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HendersonFarE IncLtd (HFEL)

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Wednesday 12 November, 2014

HendersonFarE IncLtd

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

 

 



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: 020 7818 5053



James de Sausmarez

Director and Head of Investment Trusts, Henderson Global Investors

Telephone: 020 7818 3349



Sarah Gibbons-Cook

Investor Relations and PR Manager, Henderson Global Investors

Telephone: 020 7818 3198



Jeremy Hamon

BNP Paribas Securities Services. S.C.A., Jersey Branch, Company Secretary & RNS Agent

Telephone: 01534 709108





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 -


This information is provided by RNS
The company news service from the London Stock Exchange
 
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