Final Results

RNS Number : 8764W

Henderson Far East Income Limited

12 November 2014

 



12 November 2014

This announcement contains regulated information.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

STRATEGIC REPORT

Investment Objective and policy

The Company seeks to provide investors with a high level of dividends as well as capital appreciation over the long term, from a diversified portfolio of investments traded on the Pacific, Australasian, Japanese and Indian stock markets ('Asia Pacific region').

Derivatives may be used for efficient portfolio management purposes, which may include the enhancement of income and the protection of the portfolio from undue risks.

The Company intends to continue to pay dividends on a quarterly basis each year.

Performance highlights

• The net asset value ("NAV") total return (including dividends reinvested) was 11.2% compared to a total return from the benchmark index of 13.3%.

• Increased proposed annual dividend: Fourth interim final dividend 4.70p, (2013: 4.40p) producing a total dividend for the year of 18.20p (2013: 17.00p). The dividend has increased progressively every year since incorporations.

•The share price moved to a premium of 0.9% from a discount of (1.0)%.

Sources: Morningstar for the AIC, Henderson and Datastream

Total return performance (including dividends reinvested)
		1 year %	3 years %	5 years %
NAV per ordinary share 1		11.2	34.2	64.0
AIC Asia Pacific (excluding Japan) Sector (Peer Group) Average 2		12.1	31.3	82.1
FTSE  All-World Asia Pacific ex Japan Index (sterling adjusted) 3		13.3	25.6	64.6

1 Source: Morningstar for the AIC including income fair value NAV for one and three years and capital NAV plus income reinvested for five years and since inception

2 Size weighted average (shareholders' funds)

3 From 31 December 2006 to 31 August 2014

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

STRATEGIC REPORT (continued)

Chairman's Statement

Despite the strength of sterling compared to the US dollar and Asian currencies I am pleased to announce that your Company managed to post a double digit total return in Net Asset Value ("NAV") over the period. Importantly, the Fund Manager's strategy of focusing on dividend growth ensured that revenue return per share grew by 7%, despite a lower contribution from option premiums and a higher share base, allowing the board the flexibility to increase the dividend. Although NAV total return was behind the FTSE All-World Asia ex Japan Index, the share price total return was slightly ahead, reflecting a modest expansion of the premium at which the shares traded relative to net asset value.

Performance

In the year under review, the net asset value total return was 11.2% whilst the share price total return was 13.5%. The FTSE-All World Asia Pacific ex Japan Index (sterling adjusted) returned 13.3%.

Dividends

A fourth interim dividend of 4.70p has been declared making a total of 18.20p for the year, an increase of 7.1% year on year.

Capital and Gearing

During the year your Company continued to enjoy consistent demand for its shares with the share price usually trading at a premium to net asset value. In view of this, your Board took the opportunity to issue further shares at a premium to asset value thereby enhancing the net asset value per share for shareholders. In total, 3,750,000 shares were issued in the year for net proceeds of £11.6 million and a further 675,000 shares have been issued since 31 August 2014.

The Company has continued to utilise its £45 million borrowing facility throughout the year but has changed provider to National Australia Bank. The term of the loan has also been increased to two years. At the year end the amount drawn down stood at £27.1 million and net gearing was 3.4%. The maximum amount drawn down under the facility during the year was £27.1 million which reflects individual stock opportunities.

Regulatory

In accordance with the Alternative Investment Fund Managers Directive ("AIFMD"), the Company has appointed Henderson Investment Funds Limited to act as its Alternative Investment Fund Manager. J.P. Morgan, the Company's incumbent Custodian has been appointed as the Company's Depositary.

Board Visit

In early June, the Board visited Singapore, the location of Henderson's Asian hub which has recently been strengthened by new hires, and southern China via Hong Kong. The Board considers the expansion of Henderson's Singapore office as very positive for Henderson Far East Income Limited. In China, the directors travelled to Shenzhen, Guangzhou and Macau. They visited not only companies in which we are or might be invested, but also met with a wide range of economic, and business participants as well as political and social observers.

Common threads to the discussions included a general optimism about the actions of the new government together with a conviction that the crackdown on corruption is very real. Rising salary costs together with improved working conditions and environmental measures mean that the well established manufacturing base of the Pearl River Delta is no longer a low cost production area. However, it does excel in quality and global fulfilment ability ensuring its longer term viability. The Board continues to have a positive view on China.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

STRATEGIC REPORT (continued)

Chairman's Statement (continued)

Outlook

I believe the case for Asian income remains attractive both in absolute terms and relative to other equity income strategies. Low levels of debt, rational capital expenditure and strong cash flow generation should ensure dividend sustainability while strong underlying economic growth and a gradual adoption of a dividend culture will drive higher payout ratios and dividend growth over time. Asia also offers diversification not only in terms of country and currency but also from the wide range of sectors available for the income investor which provides exposure to areas of growth not normally associated with income portfolios. I believe these points continue to make a compelling proposition for the income focused investor.

Annual General Meeting

The Company's AGM will be held at 12.00 noon on 17 December 2014 at Liberté House, 19-23 La Motte Street, Jersey, JE2 4SY.

John Russell

Chairman

12 November 2014

Principal Risks and Uncertainties

The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment limits and restrictions appropriate to the Company's investment objective and policy, in order to mitigate risks as far as practicable. The principal risks which have been identified and the steps taken by the Board to mitigate these are as follows:

Investment and Strategy

An inappropriate investment strategy, for example, in terms of asset allocation or level of gearing, may result in under performance against the companies in the peer group, and also in the Company's shares trading on a wider discount. The Board manages these risks by ensuring a diversification of investments and a regular review of the extent of borrowings. The Portfolio Manager operates in accordance with an investment limits and restrictions policy determined by the Board, which includes limits on the extent to which borrowings may be employed. The Board reviews the limits and restrictions on a regular basis and the Manager confirms adherence to them every month. The Manager provides the Board with management information, including performance data and reports and shareholder analyses. The Directors monitor the implementation and results of the investment process with the Portfolio Manager at each Board meeting and monitor risk factors in respect of the portfolio. Investment strategy is reviewed at each meeting.

Market

Market risk arises from uncertainty about the future prices of the Company's investments.

Accounting, legal and regulatory

The Company is regulated by the Jersey Financial Services Commission and complies with the regulatory requirements in Jersey. The Company must comply with the provisions of the Companies (Jersey) Law 1991 and since its shares are listed on the London Stock Exchange, the UKLA's Listing and Disclosure Rules. The Company must also ensure compliance with the listing rules of the New Zealand Stock Exchange. A breach of company law could result in the Company and/or the Directors being fined or the subject of criminal proceedings and financial and reputational damage. A breach of the UKLA Rules could result in the suspension of the Company's shares. The Board relies on its Company Secretary and advisers to ensure adherence to company law and UKLA and New Zealand Stock Exchange Rules.

Operational

Disruption to, or the failure of, the Manager's or the Administrator's accounting, dealing, or payment systems or the Custodian's records could prevent the accurate reporting or monitoring of the Company's financial position. The Administrator, BNPP, sub-contracts some of the operational functions (principally relating to trade processing, investment administration and accounting) to BNP Paribas Securities Services. Details of how the Board monitors the services provided by the Manager and other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal control section of this report.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

STRATEGIC REPORT (continued)

Principal Risks and Uncertainties (continued)

Financial

The financial risks faced by the Company include market risk (market price risk, interest rate risk and currency risk), liquidity risk and credit risk. The Company does not employ financial instruments to mitigate risk. Additional disclosures are provided in accordance with IFRS 7 Financial Instruments: Disclosures.

Related party transactions

Other than the relationship between the Company and its Directors, the provision of services by Henderson is the only related party arrangement currently in place. 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 this related party affecting the financial position or the performance of the Company during the year under review.

Statement of Directors' Responsibilities

In accordance with Disclosure and Transparency Rule 4.1.12, each of the Directors confirm to the best of his or her knowledge that:

• the Company's financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union on a going concern basis, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

• the Strategic Report and financial statements include 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.

Signed for and on behalf of the Board of Directors.

Richard Povey

Director

12 November 2014

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

STRATEGIC REPORT (continued)

Fund Manager's Report

Market

Asian markets rose strongly over the period in local currency terms but the strength of sterling and the weakness of Asian currencies resulted in a more modest return for sterling based investors.

The first few months of the period started well as the planned reduction in the US Federal Reserve's bond buying programme was delayed as weakness in US housing and employment data over the previous three months prompted a more prudent approach. Markets rallied until the end of October, making up the majority of the value lost from the sell-off in May and June 2013. Towards the end of the calendar year and into 2014 volatility increased as continued unrest in the Middle East and fears over a crisis in parts of emerging markets kept returns subdued. Despite these headwinds markets moved ahead through February buoyed by better economic data in the US and Europe and increasing optimism in the growth and valuation of internet and technology related sectors epitomised by Facebook's $19bn takeover of WhatsApp.

The second half of the company's financial year saw markets prosper from a more benign global economic environment. Although the unrest in Ukraine and the subsequent disagreements between Russia, the European Union and the US rumble on, equity markets benefited from better than expected US economic growth and an improving outlook for China. Despite US quantitative easing continuing to "taper", interest rate pressure remained benign with US 10 year Treasury bonds rallying back towards 2.3% at the end of August from 3% at the beginning of the year. Similar moves have been witnessed in Europe where German 10 year bond yields have dropped below 1% reflecting a disappointing growth outlook. The recent announcement from the ECB cutting interest rates to 0.05% and embarking on a bond buy-back programme represents the last throw of the dice for this flagging region.

From an Asian perspective the period was dominated by politics and reform. In November the 3rd Plenum of the 18th Chinese Communist Party Central Committee unveiled reforms designed to dictate the quantity and quality of Chinese growth in the years to come. A move towards a more market orientated economy allowing private companies to compete alongside state owned enterprises in some of the more protected sectors was widely applauded. Other areas of focus were land and financial reform, migrant registration (Hukou reform), and a concerted effort to tackle environmental concerns. The markets reacted positively to these announcements with China rallying in the 4th quarter of 2013. After a period of weakness in the second quarter as GDP growth faltered and investors cogitated how the reforms would impact the economic outlook the market rallied as restructuring, most notably in the oil and gas and healthcare sectors, focused interest on the corporate sector and away from quarterly growth numbers.

In October 2013 a bill proposing amnesty for former Thai leader Thaksin Shinawatra provoked sizeable rallies in Bangkok. A prolonged political stand-off was ended in May 2014 when the Thai military led by General Prayuth Chan-ocha launched a coup d'état against the ruling caretaker government. The uncertainty initially impacted market performance but there was a strong recovery as the ruling junta addressed issues on investment and subsidies which had been held back by the longstanding political malaise.

In May 2014 the Indian elections produced the first majority government for 30 years. The Bharatija Janata Party (BJP) led by Narendra Modi was elected on a reformist agenda which was well received by the market. The rally that ensued was based on optimism that changes to how the government managed its fiscal resources would promote growth and remove some of the bottlenecks that have held back the economy over recent years.

Behind India, Taiwan and Thailand were the best performing markets while Korea, Malaysia and Singapore were the laggards. At the sector level, technology was the clear winner as investors embraced the potential for companies to monetise new formats. Tencent, China's largest internet service portal, was the biggest winner rising 75% in local currency terms over the period to become the 8th largest stock in the MSCI AC Asia Pacific ex Japan Index. The poor performance of Samsung Electronics, the index's largest constituent was also notable. Competitive pressure from Apple and Sony at the high end and Chinese brands such as Xiomi, Lenovo and ZTE at the low to mid end have resulted in weaker volumes and margins in its smartphone business resulting in significant earnings downgrades and a falling share price.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

STRATEGIC REPORT (continued)

Fund Manager's Report (continued)

Market (continued)

In recent weeks political tension has been rising in Hong Kong. At the time of writing the Occupy Central protesters are still present on the streets of Hong Kong although the numbers have waned as time has passed. The movement, mainly populated by students, is seeking greater influence on the choice of candidate for the 2017 Chief Executive election. Predictably the government has refused to soften its stance. So far the protests have been largely peaceful with only a muted impact on the economy and tourism. The longer term implications for the relationship between Beijing and Hong Kong and the continuation of the "one country, 2 systems" are more difficult to quantify.

Performance

The NAV total return was 11.2% over the period but failed to match the performance of the FTSE All-World Asia Pacific ex Japan Index (sterling adjusted) which was 13.3% in sterling terms.

At the country level the portfolio benefited from being underweight in Korea and being overweight in Taiwan while underweight positions in India were detrimental. The strong performance of the technology sector and in particular the internet names, to which we have little or no exposure, also hurt our relative performance although the better than market returns of the telecom sector was a positive.

At the stock level the portfolio benefited from the strong performance of Catcher Technology, Grand Korea Leisure, Hyundai Motor, Spark New Zealand and Petrochina which all rose by more than 30% over the period. On the negative side our holdings of Guangzhou R&F Properties, Mizuho Financial, Myer Holdings and Advanced Info Services all fell by more than the market. On a relative basis our zero participation in Tencent, mentioned above, was the third largest detractor of stock attribution over the period.

Revenue

Despite the headwinds of a strong sterling the full year was a positive one for the income of your company. Income from investments rose 8.8% despite a 7.3% increase in sterling against the US dollar over the period. Income from the sales of derivatives fell by 7.9% reflecting the low levels of volatility in equity markets resulting in a combined increase in total income of 7.7%.

In local currency terms the portfolio was able to deliver mid teen dividend growth over the period which we believe is reflective of the potential for dividend growth in the region. With companies generating high levels of free cash flow and dividend payout ratios at record low levels we believe there remains the potential for dividend growth to outstrip earnings growth in the region over the next five years.

The diversity of income is also an appealing feature. The income can be generated from many diverse areas and is not reserved to the traditional yielding sectors. Technology and industrials for example are responsible for 20% of the revenue generated by the entire portfolio over the financial year, a trait not seen in most developed markets.

Strategy

The portfolio allocation has remained broadly unchanged over the period with an emphasis on domestically orientated companies with cheap valuations and sustainable and growing dividends. Despite the underperformance of certain high yield sectors following the announcement of QE tapering these "defensives" remain expensive relative to their own history and the rest of the market. We have reinvested in some of the real estate investment trusts (Westfield Retail Trust, now renamed Scentre Group) on the pull-back but on the whole feel that high yield and low growth is still overpriced. For this reason we have very little exposure to consumer staples, utilities and healthcare. We maintain a useful weight in telecoms on valuation grounds although some changes have seen us sell China Mobile over fears of increased competition and capital expenditure and replace with HK Trust which we believe is about to reap the benefits of reduced competition and better data pricing.

With cash flow generation strong and dividend payouts at record lows we remain convinced that dividend growth will be a strong driver, not only of revenue, but also capital growth. Examples of stocks that have been added to the portfolio over the period are Beijing Capital Airport, Netease and Huaneng Power in China, Vanguard Semiconductor, Casetek and Tong Hsing in Taiwan and Coal India. All of these companies could be classified as dividend growth companies although some already have relatively attractive dividend yields.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

STRATEGIC REPORT (continued)

Fund Manager's Report (continued)

Strategy (continued)

Other notable changes were the inclusion of Agricultural Bank of China and Petrochina which were funded by the sales of Digital China, and Giant Interactive, TVB and Sonic Healthcare.

For the first time in a number of years we have invested in Japan. The position in Mizuho Financial was taken after strong results in late 2013 when it became clear to us that the potential for banks to generate excess capital leading to higher dividends was a compelling reason to add to the portfolio. The likelihood of strong market returns in Japan being linked with a weaker Yen has led us to hedge this position.

Outlook

We remain positive on the outlook for the region in the medium to long term but recognise that market direction will be dictated by macro factors in the short term. The end of quantitative easing in the USA and the probable start of a series of interest rate increases, the sustainability of the U.S. recovery and renewed weakness in the Eurozone will be key to determining returns. Valuations in Asia, however, are attractive relative to their own history and other world markets and companies are cash rich with tremendous potential to increase dividend pay outs over time. We will use any market volatility as an opportunity to acquire quality high yielding or high dividend growth companies at attractive prices.

Michael Kerley

Manager

12 November 2014

Portfolio information

Twenty Largest Holdings

These twenty investments total £172,224,000 (twenty largest holdings in 2013: £160,415,000) representing 46.89% (2013: 46.05%) by value of the total investments.

Rank 2014	Rank 2013	Company	Country of incorporation	Sector	Value £'000	%
1	20	SK Telecom (†)	South Korea	Telecommunications	10,924	2.98
2	-	Petrochina	China	Oil & Gas	10,106	2.75
3	-	Huaneng Power	China	Utilities	9,437	2.57
4	10	Taiwan Semiconductor Manufacturing (†)	Taiwan	Technology	9,364	2.55
5	-	Telstra Corporation	Australia	Telecommunications	9,047	2.46
6	1	Bank Of China	China	Financials	9,004	2.45
7	18	Suncorp	Australia	Financials	8,744	2.38
8	9	Amcor	Australia	Industrials	8,652	2.36
9	3	Hyundai Motor Preferred Shares	South Korea	Consumer Goods	8,515	2.32
10	-	Agricultural Bank Of China	China	Financials	8,490	2.31
		Top Ten Investments			92,283	25.13
11	32	Philippine Long Distance Telephone (†)	The Philippines	Telecommunications	8,468	2.31
12	5	Shanghai Industrial	China	Industrials	8,236	2.24
13	37	Ascendas Real Estate	Singapore	Property	8,167	2.22
14	-	Commonwealth Bank Of Australia	Australia	Financials	8,076	2.20
15	-	Coal India (^)	India	Basic Materials	7,964	2.17
16	4	Malayan Banking	Malaysia	Financials	7,903	2.15
17	27	CapitaMall Trust REIT	Singapore	Property	7,862	2.14
18	12	SJM Holdings	Hong Kong	Consumer Services	7,799	2.12
19	41	DBS Group	Singapore	Financials	7,770	2.12
20	-	HKT Trust & HKT	Hong Kong	Telecommunications	7,696	2.09
		Top Twenty Investments			172,224	46.89

 (†) American Depositary Receipts 

 (^) Participation Notes

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

STRATEGIC REPORT (continued)

Portfolio information (continued)

Sector exposure

As a percentage of the investment portfolio excluding cash

	31 August 2014	31 August 2013
Oil and Gas	6.7	5.6
Basic Materials	6.2	0.2
Industrials	11.0	15.5
Consumer Goods	4.3	6.0
Health Care	0.0	1.9
Consumer Services	2.1	11.1
Telecoms	15.3	16.6
Property	16.0	16.6
Financials	22.8	16.3
Technology	13.0	10.2
Utilities	2.6	0.0

Geographical exposure

As a percentage of the investment portfolio excluding cash

	31 August 2014	31 August 2013
Australia	17.1	16.8
China	17.9	13.6
Hong Kong	11.8	15.6
India	2.2	1.8
Indonesia	1.7	1.7
South Korea	6.8	10.0
Malaysia	2.1	2.5
New Zealand	1.8	2.7
Japan ^	1.9	-0.1
The Philippines	2.3	1.8
Singapore	8.5	8.5
Taiwan	20.0	17.4
Thailand	5.9	7.7

^ The position in Japan in 2013 was a derivative contract.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

Audited Statement of Comprehensive Income

for the year ended 31 August

	Year ended 31 August 2014			Year ended 31 August 2013
	Revenue return	Capital return	Total	Revenue return	Capital return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income (note 3)	23,021	-	23,021	21,154	-	21,154
Other income (note 4)	1,474	-	1,474	1,600	-	1,600
Gains on investments held at fair value through profit or loss	-	18,228	18,228	-	16,572	16,572
	---------	---------	---------	---------	---------	---------
Total income	24,495	18,228	42,723	22,754	16,572	39,326
	---------	---------	---------	---------	---------	---------
Expenses
Management fees	(1,581)	(1,581)	(3,162)	(1,829)	(1,829)	(3,658)
Other expenses	(416)	(416)	(832)	(429)	(429)	(858)
	---------	---------	---------	---------	---------	---------
Profit before finance costs and taxation	22,498	16,231	38,729	20,496	14,314	34,810
Finance costs	(114)	(114)	(228)	(128)	(128)	(256)
	---------	---------	---------	---------	---------	---------
Profit before taxation	22,384	16,117	38,501	20,368	14,186	34,554
Taxation	(1,951)	-	(1,951)	(1,789)	-	(1,789)
	---------	---------	---------	---------	---------	---------
Profit for the year and total comprehensive income	20,433	16,117	36,550	18,579	14,186	32,765
	=====	=====	=====	=====	=====	=====
Earnings per ordinary share - basic and diluted  (note 5)	19.32p	15.23p	34.55p	18.05p	13.78p	31.83p
	=====	=====	=====	=====	=====	=====

The total column of this statement represents the Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

Audited Statement of Changes in Equity

For the year ended 31 August

Year ended 31 August 2014	Stated share capital £'000	Distributable reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 31 August 2013	77,511	180,471	51,305	16,511	325,798
Total comprehensive income:
Profit for the year	-	-	16,117	20,433	36,550
Transactions with owners, recorded directly to equity:
Dividends paid (note 6)	-	-	-	(18,959)	(18,959)
Shares issued (note 8)	11,679	-	-	-	11,679
Share issue costs (note 8)	(47)	-	-	-	(47)
	----------	-----------	----------	----------	----------
Total equity at 31 August 2014	89,143	180,471	67,422	17,985	355,021
	======	======	======	======	======
Year ended 31 August 2013	Stated share capital £'000	Distributable reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 31 August 2012	67,727	180,471	37,119	15,183	300,500
Total comprehensive income:
Profit for the year	-	-	14,186	18,579	32,765
Transactions with owners, recorded directly to equity:
Dividends paid (note 6)	-	-	-	(17,251)	(17,251)
Shares issued (note 8)	9,833	-	-	-	9,833
Share issue costs (note 8)	(49)	-	-	-	(49)
	----------	-----------	----------	----------	----------
Total equity at 31 August 2013	77,511	180,471	51,305	16,511	325,798
	======	======	======	======	======

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

Audited Balance Sheet

at 31 August

			2014 £'000	2013 £'000
Non current assets
Investments held at fair value through profit or loss			367,396	348,928
			----------	----------
Current assets
Other receivables			8,278	8,231
Cash and cash equivalents			7,445	4,257
			----------	----------
			15,723	12,488
			----------	----------
Total assets			383,119	361,416
			----------	----------
Current liabilities
Written options			(136)	(581)
Other payables			(823)	(3,854)
Bank loans and overdrafts			(27,139)	(31,183)
			----------	----------
			(28,098)	(35,618)
			----------	----------
Net assets			355,021	325,798
			======	======
Equity attributable to equity shareholders
Stated share capital (note 8)			89,143	77,511
Distributable reserve			180,471	180,471
Retained earnings:
Other capital reserves			67,422	51,305
Revenue reserve			17,985	16,511
			----------	----------
Total equity			355,021	325,798
			======	======
Net asset value per ordinary share			328.43p	312.23p
			======	======

The financial statements were approved by the Board of Directors and authorised for issue on 12 November 2014 and were signed on its behalf by:

Richard Thomas Povey                                                                      

Director                                                                                               

 

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

Audited Statement of Cash Flows

for the year ended 31 August

	2014 £'000	2013 £'000
Operating activities
Profit before taxation	38,501	34,554
Add back interest payable	228	245
Gains on investments held at fair value through profit or loss	(18,228)	(16,572)
Sales of investments	256,680	259,085
Purchases of investments	(259,147)	(278,348)
(Increase) / decrease in prepayments and accrued income	(723)	1,174
Decrease / (increase) in amounts due from brokers	719	(4,442)
(Decrease) / increase in amounts due to brokers	(3,078)	3,078
Increase in other payables	17	72
Stock dividends included in investment income	(199)	(44)
	----------	----------
Net cash inflow / (outflow) from operating activities before interest and taxation	14,770	(1,198)
Interest paid	(226)	(245)
Withholding tax on investment income	(1,929)	(1,800)
	----------	----------
Net cash inflow / (outflow) from operating activities	12,615	(3,243)
	----------	----------
Financing activities
Net loan (repayments) / drawndown Equity dividends paid (note 6)	(2,509) (18,959)	9,744 (17,251)
Share issue proceeds (note 8)	11,679	9,833
Share issue costs (note 8)	(47)	(49)
	----------	----------
Net cash (outflow) / inflow from financing	(9,836)	2,277
	----------	----------
Increase / (decrease) in cash and cash equivalents	2,779	(966)
Cash and cash equivalents at the start of the year	4,256	6,076
Exchange movements	389	(854)
	----------	----------
Cash and cash equivalents at the end of the year (including bank overdrafts of £21,000 (2013: £1,000))	7,424	4,256
	======	======

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

Notes:

1.     General Information

The entity is a closed-end company, registered as a no par value company under the Companies (Jersey) Law 1991, with its shares listed on the London and New Zealand Stock Exchanges.

The Company was incorporated on 6 November 2006.

2.     Accounting Policies

Basis of preparation

These financial statements for the year ended 31 August 2014 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS'). These comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ('IASC') that remain in effect, to the extent that IFRS have been adopted.

The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of financial assets designated at fair value through profit and loss and loans that are held at amortised cost using the effective interest method.

The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.

Where consistent with IFRS, the financial statements have also been prepared in accordance with the guidance set out in the Statement of Recommended Practice ('SORP') for Investment Companies issued by the Association of Investment Companies ('AIC') as revised in January 2009.

3.     Investment income

		2014	2013
		£'000	£'000
	Overseas dividends	21,630	20,499
	Outperformance Participation Note income	1,192	611
	Stock dividends	199	44
		---------	---------
		23,021	21,154
		======	======
	Analysis of investment income by geographical segment:
	Australia	4,159	4,553
	China	4,814	3,830
	Hong Kong	2,894	2,150
	India	915	270
	Indonesia	237	823
	Japan	124	-
	Malaysia New Zealand	421 681	458 869
	The Philippines	417	496
	Singapore	1,651	1,503
	South Korea	1,340	1,607
	Taiwan	4,146	3,455
	Thailand	1,222	1,140
		---------	---------
		23,021	21,154
		======	======

All of the above income is derived from equity investments.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

4.   Other income

			2014		2013
			£'000		£'000
	Bank and other interest		2		3
	Option premium income		1,472		1,597
			-------		-------
			1,474		1,600
			====		====

5.   Earnings per ordinary share

The earnings per ordinary share figure is based on the net gains for the year of £36,550,000 (2013: £32,765,000) and on the weighted average number of ordinary shares in issue during the year of 105,783,168 (2013: on 102,912,043 shares).

The earnings per ordinary share figure can be further analysed between revenue and capital, as below:

		2014	2013
		£'000	£'000
	Net revenue profit	20,433	18,579
	Net capital profit	16,117	14,186
		-------	-------
	Net total profit	36,550	32,765
		======	======
	Weighted average number of ordinary shares in issue during the year	105,783,168	102,912,043
	Revenue earnings per ordinary share	19.32p	18.05p
	Capital earnings per ordinary share	15.23p	13.78p
		---------	---------
	Total earnings per ordinary share	34.55p	31.83p
		======	======

The Company has no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted earnings per ordinary share are the same.

 

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

6.   Dividends

				2014		2013
		Record date	Pay date	£'000		£'000
	Fourth interim dividend 4.10p for the year ended 2012	9 November 2012	30 November 2012	-		4,165
	First interim dividend 4.10p for the year ended 2013	8 February 2013	28 February 2013	-		4,217
	Second interim dividend 4.10p for the year ended 2013	10 May 2013	31 May 2013	-		4,278
	Third interim dividend 4.40p for the year ended 2013	9 August 2013	30 August 2013	-		4,591
	Fourth interim dividend 4.40p for the year ended 2013	8 November 2013	29 November 2013	4,601		-
	First interim dividend 4.40p for the year ended 2014	7 February 2014	28 February 2014	4,601		-
	Second interim dividend 4.40p for the year ended 2014	9 May 2014	30 May 2014	4,690		-
	Third interim dividend 4.70p for the year ended 2014	8 August 2014	29 August 2014	5,067		-
				-------		-------
				18,959		17,251
				======		======
The fourth interim dividend for the year ended 31 August 2014 has not been included as a liability in these financial statements as it was announced and paid after the year end. The table which follows sets out the total dividends paid and to be paid in respect of the financial year and the previous year. The revenue available for distribution by way of dividend for the year is £20,433,000 (2013: £18,579,000).
				2014	2013
				£'000	£'000
	First interim dividend for 2014 - 4.40p (2013 : 4.10p)			4,601	4,217
	Second interim dividend for 2014 - 4.40p (2013 : 4.10p)			4,690	4,278
	Third interim dividend for 2014 - 4.70p (2013 : 4.40p)			5,067	4,591
	Fourth interim dividend for 2014 - 4.70p (2013 : 4.40p) (payable 28 November 2014 based on 108,770,564 shares in issue at 7 November 2014)			5,112	4,601
				--------	---------
				19,470	17,687
				=====	=====

7.   Net asset value per share

The basic net asset value per ordinary share and the net asset value attributable to ordinary shareholders at the year end calculated in accordance with the Articles of Association were as follows:

		Net asset value per share 2014 pence	Net asset value attributable 2014 £'000	Net asset value per share 2013 pence	Net asset value attributable 2013 £'000
	Ordinary shares	328.43	355,021	312.23	325,798
		======	======	======	======
The basic net asset value per ordinary share is based on 108,095,564 (2013: 104,345,564) ordinary shares, being the number of ordinary shares in issue.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

8.	Stated share capital
		Authorised	Issued and fully paid	2014 £'000	Issued and fully paid	2013 £'000
	Opening balance at 1 September Ordinary shares of no par value	Unlimited	104,345,564	77,511	101,580,564	67,727
	Issued during the year		3,750,000	11,679	2,765,000	9,833
	Share issue costs		-	(47)	-	(49)
			--------------	---------	-----------	---------
	Closing balance
	At 31 August		108,095,564	89,143	104,345,564	77,511
			=========	======	======	======
The holders of Ordinary shares are entitled to all the capital growth in the Company and all the income from the Company that is resolved by the Directors to be distributed. Each shareholder present at a general meeting has one vote on a show of hands and on a poll every member present in person or by proxy has one vote for each share held. During the year, the Company issued 3,750,000 (2013: 2,765,000) shares for proceeds of £11,632,000 (2013: £9,784,000) net of costs.
9.	Going concern statement
The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements as the assets of the Company consist mainly of securities which are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future. In reviewing the position as at the date of this report, the Board has considered the "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009", published by the Financial Reporting Council in October 2009.
10.	2014 Financial information
The figures and financial information for the year ended 31 August 2014 are compiled from an extract of the latest financial statements and do not constitute statutory accounts. These financial statements included the report of the auditors which was unqualified.
11.	2013 Financial information
The figures and financial information for the year ended 31 August 2013 are compiled from an extract of the latest published accounts and do not constitute the statutory accounts for that year.
12.	Company Status
The Company is a Jersey domiciled closed-end investment company, number 95064, which was incorporated in 2006 and which is listed on the London and New Zealand Stock Exchanges. The Company is a Jersey fund with its registered office at Liberté House, 19-23 La Motte Street, St. Helier, Jersey, JE2 4SY and is regulated by the Jersey Financial Services Commission.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2014

13.	Annual Report and Annual Strategic Review
The Annual Report and Financial Statements will be available for posting to those shareholders who have requested a copy in late November 2014 and copies will be available on the Company's website (www.hendersonfareastincome.com) or in hard copy format from the Company's registered office, Liberté House, 19-23 La Motte Street, St Helier, Jersey, JE2 4SY. Shareholders who did not in 2010 indicate that they wished to receive the full Annual Report in future years will receive an abbreviated report on the Company's results for the year, the Annual Strategic Review. The Annual General Meeting will be held at the registered office on Wednesday 17 December 2014. The Notice of the Annual General Meeting will be sent to shareholders with the Annual Report.
For further information please contact:
Mike Kerley Portfolio Manager, Henderson Far East Income Limited Telephone: [phone]
James de Sausmarez Director and Head of Investment Trusts, Henderson Global Investors Telephone: [phone]
Sarah Gibbons-Cook Investor Relations and PR Manager, Henderson Global Investors Telephone: [phone]
Jeremy Hamon BNP Paribas Securities Services. S.C.A., Jersey Branch, Company Secretary & RNS Agent Telephone: [phone]
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

- ENDS -

 

END

 

 

FR FFLFIEFLSEIF