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Regional REIT — Asset growth and refinancing completed

Regional REIT (LSE: RGL)

Last close As at 05/08/2026

GBP0.98

▲ 2.00 (2.08%)

Market capitalisation

GBP159m

More on this equity

Research: Real Estate

Regional REIT — Asset growth and refinancing completed

RGL’s acquisition of two property portfolios, first announced in early December, for an aggregate consideration of £93.4m including costs, completed just before Christmas. This followed the closing of a capital issue that raised £73m (gross) in new equity at 101p per share. The group has also completed a major refinancing programme, simplifying the debt structure and extending maturity, at no additional cost. We reinstate our estimates, including the acquisitions, which add immediately to earnings, and the capital increase. We also take a slightly more cautious approach to 2018 and have trimmed our previously above consensus position.

Written by

Martyn King

Director, Financials. Property and Insurance

Real Estate

Regional REIT

Asset growth and refinancing completed

Completion of acquisitions

Real estate

16 January 2018

Price

101.2p

Market cap

£377m

Net debt (£m) at 30 September 2017

313.3

Shares in issue

372.8m

Free float

97%

Code

RGL

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.2)

(2.4)

(5.2)

Rel (local)

(5.8)

(5.3)

(11.7)

52-week high/low

107.2p

100.0p

Business description

Regional REIT (RGL) owns a commercial property portfolio of predominantly offices and light industrial units located in the regional centres of the UK. It is actively managed and targets a total shareholder return of 10-15% with a strong focus on income.

Next events

Q4 DPS/valuation announcement

22 February 2018

Full year results

22 March 2018

Analysts

Martyn King

+44 (0)20 3077 5745

Andrew Mitchell

+44 (0)20 3681 2500

Regional REIT is a research client of Edison Investment Research Limited

RGL’s acquisition of two property portfolios, first announced in early December, for an aggregate consideration of £93.4m including costs, completed just before Christmas. This followed the closing of a capital issue that raised £73m (gross) in new equity at 101p per share. The group has also completed a major refinancing programme, simplifying the debt structure and extending maturity, at no additional cost. We reinstate our estimates, including the acquisitions, which add immediately to earnings, and the capital increase. We also take a slightly more cautious approach to 2018 and have trimmed our previously above consensus position.

Year end

Net rental
income (£m)

EPRA
EPS* (p)

EPRA NAV/
share (p)

DPS
(p)

P/EPRA
NAV (x)

Yield
(%)

12/16

38.1

7.8

106.9

7.65

0.95

7.6

12/17e

44.7

7.9

104.4

7.85

0.97

7.8

12/18e

56.3

8.4

112.2

8.05

0.90

8.0

12/19e

59.2

9.1

117.9

8.25

0.86

8.2

Note: *EPRA EPS is adjusted to exclude exceptional expenses and estimated performance fees.

Further portfolio growth and diversification

The two portfolios acquired are significant in scale and bring an immediate £7.8m uplift to the gross contracted rent roll (end-September 2017: £55.9m), offer significant asset management potential, and further diversify the portfolio. RGL estimates an ungeared 8.6% net initial yield off an overall 87% occupancy, with a reversionary yield above 10%. We have also assumed that the additional “pipeline investment”, an office property in Portsmouth included in the December announcement, proceeds to completion by end Q118, adding a further £400k to gross rent roll for a £4.9m investment.

Acquisition benefit offset by underlying revision

Assuming no uplift from asset management, the acquisitions have a broadly neutral impact on FY18e EPRA EPS. The refinancing significantly extends the debt profile (from 2.5 years to 6.2 years) with no material impact on cost. While the demand-supply balance in regional commercial property remains generally positive, we sense some caution among tenants regarding making longer-term commitments amid continuing Brexit uncertainty. We now assume a slower rate of occupancy improvement, reducing our above consensus estimates accordingly: FY18e EPRA EPS by 5%, EPRA NAV per share by 6%, and DPS by 4%. More positively, our forecast end-FY18 net LTV reduces to 44.1% from 45.5%, moving closer to management’s preferred medium-term level of around 40%.

Valuation: Sector-leading yield, fully covered

RGL’s prospective dividend yield of 7.8% is the highest of all UK REITs, while its price/EPRA NAV sits within the middle of the range despite a strong focus on asset management and the potential for capital gains. The geographic spread of its non-London portfolio, its sector and tenant diversity, and high asset yield all mitigate macroeconomic risks.

Forecasts reinstated

We temporarily suspended our estimates during the capital raise in December but are now able to reinstate these, including adjustment for the acquisitions, share issuance and refinancing. Looked at in isolation, these have a broadly neutral impact on FY18e EPS and slightly reduce EPRA NAV per share (largely as a result of property acquisition costs), while reducing LTV. We have also taken the opportunity to review our underlying forecast for FY18, and introduce an FY19 forecast for the first time. While occupier demand for regional property appears to be robust, and new supply continues to be constrained, we sense that amid ongoing macroeconomic uncertainty, particularly related to Brexit, some tenants are cautious with respect to entering into long-term commitments. While H217 will benefit from a full-period contribution from earlier acquisitions, and with the successful letting of major refurbishment projects representing a significant driver of rental income growth, we have taken a slightly more cautious view as to the pace at which occupancy may increase over the next 12 months. Not reflected in our forecasts is the possibility of additional acquisition-led growth.

The impact is to reduce our underlying (pre-acquisition) FY18e net rental income by c 3% with a somewhat more geared impact on adjusted EPRA EPS (-5%). Our revised estimates continue to show 7% growth in EPS versus FY17 and 3% growth in DPS, with cover increasing to 105%. Our newly introduced FY19 forecast assumes a continuation of recent trends, with EPS, DPS and dividend cover increasing further.

Exhibit 1: Forecast revisions

Net rental income (£m)

EPRA EPS* (p)

EPRA NAV (p)

DPS (p)

New

Old

% chg.

New

Old

% chg.

New

Old

% chg.

New

Old

% chg.

12/17e

44.7

44.7

0%

7.9

7.9

0%

104.4

108.8

-4%

7.85

7.85

0%

12/18e

56.3

49.8

13%

8.4

8.9

-5%

112.2

118.8

-6%

8.05

8.35

-4%

12/18e

59.2

N/A

N/A

9.1

N/A

N/A

117.9

N/A

N/A

8.25

N/A

N/A

Source: Edison Investment Research. Note: *EPRA EPS is adjusted to exclude exceptional expenses and estimated performance fees.

The two portfolios acquired consist of 20 properties, all UK regional offices with a relatively high weighting to the south-east. They came too late in FY17 to have any impact on rental income but are included in our revised FY18 forecast from the beginning of the year. These add £7.8m in gross rental income, to which we add an additional £400k from end-Q118, assuming completion of the pipeline asset, an office property in Portsmouth.

We have included the new £19.4m debt facility in respect of the First New Portfolio acquired (the office properties in Woking, Cheshunt and Edinburgh) that management has indicated it intends to put in place soon after completion. This will be provided by RBS at 2% above Libor, with £2.0m of the proceeds directed towards the acquisition of the Portsmouth pipeline property. We have not yet included the additional new facility that management expects to agree in respect of the Second New Portfolio acquired, with Santander, at a fixed rate of 2.15%. To add this to our forecasts at this stage would create an unlikely cash drag on earnings as we have not assumed any ongoing acquisition activity.

The end-FY17 NAV is negatively affected by the estimated £5.1m costs of acquisition (reflected in the net revaluation line of the P&L) related to the two portfolios as well as by the costs related to the refinancing that management has guided to. Reflecting our slightly more cautious assumptions for operational improvement in FY18, we have slightly reduced our projected revaluation gain. The net effect of all of the changes that we have made is to increase FY18e investment property assets by c 14%, adjusted earnings by c 17% and EPRA net assets by c 17%. The capital raising saw 77.3m new shares issued at 101p, taking the total number of outstanding shares to 372.8m.

Gross debt as at 30 September was £335.4m. Of the total, the zero dividend preference (ZDP) shares acquired with the Conygar acquisition represent c £36m. These carry a yield of 6.5% until their maturity in January 2019. Of the remaining c £300m in bank debt, a £47.8m secured facility with Santander, due to mature in December 2018, was refinanced in November 2017 with a new five-year secured Santander facility. On 12 December, the larger refinancing of five secured facilities with a new £165m secured 10-year facility was completed. The new facility with Scottish Widows and Aviva Real Estate Finance was arranged by RBS. The fixed rate on the new facility will be set at drawdown and will be between 3.3% and 3.4%. The average maturity of all of the group’s debt facilities increases from 2.5 years to 6.2 years as a result of the refinancing with no significant impact on the cost of debt, which remains at c 3.80% on average.

Exhibit 2: Financial summary

Year end 31 December

£000s

2015

2016

2017e

2018e

2019e

PROFIT & LOSS

IFRS

IFRS

IFRS

IFRS

IFRS

Gross rental income

5,361

42,994

51,042

62,844

65,506

Non-recoverable property costs

(754)

(4,866)

(6,370)

(6,569)

(6,348)

Revenue

 

 

4,608

38,128

44,672

56,276

59,159

Administrative expenses (excluding performance fees)

(1,353)

(7,968)

(8,557)

(10,702)

(10,965)

EBITDA

 

 

3,255

30,160

36,115

45,573

48,194

Gain on disposal of investment properties

87

518

(41)

6,500

0

Change in fair value of investment properties

23,784

(6,751)

4,838

22,410

15,709

Operating profit before financing costs

 

 

27,126

23,927

40,912

74,483

63,903

Performance fees

0

(249)

(1,986)

(1,632)

0

Exceptional items

(5,296)

0

0

0

0

Finance income

177

193

207

120

123

Finance expense

(997)

(8,822)

(15,328)

(14,263)

(14,304)

Net movement in the fair value of derivative financial investments and impairment of goodwill

115

(1,654)

168

0

0

Profit Before Tax

 

 

21,124

13,395

23,972

58,708

49,721

Tax

0

23

(11)

0

0

Profit After Tax (FRS 3)

 

 

21,124

13,418

23,961

58,708

49,721

Adjusted for the following:

Performance fees

0

249

1,986

1,632

0

Exceptional items

5,296

0

0

0

0

Net gain/(loss) on revaluation

(23,784)

6,751

(4,838)

(22,410)

(15,709)

Net movement in the fair value of derivative financial investments

(180)

865

(447)

0

0

Gain on disposal of investment properties

(86)

(518)

41

(6,500)

0

Profit before Tax (norm)

 

 

2,371

20,765

20,703

31,430

34,013

Period end number of shares (m)

274.2

274.2

372.8

372.8

372.8

Average Number of Shares Outstanding (m)

274.2

274.4

294.5

372.8

372.8

Fully diluted average number of shares outstanding (m)

274.2

274.4

294.5

372.8

372.8

IFRS EPS - fully diluted (p)

 

 

7.7

4.9

8.1

15.7

13.3

EPRA EPS - adjusted (p)

 

 

0.9

7.8

7.9

8.4

9.1

EPRA EPS (p)

 

 

(1.1)

7.7

6.4

8.0

9.1

Dividend per share (p) - declared basis

 

 

1.00

7.65

7.85

8.05

8.25

Dividend cover

N/A

102%

100%

105%

111%

BALANCE SHEET

Non-current assets

 

 

407,492

506,401

751,696

783,005

806,714

Investment properties

403,703

502,425

748,229

779,538

803,247

Other non-current assets

3,790

3,976

3,467

3,467

3,467

Current Assets

 

 

35,803

27,574

25,814

32,479

34,505

Trade and other receivables

11,848

11,375

14,039

16,455

17,042

Cash and equivalents

23,954

16,199

11,775

16,024

17,464

Current Liabilities

 

 

(21,485)

(23,285)

(34,360)

(39,632)

(40,158)

Trade and other payables

(12,576)

(14,601)

(20,736)

(23,853)

(23,858)

Bank and loan borrowings - current

(200)

0

0

0

0

Other current liabilities

(8,709)

(8,684)

(13,623)

(15,779)

(16,300)

Non-current liabilities

 

 

(126,469)

(218,955)

(354,184)

(358,004)

(361,824)

Bank borrowings

(126,469)

(217,442)

(315,829)

(317,029)

(318,229)

Zero dividedn preference shares (ZDP)

0

0

(37,320)

(39,940)

(42,560)

Other non-current liabilities

0

(1,513)

(1,035)

(1,035)

(1,035)

Net Assets

 

 

295,341

291,735

388,966

417,848

439,237

Derivative interest rate swaps

416

1,513

963

963

961

EPRA net assets

 

 

295,757

293,248

389,929

418,811

440,198

IFRS NAV per share (p)

107.7

106.4

104.3

112.1

117.8

Fully diluted EPRA NAV per share (p)

107.8

106.9

104.4

112.2

117.9

LTV

-5.9%

40.6%

46.1%

44.1%

42.6%

CASH FLOW

Cash (used in)/generated from operations

 

 

(2,232)

31,434

37,823

46,798

48,136

Net finance expense

(424)

(6,626)

(9,052)

(10,323)

(10,361)

Tax paid

0

(1,715)

51

0

0

Net cash flow from operations

 

 

(2,656)

23,093

28,822

36,475

37,774

Net investment in investment properties

1,157

(99,286)

(111,390)

(2,400)

(8,000)

Acquisition of subsidiaries, net of cash acquired

26,659

(5,573)

209

0

0

Other investing activity

13

60

8

0

0

Net cash flow from investing activities

 

 

27,828

(104,799)

(111,173)

(2,400)

(8,000)

Equity dividends paid

0

(15,723)

(17,834)

(29,826)

(28,334)

Bank debt drawn/(repaid)

(1,217)

91,417

28,665

0

0

Other financing activity

0

(1,744)

67,096

0

0

Net cash flow from financing activity

 

 

(1,217)

73,950

77,927

(29,826)

(28,334)

Net Cash Flow

 

 

23,955

(7,756)

(4,424)

4,249

1,440

Opening cash

0

23,955

16,199

11,775

16,024

Closing cash

 

 

23,955

16,199

11,775

16,024

17,464

Closing debt

(126,669)

(217,442)

(353,149)

(356,969)

(360,789)

Closing net debt

 

 

(102,714)

(201,243)

(341,374)

(340,945)

(343,325)

Source: Regional REIT accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Regional REIT and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Regional REIT and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Henderson Far East Income Limited — Asian recovery sparks attractive opportunities

Henderson Far East Income’s (HFEL) lead fund manager, Mike Kerley, welcomes the resumption of earnings growth in the region after five years of stagnation. He says that attractive opportunities still abound in his favoured areas of cash-generative companies offering high dividend growth potential or high yields, with the recent rise in P/E ratios across the region only partially addressing the longstanding undervaluation versus the rest of the world. The portfolio currently has a cyclical tilt, with more in financials and consumer stocks and less in utilities and telecoms, yet HFEL still pays a high yield (currently 5.4%), fully covered by income. The fund has tended to trade at a small premium to NAV and issues shares to meet demand. The recent introduction of a tiered management fee above £400m will reduce total expenses for investors as HFEL grows.

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