Henderson Far East Income Delivers Strong Returns, Enters FTSE 250 After Share Issuance

Income momentum looks robust. Total income jumped 63.4% year-on-year, with investment income up 90.8% and option-writing income up 19.0%. A chunky dividend from Brilliance China Automotive helped, and higher market volatility boosted option premia. Revenue profit for the half was £16.5m. The revenue reserve now sits at £23.1m, down from £29.8m at the last year-end after dividend payments of £24.0m during the period.

Opinion: the income engine is running hot, but some drivers – special dividends and elevated option premia – can be lumpy. It’s a positive first half, with a note of caution on repeatability.

Share issuance, premium rating and FTSE 250 entry

Investor demand has been strong. Around 16 million new shares were issued in the half, raising £39.1m, and a further 4.8 million have been issued since, raising another £12.0m. The trust’s premium of 3.3% persisted into the period end, and the enlarged size has propelled it into the FTSE 250.

The board is convening an extraordinary general meeting on 14 May 2026 at 10.00 am to seek additional authority to continue issuing shares at a premium. For existing holders, disciplined issuance at a premium is accretive to NAV and diversifies the shareholder base. The key is keeping that discipline.

Portfolio positioning: Korea up, China down, income still front and centre

The portfolio is clearly tilted toward Korea and financials, while China exposure has been pared back.

• Geography: South Korea 24.2% (from 12.6%), China 17.1% (from 29.9%), Taiwan 12.3% (from 17.9%), Singapore 11.4% (from 7.2%), Thailand 8.1% (from 1.1%).
• Sectors: Financials 35.1%, Technology 25.4%, Consumer Discretionary 14.4%, Telecommunications 6.3%, Real Estate 6.1%.

Top positions include TSMC (5.00%), Samsung Electronics (4.09%), SK Hynix (3.98%), Advanced Information Services (3.80%) and Kia Corp (3.64%). Activity-wise, the team added Samsung Electronics preference shares, Contemporary Amperex Technology (CATL), Advanced Information Services and PTT Exploration & Production, and opened a new position in Keppel. They reduced India, selling GAIL and Power Grid, and took profits or exited several Chinese and Australian names including Trip.com, Tencent, China Hongqiao, Goodman Group and Wesfarmers.

The trust continues to enhance income via option writing. Option liabilities were £14.0m at period end, up from £6.7m at the last year-end, reflecting higher premia and active use of the strategy. Options can cap some upside but generate cash flow – consistent with the trust’s income mandate.

Balance sheet, fees and gearing

Net assets rose to £518.9m from £407.7m at 31 August 2025, driven by market gains and issuance. Bank loans stood at £49.9m; after cash, net debt was £24.8m. The management fee remains a flat 0.75% of net assets per annum, charged quarterly.

Opinion: gearing is moderate and gives flexibility, but in volatile markets it cuts both ways. With a premium rating and cash generation from options, the trust has room to manoeuvre, provided risk controls stay tight.

Macro backdrop: AI tailwinds and energy headwinds

Asian equities hit all-time highs during the period, significantly outperforming the S&P 500, underpinned by technology strength and renewed optimism around AI supply chains. The chairman flags two wildcards: the Middle East conflict’s impact on energy prices and a 2026 US Supreme Court ruling striking down major tariffs, which injects uncertainty into global trade arrangements.

The International Monetary Fund expects Asia to contribute roughly 60% of global growth in 2026. Corporate reform in South Korea and Japan is a further tailwind. Set against that are energy-driven inflation, potential for tighter rates, and bouts of volatility – especially in software and AI-adjacent names where business models are being reassessed.

What this means for investors

• Big absolute gains, slight underperformance: 23.3% NAV total return is excellent in pounds-and-pence terms, but below the tech-heavy reference index and AIC sector over six months. The trust’s income bias explains part of that gap.
• Income delivery remains front-foot: two 6.25p interims declared and a 9.3% trailing yield. Income growth was bolstered by special dividends and options – helpful, if not guaranteed every half.
• Scaling up at a premium is a win: issuance added £51.1m across and after the period and helped secure FTSE 250 status. Issuing at a premium is NAV-accretive and broadens liquidity.
• Portfolio reset towards Korea and financials: exposure has rotated from China and India into Korea, Singapore and Thailand, aligning with the trust’s hunt for cash-generative names and reform-led upside.
• Watch the risks: higher energy prices, policy shifts on tariffs, and the trust’s option-writing (which can cap upside) are the main watchpoints. Longer-term performance versus comparators remains an area to improve.

Bottom line

This is a strong half for Henderson Far East Income: double-digit returns, hefty income, and meaningful scale-up without diluting value. The managers have leaned into Korea’s reform story and bankable cash flows while keeping the income flywheel spinning through dividends and option premia.

The trade-off is clear – slightly lower beta to a roaring tech index, in exchange for a high, regularly paid income stream. If you want Asia-Pacific exposure with yield and a steadier hand than go-go growth, this update reads positively. Just keep an eye on energy inflation, option exposure, and whether the team can close the gap to a tech-fuelled index as the year unfolds.