
Given the Board has a simple remuneration structure and
does not need to consider executive remuneration, including
bonuses and long-term incentive schemes, it was considered
appropriate for a combined Nominations and Remuneration
Committee to be formed.
The Board
Overview
The Articles of Association provide that the total number of
Directors shall not be less than two nor more than ten in
number. The Board currently consists of five non-executive
Directors. The biographies of the Directors holding office at
the date of this report, which are set out on pages 35 to 36,
demonstrate the breadth of investment, commercial, legal,
financial and other professional experience relevant to their
positions as Directors.
The Board meets formally at least six times a year, with
additional Board or Committee meetings arranged when
required. The Directors have regular contact with the Manager
between formal meetings. The Board has a formal Schedule
of Matters Reserved for its decision which can be viewed at
www.hendersonhighincome.com.
The terms of reference for each of the Committees of the
Board are kept under regular review and are available at
www.hendersonhighincome.com.
Board Leadership and Purpose
The Board is responsible for providing leadership, setting the
investment objective and policy, appointing the Company’s
third-party service providers, establishing a robust internal
control and risk management system and monitoring the
performance delivered by its service providers within the
established control framework.
At each meeting the Board reviews the Company’s investment
performance and considers financial analyses and other
reports of an operational nature. The Board monitors
compliance with the Company’s investment objective and
policy, and is responsible for setting investment limits and
restrictions, including gearing limits, within which the Manager
has discretion to act. The Board has responsibility for the
approval of any investments in in-house funds managed or
advised by the Manager. It has adopted a procedure for
Directors, in the furtherance of their duties, to take
independent professional advice at the expense of the
Company. In order to enable them to discharge their
responsibilities, all Directors have full and timely access
torelevant information.
The Board has engaged third-party service providers to
deliver the operations of the Company. Management of the
investment portfolio has been delegated contractually to
Janus Henderson, which also provides the day-to-day
accounting, company secretarial, administrative and sales
andmarketing activities. The Company has appointed a
Depositary, who in turn appoints the Custodian who is
responsible for the safe custody of the Company’s assets.
The Company has appointed a Registrar to maintain the
Register of Members and assist shareholders with queries in
respect of their holdings. The Company entered into each of
these principal contracts after full and proper consideration
ofthe quality and cost of the services offered, including the
operation of their control systems in relation to the affairs of
the Company. The Board and its Committees maintain
oversight of the third-party service providers through regular
and ad hoc reporting. The Board meets annually with
representatives from the Depositary and Custodian to discuss
amongst other matters performance, service levels, their value
for money, and their approach to ESG matters, information
security and business continuity plans.
In addition, the Chairman is able to attend meetings of all the
chairmen of the investment trust companies managed by
Janus Henderson which provide a forum to discuss industry
matters which are then reported to the Board as necessary.
The Manager takes decisions as to the purchase and sale
ofindividual investments. The Manager also ensures that all
Directors receive all relevant management, regulatory and
Henderson High Income Trust plc Annual Report 2023
37
Corporate Governance Report (continued)
financial information in a timely manner. Representatives of the
Manager attend each Board meeting enabling the Directors to
probe further on matters of interest or concern. The Directors
have access to the advice and services of the Company
Secretary, Janus Henderson Secretarial Services UK Limited.
The Company Secretary is responsible to the Board for
ensuring compliance both with Board and Committee duties
and responsibilities, and applicable rules and regulations.
Theproceedings at all Board and Committee meetings are
recorded through a process that allows any Director’s concerns
to be recorded in the minutes. The Board and theManager
operate in a supportive, co-operative and openenvironment.
The Corporate Secretary, Janus Henderson Secretarial Services
UK Limited, is a subsidiary of Janus Henderson with its own
reporting lines and audited internal controls. There are processes
and controls in place to ensure that there is a clear distinction
between the two entities, particularly when dealing with any
conflicts of interest or issues between the Company and the
Manager. Correspondence from shareholders addressed to the
Chairman or the Board received at the registered office is
forwarded to the Chairman in line with the audited procedures in
place. Correspondence is provided to the full Board at the next
meeting with any urgent or important correspondence circulated
promptly at the request of the Chairman.
Meeting Attendance
The table below sets out the number of formal Board and
Committee meetings held during the year under review and
the number of meetings attended by each Director. All
Directors attended the AGM on 16 May 2023. The Insider
Committee didnot meet during the year.
Board ARC NRC MEC
Number of Meetings 6 3 2 1
Jeremy Rigg 6 3 2 1
Jonathan Silver 6 3 2 1
Zoe King 6 3 2 1
Richard Cranfield 6 3 2 1
Francesca Ecsery 6 3 2 1
ARC: Audit and Risk Committee
NRC: Nominations and Remuneration Committee
MEC: Management Engagement Committee
An additional meeting of a Committee of the Board was held
to approve the Company’s year-end results.
There were also six ad hoc Board meetings held during the
year to undertake business in relation to:
●
the allocation of funds to support specific marketing
activities for the Company; and
●
the scheme of reconstruction and winding up of
Henderson Diversified Income Trust plc (HDIV) under
section 110 of the Insolvency Act 1986 and the associated
transfer of part of the assets and undertaking of HDIV to
the Company in exchange for the issue of new ordinary
shares in the Company.
Arrangements with Directors
Policy on Tenure
No Director is expected to serve for more than nine years
unless particular circumstances warrant it, for example to
facilitate effective succession planning, or promote diversity.
There may be occasions when the Board may decide to
extend the tenure of the Chairman for the sake of continuity
and/or historical knowledge of the Company. This may be so
particularly if an existing non-executive Director is appointed
as Chairman of the Board. In these exceptional cases an
explanation for such adecision will be given to shareholders.
Directors’ Independence
The independence of the Directors is determined with
reference to the AIC Code. The Nominations & Remuneration
Committee considers the independence of each Director at
least annually by reviewing the Directors’ other appointments
and commitments, as well as their tenure of service and any
connection they may have with the Manager. The Board does
not believe that length of service on the Board necessarily
compromises a Director’s independence nor that it should
necessarily disqualify a Director from seeking re-appointment.
There were no contracts subsisting during or at the end of the
year in which any Director is or was materially interested and
which is or was significant in relation to the Company’s
business. No Director has a contract of service with the
Company and there are no agreements between the
Company and its Directors concerning compensation for
lossof office.
In the year under review, the Nominations and Remuneration
Committee determined that all Directors continued to be
independent in character and judgment. The Committee
believed that the Directors’ skills, broad business experience
and knowledge and understanding of the Company were of
benefit to shareholders and its long-term sustainable success.
Directors’ Re-appointment
Jeremy Rigg, Richard Cranfield, Francesca Ecsery, Zoe King
and Jonathan Silver will offer themselves for re-appointment
by the shareholders at the AGM in 2024.
Under the Articles of Association, shareholders may remove
aDirector before the end of his or her term by passing an
ordinary resolution at a general meeting.
Directors’ Professional Development
Newly appointed directors are offered a bespoke induction
programme which covers the legal and regulatory framework
for investment companies and the operations of the Manager,
including risk, compliance and internal audit, financial
reporting oversight and bespoke sales and marketing specific
to the Janus Henderson managed investment trusts.
Henderson High Income Trust plc Annual Report 2023
38
Corporate Governance Report (continued)
Non-executive
oversight of the
Company’s
operations;
selection and
appointment of
service
providers
Company’s
operations
carried out by
specialised
third-party
service
providers
Governance Structure
Board of Directors
Comprises independent non-executive Directors
Chairman: Jeremy Rigg
HSBC Bank plc
Depositary and Custodian
Computershare
Investor Services PLC
Registrar
J.P. Morgan Cazenove
Corporate Broker
Contractually engages third-party service providers
Janus Henderson
Fund Management: Led by David Smith as Fund Manager
Sales, Marketing, Company Secretary
Alternative Investment Fund Manager: Janus Henderson Fund Management UK Limited
Directors’ Conflicts of Interest
The Company’s Articles of Association permit the Board to
consider and, if it sees fit, to authorise situations where a
Director has an interest that conflicts, or may possibly conflict,
with the interests of the Company (situational conflicts).
TheBoard has a formal system in place for Directors to
declare situational conflicts to be considered for authorisation
by those Directors who have no interest in the matter being
considered. In deciding whether to authorise a situational
conflict, the non-conflicted Directors must act honestly and
ingood faith with a view to the best interests of the Company
and they may impose limits or conditions when giving the
authorisation, or subsequently, if they think this is appropriate.
Any situational conflicts considered, and any authorisations
given, are recorded in the relevant meetings’ minutes.
Theprescribed procedures have been followed in deciding
whether, and on what terms, to authorise situational conflicts
and the Board believes that the systems it has in place for
reporting and considering situational conflicts continue to
operate effectively. Furthermore, no conflicts of interest have
been identified that would allow third parties to influence or
compromise the individual Director’s independent judgment.
Directors’ Insurance and Indemnification
Directors’ and officers’ liability insurance cover is in place
which indemnifies the Directors against certain liabilities arising
from carrying out their duties. Under the Company’s Articles of
Association and subject to the provisions of UK legislation,
aqualifying third-party provision indemnity may be provided to
Directors in respect of costs which they may incur relating to
the defence of any proceedings brought against them arising
out of their positions as Directors, in which they are acquitted,
or judgment is given in their favour by the Court. No indemnity
was given during the year or up to the date of this report.
Nominations and
Remuneration Committee
Chairman:
Zoe King
Purpose: Advise on the
composition of the Board and its
Committees, in making
appointments to the Board and
ensuring suitable succession
plans are in place. Italso has
responsibility for setting the
Remuneration Policy and setting
remuneration levels for the
non-executive Directors.
Audit and Risk Committee
Chairman:
Jonathan Silver
Purpose: Ensure the integrity of
the financial reporting, evaluate
the effectiveness of the systems
of internal control and risk
management, and oversee the
relationship with the external
auditors.
Management Engagement
Committee
Chairman:
Jeremy Rigg
Purpose: Formally evaluate
the overall performance of the
Manager and other third-party
service providers engaged by
the Company and consider
whether their continuing
appointment is in the interests
of shareholders.
Henderson High Income Trust plc Annual Report 2023
39
System of Internal Controls
Corporate Governance Report (continued)
Board of Directors
(comprised entirely of independent non-executive Directors)
Principal third-party
service providers
The Directors:
●
receive regular
reporting at meetings;
●
review the annual
assurance report
produced by each
organisation;
●
receive additional
reporting on the
control environment
from the Manager’s
Operational Risk
Team;
●
receive reporting from
the Manager’s Internal
Audit Team on areas
relevant to investment
trusts; and
●
formally evaluate the
performance on an
annual basis.
Secondary third-party
service providers
The Directors:
●
receive regular
reporting on their
activities at meetings;
and
●
formally evaluate their
performance on an
annual basis.
How the system of internal
control operates
The Board delegates contractually
to third-party service providers for
all of the Company’s operational
requirements. It maintains oversight
of these providers throughout the
year by receiving regular reporting
on their activities.
The Company’s principal third-
party service providers are the
Manager (Janus Henderson); the
Depositary/Custodian (HSBC) and
the accountants and administrators
(BNP Paribas S.A.).
In respect of its principal providers,
the Board receives quarterly
reporting on compliance with the
control environment and assesses
the effectiveness of the control
environment through review of the
annual assurance reports (usually
ISAE 3402) from each organisation.
This reporting is supplemented by
the view of the Manager’s
Operational Risk Team regarding
the control environments in
operation at the providers.
The Company’s secondary
providers report regularly to the
Board. A failing in their services is
deemed to have a minimal impact
on the Company’s value and
therefore less stringent reporting
isrequired.
The Management Engagement
Committee formally evaluates the
performance and service delivery
of all third-party service providers
at least annually.
The Audit and Risk Committee
evaluates the performance of the
statutory auditors on completion of
each audit cycle.
J.P. Morgan
Cazenove Limited
(Corporate Broker)
Janus
Henderson
(Investment
management,
company
secretarial,
sales, marketing,
PR and
administration)
Reporting
• Investment
performance
update at
each meeting
• Investment
limits and
restrictions
(monthly)
• Internal
control report
(quarterly)
• Effectiveness
of control
environment
(annually)
HSBC
(Depositary/
Custodian)
Reporting
• Depositary’s
report
(quarterly)
• Presentation
from the
Depositary
and
Custodian
(annually)
• Effectiveness
of control
environment
(biannually)
BNP Paribas
S.A.
(Accounting and
administration
services
engaged by the
Manager)
Reporting
• Balance sheet
• Liquidity and
gearing
• Income
forecasts
• Portfolio
valuation
• Portfolio
transactions
• Portfolio
attribution
• Effectiveness
of control
environment
(annually)
Marten & Co
Limited
(Sponsored Research)
Computershare
Investor Services PLC
(Registrar)
PricewaterhouseCoopers LLP have been appointed as the Company’s Statutory Auditors.
By order of the Board
For and on behalf of
Janus Henderson Secretarial Services UK Limited
Corporate Secretary
27 March 2024
Henderson High Income Trust plc Annual Report 2023
40
Membership
All Directors are members of the Committee, including the
Chairman of the Board. Taking account of the size of the
Board as a whole, the absence of any executive directors
andthe collaborative manner in which the Board and its
Committees work, it was not considered practical or
constructive to exclude the Chairman from being a member of
the Committee. The Chairman of the Board was determined
to be independent at the time of his appointment.
The Committee is chaired by Jonathan Silver, who is
considered by the Board to have recent and relevant financial
experience.
Meetings
The Committee met three times in the year under review.
TheCompany’s Auditors, the Fund Manager and the
Manager’s Financial Reporting Senior Manager for Investment
Trusts are invited to attend meetings of the Committee on a
regular basis. Other representatives of the Manager (including
the Head of EMEA Operational Risk, Global Head of
Compliance, Global Head of Internal Audit, Global Head of
Business Resilience, Chief Information Security Officer and
BNP Paribas S.A.) may also be invited to attend meetings
ifdeemed necessary by theCommittee.
Role and Responsibilities
The role of the Committee is to assist the Board with
monitoring the integrity of the Company’s financial reporting
and monitoring and reviewing the internal controls and risk
management systems in place at the Manager and the
Company’s other third-party service providers. The
Committee also makes recommendations to the Board on the
appointment, re-appointment and removal of the Company’s
Auditors. TheCommittee formally reports to the Board after
each meeting and its responsibilities are set out in formal
terms ofreference which are regularly reviewed.
In discharging its duties over the course of the year the
Committee considered:
Financial Reporting
●
the integrity of the financial statements of the Company,
including its annual and half year reports, and any formal
announcements relating to its financial performance;
●
the significant financial reporting issues and judgments
made in connection with the preparation of the Company’s
financial statements, half year reports and related formal
statements and challenging the Manager where necessary
on the consistency of, and any changes to, accounting
policies both on a year-on-year basis and across the
Company;
●
the methods used to account for significant or unusual
transactions where different approaches are possible;
●
whether the Company had followed appropriate
accounting standards and made appropriate estimates
and judgments, taking into account the views of the
Auditors;
●
the clarity and completeness of disclosures in the
Company’s financial statements and the context in which
these statements were made;
●
all material information presented within the Annual Report
insofar as it relates to audit and risk management;
●
the Company’s statement on Internal Control and Risk
Management and Internal Audit Function (please refer to
pages 42 to 43) prior to endorsement by the Board;
●
the policies and processes used for identifying and
assessing business risks and the management of those
risks by the Company and other narrative statements
made in the Annual Report and half year reports including
the Viability Statement (please refer to page 27);
●
whether the information presented inthe Annual Report is,
in the Committee’s view, fair, balanced and
understandable and provides the information necessary
forshareholders to assess theCompany’s position and
performance, business modeland strategy; and
●
any significant issues considered in relation to the financial
statements and how these were addressed in the year
under review.
Internal Controls and Risk Management Systems
●
the adequacy and effectiveness of the Company’s internal
controls and risk management systems, including a review
of the Company’s key third-party suppliers’ assurance
reports;
●
the Company’s risk map including consideration of the
principal and emerging risks;
●
the remit and effectiveness of the Manager’s Internal
Audit, Compliance, Risk, Information Security and
Business Resilience functions in the context of the
Manager’s overall risk management systems. The
Committee met representatives of the Manager’s Risk and
Internal Audit Teams, at the half year and full year reporting
stage and with representatives of the Manager’s
Compliance, Information Security and Business Resilience
Teams; and
●
the remit and effectiveness of the overall risk management
systems of the Company’s key third-party suppliers.
External Audit
●
the relationship with the Auditors including (butnot
limitedto):
– consideration of their remuneration, whether for audit
or non-audit services, and ensuring that the level of
fees is sufficient to enable an adequate audit to be
carried out and make recommendations to the Board
on fees;
Report of the Audit and Risk Committee
Henderson High Income Trust plc Annual Report 2023
41
– approval of their terms of engagement, including any
engagement letter and terms of business issued at the
start of each audit and the scope of the audit;
– independence and objectivity (please refer to
Effectiveness and Independence of the Auditors on
page 43), taking into account relevant professional and
regulatory requirements and the relationship with the
Auditors as a whole, including the provision of any
non-audit services (please refer to the Policy on
Non-Audit Services on page 43);
– the need to include the risk of the withdrawal of the
Auditors from the market in the Board’s risk evaluation
and planning; and
– meeting regularly with the Auditors to discuss the
Auditors’ remit and any issues arising from the audit
(including at least once a year without representatives
of the Manager being present).
●
the findings of the audit with the Auditors, including any
accounting and audit judgments.
Compliance, Whistleblowing and Fraud
●
the adequacy and security of the Manager’s arrangements
for its employees and service providers to raise concerns,
in confidence, about possible wrongdoing in financial
reporting or other matters to ensure that they are
comfortable that these arrangements allow proportionate
and independent investigation of such matters and
appropriate follow up action;
●
the Manager’s procedures for detecting fraud;and
●
confirmations from the Manager and the Company’s
third-party suppliers of their adherence to the UK Bribery
Act 2010, the Modern Slavery Act 2015, Criminal Finances
Act 2017 and sanctions element of the Economic Crime
(Transparency and Enforcement) Act 2022.
Internal Control and Risk Management
The Board has overall responsibility for the Company’s system
of internal control and for reviewing its effectiveness. The
Committee supports the Board in the continuous monitoring
of the Company’s internal control and risk management
framework and that of its key service providers. Please refer to
the System of Internal Controls on page 40.
The Committee uses an ongoing process for identifying,
evaluating and managing the principal risks faced by the
Company. The process accords with the FRC’s Guidance on
Risk Management, Internal Control and Related Business and
Financial Reporting published in September 2014. The system
is designed to meet the specific risks faced by the Company
and takes account of the nature of the Company’s reliance
onits service providers and their internal controls and risk
management systems. The system therefore manages rather
than eliminates the risk of failure to achieve the Company’s
business objectives and provides reasonable, but not
absolute assurance against material misstatement or loss.
The key components of the internal control framework
include:
●
clearly defined investment criteria which specify levels of
authority and exposure limits. The Board reviews reports
on compliance with the criteria at each meeting;
●
regular reporting which allows the Board to assess the
Company’s financial position. The management accounts
and forecasts are reviewed by the Board at each meeting;
●
the contractual agreements with the Manager and other
third-party service providers. The Board reviews
performance levels and adherence to relevant provisions
of the agreements on a regular basis. The Management
Engagement Committee conducts a formal evaluation of
the overall level of services from third-party providers at
least annually;
●
the review of controls (including financial, operational and
compliance) at the Manager and other third-party service
providers; and
●
the Board receives quarterly internal controls reports from
the Manager and a quarterly report from the Depositary.
The Committee reviewed the assurance reports of the
Manager, BNP Paribas S.A., HSBC (Custodian and
Depositary) and Computershare Investor Services PLC
(Registrar) that report on the effectiveness of the control
environment in operation at these service providers.
The Committee also met with the Manager’s Global Head
ofInternal Audit at the full year and half year stage to obtain
comfort that the high standards of internal control and the
riskmanagement systems in place at the Manager were
satisfactory. In particular, the Committee asked questions
relating specifically to areas of the Manager’s business that
directly or indirectly affected investment trusts. The
Committee did not identify nor has been advised of any
failings or weaknesses relating to the Company’s portfolio that
have been determined as significant for the year under review.
The Committee is therefore satisfied that the internal control
and risk management systems in place at the Manager and its
key service providers remain effective.
Internal Audit Function
Systems are in operation to safeguard the Company’s assets
and shareholders’ investments, to maintain proper accounting
records and to ensure that financial information used within
the business, or published, is reliable.
The Company is an investment company, has no employees
and delegates all executive activities to third-party service
providers, principally among them, the Manager. The Board
places reliance on the Company’s framework of internal
control and the Committee’s view on reporting received
fromspecific second and third line of defence teams at
theManager.
The Manager’s Operational Risk Team supports the
Committee in considering the independently audited
Report of the Audit and Risk Committee (continued)
Henderson High Income Trust plc Annual Report 2023
42
assurance reports on the effectiveness of internal controls in
place at the Company’s third-party service providers. The
Manager’s Internal Audit Team provides regular reporting to
the Board on the operations at the Manager and presents to
the Committee at the full year and half year reporting stage.
The Committee therefore concluded that it is not necessary
atthe present time for the Company to have its own internal
audit function.
Appointment and Tenure of the Auditors
Regulations currently in force require the Company to change
statutory auditor every 20 years and undertake an audit
tender process after a period of ten years, which may be
extended where audit tenders are carried out or where more
than one audit firm is appointed to carry out the audit. The
Committee last carried out an audit tender process during the
year-ended 31 December 2016 and PricewaterhouseCoopers
LLP (PwC) has been appointed asAuditors since then. The
Auditors are required to rotate partners every five years. This
is the third year that the current audit partner, Jennifer March,
has been in place. Subject to the audit remaining effective and
the continuing agreement from shareholders on the
appointment of the Auditors, the Committee envisages
carrying out an audit tender process in respect of the
year-ending 31 December 2026 at the latest.
Policy on Non-Audit Services
The Committee has approved, and keeps under regular
review, the policy on the provision of non-audit services by the
Auditors. The policy sets out that the Company’s Auditors will
not be considered for non-audit work where this is prohibited
by the current regulations and where it appears to affect their
independence, effectiveness and objectivity. In addition, the
provision of any non-audit services by the Auditors are not
permitted to exceed 70% of the average annual statutory
audit fee for the three consecutive financial periods preceding
the financial period to which the cap applies. Such services
require approval in advance by the Audit and Risk Committee,
or the Chairman of the Committee, following due
consideration of the proposed services.
No fees were paid, or are payable to the Auditors for non-
audit services in the year under review (2022: none).
Effectiveness and Independence of the
External Auditors
The Committee monitors the Auditors’ independence,
effectiveness and objectivity through three aspects of its
work: approval of the Policy on Non-Audit Services; assessing
the appropriateness of the fees paid to the Auditors for all
work undertaken by them; and by reviewing the information
and assurances provided by the Auditors on their compliance
with the relevant ethical standards including confirmation of
PwC’s independence in accordance with the FRC’s Ethical
Standard.
PwC have been appointed as the Company’s Auditor since
the year-ended 31 December 2016. The Committee and the
Manager have developed a strong working relationship with
PwC over that time. The Committee is satisfied that auditor
independence and objectivity are safeguarded as a result of
the independence checks within PwC, the change of Audit
Partner every five years and because PwC do not provide
anynon-audit services to the Company.
The Committee’s process for evaluating the effectiveness
ofthe external audit comprises two components: firstly,
consideration is given to the findings of the FRC’s Audit
Quality Inspection Report (AQIR) and secondly, a post-audit
assessment is carried out, led by the Committee Chairman.
In assessing the effectiveness of the audit process, the
Committee discussed the service provided by PwC with
Janus Henderson’s Financial Reporting Senior Manager for
Investment Trusts and the Company Secretary, who have
themost hands-on involvement in the audit each year.
TheCommittee reviewed and assessed the robustness of the
audit, level of challenge offered by the Audit Team, the quality
of the Audit Team and timeliness of delivering the tasks
required for the audit and reporting for the Committee and
benchmarking PwC’s performance against the Committee
members’ recent experience with other firms gained through
their other commitments. The Committee also met privately
with the Audit Partner to discuss how the audit operated from
their perspective.
The Committee remain satisfied with the effectiveness of the
audit provided by PwC and therefore recommended their
continuing appointment to the Board. PwC have indicated
their willingness to continue in office. Accordingly, resolutions
re-appointing PwC as the Company’s Auditors and
authorising the Directors to determine their remuneration will
be proposed at theAGM in 2024.
Disclosure of Information to the Auditors
Each of the Directors who were members of the Board at the
date of approval of this report confirm that to the best of his
orher knowledge and belief, there is no information relevant
tothe preparation of the Annual Report which the Company’s
Auditors are unaware of, and they have taken all the steps a
Director might reasonably be expected to have taken to be
aware of relevant audit information and to establish that the
Company’s Auditors are aware of that information.
Report of the Audit and Risk Committee (continued)
Henderson High Income Trust plc Annual Report 2023
43
In relation to the Annual Report for the year-ended 31December 2023 the following significant issues were considered and
addressed by the Committee:
Significant issues and audit matters How it was addressed
Valuation and Ownership of
the Company’s Investments
The Directors have appointed Janus Henderson, who outsource some of the
administration and accounting services to BNP Paribas S.A., to perform the
valuation of the assets of the Company in accordance with its responsibilities under
the AIFMD rules. As required under the AIFMD rules, Janus Henderson has adopted
a written valuation policy, which may be modified from time to time. Actively traded
investments are valued using stock exchange prices provided by third-party pricing
vendors. Ownership of listed investments is verified by reconciliation to the
Custodian’s records and the Directors have received quarterly reports from the
Depositary who has responsibility for overseeing operations of the Company,
including verification of ownership and valuation of investments.
Recognition of Income Income received has been accounted for in line with the Company’s accounting
policies (asset out in Note 1f on page 64).The Board reviews the revenue forecast at
every meeting in support of theCompany’s future dividend. In respect of special
dividends where there is a requirement to allocate between revenue and capital, the
Committee reviews the rationale provided by Janus Henderson and approves the
relevant treatment.
Compliance with Section 1158 of
the Corporation Tax Act 2010
The Committee regularly considers the controls in place to ensure that the
regulations for ensuring investment trust status are observed at all times, receiving
supporting documentation from Janus Henderson and BNP Paribas S.A.
Maintaining Internal Controls The Committee receives regular reports on internal controls from Janus Henderson
Investors (Manager), BNP Paribas S.A. (Administrator), Computershare Investor
Services PLC (Registrar) and HSBC (Depositary and Custodian) and has access to
the relevant personnel of JanusHenderson who have a responsibility for risk
management and internal audit.TheCommittee is satisfied that these key
stakeholders have appropriate andeffective internal control and risk management
systems in place.
Audit for the Year-Ended 31 December 2023
In the year under review PwC challenged both the Manager’s and the Board’s judgments and exercised professional scepticism.
The Audit Team required detailed evidence of all metrics, numbers and disclosures made within the Annual Report to support
arobust assessment and evaluation of the financial information contained therein. Overall the Committee considers that the audit
quality has been high and is satisfied that the Annual Report for the year-ended 31December 2023, taken as a whole, is fair,
balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and
performance, business model and strategy.
Jonathan Silver
Chairman of the Audit and Risk Committee
27 March 2024
Report of the Audit and Risk Committee (continued)
Henderson High Income Trust plc Annual Report 2023
44
Membership
All Directors are members of the Committee.
Jeremy Rigg is the Chairman of the Committee.
Meetings
The Committee meets at least annually, with additional
meetings scheduled when required.
Role and Responsibilities
The Committee is responsible for formally evaluating the
overall performance of the Manager and other third-party
service providers engaged by the Company, to consider
whether their continuing appointment is in the interests
oftheCompany and its long-term sustainable success.
The Board monitors the performance of the Manager by
reviewing key performance indicators at each meeting.
Aseparate formal review of the Manager is undertaken by
theCommittee each year. For the year under review this
included a questionnaire that each Director was asked to
complete about the Manager’s performance.
In discharging its duties over the course of the year, the
Committee assessed:
●
the Manager’s compliance with legal and regulatory
obligations;
●
the key clauses of the Investment Management
Agreement, how the Manager had fulfilled these and
whether these continued to be appropriate;
●
the composition of the Janus Henderson team that
directlyinput to the work of the Company;
●
fees and cumulative and annual performance figures in
comparison to those in the AIC UK Equity Income sector
with total assets under management of between £200
million and £700 million and the management fee;
●
arrangements compared against the other Janus Henderson
managed investment trusts; and
●
the performance and fees of the Company’s other
third-party service providers, including the depositary,
custodian, registrar, broker, research provider and the
Company’s accountants.
Continuing appointment of the Manager
The Committee has concluded that the continuing
appointment of Janus Henderson as Manager to the
Company on the existing terms continues to be in the best
interests of the long-term success of the Company and its
shareholders. The Committee was satisfied that the high
standards of business conduct expected in the services of the
Company’s suppliers had been demonstrated.
Management Engagement Committee Report
Henderson High Income Trust plc Annual Report 2023
45
Nominations & Remuneration Committee Report
Membership
All Directors are members of the Committee. Zoe King, the
Company’s Senior Independent Director, is the Chairman
ofthe Committee.
Meetings
The Committee meets twice annually, with additional meetings
scheduled when required.
Role and Responsibilities
The Committee advises the Board on the composition of the
Board and its Committees, ensuring suitable succession
plans are in place for the Directors and Fund Manager and
hasa formal, rigorous and transparent approach to the
appointment of Directors to the Board. It also has
responsibility for setting the Remuneration Policy (please
referto page 47) and determining the remuneration for all
theindependent non-executive Directors within the
parameters determined by shareholders.
Annual Performance Evaluation
The Chairman of the Committee led the review of the annual
performance evaluation process. The evaluation was
conducted by way of a questionnaire circulated to each
individual Director and the outcomes were presented to the
Committee. The evaluation addressed board and committee
meetings, board composition, board dynamics and culture,
Directors’ remuneration and training and development.
TheDirectors considered that meetings were constructive
andcollaborative in nature and each Director made a valuable
contribution to the Board and its discussions. All Directors
remained independent in character and judgment and there
was a good balance of skills and experience on the Board
that encouraged diversity of thought. There is an orderly
succession plan for appointments going forward to
maintainan appropriate balance of skills and experience.
Therelationship with the Manager was also considered very
good,in particular with theFund Manager and the
CompanySecretary.
Board Diversity
The FCA’s Listing Rules require companies to report on the
following targets on board diversity: that at least 40% of the
individuals on the board are women; at least one of the senior
positions on the board is held by a woman; and that at least
one individual on the board is from a minority ethnic
background.
It is the Company’s aim to have a diverse Board. At
31December 2023, the Board complied with targets one
andtwo with 40% of the Board membership being female
andthe role of the Senior Independent Director being held by
a woman. None of the five Directors, as at 31 December
2023, were from a minority ethnic background. The
Nominations and Remuneration Committee considers
diversity generally when making recommendations for
appointments to the Board, taking into account gender, social
and ethnic backgrounds, cognitive and personal strengths
and experience. All Board appointments are subject to a
formal, rigorous and transparent procedure.
The Board’s prime responsibility is the strength of the Board
and its overriding aim in making any new appointments upon
rotation of Directors is to select the best candidate based
onobjective criteria and merit, which it did at the time the
currentDirectors were selected. When the Board next
recruits, it will request the relevant search firm retained to
provide a diverse list of potential candidates.
Gender diversity
Number
of Board
members
% of the
Board
Number
of senior
positions
on the
Board
1
Men 3 60 2
Women 2 40 1
Ethnic diversity
White British or other White
(including minority white groups) 5 100 3
1 As a fully managed investment company, the Company does not have a CEO
or CFO. Accordingly, only the roles of Chairman, Audit & Risk Committee
Chairman and Senior Independent Director are applicable to this disclosure.
The information in the table was provided by individual
Directors in response to a request from the Company.
The Board recognises the benefits of diversity and therefore
takes an interest in the diversity initiatives in place at its
otherservice providers and in particular, supports and
encourages the Manager’s diversity training and initiatives to
improve any imbalances. These include Janus Henderson’s
gender and ethnicity pay gap analysis, returnship, trainee,
apprenticeship and internship programmes, such as
INROADS, Girls Who Invest, Investment 2020 and #100 Black
Interns. The Board monitors the culture at Janus Henderson
and appreciates that the Manager fosters and maintains an
environment that values the unique talents and contributions
of individuals, and strives to cultivate and practise
inclusiveness for the long-term success of the business and
for the benefit of its employees, investors and shareholders.
The Board is supportive of developing talent and recognises
the challenges all organisations face to ensure there is a
sufficient pipeline of talent. To assist the Manager in this
regard the Board invites selected junior members of the
JanusHenderson Global Equity Income Team and Investment
Trust Secretariat Team to its meetings to gain experience and
exposure to the boardroom.
Henderson High Income Trust plc Annual Report 2023
46
Directors’ Remuneration Report
Annual Report on Remuneration
This report is submitted in accordance with Schedule 8 of
TheLarge and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 as amended (“the
Regulations”). The report also meets the relevant requirements
of the Companies Act 2006 (“the Act”) and the Listing Rules
of the FCA and describes how the Board has applied the
principles relating to Directors’ remuneration. Asrequired by
section 439 of the Act, an ordinary resolution to approve the
Directors’ Remuneration Policy was proposedat the 2023
AGM and wassubsequently approvedbyshareholders.
The Company’s Auditors are required to report on certain
information contained within this report: where information
setout below has been audited it is indicated as such.
All Directors are non-executive and the Company has no chief
executive officer or employees. As such some of the reporting
requirements contained in the Regulations are not applicable
and have not been reported on, including the requirement for
a future policy table and an illustrative representation of the
level of remuneration that could be received by each individual
Director. It is believed that all relevant information is disclosed
within this report in an appropriate format.
TheBoard has established a Nominations and Remuneration
Committee with responsibility for determining the Remuneration
Policy and setting the individual remuneration of all Directors
in accordance with the Articles ofAssociation. Zoe King, the
Senior Independent Director, is Chairman of the Nominations
and Remuneration Committee.
The Board has not been provided with advice or services
byany person in respect of its consideration of Directors’
remuneration (although the Directors review annually the fees
paid to the boards of directors of other comparable
investment companies).
Remuneration Policy
Shareholders last approved the Remuneration Policy at the
AGM in 2023. In accordance with section 439A of the Act,
shareholders will next be asked to approve the Remuneration
Policy at the 2026 AGM.
In determining the Remuneration Policy, the Board takes into
account all factors which it deems necessary including
relevant legal and regulatory requirements, the provisions
andrecommendations of the UK Code and the AIC Code.
Theobjective of the Remuneration Policy is to attract, retain
and motivate non-executive Directors of the quality required
tomanage the Company successfully without paying more
than is necessary, having regard to views of shareholders
andother stakeholders. The Board obtains up-to-date
information about remuneration in other companies of
comparable scale and complexity in order to avoid and
manage conflicts of interest in determining remuneration
levels. The appropriateness and relevance of the
Remuneration Policy is reviewed at least annually, particularly
in terms of whether it supports the Company’s long-term
sustainable success.
Directors are remunerated in the form of fees, payable
quarterly in arrears. In accordance with the Company’s
Articles of Association the aggregate remuneration of the
Directors may not exceed £250,000 perannum.
All Directors, including any new appointments to the Board,
are paid at the same rate, apart from the Chairman of the
Board and the Chairman of the Audit and Risk Committee,
who are paid a higher fee in recognition of their additional
responsibilities. From time to time the Board may approve
one-off payments to Directors for specific work undertaken
inaddition to their regular responsibilities. Any feedback from
shareholders would be taken into account when setting
remuneration levels. Directors are authorised to claim
reasonable expenses from the Company in relation to the
performance of their duties.
No Director has a service contract with the Company.
Directors’ appointments may be terminated at any time by
written notice with no compensation payable. No Director is
eligible to receive bonuses, pension benefits, share options
orother benefits and no long-term incentive schemes are
inplace.
Statement from the Chairman
Zoe King, Chairman of the Nominations and Remuneration
Committee, reports that the Committee carried out its
annual review of the fees being paid to the Directors and
aspart of this it reviewed the fees paid to other investment
companies in the AIC UK Equity Income Sector for
companies with total assets under management of between
£200 million and £700 million, the fees paid in other sectors
and the other JanusHenderson managed investment trusts.
The Committee also considered the changes in the retail
prices index and the consumer prices index since the last
fee increase in July 2022. Following consideration, it was
agreed that an increase of approximately 5.6% should be
made with effect from 1 July 2023 to ensure that the
Directors are properly remunerated for their services to the
Company and so that the Company can remain competitive
when seeking new directors. The new rates are set out on
the following page. The Board is satisfied that the changes
to the remuneration of the Directors are compliant with the
Directors’ Remuneration Policy approved by shareholders at
the 2023 AGM.
Henderson High Income Trust plc Annual Report 2023
47
Directors’ Remuneration Report (continued)
Directors’ Remuneration (Audited)
The total remuneration paid to the Directors who served during the years-ended 31 December 2023 and 31 December 2022 was
asfollows:
Year-ended
31December 2023
Total fees
£
Year-ended
31December 2022
Total fees
£
Jeremy Rigg (Chairman of the Board) 41,625 39,000
Jonathan Silver (Chairman of the Audit and Risk Committee) 33,300 31,200
Zoe King 27,750 26,000
Richard Cranfield 27,750 26,000
Francesca Ecsery
1
27,824 n/a
Penny Lovell
2
n/a 19,250
Total 158,249 141,450
1 Appointed to the Board on 31 December 2022
2 Retired from the Board on 30 September 2022
The table above omits other columns set out in the relevant regulations because no payments of other types such as taxable benefits including expenses, performance
related pay, vesting performance related pay and pension related benefits were made.
No other remuneration or compensation was paid or payable by the Company during the year to any of the current or former
Directors or third parties specified by any of them.
Relative importance of spend on pay
In order to show the relative importance of expenditure on pay, the table below sets out the total level of remuneration compared
to the distributions to shareholders by way of dividends. There were no share buybacks during the year. There were no other
significant distributions, payments or other uses of the Company’s net return or cash flow deemed to assist in the understanding
of the relative importance of spend on pay.
2023
£
2022
£
2018
£
1 year
change
£
1 year
change
%
5 year
change
£
5 year
change
%
Total remuneration paid to Directors
1
158,249 141,450 137,893 16,799 11.9 20,356 14.8
Ordinary dividends paid during the year 13,369,017 13,054,505 12,280,945 314,512 2.4 1,088,072 8.9
1 Remuneration will fluctuate due to the number of directors in any one year
Directors’ Interests in Shares (Audited)
Ordinary shares of 5p
31December 2023 1 January 2023
Beneficial
Jeremy Rigg 27,000 20,000
Jonathan Silver 30,000 30,000
Zoe King 9,000 9,000
Francesca Ecsery 3,481 –
Non-Beneficial
Richard Cranfield 30,000 30,000
Since the Company’s year-end Francesca Ecsery purchased
57 shares in the Company bringing her total beneficial holding
to 3,538 shares. There have been no further changes
reported since the year end to the date of this Annual Report.
No Director is required to hold shares of the Company by way
of qualification.
Table of Directors’ Annual Fees
The current fees for specific responsibilities are set out in the
table below.
Rate from
1 July 2023
Rate from
1 July 2022
%
increase
Chairman of the Board £42,750 £40,500 5.6%
Chairman of the Audit &
Risk Committee £34,200 £32,400 5.6%
Directors £28,500 £27,000 5.6%
Henderson High Income Trust plc Annual Report 2023
48
Directors’ Remuneration Report (continued)
Statement of Voting at AGM
At the Company’s last AGM held on 16 May 2023, shareholders approved the Directors’ Remuneration Report and the
Directors’Remuneration Policy in respect of the year ended 31 December 2022. The following proxy votes were received on
therespective resolutions:
Resolution
For (including
discretionary)
% of total
votes
1
Against
% of total
votes
1
Withheld
To receive the Directors’ Remuneration Report 10,358,926 98.4 171,388 1.6 240,939
To approve the Directors’ Remuneration Policy 10,349,367 98.4 171,388 1.6 250,498
1 Excluding votes withheld
For and on behalf of the Board
Zoe King
Chairman of the Nominations and Remuneration Committee
27 March 2024
Annual Percentage Change in Directors’ Remuneration
The table below sets out the annual percentage change in Directors’ fees (excluding expenses paid) for the Directors for the last
three years in respect of each Director who has served for a minimum of two financial years.
Year to
31 December 2023
%
Year to
31 December 2022
%
Year to
31 December 2021
%
Year to
31 December 2020
%
Jeremy Rigg
1
6.7 20.8
1
31.8
1
1.0
Jonathan Silver 6.7 5.1 1.0 7.6
Zoe King 6.7 5.1 1.0 1.0
Richard Cranfield 6.7 5.1 21.0 n/a
2
Francesca Ecsery
3
n/a n/a n/a n/a
1 Appointed Chairman of the Board on 24 May 2021. The increase in Mr Rigg’s remuneration reflects this appointment part way through the year to 31 December 2021
and the additional remuneration associated with this role. The year to 31 December 2022 was his first full year in this role
2 Appointed to the Board on 1 March 2020
3 Appointed to the Board on 31 December 2022
Performance
The Company’s performance has been measured against the benchmark for the ten-year period ended 31 December 2023
onatotal return basis in sterling terms. The graph compares the mid-market price of the Company’s ordinary shares with the
benchmark over the same period, assuming a notional investment of £1,000 on 31 December 2013 and the reinvestment of
alldividends.
Benchmark
1
Share price total return
1000
1500
2000
(£)
2019 2021 202220172015 2020201820162013 2014 2023
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
Source: Morningstar Direct
Henderson High Income Trust plc Annual Report 2023
49
The Directors who are listed on pages 35 to 36 present their
report and financial statements for the year-ended 31December
2023. The Company (a public limited company registered and
domiciled in England & Wales with company registration number
02422514) was active throughout the year under review.
The Corporate Governance Report (pages 37 to 40 and 45 to
46), the Report of the Audit and Risk Committee (pages 41 to
44), theStatement of Directors’ Responsibilities (page 51), the
Glossary (page 80), the Alternative Performance Measures
(pages 81 to 82) and General Shareholder Information
(pages83 to 84) all form part of the Report of the Directors.
Share Capital
The Company’s share capital comprises ordinary shares with
a nominal value of 5p. The voting rights of the shares on a poll
are one vote for every share held. There are no restrictions
concerning the transfer of securities in the Company, no
special rights with regard to control attached to securities,
noagreements between holders of securities regarding their
transfer known to the Company and no agreement which
theCompany is party to that affects its control following a
takeover bid. To the extent that they exist, the revenue profits
and capital of the Company (including accumulated revenue
and capital reserves) are available for distribution by way of
dividends to the holders of the ordinary shares. Upon a
winding up, after meeting the liabilities of the Company, the
surplus assets would be distributed to the shareholders
pro-rata to their holding of ordinary shares.
At the beginning of the year, there were 129,796,278 ordinary
shares in issue. During the year no shares were issued or
bought back. Therefore, at 31 December 2023 the number of
ordinary shares in issue with voting rights was 129,796,278
(2022: 129,796,278).
On 16 January 2024 the Company issued 42,345,422 new
shares at a price of 170.25p per share 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 2024 and 27 March 2024, being the last
practicable date prior to the publication of this Annual Report,
no further ordinary shares have been issued. Accordingly, the
number of shares in issue with voting rights as at 27 March 2024
was 172,141,700.
The Company will seek authority from its shareholders at
the2024 AGM to renew its authority to allot shares up to
10%ofthe issued share capital. Please refer to the Notice
ofMeeting that has been sent to shareholders with this
reportfor further details. This is also available at
www.hendersonhighincome.com.
Holdings in the Company’s Shares
In accordance with the Disclosure Guidance and Transparency
Rules there were no declarations of interest in the voting rights of
the Company in the year under review. Nochanges have been
notified in the period 1 January 2024 to the date of this report.
Related Party Transactions
The Company’s transactions with related parties in the year
were with the Directors and the Manager. There have been
nomaterial 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 on page
48. 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 on page 78.
Energy and Carbon Reporting
Details of the Company’s disclosures with regard to energy
and carbon reporting can be found on page 33.
Future Developments
While the future performance of the Company is mainly
dependent on the performance of financial markets which are
subject to various external factors, the Board’s intention is that
the Company will continue to pursue its stated investment
objective and policy explained on page 22. The Chairman’s
Statement and Fund Manager’s Report provide commentary
on the outlook for the Company.
Annual General Meeting
The Annual General Meeting (AGM) will be held on
Tuesday,14May 2024 at 12 noon at 201 Bishopsgate,
London EC2M3AE. The Notice of Meeting and details of the
resolutions to be put to the AGM are contained in the separate
document being sent to shareholders with this Annual Report.
Listing Rule 9.8.4
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual Report
or a cross reference table indicating where the information is
set out. The Directors confirm that there are no disclosures to
be made in this regard other than in accordance with Listing
Rule 9.8.4(7), the information of which is detailed in the
adjacent column under Share Capital.
Other Information
Information on dividends and financial risks are detailed in the
Strategic Report.
By order of the Board
Janus Henderson Secretarial Services UK Limited
Corporate Secretary
27 March 2024
Report of the Directors
Henderson High Income Trust plc Annual Report 2023
50
Statement of Directors’ Responsibilities in
Respect of the Financial Statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 102
– The Financial Reporting Standard applicable in the UK and
Republic of Ireland, and applicable law).
Under company law, directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the company and of the profit
or loss of the company for that period. In preparing the
financial statements, the Directors are required to:
●
select suitable accounting policies and then apply them
consistently;
●
state whether applicable United Kingdom Accounting
Standards, comprising FRS 102 have been followed,
subject to any material departures disclosed and
explained in the financial statements;
●
make judgments and accounting estimates that are
reasonable and prudent; and
●
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
The Directors are responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain
theCompany’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements and
the Directors’ Remuneration Report comply with the
Companies Act 2006.
The Directors are responsible for the maintenance and
integrity of the Company’s financial statements published
onthe Company’s website. This responsibility is delegated
toJanus Henderson as Manager. Legislation in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Directors’ Confirmations
Each of the Directors, whose names and functions are listed
on pages 35 to 36, 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
theprincipal risks and uncertainties that it faces.
For and on behalf of the Board
Jeremy Rigg
Chairman
27 March 2024
Henderson High Income Trust plc Annual Report 2023
51
Financial
Statements
52
Report on the Audit of the Financial Statements
Opinion
In our opinion, Henderson High Income Trust plc’s financial statements:
●
give a true and fair view of the state of the Company’s affairs as at 31 December 2023 and of its return and cash flows for the
year then ended;
●
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”,
and applicable law); and
●
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the Financial Statements, included within the Annual Report 2023 (the “Annual Report”), which comprise: the
Statement of Financial Position as at 31 December 2023; the Income Statement; the Statement of Cash Flows; the Statement of
Changes in Equity for the year then ended; and the notes to the Financial Statements, which include a description of the
significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the Financial Statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We remained independent of the Company in accordance with the ethical requirements that are relevant to our audit of the
Financial Statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided.
We have provided no non-audit services to the Company in the period under audit.
Our audit approach
Overview
Audit scope
●
The Company is a standalone Investment Trust Company and engages Janus Henderson Fund Management UK Limited (the
“Manager”) to manage its assets.
●
We conducted our audit of the Financial Statements using information from BNP Paribas S.A. (the “Administrator”) to whom
the Manager has, with the consent of the Directors, delegated the provision of certain administrative functions.
●
We tailored the scope of our audit taking into account the types of investments within the Company, the involvement of the
third parties referred to above, the accounting processes and controls, and the industry in which the Company operates.
●
We obtained an understanding of the control environment in place at both the Manager and the Administrator and adopted a
fully substantive testing approach using reports obtained from the Administrator.
Key audit matters
●
Valuation and existence of investments.
●
Accuracy, occurrence and completeness of income from investments.
Materiality
●
Overall materiality: £2,223,420 (2022: £2,142,767) based on 1% of net asset value.
●
Performance materiality: £1,667,565 (2022: £1,607,075).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the Financial Statements.
Independent Auditors’ Report to the Members
ofHenderson High Income Trust plc
53
Henderson High Income Trust plc Annual Report 2023
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
Financial Statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the Financial Statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Valuation and existence of investments
Refer to the Report of the Audit and Risk Committee,
Accounting Policy – 1d) and page the Notes to the
Financial Statements – Note 11.
The investment portfolio at the year-end comprised
listed equity investments at £236.8 million and fixed
interest investments valued at £33.2 million
(£270million total).
We focused on the valuation and existence of
investments because investments represent the
principal element of the net asset value as disclosed
on the Statement of Financial Position within the
Financial Statements.
Our audit work on the valuation and existence of investments included the
following:
●
We tested the valuation of 100% of the listed equity investments and
fixed interest investments by agreeing the prices used in the valuation to
independent third-party sources; and
●
We tested the existence of the investment portfolio by agreeing
investment holdings to an independent custodian confirmation.
Based on the results of the audit procedures performed we are satisfied
that the listed equity investments and fixed interest investments exist, and
that the valuation of listed equity investments and fixed interest investments
is not materially misstated.
Accuracy, occurrence and
completeness of income
frominvestments
Refer to the Report of the Audit and Risk Committee,
Accounting Policy – 1f) and the Notes to the Financial
Statements – Note 3.
ISAs (UK) presume there is a risk of fraud in income
recognition because of the pressure management
may feel to achieve a certain objective. In this
instance, we consider that ‘income’ refers to all the
Company’s income streams, both revenue and
capital (including gains and losses on investments).
Income from investments comprised dividend
income and fixed interest income. We focused on the
accuracy, occurrence and completeness of dividend
and fixed interest income recognition as incomplete,
fictitious or inaccurate income could have a material
impact on the Company’s net asset value and
dividend cover. In addition, the Directors are required
to exercise judgment in determining whether income
receivable in the form of special dividends should be
classified as ‘revenue’ or ‘capital’ in the Statement of
Comprehensive Income.
We also focused on the accounting policy for income
recognition and its presentation in the Income
Statement as set out in the requirements of The
Association of Investment Companies Statement of
Recommended Practice (the ‘AIC SORP’) as
incorrect application could indicate a misstatement in
income recognition.
We responded to this risk by performing the following audit procedures:
●
We obtained an understanding of the processes and controls around
income recognition and classification of special dividends by reviewing
the internal controls reports of the Administrator; and
●
We assessed the appropriateness of the classification of special
dividends as revenue or capital by the Directors with reference to
publicly available information.
For all dividends recorded by the Company, we performed our audit
procedures through the use of our proprietary testing tool Halo:
●
We tested the accuracy of dividend income by agreeing the dividend
rates from investments to independent market data;
●
We tested occurrence by testing that all dividends recorded in the year
had been declared in the market by investment holdings; and
●
To test for completeness, we investigated that the appropriate dividends
had been received in the year by reference to independent data of
dividends declared for all investment holdings held within theyear.
We have no matters to report as a result of this testing.
For all fixed interest income recorded by the Company, we have performed
the following procedures:
●
We have tested interest income for the year by obtaining the bond
standing data;
●
We tested the accuracy of fixed-interest income by agreeing a sample
of coupon rates and maturity dates to third-party sources; and
●
We have recalculated the income received as well as tracing a sample
of receipts to bank statements.
We have no matters to report as a result of this testing.
Independent Auditors’ Report to the Members
ofHenderson High Income Trust plc
(continued)
54
Henderson High Income Trust plc Annual Report 2023
Independent Auditors’ Report to the Members
ofHenderson High Income Trust plc
(continued)
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial
Statements as a whole, taking into account the structure of the Company, the accounting processes and controls, and the
industry inwhich it operates.
The Company’s accounting is delegated to the Administrator who maintains the Company’s accounting records and who has
implemented controls over those accounting records. We obtained our audit evidence from substantive tests. However, as part of our
risk assessment, we understood and assessed the internal controls in place at both the Manager and the Administrator to the extent
relevant to our audit. This assessment of the operating and accounting structure in place at both organisations involved obtaining and
analysing the relevant controls reports issued by the independent service auditor of the Manager and the Administrator in accordance
with generally accepted assurance standards for such work. Following this assessment, we applied professional judgment to
determine the extent of testing required over each balance in the Financial Statements.
The impact of climate risk on our audit
In planning our audit, we made enquiries of the Directors and Manager to understand the extent of the potential impact of climate
change risk on the Company’s financial statements. In conducting our audit, we made enquiries of the Directors and Manager to
understand the extent of the potential impact of the climate change risk on the Company’s Financial Statements. Both concluded that
the impact on the measurement and disclosures within the Financial Statements is not material because the Company’s investment
portfolio is made up of Level 1 quoted securities which are valued at fair value based on market prices. We found this to be
consistent with our understanding of the Company’s investment activities. We also considered the consistency of the climate change
disclosures included in the Strategic Report with the Financial Statements and our knowledge from our audit. Our procedures did not
identify any material impact as a result of climate risk on the Company’s Financial Statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the Financial Statements as a whole.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Overall Company materiality £2,223,420 (2022: £2,142,767).
How we determined it 1% of net asset value.
Rationale for benchmark applied We have applied this benchmark, which is a generally accepted auditing
practice for investment trust audits.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £1,667,565
(2022: £1,607,075) for the Company’s Financial Statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls – and concluded that an amount in the middle end of our normal range
wasappropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £111,171
(2022: £107,138) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included:
●
evaluating the Directors’ updated risk assessment and considering whether it addressed relevant threats;
●
evaluating the Directors’ assessment of potential operational impacts, considering their consistency with other available
information and our understanding of the business and assessed the potential impact on the Financial Statements;
●
reviewing the Directors’ assessment of the Company’s financial position in the context of its ability to meet future expected
operating expenses and debt repayments, their assessment of liquidity as well as their review of the operational resilience of
the Company and oversight of key third-party service providers; and
●
assessing the implication of significant reductions in net asset value as a result of market performance on the ongoing ability
of the Company to operate.
55
Henderson High Income Trust plc Annual Report 2023
Independent Auditors’ Report to the Members
ofHenderson High Income Trust plc
(continued)
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at
least twelve months from when the Financial Statements are authorised for issue.
In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the Financial Statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Company’s
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the Directors’ statement in the Financial Statements about whether the Directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the Financial Statements and our auditors’
report thereon. The Directors are responsible for the other information. Our opinion on the Financial Statements does not cover
the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement,
we are required to perform procedures to conclude whether there is a material misstatement of the Financial Statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report based on these
responsibilities.
With respect to the Strategic Report and Report of the Directors, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic Report and Report of the Directors
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Report
of the Directors for the year ended 31 December 2023 is consistent with the Financial Statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Report of the Directors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate Governance Statement
The Listing Rules require us to review the Directors’ statements in relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance
Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other
information are described in the ‘Reporting on other information’ section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement included within the Corporate Governance Report is materially consistent with the Financial Statements
and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:
●
The Directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
●
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or mitigated;
56
Henderson High Income Trust plc Annual Report 2023
Independent Auditors’ Report to the Members
ofHenderson High Income Trust plc
(continued)
●
The Directors’ statement in the Financial Statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the Company’s ability
to continue to do so over a period of at least twelve months from the date of approval of the Financial Statements;
●
The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why
the period is appropriate; and
●
The Directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the Directors’ statement regarding the longer-term viability of the Company was substantially less in scope than an
audit and only consisted of making inquiries and considering the Directors’ process supporting their statement; checking that
the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the
statement is consistent with the Financial Statements and our knowledge and understanding of the Company and its
environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Report is materially consistent with the Financial Statements and our knowledge obtained during the audit:
●
The Directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable,
andprovides the information necessary for the members to assess the Company’s position, performance, business model
and strategy;
●
The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems;and
●
The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the Directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the
Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities in Respect of the Financial Statements, the Directors are
responsible for the preparation of the Financial Statements in accordance with the applicable framework and for being satisfied
that they give a true and fair view. The Directors are also responsible for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the Directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Company and industry, we identified that the principal risks of non-compliance with laws and
regulations related to the ongoing qualification as an Investment Trust under the Corporation Tax Act 2010, and we considered
the extent to which non-compliance might have a material effect on the Financial Statements. We also considered those laws
and regulations that have a direct impact on the financial Statements such as the Companies Act 2006. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the Financial Statements (including the risk of override
of controls), and determined that the principal risks were related to posting of inappropriate journal entries to increase income or
to overstate the value of investments and increase the net asset value of the Company. Audit procedures performed by the
engagement team included:
57
Henderson High Income Trust plc Annual Report 2023
●
discussions with the Directors, the Manager and the Administrator, including consideration of known or suspected instances
of non-compliance with laws and regulation and fraud;
●
evaluation of the controls implemented by the Manager and the Administrator designed to prevent and detect irregularities;
●
assessment of the Company’s compliance with the requirements of Section 1158 of the Corporation Tax Act 2010, including
recalculation of numerical aspects of the eligibility conditions;
●
identifying and testing journal entries, in particular year-end journal entries posted by the Administrator during the preparation
of the Financial Statements;
●
designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing; and
●
reviewing relevant meeting minutes, including those of the Audit and Risk Committee.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely related to events and transactions reflected in the Financial
Statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 Exception Reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
●
we have not obtained all the information and explanations we require for our audit; or
●
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received
from branches not visited by us; or
●
certain disclosures of Directors’ remuneration specified by law are not made; or
●
the Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit and Risk Committee, we were appointed by the Directors on 14 December 2016 to
audit the Financial Statements for the year ended 31 December 2016 and subsequent financial periods. The period of total
uninterrupted engagement is eight years, covering the years ended 31 December 2016 to 31 December 2023.
Jennifer March (Senior Statutory Auditor)
For and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
27 March 2024
Independent Auditors’ Report to the Members
ofHenderson High Income Trust plc
(continued)
58
Henderson High Income Trust plc Annual Report 2023
Income Statement
Year-ended 31December 2023 Year-ended 31December 2022
Notes
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Revenue
return
£’000
Capital
return
£’000
Total
£’000
2 Gains/(losses) on investments held
at fair value through profit or loss – 10,620 10,620 – (22,469) (22,469)
3 Income from investments held at
fair value through profit or loss 14,859 – 14,859 14,632 – 14,632
4 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)
5 Management fee (565) (846) (1,411) (557) (836) (1,393)
6 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)
7 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)
8 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)
9 Return/(loss) per ordinary share 10.39p 6.11p 16.50p 10.37p (18.89p) (8.52p)
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.
The notes on pages 63 to 78 form part of these financial statements
59
Henderson High Income Trust plc Annual Report 2023
Statement of Changes in Equity
Notes Year-ended 31December 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
10 Dividends paid – – – – (13,355) (13,355)
At 31 December 2023 6,490 128,827 26,302 51,807 8,916 222,342
Notes Year-ended 31December 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)
16 Issue of new shares 60 2,044 – – – 2,104
10 Dividends paid – – – – (13,039) (13,039)
At 31 December 2022 6,490 128,827 26,302 43,870 8,788 214,277
The notes on pages 63 to 78 form part of these financial statements
60
Henderson High Income Trust plc Annual Report 2023
Statement of Financial Position
Notes
At 31December 2023
£’000
At 31December 2022
£’000
Fixed assets
11 Investments held at fair value through profit or loss 270,007 260,053
Current assets
12 Debtors 2,092 1,928
Cash at bank and in hand 1,990 2,873
4,082 4,801
13 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
14 Creditors: amounts falling due after more than one year (19,867) (19,858)
Net assets 222,342 214,277
Capital and reserves
16 Called up share capital 6,490 6,490
17 Share premium account 128,827 128,827
17 Capital redemption reserve 26,302 26,302
17 Other capital reserves 51,807 43,870
17 Revenue reserve 8,916 8,788
Total shareholders’ funds 222,342 214,277
18 Net asset value per ordinary share (basic and diluted) 171.30p 165.09p
The financial statements and corresponding notes on pages 59 to 78 were approved by the Board on 27 March 2024 and signed on
its behalf by:
Jeremy Rigg
Chairman
The notes on pages 63 to 78 form part of these financial statements
61
Henderson High Income Trust plc Annual Report 2023
Statement of Cash Flows
Year-ended
31December 2023
£’000
Year-ended
31December 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 activities
1
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 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)
The notes on pages 63 to 78 form part of these financial statements
62
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements
1 Accounting Policies
a) 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 andWales 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.
b) 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
ofexpenses 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 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.
c) 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 agoing concern basis.
d) Valuation of investments
The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income
and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in
accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis
to the Company’s Directors. Accordingly, upon initial recognition the investments are included initially at fair value, which is
taken to be their cost. Subsequently, the investments are valued at fair value, which is deemed to be the bid market prices
or the last traded price as at close of business on the last business day of the accounting period depending on the
convention of the exchange on which the investment is quoted.
All fair value movements in investments are taken to the Income Statement. In accordance with the SORP, the Company’s
profit and loss account is split between revenue and capital returns columns as can be seen in the Income Statement.
Fairvalue movements on investments are taken to the capital column in the Income Statement.
e) Capital gains and losses
Profits or losses or disposal of investments and investment holding gains and losses are taken to the capital column in the
Income Statement and transferred to other capital reserves.
The Company’s capital reserves arising on investments sold and revenue reserve may be distributed by way of a dividend.
The portion of the capital reserve arising on investments held is wholly non-distributable. There may be factors that restrict
the value of reserves that can be distributed and these factors may be complex to determine. Amounts fully distributable
may therefore not be the total of the revenue and the portion of capital reserve arising on investments sold.
63
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
1 Accounting Policies (continued)
f) Income
Dividends receivable on equity shares are taken to the revenue return of the Income Statement on an ex-dividend basis
except where, in the opinion of the Directors, based on the facts and circumstances the dividend is capital in nature in
which case it is taken to the capital return. Income from fixed interest debt securities and preference shares with no fixed
maturity date is recognised on a time-apportioned basis. Income from other fixed interest securities is recognised so as to
reflect the effective interest rate on these securities.
g) Expenses
All expenses and finance costs are accounted for on an accruals basis. The Board’s expectation is that over the long term
three quarters of the Company’s investment returns will be in the form of capital gains. The Directors have determined that
the proportion of the annual management fees that relates to the maintenance or enhancement of the valuation of
investments is 80%. On this basis, the Company charges to capital 60% of total management fees (i.e. 75% of 80%) and
75% of its finance costs. The balance of the management fees is charged to revenue. Expenses which are incidental to
theacquisition of an investment are charged to the Income Statement and included within gains/losses on investments.
Expenses which are incidental to the disposal of an investment are deducted from sale proceeds and go to the Income
Statement indirectly.
h) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the
Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using the
applicable tax rate of corporation tax for the accounting period.
The tax effect of different items of expenditure is allocated between the capital return and revenue return using the
Company’s applicable rate of tax for the year. In line with the recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented against capital returns on the Income Statement is the ‘marginal basis’. Under
this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue column of the Income
Statement, then no tax relief is transferred to the capital return column.
Deferred taxation is provided on all timing differences that have originated but not been reversed by the Statement of
Financial Position date, other than those differences regarded as permanent. Timing differences arise from the inclusion of
items of income and expenditure in taxation computations in periods different from those in which they are included in the
financial statements. Any liability to deferred tax is provided at the average rate of tax expected to apply. Deferred tax
assets and liabilities are not discounted to reflect the time value of money. The carrying amount of deferred tax assets is
reviewed at each Statement of Financial Position date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be recovered.
i) Foreign Currency
The results and financial position of the Company are expressed in sterling, which is the functional and presentational
currency of the Company. Sterling is the functional currency because the Company is listed in the UK with a predominantly
UK shareholder base.
Transactions denominated in overseas currencies during the year are translated into sterling at the appropriate daily
exchange rate.
Assets and liabilities denominated in overseas currencies at the Statement of Financial Position date are translated into
sterling at the exchange rate ruling at that date. Differences arising from translation at this rate of exchange are included
within the Income Statement as a capital item and then transferred to capital reserves.
j) Borrowings
Interest-bearing bank loans, overdrafts and the senior unsecured note are recorded as proceeds received, net of direct
issue costs.
They are subsequently measured at amortised cost. Finance costs, including premiums payable on settlement or
redemption and direct issue costs, are accounted for on an accruals basis in the Income Statement, using the effective
interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period
in which they arise.
64
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
1 Accounting Policies (continued)
k) Derivative financial instruments
The Company does not use derivative financial instruments for speculative purposes.
Derivative transactions which the Company may enter into comprise forward exchange contracts (the purpose of which is
to hedge foreign currency exposure) and futures contracts on indices appropriate to sections of the portfolio (one purpose
for which may be to provide protection against falls in the capital values of the holdings). The Company may also write
options on shares represented in the portfolio where such options are priced attractively relative to Janus Henderson’s
expectations for the relevant share prices and to generate additional return for shareholders. The use of financial derivatives
is governed by the Company’s polices as approved by the Board.
Changes in the fair value of derivative financial instruments are recognised in the Income Statement as they arise. If based
on circumstances and motive they are capital in nature, the associated change in value is presented as a capital item in the
Income Statement.
Where options are written for the purpose of generating revenue, applicable premiums are recognised evenly over the life
of the option and shown in the revenue return, with the appropriate amount shown as a capital return such that the total
return reflects the overall change in the fair value of the option.
l) Dividends payable to shareholders
Interim dividends payable to shareholders are recognised in the financial statements when they are paid. The Company
does not pay a final dividend.
Details of dividends provided are in the Statement of Changes in Equity on page 60 and Note 10 on pages 68 to 69.
m) Capital and reserves
Share capital represents the nominal value of shares issued.
The share premium account represents the premium above nominal value received by the Company on issuing shares net
of issue costs.
The revenue reserve represents accumulated revenue profits retained by the Company that have not currently been
distributed to shareholders as a dividend.
The capital redemption reserve represents the nominal value of ordinary shares repurchased and cancelled.
Other capital reserves are split into two components, the capital reserve arising on investments sold and the capital
reserve arising on investments held. The following analyses what is accounted for in each of these components.
Capital reserve arising on investments sold
●
gains and losses on disposals of investments;
●
realised foreign exchange differences of a capital nature;
●
cost of repurchasing ordinary share capital; and
●
other capital charges and credits charged to this account in accordance with the above policies.
Capital reserve arising on investments held
●
increases and decreases in the valuation of investments held at the year end; and
●
unrealised foreign exchange differences of a capital nature.
n) Distributable Reserves
The Company’s capital reserve arising on investments sold and revenue reserve may be distributed by way of a dividend.
The portion of the capital reserve arising on investments held is wholly non-distributable. There may be factors that restrict
the value of reserves that can be distributed and these factors may be complex to determine. Amounts fully distributable
may therefore not be the total of the revenue reserve and the portion of capital reserve arising on investments sold.
65
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
2 Gains/(losses) on Investments Held at Fair Value through Profit or Loss
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 Arrangements with the Manager on page 25.
An explanation of the split between revenue and capital is contained in Note 1g on page 64.
66
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
6 Other Administrative Expenses
2023
£’000
2022
£’000
Directors’ fees (please refer to the Directors’ Remuneration Report on page 48) 158 141
Auditor’s remuneration – for audit services (excluding VAT) 45 42
Depositary fees 23 23
Registrar fees 22 22
Sales and marketing expenses payable to the Manager 44 75
Listing fees 35 32
Printing and postage fees 24 25
Legal and professional fees 46 83
AIC subscriptions 17 16
Other expenses 42 39
456 498
7 Finance Costs
2023 2022
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Interest on bank loans repayable within one year 461 1,383 1,844 193 580 773
Interest on senior unsecured note 185 555 740 187 560 747
646 1,938 2,584 380 1,140 1,520
8 Taxation on Net Return
2023 2022
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Overseas withholding tax 146 – 146 81 – 81
Tax relief on management expenses allocated to capital 101 (101) – – – –
Total current tax charge for the year 247 (101) 146 81 – 81
a) Factors affecting tax charge for the year
The UK corporation tax rate was 19% until 31 March 2023 and 25% from 1 April 2023, giving an effective rate of 23.5%
(2022 – applicable rate of 19%). The tax charge for the year is lower than the corporation tax rate. The differences are
explained below:
2023 2022
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Net revenue before taxation 13,730 7,836 21,566 13,504 (24,445) (10,941)
Corporation tax of 23.5% (2022: 19%) 3,227 1,841 5,068 2,566 (4,645) (2,079)
Effects of:
– UK dividends (2,500) – (2,500) (2,113) – (2,113)
– Non–taxable overseas dividends (554) – (554) (374) – (374)
– Utilised excess management expenses (173) 654 481 (77) 376 299
– Tax relief on management expenses allocated to capital 101 (101) – – – –
– Irrecoverable overseas withholding tax 146 – 146 81 – 81
– Tax effect of expensed double taxation relief – – – (2) – (2)
– (Gains)/losses on investments held at fair value – (2,495) (2,495) – 4,269 4,269
Total current tax charge for the year 247 (101) 146 81 – 81
The Company is an investment trust and therefore its capital gains are not taxable.
67
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
8 Taxation on Net Return (continued)
b) Factors that may affect future tax charges
The Company can offset management fees, other administrative expenses and interest costs against taxable income to
eliminate any tax charge on such income. The tax legislation refers to these as management expenses (management fees
and other administrative expenses) and non-trade loan relationship deficits (interest costs) and these are captured together
under the heading “Utilised excess management expenses” in the table above. Where these are not fully utilised, they can
be carried forward to future years. As the Company is unlikely to generate future taxable profits to utilise these amounts,
the Company cannot recognise an asset to reflect them, but must still disclose the deferred tax amount carried forward
arising from any unutilised amounts.
Consequently, the Company has not recognised a deferred tax asset totalling £6,118,000 (2022: £5,598,000) based on
aprospective tax rate of 25% (2022: 25%) arising as a result of having unutilised management expenses and unutilised
non-trade loan relationship deficits. These expenses will only be utilised, to any material extent if changes are made either
to the tax treatment of the capital gains made by investment trusts or to the Company’s investment profile which require
them to be used.
9 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
(2022loss: £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)
10 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
68
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
10 Dividends Paid on Ordinary Shares (continued)
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 FRS102, 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.
11 Investments Held at Fair Value through Profit or Loss
2023
£’000
2022
£’000
Valuation at 1 January 260,053 289,091
Investment holding gains at 1 January (25,734) (47,124)
Cost at 1 January 234,319 241,967
Purchases at cost 67,282 51,435
Sales at cost (62,527) (59,083)
Cost at 31 December 239,074 234,319
Investment holding gains at 31 December 30,933 25,734
Valuation of investments at 31 December 270,007 260,053
Total transaction costs amounted to £257,000 (2022: £165,000) of which purchase transaction costs for the year-ended
31December 2023 were £238,000 (2022: £147,000). Sale transaction costs for the year-ended 31 December 2023 were
£19,000 (2022: £18,000). These comprise mainly stamp duty (purchases only) and commissions.
The Company received £66,925,000 (2022: £60,179,000) from investments sold in the year. The book cost of these
investments when they were purchased was £62,527,000 (2022: £59,083,000). These investments have been revalued
over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
12 Debtors
2023
£’000
2022
£’000
Taxation recoverable 565 508
Prepayments and accrued income 1,527 1,420
2,092 1,928
13 Creditors: Amounts Falling Due Within One Year
2023
£’000
2022
£’000
Bank loans 30,639 29,141
Accruals and deferred income 1,241 1,578
31,880 30,719
69
Henderson High Income Trust plc Annual Report 2023
13 Creditors: Amounts Falling Due Within One Year (continued)
On 20 December 2023, the short-term multi-currency loan facility with The Bank of Nova Scotia, London Branch expired.
The Company entered into ashort term multi-currency loan facility with BNP Paribas, London Branch. As at 31 December
2023 £30,639,000, repayable in January and February 2024 (2022: £29,141,000, repayable January and March 2023) of
the facility was drawn down. The average interest rate payable on these loans was 5.61% (2022: 4.10%).
14 Creditors: Amounts Falling Due After More Than One Year
2023
£’000
2022
£’000
Senior unsecured note 19,867 19,858
19,867 19,858
On 8 July 2015 the Company issued £20 million (nominal) 3.67% senior unsecured note due 2034, net of issue costs
totalling £204,000. The issue costs will be amortised over the life of the senior unsecured note by way of an effective
interest rate method. The fair value methodology of the senior unsecured note is detailed in note 15.4 on page 74.
Pleaserefer to the Financial Calendar on page 85 for the senior unsecured note interest payment dates.
15 Financial Risk Management Policies and Procedures
As an investment trust, the Company invests in equities and other investments for the long-term so as to secure its
investment objective and policy (please refer to page 22). In pursuing its investment objective and policy, the Company is
exposed to a variety of financial risks that could result in either a reduction in the Company’s net assets or a reduction in
the profits available for distribution by way of dividends.
These financial risks are: market risk (comprising market price risk, currency risk and interest rate risk), credit risk, liquidity
risk and gearing. Details of these risks and of the Directors’ approach to the management of these risks, are set out below
and have not changed from the previous accounting year. The Board receives regular financial and other reporting to
enable it to measure these risks. The Board and Janus Henderson co-ordinate the Company’s risk management and there
are various risk management systems in place as detailed below:
●
Listed securities, exchange-traded derivatives and over the counter (OTC) derivatives contracts are processed,
confirmed and reconciled using automated systems linked to counterparties and clearing houses;
●
Portfolio modelling and investment management functions (including order-raising, dealing and trade execution) are
performed using one of, or a combination of, third-party software applications; and
●
Fund pricing and accounting services are outsourced to a third-party administrator (currently BNP Paribas S.A.)
Janus Henderson Risk, Compliance and Operations Teams have access to and use a variety of in-house and third party
databases and applications for independent monitoring and risk measurement and compliance purposes.
15.1 Market Risk
The fair value of a financial instrument held by the Company may fluctuate due to changes in market prices. This market
risk comprises currency risk (see note 15.1.1), interest rate risk (see note 15.1.2) and other price risk (see note 15.1.3), in
particular the risk of fluctuations in prices of securities. The Board reviews and agrees policies for managing these risks
and agrees investment guidelines and restrictions for managing the portfolio; these have remained substantially unchanged
from those applying in the previous year. The Fund Manager assesses the exposure to market risk when making each
investment decision, and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing
basis. This risk is mitigated through diversification of investments in the portfolio.
15.1.1 Currency Risk
A proportion of the Company’s assets and income is denominated in currencies other than sterling (the Company’s
functional currency and the one in which it reports its results). Therefore, movements in exchange rates may affect the
sterling value of these items. This may be partially offset by borrowing in foreign currencies. The Board regularly reviews
currency risk.
Notes to the Financial Statements (continued)
70
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
15 Financial Risk Management Policies and Procedures (continued)
15.1.1 Currency Risk (continued)
Foreign currency exposure
The fair values of the Company’s monetary items that have foreign currency exposure as at 31 December 2023 and 2022
are shown below. Where the Company’s investments which are not monetary items are denominated in a foreign currency,
they have been included separately in the analysis so as to show the overall level of exposure.
2023
EUR
£’000
US$
£’000
SEK
£’000
Cash and cash equivalents 50 13 –
Bank loans (11,412) (9,727) –
Total foreign currency exposure on net monetary items (11,362) (9,714) –
Investments at fair value through profit or loss that are equities 23,012 19,408 –
Total net foreign currency exposures 11,650 9,694 –
2022
EUR
£’000
US$
£’000
SEK
£’000
Cash and cash equivalents 3 – –
Bank loans (8,140) (12,909) –
Total foreign currency exposure on net monetary items (8,137) (12,909) –
Investments at fair value through profit or loss that are equities 16,470 26,012 2,920
Total net foreign currency exposures 8,333 13,103 2,920
The above amounts are not necessarily representative of the exposure to risk during the year as levels of monetary foreign
currency exposure may have changed significantly throughout the year.
If sterling depreciates against the currencies shown by 10%, the impact on the total return and net assets would be
£2,844,000 (2022: £3,114,000). If sterling appreciates against the currencies shown by 10%, the impact on the total return
and net assets would be (£2,327,000) (2022: (£2,548,000)).
15.1.2 Interest Rate Risk
Interest rate movements may affect:
●
the fair value of investments on fixed interest securities;
●
the level of income receivable from interest-bearing securities and cash at bank and on deposit; and
●
the interest payable on the Company’s variable rate borrowings.
Management of the risk
The possible effects of fair value and cash flows that could arise as a result of changes in interest rates are taken into
account when making investment decisions and borrowing under the multi-currency loan facility. The Company generally
does not hold significant cash balances; short term borrowings are used when required. The Company finances part of its
activities through borrowings at levels approved by the Board. Derivative contracts may sometimes be used to hedge
against the exposure to interest rate risk.
Interest rate exposure
The exposure at 31 December of financial assets and financial liabilities to interest rate risk is shown by reference to:
●
floating interest rates: when the interest rate is due to be re-set; and
●
fixed interest rates: when the financial instrument is due for repayment.
Please refer to the Financial Calendar on page 85 for the senior unsecured note interest repayment dates.
71
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
15 Financial Risk Management Policies and Procedures (continued)
15.1.2 Interest Rate Risk (continued)
2023 2022
Within
one year
£’000
More than
one year
£’000
Total
£’000
Within
one year
£’000
More than
one year
£’000
Total
£’000
Exposure to floating interest rates:
Cash at bank 1,990 – 1,990 2,873 – 2,873
Creditors – within one year:
Borrowings under multi-currency loan facility (30,771) – (30,771) (29,200) – (29,200)
(28,781) – (28,781) (26,327) – (26,327)
Exposure to fixed interest rates:
Investments held at fair value through profit or loss 4,904 28,310 33,214 – 29,076 29,076
Creditors – more than one year:
Senior unsecured note
1
(740) (27,334) (28,074) (747) (28,061) (28,808)
Total exposure to interest rates (24,617) 976 (23,641) (27,074) 1,015 (26,059)
1 The above figures show interest payable over the remaining term of the senior unsecured note. The figures in the ‘more than one year’ column also include
the capital to be repaid
Interest receivable and finance costs are at the following rates:
●
interest received on cash balances, or paid on bank overdrafts, is at a margin linked to SONIA or its foreign currency
equivalent (2022: same);
●
interest paid on borrowings under the multi-currency loan facility is at a margin over SONIA or its foreign currency
equivalent for the type of loan. The weighted average interest rate of these was 5.61% at 31 December 2023
(2022:4.10%);
●
interest paid on the senior unsecured note is at a rate of 3.67% (2022: 3.67%); and
●
the nominal interest rates on the investments held at fair value through profit and loss are shown above.
Interest rate risk sensitivity
The Company is primarily exposed to interest rate risk through its loan facility with BNP Paribas, London Branch,
previouslyThe Bank of Nova Scotia, London Branch, and its fixed interest investment portfolio. The sensitivity of each
exposure is as follows:
●
loan sensitivity: borrowings vary throughout the year as a result of the Board’s borrowing policy. Borrowings at the
year end were £30,639,000 (2022: £29,141,000) (see note 13 on pages 69 to 70) and if that level of borrowings were
maintained for a full year, then a 100 basis points change in SONIA (up or down) would decrease or increase total
return after taxation by approximately £306,000 (2022: £291,000). This level of change is considered to be reasonably
possible based on changes that have been applied to interest rates and a reader of the financial statements can apply
this to any future rate change. This is not representative of the year as a whole, since the exposure changes as
investments are made; and
●
Senior unsecured note: the senior unsecured note is at a fixed rate of interest so will not be impacted by any changes
in SONIA or short term interest rates; and
●
fixed interest investment sensitivity: the Company’s fixed interest portfolio at the year end was valued at £33,214,000
(2022: £29,076,000), and it has a modified duration (interest rate sensitivity) of approximately 5.8 years (2022: 6.9
years). A 100 basis points change in short term interest rates (up or down), which is mirrored by an equivalent change
in long term interest rates, would be expected to decrease or increase this portfolio’s value by approximately
£3,321,000 (2022: £2,908,000), all other factors being equal.
15.1.3 Other Price Risk
Other price risks (changes in market prices other than those arising from interest rate risk or currency risk) may affect the
value of quoted and unquoted investments.
Management of the risk
The Board manages the risks inherent in the investment portfolio by ensuring full and timely access to relevant information
from Janus Henderson. The Board meets regularly and at each meeting reviews investment performance. The Board
monitors Janus Henderson’s compliance with the Company’s objectives, and is directly responsible for investment strategy
and ultimately for asset allocation.
72
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
15 Financial Risk Management Policies and Procedures (continued)
15.1.3 Other Price Risk (continued)
When appropriate, the Company may buy/sell put or call options or futures on indices and on equity investments in its
portfolio to manage its exposure to price risk or to generate income. At 31 December 2023 the Company had no open
positions (2022: no open positions).
Concentration of exposure to other price risks
An analysis of the Company’s investment portfolio is shown on pages 16 to 17. The majority of the investments are in UK
companies. Accordingly, there is a concentration of exposure to the UK, particularly to financials and consumer staples
(please refer to page 18). It is recognised that an investment’s country of domicile or of listing does not necessarily equate
to its exposure to the economic conditions in that country.
Other price risk sensitivity
The following table illustrates the sensitivity of the net return after taxation for the year and the equity shareholders’ funds to
an increase or decrease in the fair values of the Company’s investments. The level of change used in the table below is
considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based
on the Company’s equities at each Statement of Financial Position date, with all other variables held constant.
2023 2022
10% increase
in fair value
£’000
10% decrease
in fair value
£’000
10% increase
in fair value
£’000
10% decrease
in fair value
£’000
Income Statement – net return after tax
Revenue return (40) 40 (42) 42
Capital return 26,906 (26,906) 25,917 (25,917)
Net return after tax for the year 26,866 (26,866) 25,875 (25,875)
Equity shareholders’ funds 26,866 (26,866) 25,875 (25,875)
15.2 Liquidity Risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with the financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the Company’s assets are investments in quoted securities that are readily
realisable. The Company has a one year multi-currency loan facility of £45 million with BNP Paribas, London Branch which
will expire on 19 December 2024 (2022:£45 million with The Bank of Nova Scotia, London Branch). This facility has an
accordion of £25 million allowing the Company to borrow up to £70 million. As part of the combination with Henderson
Diversified Income Trust plc, the facility was drawn down by approximately £60 million in January 2024.
Liquidity risk exposure
The contractual maturities of the financial liabilities at 31 December, based on the earliest date on which payment can be
required, were as follows:
2023
Due within
three months
£’000
2022
Due within
three months
£’000
Bank loans 30,639 29,141
Other creditors and accruals 1,241 1,578
31,880 30,179
15.3 Credit and Counterparty Risk
The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the
Company suffering a loss.
Management of the risk
●
transactions involving derivatives are entered into only with investment banks, whose creditworthiness is carefully
assessed so as to minimise the risk to the Company of default;
●
investment transactions are carried out with a large number of brokers, whose credit standard is reviewed periodically
by the Manager, and limits are set on the amount that may be due from any one broker;
●
the Company’s trades are usually on a delivery versus payment (DVP) settlement basis. This process mitigates the risk
of loss during the settlement process;
73
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
15 Financial Risk Management Policies and Procedures (continued)
15.3 Credit and Counterparty Risk (continued)
Management of the risk (continued)
●
Janus Henderson and the Board monitor the Company’s risk by reviewing the Depositary’s biannual assurance
report. The Manager’s Operational Risk Team also reports to the Board on these reports. They also engage with the
Depositary to ensure that follow up action arising from any exceptions identified in the report are completed, and
report back to the Board where necessary;
●
cash at bank is held only with banks considered to be creditworthy; and
●
with regards to the corporate bonds in the portfolio, there is a credit risk that the borrowers do not repay principal or
make interest payments. This is managed through careful selection, supported by monitoring of credit ratings, and is
reviewed regularly.
The percentages below represent the value of fixed interest investments included in the Statement of Financial Position
which are exposed to credit and counterparty risk by credit rating.
Rating
2023
%
2022
%
AA 32.9 5.4
A 6.7 6.2
BBB 22.3 23.0
BB 20.8 44.6
B 4.8 3.9
Not rated 12.5 16.9
Total 100.0 100.0
Source: Bloomberg composite rating
None of the Company’s financial assets or financial liabilities is secured by collateral or other credit enhancements. None of
the Company’s financial assets are past due or impaired, and any expected credit loss has not had a material impact on
the Company.
15.4 Fair Values of Financial Assets and Financial Liabilities
The fair values of the financial assets and liabilities are either carried in the Statement of Financial Position at their fair value
(investments and derivatives) or the Statement of Financial Position amount is a reasonable approximation of fair value
(duefrom brokers, dividends, and interest receivable, due to brokers, accruals, cash at bank and amounts due under the
multi-currency loan facility). At 31 December 2023 the fair value of the senior unsecured note has been estimated to be
£18,696,000 (2022: £17,653,000) and is categorised as level 3 (see note 15.5 below) in the fair value hierarchy.
The current estimated fair value of the senior unsecured note is calculated using a discount rate based on the redemption
yield of the relevant existing reference UK Gilt plus a suitable estimated credit spread. The estimated credit spread is based
on the spread between the yield of the ICE BofA 10-15 Year A Sterling Non-Gilt Index and the redemption yield of the ICE
BofA 10-15 Year UK Gilt Index. The discount rate is calculated and updated at each month end and applied daily
todetermine the Company’s published fair value NAVs.
15.5 Fair Value Hierarchy Disclosures
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair
value measurement of the relevant asset:
Level 1 – the unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the
measurement date;
Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included within
Level 1; and
Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the Company are explained in note 1d on page 63.
There have been no transfers during the year between levels.
The table overleaf sets out fair value measurements using the FRS 102 fair value hierarchy. Fixed interest investments have
been included in level 1 because they are considered to be highly liquid and therefore trade in an active market.
74
Henderson High Income Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
15 Financial Risk Management Policies and Procedures (continued)
15.5 Fair Value Hierarchy Disclosures (continued)
Financial assets at fair value through profit or loss at 31 December 2023
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity investments 236,793 – – 236,793
Fixed interest instruments:
Preference shares 4,470 – – 4,470
Other 28,744 – – 28,744
Total 270,007 – – 270,007
Financial assets at fair value through profit or loss at 31 December 2022
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity investments 230,977 – – 230,977
Fixed interest instruments:
Preference shares 4,585 – – 4,585
Other 24,491 – – 24,491
Total 260,053 – – 260,053
15.6 Capital Management Policies and Procedures
The Company’s capital management objectives are:
●
to ensure that it will be able to continue as a going concern; and
●
to provide investors with a high dividend income while also maintaining the prospect of capital growth.
The Company’s capital is its equity share capital, reserves and debt that are shown in the Statement of Financial Position
at a total of £272,848,000 (2022: £263,276,000).
The Board, with assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an
ongoing basis. This review includes:
●
the planned level of gearing, which takes into account Janus Henderson’s view on the market;
●
the need to buy back equity shares, either for cancellation or to hold in treasury, which takes account of the difference
between the net asset value per ordinary share and the share price (i.e. the level of share price discount);
●
the need for new issues of equity shares, including sales from treasury; and
●
the extent to which revenue in excess of that which is required to be distributed should be retained.
The Company is subject to several externally imposed capital requirements:
●
under the multi-currency loan facility and the senior unsecured note agreement the total of these borrowings may not
exceed one third of adjusted total assets (as defined in the facility agreement) and net assets must be more than
£90million;
●
as a public company, the Company has a minimum share capital of £50,000; and
●
in order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be
able to meet one of the two capital retention tests imposed on investment companies by company law and cannot
retain more than 15% of income.
The Company has complied with these requirements in the year under review and the prior year.
75
Henderson High Income Trust plc Annual Report 2023
16 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) 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.
17 Reserves
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
arising on
investments
sold
£’000
Capital reserve
arising on
revaluation of
investments
held
£’000
Revenue
reserve
£’000
At 1 January 2023 128,827 26,302 18,197 25,673 8,788
Transfer on disposal of investments – – 2,523 (2,523) –
Net profit on investments – – 1,837 7,760 –
Foreign exchange gains – – 1,023 – –
Management fee and finance costs
charged to capital – – (2,784) – –
Tax relief thereon – – 101 – –
Net return after taxation – – – – 13,483
Dividends paid – – – – (13,355)
At 31 December 2023 128,827 26,302 20,897 30,910 8,916
Notes to the Financial Statements (continued)
76
Henderson High Income Trust plc Annual Report 2023
17 Reserves (continued)
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
arising on
investments
sold
£’000
Capital reserve
arising on
revaluation of
investments
held
£’000
Revenue
reserve
£’000
At 1 January 2022 126,783 26,302 21,245 47,070 8,404
Transfer on disposal of investments – – 3,655 (3,655) –
Net loss on investments – – (2,553) (17,742) –
Foreign exchange losses – – (2,174) – –
Issue of shares 2,044 – – – –
Management fee and finance costs
charged to capital – – (1,976) – –
Net return after taxation – – – – 13,423
Dividends paid – – – – (13,039)
At 31 December 2022 128,827 26,302 18,197 25,673 8,788
The capital reserve arising on investments sold is distributable. The amount of the capital reserve that is distributable is
complex to determine and is not necessarily the full amount of the reserve as disclosed within these financial statements of
£20,897,000 as at 31 December 2023 (2022: £18,197,000). The portion of the capital reserve arising on revaluation of
investments held is wholly non-distributable.
The revenue reserve is distributable. The amount of the revenue reserve that is distributable is not necessarily the full amount
of the reserve as disclosed within these financial statements of £8,916,000 as at 31 December 2023 (2022: £8,788,000).
18 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
19 Contingent Liabilities
There were no partly paid shares or underwriting commitments or any other contingent liabilities at 31 December 2023
(2022: nil).
20 Net Debt Reconciliation
Cash and cash
equivalents
£’000
Bank loans
repayable within
one year
£’000
Other debt
repayable after
more than one year
£’000
Total
£’000
Net debt as at 1 January 2023 2,873 (29,141) (19,858) (46,126)
Cash flows (1,755) (1,649) – (3,404)
Exchange movements 872 151 – 1,023
Non cash flow:
Effective interest movements – – (9) (9)
Net debt as at 31 December 2023 1,990 (30,639) (19,867) (48,516)
Notes to the Financial Statements (continued)
77
Henderson High Income Trust plc Annual Report 2023
20 Net Debt Reconciliation (continued)
Cash and
cash equivalents
£’000
Bank loans
repayable within
one year
£’000
Other debt
repayable after
more than one year
£’000
Total
£’000
Net debt as at 1 January 2022 3,942 (37,593) (19,849) (53,500)
Cash flows (1,773) 11,330 – 9,557
Exchange movements 704 (2,878) – (2,174)
Non cash flow:
Effective interest movements – – (9) (9)
Net debt as at 31 December 2022 2,873 (29,141) (19,858) (46,126)
21 Transactions with JanusHenderson and Related Parties
Under the terms of an agreement effective from 22 July 2014 the Company has appointed wholly owned subsidiaries
ofJanus Henderson to provide investment management, accounting, administrative and company secretarial services.
JanusHenderson has contracted with BNP Paribas S.A. to provide accounting and administration services. Details of
themanagement fee arrangements for these services are given in the Strategic Report on page 25.
The total fees paid or payable under this agreement to Janus Henderson in respect of the year ended 31 December 2023
were £1,411,000 (2022: £1,393,000), of which £715,000 was outstanding as at 31 December 2023 (2022: £1,040,000).
Please refer to the Directors’ Remuneration Report on page 48 and in Note 6 on page 67 for the fees paid to the Directors.
In addition to the above, Janus Henderson facilitates marketing activities with third parties which are recharged to the Company.
22 Subsequent Events
Since the year-end, the Board announced a first interim dividend of 2.625p per ordinary share, in respect of the year-
ending 31December 2024. This will be paid on 26 April 2024 to holders registered at the close of business on 5 April 2024.
Thisdividend is to be paid from the Company’s revenue account. The Company’s shares will become ex-dividend on
4April 2024.
On 4 October 2023 the Company announced that the Board had agreed heads of terms with Henderson Diversified
Income Trust plc (HDIV) in respect of a proposed combination of the Company with HDIV. The combination was approved
by each company’s shareholders at general meetings held on 8 January 2024. In accordance with the scheme of
reconstruction and winding up of HDIV under section 110 of the Insolvency Act 1986, on 16 January 2024 the Company
issued 42,345,422 new shares at a price of 170.25p per share to HDIV shareholders in consideration of the £72.1 million
ofnet assets acquired from HDIV. Following the issue of the new shares, the total number of shares in issue with voting
rights was 172,141,700 ordinary shares, with each ordinary share holding one voting right. Noordinary shares are held
intreasury.
Notes to the Financial Statements (continued)
78
Henderson High Income Trust plc Annual Report 2023
Additional
Shareholder
Information
79
Alternative Investment Fund Managers
Directive (AIFMD)
Agreed by the European Parliament and the Council of the
European Union and adopted into UK legislation, the AIFMD
classifies certain investment vehicles, including investment
companies, as Alternative Investment Funds (AIFs) and requires
them to appoint an Alternative Investment Fund Manager (AIFM)
and Depositary to manage and oversee the operations of the
investment vehicle. TheBoard of Directors retains responsibility
for strategy, operations and compliance and the Directors retain
a fiduciary dutyto shareholders.
Association of Investment Companies (AIC)
The Company is a member of the AIC which is the trade body
for investment companies and represents the industry in relation
to various matters which impact the regulation of such entities.
Benchmark
An index against which performance is compared. For the
Company this 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) and is rebalanced annually.
Compounding
Compounding is the process whereby interest is credited to an
existing principal amount as well as to interest already paid.
Custodian
The Custodian is responsible for ensuring the safe custody of
theCompany’s assets and that all transactions in the underlying
holdings are transacted in an accurate and timely manner.
Depositary
As an AIF the Company is required to appoint a Depositary
which has responsibility for overseeing the operations of the
Company, including safekeeping, cash monitoring and
verification ofownership and valuation of the underlying
holdings and is responsible for the appointment of a
Custodian. The Depositary is strictly liable for the loss of any
investments or other assets in its custody unless it hasnotified
that it has discharged its liability in certain markets.
TheDepositary has confirmed that it has not discharged
liability inrelationto any of the Company’s assets.
Derivative
A contract between two or more parties in relation to an
underlying security. The value of a derivative will fluctuate
inaccordance with the value of the security and is a form
ofgearing as the fluctuations invalue are usually greater than
the fluctuations in the underlying security’s value. Examples
ofderivatives are put and call options, swap contracts, futures
and contracts for difference.
Dividend Dates
When declared or announced, each dividend will have three
keydates applied to it. The payment date is the date on which
shareholders will receive their dividend, either by BACS
transfer or byreceipt of a dividend cheque. The record date
applied to the dividend is used as a cut-off for the Company’s
Registrars to know which shareholders should be paid a
dividend. Only shareholders on the Register of Members at the
close of business on the record date will receive the dividend.
The ex-dividend date is the business day before the record
date and is the date upon which the Company’s net asset
value per share and share price will be disclosed ex-dividend.
Effective Interest Rate Method
The effective interest rate is a method used by a bond buyer
to calculate the total yield to maturity including any capital loss
if the bond is purchased above par, or capital gain if
purchased at a discount to par.
Geometric Returns
A method for aggregating percentage returns over a holding
period to include the impact of compounding.
Investment Trusts
Investment trusts are public limited companies, listed on the
London Stock Exchange, which provide shareholders with a
professionally managed portfolio of investments. Investment
trusts are exempt from tax on the capital gains arising on
their investments subject to meeting certain criteria. Income,
net of expenses and tax, is substantially distributed to
shareholders. Investment trusts are also known as
investment companies although the tax legislation retains
the reference to investment trusts.
Liquidity
In the context of the liquidity of shares in the stock market, this
refers to the availability of buyers in the market for the share in
question. Where the market in a particular share is described as
liquid that share will be in demand and holders wishing to sell
their shares should find ready buyers. Conversely, where the
market in a share is illiquid the difficulty of finding a buyer will
tend to depress the price that might be negotiated for a sale.
Market Capitalisation
The market value of a company calculated by multiplying the
mid-market price per share by the number of shares in issue.
Mid-Market Price
The middle (or mid) market price is the price between the best
offered price and the best bid price. It can simply be defined as
the average of the current bid and offer prices being quoted.
Treasury Shares
Shares repurchased by the Company but not cancelled.
Glossary
Henderson High Income Trust plc Annual Report 2023
80
The Company uses the following Alternative Performance Measures (APMs) throughout the Annual Report and financial
statements and notes to the financial statements. The APMs are reconciled to the financial statements through the narrative
below. The Board believes that each of the APMs, which are typically used within the investment trust sector, provide
additionaluseful information to shareholders to help assess the Company’s performance against its peer group.
Discount or Premium to NAV
The NAV per ordinary share used in this calculation is the NAV published by the London Stock Exchange and by the AIC with
theinterim dividends deducted on the corresponding ex-dividend date and with debt at fair value, as defined below.
The amount by which the market price per share of an investment trust is either higher (premium) or lower (discount) than the
NAV per ordinary share, expressed as a percentage of the NAV per ordinary share.
NAV
pence
Share price
pence
(Discount)/
premium to NAV
%
At 31 December 2023 169.58 156.50 (7.71)
At 31 December 2022 164.24 165.25 0.61
Gearing/(Net Cash)
Gearing means borrowing money to buy assets with the expectation that the return on investments bought will exceed the interest
cost of the borrowings. The gearing percentage reflects the amount of borrowings (e.g. bank loans and senior unsecured notes)
the Company has used to invest in the market and also takes into account the exposure to hedging and derivatives which have
agearing effect. It is calculated by taking the difference between total investments (see Note 11 on page 69) and equity
shareholders’ funds (see Statement of Financial Position) and dividing by equity shareholders’ funds and multiplying by 100.
2023 2022
Investments held at fair value through profit or loss (£’000) (page 61) (A) 270,007 260,053
Net assets (£’000) (page 61) (B) 222,342 214,277
Gearing (C = A/B -1) (%) (C) 21.4 21.4
NAV with debt at par and fair value
2023
£’000
2022
£’000
Investments held at fair value through profit or loss (see note 11) 270,007 260,053
Current assets (see page 61) 4,082 4,801
Creditors: amounts falling due within one year (see note 13) (31,880) (30,719)
Creditors: amounts falling due after more than one year (see note 14) (19,867) (19,858)
NAV with debt at par (A) 222,342 214,277
Less: fair value of senior unsecured note (see note 15.4) (18,696) (17,653)
Add back: amortised cost of senior unsecured note 19,867 19,858
NAV with debt at fair value (B) 223,513 216,482
Ordinary shares in issue (see note 16) (C) 129,796,278 129,796,278
NAV per ordinary share with debt at par (see page 61) (A/C x 100) (p) 171.30 165.09
NAV per ordinary share with debt at fair value (B/C x 100) (p) 172.20 166.79
The NAV per share is published daily and the year-end NAV as published by the AIC can be found on page 6. The NAV published
to the London Stock Exchange and by the AIC will deduct interim dividends on the corresponding ex-dividend date. The NAV in
the Company’s financial statements will deduct the interim dividends on the corresponding dividend payment date.
TheCompany currently publishes two NAVs, one with debt at par and the other with debt at fair value and further information
isavailable in Note 18.
Alternative Performance Measures (Unaudited)
81
Henderson High Income Trust plc Annual Report 2023
Alternative Performance Measures (Unaudited)
(continued)
Ongoing Charge
The ongoing charges ratio has been calculated in accordance with the guidance issued by the AIC as the total investment
management fees and administrative expenses and expressed as a percentage of the net asset values throughout the year.
2023
£’000
2022
£’000
Management fee 1,411 1,393
Other administrative expenses (note 6) 456 498
Less: non-recurring expenses (4) (46)
Ongoing charge 1,863 1,845
Average net assets
1
217,464 218,505
Ongoing charge ratio 0.86% 0.84%
1 Calculated using the average daily net asset value (with debt at fair value)
The ongoing costs provided in the Company’s Key Investor Document (KID) is calculated in line with the PRIIPs regulations.
The ongoing costs in the KID includes finance costs and look through to costs incurred by other investment trusts and funds
thatthe Company invests in.
Total Return
The total return on the share price or NAV (with debt at fair value) takes into account both the rise and fall of NAVs/share prices
and dividends paid to shareholders. Any dividends received by a shareholder are assumed to have been reinvested in either
additional shares (for share price total return) or the Company’s assets (for NAV with debt at fair value total return). Dividends paid
and payable are set out in note 10 on pages 68 to 69.
NAV (with debt
at fair value)
Share
price
NAV/Share price per share at 31 December 2022 (pence) 164.24 165.25
NAV/Share price per share at 31 December 2023 (pence) 169.58 156.50
Change in the year (%) 3.3 (5.3)
Impact of dividends reinvested (%) 6.3 6.6
Total return for the year (%)
1
9.8 0.9
1 Geometric returns
Income/Dividend Yield
The yield is the annual dividend (paid or announced for the year) expressed as a percentage of the year-end share price.
31 December
2023
31 December
2022
Annual dividend (pence) (A) 10.35 10.15
Share price (pence) (B) 156.50 165.25
Yield (C=A/B) (%) (C) 6.6 6.1
82
Henderson High Income Trust plc Annual Report 2023
General Shareholder Information
Alternative Investment Fund Managers
Directive (AIFMD) Disclosures
In accordance with the AIFMD, information in relation to the
Company’s leverage and remuneration of JanusHenderson,
as the Company’s Alternative Investment Fund Manager
(AIFM) is required to be made available to investors. These
disclosures, including those on the AIFM’s remuneration
policy, are contained in a separate document (AIFMD
Disclosure) at: www.hendersonhighincome.com.
BACS
Dividends can be paid by means of BACS (Bankers’
Automated Clearing Services); mandate forms for this purpose
are available from the Registrar, Computershare Investor
Services PLC. Alternatively, shareholders can write to the
Registrar (the address isgiven on page 85) to give their
instructions; these must include thebank account number,
the bank account title and the sort code ofthe bank to which
payments are to be made.
Common Reporting Standard
Tax legislation under The Organisation for Economic
Co-operation and Development Common Reporting Standard
for Automatic Exchange of Financial Account Information was
introduced with effect from 1 January 2016. The legislation
requires the Company to provide personal information to
HMRC on certain investors who purchase shares in
investment trusts. This information is provided annually to
thelocal tax authority of the tax residencies of a number
ofnon-UK based certificated shareholders and
corporateentities.
Equality Act 2010
Copies of this Annual Report and other documents issued by
the Company are available from the Corporate Secretary.
Ifneeded, copies can be made available in a variety of
formats, including Braille, audio tape or larger type as
appropriate.
You can contact the Registrar, which has installed textphones
to allow speech and hearing impaired people who have their
own textphone to contact them directly, without the need for
an intermediate operator by dialling 03707020005. Specially
trained operators are available during normal business hours
to answer queries via this service.
Alternatively, if you prefer to go through a Typetalk operator
(provided by the Royal National Institute for Deaf People) dial
18001followed by the number you wish to dial.
Foreign Account Tax Compliance Act
(FATCA)
FATCA is a United States federal law enacted in 2010 whose
intent is to enforce the requirement for United States persons
(including those living outside the U.S.) to file yearly reports on
their non-U.S. financial accounts. As a result of HMRC’s
change of interpretation on the meaning of shares and
securities ‘regularly traded on an established securities
market’, investment trusts now need to monitor each year the
trading volume and frequency of their shares and securities to
assess whether they have financial accounts. The Company
therefore needs to make an annual assessment, before the
FATCA return is due, to determine if the shares represent
financial accounts and, where they do, will need to identify
and report U.S. reportable accounts to HMRC, as required.
General Data Protection Regulation
(GDPR)
A privacy statement can be found at
www.janushenderson.com.
ISA
The Company intends to continue to manage its affairs in
order to qualify as an eligible investment for a stocks and
shares ISA.
Non-Mainstream Pooled Investments
(NMPI)Status
The Company currently conducts its affairs so that its ordinary
shares of 5p each can be recommended by IFAs to ordinary
retail investors in accordance with the FCA rules in relation to
non-mainstream investment products and intends to continue
to do so for the foreseeable future. The shares are excluded
from the FCA’s restrictions which apply to non-mainstream
investment products because they are shares in an
investment trust.
Packaged Retail and Insurance-based
Investment Products Regulation
(PRIIPs)/Key Information Document (KID)
Investors should be aware that the PRIIPs Regulation requires
the Manager, as the PRIIP manufacturer, to prepare a key
information document in respect of the Company. This KID
must be made available by the Manager to retail investors
prior to them making any investment decision and is available
on the Company’s website. The Company is not responsible
for the information contained in the KID and investors should
note that the procedures for calculating the risks, costs and
potential returns are prescribed by the law. The figures in the
KID may not reflect the expected returns for the Company and
anticipated performance returns cannot be guaranteed.
Henderson High Income Trust plc Annual Report 2023
83
General Shareholder Information (continued)
Performance Details/Share Price
Information
Details of the Company’s share price and NAV per share can
befound at www.hendersonhighincome.com.
TheCompany’s NAV is published daily.
The market price of the Company’s ordinary shares is published
daily in the Financial Times and the Daily Telegraph, which also
show figures for the estimated net asset value per share.
The market price of the Company’s shares can be found in
the London Stock Exchange Daily Official List.
Shareholder Details
Shareholders who hold their shares in certificated form can
check their shareholding with the Registrar, Computershare
Investor Services PLC, via www.computershare.com. Please
note that to gain access to your details on the Computershare
site you will need the holder reference number shown on your
share certificate.
Taxonomy Regulation
Regulation (EU) 2020/852 establishes the basis for the
EUtaxonomy. The EU taxonomy is a classification system,
establishing a list of environmentally sustainable economic
activities to provide companies, investors and policymakers
with appropriate definitions for which economic activities can
be considered environmentally sustainable. In accordance
with the Taxonomy Regulation, the Company states that the
investments underlying this financial product do not take into
account the EU criteria for environmentally sustainable
economic activities.
Warning to Shareholders
Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders offering to sell them what
often turn out to be worthless or high risk shares in US or UK investments. They can be very persistent and extremely
persuasive. Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount or
offers of free company reports.
Please note that it is very unlikely that either the Company or the Company’s Registrar, Computershare Investor Services PLC,
would make unsolicited telephone calls to shareholders and that any such calls would relate only to official documentation
already circulated to shareholders and never in respect of investment ‘advice’.
If you are in any doubt about the veracity of an unsolicited phone call, please call the Corporate Secretary on 0800 832 832.
You can also check the FCA Warning List at #BeScamSmart https://www.fca.org.uk/scamsmart
Henderson High Income Trust plc Annual Report 2023
84
Henderson High Income Trust plc Annual Report 2023
Strategic Report
Performance Highlights 5
Chairman’s Statement 8
Fund Manager’s Report 11
Portfolio and
Financial Information 16
Business Model 22
Managing Risks 25
Viability Statement 27
Key Performance
Indicators 28
Environmental, Social and
Governance Matters 30
Governance
Board of Directors 35
Corporate Governance
Report 37
Report of the Audit and
Risk Committee 41
Report of the Management
Engagement
Committee 45
Report of the Nominations
and Remuneration
Committee 46
Directors’ Remuneration
Report 47
Report of the Directors 50
Statement of Directors’
Responsibilities 51
Financial
Statements
Independent Auditors’
Report 53
Income Statement 59
Statement of Changes
inEquity 60
Statement of Financial
Position 61
Statement of Cash
Flows 62
Notes to the Financial
Statements 63
Additional
Shareholder
Information
Glossary 80
Alternative Performance
Measures 81
General Shareholder
Information 83
Corporate Information 85
Objective
The Company invests in a prudently
diversified selection of both well-
known and smaller companies to
provide investors with a high dividend
income stream while also maintaining
the prospect of capital growth.
85
Henderson High Income Trust plc Annual Report 2023
Corporate Information
Registered Office
201 Bishopsgate
London
EC2M 3AE
Telephone: 020 7818 1818
Service Providers
Alternative Investment Fund Manager
Janus Henderson Fund Management UK Limited
201 Bishopsgate
London
EC2M 3AE
Corporate Secretary
Janus Henderson Secretarial Services UK Limited
201 Bishopsgate
London
EC2M 3AE
Telephone: 0800 832 832
Email: support@janushenderson.com
Depositary and Custodian
HSBC Bank plc
8 Canada Square
London
E14 5HQ
Stockbrokers
J.P. Morgan Cazenove Limited
25 Bank Street
London
E14 5JP
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Telephone: 0370 707 1039
Email: web.queries@computershare.co.uk
Investors with share certificates (i.e. not those in a share plan or
ISA) can check their holdings at www.computershare.com.
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Financial Calendar
Annual General Meeting Tuesday, 14 May 2024
First interim dividend payment Friday, 26 April 2024
Second interim dividend payment Friday, 26 July 2024
Third interim dividend payment Friday, 25 October 2024
Fourth interim dividend payment Friday, 31 January 2025
Half year results announced September 2024
Senior unsecured note interest payment dates 8 July 2024
8 January 2025
Information Sources
For more information about the Company, visit the website at
www.hendersonhighincome.com.
Follow Janus Henderson Investment Trusts on
Twitter, YouTube andFacebook
Investing
Shares can be purchased in the market via a stockbroker
orthrough share dealing platforms. They can also be held
through share plans, ISAs or pensions and links to various
providers are included on the website.
Potential investors are reminded that the value of investments
and the income from them may go down as well as up and
investors may not receive back the full amount invested.
Taxbenefits may vary as a result of statutory changes and
their value will depend onindividual circumstances.
Nominee Share Code
Where notification has been provided in advance, the Company
will arrange for copies of shareholder communications to be
provided to the operators of nominee accounts. Nominee
investors may attend general meetings and speak at them
when invited to do so by the Chairman.
Henderson
High Income
Trust plc
Annual Report 2023
JHI9212/2023Henderson High Income Trust plc – Annual Report 2023
Henderson High Income Trust plc
Registered as an investment company in England and Wales
with registration number 02422514
Registered office: 201 Bishopsgate, London EC2M 3AE
SEDOL number: 0958057
ISIN number: GB0009580571
London Stock Exchange (TIDM) Code: HHI
Global Intermediary Identification Number (GIIN): JBA08I.99999.SL.826
Legal Entity Identifier Number (LEI): 213800OEXAGFSF7Y6G11
Telephone: 0800 832 832
Email: support@janushenderson.com
www.hendersonhighincome.com
JHI9212/2023Designed and typeset by 2112 Communications, London. Printed by Paragon, London.
This report is printed on Revive silk 100% recycled, contains 100% recycled waste and
ismanufactured at a mill certified with ISO 14001 environmental management standard.
The pulp used in this product is bleached using an Elemental Chlorine Free process (ECF).
Seeking superior
income generation
and long-term
capital growth