HENDERSON INVESTMENT FUNDS LIMITED

HENDERSON HIGH INCOME TRUST PLC

LEGAL ENTITY IDENTIFIER 213800OEXAGFSF7Y6G11

31 March 2021

HENDERSON HIGH INCOME TRUST PLC

Annual Financial Report for the year-ended 31 December 2020

This announcement contains regulated information

PERFORMANCE HIGHLIGHTS

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

² Net asset value with debt at fair value per ordinary share total return (including dividends reinvested and excluding transaction costs)

³ Includes dividends reinvested

⁴ Net asset value with debt at fair value as published by the AIC

⁵ Based on the dividends paid or announced for the year and the share price at the year-end

Sources: Morningstar for the AIC, Janus Henderson and Refinitiv DataStream. All data is either as at 31 December 2020 or for the year-ended 31 December 2020.

CHAIRMAN'S STATEMENT

2020 is a year that none of us will forget. The rapid spread of COVID-19 across the globe has radically changed the way that we live and work in ways that we could never have imagined at the start of the year. These have been very challenging and isolating times and, above all, I hope that you have remained well and coped with the pressures of the various lockdowns and restrictions.

Performance

Whilst 2019 saw a very strong performance from the FTSE All-Share Index, delivering a total return of 19.2%, 2020 could not have been more different, finishing this eventful year down by 9.8%. Once the news emerged that COVID-19 was not limited to China but had started to spread globally, world markets experienced extreme volatility. Daily swings in major indices of 5% or more were quite common. From peak to trough during 2020, the FTSE All-Share Index fell 35%. Many other major markets suffered similar dramatic declines, but thereafter, they rallied considerably, boosted by the massive coordinated stimulus from both central banks and governments. The early successes in vaccine developments and their subsequent approvals and roll-outs towards the end of the year gave investors confidence in the prospect of a return to more normal times. In addition, the uncertainties created by the elections in the US and by the prospect of a "no-deal" Brexit in the UK subsided by the end of the year and helped support equities. However, there was a large disparity in the total returns of different markets over this 12 month period; the UK equity market was the only major equity market to record an overall fall for the year, while the US market, for example, ended the year up 16%. The FTSE All-Share Index has a heavy weighting to oil and resources stocks and high exposure to many of the more traditional business sectors, including retail, hospitality, travel and leisure, which were greatly impacted by the pandemic. Unlike the S&P 500, the FTSE All-Share Index also has very few technology stocks which have generally thrived as consumers and businesses adapted to social distancing by making more on-line purchases and working from home.

Against this difficult UK market backdrop, the Company's portfolio underperformed its benchmark in 2020, with its NAV total return falling 11.4% versus the benchmark's decline of 6.3%. Both the equity and bond portfolios performed broadly in line with the respective components of the Company's benchmark, but the Company's equity gearing and its underweight position in bonds in relation to the benchmark both detracted from relative performance. In this falling equity market, the Company's gearing naturally exacerbated losses, while bonds performed better than anticipated, as a result of central banks' increased stimulus in response to COVID-19, with ten year gilt yield falling from 0.8% to 0.2%. The Company's bond portfolio represented 12.5% of the overall portfolio at the close of the year, while the Company's benchmark has a 20% allocation to its chosen bond index. The Company's shares on a total return basis fell by 17.6%, as the share price moved from a small premium to NAV (with debt at fair value) at the beginning of the year to a discount of 6.5% at the end of 2020. This discount reflected in large part the UK market's lack of attraction to investors last year.

While the Company's absolute and relative capital performance has been disappointing, our Fund Manager, David Smith, has successfully protected the Company's income from some of the worst dividend cuts experienced by the market as a whole: the Company's earnings per share fell 19% (including special dividends) from their 2019 level, while total dividends from the FTSE All-Share Index fell 44%. The preservation of income in these challenging conditions has been a priority for the Company, appreciating, as we do, the importance of a regular and reliable stream of income for our shareholders. David has remained committed to this goal and has managed to mitigate some of the worst effects of COVID-19. In particular, he has done this through careful stock selection and the investment of a portion of the portfolio in bonds (albeit a reduced amount in 2020) and increased the exposure to overseas equities. The inclusion of bonds in the portfolio, which help to stabilise the revenue account, remains a differentiating feature of your Company from other UK equity income investment trusts.

Dividends

At the interim stage, the Board reiterated its intention to use its revenue reserves where necessary to maintain its quarterly dividend of 2.475p per share for the remainder of the year. I am pleased now to report that four interim dividends of 2.475p per share have been paid to shareholders, totalling 9.90p per share for the full financial year-ended 31 December 2020. This represents a small increase of 1.0% over the previous year, modestly above the rise in the consumer price index (CPI) of 0.9% for the same period. The dividend yield on the Company's share price as at year-end was 6.7%, considerably higher than the FTSE All-Share Index yield of 3.4%.

The Company is in the fortunate position of being structured as an investment trust and, as such, has the ability to add surplus income to its revenue reserves in the good years and to draw on these reserves to smooth its dividend payments in the more difficult years. 2020 was an extreme example of a difficult year. Unsurprisingly, COVID-19 has impacted the level of dividends received from the Company's portfolio companies in 2020, but as explained earlier, not by as much as the overall market. The Company has needed to draw only £1.7 million from its revenue reserves to contribute to its full year dividend of 9.90p per share.

The Company had been building up its revenue reserves in each of the last nine years. At the end of 2019 revenue reserves exceeded £10 million, representing nearly 10 months' worth of dividend cover. Having utilised a small portion of these reserves to contribute to the dividend shortfall in 2020, we retained a very healthy balance of almost £9 million, well over 8 months' worth of dividend cover at the end of the year.

During the course of the year we have been monitoring the level and sustainability of dividends received from our portfolio companies. David has run frequent stress tests of the Company's revenue account under different scenarios looking several years ahead. Although the outlook for dividends is gradually improving, it is clear that it will take time for income to return to the levels enjoyed in 2019 and we anticipate a continued shortfall this year. Nonetheless, David's medium-term forecasts and the relative robustness of the Company's current reserves gives the Board reassurance that, barring unforeseen circumstances, the Company's dividend can be maintained at the current level, utilising revenue reserves where necessary. It remains, therefore, our intention to continue to pay at least the current level of dividend for the foreseeable future.

As we emerge from COVID-19, the Board's ambition remains to increase the Company's dividend gradually, but it will be subject to investment conditions at the time and whether we determine such an increase to be sustainable in the future.

Gearing

Gearing was reduced in the first quarter of 2020, principally by selling US investment grade bonds. At the end of 2020 we had drawn down approximately £30 million of our multicurrency revolving facility. This represented a net reduction in borrowings of about £8 million. Investment of this floating rate facility, combined with the long-term fixed rate senior unsecured note of £20 million, helps to generate additional income and potentially increases the Company's total return to shareholders. Nearly 65% of the Company's borrowings have been used to fund additional investment in bonds within the portfolio and the average yield achieved generated a profitable margin over the Company's average cost of borrowing. The level of gearing allocated to equities (9.0% as at the end of 2020) was therefore considerably lower than the reported headline gearing figure of 22.9%.

In December we negotiated an amendment to, and extension of our existing floating rate revolving facility of £45 million with Scotiabank, due to expire in June 2021. The renewed two-year multicurrency facility is available until December 2022 and, like the previous arrangement, includes the option to increase it to £57 million.

Responsible Investing

Responsible investing relates to how environmental, social and corporate governance (ESG) factors impact a company's long-term sustainability. Analysis of the sustainability of a business and its profits has always been at the core of the Company's investment strategy, and ESG factors are fully integrated into the investment processes employed by the Fund Manager.

The Board believes that voting the Company's shareholdings at general meetings is essential to 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 on any controversial votes, after any necessary consultation with the Board. Janus Henderson will actively engage with those companies that fall below such expectations to encourage improvement over time. However, the final sanction is the divestment of those holdings that fail to make an acceptable transition and adapt sufficiently. The Board monitors the process by reviewing on an annual basis a report on the Company's voting pattern.

Succession Planning

Having chaired the Board since 2016 and having served as a director since 2008, I will be retiring at the AGM in May 2021. This will conclude the Board's five-year process of succession and refreshment. Five new directors have now joined the Board since 2016 and their appointments have been phased annually to ensure the Board retains the required mix of skills, experience and corporate knowledge during the recruitment process. The most recent addition to the Board is Penny Lovell who was appointed on 1 January 2021. Penny is CEO of Sanlam Private Wealth and has extensive experience in wealth management and financial advice for private investors, having held several senior positions in sales and marketing in the asset management industry.

I am delighted that my colleagues have chosen Jeremy Rigg to succeed me as Chairman. Jeremy has over 25 years of investment management experience and his three years of valuable service as a director of the Company have proven to the Board that he will make an excellent and committed Chairman.

I would like to take this opportunity to thank shareholders, my fellow directors and the team at Janus Henderson for the support that they have given to me over many years. It has been an honour and privilege to serve the Company as both a director and Chairman and a very enjoyable and stimulating experience.

AGM

In light of the ongoing COVID-19 pandemic and with a view to making the AGM as safe and accessible for shareholders as possible, we are inviting you to register to attend our virtual AGM this year, which will be held on Monday 24 May 2021 at 12.30pm, as a webinar using the conferencing software Zoom. This will allow you to be present for the usual presentation from our Fund Manager, David Smith, and will enable you to ask questions of the Fund Manager and Board, as you would at a physical AGM.

To attend the AGM, please register in advance using the link below. You will then receive a dedicated invitation to join the webinar.

https://jhi.zoom.us/webinar/register/WN_l8zVel1VQgyTDPd6PLdB8w

Due to technological restrictions, voting will be conducted on a poll, rather than on a show of hands, with the Chairman of the AGM holding the proxy votes. We therefore request all shareholders to submit their votes by proxy, ahead of the deadline of Thursday 20 May 2021, to ensure that their vote counts at the AGM, where there will be no live voting. If you hold your shares in a nominee account, such as through a share dealing service or platform, you will need to contact your provider and ask them to submit the proxy votes on your behalf.

Non-Routine Business of the AGM

In addition to the regular business conducted at this year's AGM, a resolution will be put to shareholders to approve an increase in the limit upon overseas holdings in the portfolio from 20% to 30% of gross assets. Doing so would provide the Fund Manager with additional flexibility to invest from time-to-time in overseas opportunities that may not be available in the UK market. The Company's ability to invest a small portion of its portfolio in bonds and equities in developed markets abroad proved beneficial in 2020. It further diversified the portfolio and preserved income by accessing reliable dividend payers beyond the concentrated UK market. David Smith will continue to conduct his own due diligence on potential overseas investments, ably supported by the wider team of specialist investment managers within Janus Henderson. Regardless of this proposed increase in overseas exposure, the portfolio will remain predominantly invested in the UK equity market.

A resolution will also be put to shareholders to amend the company's Articles of Association to allow for hybrid and/or virtual-only General Meetings and Annual General Meetings. This is simply to enable the Company in the future to adapt to extreme circumstances where physical meetings are prohibited, as was the case in 2020. I would like to stress, however, that it will always be the Company's intention to hold face to face meetings with shareholders whenever possible as we value highly the opportunity this provides for engagement with our shareholders.

Prospects and Outlook

The experience of 2020 has taught all of us the difficulties of making predictions in such an uncertain world. Unfortunately, COVID-19 is likely to remain the dominant theme for 2021 with concerns about the duration and severity of its legacy on the global economy. The rapid roll-out of vaccines, particularly in the UK, has prompted cautious optimism, acknowledging that there may still be setbacks on the path to the "new normal" as variants of the virus start to emerge. Nonetheless, some of the other uncertainties raised in my interim statement have now been resolved, namely the US elections in November with the subsequent appointment of Joe Biden as US President, and the agreement of a last minute trade deal between the UK and the European Union at the end of 2020. Monetary and fiscal policy is still expected to remain very supportive during the coming year, given the likely long-term economic hangover caused by the pandemic. The worst of the dividend cuts may now be over as those businesses most affected by lockdowns have learned to adapt although we should not anticipate a rapid bounce back to their pre-pandemic dividend levels in 2021.

During 2020 the Company's income has proven relatively resilient in comparison to the UK market, thanks to our Fund Manager's careful construction of a well-diversified portfolio. We are confident that David Smith will make every effort in the year ahead to continue to protect our shareholders' crucial wish for income while balancing this with the opportunity for capital appreciation in the future.

Margaret Littlejohns

Chairman

31 March 2021

FUND MANAGER'S REPORT

Review of the Year

History will look back at 2020 as a truly exceptional period. The spread of COVID-19 across the world not only led to the fastest equity bear market in history but changed the way we live our lives. Between February and March, the FTSE All-Share Index fell 35% in only 22 trading days as hospitals started to become overwhelmed and governments imposed lockdowns on their citizens to combat the spread of the virus. The UK was one of the economies most impacted by the pandemic and restrictions because of its dominant services sector, with Q2 2020 GDP falling 20.8% year-on-year, the worst fall on record.

Global equity markets started to recover from their March lows following an unprecedented level of coordinated government support through furlough and loan guarantee schemes, and monetary and fiscal stimulus. Markets continued to recover towards the end of the year, despite the emergence of a second wave and a new, more contagious, strain of the virus, on the news that three highly effective vaccines had been developed. Joe Biden's victory at the US Presidential Election was seen as a further positive factor for equities, while the last-minute Brexit deal between the UK and EU over its future trading relationship was a relief given the uncertainty it removed.

The FTSE All-Share Index finished the year down 9.8% with the FTSE 250 (-4.4%) and FTSE Small Cap (+7.2%) indices outperforming the FTSE 100 (-11.6%). There was significant divergence in sector performances with those most directly impacted by the pandemic, such as oil & gas, banks and travel & leisure, underperforming, while the likes of industrials and mining posted better returns, as investors sought companies likely to benefit more immediately from  the anticipated global economic recovery and fiscal stimulus.

While the Company had been positioning itself more defensively through 2019, reducing borrowings, increasing the bond exposure and lowering the cyclicality in the equity portfolio, this was not enough to offset the significant declines in equity markets during 2020. The NAV fell 11.4%, underperforming the 6.3% decline in the benchmark. Both the equity and bond portfolios performed broadly in line with their respective benchmarks, with the Company's underperformance being driven by the equity gearing, which accentuated the market falls.

The equity portfolio fell 10.1% during the year, performing broadly in line with the FTSE All-Share Index decline of 9.8%. The main detractors to performance were those companies most directly impacted by the pandemic and subsequent government lockdowns. Shares in bus operator National Express, contract caterer Compass Group, events company Informa and hotel operator Whitbread all fell sharply in late February and early March as the restrictions imposed upon populations had a material impact upon each company's profits and cash flows. Such businesses were forced to cease the majority of their operations, suspend dividend payments, focus on conserving cash and improve their liquidity and balance sheet positions. Each company raised fresh equity during the crisis to shore up their financial strength which we supported, given our belief that the pandemic had not permanently impaired the business models longer-term. Indeed we still maintain holdings in each, despite the prospects of no dividends in 2021, as the roll-out of effective vaccines gives some hope that their businesses will soon start to return to normal, while their repaired balance sheets provide them with the opportunity to take market share once the recovery is sustained.

While the pandemic impacted the majority of companies in the UK market to some degree, it did prove beneficial for a number of the portfolio's holdings, such as Bunzl and Hilton Food Group. Bunzl sources and distributes non-consumable products, including sanitiser, disposable gloves and masks and other safety equipment, which saw significantly increased demand. Hilton Food Group packages meat-based products for supermarkets globally and benefitted from the shift to food consumption at home. The portfolio's underweight positions in the oil & gas and banking sectors were also positive for relative performance. Lockdowns significantly impacted the short-term demand for oil-based products while a breakdown in relations between Saudi Arabia and Russia regarding cuts to oil production, caused the oil price to collapse during the crisis, even turning negative at one point. In this environment, both BP and Royal Dutch Shell underperformed and cut their dividends, the latter for the first time since World War II.

Elsewhere it was pleasing to see some of the Company's overseas holdings performing well. Pharmaceutical company Roche outperformed during the year, as investors sought its defensive earnings, while new additions Deutsche Post and Metso Outotec were also positive for performance. Deutsche Post is a global logistics company which benefitted from increased parcel deliveries given the acceleration towards online shopping caused by the pandemic. Metso Outotec was formed by the merger of Metso and competitor Outotec which has created a global leader in the supply of industrial machinery for the mining sector. Strong profit growth during the year has been supported by robust capital spending by large mining companies and significant merger synergies.

Although the fixed income portfolio marginally underperformed its benchmark, it still produced a positive total return of 7.7% versus the 8.0% rise in the ICE BofAML Sterling Non-Gilts Index. This highlights the benefits of the Company's unique structure; the ability to own bonds helps dampen the overall volatility of the Company, especially during equity market drawdowns, and diversifies its income stream. The portfolio benefitted from both government bond yields falling, with the UK 10 year gilt yield contracting close to all-time lows of 0.2% as at the end of December, and credit spreads tightening (both positive for bond prices). Both were driven lower by the substantial government support and liquidity provided by central banks, effectively reducing the prospect of material defaults. Holdings in bonds issued by Tesco, Nationwide (preference shares) and Direct Line were the best performers as investors sought their relatively high coupons.

Income

The environment for income investors was very challenging in 2020, with a significant number of companies either cutting, abandoning or deferring dividend payments, whether as a matter of choice or because of political pressure. Total market dividend payments for the FTSE All-Share Index fell by 44% during the year, with the FTSE 100 and FTSE 250's aggregate dividends down by 35% and 56% respectively, according to the Link UK dividend monitor.

The Company was not immune in this environment but given its diversified nature, the income return performed relatively better than that of the overall UK equity market. The income generated through the year was 8.58p per share, a fall of 19% on 2019 (10.59p per share) or 17% on an underlying basis excluding special dividends. The Company benefitted from the stability of income from the bond portfolio, where we experienced no defaults, and the Company's exposure to more defensive sectors within the equity portfolio, such as utilities, healthcare and consumer staples, where companies continued to pay dividends. For the companies held in the equity portfolio that suspended dividend payments, we took a pragmatic approach, supporting those companies which we believe have the best long-term potential despite a lack of dividends in the short-term, and sold those businesses that cancelled dividends but where we have less faith in the medium-term recovery prospects, such as HSBC, BT and Hammerson. The Company also increased its exposure to overseas holdings where dividends were less impacted, focusing on high quality companies that can sustain and grow their dividends into the long-term.

One of the benefits of an investment trust structure is its ability to put aside excess income earned in any one year, known as revenue reserves, to help support dividends in more difficult years. Over the last nine years, the Company has built up revenue reserves to £10.7 million at the start of 2020. Given the robust level of these reserves, the Company raised the full year dividend for the eighth year in succession to 9.90p per share, an increase of 1.0%. Revenue reserves contributed a modest £1.7 million to fund the shortfall in income, which left reserves at £9 million, sufficient to cover 70% of the anticipated full year dividend going forward.

Although last year was an incredibly tough year for income seeking investors, 2020 ended with a glimpse of optimism thanks to the return of previously suspended dividends from some of our investee companies. It is likely that more companies will continue to return to the dividend register in 2021 but at lower levels, as companies are likely to remain cautious until there is a clearer path for cash flows to recover and balance sheets to be repaired. The Company may have to utilise more revenue reserves again this year, but the level of those reserves gives confidence that the Company's own dividend can be at least sustained until underlying income covers the full dividend payment again.

Portfolio Activity

Early in the pandemic, the Company reduced its borrowings to more defensive levels given the very uncertain outlook, by selling holdings in US investment grade corporate bonds. These bonds, from issuers such as Amazon, American Towers Corp, Comcast and Verizon had performed particularly well since purchase, with yields moving to extremely low levels and no longer offering compelling value, especially against the Company's cost of borrowings. The allocation to the bond portfolio finished the year at 12.5% and 15.4% of the portfolio's gross and net assets respectively.

Within the equity portfolio we were quick to reduce the cyclicality, selling IAG (the holding company of British Airways) Ibstock and Jupiter Fund Management in January, and aerospace company Senior and housebuilder Vistry in March. The proceeds were used to increase holdings in more stable businesses that have dependable cash flows and dividends, such as British American Tobacco, Unilever, Reckitt Benckiser and the French pharmaceutical company Sanofi.

As previously mentioned, the Company utilised its ability to invest up to 20% of gross assets overseas by increasing the international exposure to 16.2% by year-end. New positions were initiated in McDonald's and Texas Instruments in the US, and EDP and RWE in Europe. McDonald's is a strong global franchise with a robust cash flow and an attractive long-term dividend growth track record. Texas Instruments designs and manufactures semiconductors for markets such as general industrials and autos, which offer good long-term structural growth given the shift to make products smarter, safer, better connected and more efficient. The company has high margins and good cash generation, supporting an attractive dividend. In the last few years, European utilities EDP and RWE have transitioned their businesses away from carbon-based energy generation to renewable sources. Both now generate the majority of their profits from renewable energy generation and have large pipelines of new projects to increase their renewable capacity significantly over the next five years. This will help underpin future profit growth, as technologies improve to make renewable energy assets more cost-competitive, and supporting growth in dividends from already attractive yield levels.

The advantage of being part of the wider 14-person strong Janus Henderson Global Equity Income Team is the ability to leverage the experience and knowledge of team members for investment ideas outside the UK. This was invaluable last year as utilising that expertise helped me take decisive action to broaden the portfolio not only in terms of overseas income opportunities but also companies that offer the prospect of long-term capital growth. As highlighted in the Chairman's Statement, the Company is looking to increase the limit for overseas holdings in the portfolio from 20% to 30%. While the intention is still for the Company to have the majority of its assets invested in the UK, having the additional flexibility to invest more internationally will help open up the investment universe for the Company to find opportunities not readily available in the UK. It will also help further diversify the income generated by the equity and bond portfolios, given the concentrated nature of UK equity and bond markets.

Towards the end of the year, as the outlook for markets and economies became more optimistic, thanks to the news regarding the development of successful vaccines, I initiated new holdings in more cyclical companies, such as Anglo American and NatWest. Anglo American is a well-diversified miner with good organic growth prospects given the number of new projects, especially in copper and PGMs (Platinum Group Metals), due to come on stream in the next few years. Both metals should have good long-term structural support given their applications in the electrification of energy infrastructure and use in autocatalytic convertors respectively. As the UK economy gradually recovers, NatWest should be able to generate higher returns than in the recent past given the operational improvement implemented by the new management team, which we believe is not fully reflected in the current valuation. The company also has a very strong capital position which should see the return of attractive dividends once allowed by the regulator. Funding came from reducing some of the portfolio's more defensive holdings, such as National Grid, GlaxoSmithKline and Bunzl. Over the course of the year, borrowings reduced by approximately £8 million, with the Company's level of gearing finishing 2020 at 22.9%.

Outlook

The FTSE 100 has appreciated in capital terms by just 9.5% over the last 10 years. One could describe this period as a lost decade for UK equity investors as there has been a multitude of issues to worry about and hold back returns. The Eurozone debt crisis in 2011, the commodities recession in 2015, Brexit from 2016, US-China trade relations in 2018 and more recently a pandemic. However, when we look forward, the majority of those headwinds have now passed and with effective vaccines being rolled-out there is a credible path to life returning to some form of normality sooner rather than later.

Just as the pandemic has caused the worst UK recession in living memory, so too could it produce a significant rebound in activity given pent up demand arising from enforced lockdowns and savings reaching all-time highs. While we need to be mindful of potential new mutations of the virus and to understand the longer-term economic damage caused by the pandemic, a return to more normal life is supportive of strong synchronized global economic growth in the medium-term, further supported by monetary and fiscal stimulus from governments and central banks. This backdrop should be positive for UK equities, and we look forward with cautious optimism, especially given attractive valuations in the UK, both in absolute terms and relative to other developed markets. The Company is well-positioned, owning good quality companies that either currently pay an attractive dividend or are likely to return to the dividend register soon, and have the potential for capital recovery.

David Smith

Fund Manager

31 March 2021

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 risk and to determine 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 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, the Company 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. Alternatively, 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 and emerging 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 do not consider these principal risks to have changed during the year under review and up to the date of this report. There have been two changes to the emerging risks section in the year under review with the removal of risks associated with Brexit (now that the UK has departed from the EU) and the inclusion of risks associated with the legacy of COVID-19.

Emerging Risks

With the help of the Manager's research resources and using its own market intelligence, the Board continually monitors the changing risk landscape and any emerging and increasing threats to the Company's business model. Such emerging risks could cause disruption for the Company, if ignored, but, if identified, could provide business opportunities. The emerging risks identified below are currently being evaluated and monitored.

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 pursuing 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 of 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-ended nature as an investment company (therefore there are limited liquidity issues arising from unexpected redemptions);

● a low ongoing charge (0.93% for the year-ended 31 December 2020 (2019: 0.80%)); and

● long-term borrowings in place in the form of the 3.67% senior unsecured note which matures in July 2034 (the value of this long-term borrowing is relatively small in comparison to the value of net assets at 9.4% as at 31 December 2020).

Furthermore, the Company retains title to all assets held by the Custodian (under the terms of the formal agreement with the Depositary), cash is held with approved banks and revenue and expenditure forecasts are reviewed at each Board meeting. The Fund Manager provides an additional, conservative stress-tested revenue forecast at least once a year to assist the Board with its dividend decision making. The Company's revenue reserves have grown in the last few years and there is now approximately 8 months' worth of dividend cover which gives additional comfort for any difficult years that may arise in the future.

The Board believes it is appropriate to assess the Company's viability over a five-year period in recognition of its long-term horizon and taking account of the Company's current position and the assessment factors detailed above.

When assessing the viability of the Company over the next five years the directors considered its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's borrowing facilities and how a breach of any loan covenants could impact on the Company's net asset value and share price. The Board also considered the Company's viability in the context of the COVID-19 pandemic and the end of the transition period relating to the UK's departure from the EU.

The Board does not envisage any change in strategy or investment objective, or any events that would prevent the Company from continuing to operate over the next five years as the Company's assets are liquid, its commitments are limited, and the Company intends to continue to operate as an investment trust. The Board notes the Company's next continuation vote is due to take place at the AGM in 2025. Last year the Board received feedback from the Fund Manager, the Janus Henderson Investment Trust Sales Team and the Company's Broker from meetings held with shareholders. That feedback suggested that the shareholders were supportive of the Company continuing in operation for a further five-year period and beyond. Having discussed feedback from the Fund Manager and the Janus Henderson Investment Trust Sales Team in the year under review, 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. The Board is reassured that the Company is well-equipped to navigate the significant societal, economic and financial impact of the COVID-19 pandemic 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 2025.

Related Party Transactions

The Company's transactions with related parties in the year were with the directors and the Manager. There have been no material transactions between the Company and its directors during the year. The only amounts paid to them were in respect of remuneration for which there were no outstanding amounts payable at the year-end. Directors' interests in shares are disclosed in the Directors' Remuneration Report in the Annual Report. In relation to the provision of services by the Manager (other than fees payable by the Company in the ordinary course of business and the provision of marketing services) there have been no material transactions with the Manager affecting the financial position or performance of the Company during the year under review. More details on Transactions with the Janus Henderson and Related Parties including amounts outstanding at the year-end, are given in Note 21 to the financial statements within the Annual Report.

The directors confirm that in accordance with Listing Rule 9.8.4(7) there are no further disclosures that need to be made in this regard.

Update Statement

The Company received the following votes in respect of the resolution to re-elect Margaret Littlejohns as a director of the Company at the AGM held on 23 June 2020.

The Board subsequently analysed the proxy votes received and identified one large shareholder vote which amounted to 15% of the total votes against this resolution. The Senior Independent Director subsequently wrote to this shareholder to ask for their feedback. The feedback provided made it clear that the reason for the vote against was based on the UK Code of Corporate Governance provision that the Board Chair should not also chair the Remuneration Committee. As a result of this feedback the Board has appointed its Senior Independent Director, Zoe King, as Chairman of the Nominations and Remuneration Committee.

Statement of Directors' Responsibilities in Respect of the Financial Statements

Directors' Confirmations

Having taken advice from the Audit and Risk Committee, the directors consider that the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy. Each of the directors, whose names and functions are listed in Board of Directors section within the Annual Report confirm that, to the best of their knowledge:

·     the Company's financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

·     the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Margaret Littlejohns

Chairman

31 March 2021

AUDITED INCOME STATEMENT

AUDITED STATEMENT OF CHANGES IN EQUITY

AUDITED STATEMENT OF FINANCIAL POSITION

AUDITED STATEMENT OF CASH FLOWS