Half-year Report
09/10/2024 07:30
Pacific Assets Trust plc
(the “Company”)
Unaudited Half Year Report
for the six months ended 31 July 2024
Financial Highlights
As at As at
31 July 31 January
2024 2024 % change
Share price 386.0p 349.0p 10.6%
Net asset value per share 421.8p 384.3p 9.8%
Discount of share price to net asset value per share 8.5% 9.2%
Market capitalisation £466.9m £422.1m 10.6%
Shareholders’ funds £510.1m £464.8m 9.8%
Six months to One year to
31 July Six months to 31 January
2024 31 July 2023 2024
Share price (total return)*^ 11.8% 3.7% (1.9)%
Net asset value per share (total return)*^ 10.8% 0.3% (1.3)%
CPI + 6% 1 4.5% 6.5% 10.4%
MSCI All Country Asia ex Japan Index (total return, sterling adjusted)* 14.9% (3.3%) (10.5%)
Average discount of share price to net asset value per share^ 10.4% 6.5% 6.4%
Ongoing charges^ 1.1% 1.1% 1.1%
* Source: Morningstar.
^ Alternative Performance Measure (see Glossary).
1 UK Consumer Price Index + 6% – the Company’s Performance Objective (see
Glossary). Figures for six month periods are calculated on a pro rata basis.
Year ended Year ended
31 January 31 January
Dividends 2024 2023
Final dividend per share 4.0p 2.3p
Chair’s Statement
Return
I am pleased to report that the net asset value total return for the six
months ended 31 July was 10.8% (2023: 0.3%).
Over longer periods, we assess our investment return against the UK CPI plus
6%, in that we believe that our largely UK-based investors are seeking to
protect and grow their capital in real terms by extracting a premium over
their home markets from the faster growing Asian economies. Over the last five
years, our annualised return of 7.7% has fallen behind the annualised CPI plus
6% figure of 10.8%. This is of course a result of unusually high inflation
experienced in the UK and globally in recent years, although it now appears to
be returning towards the 2% targeted by the Bank of England.
In addition, while the increase in the net asset value per share in the first
half of the Company’s financial year represents an attractive absolute
return, it is below the peer group average return of 12.9% and the total
return (sterling adjusted) of the MSCI All Country Asia Pacific ex Japan Index
of 14.9%.
The Company’s high exposure to India has continued to be helpful to returns:
half of the top ten principal contributors to the return in this six-month
period were Indian companies, notably Mahindra & Mahindra, CG Power and
Triveni Turbine. Taiwanese companies also performed well: Voltronic Power,
TSMC and Chroma ATE also appear in the top ten, reflecting the good
performance of technology companies, and specifically those involved in the
semiconductor manufacturing industry.
The returns from Indian companies were partially offset by an increase in the
Company’s provision for Indian capital gains tax, due in part to the higher
valuations of the companies as well as an increase in the rate of capital
gains tax in India from 10.0% to 12.5%.
The Company’s principal detractors were primarily companies based in, or
economically exposed to, China and Hong Kong including Shenzhen Inovance, Wuxi
Biologics and Koh Young Technology. China’s economy has struggled in its
post-Covid recovery and has suffered from a property downturn, mounting
government debt, geopolitical issues and weak domestic spending.
Further analysis of the Company’s performance and its portfolio positioning
can be found in the Portfolio Manager’s Review.
Share Price Performance
The Company’s shares traded at an average discount of 10.4% during the
period. This compares to the average discount of 10.5% at which the
Company’s (closed-ended) peers traded and the average discount of 14.7%
across the investment trust sector as a whole (excluding 3i). The share price
total return of 11.8% exceeded the Company’s net asset return of 10.8%,
reflecting a slight narrowing of the share price discount compared with the
start of the period.
In its efforts to improve demand for the Company’s shares, the Board,
advised by the Sales, Marketing and Communications Committee, continues to
work with the Portfolio Manager on improving investors’ awareness of the
Company and the attributes that distinguish it from its competitors, including
an investment approach that prioritises total return and capital preservation
and its long-held focus on sustainability. The Board believes that a
combination of effective marketing and good performance has the potential to
improve the company’s rating on a more sustained basis.
The Board has also continued to actively debate the circumstances in which the
Company will buy back shares in the market. The Board has been conscious that
share buybacks have their drawbacks and may be of limited effectiveness, but
we are prepared to take action when the discount widens materially. No shares
were bought back during the period under review, however, the Company
repurchased shares in the market in September. At the date of this report, the
Company had bought back 35,000 shares, at a total cost of £131k and at an
average discount of 12.9%.
Sustainability Labels
In our last annual report, I said that the Board would take some time to
assess whether it would be beneficial to propose to shareholders material
changes to the Company’s published investment objective and policy in order
to utilise a sustainable investment label under the UK Sustainability
Disclosure Requirements (“UK SDR”).
The Board has now had a chance to consider the FCA and AIC guidance on this
matter, to consult with the AIFM and the Portfolio Manager, and has decided
not to propose any such changes for the time being. The requirements for the
sustainable investment labels included in the UK SDR regime are such that we
would need to impose specific and measurable objectives and KPIs to all (or
substantially all) portfolio companies which may not tally with Stewart
Investors’ approach to sustainable investing, which is based on a broader
and more qualitative view of sustainability.
There will be no change to Stewart Investors’ approach to managing the
Company’s portfolio: they will continue to follow the philosophy and
approach that they have developed over the past three decades. However, as
things stand, the Company will not apply a label under UK SDR. In order to
comply with the requirements of the regime, Frostrow and Stewart Investors
will augment the Company’s existing disclosures which explain the Portfolio
Manager’s understanding of sustainability and how they integrate this to
their investment approach.
It is worth noting that the requirements and approach of the UK SDR are
different from the EU Sustainable Finance Disclosure Regulation (“EU
SFDR”) and we have been advised that we can continue to report against a
high standard of sustainability disclosures (Article 9) under the EU regime.
However, we note that the European Commission has recently consulted on EU
SFDR and the outcomes of that consultation for its future disclosure regime
are not yet known.
The Board, the AIFM and the Portfolio Manager will continue to monitor
developments in this area.
The Board
During the period, and as previously announced, Charlotta Ginman retired from
the Board and Nandita Sahgal succeeded her as Chair of the Audit Committee.
The Board is grateful for Charlotta’s considerable contribution.
On 22 July we announced the appointment of June Ang, effective 26 September.
We are delighted to welcome a Director with extensive expertise both in the
financial sector and in Asian emerging markets.
The Outlook
As inflation in the UK stabilises at lower levels, we consider that the
challenge presented by our performance objective of exceeding UK CPI plus 6%
will become more achievable. In Asia, markets are as diverse as the many
cultures and so the outlook varies for each country in the region. China’s
growth may continue to disappoint, which will also affect closely linked
economies and companies. There is more optimism for other countries,
particularly India, whose prospects remain especially appealing when compared
with China. However, while there are plenty of opportunities across Asia, many
of them are in emerging markets with high levels of volatility and uncertainty
and with an exposure to geopolitics which should not be underestimated and
which is impossible to predict with any degree of confidence. Against that
backdrop, our Portfolio Manager will continue to build the portfolio from the
bottom up, focusing on identifying and selecting companies with successful and
experienced management teams, strong balance sheets and sustainable business
models. Such businesses are those that the Portfolio Manager, and the Board,
believe are most able to weather macroeconomic difficulties and deliver the
best long-term returns for shareholders.
Andrew Impey
Chair
8 October 2024
Portfolio Manager’s Review
Performance
Although we are satisfied with the Company’s performance over the past six
months, we believe shareholders are best served by our focus remaining on the
long term. Over short periods stock prices are driven by sentiment, but over
the long run they are driven by business performance and growth. As stewards
of shareholders’ capital, our time and effort are spent focused on curating
a portfolio of companies we believe will be worth substantially more in a
decade’s time.
The stark divergence between the performance of the Company’s holdings in
India and China continued during the period. Indian holdings, buoyed by a
strong economy and positive sentiment, have performed well, whereas Chinese
holdings have continued to be challenged by a declining property sector and
the risk of escalating trade tensions with the US and its allies.
A significant proportion of our time this year has therefore been spent
re-assessing the long-term prospects for the Chinese businesses owned by the
Company. In this, we have tried to balance our inclination to buy from fearful
sellers, with a recognition of the serious struggles China faces and the
impact this might have on the companies owned by the Company. Despite low
valuations we have been deliberate in maintaining a high-quality bar for the
Company’s portfolio and have not chased apparent bargains in low quality,
unpredictable businesses.
The outcome of our review process so far has been additions to companies where
we maintain our conviction in their long-term prospects and sales where the
external environment has made assessment of their future difficult. The number
of businesses owned in China by the Company has declined from eleven at the
beginning of the year to seven at the period end.
The majority of these exits have been from businesses in the healthcare
industry. We believe demand will grow for medical products from China’s
ageing population, but we believe that there is a lack of alignment between
profit making healthcare companies and the government’s need to limit
healthcare spending. We have seen the government intervene increasingly to
push down prices. This means that despite their quality, it is hard for us to
have any confidence on how much profit these companies will be permitted to
make in a decade’s time.
Transactions
We aim to build resilient portfolios of high-quality companies with
diversified streams of cash flows, which have the ability to grow in value
over the long term. High-quality companies at reasonable valuations tend not
to come along too often. In the absence of such opportunities, we are
comfortable long-term owners of investee companies. Accordingly, the turnover
figures on a new names basis tends to be in the low teens which is roughly
in-line with our investment horizon of at least five years.
Complete Sales
The sale of Amoy Diagnostics (China: Health Care) and Kingmed Diagnostics
(China: Health Care) follows our assessment of their alignment with the
government as they drive to reduce healthcare spending. Nothing has changed
internally with these companies: Amoy remains a leader in companion
diagnostics, and Kingmed is still China’s largest diagnostics laboratory
chain, but the external environment has reduced our conviction in the
sustainability of their profit margins.
Kotak Mahindra Bank (India: Financials), Telkom Indonesia (Indonesia:
Communication Services) and Pigeon (Japan: Consumer Staples) were sold during
the first half of the year. These were each relatively small positions which
were sold to fund additions to companies we have higher conviction in.
Vinda International (China: Consumer Staples), a Hong Kong based tissue paper
business, was sold in March after it was approached by RGE Ltd for acquisition
at an 18% premium to the prevailing share price.
We sold WuXi Biologics (China: Health Care), a Hong Kong listed, Chinese drug
development outsourcer after a short holding period of less than a year. We
first met the company in 2007 and were impressed by the ambition of the
founder, Chris Chen, as well as the patience and competence with which he has
developed Wuxi into a trusted partner of global pharmaceutical companies.
Prior to investing in 2023, we debated fiercely the vulnerability of their
position handling the intellectual property of US pharma companies, but
decided this risk was tolerable given the tailwinds behind the business, our
confidence in Chris Chen as a steward, and its low valuation. Our assessment
here was wrong and within a few months of purchase, a bill was proposed in the
United States Congress which aimed to restrict some Chinese biotech business
tie-ups with United States companies due to national security concerns. In
recognition of this mistake, we exited the Company’s position.
We also sold DBH Finance (Bangladesh: Financials) from the portfolio. Although
quality remains intact on a bottom-up basis, the company faced increased
regulatory pressures across the sector and deteriorating macro-economic
conditions.
New Additions
During the period, the Company purchased ESAB India (India: Industrials),
India’s largest welding equipment and consumables business. We are
particularly excited by the steward behind ESAB India’s parent, Mitch Rales,
who has had tremendous success as the founder of Danaher. ESAB India operates
with the same “kaizen” culture of continuous improvement and is set to
benefit from the growth of India’s manufacturing sector.
The Company initiated a position in Samsung C&T (South Korea: Industrials).
This is a holding company through which JY Lee, the patriarch of Samsung,
holds the majority of his stake in the group. Its major assets are stakes in
Samsung Electronics and Samsung Biologics, but it trades at a significant
discount to the value of these stakes. The Company is separately a shareholder
of both these underlying companies and following signs that Samsung C&T aims
to close the discount, we initiated a position.
Taiwanese fabless chip designer, Mediatek (Taiwan: Information Technology),
was purchased. As a team our first meeting with Mediatek was in 2000 and we
have watched their evolution from a designer of the chips for CD-Roms and DVD
players, into a world leading chip designer estimated to power over two
billion devices a year from smartphones to home entertainment.
We re-purchased Techtronic Industries (Hong Kong: Industrials) having sold
last year over concerns about the management team. Over the course of the
year, we have been re-assured of the quality of the Pudwell family’s
stewardship and more recently have been pleased with their appointment of a
new CEO, Steve Richman. Richman is a long tenured internal hire and has
effectively led Techtronic’s successful power tools division for the past 17
years.
Other Notable Changes
We remain vigilant on the position sizes of the Company’s largest holdings
following a period of continued strong performance and trimmed each of the top
three positions: CG Power (India: Industrials), Tube Investments (India:
Consumer Discretionary) and Mahindra & Mahindra (India: Consumer
Discretionary).
Contributors & Detractors
The top ten contributors to the Company’s performance were largely comprised
of Indian businesses and companies related to semiconductors. Mahindra &
Mahindra, the Company’s largest investment, continued to grow strongly in
its core auto business whilst investing in its tractors and farm equipment
franchise. Companies within the Murugappa Group also performed well, with CG
Power, Tube Investments, and Cholamandalam Financial Holdings (India:
Financials) all performing strongly. TSMC (Taiwan: Information Technology) was
also a major contributor as it continued to enjoy strong momentum as a
beneficiary of increasing enthusiasm for artificial intelligence (AI).
Companies listed in and with economic exposure to China formed a large
proportion of the bottom ten, led by Shenzhen Inovance (China: Industrials)
and Wuxi Biologics. Other significant detractors were Koh Young Technology
(South Korea: information Technology) and Advanced Energy Solutions (Taiwan:
Industrials), both of which struggled with declining earnings.
Outlook
There is never a time when investors are confronted with a risk-free horizon.
The most vivid macroeconomic risks the Company faces today are the continued
woes faced by China’s economy, but we are keenly aware that the greatest
threats to markets are typically not those that are easily identifiable ahead
of time.
We are focussed on owning businesses set to benefit from the attractive
tailwinds in the Asian region, but which also have the strong stewardship and
conservatism required to emerge stronger from the inevitable periods of
macroeconomic trouble that they will face. An outcome of this approach is the
Company track record of outperforming the vast majority of down markets whilst
compounding long term returns alongside its portfolio companies.
Stewart Investors
Portfolio Manager
8 October 2024
Contribution by Investment
Contribution by investment for the six months ended 31 July 2024
Top 10 contributors to and detractors from absolute performance (%)
Top 10 Contributors %
Mahindra & Mahindra 3.8
CG Power & Industrial Solutions 2.3
Voltronic Power 0.9
Taiwan Semiconductor Manufacturing Company 0.8
Triveni Turbine 0.8
Chroma ATE 0.7
Cholamandalam Financial Holdings 0.6
Philippine Seven 0.6
Marico 0.6
Oversea-Chinese Banking Corporation 0.5
Bottom 10 Detractors
Koh Young Technology -0.6
Shenzhen Inovance Technology -0.6
Airtac International Group -0.5
Wuxi Biologics -0.2
Advanced Energy Solution -0.2
PT Telkom Indonesia -0.2
Yifeng Pharmacy Chain -0.2
PT Unilever Indonesia -0.2
Cyient -0.1
Unicharm -0.1
Portfolio Valuation
as at 31 July 2024
Val’n % Total
Company Country Sector £’000 Assets
Mahindra & Mahindra India Consumer Discretionary 34,919 6.9%
CG Power & Industrial Solutions India Industrials 21,135 4.2%
Samsung Electronics South Korea Information Technology 20,387 4.0%
Tube Investments of India India Consumer Discretionary 20,241 4.0%
Voltronic Power Technology Taiwan Industrials 16,994 3.4%
Oversea-Chinese Banking Corporation Singapore Financials 16,718 3.3%
Cholamandalam Financial Holdings India Financials 14,882 3.0%
Midea China Consumer Discretionary 13,609 2.7%
Taiwan Semiconductor Manufacturing Taiwan Information Technology 13,546 2.7%
Shanthi Gears India Industrials 13,218 2.6%
Top 10 Investments 185,649 36.8%
Hoya Corporation Japan Health Care 12,840 2.5%
ELGI Equipments India Industrials 11,794 2.3%
HDFC Bank India Financials 11,526 2.3%
Shenzhen Inovance Technology China Industrials 11,467 2.3%
MediaTek Taiwan Information Technology 11,079 2.2%
Marico India Consumer Staples 10,893 2.2%
Triveni Turbine India Industrials 10,157 2.0%
Chroma Taiwan Information Technology 10,126 2.0%
Unicharm Japan Consumer Staples 9,703 1.9%
Bank OCBC NISP Indonesia Financials 9,316 1.9%
Top 20 Investments 294,550 58.4%
Info Edge India India Communication Services 8,653 1.7%
Techtronic Industries Hong Kong Industrials 8,569 1.7%
Delta Electronics Taiwan Information Technology 8,109 1.6%
Airtac International Taiwan Industrials 7,414 1.5%
Samsung Biologics South Korea Health Care 7,414 1.5%
Philippine Seven Philippines Consumer Staples 7,224 1.4%
Selamat Sempurna Indonesia Consumer Discretionary 7,158 1.4%
Sheng Siong Singapore Consumer Staples 6,705 1.3%
Tata Consumer Products India Consumer Staples 6,435 1.3%
Aavas Financiers India Financials 6,425 1.3%
Top 30 Investments 368,656 73.1%
Humanica Thailand Industrials 6,391 1.3%
Tata Communications India Communication Services 6,218 1.2%
Advantech Taiwan Information Technology 6,112 1.2%
Kalbe Farma Indonesia Health Care 6,084 1.2%
Dr. Lal PathLabs India Health Care 6,008 1.2%
Samsung C&T South Korea Industrials 5,881 1.2%
Godrej Consumer Products India Consumer Staples 5,630 1.1%
Tech Mahindra India Information Technology 5,624 1.1%
Vitrox Malaysia Information Technology 5,390 1.1%
Koh Young Technology South Korea Information Technology 4,952 1.0%
Top 40 Investments 426,946 84.7%
Tata Consultancy Services India Information Technology 4,934 1.0%
Dr. Reddy's Laboratories India Health Care 4,857 1.0%
Cyient India Information Technology 4,788 1.0%
Dabur India India Consumer Staples 4,648 0.9%
Tarsons Products India Health Care 4,155 0.8%
IndiaMART InterMESH India Industrials 3,964 0.8%
Industri Jamu dan Farmasi Sido Muncul Indonesia Consumer Staples 3,752 0.7%
Advanced Energy Solution Taiwan Industrials 3,741 0.7%
Uni-Charm Indonesia Indonesia Consumer Staples 3,720 0.7%
Zhejiang Supor China Consumer Discretionary 3,584 0.7%
Top 50 Investments 469,089 93.0%
Vitasoy International Hong Kong Consumer Staples 3,514 0.7%
RBL Bank India Financials 3,331 0.7%
Glodon Company China Information Technology 3,121 0.6%
Hangzhou Robam China Consumer Discretionary 3,098 0.6%
ESAB India India Industrials 2,916 0.6%
Kasikornbank Thailand Financials 2,791 0.6%
Marico Bangladesh Bangladesh Consumer Staples 2,661 0.5%
Syngene International India Health Care 2,612 0.5%
Unilever Indonesia Indonesia Consumer Staples 2,599 0.5%
Silergy Taiwan Information Technology 2,160 0.4%
Tokyo Electron Japan Information Technology 2,086 0.4%
Centre Testing International China Industrials 1,899 0.4%
Yifeng Pharmacy Chain China Consumer Staples 1,826 0.3%
Pentamaster International Malaysia Information Technology 899 0.2%
Total Investment 504,602 100.0%
Financial Statements
Income Statement
for the six months ended 31 July 2024
(Unaudited) (Unaudited)
Six months ended Six months ended
31 July 2024 31 July 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Gains on investments – 56,740 56,740 – 3,112 3,112
Exchange differences on currency balances – (181) (181) – (976) (976)
Investment Income 6,771 – 6,771 5,784 – 5,784
Portfolio Management and AIFM fees (note 2) (596) (1,789) (2,385) (561) (1,682) (2,243)
Other expenses (364) – (364) (386) – (386)
Return before taxation 5,811 54,770 60,581 4,837 454 5,291
Taxation (860) (9,555) (10,415) (772) (3,243) (4,015)
Return/(loss) after taxation 4,951 45,215 50,166 4,065 (2,789) 1,276
Return/(loss) per ordinary share (note 3) 4.1p 37.4p 41.5p 3.4p (2.3)p 1.1p
The Total column of this statement represents the Company’s Income
Statement.
The Revenue and Capital columns are supplementary to this and are both
prepared under guidance published by the Association of Investment Companies
(“AIC”).
All revenue and capital items in the Income Statement derive from continuing
operations.
The Company had no recognised gains or losses other than those declared in the
Income Statement.
All of the return and total comprehensive income for the period is
attributable to the shareholders of the Company.
Statement of Changes in Equity
for the six months ended 31 July 2024
Ordinary Share Share Capital Redemption Special Capital Revenue
Capital premium reserve reserve reserve reserve Total
Note £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 January 2024 15,120 8,811 1,648 14,572 415,270 9,398 464,819
Return after taxation – – – – 45,215 4,951 50,166
Ordinary dividends paid 4 – – – – – (4,838) (4,838)
At 31 July 2024 15,120 8,811 1,648 14,572 460,485 9,511 510,147
At 31 January 2023 15,120 8,811 1,648 14,572 426,502 7,009 473,662
(Loss)/return after taxation – – – – (2,789) 4,065 1,276
Ordinary dividends paid 4 – – – – – (2,782) (2,782)
At 31 July 2023 15,120 8,811 1,648 14,572 423,713 8,292 472,156
Statement of Financial Position
as at 31 July 2024
(Unaudited) (Audited)
As at As at
31 July 31 January
2024 2024
£’000 £’000
Fixed assets
Investments (note 5) 504,602 470,109
Current assets
Debtors 1,303 1,032
Cash and cash equivalents 22,631 6,191
23,934 7,223
Creditors (amounts falling due within one year) (1,382) (1,307)
Net current assets 22,552 5,916
Non-current liabilities
Provisions (note 6) (17,007) (11,206)
Net assets 510,147 464,819
Capital and reserves
Share capital 15,120 15,120
Share premium account 8,811 8,811
Capital redemption reserve 1,648 1,648
Special reserve 14,572 14,572
Capital reserve 460,485 415,270
Revenue reserve 9,511 9,398
Equity shareholders’ funds 510,147 464,819
Net asset value per ordinary share (note 7) 421.8p 384.3p
Notes to the Financial Statements
1. Basis of preparation
The condensed financial statements for the six months to 31 July 2024 comprise
the statements set out on pages 12, 13 and 14 including the related notes
below. They have been prepared in accordance with FRS 104 ‘Interim Financial
Reporting’ and the principles of the AIC’s Statement of Recommended
Practice published in July 2022, using the same accounting policies as set out
in the Company’s Annual Report and Financial Statements for the year ended
31 January 2024.
Going Concern
The Board has considered a detailed assessment of the Company’s ability to
meets its liabilities as they fall due, including modelling the effects of
substantial falls in markets and significant reductions in market liquidity on
the Company’s assets and liabilities. In light of the results of these
tests, the Company’s cash balances, the liquidity of the Company’s
investments and the absence of any gearing, the Directors are satisfied that
the Company has adequate financial resources to continue in operation for at
least the next 12 months from the date of approval of these financial
statements and that, accordingly, it is appropriate to adopt the going concern
basis in preparing these financial statements.
Fair value
Under FRS 102 and FRS 104 investments have been classified using the following
fair value hierarchy: Level 1 – Quoted prices in active markets.
Level 2 – Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data), either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is
unavailable).
All of the Company’s investments fall into Level 1 for the periods reported.
2. Portfolio Management and AIFM fees*
(Unaudited) Six months ended 31 July 2024 (Unaudited) Six months ended 31 July 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Portfolio management fee – Stewart Investors 529 1,588 2,117 498 1,493 1,991
AIFM fee – Frostrow 67 201 268 63 189 252
596 1,789 2,385 561 1,682 2,243
* Please refer to the most recent annual report for more details of the
management fee structure.
3. Return per ordinary share
The total return per ordinary share is based on the return attributable to
shareholders of £50,166,000 (six months ended 31 July 2023: £1,276,000) and
on 120,958,386 shares (six months ended 31 July 2023: 120,958,386 shares),
being the weighted average number of shares in issue.
The revenue return per ordinary share is calculated by dividing the revenue
return attributable to shareholders of £4,951,000 (six months ended 31 July
2023: £4,065,000) by the weighted average number of shares in issue as above.
The capital return per ordinary share is calculated by dividing the capital
return attributable to shareholders of £45,215,000 (six months ended 31 July
2023: loss of £2,789,000) by the weighted average number of shares in issue
as above.
4. Dividends
(Unaudited) (Unaudited)
Six months Six months
ended ended
31 July 31 July
2024 2023
Amounts recognised as distributions in the period:
Previous year’s final dividend of 4.0p (2023: final dividend of 2.3p) 4,838 2,782
5. Investments
Six months to Year to
31 July 2024 31 July 2023 31 January 2024
Investments
Cost at start of period 352,944 320,883 320,883
Investment holding gains at start of period 117,165 153,516 153,516
Valuation at start of period 470,109 474,399 474,399
Purchases at cost 55,677 28,800 84,889
Disposal proceeds (77,924) (43,226) (87,161)
Losses/gains on investments 56,740 3,112 (2,018)
Valuation at end of period 504,602 463,085 470,109
Cost at end of period 353,193 322,473 352,944
Investment holdings gains at end of period 151,409 140,612 117,165
Valuation at end of period 504,602 463,085 470,109
The Company received £77,924,000 (period to 31 July 2023: £ 43,226,000; year
to 31 January 2024: £87,161,000) from investments sold in the period. The
book cost of these investments when they were purchased was £55,428,000
(period to 31 July 2023: £27,210,000; year to 31 January 2024: £52,282,000).
These investments have been revalued over time and until they were sold any
unrealised gains/losses were included in the fair value of the investments.
During the period the Company incurred transaction costs on purchases of
£66,000 (period to 31 July 2023: £46,000; year to 31 January 2024:
£110,000) and transaction costs on sales of £127,000 (period to 31 July
2023: £86,000; year to 31 January 2024: £169,000).
6. Provision
As an investment trust, the Company is generally not subject to UK tax on
capital gains. However, Indian capital gains tax arises on capital gains on
the sale of Indian securities at a rate of 20% on short-term capital gains
(defined as those where the security was held for less than a year) and 12.5%
on long-term capital gains. The capital gains tax rates in India were
increased with effect for sales after 23 July 2024 from 15% and 10%,
respectively.
The provision at 31 July 2024 of £17,007,000 (31 January 2024: £11,206,000)
relates to the potential deferred tax liability for Indian capital gains tax
that may arise on the Company’s Indian investments should they be sold in
the future. The provision is calculated on the net unrealised taxable capital
gain at the period end and on the enacted Indian long-term capital gains tax
rate. The amount of any future tax amounts payable may differ from this
provision, depending on the value and timing of any future sales of such
investments and future Indian tax rates.
The capital tax charge shown in the Income Statement results primarily from
the movements on this provision.
7. Net asset value per ordinary share
The net asset value per ordinary share is based on the net assets attributable
to shareholders of £510,147,000 (31 January 2024: £464,819,000) and on
120,958,386 shares in issue (31 January 2024: 120,958,386).
8. 2024 accounts
These are not statutory accounts in terms of Section 434 of the Companies Act
2006 and are unaudited. Statutory accounts for the year to 31 January 2024,
which received an unqualified audit report, have been lodged with the
Registrar of Companies. No statutory accounts in respect of any period after
31 January 2024 have been reported on by an auditor or delivered to the
Registrar of Companies.
Earnings for the first six months should not be taken as a guide to the
results for the full year.
Interim Management Report
Principal Risks and Uncertainties
The Company’s principal area of risk relates to its investment activity and
strategy, including currency risk in respect of the markets in which it
invests. Other risks faced by the Company include financial, strategic and
operational risks. These risks and the way in which they are managed are
described in more detail under the heading Risk Management within the
Strategic Report in the Company’s Annual Report for the year ended 31
January 2024. The Company’s principal risks and uncertainties have not
changed materially since the date of that report and are not currently
expected to change materially for the remaining six months of the Company’s
financial year.
The Board, the AIFM and the Portfolio Manager discuss and identify emerging
risks as part of the risk identification process and have considered, amongst
other things, the effects of global supply chain disruption, increasing water
scarcity, the development of artificial intelligence, and the rise of
‘post-truth’ politics on the Company’s performance.
Related Party Transactions
During the first six months of the current financial year no material
transactions with related parties have taken place which have affected the
financial position or the performance of the Company during the period.
Going Concern
The Directors believe, having considered the Company’s investment objective,
risk management policies, capital management policies and procedures, and the
nature of the portfolio (including its liquidity) and its expenditure
projections, that the Company has adequate resources, an appropriate financial
structure and suitable management arrangements in place to continue in
operational existence for the foreseeable future. In addition, there are no
material uncertainties pertaining to the Company that would prevent its
continued operational existence for at least 12 months from the date of the
approval of this half-yearly report. For these reasons, the Directors consider
it appropriate to continue to adopt the going concern basis in preparing the
financial statements.
Directors’ Responsibilities
The Board confirms that, to the best of the Directors’ knowledge:
(i) the condensed set of financial statements contained within the
Half Year Report has been prepared in accordance with Financial Reporting
Standard 104 (Interim Financial Reporting); and
(ii) the Half Year Report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being
an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
This Half Year Report has not been audited or reviewed by an auditor.
This Half Year Report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the information
available to them up to the date of this report and such statements should be
treated with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such forward-looking
information.
For and on behalf of the Board
Andrew Impey
Chair
8 October 2024
Glossary of Terms
AIFMD
The Alternative Investment Fund Managers Directive (the “Directive”) is a
European Union Directive that entered into force on 22 July 2013. The
Directive, which was retained in UK law following the withdrawal of the UK
from the European Union, regulates fund managers that manage alternative
investment funds (including investment trusts).
Where an entity falls within the scope of the Directive, it must appoint a
single Alternative Investment Fund Manager (“AIFM”). The core functions of
an AIFM are portfolio and risk management. An AIFM can delegate one but not
both of these functions. The entity must also appoint an independent
depositary whose duties include the following: the safeguarding and
verification of ownership of assets; the monitoring of cashflows; and ensuring
that appropriate valuations are applied to the entity’s assets.
Alternative Performance Measures (“APMs”)
Measures that are not specifically defined under International Financial
Reporting Standards, but which the Board of Directors views as particularly
relevant for investment trust companies and which it uses to assess the
Company’s performance. Definitions of the terms used and the basis of
calculation are set out in this Glossary and the APMs are indicated with a
caret (^).
Average Discount^
The average share price for the period divided by the average net asset value
for the period and expressed as a percentage (%).
Six months to Six months to Year to
31 July 31 July 31 January
2024 2023 2024
Average Discount pence pence pence
Average share price for the period 366.9 362.9 363.1
Average net asset value for the period 409.5 388.1 388.0
Average Discount 10.4% 6.5% 6.4%
Bottom Up Approach
An investment approach that focuses on the analysis of individual stocks
rather than the significance of macroeconomic factors.
Net Asset Value (“NAV”) Per Share
The value of the Company’s assets, principally investments made in other
companies and cash held in the Company’s bank accounts, minus any
liabilities and divided by the number of shares in issue. The net asset value
is often expressed in pence per share and it may also be described as
‘shareholders’ funds’ per share. The net asset value per share is
unlikely to be the same as the share price, which is the price at which the
Company’s shares can be bought or sold by an investor. The share price is
determined by the relationship between the demand for and supply of the
shares.
NAV Per Share Total Return^
The theoretical total return on shareholders’ funds per share, reflecting
the change in net asset value, assuming that dividends paid to shareholders
were reinvested at net asset value at the time the shares were quoted
ex-dividend. A way of measuring investment management performance of
investment trusts which is not affected by movements in the share price.
Six months to Six months to Year to
31 July 2024 31 July 2023 31 January 2024
NAV Total Return pence pence pence
Opening NAV per share 384.3 391.6 391.6
Increase/(decrease) in NAV 41.5 1.0 (5.0)
Dividend paid (4.0) (2.3) (2.3)
Closing NAV 421.8 390.3 384.3
Increase/(decrease) in NAV 10.8% 0.3% (1.3)%
Impact of reinvested dividends 0.0% 0.0% 0.0%
NAV Per Share 10.8% 0.3% (1.3)%
Total Return
Ongoing Charges^
Ongoing charges are calculated by taking the Company’s annualised operating
expenses excluding finance costs, taxation and exceptional items, and
expressing them as a percentage of the average daily net asset value of the
Company over the period. The costs of buying and selling investments are
excluded, as are interest costs, taxation, costs of buying back or issuing
shares and other non-recurring costs. These items are excluded because if
included, they could distort the understanding of the Company’s performance
for the period and the comparability between periods.
Ongoing Charges Six months to 31 July 2024 £’000 Six months to 31 July 2023 £’000 Year to 31 January 2024 £’000
Total Operating Expenses 2,749 2,629 5,287
Average Net Assets 495,059 469,886 469,515
Ongoing Charges 1.1%* 1.1%* 1.1%
*Annualised.
Performance Objective
The Company’s performance objective is to provide shareholders with a net
asset value per share total return in excess of the UK Consumer Price Index
(“CPI”) plus 6 per cent. (calculated on an annual basis) measured over
three to five years. The Consumer Price Index is published by the UK Office
for National Statistics and represents inflation. The additional 6% is a fixed
element to represent what the Board considers to be a reasonable premium on
investors’ capital which investing in the faster-growing Asian economies
ought to provide over time.
Performance Objective Company NAV Per Share Total Return (annualised) (%) CPI + 6% (annualised) (%)
One year to 31 July 2024 9.1% 8.3%
Three years to 31 July 2024 6.2% 12.9%
Five years to 31 July 2024 7.7% 10.8%
Ten years to 31 July 2024 9.9% 9.3%
Share Price Discount (or Premium) to the NAV Per Share^
A description of the difference between the share price and the net asset
value per share. The size of the discount or premium is calculated by
subtracting the share price from the net asset value per share and is usually
expressed as a percentage (%) of the net asset value per share. If the share
price is higher than the net asset value per share, the result is a premium.
If the share price is lower than the net asset value per share, the shares are
trading at a discount.
Share Price Total Return^
Share price total return to a shareholder, on a last traded price to a last
traded price basis, assuming that all dividends received were reinvested,
without transaction costs, into the shares of the Company at the time the
shares were quoted ex-dividend.
Six months Six months Year to
to 31 July 2024 to 31 July 2023 31 January 2024
Share Price Total Return pence pence pence
Opening share price 349.0 358.0 358.0
Increase/(decrease) in share price 41.0 13.3 (6.7)
Dividend paid (4.0) (2.3) (2.3)
Closing share price 386.0 369.0 349.0
Increase/(decrease) in share price 11.8% 3.7% (1.9)%
Impact of reinvested dividends 0.0% 0.0% 0.0%
Share Price Total Return 11.8% 3.7% (1.9)%
Volatility
A measure of the range of possible returns for a given security or market
index.
A copy of the Half Year Report has been submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Half Year Report will also shortly be available on the Company's website
at www.pacific-assets.co.uk where up to date information on the Company,
including NAV, share prices and fact sheets, can also be found.
ENDS
For further information please contact:
Frostrow Capital LLP
Company Secretary
020 3709 8734
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.
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