Final Results

RNS Number : 8973O

Henderson Far East Income Limited

10 November 2016

 

10 November 2016

This announcement contains regulated information.

HENDERSON FAR EAST INCOME LIMITED

Annual Financial Report for the year ended 31 August 2016

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

• Increased proposed annual dividend: Fourth interim final dividend 5.10p, (2015: 4.90p) producing a total dividend for the year of 20.00p (2015: 19.20p). The dividend has increased progressively every year since incorporation.

•The share price to NAV (including current year income) moved to a premium of 1.6% (2015: 0.4%).

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		32.1	30.0	56.9
AIC Asia Pacific (excluding Japan) Sector (Peer Group) Average 2		33.1	35.0	59.5
FTSE  All-World Asia Pacific ex Japan Index (sterling adjusted)		34.3	34.3	48.9
FTSE All-World Asia Pacific including Japan Index (sterling adjusted)		28.4	37.4	59.4

1 Source: Morningstar for the AIC including income fair value NAV

2 Size weighted average (shareholders' funds)

Chairman's Statement

Introduction

I am pleased to report a strong positive total return for the year under review as well as a robust revenue account which was assisted by the devaluation of sterling following the result of the EU referendum on 23 June 2016. Your Board was able to raise the annual dividend by 4.2% which maintains the significant yield advantage that your Company achieves over other Asian income investment companies. That said, global macro uncertainties continue to unsettle global stock markets which means that the volatility which has been a feature of the last two years looks set to continue.

Performance

In the year under review, the net asset value total return was 32.1% whilst the share price total return was 33.4% reflecting the small uplift in your Company's discount/premium rating. The FTSE All-World Asia Pacific ex Japan Index (sterling adjusted) returned 34.3%.

Dividends

A fourth interim dividend of 5.10p has been declared making a total of 20.00p for the year. This total was fully covered by revenue for the year which also allowed for a modest addition to our revenue reserve, which will underpin dividends in future years. Your Board is confident that it will be able to at least maintain the level of total dividend in the current year.

Capital

During the year there was consistent demand for the Company's shares. In view of this and the opportunities to expand the portfolio, the Company issued further shares at a premium to asset value thereby enhancing the net asset value per share for existing shareholders.

In total, 2,190,000 shares were issued in the year for total proceeds (net of commission) of £6,269,000 and a further 350,000 shares have been issued since 31 August 2016 for total proceeds (net of commissions) of £1,192,000.

Gearing

The Company has continued to utilise its borrowing facility throughout the year to capitalise on specific stock opportunities. During the year, the £45 million facility with National Australia Bank was replaced by a two year £35 million facility with Commonwealth Bank of Australia. At 31 August 2016 the amount drawn down stood at £25.3 million and net gearing was 4.6%. The maximum amount drawn down under the facility during the year was £35.5 million (including exchange rate movements since draw down).

Board composition

As reported in the half year statement, Richard Povey and Simon Meredith Hardy retired as directors on 16 December 2015 and 28 January 2016 respectively and Nicholas George was appointed as a director on 20 April 2016. Richard and Simon made a significant contribution over their years as directors and we wish them well for the future. Nicholas has extensive business connections in Asia and is already adding significantly to your Board's deliberations.

Outlook

Trying to predict the future is a most hazardous task. Who in 2015 would have predicted the events of 2016?

It is, however, possible to identify regional trends across the globe and examine what this might mean for investors. There is a striking difference between developments in America and Europe. Voters there are increasingly embracing populist leaders who by and large promote policies that are inward looking and isolationist. Britain has rejected the European model of economic cooperation. Both Presidential candidates reject the Trans Pacific Partnership proposed by President Obama linking east Asia (excluding China) with the US, South America, Canada and Australasia in a wide ranging trade agreement. Anti globalisation is a strong movement encouraging the "we are better off on our own sentiment." This trend, however, is confined to Europe and North America.

In Asia the trend is reversed. Since the end of the Second World War Asia has been on a roller coaster ride while countries competed with each other often to mutual disadvantage. In the last decade or so, things have changed and the 650 million people living there have experienced a dramatic turnaround in their standard of living and opportunities. Recently the Association of South East Asian Nations (10 Member States) ratified the ASEAN Economic Community with free labour mobility and free trade. The Nations of South East Asia have decided they will enjoy much better economic outcomes by growing together than apart.

China is a key player here invigorating economic development across Asia including India, Pakistan and across Eurasia all the way to Iran. By helping to bind these countries together China hopes to create strong economies with which it can trade. The Asia Infrastructure Investment Bank ("AIIB") has been established by China to promote this objective and more than 70 countries, including United Kingdom and Australia, have agreed to join. It has access to an enormous pool of funds. The World Bank too has agreed to co-invest.

This is in stark contrast to events and moods in America and Europe. Of course China will experience difficulties and disappointments and will make mistakes but it has the funds, the motivation to succeed and offer hope of a better life to an enormous number of people across the region.

The Board attended a 3 day conference on China in Chengdu in May followed by 2 days in Beijing. The conference was attended by a large number of Chinese companies and commentators from China and elsewhere. In Beijing we met a number of people with experience of China's economic, social and political policy development. While, as expected, there was a range of opinions, overall our views and expectations on China were confirmed.

While the world remains volatile and uncertain portfolio diversification is an important part of any investment strategy for savers taking a longer term view. Asia remains a very strong candidate for consideration.

Annual General Meeting

The Company's AGM will be held at 12.00 noon on 13 December 2016 at Liberté House, 19-23 La Motte Street, Jersey, JE2 4SY and full details of the proposed resolutions are set out in the separate Notice of Meeting which has been issued with this report. As usual an open presentation to shareholders will be held at Henderson's offices in London on 15 December 2016 at 11.00am when Michael Kerley will make an investment presentation and he and I will be happy to answer questions. If you would like to attend please complete and return the invitation card enclosed with this report.

John Russell

Chairman

10 November 2016

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, with the assistance of Henderson, has carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. In carrying out this assessment, the Board considered the market uncertainty arising from the result of the UK referendum on leaving the European Union.

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), sub-contracts some of the operational functions (principally relating to trade processing, investment administration and accounting) to BNP Paribas Securities Services.

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.

Viability statement

The Company is a medium to longer term investor and, as such, the Directors believe it is appropriate to assess the Company's viability over a five year period in recognition of the Company's investment horizon and what the Directors believe to be investors' horizons.

The assessment has considered the impact of the likelihood of the principal risks and uncertainties facing the Company, in particular investment strategy and performance absolutely and against certain indices and other funds with a similar mandate, whether from asset allocation, the level of gearing, and market risk in severe but plausible scenarios, and the effectiveness of any mitigating controls in place.

The Directors took into account the liquidity of the portfolio. Nearly all of the Company's investments are in listed companies which are frequently traded on recognised markets. The portfolio is spread over approximately 50 companies in a wide spread of sectors and geographical areas and hence there is little concentration. The Directors also considered the borrowing facility the Company has in terms of its duration, the headroom available under any covenants and how a breach of any of those covenants could impact on the Company's net asset value and share price.

Based on their assessment and the fact that the Company's financial commitments are small in relation to the current value of the portfolio, which is highly liquid, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five years.

The Directors' view is that only a cataclysmic financial crisis affecting the global economy could have an impact on this assessment. Whilst there is currently uncertainty in the markets following the UK referendum result to leave the European Union, the Directors do not believe that this will have a long term impact on the viability of the Company and its ability to continue in operation.

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.

For and on behalf of the Board.

John Russell

Chairman

10 November 2016

Fund Manager's Report

Market

Despite a period of heightened volatility, I am pleased to report that the net asset value ("NAV") total return of your Company was 32.1% over the twelve months to 31 August 2016 bolstered by improved performance from the Asia Pacific stock markets and the weakness of sterling. In local currency terms, the markets returned 11.3% highlighting the significance of the weakness of sterling pre and post the UK's vote to leave the European Union.

The first half of the Company's financial year started where the previous year left off. The announcement by the Peoples Bank of China in August 2015 to fix the renminbi to a basket of currencies rather than just the US dollar was communicated poorly, prompting speculation of a competitive devaluation. With the US Federal Reserve deliberating its first interest rate rise in 8 years and oil and commodity prices tumbling, it was an uncertain period for investors everywhere. The heightened risk aversion prompted a sell down in risk assets globally. Equity markets in the US, Europe and the UK came under pressure as did high yield corporate and sovereign credit markets. Emerging markets experienced significant outflows through this period as investors withdrew funds in expectation of heightened volatility and possible default especially in some of the more highly levered and commodity dependent economies of Latin America and Emerging Europe.

Although markets stabilised in the fourth quarter, the start of 2016 was met with a further wave of uncertainty. The 25 basis point rise in US interest rates in December, geopolitical risks in the Middle East, solvency worries over European banks and the potential for default in the US high yield market conspired to send markets into a tailspin. Further expansion of quantitative easing from the European Central Bank helped to stabilise markets towards the end of January although the volatility in global currencies remained elevated.

The second half of the financial year was no less eventful. The Bank of Japan's latest attempt to revive its flagging economy followed the European Union down the path of negative interest rates. The result was not as intended as the yen strengthened to below 100 to the US dollar, unwinding the positive earnings momentum derived from the previously weak currency and undermining the already flaccid economic recovery. In addition, there was further contraction in sovereign bond and credit yields. The uncertainty of the first quarter of 2016 was quickly forgotten as bond prices made new highs and yields record lows with even US high yield, which had been the epicentre of uncertainty earlier in the year, rallying strongly. The contraction of sovereign yields was most notable with large swathes of the developed world experiencing negative yields even out as far as 10 years. Only in recent months have yield curves started to steepen as growth expectations are modestly upgraded and the expectation of a further rate rise in the US draws closer.

In Asia the trajectory of economic growth continued to slow. Unlike their western peers Asian policymakers do have some flexibility as witnessed by the interest rate cuts in India, China, South Korea, Thailand and Indonesia over the period. With inflation benign, further cuts in interest rates are expected over the coming months. Reform

also remains high on the agenda with significant changes taking place in India, China, South Korea and Indonesia although at times the pace is not as fast as many commentators would like. Corporate earnings for most of the reporting period have been subject to downgrades, concentrated mainly in energy, materials and semiconductors. More recently, we have seen some stabilisation as energy and commodity prices have staged a recovery, albeit from a low base. The more domestically orientated sectors have proved more resilient and there are signs that the earnings downgrade cycle which has been one of the main causes of Asian underperformance versus the developed world could be turning. The outlook for dividends is more robust. Capital expenditure remains benign, debt levels are extremely low and cash flow is booming allowing the potential for dividends to rise from levels well below developed market peers given the higher levels of cover. We continue to expect dividend growth to exceed earnings growth in Asia Pacific over the next 5 years.

The best performing markets were New Zealand, Indonesia and South Korea. The first two were aided by improved economic conditions and strong currencies while the latter was the biggest beneficiary of the strong Japanese yen. South Korea has also been leading the region in earnings upgrades, partially helped by improved sentiment towards index heavyweight Samsung Electronics, while dividend growth has surpassed most expectations as the government has become more forceful in demanding higher pay outs from the corporate sector. The laggards were Singapore, India and China. Despite being a net importer of energy and commodities the Singapore economy is highly exposed to oil services and shipbuilding which are highly correlated to energy and bulk commodity prices and world trade. India continues to see positive portfolio flows but has underperformed more recently following some disappointingly high inflation numbers and the surprising move to change the Central Bank Governor who was well respected by the market. The outlook for China continues to divide opinion. The economy appears to have stabilised with Purchasing Managers' Index ('PMIs') of both manufacturing and services above 50 (suggesting expansion) but sceptics still hold the upper hand with concerns over sustainability, the pace of reform and the high levels of debt at the forefront of most investors' minds.

At the sector level the recent rally in oil and commodities saved the energy and materials sectors with the latter actually posting above market returns for the year to 31 August 2016. The best performing sector was technology helped by the performance of Samsung Electronics, Taiwan Semiconductor and Tencent. Consumer goods were also well supported with the auto companies a standout while the laggards were telecommunications and financials.

Performance

The NAV return of 32.1% was behind the FTSE All-World Asia Pacific ex Japan Index return of 34.3% in sterling terms. The outperformance at the interim stage was negated by the underperformance of high yielding equities in the second half of the year as momentum shifted towards growth and cyclicality. The strong performance of the technology sector and in particular stocks which do not fit the Company's mandate together with the disappointing returns from the telecom sector were also not beneficial. On a more positive note there was some very strong performance at the stock level with Netease rising 127%, Telkom Indonesia rising 80% and Kepco, Scentre Group, Spark Infrastructure, Spark NZ and Mapletree Greater China Trust all seeing gains of over 50% in sterling terms.

The weakness of sterling was not only positive for capital returns but it also provided a significant boost to revenue. Total revenue rose by 5.4% with dividend income rising 6.3% and the contribution from option premium falling by 3%. The 4% rise in the dividend announced at the third interim stage to 5.1p is reflective of the strong underlying revenue growth but also of the fact that the boost from weak sterling is something that should not be relied on going forward.

Despite lower turnover some important changes were made to the portfolio over the year. In China, we reduced our exposure to the financial sector selling property and insurance and reducing our position in banks. These were replaced with strong cash flow generative domestic businesses such as toll road operator Jiangsu Expressway, water management company Guangdong Investment, hydro power producer China Yangtze Power, sportswear retailer Anta Sports and auto parts manufacturer Huayu Automotive. In Korea, we added positions in KB Financial and South Korea Electric Power on the expectation of higher dividends and took a more positive view on the oil refining sector by adding SK Innovation from South Korea and Star Petroleum from Thailand to the portfolio. Other notable acquisitions were Fairfax Media in Australia, which we believe has plenty of upside from its online real estate business, and Hon Hai Precision in Taiwan, which is benefitting from an uptrend in electronic component demand. Positions in Mizuho Financial, Catcher Technology, CK Hutchison and Huaneng Power were used to fund these purchases.

Outlook

We remain cautiously optimistic on the outlook for Asia Pacific markets although we expect continued volatility as world events around political elections and central bank policy continue to dominate. Valuations, despite the recent rise, are still attractive, especially compared to western alternatives, while economic growth appears to be stabilising. The outlook for dividends is the region's most compelling feature. The strong cash flow generation and low dividend pay-out ratio provide real optimism for strong dividend growth while the cushion this provides gives comfort that dividends are sustainable should unforeseen global events call into question levels of dividend pay-out. This is especially relevant for some developed markets such as the UK where dividend levels are already elevated.

Michael Kerley

Fund Manager

10 November 2016

Portfolio information

Twenty Largest Holdings

These twenty investments total £193,705,000 (twenty largest holdings in 2015: £156,282,000) representing 47.88% (2015: 48.31%) by value of the total investments.

Rank 2016	Rank 2015	Company	Country of incorporation	Sector	Valuation 2016 £'000	% of portfolio
1	48	Netease2	China	Technology	13,422	3.32
2	23	Taiwan Semiconductor Manufacturing2	Taiwan	Technology	12,712	3.14
3	5	Macquarie Korea Infrastructure Fund	South Korea	Financials	11,721	2.90
4	31	Telekomunikasi Indonesia	Indonesia	Telecommunications	10,577	2.61
5	6	Spark New Zealand	New Zealand	Telecommunications	10,399	2.57
6	30	Mapletree Greater China Commercial Trust	Hong Kong	Property	10,382	2.57
7	12	CapitaLand Mall Trust REIT	Singapore	Property	10,337	2.56
8	-	KB Financial Group	South Korea	Financials	9,844	2.43
9	1	HKT Trust & HKT	Hong Kong	Telecommunications	9,536	2.36
10	-	Ascendas REIT	Singapore	Property	9,303	2.30
		Top Ten Investments			108,233	26.76
11	-	Telstra Corporation	Australia	Telecommunications	9,122	2.25
12	7	Coal India1	India	Basic Materials	8,955	2.21
13	-	Fairfax Media	Australia	Consumer Services	8,889	2.20
14	34	Zhengzhou Yutong Bus 'A Share'1	China	Industrials	8,747	2.16
15	-	Hon Hai Precision Industry	Taiwan	Technology	8,576	2.12
16	14	Amcor	Australia	Industrials	8,523	2.11
17	-	Jiangsu Expressway	China	Industrials	8,210	2.03
18	-	AMP	Australia	Financials	8,204	2.03
19	-	China Yangtze Power 'A Share'1	China	Utilities	8,135	2.01
20	17	AGL Energy	Australia	Utilities	8,111	2.00
		Top Twenty Investments			193,705	47.88

(1) Participation Notes

(2) American Depositary Receipts 

Sector exposure

As a percentage of the investment portfolio excluding cash

	31 August 2016	31 August 2015
Oil and Gas	1.9	0.0
Basic Materials	4.1	6.1
Industrials	11.3	13.3
Consumer Goods	4.5	3.8
Consumer Services	5.6	3.5
Telecommunications	20.2	20.9
Property	11.0	14.0
Financials	14.2	19.5
Technology	15.8	9.5
Utilities	11.4	9.4

Geographic focus

As a percentage of the investment portfolio excluding cash

	31 August 2016	31 August 2015
Australia	21.3	21.9
China	17.6	20.9
Hong Kong	8.3	10.9
India	5.6	6.7
Indonesia	2.6	1.9
South Korea	14.0	9.7
Malaysia	0.0	1.2
New Zealand	2.6	2.6
Japan	0.0	2.5
Singapore	8.4	4.3
Taiwan	13.8	13.1
Thailand	5.8	4.3

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, Report of the Directors, Corporate Governance Statement, Remuneration 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.

For and on behalf of the Board

Julia Chapman

Director

10 November 2016

Audited Statement of Comprehensive Income

	Year ended 31 August 2016			Year ended 31 August 2015
	Revenue return	Capital return	Total	Revenue return	Capital return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income (note 3)	25,974	-	25,974	24,451	-	24,451
Other income (note 4)	2,489	-	2,489	2,554	-	2,554
Gains/(losses) on investments held at fair value through profit or loss	-	75,636	75,636	-	(60,182)	(60,182)
Net foreign exchange loss excluding foreign exchange gains/(losses) on investments	-	(2,275)	(2,275)	-	(705)	(705)
	---------	---------	---------	---------	---------	---------
Total income / (loss)	28,463	73,361	101,824	27,005	(60,887)	(33,882)
	---------	---------	---------	---------	---------	---------
Expenses
Management fees	(1,565)	(1,565)	(3,130)	(1,472)	(1,472)	(2,944)
Other expenses	(403)	(403)	(806)	(417)	(418)	(835)
	---------	---------	---------	---------	---------	---------
Profit / (loss) before finance costs and taxation	26,495	71,393	97,888	25,116	(62,777)	(37,661)
Finance costs	(142)	(143)	(285)	(135)	(136)	(271)
	---------	---------	---------	---------	---------	---------
Profit / (loss) before taxation	26,353	71,250	97,603	24,981	(62,913)	37,932
Taxation	(2,228)	-	(2,228)	(2,314)	-	(2,314)
	---------	---------	---------	---------	---------	---------
Profit / (loss) for the year and total comprehensive income	24,125	71,250	95,375	22,667	(62,913)	(40,246)
	=====	=====	=====	=====	=====	=====
Earnings per ordinary share  - basic and diluted (note 5)	21.13p	62.41p	83.54p	20.54p	(57.00p)	(36.46p)
	=====	=====	=====	=====	=====	=====

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.

Audited Statement of Changes in Equity

Year ended 31 August 2016	Stated share capital £'000	Distributable reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 31 August 2015	103,202	180,471	4,509	19,639	307,821
Total comprehensive income:
Profit for the year	-	-	71,250	24,125	95,375
Transactions with owners, recorded directly to equity:
Dividends paid (note 6)	-	-	-	(22,606)	(22,606)
Shares issued (note 8)	6,294	-	-	-	6,294
Share issue costs (note 8)	(25)	-	-	-	(25)
	----------	-----------	----------	----------	----------
Total equity at 31 August 2016	109,471	180,471	75,759	21,158	386,859
	======	======	======	======	======
Year ended 31 August 2015	Stated share capital £'000	Distributable reserve £'000	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
	======	======	======	======	======

Audited Balance Sheet

			31 August 2016 £'000	31 August 2015 £'000
Non current assets
Investments held at fair value through profit or loss			405,131	324,474
			----------	----------
Current assets
Other receivables			3,321	7,584
Cash and cash equivalents			5,944	11,681
			----------	----------
			9,265	19,265
			----------	----------
Total assets			414,396	343,739
			----------	----------
Current liabilities
Written options			(635)	(1,007)
Other payables			(1,581)	(432)
Bank loans			(25,321)	(34,479)
			----------	----------
			(27,537)	(35,918)
			----------	----------
Net assets			386,859	307,821
			======	======
Equity attributable to equity shareholders
Stated share capital (note 8)			109,471	103,202
Distributable reserve			180,471	180,471
Retained earnings:
Capital reserves			75,759	4,509
Revenue reserve			21,158	19,639
			----------	----------
Total equity			386,859	307,821
			======	======
Net asset value per ordinary share (note 7)			337.76p	273.99p
			======	======

The financial statements were approved by the Board of Directors on 10 November 2016 and were signed on its behalf by:

Julia Chapman                                                                                    

Director                                                                                               

Audited Statement of Cash Flows

	31 August 2016 £'000	31 August 2015 £'000
Operating activities
Profit/(loss) before taxation	97,603	(37,932)
Add back interest payable	285	271
(Gains)/losses on investments held at fair value through profit or loss	(75,636)	60,182
Net foreign exchange loss excluding foreign exchange gains on investments	2,275	705
Sales of investments	310,929	373,902
Purchases of investments	(316,188)	(390,007)
Decrease in prepayments and accrued income	170	474
Decrease in amounts due from brokers	4,093	422
Increase/(decrease) in other payables	1,153	(577)
Stock dividends included in investment income	(134)	(284)
	----------	----------
Net cash inflow from operating activities before interest and taxation	24,550	7,156
Interest paid	(289)	(294)
Withholding tax on investment income	(2,228)	(2,307)
	----------	----------
Net cash inflow from operating activities before interest and taxation	22,033	4,555
	----------	----------
Financing activities
Net loan (repayment)/drawdown Equity dividends paid (note 6)	(12,231) (22,606)	4,899 (21,013)
Share issue proceeds (note 8)	6,294	14,115
Share issue costs (note 8)	(25)	(56)
	----------	----------
Net cash outflow from financing	(28,568)	(2,055)
	----------	----------
(Decrease)/increase in cash and cash equivalents	(6,535)	2,500
Cash and cash equivalents at the start of the year	11,681	7,424
Exchange movements	798	1,757
	----------	----------
Cash and cash equivalents at the end of the year	5,944	11,681
	======	======

Notes to the Financial Statements:

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

The Company's financial statements for the year ended 31 August 2016 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 by the European Union.

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 as held at fair value through profit and loss.

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

3.     Investment income

		2016	2015
		£'000	£'000
	Overseas dividends	23,485	22,921
	Outperformance Participation Note income	2,355	1,246
	Stock dividends	134	284
		---------	---------
		25,974	24,451
		======	======
	Analysis of investment income by geography:
	Australia	5,615	5,291
	China	5,779	6,117
	Hong Kong	2,173	1,594
	India	1,265	618
	Indonesia	254	305
	Japan	262	254
	Malaysia New Zealand	394 660	491 568
	The Philippines	-	(5)
	Singapore	1,628	1,499
	South Korea	2,173	1,349
	Taiwan	4,255	5,702
	Thailand	1,516	668
		---------	---------
		25,974	24,451
		======	======

All of the above income is derived from equity investments. Income from the Philippines is negative in the prior year due to an over accrual in 2014.

4.      Other income

		2016	2015
		£'000	£'000
	Bank and other interest	14	3
	Option premium income	2,475	2,551
		-------	-------
		2,489	2,554
		====	====

5.      Earnings per ordinary share

The earnings per ordinary share figure is based on the profit for the year and total comprehensive income of £95,375,000 (2015: losses of £40,246,000) and on the weighted average number of ordinary shares in issue during the year of 114,161,274 (2015: 110,366,043).

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

		2016	2015
		£'000	£'000
	Net revenue profit	24,125	22,667
	Net capital profit / (loss)	71,250	(62,913)
		----------	----------
	Net total profit / (loss)	95,375	(40,246)
		======	======
	Weighted average number of ordinary shares in issue during the year	114,161,274	110,366,043
		2016 Pence	2015 Pence
	Revenue earnings per ordinary share	21.13p	20.54p
	Capital earnings / (loss) per ordinary share	62.41p	(57.00p)
		---------	---------
	Total earnings / (loss) per ordinary share	83.54p	(36.46)
		======	======

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

6.      Dividends

				2016	2015
		Record date	Pay date	£'000	£'000
	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
	Fourth interim dividend 4.90p for the year ended 2015	6 November 2015	30 November 2015	5,540	-
	First interim dividend 4.90p for the year ended 2016	5 February 2016	29 February 2016	5,612	-
	Second interim dividend 4.90p for the year ended 2016	6 May 2016	31 May 2016	5,612	-
	Third interim dividend 5.10p for the year ended 2016	5 August 2016	31 August 2016	5,842	-
				-------	-------
				22,606	21,013
				======	======
The fourth interim dividend for the year ended 31 August 2016 has not been included as a liability in these financial statements as it was announced and is payable 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 £24,125,000 (2015: 22,667,000). All dividends have been paid or will be paid out of revenue profits.

		2016	2015
		£'000	£'000
	First interim dividend for 2016 - 4.90p (2015: 4.70p)	5,612	5,189
	Second interim dividend for 2016 - 4.90p (2015: 4.70p)	5,612	5,207
	Third interim dividend for 2016 - 5.10p (2015: 4.90p)	5,842	5,505
	Fourth interim dividend for 2016 - 5.10p (2015: 4.90p) (payable 30 November 2016 based on 114,885,564 shares in issue at 4 November 2016)	5,859	5,540
		--------	--------
		22,925	21,441
		=====	=====

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:

		2016		2015
		Net asset value per share pence	Net asset value attributable £'000	Net asset value per share pence	Net asset value attributable £'000
	Ordinary shares	337.76p	386,859	273.99	307,821
		======	======	======	======
The basic net asset value per ordinary share is based on 114,535,564 (2015: 112,345,564) ordinary shares, being the number of ordinary shares in issue.

	8.      Stated share capital
		Authorised	Issued and fully paid	2016 £'000	Issued and fully paid	2015 £'000
	Opening balance at 1 September Ordinary shares of no par value	Unlimited	112,345,564	103,202	108,095,564	89,143
	Issued during the year		2,190,000	6,294	4,250,000	14,115
	Share issue costs		-	(25)	-	(56)
			---------------	----------	---------------	----------
	Closing balance at 31 August		114,535,564	109,741	112,345,564	103,202
			=========	======	=========	======
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 2,190,000 (2015: 4,250,000) shares for the proceeds of £6,269,000 (2015: £14,059,000) net of share issue costs.
	9.     Going concern statement
The assets of the Company consist almost entirely of securities that are listed and regularly traded and, accordingly, the Directors believe that the Company has adequate financial resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Having assessed these factors, the principal risks and other matters discussed in connection with the Viability Statement, the Board has decided that it is appropriate for the financial statements to be prepared on a going concern basis.
	10.     2016 Financial information
The figures and financial information for the year ended 31 August 2016 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.     2015 Financial information
The figures and financial information for the year ended 31 August 2015 are compiled from an extract of the 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.

13.	Annual Report and Annual Strategic Report
The Annual Report and financial statements will be available for posting to those shareholders who have requested a copy in late November 2016 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 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 at 12.00 noon on Tuesday 13 December 2016. The Notice of the Annual General Meeting will be sent to shareholders with the Annual Report.
For further information please contact:
Mike Kerley Fund 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

 

 

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