RCS - Pacific Assets Tst - Results analysis from Kepler Trust Intelligence

Pacific Assets TrustAnnouncement

02/10/2025 17:15

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RNS Number : 8951B  Pacific Assets Trust PLC  02 October 2025

Pacific Assets (PAC)

02/10/2025

Results analysis from Kepler Trust Intelligence

Pacific Assets (PAC) has released its half-year results for the period ending
31/07/2025. Over the period, NAV decreased by 3.7% on a total return basis,
compared to an increase of 9.5% for the trust's benchmark, the MSCI AC Asia ex
Japan Index. longer-term performance remains robust, with five-year returns of
44.6% versus the formal benchmark of 28% to 31/07/2025.

Performance was mostly attributable to India, with a large number of
high-quality, well-managed Indian companies held. Whilst operational
performance was robust, sentiment impacted share prices and detracted from
returns. Positives centred around firms linked to the AI trade.

PAC's previous alternative performance objective of beating UK CPI +6% has
been retired following the proposed introduction of a performance-related
tender offer. This will allow investors to redeem up to 25% of share capital
close to NAV should the company fail to beat a set target over a seven-year
period.

The share buy-back programme will be unaffected. In the period, over 2.2m
shares were repurchased, with a further 1.7m shares bought back since. The
share price total return was 0.3%, contributing to the discount narrowing in
the period.

A lower, tiered management fee was announced, based on the lower of market
capitalisation or NAV, further incentivising the management team to narrow the
discount. The new structure be 0.75% on the first £500m of assets, then
dropping to 0.65%.

Doug and the team identified several new stocks most notably in China as
government regulation evolved. Recent additions include Alibaba and S.F.
Holding, a leading logistics firm which is still founder-led and growing an
enduring franchise.

Chairman Andrew Impey commented on the governance changes: "A revised,
competitive investment management fee  and  newly introduced Conditional
Tender Offer further aligns the portfolio manager with shareholders," also
acknowledging that the manager's "clearly differentiated investment process
has delivered robust, long-term, risk-adjusted returns."

Kepler View

These results are, in our view, significant, due to the proposal of several
shareholder-friendly initiatives which should improve the appeal of the trust
over multiple time periods.

The conditional tender helps reduce discount risk in our view and is a
pragmatic compromise between the manager's long-term focus, and the awareness
of recent returns. It has set an ambitious target although outperformance of
this magnitude has been delivered previously.

The team has made several changes, most notably adding to China. This has
narrowed the long-standing underweight although new ideas remain high-quality
and should reduce the portfolio's relative country risks. The trust is
arguably better placed to capture the region's success stories, whilst also
maintaining the quality focus that has supported in more volatile periods.

The reduction in the management fee is also positive and can accumulate over
the years, whilst also sending a positive signal to investors and further
aligning their interests with managers.

We think these changes could help narrow the discount. PAC currently has the
widest discount in the peer group (as at 01/10/2025) which we believe could
present an opportunity.

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