Final Results

RNS Number : 7355E

Henderson Far East Income Limited

05 November 2015

 



5 November 2015

This announcement contains regulated information.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

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 does not have a fixed life.

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 -11.5% compared to a total return from the index of -11.8%³.

• Increased proposed annual dividend: Fourth interim final dividend 4.90p, (2014: 4.70p) producing a total dividend for the year of 19.20p (2014: 18.20p). The dividend has increased progressively every year since incorporation.

•The share price moved to a premium of 0.4% from a premium of 0.9%.

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		-11.5	9.1	21.3
AIC Asia Pacific (excluding Japan) Sector (Peer Group) Average 2		-9.5	12.9	28.5
FTSE  All-World Asia Pacific ex Japan Index (sterling adjusted)		-11.8	9.9	18.3
FTSE All-World Asia Pacific including Japan Index (sterling adjusted)		-1.8	24.7	28.7

1 Source: Morningstar for the AIC including income fair value NAV for one, three and five years

2 Size weighted average (shareholders' funds)

3 FTSE  All-World Asia Pacific ex Japan Index (sterling adjusted)

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

STRATEGIC REPORT (continued)

Chairman's Statement

To say that Asian markets were volatile during the period under review would be a gross understatement. For part of the year investors enjoyed a useful tailwind and the outlook appeared rosy only to run into a savage headwind initiated by the collapse of the Chinese stock market bubble. We have experienced bubbles in western markets, the most recent being in technology, but nothing on this scale.

Encouraged by State media and expectations of further monetary easing from Beijing, private investors in China began to enter the market, often with borrowed money, in the fourth quarter of last year. The subsequent rise encouraged further investment and even more aggressive borrowing by 90 million private investors. The rapid rise did not reflect the outlook for the underlying economy but rather the supportive government policy and the naivety of private investors simply gambling that whatever they bought today somebody would pay a higher price tomorrow. Cracks began to appear in the market by the middle of this year as the share prices of a few high profile companies were badly affected by significant profit downgrades. Margin calls began to be made and the vulnerability of investors to loss became apparent causing panic and the bubble burst.

The Government intervened both on the way up, trying to moderate the rate of the rise, and on the way down trying to mitigate loss. It failed on both counts and a degree of political damage ensued.

It is important to note, however, that these events are not a re-run of the Asian financial crisis of 1997. China still offers some of the most attractive long term structural growth opportunities.

The slowdown in China has had a mixed impact on the rest of the region. The fall in oil and other commodity prices has been detrimental to Australia and Malaysia but beneficial to most other countries which are net importers of energy and resources. The weakness in intra-regional trade has impacted most countries around the region but ongoing reforms in markets such as India, Korea and Indonesia have, to a degree, mitigated this impact. The strong underlying income growth being generated from your company's investment portfolio is testament to the progress that is being made in shareholder friendly reforms.

Performance

Your Company was not immune to these developments although the impact was much less severe than the decline in the China market would suggest. The substantial downturn in commodity markets was not beneficial either. The Australian market is an important source of income for the Company but the dramatic fall in the A$ exchange rate impacted on sterling returns.

The net asset value total return was - 11.5% over the period and the share price total return was - 12.0%. By comparison the FTSE All-World Asia Pacific ex Japan Index (sterling adjusted) total return was - 11.8%. More positively, income from investments rose 6.2% over the year and would have been much higher had the sterling

exchange rate not appreciated by 4.2% against Asia Pacific currencies. Notwithstanding this, your Company enjoyed an increase in total income of 10.2%.

Over the period portfolio turnover is 121.5% which is higher than in previous years. The majority of the change was down to the calculation being based on year end asset values rather than on monthly averages. Additional trading to enhance revenue in an environment of weak Asian currencies and strong sterling, increased share issuance and high levels of volatility also partly explain the rise.

Dividends

The overall income performance gave the Board confidence to declare a 4th interim dividend of 4.90p making a total of 19.20p for the year, an increase of 5.5%.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

STRATEGIC REPORT (continued)

Chairman's Statement (continued)

Dividends (continued)

Following the increased volatility in markets and currencies in the last few months of the Company's financial year the Board has decided to give the fund manager more flexibility in terms of revenue generation during periods of unforeseen disruption. The Board remains positive on the outlook for dividends in the Asia Pacific region and is committed to growing the Company's dividend over time but understands that this may involve the use of revenue reserves should the income from the portfolio be impacted by exchange rate fluctuation or significant market events. The emphasis on greater flexibility should ensure that capital returns are not compromised for the sake of income generation and is in keeping with the Company's total return objective.

The Board

As part of the Board's succession plan, Richard Povey is stepping down from the Board at the AGM. Richard has served on the Board since the Company moved to Jersey in 2007. He has served the Board and shareholders diligently and his business experience in the Asia region, where he lived and worked for many years, has been most useful. We shall miss his guidance. Earlier in the year, Julia Chapman joined the Board. Julia is a Jersey resident and a lawyer with a great deal of experience in both UK and Jersey financial services. In this age of rapidly expanding regulation, her presence on the Board will be most welcome.

Outlook

China remains the key. Much is written about the slow down there but GDP growth, now referred to as the "new norm", is still robust in global terms. China is going through another transition phase as important and far reaching as the reforms introduced by President Deng Xiaoping. For him, the reform policy had to accommodate the severe economic damage and substantial social disruption caused by Mao Zedong's policies. To gain political traction President Deng Xiaoping adopted a consensus policy to help bind various factions together and he was successful. However, President Xi Jinping is faced with a different challenge.

He knows and has stated publicly that the transition to a more open consumer led economy is now imperative if growth is to continue and jobs created. Deregulation was the most important reform proposed at the 3rd Plenum in 2013. It is estimated that, relative to the "no reform" scenario, deregulation will boost average annual real output growth of the private sector by 3 percentage points. However, he is battling against entrenched interests created during the President Deng Xiaoping consensus period who opposed change and he appears to believe it is necessary to centralise control once again.

A further measure proposed by President Xi Jinping in 2013 to restore strong growth was the introduction of the "Belt and Road" infrastructure project. The aim will be to link, in a coordinated way, existing infrastructure and create 6 separate corridors from China across Asia to Europe. There will be roads, high speed rail, energy pipelines and sea ports. For China the benefits are clear. The project will reduce China's dependence on eastern seaboard trade routes for both imports and exports, avoid the long sea route through the Straits of Malacca, open up opportunities for central and western China to develop new industries creating jobs and economic prosperity in this neglected region. It will also open up new markets for Chinese goods and involve over 60 countries when complete. Of course this will not happen overnight but it is a key plank in the President's strategy. The potential benefits are so strong that it is reasonable to assume that the project will proceed quite quickly.

The outlook for China will continue to dominate Asian markets. The transition is necessary and has every prospect of being successful in the medium to long term. The stock market in China will remain unsettled for some time to come as the effects of the bursting bubble work their way through but valuations are attractive giving rise to improved yield opportunities giving your Board confidence that the current dividend can be at least

maintained in the year ahead.

Annual General Meeting

The Company's AGM will be held at 12.00 noon on 16 December 2015 at Liberté House, 19-23 La Motte Street, Jersey, JE2 4SY.

John Russell

Chairman

5 November 2015

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

STRATEGIC REPORT (continued)

Management

The Company has appointed Henderson Investment Funds Limited ("HIFL") to act as its Alternative Investment Fund Manager. HIFL delegates investment management services to Henderson Global Investors Limited in accordance with an agreement which was effective from 22 July 2014 which is terminable on six months' notice. Both entities are authorised and regulated by the Financial Conduct Authority ("FCA"). References to Henderson within this report refer to the services provided by both entities.

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 Fund 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 Henderson confirms adherence to them every month. Henderson 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 Fund 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, Henderson'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, BNP Paribas Securities Services S.C.A., Jersey Branch, 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 Henderson and other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal control section of this report.

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.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

STRATEGIC REPORT (continued)

Related party transactions

The Company's current related parties are its Directors, and Henderson. There have been no material transactions between the Company and its Directors during the year and the only amounts paid to them were in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end.

In relation to the provision of services by Henderson, other than fees payable by the Company in the ordinary course of business and the provision of sales and marketing services there have been no material transactions with Henderson affecting the financial position of the Company during the year under review.

Signed for and on behalf of the Board of Directors.

Richard Povey

Director

5 November 2015

Fund Manager's Report

Market

The financial year to the end of August 2015 was a particularly volatile period for Asia Pacific markets. The boom and bust in Chinese equities, a significant increase in volatility in the currency markets and the overhang of a potential rate rise in the US resulted in an 11.8% decline in the FTSE All World Asia Pacific ex Japan index in sterling total return terms.

The year started poorly as the withdrawal of the US Federal Reserve's bond buy-back programme, geopolitical risks in the Middle East and economic weakness in Europe conspired to send markets lower. Sentiment turned positive in December 2014 as comments from the European Central Bank about quantitative easing combined with lower commodity prices and a 50% decline in oil prices, improved investors' growth expectations. This more positive backdrop continued until the middle of June 2015 when a clampdown on margin trading halted the meteoric rise of Chinese mainland shares and slowing regional and global growth extended the weakness to global emerging markets and the world beyond.

Of all the headlines which hit the news wires over the period the performance of Chinese shares and the policy responses designed to contain it were the most notable. The 'party' started in November 2014 when The People's Bank of China unexpectedly cut interest rates for the first time since 2012 spurring a surge in equity investment on expectations of the commencement of a prolonged period of government easing. At its peak the number of new trading accounts being opened by retail investors hit 3.3m a week with the volumes in Shanghai exceeding those on Wall Street. Between 20 November 2014 and 12 June 2015 the Shanghai Composite Index rose 111% in local currency terms. The market was buoyed not only by interest rate cuts but also by continuing state owned

enterprise reform, headline grabbing infrastructure projects and implicit government support. The correction came in mid June following the clampdown on margin trading which had grown to an estimated 8% of total market transactions from virtually nothing nine months earlier.

The change in sentiment combined with forced selling of stocks to meet margin calls resulted in an almost 40% decline in the Shanghai Composite Index between 12 June and 31 August while the government's use of public funds to shore up the market was clumsy and mistimed and did little to improve sentiment or confidence.

With equity markets still unnerved by the increased volatility, the surprise decision by The People's Bank of China to increase the flexibility of the Renminbi peg to the US dollar came as an unwelcome surprise. With the IMF's decision pending on whether to grant the Chinese Renminbi reserve currency status, the decision was designed to adhere to the IMF'S mantra of increased flexibility. However following on from an extremely weak export number, fears of a competitive devaluation were readily aired. The subsequent devaluation of 2% was modest, but, the impact on commodity and energy prices, regional and emerging currencies and world equity markets contributed to the belief that this was only the start of a significant move lower for the Chinese currency.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

STRATEGIC REPORT (continued)

Fund Manager's Report (continued)

Market (continued)

Elsewhere in the region slowing growth, falling energy and materials pricing together with weak currencies dictated returns. Australia and Malaysia, the only net commodity and energy exporters in the region, were the hardest hit as their equity markets fell by 21% and 29% in sterling terms respectively, with the majority of the fall coming from currency decline. Unsurprisingly, energy and materials were the worst performing sectors although the inclusion of consumer discretionary in the bottom three reflects the slowdown prevailing across the region. Healthcare, telecoms and utilities proved most resilient while, at the country level, The Philippines, India and China ended the period close to parity from a year earlier.

With GDP growth falling across the region, looser monetary policy was evident in many countries. Interest rates were cut in China, India, Australia, Taiwan, Korea and Thailand over the period, reflective of weaker demand but also of lower levels of inflation as weaker energy, commodity and food pricing impacted CPI baskets.

At the corporate level earnings have been resilient in this period of increased volatility, reflecting that the recent turmoil is a macro rather than a micro event. Earnings forecasts have been revised lower, but only modestly, with the concentration of downgrades being in the cyclical resource and technology sectors. The same dynamic is true

of dividend forecasts which have been revised down slightly on average, but less so than earnings, and again in the areas most impacted by the cyclical downturn. Encouragingly, sectors such as diversified financials, real estate, transport and utilities have actually seen dividend upgrades in calendar 2015 which bodes well for dividend sustainability for the rest of 2015 and into 2016.

Performance

The NAV total return was -11.5%, slightly outperforming the FTSE All World Asia Pacific ex Japan Index (total return) which was -11.8% in sterling terms. With this magnitude of decline we would normally expect the portfolio to be more resilient than it has proved to be. This, we believe, is a function of the indiscriminate nature of the sell-off dominated by fund flows, rather than fundamentals in a period where weaker growth and a possible rise in interest rates impacted growth and yield alike.

Although it was a roller coaster ride, the portfolio benefited from its positions in China where the attractive valuations of the stocks held proved much less volatile than the broader market. Elsewhere, the resilience of Taiwan was beneficial while the heavy weighting in telecommunications also added value on a relative, if not absolute, basis.

At the stock level there were notable performances from some of our Chinese shares such as Beijing Capital Airport, Netease, Bank of China and Zhengzhou Yutong Bus which all posted significant gains over the period. On the negative side, poor returns from Hyundai Motor, Wistron and Sands China offset some of these gains.

Revenue

Despite the headwinds of weak Asian currencies and a strong sterling the full year was a positive one for the income of your Company. Income from investments rose by 6.2% despite a 4.2% increase in sterling against Asian Pacific currencies over the period. Income from the sales of derivatives rose by 73%, reflecting the higher levels of volatility in equity markets resulting in a combined increase in total income of 10.2%.

In local currency terms the portfolio was able to deliver double digit 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 pay-out ratios at record low levels, we believe the potential for dividend growth

to outstrip earnings growth in the region is strong over the next five years.

The diversification of income is also an appealing feature. The chart below shows that income can be generated from many different areas and is not reserved to the traditional higher yielding sectors. Technology and property, for example, are responsible for 27% of the revenue generated by the entire portfolio over the financial year- a trait not seen in most developed markets.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

STRATEGIC REPORT (continued)

Fund Manager's Report (continued)

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 uncertainty surrounding interest rate rises in the US and volatility in the currency markets is likely to persist for the short term but we remain confident that Asian economies and companies are well placed to handle any potential bouts of volatility. Valuations in Asia are attractive relative to their own history and other world markets. 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.

Mike Kerley

Fund Manager

5 November 2015

Portfolio information

Twenty Largest Holdings

These twenty investments total £156,282,000 (twenty largest holdings in 2014: £172,224,000) representing 48.31% (2014: 46.89%) by value of the total investments.

Rank 2015	Rank 2014	Company	Country of incorporation	Sector	Value 2015 £'000	%
1	20	HKT Trust & HKT	Hong Kong	Telecommunications	9,307	2.88
2	-	Korea Electric Power	South Korea	Utilities	9,219	2.85
3	35	Intouch Holdings	Thailand	Telecommunications	8,739	2.70
4	-	Spark Infrastructure	Australia	Utilities	8,633	2.67
5	47	Macquarie Korea Infrastructure Fund	South Korea	Financials	8,329	2.58
6	40	Spark New Zealand	New Zealand	Telecommunications	8,317	2.57
7	15	Coal India1	India	Basic Materials	8,021	2.48
8	37	Mizuho Financial	Japan	Financials	7,999	2.47
9	-	Bharti Infratel1	India	Telecommunications	7,969	2.46
10	1	SK Telecom2	South Korea	Telecommunications	7,896	2.44
		Top Ten Investments			84,429	26.10
11	5	Telstra Corporation	Australia	Telecommunications	7,859	2.43
12	17	CapitaLand Mall Trust REIT	Singapore	Property	7,597	2.35
13	-	Macquarie Group	Australia	Financials	7,569	2.34
14	8	Amcor	Australia	Industrials	7,152	2.21
15	-	CK Hutchison	Hong Kong	Industrials	7,126	2.20
16	29	Casetek Holdings	Taiwan	Technology	6,990	2.16
17	-	AGL Energy	Australia	Utilities	6,949	2.15
18	28	Scentre Group	Australia	Property	6,920	2.14
19	-	China Resources Land	China	Property	6,887	2.13
20	39	Asustek Computer	Taiwan	Technology	6,804	2.10
		Top Twenty Investments			156,282	48.31

(1) Participation Notes

(2) American Depositary Receipts 

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

STRATEGIC REPORT (continued)

Portfolio information (continued)

Sector exposure

As a percentage of the investment portfolio excluding cash

	31 August 2015	31 August 2014
Oil and Gas	0.0	6.7
Basic Materials	6.1	6.2
Industrials	13.3	11.0
Consumer Goods	3.8	4.3
Consumer Services	3.5	2.1
Telecommunications	20.9	15.3
Property	14.0	16.0
Financials	19.5	22.8
Technology	9.5	13.0
Utilities	9.4	2.6

Geographical exposure

As a percentage of the investment portfolio excluding cash

	31 August 2015	31 August 2014
Australia	21.9	17.1
China	20.9	17.9
Hong Kong	10.9	11.8
India	6.7	2.2
Indonesia	1.9	1.7
Japan	2.5	1.9
Malaysia	1.2	2.1
New Zealand	2.6	1.8
The Philippines	0.0	2.3
Singapore	4.3	8.5
South Korea	9.7	6.8
Taiwan	13.1	20.0
Thailand	4.3	5.9

CORPORATE REPORT

Statement of Directors' Responsibilities

In accordance with Disclosure and Transparency Rule 4.1.12, each of the Directors confirms 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

5 November 2015

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

Audited Statement of Comprehensive Income

for the year ended 31 August

	Year ended 31 August 2015			Year ended 31 August 2014
	Revenue return	Capital return	Total	Revenue return	Capital return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income (note 3)	24,451	-	24,451	23,021	-	23,021
Other income (note 4)	2,554	-	2,554	1,474	-	1,474
(Losses) / gains on investments held at fair value through profit or loss	-	(60,887)	(60,887)	-	18,228	18,228
	---------	---------	---------	---------	---------	---------
Total income / (loss)	27,005	(60,887)	(33,882)	24,495	18,228	42,723
	---------	---------	---------	---------	---------	---------
Expenses
Management fees	(1,472)	(1,472)	(2,944)	(1,581)	(1,581)	(3,162)
Other expenses	(417)	(418)	(835)	(416)	(416)	(832)
	---------	---------	---------	---------	---------	---------
Profit / (loss) before finance costs and taxation	25,116	(62,777)	(37,661)	22,498	16,231	38,729
Finance costs	(135)	(136)	(271)	(114)	(114)	(228)
	---------	---------	---------	---------	---------	---------
Profit / (loss) before taxation	24,981	(62,913)	37,932	22,384	16,117	38,501
Taxation	(2,314)	-	(2,314)	(1,951)	-	(1,951)
	---------	---------	---------	---------	---------	---------
Profit / (loss) for the year and total comprehensive income	22,667	(62,913)	(40,246)	20,433	16,117	36,550
	=====	=====	=====	=====	=====	=====
Earnings per ordinary share - basic and diluted (note 5)	20.54p	(57.00)p	(36.46)p	19.32p	15.23p	34.55p
	=====	=====	=====	=====	=====	=====

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 2015

Audited Statement of Changes in Equity

For the year ended 31 August

Year ended 31 August 2015	Stated share capital £'000	Distributable reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 31 August 2014	89,143	180,471	67,422	17,985	355,021
Total comprehensive income:
(Loss) / profit for the year	-	-	(62,913)	22,667	(40,246)
Transactions with owners, recorded directly to equity:
Dividends paid (note 6)	-	-	-	(21,013)	(21,013)
Shares issued (note 8)	14,115	-	-	-	14,115
Share issue costs (note 8)	(56)	-	-	-	(56)
	----------	-----------	----------	----------	----------
Total equity at 31 August 2015	103,202	180,471	4,509	19,639	307,821
	======	======	======	======	======
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
	======	======	======	======	======

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

Audited Balance Sheet

at 31 August

			2015 £'000	2014 £'000
Non current assets
Investments held at fair value through profit or loss			324,474	367,396
			----------	----------
Current assets
Other receivables			7,584	8,278
Cash and cash equivalents			11,681	7,445
			----------	----------
			19,265	15,723
			----------	----------
Total assets			343,739	383,119
			----------	----------
Current liabilities
Written options			(1,007)	(136)
Other payables			(432)	(823)
Bank loans and overdrafts			(34,479)	(27,139)
			----------	----------
			(35,918)	(28,098)
			----------	----------
Net assets			307,821	355,021
			======	======
Equity attributable to equity shareholders
Stated share capital (note 8)			103,202	89,143
Distributable reserve			180,471	180,471
Retained earnings:
Other capital reserves			4,509	67,422
Revenue reserve			19,639	17,985
			----------	----------
Total equity			307,821	355,021
			======	======
Net asset value per ordinary share			273.99p	328.43p
			======	======

The financial statements were approved by the Board of Directors on 5 November 2015 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 2015

Audited Statement of Cash Flows

for the year ended 31 August

	2015 £'000	2014 £'000
Operating activities
(Loss) / profit before taxation	(37,932)	38,501
Add back interest payable	271	228
Losses / (gains) on investments held at fair value through profit or loss	60,887	(18,228)
Sales of investments	373,902	256,680
Purchases of investments	(390,007)	(259,147)
Decrease / (increase) in prepayments and accrued income	474	(723)
Decrease in amounts due from brokers	422	719
Decrease in amounts due to brokers	-	(3,078)
(Decrease) / increase in other payables	(577)	17
Stock dividends included in investment income	(284)	(199)
	----------	----------
Net cash inflow from operating activities before interest and taxation	7,156	14,770
Interest paid	(294)	(226)
Withholding tax on investment income	(2,307)	(1,929)
	----------	----------
Net cash inflow from operating activities	4,555	12,615
	----------	----------
Financing activities
Net loan drawdown / (repayments) Equity dividends paid (note 6)	4,899 (21,013)	(2,509) (18,959)
Share issue proceeds (note 8)	14,115	11,679
Share issue costs (note 8)	(56)	(47)
	----------	----------
Net cash outflow from financing	(2,055)	(9,836)
	----------	----------
Increase in cash and cash equivalents	2,500	2,779
Cash and cash equivalents at the start of the year	7,424	4,256
Exchange movements	1,757	389
	----------	----------
Cash and cash equivalents at the end of the year (including bank overdrafts of £nil (2014: £21,000))	11,681	7,424
	======	======

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

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 2015 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

		2015	2014
		£'000	£'000
	Overseas dividends	22,921	21,630
	Outperformance Participation Note income	1,246	1,192
	Stock dividends	284	199
		---------	---------
		24,451	23,021
		======	======
	Analysis of investment income by geographical segment:
	Australia	5,291	4,159
	China	6,117	4,814
	Hong Kong	1,594	2,894
	India	618	915
	Indonesia	305	237
	Japan	254	124
	Malaysia New Zealand	491 568	421 681
	The Philippines	(5)	417
	Singapore	1,499	1,651
	South Korea	1,349	1,340
	Taiwan	5,702	4,146
	Thailand	668	1,222
		---------	---------
		24,451	23,021
		======	======

All of the above income is derived from equity investments. Income from the Philippines is negative in the current year due to an over accrual in the prior year.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

4.     Other income

			2015		2014
			£'000		£'000
	Bank and other interest		3		2
	Option premium income		2,551		1,472
			-------		-------
			2,554		1,474
			====		====

5.     Earnings per ordinary share

The earnings per ordinary share figure is based on the net losses for the year of £40,246,000 (2014: gain of £36,550,000) and on the weighted average number of ordinary shares in issue during the year of 110,366,043 (2014: 105,783,168).

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

		2015	2014
		£'000	£'000
	Net revenue profit	22,667	20,433
	Net capital (loss) / profit	(62,913)	16,117
		----------	---------
	Net total (loss) / profit	(40,246)	36,550
		======	======
	Weighted average number of ordinary shares in issue during the year	110,366,043	105,783,168
		2015 Pence	2014 Pence
	Revenue earnings per ordinary share	20.54	19.32
	Capital (loss) / earnings per ordinary share	(57.00)	15.23
		---------	---------
	Total (loss) / earnings per ordinary share	(36.46)	34.55
		======	======

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

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

6.     Dividends

				2015		2014
		Record date	Pay date	£'000		£'000
	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
	Fourth interim dividend 4.70p for the year ended 2014	7 November 2014	28 November 2014	5,112		-
	First interim dividend 4.70p for the year ended 2015	13 February 2015	27 February 2015	5,189		-
	Second interim dividend 4.70p for the year ended 2015	8 May 2015	29 May 2015	5,207		-
	Third interim dividend 4.90p for the year ended 2015	7 August 2015	28 August 2015	5,505		-
				-------		-------
				21,013		18,959
				======		======
The fourth interim dividend for the year ended 31 August 2015 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 £22,667,000 (2014: £20,433,000).
				2015	2014
				£'000	£'000
	First interim dividend for 2015 - 4.70p (2014 : 4.40p)			5,189	4,601
	Second interim dividend for 2015 - 4.70p (2014 : 4.40p)			5,207	4,690
	Third interim dividend for 2015 - 4.90p (2014 : 4.70p)			5,505	5,067
	Fourth interim dividend for 2015 - 4.90p (2014 : 4.70p) (payable 30 November 2015 based on 113,060,564 shares in issue at 2 November 2015)			5,540	5,112
				--------	--------
				21,441	19,470
				=====	=====

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 2015 pence	Net asset value attributable 2015 £'000	Net asset value per share 2014 pence	Net asset value attributable 2014 £'000
	Ordinary shares	273.99	307,821	328.43	355,021
		======	======	======	======
The basic net asset value per ordinary share is based on 112,345,564 (2014: 108,095,564) ordinary shares, being the number of ordinary shares in issue.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2015

8.	Stated share capital
		Authorised	Issued and fully paid	2015 £'000	Issued and fully paid	2014 £'000
	Opening balance at 1 September Ordinary shares of no par value	Unlimited	108,095,564	89,143	104,345,564	77,511
	Issued during the year		4,250,000	14,115	3,750,000	11,679
	Share issue costs		-	(56)	-	(47)
			-----------	---------	-----------	---------
	Closing balance at 31		112,345,564	103,202	108,095,564	89,143
	August
			======	======	======	======
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 4,250,000 (2014: 3,750,000) shares for the proceeds of £14,059,000 (2014: £11,632,000) 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.	2015 Financial information
The figures and financial information for the year ended 31 August 2015 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.	2014 Financial information
The figures and financial information for the year ended 31 August 2014 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 2015

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 2015 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 Report. The Annual General Meeting will be held at the registered office on Wednesday 16 December 2015. 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 -

 

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