| HENDERSON FAR EAST INCOME LIMITEDFinancial results for the year ended 31 August 2022 This announcement contains regulated information Investment ObjectiveThe Company seeks to provide shareholders with a growing total annual dividend per share, as well as capital appreciation, from a diversified portfolio of investments from the Asia Pacific region. Highlights· Total dividend of 23.80p (2021: 23.40p) for the year· Dividend yield at 31 August 2022 of 8.5% (2021: 7.8%) |
| Total return performance to 31 August 2022 (including dividends reinvested) | ||||
| 1 year% | 3 years% | 5 years% | 10 years% | |
| NAV1 | 1.9 | -1.6 | 6.3 | 80.8 |
| Share price2 | 1.0 | -2.8 | 4.0 | 81.9 |
| FTSE All-World Asia Pacific ex Japan Index3 | -3.4 | 22.3 | 27.3 | 132.5 |
| MSCI AC Asia Pacific ex Japan High Dividend Yield Index3 | 7.4 | 15.6 | 18.3 | 94.0 |
| Financial highlights | At 31 August 2022 | At 31 August 2021 | |
| Shareholders’ funds | |||
| Net assets (£’000) | 435,576 | 452,644 | |
| NAV per ordinary share | 281.11p | 299.58p | |
| Share price | 281.00p | 301.50p | |
| Year ended31 August 2022 | Year ended31 August 2021 | ||
| Profit/(loss) for year | |||
| Revenue return (£’000)Capital return (£’000) | 37,102 | 33,773 | |
| (29,145) | (4,096) | ||
| ———— | ———— | ||
| Net total profit | 7,957 | 29,677 | |
| ======= | ======= | ||
| Total earnings/(loss) per ordinary share | |||
| Revenue | 24.41p | 23.22p | |
| Capital | (19.18p) | (2.82p) | |
| Total earnings per ordinary share | 5.23p | 20.40p | |
| Ongoing charge 4 | 1.01% | 1.09% | |
1. Net asset value total return including dividends reinvested
2. Share price total return using mid-market closing price (including dividends reinvested)
3. Total return performance is sterling adjusted (including dividends reinvested)
4. Calculated using the methodology prescribed by the Association of Investment Companies
Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream
| CHAIRMAN’S STATEMENT IntroductionAs your new Chairman it would have been good to begin my first letter to shareholders in an environment filled with positives, optimism and a clear glidepath toward rosy investment results in the immediate future. Indeed, as we look back at the past year, there is much to be pleased with despite the challenging time through which we have come in so many areas. Having faced down the trauma of the pandemic with its massive impact on societies around the world, we now face new dramas. The war in Ukraine has not only represented a great humanitarian tragedy, it has driven massive economic dislocation and the very real prospect of a global recession while helping to fuel the inflation that was already out of control. None of this is likely to make for an upbeat investment environment but there are a few reasons for a more positive view, especially in Asia, that we will explore as well. PerformanceDespite the rather dire backdrop of the last financial year, the Company rose to the challenge in many ways, producing a positive NAV total return of 1.9% and year-end dividend yield of 8.5%. These results compare favourably with the FTSE All-World Asia Pacific ex Japan Index total return of negative 3.4%, but less well against the MSCI AC Asia Pacific ex Japan High Dividend Yield Index which returned 7.4%. Capital performance struggled once again this year with yield, as an investment style, remaining out of favour. Our Fund Managers will discuss our investment results in more detail in their report, but it is right for me to note that our commitment to providing a high and reliable dividend income to our shareholders while still generating capital growth along the way, is not an easy hurdle. Our underlying investment bias toward value rather than growth has had the effect of reducing capital returns over the last few years as growth company valuations expanded dramatically. More recently, perhaps driven by concerns of faltering growth rates, investor sentiment toward value has improved, benefitting our portfolio and resulting in a pickup in relative capital returns. We expect that to continue, at least in relative terms, as economic growth slows in the months ahead. During this period of rising of living costs, investors’ need for dividend income is higher than ever and the Company’s shares often sell at a premium to its NAV as a result. DividendsThe Company paid a total dividend of 23.80p per ordinary share in the year ended 31 August 2022 representing a 1.7% increase over the prior year and our 15th consecutive year of increasing dividends. The financial year just passed has been a challenging one, but our portfolio companies achieved a good rebound in dividend payments and our forecast for dividends in the current year is cautiously positive. After paying the dividend, we will once again be adding a moderate amount to the revenue reserve, which we use to smooth the dividend when market conditions are severe. The 4th interim dividend for the year ended 31 August 2022 was declared on 19 October 2022 at a rate of 6.00p per ordinary share. Governance mattersThe Board has long benefitted from a strong team of members as a result of good succession planning and a careful selection process. I want to take this opportunity to thank John Russell, our recently retired Chairman, for his untiring efforts to lead the Board with a high standard of governance and an unswerving commitment to the Company’s key investment objectives. John’s patient guidance will be missed and we wish him well. The Board has continued to review its longer term development needs in a changing world and recognises its desire and obligation to become more diverse in order to better represent shareholders and retain the right range of expertise within its ranks. Recent regulatory changes from the Financial Conduct Authority continue to raise the bar for board diversity, something that we believe is long overdue and which we fully support. Our ability to be compliant will, however, be constrained by the current Jersey requirement for two resident directors and we are actively engaging with the Jersey regulator to find a successful way forward. The Board remains committed to an ongoing refreshment process and will be looking to recruit a successor to David Mashiter who has served so well as a director since 2006. We will await the outcome of our discussions with the Jersey regulator before initiating this recruitment process soon thereafter. David has graciously agreed to remain on the Board until that appointment in order to assure a smooth handover process. ESGESG has been the subject of much discussion among investors over the past year, both positive and negative.Our view has always been that sound investing and responsible investing go hand in hand and recognise that ESG matters are an intrinsic part of the Janus Henderson investment process, helping to shape the approach we take to investment decisions but through a philosophy based on engagement with companies to achieve positive long term results. We do not believe that it makes sense to create ‘no-go’ areas for investment, with the exception of munitions, but instead work with companies to do better across a range of areas. Too often of late, we have found extreme ESG based positions become the subject of criticism for compromising shareholder returns. We believe sound investment decisions and a sensitivity to ESG issues are compatible with the right approach and that our investment team works hard and effectively to achieve this balanced outcome. AGMThe Company’s 16th Annual General Meeting is due to be held at 11.00 am on 27 January 2023 at the offices of our investment manager, 201 Bishopsgate, London, EC2M 3AE. The Notice of Meeting has been posted to shareholders with a copy of the annual report. Voting will take place on a show of hands so if you are unable to attend in person, I encourage you to submit your proxy form or instruct your share dealing platform accordingly. OutlookIt is never easy nor especially reliable to predict the future and the year ahead seems murkier than most. When will inflation start to decline? How resilient will economies be in the face of rising interest rates? How vulnerable will economic growth prove to be given so many cross-currents that could undermine demand and damage business confidence? None of these questions have easy answers but there are certainly some useful observations to be made regarding the environment we face, many of which are expanded upon in our Fund Managers’ report. First, inflation has been more difficult for central banks to bring down after years of monetary stimulation but there are now signs that it is receding, albeit slowly. Rising interest rates are starting to have the impact that central banks want and slower economic activity is reducing demand pressure and thus, the scope for price increases. Labour demand remains fairly strong, however, rising labour costs will continue to be a key inflation factor for some time to come. Energy prices display a degree of schizophrenia reflecting the impact of the war in Ukraine, OPEC1 production restraints and moderating oil demand in the face of slower global economic activity. The economies of Europe and North America may well fall into a mild recession (or even be in one now) but Asia is not in synch with all the same pressures as western economies and may benefit from some positives peculiar to the region. For example, China remains the region’s most important economy and unlike western governments is now aggressively stimulating its economy to achieve better economic growth. This will inevitably have a positive ‘spillover’ effect on other economies in the region and we will be monitoring the scope of that impact closely. Concerns about China’s real estate debt crisis fail to take account of the country’s unique financial management tools to cope with this type of problem and with share prices now at much more attractive valuation levels, there is again scope for investment upside. Markets in the Asia Pacific region will continue to be subject to uncertainty generated by geopolitical concerns, especially between China and Taiwan. The underlying solidity of economic growth in the region, however, remains good and we are positive about the prospects for continuing dividend increases from our portfolio of companies in the region. While we have had a difficult start to our new financial year there are opportunities for individual companies to grow. Asia company payout ratios remain low by western standards and continue to offer real expansion opportunities as we look ahead. Ronald GouldChairman3 November 2022 |