REG-Pacific Assets Trust plc: Annual Report for the Year Ended 31 January 2025
30/04/2025 07:05
LONDON STOCK EXCHANGE ANNOUNCEMENT
Pacific Assets Trust plc
(the “Company”)
Annual Results for the Year Ended 31 January 2025
The statements below are extracted from the Company’s annual report for the
year ended 31 January 2025 (the “Annual Report”). The Annual Report,
which includes the notice of the Company’s forthcoming annual general
meeting, will be submitted to the Financial Conduct Authority and will shortly
be available in full, unedited text for inspection on the National Storage
Mechanism (NSM): https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual Report will be posted to shareholders on 9 May 2025. Members of the
public may obtain copies by writing to Frostrow Capital LLP, 25 Southampton
Buildings, London WC2A 1AL or from the Company’s website at
www.pacific-assets.co.uk where up to date information on the Company,
including daily NAV, share prices and fact sheets, can also be found.
Frostrow Capital LLP, Company Secretary
0203 709 8734
30 April 2025
Company Performance
Performance Summary
As at As at
31 January 31 January
2025 2024
Shareholders’ funds £503.4m £464.8m
Market capitalisation £431.7m £422.1m
One year to One year to
31 January 31 January
Performance 2025 2024
Net asset value per share total return 1 2 9.7% (1.3)%
Share price total return 1 2 3.7% (1.9)%
CPI +6% 3 8.8% 10.4%
MSCI All Country Asia ex Japan Index total return, sterling adjusted 1 22.3% (10.5)%
Average discount of share price to net asset value per share 1 2 11.5% 6.4%
Ongoing charges 2 1.1% 1.1%
Revenue return per share 4 5.4p 4.3p
Dividend per share 4.9p 4.0p
1 Source: Morningstar
2 Alternative Performance Measure (see Glossary beginning on page 80).
3 The Company’s Performance Objective (see Glossary beginning on page 80).
4 See Glossary beginning on page 80.
Chair’s Statement
Introduction and Results
I am pleased to present this Annual Report for the year ended 31 January 2025.
The Company’s net asset value total return for the year was 9.7% (2024:
-1.3%), exceeding the performance objective of UK CPI + 6% which was 8.8%
(2024: 10.4%).
While this is a good absolute return, which is the Company’s primary
objective, the Company lagged the MSCI AC Asia ex Japan Index total return of
22.3%, and the Company’s bespoke peer group of four other trusts and an
exchange traded fund. The year presented a number of challenges, in particular
a strong market rally in China driven by stimulus measures and weaker
performance in Indian equities towards the end of the year. Our portfolio is
relatively underweight in China and overweight in India and so these
conditions were not conducive to performance.
This performance is characteristic of Stewart Investors’ investment
strategy, which typically leads the Company to underperform in sharply rising
markets but has historically preserved capital during times of market stress;
a particularly pertinent quality for investors to keep in mind today as global
markets enter an increasingly volatile period. Capital preservation remains
the Portfolio Manager’s primary focus and shareholders may recall that the
Company’s performance in a weak market in 2023 was the best of the peer
group, when overweight positioning in India and underweight allocation to
China contributed to outperformance.
The Board also notes that, over the longer periods against which we assess
investment return, the Company’s performance is the best within the peer
group over three years and third over five years. We have not done so well,
however, against the long-term performance objective: over the last five
years, our annualised NAV total return of 8.7% is behind the UK CPI + 6%
figure of 11.0%, reflecting the period of persistently high inflation in
Western economies during that time.
Despite these headwinds, Stewart Investors remain optimistic about the
prospects for finding high-quality companies with strong growth prospects in
the Asia Pacific Region. One of the year’s key developments was our
increasing exposure to China and Hong Kong, as our Portfolio Manager has been
able to identify a greater number of strong businesses, with attractive
valuations, in those jurisdictions.
The downturn in the Indian market, and the increasing fund flows into China,
continued to affect the Company’s performance after the year end. The
Company has also been impacted by the significant volatility caused by
President Trump’s tariff announcements, along with the rest of the market.
However, SI’s bottom-up approach to stock picking and long-term view ensures
they stay focused on identifying high-quality, resilient companies, rather
than simply following market trends. As you will read in their review,
beginning on page 12, they continue to find good opportunities in India, as
well as other markets.
The top two contributors to performance were, once again, Indian companies:
Mahindra & Mahindra and CG Power and Industrial Solutions continue to be
excellent investments for the Company. We note that Taiwanese companies also
performed well, with four of the top ten contributors based in Taiwan. By
contrast, South Korean companies performed poorly and the Portfolio Manager
has sold Koh Young Technology, one of the top two detractors from performance.
Further analysis of the Company’s performance can be found in the Portfolio
Manager’s Review beginning on page 12.
Share price performance
The Company’s shares traded at an average discount to the net asset value
per share of 11.5% through the 12-month period to the end of January (2024:
6.4%). In line with the investment trust sector generally, the discount
widened during the financial year to close at 14.4% (2024: 9.2%) and this is
reflected in the Company’s share price total return of 3.7%, which fell
short of the net asset value total return.
During the year, the Company repurchased 370,000 shares, at a total cost of
£1.4 million, and at an average discount of 14.0%. The Company has continued
to buy back shares since the year end and, at the time of writing, had
repurchased a further 1,855,000 shares, at a cost of £6.3m, at an average
discount of 13.0%. The Board continues to carefully weigh up the circumstances
in which the Company should buy back shares in the market. We have been
conscious that share buybacks have their drawbacks and are not always
effective but we are prepared to take action when the discount widens
materially.
Buybacks are an immediate way of addressing the share rating but the Board
continues to believe that a combination of effective marketing and good
performance offers the potential to improve the Company’s rating on a more
sustained basis. Accordingly, the Sales, Marketing and Communications
Committee, working together with the Portfolio Manager, has continued to
develop and oversee the marketing and promotional strategy for the Company.
During the year, the Board appointed Kepler Partners LLP to produce research
on and provide PR services to the Company. We hope that this will be effective
in increasing demand for the Company’s shares.
Investment Policy
Shareholders will be aware that the definition of ‘Asia Pacific Region’ in
the Company’s investment objective currently excludes Australia, New Zealand
and Japan. The Board reviews the Company’s investment objective and policy
at every Board meeting and reviews the Company’s strategy annually. This
year, following discussions with our AIFM and our Portfolio Manager, it was
agreed to propose to shareholders that we broaden the Company’s investable
universe by permitting investment in Australia and New Zealand. We also
considered permitting investment in Japan but understand that many investors
prefer to invest in that country on a standalone basis.
While there are a number of high-quality companies in Australia and New
Zealand that Stewart Investors believe to be attractive, these companies are
currently highly valued and consequently the proposed change is unlikely to
result in many immediate new purchases and will not entail a material
rebalancing of the portfolio. Nevertheless, this is considered to be a
material change to the investment policy and therefore it will be put to
shareholders at the forthcoming annual general meeting (“AGM”). Further
information can be found on pages 101 to 108 of this report.
Dividend
The Company generated a revenue return of 5.3p per share during the year
(2024: 4.3p per share) and, as a result, the Board recommends to shareholders
the payment of a final dividend to ensure the Company complies with the
investment trust rules regarding distributable income.
Subject to shareholder approval at the AGM, a final dividend of 4.9p per share
will be paid on 11 July 2025 to shareholders on the register on 13 June 2025.
The associated ex-dividend date will be 12 June 2025.
The Board
During the year, and as previously announced, we were very pleased to appoint
June Ang as a non-executive director with effect from 26 September 2024. In
addition, Nandita Sahgal became Chair of the Audit Committee as planned.
Having served on the Board for just over nine years now, Sian Hansen will
retire at the AGM in July. On behalf of the Board, I would like to express our
gratitude to Sian for her outstanding contribution to the Company during her
tenure as a non-executive director. Sian’s insight, sound judgement and
unwavering commitment have been invaluable in guiding the Company through key
challenges. We will miss her presence on the Board and wish her the very best
for the future.
Following Sian’s retirement, June Ang will take over as Chair of the
Engagement and Remuneration Committee.
Management
David Gait has ably led the Company’s investment management team since
Stewart Investors’ appointment 15 years ago, with Douglas Ledingham as the
co-manager for almost seven years. It has been agreed that, with effect from
1st July 2025, David will hand over the lead portfolio manager role to Douglas
whilst continuing to play an integral role as co-portfolio manager (as well as
head of the investment team at Stewart Investors). This swapping of roles is a
natural evolution in the management of the Company and reflects Stewart
Investors’ focus on team development and long-term succession planning.
There are also practical advantages of having the lead manager based in the
UK, to facilitate the opportunity for more regular and direct engagement with
the Board and shareholders. This initiative by Stewart Investors has the full
backing of the Board and we are confident that this will be a seamless
transition, ensuring both the continuity of the investment strategy and depth
of experience.
The Annual General Meeting
After holding our AGM in Edinburgh last year, this year the AGM will return to
London. The AGM will be held at 12 noon on Tuesday, 1 July 2025, at the
offices of Stewart Investors, Finsbury Circus House, 15 Finsbury Circus,
London, EC2M 7EB.
As well as the formal proceedings, there will be an opportunity for
shareholders to meet the Board and the Portfolio Manager, and to receive an
update on the Company’s performance and its key investments.
The meeting, including the Portfolio Manager’s presentation, will again be
live streamed by Investor Meet Company for the benefit of those shareholders
who are unable to attend in person. Shareholders joining the meeting remotely
will not be able to speak or vote but will be able to submit questions via the
platform and vote in advance of the meeting in the usual way. Full details of
how to participate this way are set out on page 99.
I encourage all shareholders to exercise their right to vote at the AGM. The
Board strongly encourages shareholders to register their votes online in
advance (information on how to vote can be found on page 99). Registering your
vote in advance will not restrict shareholders from attending and voting at
the meeting in person should they wish to do so. The Board recommends that
shareholders vote in favour of all the resolutions set out in the Notice of
AGM, beginning on page 101, as the directors intend to do ourselves.
Outlook
The outlook for the Asia Pacific Region has become more uncertain following
renewed trade tensions, in particular between the United States and China,
prompted by the recent tariff announcements from the Trump administration.
While the region had been expected to see modest economic growth supported by
easing inflation and proactive monetary policies, the re-emergence of a trade
war poses fresh challenges to supply chains, investor sentiment, and
export-led growth.
While long-term opportunities persist—particularly in areas aligned with
sustainable development—our Portfolio Manager’s investment approach will
need to account for heightened geopolitical risk and potential market
dislocations. Their focus will continue to be on selecting high-quality
companies with strong fundamentals, resilient balance sheets, and capable
management teams that can navigate volatility and adapt to a more fragmented
global trade environment.
Our Portfolio Manager’s long-term investment horizon, careful risk
management, and commitment to engaging actively with portfolio companies
remain their key strengths. The Board continues to believe their approach is
well-suited to delivering sustainable value for shareholders, even in a more
complex and fast-evolving regional landscape.
Andrew Impey
Chair
29 April 2025
Investment Portfolio
as at 31 January 2025
Company Country Sector Value £’000 % Total Assets
Mahindra & Mahindra India Consumer Discretionary 30,390 6.0%
Oversea-Chinese Banking Corporation Singapore Financials 19,998 3.9%
Voltronic Power Technology Taiwan Industrials 18,120 3.6%
Cholamandalam Financial India Financials 17,380 3.4%
Tube Investments of India India Consumer Discretionary 16,259 3.2%
Midea China Consumer Discretionary 16,217 3.2%
Taiwan Semiconductor Manufacturing Taiwan Information Technology 15,574 3.1%
CG Power & Industrial Solutions India Industrials 15,218 3.0%
Shenzhen Inovance Technology China Industrials 15,164 3.0%
MediaTek Taiwan Information Technology 13,870 2.7%
Top 10 Investments 178,190 35.1%
Hoya Japan Health Care 12,639 2.5%
Samsung Electronics South Korea Information Technology 12,486 2.4%
Ayala Philippines Industrials 12,398 2.4%
Techtronic Industries Hong Kong Industrials 12,116 2.4%
Info Edge India India Communication Services 11,591 2.3%
Triveni Turbine India Industrials 11,391 2.2%
Airtac International Taiwan Industrials 10,568 2.1%
Shanthi Gears India Industrials 10,174 2.0%
Bank OCBC Indonesia Financials 9,867 1.9%
HDFC Bank India Financials 9,400 1.8%
Top 20 Investments 290,820 57.1%
ELGI Equipments India Industrials 9,231 1.8%
Delta Electronics Taiwan Information Technology 8,896 1.7%
Samsung Biologics South Korea Health Care 8,371 1.6%
Marico India Consumer Staples 8,051 1.6%
Philippine Seven Philippines Consumer Staples 7,853 1.5%
Dongguan Yiheda Automation China Industrials 7,796 1.5%
Tata Communications India Communication Services 7,367 1.4%
Sheng Siong Group Singapore Consumer Staples 7,287 1.4%
Advantech Taiwan Information Technology 6,941 1.4%
DFI Retail Hong Kong Consumer Staples 6,508 1.3%
Top 30 Investments 369,121 72.3%
Company Country Sector Value £’000 % Total Assets
Selamat Sempurna Indonesia Consumer Discretionary 6,491 1.3%
Naver South Korea Communication Services 6,204 1.2%
Tech Mahindra India Information Technology 6,068 1.2%
Vitasoy International Holdings Hong Kong Consumer Staples 5,811 1.1%
Tata Consumer Products India Consumer Staples 5,747 1.1%
Vitrox Malaysia Information Technology 5,585 1.1%
Unicharm Japan Consumer Staples 5,306 1.0%
Kasikornbank Thailand Financials 5,163 1.0%
Kalbe Farma Indonesia Health Care 4,947 1.0%
Tata Consultancy Services India Information Technology 4,610 0.9%
Top 40 Investments 425,053 83.2%
Humanica Thailand Industrials 4,532 0.9%
Chroma ATE Taiwan Information Technology 4,509 0.9%
Aavas Financiers India Financials 4,493 0.9%
Godrej Consumer Products India Consumer Staples 4,366 0.9%
Dr. Reddy’s Laboratories India Health Care 4,358 0.9%
Cyient India Information Technology 3,957 0.8%
Zhejiang Supor China Consumer Discretionary 3,898 0.8%
Dabur India India Consumer Staples 3,867 0.8%
Dr. Lal PathLabs India Health Care 3,766 0.7%
MANI Japan Health Care 3,563 0.7%
Top 50 Investments 466,362 91.5%
Glodon Company China Information Technology 3,443 0.7%
Blue Dart Express India Industrials 3,317 0.6%
Sundaram Finance India Financials 3,315 0.6%
Industri Jamu dan Farmasi Sido Muncul Indonesia Consumer Staples 3,070 0.6%
Hangzhou Robam China Consumer Discretionary 3,042 0.6%
Tarsons Products India Health Care 3,006 0.6%
Unicharm Indonesia Indonesia Consumer Staples 2,878 0.6%
Marico Bangladesh Bangladesh Consumer Staples 2,693 0.5%
Syngene International India Health Care 2,420 0.5%
ICICI Lombard General Insurance India Financials 2,400 0.5%
Esab India India Industrials 2,276 0.4%
Bajaj Auto India Consumer Discretionary 2,137 0.4%
Centre Testing International Group China Industrials 2,092 0.4%
Yifeng Pharmacy Chain China Consumer Staples 2,053 0.4%
Silergy Taiwan Information Technology 1,971 0.4%
Bajaj Holdings & Investment India Financials 1,939 0.4%
Tokyo Electron Japan Information Technology 1,770 0.3%
Bajaj Housing Finance India Financials 19 0.0%
Total Investments 510,203 100.0%
Portfolio Manager’s Review
Over the year to 31 January 2025, the net asset value of the Company returned
9.7%. As a reference, the MSCI AC Asia ex Japan Index (the ‘Index’) return
was 22.3% over the same period.
The performance was in keeping with the characteristic outcome of our
investment philosophy. Historically, we trail rapidly rising markets but
preserve capital better than others when markets are weak.
During the period, the Chinese government announced a stimulus package that
resulted in a large and swift appreciation from the market as a whole and
lower quality companies which are financially strained in particular. We do
not invest in lower quality companies. This, along with some weakness in
Indian equities towards the end of the year, created a challenging environment
for performance.
More specific details on performance are in the Contributors and Detractors
sections.
Investing in China and India
Over the last decade critics of the Company’s management have, from time to
time, focused on a ‘failure to allocate’ capital to China. Typically, this
criticism is greatest after a rapid appreciation in Chinese equity prices
following a change in government policy or economic stimulus. Generally, the
criticism ebbs as the China rally fades. We have experienced this at least
three times over the years. It should be noted that a historic ‘failure to
allocate’ to China has been beneficial for shareholders. Moreover, this
criticism is increasingly unfounded.
Today, the Company is invested in a greater number of high-quality Chinese
businesses than ever before. As little as five years ago the Company invested
in only one company in China, or 0.6% of shareholder funds. As at the end of
this period the Company is invested in eight Chinese companies which amount to
10.4% of shareholder funds. This is a considerable change over a short period
of time. Moreover, this understated the true position in China. When the
Company’s geographic outcome by revenue is considered, the ‘allocation to
China’ is almost double that amount. Companies such as Vitasoy (Hong Kong:
Consumer Staples), AirTAC International (Taiwan: Industrials), Silergy
(Taiwan: Information Technology) and Unicharm (Japan: Consumer Staples) all
have substantial businesses and revenues from China.
The reason we are finding more investments in China is due to attractive
valuations not a decrease in our quality standards. High quality people,
franchises and financials exist in China, and at attractive valuations. It is
valuation which explains why we have been trimming some investments in India
and adding to some high-quality companies in China. Despite the contrasting
economic fortunes, we are finding new exciting investments in both China and
India. This is because we invest in companies not countries. Dongguan Yiheda
Automation (China: Industrials) and Sundaram Finance (India: Financials) are
two of the latest investments.
Dongguan Yiheda Automation is a one-stop supply chain solution for factory
automation across China. Last year they shipped 3.3 million items with an
average price of USD$3.50. This is not a robot company, it supplies essential
items to manufacturing companies, that need to automate, in a timely and
cost-effective manner. The ageing population and falling workforce combined
with the low penetration of automation in China are compelling long-term
tailwinds here.
We first met the company in 2021 and noted high-quality owner/founder/manager
stewards who exhibited intentions to build a strong franchise in the long term
rather than a speedy enrichment programme. The market capitalisation after the
initial public offering (“IPO”) in 2021 peaked around US$6 billion on a
price-earnings ratio of over 100 times. After studying and meeting the company
we recognised that it was vulnerable to cyclical end demand. This has impacted
the rating severely, even though the absolute amount of net income has grown
every year since listing. Today, the company has $179 million of net cash on
the balance sheet and makes cyclically depressed gross margins of 35%1. We
recently invested in Dongguan Yiheda when the market capitalisation was
two-thirds off peak levels and the price earnings ratio was in the low
twenties. Dongguan Yiheda may have to continue to endure some cyclical
challenges but the long-term opportunity for growth is extremely attractive.
A recent visit to Chennai in the state of Tamil Nadu reacquainted us with
Sundaram Finance, an extremely high-quality non-banking financial company.
Sundaram Finance is a deposit-taking institution that has been trusted by over
three generations of savers. The company proudly showcases its charter – the
Sundaram Way2 - on the wall of each meeting room. The Sundaram Way consists of
nine idioms and each is compelling but it was the final idiom that resonated
most: “to know that we are not merely the holders of people’s money; but
more importantly the custodians of their trust”.
Trust is key in finance – not only for deposit taking but also to lend or
invest. We met the new managing director of this family-owned franchise, Rajiv
Lochan. His curriculum vitae of experience was as impressive as his humility
and competence. Rajiv trained at American Express before becoming a partner at
McKinsey for 12 years. After a brief stint running a newspaper, he answered
the call of his family friends to step up and run Sundaram Finance. Under his
guidance we are confident that Rajiv will increase the growth part of the
firm’s holy trinity: ‘quality, profitability and growth’. Such is his
personal commitment to the organisation and the scale of the under-penetration
of financial services that we were able to enjoy conversations about how the
firm may look in 2040. It is this sort of meeting that makes the head and
tummy ache of travel in India so rewarding, and the outlook for the
Company’s investments so bright.
1 Stewart Investors, Bloomberg 24 February 2025
2 https://www.sundaramfinance.in/sundaram-way
China requires four rather than three golden rules
We have four golden rules when investing in China, compared with our normal
three. First, the company must meet our quality requirements of management,
franchise and financials. A growing number of listed Chinese companies are
meeting these requirements. Second, they must be well positioned to contribute
to China’s sustainable development. On this, we are particularly well
aligned with the Chinese Government in almost all aspects of sustainable
development. Sustainability talk is cheap, but very few countries have walked
the walk as purposefully or far as China in terms of reorientating development
toward a genuine sustainable path. Human rights risk is the clear and present
exception. We try to navigate this challenge with an approach based on
individual companies. Third, valuations must be attractive. The prolonged
sell-off in Chinese assets has brought many companies back to attractive
levels. We believe despite the recent bounce-from-the-bottom, valuations are
still reasonable, particularly when factoring in a recovery in earnings.
Our fourth “China-specific” golden rule is the need to form a view on the
Chinese Government’s “allowable return” for a particular company. This
tries to capture the idea that in China, returns can erode not just with new
capital and competition entering a market, but with a change of strategic view
by the Chinese Government. In other words, all Chinese companies are actively
regulated by the Chinese Government, whether they sell soy sauce, build toll
roads or connect small businesses with consumers via online shopping
platforms. Over the past decade or so, the Chinese Government appears to have
taken a much more proactive approach to allowable return, built on their goals
and ambitions. Great companies are not just tolerated by Beijing but embraced
and encouraged as part of the development solution, but excess returns are
only acceptable to facilitate national development. In order to earn extended
supernormal returns in China, not only must companies have sound business
fundamentals, they must also be operating in the “build-out” phase of
industries of national importance, as decided by the government. The Chinese
Government has been notably transparent in spelling out just what these
industries are, with clear long-term development plans reaching out to 2035
and beyond.
Investing in a world of “allowable” or “capped” returns comes with
challenges of its own and we are still learning. Long-term sustainable
development alignment is a critical first step, but looking through a
“toll-road” lens is also helpful. By this we mean, so long as new roads
need to be built, toll-road companies are usually allowed to generate
attractive returns well in excess of their cost of capital in order to
reinvest in new roads. This cycle usually comes to an abrupt end once the last
roadbuilding project is in sight. We are trying to apply this lens not just to
our Chinese companies but more broadly. Where China leads, other countries
often follow.
Contributors
During the year under review, the Company’s material ownership of Indian
companies, especially those with exposure to capital spending and industrial
growth, was a key contributor to performance.
Mahindra & Mahindra
(India: Consumer Discretionary)
Contribution: 3.9%
Mahindra & Mahindra have leadership positions in farm equipment, utility SUVs,
information technology and financial services in India. It is the world’s
largest tractor company by volume. Since Dr Anish Shah was appointed as group
CEO and Managing Director, replacing the Chairman, Mr Anand Mahindra, the
group has enjoyed superior decisions on capital allocation and improved
operating metrics at key subsidiaries. Dr Shah, previously of GE Capital, is
an excellent example of the powerful returns that can be derived from the
combination of professional management within family-owned companies.
CG Power & Industrial Solutions
(India: Industrials)
Contribution: 1.8%
CG Power is the leading manufacturer of motors in India with a high-quality
franchise and fantastic long-term avenues for growth. Historically the quality
of stewardship was poor at CG Power but this changed when Tube Investments
(India: Consumer Discretionary) took control of the company, at a low
valuation, after a scandal with creditors. The company invested quickly after
Tube Investments took control and has benefited from strong investment returns
as high-quality stewardship maximises the opportunities of this high quality,
but previously badly run, franchise.
Taiwan Semiconductor Manufacturing Company
(Taiwan: Information Technology)
Contribution: 1.5%
TSMC is the world’s largest independent semiconductor foundry. It benefits
from economies of scale, engineering expertise, leading-edge technology,
excellent operational execution and high levels of trust from clients. It
continues to benefit from strong demand and positive sentiment regarding the
long-term benefits of AI to semiconductor demand. It has delivered strong
results.
Detractors
During the year under review the most significant detractors were technology
companies operating in South Korea.
Samsung Electronics
(South Korea: Information Technology)
Contribution: -1.1%
Improving governance of the Samsung Chaebol meant the Company was able to
invest in this franchise for which we have the utmost respect. Samsung has
progressed from bankruptcy in 1997 to a world-renowned brand capable of
spending tens of billions of US dollars a year on capital expenditure. Samsung
Electronics has suffered over the year as it failed to compete with Hynix
(South Korea: Information Technology), Micron (US: Information Technology) and
TSMC in the manufacturing of semiconductors which enable growth in artificial
intelligence. It is our contention that this is a short-term challenge rather
than a fundamental weakness in the manufacturing capabilities of Samsung
Electronics. We have been able to build the majority of our position at
valuations last seen during previous fiscal crises. History teaches us that
Samsung are formidable competitors with the human and financial capital to
compete successfully.
Koh Young Technology
(South Korea: Information Technology)
Contribution: -0.8%
Koh Young manufactures and develops 3D measurement and inspection devices
which detect accuracy and reliability in various machines. The Company was
invested in Koh Young for many years but our concerns about the quality of the
franchise were raised when we, accompanied by the Pacific Assets Trust Board,
toured their plant in Seoul in November 2022. Since then, operating metrics
were patchy, and our concerns grew on learning about higher-than-normal staff
turnover. We have sold the holding.
Tube Investments
(India: Consumer Discretionary)
Contribution: -0.7%
Tube Investments is a manufacturer of precision-engineered metal-formed
products and India’s largest bicycle maker. The founding Murugappa family
are the largest shareholders. It saw its share price increase significantly
over the last five years but short-term declines in the share price at the end
of the reporting period have given back some of these gains. It fell following
slower than expected growth in the core business but it is important that this
is seen in the context of its longer term evolution.
Significant transactions
Over the course of the year, the portfolio turnover of the Company was 24.7%.
This is higher than the previous year (18.3%) and is an outcome of finding a
greater number of new ideas. Furthermore we have been strict this year on
cutting smaller holdings in the tail of the portfolio. New ideas were driven
by attractive valuations given how much investor despondency there is within
the region.
New investments
During the year the Company made new investments in MediaTek (Taiwan:
Information Technology), Ayala (Philippines: Industrials), Techtronic
Industries (Hong Kong: Industrials), Info Edge (India: Communication
Services), Dongguan Yiheda Automation, DFI Retail (Hong Kong: Consumer
Staples), Naver (South Korea: Communication Services), MANI (Japan: Health
Care), Blue Dart Express (India: Industrials) and Sundaram Finance.
Additions
The comparative weakness in many companies, particularly in China, allowed us
to add to Midea (China: Consumer Discretionary) and Shenzhen Inovance
Technology (China: Industrials). We also added to Kasikornbank (Thailand:
Financials).
Reductions
As mentioned, most of the reductions were either to control position size or
because of valuation concerns in India. We reduced Mahindra & Mahindra, CG
Power and Marico (India: Consumer Staples). We also reduced companies where
the valuation appeared to incorporate excess enthusiasm for the benefit to
earnings of artificial intelligence. In this regard, we trimmed Chroma ATE
(Taiwan: Information Technology) and Tokyo Electron (Japan: Information
Technology).
Disposals
We also identified deteriorating quality and/or found better investments
elsewhere. Accordingly the Company sold out of Koh Young Technology, Kotak
Mahindra Bank (India: Financials), Advanced Energy Solution, (Taiwan:
Industrials), Amoy Diagnostics (China: Health Care), RBL Bank (India:
Financials), Telekom Indonesia (Indonesia, Communication Services), Unilever
Indonesia (Indonesia: Consumer Staples), IndiaMART (India: Industrials), WuXi
Biologics (China: Health Care), Samsung C&T (South Korea: Industrials), Pigeon
(Japan: Consumer Staples), Kingmed Diagnostics (China: Health Care),
Pentamaster (Malaysia: Information Technology), DBH Finance (Bangladesh:
Financials) and lastly Vinda International (China: Consumer Staples) after it
was acquired by a trade buyer.
Looking forward
Given the number of attractively valued companies in Asia at present it’s
hard not to get excited about future returns. As always, there are plenty of
things that could go wrong at any time. Political risk is rising in almost
every Asian country, with impeachments, International Criminal Court arrests
and attempted coups a growing feature in the region. If the US economy falters
and global demand falls, Asian economies will all be impacted, to differing
degrees. Asia’s technology hub, built around Taiwan, South Korea and China,
is particularly vulnerable. Elsewhere, India remains largely isolated from the
global economy, while the Philippines would receive a significant economic
boost from falling oil prices. Very recently we have seen dramatic share price
moves as Asia markets caught up with US-imposed tariff announcements and
subsequent global share price movements. Fortunately an outcome of our
investment philosophy means our companies are both financially strong and
comparatively isolated from sales to the USA. Predicting these events is
beyond us though. Fortunately, most of our Asian companies have very long
memories and the scar tissue from multiple previous crises from which to learn
and adapt. We hope they are set up not just to sail in fair weather but to
navigate safely through unpredictable political and economic storms which
could appear at any time. Ultimately, the key attraction lies in the
opportunity to invest in such companies in Asia.
Stewart Investors
Portfolio Manager
29 April 2025
Business Review
The Strategic Report, set out on pages 1 to 32, contains a review of the
Company’s business model and strategy, an analysis of its performance during
the financial year and its future developments as well as details of the
principal risks and challenges it faces. Its purpose is to inform shareholders
and help them to assess how the Directors have performed their duty to promote
the success of the Company.
The Strategic 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 time of their approval of this report. 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.
Business Model
The Company is an externally managed investment trust and its shares are
admitted to the closed-ended investment funds category of the FCA’s Official
List and to trading on the main market of the London Stock Exchange.
The purpose of the Company is to achieve long-term growth in its
shareholders’ capital by providing a vehicle for investors to gain exposure
to a portfolio of companies in the Asia Pacific region and the Indian
sub-continent, but excluding Japan, Australia and New Zealand, through a
single investment.
The Company’s strategy is to create value for shareholders by addressing its
investment objective.
As an externally managed investment trust, all of the Company’s day-to-day
management and administrative functions are outsourced to service providers.
As a result, the Company has no executive directors, employees or internal
operations.
The Company is an Alternative Investment Fund (“AIF”) pursuant to the
Alternative Investment Fund Managers Regulations and the EU AIFM Directive.
The Company employs Frostrow Capital LLP (“Frostrow”) as its Alternative
Investment Fund Manager (“AIFM”) and they provide corporate management,
risk management, company secretarial and administrative services. The Company
employs Stewart Investors as its Portfolio Manager (see page 45 for further
information).
The Board remains responsible for all aspects of the Company’s affairs,
including setting the parameters for monitoring the investment strategy and
the review of investment performance and policy. It also has responsibility
for all strategic policy issues, including share issuance and buybacks, share
price and discount/ premium monitoring, corporate governance matters,
dividends and gearing.
Further information on the Board’s role and the topics it discusses with the
Portfolio Manager is provided in the Corporate Governance report beginning on
page 36.
Investment Objective and Policy
The Company aims to achieve long-term capital growth through investment in
selected companies in the Asia Pacific region and the Indian sub-continent,
but excluding Japan, Australia and New Zealand (the “Asia Pacific
Region”). Up to a maximum of 20% of the Company’s total assets (at the
time of investment) may be invested in companies incorporated and/or listed
outside the Asia Pacific Region (as defined above); at least 25% of their
economic activities (at the time of investment) are within the Asia Pacific
Region with this proportion being expected to grow significantly over the long
term.
The Company invests in companies which Stewart Investors believe will be able
to generate long-term growth for shareholders.
The Company invests principally in listed equities although it is able to
invest in other securities, including preference shares, debt instruments,
convertible securities and warrants. In addition, the Company may invest in
open and closed-ended investment funds and companies.
The Company is only able to invest in unlisted securities with the Board’s
prior approval. It is the current intention that such investments are limited
to those which are expected to be listed on a stock exchange or which cease to
be listed and the Company decides to continue to hold or is required to do so.
Risk is diversified by investing in different countries, sectors and stocks
within the Asia Pacific Region. No more than 45% of the Company’s total
assets (at the time of investment) may be invested in any single jurisdiction.
If the proportion of the Company’s total assets invested in a single
jurisdiction exceeds 49% at any time, the AIFM and the Portfolio Manager will,
as soon as reasonably practicable, seek to re-balance the Company’s
portfolio below this threshold.
No single investment may exceed 7.5% of the Company’s total assets at the
time of investment. This limit is reviewed from time to time by the Board and
may be revised as appropriate.
No more than 10% of the Company’s total assets may be invested in other
listed closed-ended investment companies unless such investment companies
themselves have published investment policies to invest no more than 15% of
their total assets in other closed-ended investment companies, in which case
the limit is 15%.
When deemed appropriate, the Company may borrow for investment purposes up to
the equivalent of 10% of the net asset value of the Company at the time of
drawdown of such borrowing.
The use of derivatives is permitted with prior Board approval and within
agreed limits. However, Stewart Investors are unlikely to use derivatives as
they do not form part of their investment strategy.
Proposed Change to Investment Policy
As noted in the Chair’s Statement on page 7, the definition of ‘Asia
Pacific Region’ in the Company’s investment objective currently excludes
Australia, New Zealand and Japan. The Board is proposing to broaden the
Company’s investable universe by removing the exclusion of Australia and New
Zealand from the definition of ‘Asia Pacific Region’ in the investment
objective.
Accordingly, an ordinary resolution to approve this amendment to the
investment objective is included in the Notice of AGM, beginning on page 101,
and the full text of the proposed new investment policy can be found in the
explanatory notes on pages 106 and 107. For the avoidance of doubt, the
amendment of the investment objective is the only proposed change to the
Company’s investment policy. The proposed amendment has been approved in
principle by the Financial Conduct Authority in accordance with the
requirements of the Listing Rules.
Performance Measurement
The Board measures Stewart Investors’ performance against a performance
objective, which is to provide shareholders with a net asset value total
return in excess of the UK Consumer Price Index (“CPI”) plus 6%
(calculated on an annual basis) measured over three to five years (the
“Performance Objective”). The Board also monitors the Company’s
performance against its peer group (see page 4 for details). Please refer to
the Chair’s Statement beginning on page 6 and the Glossary on page 80 for
further information.
Dividend Policy
It is the Company’s policy to pursue capital growth for shareholders with
income being a secondary consideration. This reflects that the Portfolio
Manager is frequently drawn to companies whose future growth profile is more
important than the generation of dividend income for shareholders.
The Company complies with the United Kingdom’s investment trust rules which
require investment trusts to retain no more than 15% of their distributable
income each year. The Company’s dividend policy is that the Company will pay
a dividend as a minimum to maintain investment trust status.
The Board
At the date of this report, the Board of the Company comprises Andrew Impey
(Chair), Nandita Sahgal (Chair of the Audit Committee), Sian Hansen (Chair of
the Engagement and Remuneration Committee), Robert Talbut, (the Senior
Independent Director) Edward Troughton (the Chair of the Sales, Marketing and
Communications Committee) and June Ang. All of these Directors are
non-executive, independent Directors. They all served throughout the year
except for June Ang who joined the Board with effect from 26 September 2024.
Further information on the Directors can be found on pages 34 and 35 and
information on the Board’s diversity can be found in the Corporate
Governance Report on pages 42 and 43.
Key Performance Indicators (“KPIs”)
The Board of Directors reviews performance against the following KPIs, which
are unchanged from the prior year.
* NAV total return against the Performance Objective*^
* NAV per share total return against the peer group*^
* Average discount/premium of share price to NAV per share over the year^
* Ongoing charges ratio^
* Calculated on an annual basis and measured over three to five years.
^ Alternative Performance Measure (see Glossary beginning on page 80).
NAV per share total return – Performance Objective
The Directors regard the Company’s net asset value total return as being the
overall measure of value generated by the Portfolio Manager over the long
term. Total return reflects both the net asset value growth of the Company and
the dividends paid to shareholders. The performance objective of the Company
is inflation (represented by the Consumer Price Index) plus 6%, measured over
three to five years. The 6% represents 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. The Performance Objective
is designed to reflect that the Portfolio Manager’s approach does not
consider index composition when building and monitoring the portfolio.
During the year under review, the NAV per share total return was 9.7%
outperforming the Performance Objective by 0.9% (2024: NAV per share total
return of 1.3%, underperforming the Performance Objective by 11.7%). Over the
past three years, the annualised NAV per share total return was 4.6%,
underperforming the Performance Objective by 7.5%. Over five years, the
annualised NAV per share total return was 8.7%, underperforming the
Performance Objective by 2.3% per annum.
A full description of performance during the year under review is contained in
the Portfolio Manager’s Review beginning on page 12.
NAV total return – peer group
The Board also monitors the Company’s performance against its peer group of
four other investment trusts with similar investment mandates and one exchange
traded fund.
Over the one, three and five years ended 31 January 2025, the Company ranked
6th, 1st and 3rd, respectively, in its peer group. The Company’s performance
is discussed in the Chair’s Statement beginning on page 6; further
information can be found in the Portfolio Manager’s Review beginning on page
12.
Average discount/premium of share price to NAV per share
The Board believes that the principal drivers of an investment trust’s share
price discount or premium over the long term are investment performance and a
proactive marketing strategy. However, there can be volatility in the discount
or premium during the year. Therefore, the Board takes powers each year to buy
back and issue shares with a view to limiting the volatility of the share
price discount or premium, in normal market conditions.
During the year under review no new shares were issued by the Company. The
Company’s share price discount to the NAV per share was wider this year, in
comparison with last year. As a result, the Company repurchased 370,000 shares
during the year, at a total cost of £1.4 million, and at an average discount
of 14.0%. The Board keeps the level of the discount under close review. Please
refer to the Chair’s Statement and pages 30 and 31 for further information
regarding how the Board addressed this issue during the year.
Average discount of share price to NAV per share*^ during the year ended
31 January 2025 31 January 2024
11.5% 6.4%
Peer group average Peer group average
discount 10.8% discount 9.3%
* Source: Morningstar.
^ Alternative Performance Measure (see Glossary beginning on page 80).
Ongoing charges ratio
Ongoing charges represent the costs that the Company can reasonably expect to
pay from one year to the next, under normal circumstances. The Board continues
to be conscious of expenses and seeks to maintain a sensible balance between
high quality service and costs.
The Board therefore considers the ongoing charges ratio to be a KPI and
reviews the figure both in absolute terms and in relation to the Company’s
peers.
Ongoing charges ratio^
31 January 2025 31 January 2024
1.1% 1.1%
Peer group average 0.9% Peer group average 0.9%
^ Alternative Performance Measure (see Glossary beginning on page 80).
The Board believes that the Company’s relatively low turnover, and the
absence of any costs associated with gearing, will mean that the Company’s
overall running costs – should these costs be factored into the calculation
– are not necessarily as high as some other investment vehicles. It should
also be noted that the Company does not have a performance fee. Performance
fees are not included in the peer group average ongoing charges ratio.
Risk Management
The Board is responsible for managing the risks faced by the Company. Through
delegation to the Audit Committee, the Board has established procedures to
manage risk, to review the Company’s internal control framework and to
establish the level and nature of the principal risks the Company is prepared
to accept in order to achieve its long-term strategic objective. The Board,
meeting as the Audit Committee, has carried out a robust assessment of the
principal and emerging risks facing the Company with the assistance of the
AIFM. A process has been established to identify and assess risks, their
likelihood and the possible severity of their impact.
These principal risks are set out on the following pages with a high-level
summary of their management through mitigation and arrows to indicate any
change in assessment during the year. The risks faced by the Company have been
categorised under three headings as follows:
* Investment and financial risks
* Strategic risks
* Operational risks
A summary of these risks and their mitigation is set out below:
Principal Risks and Uncertainties Mitigation Change in risk assessment over the last financial year
Investment and Financial Risks
Market and Foreign Exchange Risk Increased
The Company’s portfolio is exposed to fluctuations in market prices (from both individual security prices and foreign exchange rates) in the regions and sectors in which it invests. Emerging markets in the Asia Pacific region, in which the portfolio companies operate, are expected to be more volatile than developed markets. To an extent, this risk is accepted as being inherent to the Company’s activities. However, the Board has set limits in the investment policy which ensure that the portfolio is diversified, reducing the risks associated with individual stocks and markets. Compliance with the investment objective and policy limits is monitored daily by Frostrow and Stewart Investors and reported to the Board monthly. Stewart Investors report at each Board meeting on the performance of the Company’s portfolio, including the impact of wider market trends and events. As part of its review of the viability of the Company, the Board also considers the sensitivity of the Company to changes in market prices and foreign exchange rates (see note 14 beginning on
page 75), how the portfolio would perform during a market crisis, and the ability of the Company to liquidate its portfolio if the need arose. Further details are included in the Going Concern and Viability Statements on page 29. In light of the material effect that recent geopolitical events have had on global markets and the volatility of certain markets that the Company invests in, during the year the Board increased the market risk rating.
Investment Performance Unchanged
Investment performance may not achieve the Company’s investment objective. Stewart Investors’ investment strategy and approach is expected to lead to performance that will deviate from that of both market indices and other investment companies investing in the Asia Pacific Region. To manage this risk, the Board: * reviews and challenges reports from Stewart Investors, which cover portfolio composition, asset allocation, concentration and performance at each Board meeting;
* reviews investment performance over the long term against the Company’s performance objective and peer group;
* monitors Stewart Investors’ performance against set KPIs; and
* formally reviews Stewart Investors’ appointment, including their performance, service levels and contractual arrangements, each year.
Principal Risks and Uncertainties Mitigation Change in assessment of risk over the last financial year
Strategic Risks
Geopolitical Risk Unchanged
Geopolitical events may have an adverse impact on the Company’s performance by causing exchange rate volatility, changes in tax or regulatory environments, a reduced investment universe and/or a fall in market prices. The Board regularly discusses global geopolitical issues and general economic conditions and developments. Political changes in recent years, particularly in the US and Asia Pacific region and more recently in the Middle East, as well as Ukraine and Eastern Europe, have increased uncertainty and volatility in financial markets. The Board discusses such developments and how they may impact decision making with Stewart Investors. The Board’s discussions with the Portfolio Manager often focus on geopolitical themes or trends that affect social and environmental sustainability, for example conflict minerals and water scarcity. These are often subjects on which the Portfolio Manager engages with investee companies.
Climate Change Risk Unchanged
The Board is cognisant of risks arising from climate change and the impact climate change events could have on portfolio companies and their operations, as well as on service providers to the Company. The Board regularly reviews global environmental, geopolitical and economic developments with the Portfolio Manager and the implications of these risks and events on portfolio construction and the Company’s operations. Given Stewart Investors’ focus on sustainability as set out on pages 17 to 21, the Board considers the portfolio to be relatively well positioned in this regard.
Black Swan Risk Unchanged
A significant unpredictable event (e.g. a pandemic/war/closure of a major shipping route) could lead to increased market volatility, and in a worst-case scenario, major global trade and supply chain breakdown resulting in significant volatility/declines in market prices. The Company’s service providers and their operational systems may also be affected. The Board monitors emerging risks and the robustness of Stewart Investors’ and other service providers’ business continuity plans. Stewart Investors’ investment approach includes a focus on sustainability and stewardship, which emphasises quality investments with strong balance sheets, a proven track record in previous crises, and the protection of shareholders’ funds, leaving them relatively well positioned to deal with unforeseen events. All of the Company’s service providers are required to have business continuity / disaster recovery policies and test them at least annually. Service providers provide updates on contingency plans for coping with major disruption to their operations.
Key Persons Risk Unchanged
There is a risk that the team responsible for managing the Company’s portfolio may leave their employment or may be prevented from undertaking their duties. The Board manages this risk by: * receiving regular reports from the Portfolio Manager, including any significant changes in the make-up of the portfolio management team;
* meeting the wider team supporting the designated lead manager, at both Board meetings and at the Portfolio Manager’s offices; and
* delegating to the Engagement & Remuneration Committee responsibility to perform an annual review of the service received from the Portfolio Manager, including, inter alia, the team supporting the lead manager and their succession planning.
Share Price Risk Increased
The Company is exposed to the risk, particularly if the investment strategy and approach are unsuccessful, that the Company underperforms its peer group, fails to achieve its Performance Objective and becomes unattractive to shareholders, resulting in a widening of the share price discount to the NAV per share. In managing this risk the Board: * reviews the Company’s investment objective and policy, and Stewart Investors’ investment approach, in relation to investment performance, market and economic conditions and the performance of the Company’s peers;
* regularly discusses the Company’s future development and strategy;
* undertakes a regular review of the level of the share price discount/premium to the NAV per share and considers ways in which share price performance may be enhanced, including the effectiveness of marketing, share issuance and share buybacks, where appropriate; and
* reviews an analysis of the shareholder register at each Board meeting and is kept informed of shareholder sentiment.
Noting recent developments in the investment trust sector, including widening share price discounts, and action taken by activist investors and arbitrageurs, the Board considered that this risk had increased during the year.
Principal Risks and Uncertainties Mitigation Change in risk assessment over the last financial year
Operational Risk
Operational Risk Unchanged
As an externally managed investment trust, the Company is reliant on the systems of its service providers for dealing, trade processing, administration, financial and other functions. If such systems were to fail or be disrupted (including, for example, as a result of cyber-crime or a pandemic) this could lead to a failure to comply with applicable laws, regulations and To manage these risks the Board: * periodically visits all key service providers to gain a better understanding of their control environment, and the processes in place to mitigate any disruptive events;
governance requirements and/or to a financial loss. Credit risk arising from the use of counterparties forms part of this risk. If a counterparty were to fail, the Company could be adversely affected through either delay in settlement or loss of assets. * receives a monthly report from Frostrow, which includes, inter alia, confirmation of compliance with applicable laws and regulations;
* reviews internal control reports and key policies of its service providers, including disaster recover procedures and business continuity plans;
* maintains a risk matrix with details of the risks to which the Company is exposed, the approach to managing those risks, the key controls relied upon and the frequency of the controls operation;
* receives updates on pending changes to the regulatory and legal environment and progress towards the Company’s compliance with such changes;
* has considered the increased risk of cyber-attacks and received reports and assurance from its service providers regarding the information security controls in place;
* has reviewed the arrangements (including sub-custodial arrangements) and services provided by the Custodian to ensure that the security of the Company’s custodial assets is maintained; and
* reviews Stewart Investors’ approved list of counterparties, the process for monitoring and adding to the approved counterparty list, and the Company’s use of those counterparties.
Under the terms of the contract with J.P. Morgan Chase Bank, the Company’s investments are required to be segregated from J.P. Morgan Chase Bank’s own assets. Further information on credit risk and other financial risks can be found in note 14 beginning on page 75.
Emerging Risks
Emerging risks are discussed as part of the risk review process. During the
year the Board identified the following emerging risks:
1. As well as offering investment opportunities, the development and
exploitation of technological breakthroughs, such as artificial intelligence,
may challenge and damage the addressable market, revenue and operations of
portfolio companies to the extent that they no longer offer the promise of
returns consistent with the Company’s investment objective.
2. The risk that increasing water scarcity will affect economic development,
potentially leading to mass migration and political conflict in the Asia
Pacific Region. This is a particular threat in India, where a high proportion
of the Company’s assets are invested, and which the UN identifies as one of
the most water-stressed countries in the world.
3. The continued rise of misinformation is contributing to the perceived decay
of political and social norms, and the diminishing role of generally accepted
truth and reason. This trend has encouraged mistrust in democratic
institutions and public discourse and the success in many countries of more
extreme political parties. Businesses and brands can be drawn into such
debates which may have uncertain direct or indirect consequences for portfolio
companies.
4. Heightened geopolitical tensions and assertive state behaviour are
increasing the risk of state-backed armed conflicts. Governments may leverage
military capabilities to advance strategic interests, potentially engaging in
proxy wars or direct military confrontations. This emerging risk could lead to
regional instability, disrupted supply chains and trade flows, regulatory
unpredictability, significant market volatility and adverse impacts on
economic growth.
Going Concern
The Company’s portfolio, investment activity, the Company’s cash balances
and revenue forecasts, and the trends and factors likely to affect the
Company’s performance are reviewed and discussed at each Board meeting. The
Board has considered a detailed assessment of the Company’s ability to meet
its liabilities as they fall due, including stress tests which modelled the
effects of substantial falls in portfolio valuations and liquidity constraints
on the Company’s NAV, cash flows and expenses. Further details of the stress
tests and scenarios considered can be found in the Audit Committee Report
beginning on page 51 and Notes 1 and 14 to the financial statements. Based on
the information available to the Directors at the date of this report, the
conclusions drawn in the Viability Statement (including the results of the
stress tests undertaken) below and the Company’s cash balances, 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 signing
this report and that, accordingly, it is appropriate to continue to adopt the
going concern basis in preparing the financial statements.
Viability Statement
The Directors have carefully assessed the Company’s financial position and
prospects as well as the principal risks facing the Company and have formed a
reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the next five financial years.
The Board has chosen a five year horizon in view of the long-term outlook
adopted by the Portfolio Manager when making investment decisions.
To make this assessment and in reaching this conclusion, the Audit Committee
has considered the Company’s financial position and its ability to liquidate
its portfolio and meet its liabilities as they fall due and notes the
following:
* The portfolio is comprised of investments traded on major international
stock exchanges. Based on historic analysis, it is estimated that
approximately 72% of the current portfolio could be liquidated within two
weeks (based on current market volumes with 20% participation);
* The Audit Committee has considered the viability of the Company under
various scenarios, including periods of acute stock market and economic
volatility. In view of the results of these stress tests, the Board has
concluded that it would expect to be able to ensure the financial stability of
the Company through the benefits of having a diversified portfolio of listed
and realisable assets. Further details of the stress tests can be found in
Note 1 to the financial statements;
* With an ongoing charges ratio of 1.1%, the expenses of the Company are
predictable and modest in comparison with the assets and there are no capital
commitments currently foreseen which would alter that position;
* The Board has considered the Company’s average cash balance over the past
three years and noted that the Company has consistently retained levels of
cash that are significantly higher than its annual operating expenses;
* The Company has no employees, only non-executive Directors. Consequently it
does not have redundancy or other employment related liabilities or
responsibilities; and
* The closed ended nature of the Company means that, unlike open ended funds,
it does not need to realise investments when shareholders wish to sell their
shares.
The Directors, as well as considering the potential impact of the principal
risks and various severe but plausible downside scenarios, have also made the
following assumptions in considering the Company’s longer-term viability:
* There will continue to be demand for investment trusts;
* The Portfolio Manager will continue to adopt a long-term view when making
investments, and anticipated holding periods will be at least five years;
* The Company invests in the securities of listed companies traded on
international stock exchanges to which investors will wish to continue to have
exposure;
* Regulation will not increase to a level that makes running the Company
uneconomical; and
* The performance of the Company will continue to be satisfactory.
Stakeholder Interests and Board Decision-Making (Section 172 of the Companies
Act 2006)
As an externally managed investment trust, the Company has no employees,
customers, operations or premises. Therefore, the Company’s key stakeholders
(other than its shareholders) are considered to be its service providers,
including its Portfolio Manager. The need to foster good business
relationships with service providers and maintain a reputation for high
standards of business conduct are central to the Directors’ decision-making
as the Board of an externally managed investment trust.
The following disclosure, which is required by the Companies Act 2006 and the
AIC Code of Corporate Governance, describes how the Directors have had regard
to the views of the Company’s stakeholders in their decision-making.
STAKEHOLDER GROUP HOW THE BOARD HAS ENGAGED WITH THE COMPANY’S STAKEHOLDERS
Investors The Board’s key mechanisms of engagement with investors include: * The Annual General Meeting
* The Company’s website which hosts reports, articles and insights, and monthly fact sheets
* One-to-one investor meetings
* Group meetings with professional investors
* The Annual and Half yearly Reports
The Portfolio Manager and the Company’s broker, on behalf of the Board, completed a programme of investor relations throughout the year, reporting to the Board on the feedback received. In addition, the Chair was (and remains) available to engage with the
Company’s shareholders.
Portfolio Manager The Board met regularly with Stewart Investors (the Portfolio Manager) throughout the year, both formally at quarterly Board meetings and informally, as required. The Board engaged with the portfolio management team, discussing the Company’s overall
performance and strategy, as well as developments in individual portfolio companies and wider macroeconomic developments. The Board periodically visits different countries and investee companies in the Asia Pacific Region with the Portfolio Manager, to
gain first-hand insight into the Portfolio Manager’s investment process and engagement with portfolio companies. The Board considers these visits to be an important part of their oversight of the Portfolio Manager. This year, the Board accompanied the
Portfolio Manager to meetings with portfolio companies in Mumbai, India, engaging with representatives from portfolio companies and potential investee companies.
Other Service Providers The Board met regularly with Frostrow (the AIFM), representatives of which attend every quarterly Board meeting to provide updates on risk management, accounting, administration, corporate governance and regulatory matters. The Board, meeting as the
Engagement and Remuneration Committee, reviewed the performance of all the Company’s service providers, receiving feedback from Frostrow in their capacity as AIFM and Company Secretary. The AIFM, which is responsible for the day-to-day operational
management of the Company, meets and interacts with the other service providers including the Depositary, the Custodian and the Registrar, on behalf of the Board, on a daily basis. This can be through email, one-to-one meetings and/or regular written
reporting. The Audit Committee met with BDO LLP to review the audit plan for the year, agree their remuneration, review the outcome of the annual audit and to assess the quality and effectiveness of the audit process. Please refer to the Audit Committee
Report beginning on page 51 for further information.
Portfolio Companies The Board supports and endorses the Portfolio Manager’s approach to responsible and sustainable investing. The Board has delegated authority to Stewart Investors, as Portfolio Manager, to engage with the companies held in the portfolio and to vote the
shares owned by the Company. The Board reviews the Portfolio Manager’s voting and engagement reports, and any exceptions to the Portfolio Manager’s position statement on harmful and controversial products, services or practices. As mentioned above, the
Board periodically visits different countries and investee companies in the Asia Pacific Region with the Portfolio Manager and during the year, the Board engaged directly with representatives from companies based in Mumbai, India.
KEY AREAS OF ENGAGEMENT MAIN DECISIONS AND ACTIONS TAKEN
Investors * Ongoing dialogue with shareholders concerning the strategy of the Company, performance and the portfolio. The Board and the Portfolio Manager provided updates on performance via RNS, the Company’s website and the usual financial reports and monthly fact sheets. The Board continued to monitor share price movements closely, both in absolute terms and in relation
* Share price performance. to the Company’s peer group. As the discount widened during the year, the Board. initiated a limited buyback programme. As a result, 370,000 shares were bought back during the year. No shares were issued at a premium to the net asset value per share during
* The Portfolio Manager's approach to sustainable development and investment. the year. The Board, meeting as the Sales, Marketing and Communications Committee, also continued its work to improve the visibility of the Company and the Portfolio Manager’s sustainability credentials, in particular to retail investors. Further
information is provided in the Chair’s Statement beginning on page 6.
Portfolio Manager * Portfolio composition, performance, outlook and business updates. The Board agreed that high standards of research and decision-making have been maintained and the Portfolio Manager’s strategy has been implemented consistently, leading to good returns over the past year and over longer periods. The Board considered that
* Matters relating to sustainability, including the sustainability credentials of the portfolio companies, and regulatory developments affecting the Company itself. accompanying the Portfolio Manager to meetings with portfolio companies in India was a useful part of this assessment. The Board concluded that it was in the interests of shareholders for Stewart Investors to continue in their role as Portfolio Manager on
* The promotion and marketing strategy of the Company. the same terms and conditions. Further information is provided on page 46. The Sales, Marketing and Communications Committee continued to work with the Portfolio Manager on improving the marketing strategy of the Company. Further information is provided in
* The terms and conditions of the Portfolio Management Agreement. the Chair’s Statement beginning on page 6. The Board considered and subsequently approved (subject to shareholder approval) a proposal from Stewart Investors to widen the investment policy to include investment in Australia and New Zealand. Further
information is provided in the Chair’s Statement and the Notice of AGM. The Portfolio Management Agreement was restated and amended to reflect the Portfolio Manager’s governance framework for complying with the FCA’s Consumer Duty and to reflect the
Portfolio Manager’s responsibility for marketing the Company. The amendments were not considered to be material.
Other Service Providers * The quality of service provision and the terms and conditions under which service providers are engaged. The Board concluded that it was in the interests of shareholders for Frostrow to continue in their role as AIFM on the same terms and conditions. See pages 46 and 47 for further details. The Board agreed that the Company’s other service providers continued
* The assessment of the effectiveness of the audit and the Auditor's reappointment. to perform satisfactorily and should continue in their roles. The Board approved the Audit Committee’s recommendation to propose to shareholders that BDO LLP be re-appointed as the Company’s auditor for a further year. Please refer to the Audit Committee
* The terms and conditions under which the Auditor is engaged. Report beginning on page 51 and the Notice of AGM beginning on page 101 for further information.
Portfolio Companies * Business and investment plans. Investment decisions are made at the discretion of the Portfolio Manager, however the Board values the opportunity to engage directly with representatives from portfolio companies. Direct engagement enhances the Directors’ understanding of the relevant
* ESG and sustainability matters. companies, as well as their understanding of the Portfolio Manager’s investment process.
Social, Human Rights and Environmental Matters
As an externally managed investment trust, the Company does not have any
employees or maintain any premises, nor does it undertake any manufacturing or
other physical operations itself. All its operational functions are outsourced
to third party service providers. Therefore the Company has no material,
direct impact on the environment or any particular community and, as a result,
the Company itself has no environmental, human rights, social or community
policies.
The Portfolio Manager engages with the Company’s underlying investee
companies in relation to their corporate governance practices and the
development of their policies on social, community and environmental matters.
The Portfolio Manager (under their parent, legal entity name, First Sentier
Investors) is a Tier 1 signatory to the UN Principles of Responsible
Investment, an investor signatory of Climate Action 100+ and an investor
member of the Institutional Investors Group on Climate Change.
Integrity and Business Ethics
The Board is committed to carrying out the Company’s business in an honest
and fair manner with a zero-tolerance approach to bribery, tax evasion and
corruption. As such, policies and procedures are in place to prevent this and
can be found on the Company’s website. In carrying out the Company’s
activities, the Board aims to conduct itself responsibly, ethically and
fairly, including in relation to social and human rights issues.
Taskforce for Climate-Related Financial Disclosures (“TCFD”)
The Company notes the TCFD recommendations on climate-related financial
disclosures. The Company is an investment trust and, as such, it is exempt
from the Listing Rules requirement to report against the TCFD framework.
Stewart Investors is committed to reporting annually on its progress against
its climate change objectives which are set out in its climate change
statement10. This reporting is modelled on TCFD recommendations to the degree
it is relevant to their activities and to support shareholders with their
reporting requirements.
10
https://www.stewartinvestors.com/uk/en/private-investor/insights/climate-change-statement.html
Stewart Investors have signed up to the Net Zero Asset Managers Initiative.
They published their first climate report11 in 2022 which provides details
about their plan; this will be updated annually. They are engaging with their
investee companies to set ambitious targets and have credible action plans to
achieve net zero by 2050. They are targeting outcomes that are aligned with
their commitment to the Net Zero Asset Managers Initiative and prioritising
engagement with companies that have inadequate disclosures and targets, and/or
rising emissions.
11
https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/Climate-Report-2021.pdf
Climate reporting, at both the Stewart Investors12 and Pacific Assets Trust13
level, is available via the Company’s website.
12 https://www.stewartinvestors.com/all/insights/annual-report-2023.html
13
https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/PAC-TCFD-report.pdf
https://www.stewartinvestors.com/content/dam/stewartinvestors/pdf/annual-report-2023/pac/pac-annual-review-2023.pdf
Performance and Future Developments
A review of the Company’s performance over the year and the outlook for the
Company can be found in the Chair’s Statement beginning on page 6 and in the
Portfolio Manager’s Review beginning on page 12.
The Company’s overall strategy remains unchanged.
By order of the Board
Frostrow Capital LLP
Company Secretary
29 April 2025
Report of the Directors
The Directors present this Annual Report on the affairs of the Company
together with the audited financial statements and the Independent Auditor’s
Report for the year ended 31 January 2025.
Business and Status of the Company
The Company is registered as a public limited company in Scotland (Registered
Number SC091052) and is an investment company within the terms of Section 833
of the Companies Act 2006 (the “Act”). Its shares are admitted to the
closed-ended investment funds category of the FCA’s Official List and to
trading on the main market of the London Stock Exchange, which is a regulated
market as defined in Section 1173 of the Act.
The Company has been accepted as an investment trust under Section 1158 of the
Corporation Taxes Act 2010 and Part 2 Chapter 1 of Statutory Instrument
2011/2999. This approval relates to accounting periods commencing on or after
1 February 2012. The Directors are of the opinion that the Company has
conducted its affairs so as to be able to retain such approval.
It is the Directors’ intention that the Company should continue to manage
its affairs so as to be a qualifying investment for inclusion in the stocks
and shares components of an Individual Savings Account (“ISA”) and Junior
ISA.
The Company is a member of the Association of Investment Companies.
Alternative Performance Measures
The financial statements (on pages 66 to 79) set out the required statutory
reporting measures of the Company’s financial performance. In addition, the
Board assesses the Company’s performance against a range of criteria which
are viewed as particularly relevant for investment trusts. These measures are
summarised on page 1 and explained in greater detail in the Strategic Report,
under the heading ‘Key Performance Indicators’ on pages 24 and 25. The
Directors believe that these measures enhance the comparability of information
between reporting periods and aid investors in understanding the Company’s
performance.
The measures used for the year under review have remained consistent with the
prior year.
Definitions of the terms used and the basis of their calculation are set out
in the Glossary beginning on page 80.
Annual General Meeting
THE FOLLOWING INFORMATION TO BE DISCUSSED AT THE FORTHCOMING ANNUAL GENERAL
MEETING IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt about the action you should take, you should seek
advice from your stockbroker, bank manager, solicitor, accountant or other
financial adviser authorised under the Financial Services and Markets Act 2000
(as amended). If you have sold or transferred all of your ordinary shares in
the Company, you should pass this document, together with any other
accompanying documents, including the form of proxy, at once to the purchaser
or transferee, or to the stockbroker, bank or other agent through whom the
sale or transfer was effected, for onward transmission to the purchaser or
transferee.
Resolutions relating to the following items of business will be proposed at
the Annual General Meeting to be held on 1 July 2025.
Resolution 11 Approval of the proposed, amended Investment Policy
Resolution 12 Authority to allot shares
Resolution 13 Authority to disapply pre-emption rights
Resolution 14 Authority to buy back shares
Resolution 15 Authority to hold General Meetings (other than the AGM) on at
least 14 clear days’ notice The full text of the resolutions can be found in
the Notice of Annual General Meeting on pages 101 and 102.
Explanatory notes regarding the resolutions can be found on pages 106 to 108.
Results and Dividend
The results attributable to shareholders for the year are shown on page 66.
Details of the Company’s dividend record can be found on page 5 and the
dividend policy is outlined in the Strategic Report on page 23.
A final dividend of 4.9p per ordinary share has been proposed and, subject to
shareholder approval, will be paid on 11 July 2025 to shareholders on the
register on 13 June 2025. The associated ex-dividend date is 12 June 2025.
Capital Structure
As at 31 January 2025, there were 120,588,386 ordinary shares of 12.5p each
(“shares”) in issue (2024: 120,958,386). All shares rank equally for
dividends and distributions. Each shareholder is entitled to one vote on a
show of hands and, on a poll, to one vote for every share held. Details of the
substantial shareholders in the Company are listed on page 47.
At the start of the year under review, the Directors had shareholder authority
to issue up to 12,095,838 shares on a non-pre-emptive basis and to buy back up
to 18,131,662 shares in the market. At the Company’s annual general meeting
held on Tuesday, 9 July 2024, these authorities expired and new authorities to
allot up to 12,095,838 shares (representing 10% of the Company’s issued
share capital) on a non-pre-emptive basis and to buy back up to 18,131,662
shares (representing 14.99% of the Company’s issued share capital) were
granted.
During the year, no new shares were issued (2024: nil). 370,000 shares were
repurchased and then cancelled during the year (2024: nil) and there are no
shares held in Treasury.
The powers to issue or buy back the Company’s shares require the relevant
resolution to be passed by shareholders. Proposals for the renewal of the
Board’s authorities to issue and buy back shares are detailed in the Notice
of AGM beginning on page 101.
There are no restrictions concerning the transfer of securities in the
Company; no special rights with regard to control attached to securities; no
restrictions on voting rights; no agreements between holders of securities
regarding their transfer known to the Company; and no agreements which the
Company is party to that might affect its control following a successful
takeover bid.
Financial Instruments
The Company’s financial instruments comprise its investment portfolio, cash
balances, debtors and creditors which arise directly from its operations such
as sales and purchases awaiting settlement, and accrued income. The financial
risk management objectives and policies arising from its financial instruments
and the exposure of the Company to risk are disclosed in note 14 to the
financial statements, beginning on page 75.
Principal Service Providers
Portfolio Manager
The Company’s investment portfolio has been managed by Stewart Investors
since 1 July 2010. Stewart Investors are engaged under the terms of a
Portfolio Management Agreement (the “PMA”) effective from 24 March 2025,
which replaced two previous agreements.
Under the terms of the PMA, Stewart Investors provide, inter alia, the
following services:
* seeking out and evaluating investment opportunities;
* recommending the manner by which cash should be invested, divested, retained
or realised;
* advising on how rights conferred by the investments should be exercised;
* analysing the performance of investments made;
* advising the Company in relation to trends, market movements and other
matters which may affect the investment objective and policy of the Company;
and
* marketing and investor relations services.
The PMA is terminable by six months’ notice. Stewart Investors complied with
the terms of the PMA dated 30 April 2021 throughout the year to 31 January
2025. Stewart Investors are entitled to a fee, paid quarterly, of 0.85% of the
Company’s net assets.
Alternative Investment Fund Manager
Frostrow Capital LLP acts as the AIFM. It is an independent provider of
services to the investment companies sector.
The Board resolved to appoint Frostrow Capital LLP as the Company’s AIFM
with effect from 30 April 2021 on the terms and subject to the conditions of
the alternative investment fund management agreement between the Company and
Frostrow (the “AIFM Agreement”). The AIFM Agreement assigns to Frostrow
overall responsibility to manage the Company, subject to the supervision,
review and control of the Board, and ensures that the relationship between the
Company and Frostrow is compliant with the requirements of the AIFMD.
Frostrow, under the terms of the AIFM Agreement provides, inter alia, the
following services:
* risk management services;
* administrative and secretarial services;
* advice and guidance in respect of corporate governance requirements;
* maintenance of the Company’s accounting records;
* preparation and dispatch of the annual and half yearly reports; and
* ensuring compliance with applicable tax, legal and regulatory requirements.
Under the AIFM Agreement, Frostrow receives a fixed fee of £75,000 per annum
plus 0.11% per annum of net assets up to £250 million, plus 0.075% per annum
of net assets in excess of £250 million.
The AIFM Agreement is terminable on six months’ notice given by either
party.
Further details of the fees payable to Stewart Investors and Frostrow Capital
LLP during the year are set out in note 3 to the financial statements on page
70.
Depositary and Custodian
The Board resolved to appoint J.P. Morgan Europe Limited (the
“Depositary”) as the Company’s depositary in accordance with the AIFMD
on the terms and subject to the conditions of the depositary agreement between
the Company, Frostrow and the Depositary (the “Depositary Agreement”),
with effect from 30 April 2021.
The Depositary provides the following services, inter alia, under its
agreement with the Company:
* safekeeping and custody of the Company’s custodial investments and cash;
* processing of transactions; and
* foreign exchange services.
The Depositary must take reasonable care to ensure that the Company is managed
in accordance with the Financial Conduct Authority’s Investment Funds
Sourcebook, the AIFMD and the Company’s Articles of Association.
Under the terms of the Depositary Agreement, the Depositary is entitled to
receive an annual fee of the higher of £30,000 or 0.015% of the net assets of
the Company up to £150 million, 0.0125% of the net assets in excess of £150
million and up to £300 million, 0.01% of the net assets in excess of
£300 million and up to £500 million and 0.005% of the net assets in excess
of £500 million.
The Depositary has delegated the custody and safekeeping of the Company’s
assets to JPMorgan Chase Bank N.A., London branch under a Global Custody
Agreement. Custody fees are charged according to the jurisdiction in which the
holdings are based. Variable transaction fees are also chargeable.
The notice period on the Depositary Agreement is 90 days if terminated by the
Company and 120 days if terminated by the Depositary.
Portfolio Manager and AIFM Evaluation and Re-Appointment
The review of the performance of Stewart Investors as Portfolio Manager and
Frostrow Capital LLP as AIFM is a continuous process carried out by the Board
and the Engagement and Remuneration Committee (the “ERC”), with a formal
evaluation being undertaken each year. As part of this process the Board
monitors the services provided by Stewart Investors and Frostrow and receives
regular reports and views from them. The Board also receives comprehensive
performance measurement reports to enable it to determine whether or not the
Performance Objective set by the Board has been met.
The ERC formally reviewed the appointment of Stewart Investors in January 2025
with a recommendation being made to the Board to continue their appointment on
the existing terms.
The Board believes the continuing appointment of Stewart Investors, under the
terms described earlier in this report, is in the interests of shareholders.
In coming to this decision the Board took into consideration the following
reasons:
* the terms of the Portfolio Management Agreement, in particular the level and
method of remuneration and the notice period, and the comparable arrangements
of a group of the Company’s peers; and
* the quality and depth of experience of the Stewart Investors team and the
level of performance of the portfolio in absolute terms and also by reference
to the Performance Objective and the Company’s peer group over the medium to
longer term.
The ERC also formally reviewed Frostrow’s appointment in January 2025 with a
formal recommendation being made to the Board. The Board believes the
continuing appointment of Frostrow Capital LLP, under the terms described
earlier in this report, is in the interests of shareholders. In coming to this
decision, the Board took into consideration the quality and depth of
experience of the management, administrative and company secretarial team that
Frostrow allocates to the Company.
Directors
Directors’ and Officers’ Liability Insurance Cover
Directors’ and officers’ liability insurance cover was maintained by the
Board during the year ended 31 January 2025 and to the date of this report.
It is intended that this cover will continue throughout the year ending 31
January 2026 and subsequent years.
Directors’ Indemnities
As at the date of this report, a deed of indemnity has been entered into by
the Company and each of its Directors under which the Company has agreed to
indemnify each Director, to the extent permitted by law, in respect of certain
liabilities as a result of carrying out his or her role as a Director of the
Company. Each Director is indemnified against the costs of defending any
criminal or civil proceedings or any claim by the Company or a regulator as
they are incurred provided that where the defence is unsuccessful the Director
must repay those defence costs to the Company. The indemnities are qualifying
third party indemnity provisions for the purposes of the Companies Act 2006.
A copy of each deed of indemnity is available for inspection at Frostrow’s
offices during normal business hours and will be available for inspection at
the AGM.
Articles of Association
Amendment of the Company’s Articles of Association requires a special
resolution to be passed by shareholders.
The Directors have not proposed any changes to the Articles of Association
this year.
Substantial Interests in Share Capital
As at 31 January 2025 the Company had been notified of the following
substantial interests in the Company’s voting rights:
Number of shares held % held
Evelyn Partners 14,520,035 12.0
Rathbones 12,374,668 10.2
Brewin Dolphin (Ireland) 11,332,765 9.4
Charles Stanley 6,038,409 4.9
These disclosures reflect those shareholders that have notified the Company of
a substantial interest in its shares when they have crossed certain thresholds
and may not reflect their current holdings. The table does not reflect the
full range of investors in the Company. The shareholder register is
principally comprised of private wealth managers and retail investors who own
their shares through a variety of online platforms. A profile of the
Company’s ownership is shown on page 99.
After the year end, on 4 February 2025, EQ Investors notified the Company that
they held 4,099,121 shares (3.4%) in the Company. At the date of this report,
there had been no other substantial interests or changes to substantial
interests notified to the Company.
Beneficial Owners of Shares – Information Rights
The beneficial owners of shares who have been nominated by the registered
holder of those shares to receive information rights under Section 146 of the
Companies Act 2006 are required to direct all communications to the registered
holder of their shares rather than to the Company’s registrar, Equiniti, or
to the Company directly.
Modern Slavery Act 2015
The Company does not provide goods or services in the normal course of
business, and as a financial investment vehicle, does not have customers.
Therefore, the Directors do not consider that the Company is required to make
a statement under the Modern Slavery Act 2015 in relation to slavery or human
trafficking. The Company’s suppliers are typically professional advisers and
the Company’s supply chains are considered to be low risk in this regard.
Anti-Bribery and Corruption Policy
The Board has adopted a zero tolerance approach to instances of bribery and
corruption. Accordingly, it expressly prohibits any Director or associated
persons when acting on behalf of the Company, from accepting, soliciting,
paying, offering or promising to pay or authorise any payment, public or
private, in the United Kingdom or abroad to secure any improper benefit for
themselves or for the Company.
The Board applies the same standards to its service providers in their
activities for the Company.
A copy of the Company’s Anti Bribery and Corruption Policy can be found on
its website at www.pacific-assets.co.uk. The policy is reviewed annually by
the Audit Committee.
Prevention of the Facilitation of Tax Evasion
In response to the implementation of the Criminal Finances Act 2017, the Board
adopted a zero-tolerance approach to the criminal facilitation of tax evasion.
A copy of the Company’s policy on preventing the facilitation of tax evasion
can be found on the Company’s website www.pacific-assets.co.uk. The policy
is reviewed annually by the Audit Committee.
Global Greenhouse Gas Emissions
The Company is an investment trust, with no employees or premises, nor has it
any financial or operational control of the assets it owns. It has no
greenhouse gas emissions to report from its operations, nor does it have
responsibility for any other emissions producing sources under the Companies
Act 2006 (Strategic Reports and Directors’ Reports) Regulations 2013 or the
Companies (Directors’ Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018, including those within the Company’s
underlying investment portfolio. The Company consumed less than 40,000 kWh of
energy during the year and therefore is exempt from the disclosures required
under the Streamlined Energy and Carbon Reporting criteria.
Political Donations
The Company has not made and does not intend to make any political donations.
Corporate Governance
The Corporate Governance report, which includes the Company’s corporate
governance policies and forms part of the Report of the Directors, is set out
on pages 36 to 43.
Common Reporting Standard (“CRS”)
CRS is a global standard for the automatic exchange of information
commissioned by the Organisation for Economic Cooperation and Development and
incorporated into UK law by the International Tax Compliance Regulations 2015.
CRS requires the Company to provide certain additional details to HMRC in
relation to certain shareholders. The reporting obligation began in 2016 and
is an annual requirement. The Registrar, Equiniti, has been engaged to collate
such information and file the reports with HMRC on behalf of the Company.
UK Sanctions
The Board has made due diligence enquiries of the service providers that
process the Company’s shareholder data, to ensure the Company’s compliance
with the UK sanctions regime. The relevant service providers have confirmed
that they check the Company’s shareholder data against the UK sanctions list
on a daily basis. At the date of this report, no sanctioned individuals had
been identified on the Company’s shareholder register. The Board notes that
stockbrokers and execution-only platforms also carry out their own due
diligence.
By order of the Board
Frostrow Capital LLP
Company Secretary
29 April 2025
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they are required to prepare the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice, including FRS 102 ‘The Financial Reporting Standard applicable in
the UK and the Republic of Ireland’.
Under company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period. In preparing these financial statements, the Directors are required
to:
* select suitable accounting policies and then apply them consistently;
* make judgements and accounting estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
* prepare the financial statements on a going concern basis unless it is
inappropriate to presume that the Company will continue in business; and
* prepare a directors’ report, a strategic report and a directors’
remuneration report which comply with the requirements of the Companies Act
2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities. The Directors are responsible for ensuring
that the Annual Report and financial statements, taken as a whole, are fair,
balanced, and understandable and provide the information necessary for
shareholders to assess the Company’s performance, business model and
strategy.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors’ Report, Directors’ Remuneration
Report and Corporate Governance Statement which comply with that law and those
regulations.
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on the Company’s website, which is maintained
by the Portfolio Manager. Financial statements are published on the
Company’s website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company’s website is the responsibility of the Directors. The
Directors’ responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Disclosure of Information to the Auditor
The Directors who held office at the date of approval of this report confirm
that, so far as they are each aware, there is no relevant audit information of
which the Company’s auditor is unaware; and each Director has taken all the
steps that he/she might reasonably be expected to have taken as a Director to
make himself/ herself aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
Responsibility Statement of the Directors in respect of the Annual Financial
Report
We confirm that to the best of our knowledge:
* the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and the return of the Company for the year ended 31 January
2025; and
* the Annual Report includes a fair review of the development and performance
of the business and the financial position of the Company, together with a
description of the principal risks and uncertainties that they face.
We consider the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company’s position and performance, business model and strategy.
On behalf of the Board
Andrew Impey
Chair
29 April 2025
Income Statement
for the year ended 31 January 2025
Year ended 31 January 2025 Year ended 31 January 2024
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains/(losses) on investments 8 - 49,989 49,989 - (2,018) (2,018)
Exchange differences - (414) (414) - (642) (642)
Income 2 9,687 - 9,687 7,861 - 7,861
Portfolio management
and AIFM fees 3 (1,211) (3,634) (4,845) (1,123) (3,369) (4,492)
Other expenses 4 (863) - (863) (795) - (795)
Return/(loss) before taxation 7,613 45,941 53,554 5,943 (6,029) (86)
Taxation 5 (1,049) (7,684) (8,733) (772) (5,203) (5,975)
Return/(loss) after taxation 6,564 38,257 44,821 5,171 (11,232) (6,061)
Return/(loss) per share (p) 7 5.4 31.7 37.1 4.3 (9.3) (5.0)
The Total column of this statement represents the Company’s Income
Statement. The Revenue and Capital columns are supplementary to this and are
prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the Income Statement derive from continuing
operations.
The Company had no recognised gains or losses other than those shown above and
therefore no separate Statement of Other Comprehensive Income has been
presented.
The accompanying notes on pages 69 to 79 are an integral part of these
statements.
Statement of Changes in Equity
for the year ended 31 January 2025
Ordinary Capital
share Share redemption Special Capital Revenue
capital premium reserve reserve reserve reserve Total
Note £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 January 2023 15,120 8,811 1,648 14,572 426,502 7,009 473,662
(Loss)/return after taxation - - - - (11,232) 5,171 (6,061)
Ordinary dividends paid 6 - - - - - (2,782) (2,782)
At 31 January 2024 15,120 8,811 1,648 14,572 415,270 9,398 464,819
Return after taxation - - - - 38,257 6,564 44,821
Repurchase of own shares for cancellation (46) - 46 - (1,361) - (1,361)
Ordinary dividends paid 6 - - - - - (4,838) (4,838)
At 31 January 2025 15,074 8,811 1,694 14,572 452,166 11,124 503,441
The accompanying notes on pages 69 to 79 are an integral part of these
statements.
Statement of Financial Position
as at 31 January 2025
2025 2024
Notes £’000 £’000 £’000 £’000
Fixed assets
Investments 8 510,203 470,109
Current assets
Debtors 9 1,252 1,032
Cash 8,028 6,191
9,280 7,223
Creditors (amounts falling due within one year) 10 (2,397) (1,307)
Net current assets 6,883 5,916
Total assets less current liabilities 517,086 476,025
Creditors (amounts falling due after one year)
Provision for liabilities 11 (13,645) (11,206)
Net assets 503,441 464,819
Capital and reserves
Called up share capital 12 15,074 15,120
Share premium account 8,811 8,811
Capital redemption reserve 15 1,694 1,648
Special reserve 15 14,572 14,572
Capital reserve 15 452,166 415,270
Revenue reserve 15 11,124 9,398
Equity shareholders’ funds 503,441 464,819
Net asset value per Ordinary Share (p) 13 417.5p 384.3p
The financial statements on pages 66 to 79 were approved and authorised for
issue by the Board of Directors on 29 April 2025 and signed on its behalf by:
Andrew Impey
Chair
The accompanying notes on pages 69 to 79 are an integral part of these
statements.
Pacific Assets Trust Public Limited Company – Company Registration Number:
SC091052 (Registered in Scotland)
Notes to the Financial Statements
1. Accounting Policies
A summary of the principal accounting policies adopted is set out below or as
appropriate within the relevant note to the financial statements.
(a) Basis of Accounting
These financial statements have been prepared under UK Company Law, FRS 102
‘The Financial Reporting Standard applicable in the UK and Ireland’, and
in accordance with guidelines set out in the Statement of Recommended Practice
(“SORP”), published in July 2022, for Investment Trust Companies and
Venture Capital Trusts issued by the Association of Investment Companies, the
historical cost convention, as modified by the valuation of investments at
fair value through profit or loss.
The Company has taken advantage of the exemption from preparing a Cash Flow
Statement under FRS 102, as it is an investment fund whose investments are
substantially highly liquid, carried at fair (market) value and provides a
statement of changes in equity.
The Board is of the opinion that the Company is engaged in a single segment of
business, namely investing in accordance with the Investment Objective, and
consequently no segmental analysis is provided.
Going concern
The Directors are required to make an assessment of the Company’s ability to
continue as a going concern and have concluded that the Company has adequate
resources to continue in operational existence for at least 12 months from the
date these financial statements were approved.
In making this assessment, the Directors have considered a wide variety of
emerging and current risks to the Company, as well as the mitigation
strategies that are in place. The Board has also reviewed stress-testing and
scenario analyses prepared by the AIFM. The stress tests and scenario analyses
considered the effect of various downturns, based on historic bear markets, on
the asset value and expenses of the Company. The tests modelled the impact of
decreases of up to and over 80% on the value of the investment portfolio and
decreases in current market liquidity of up to 80%.
These tests are carried out as an arithmetic exercise, which can apply equally
to any set of circumstances in which asset value and income are significantly
impaired. It was concluded that even in an extreme downside scenario, the
Company would be able to continue to meet its liabilities as they fell due.
Whilst the economic future is uncertain, the opinion of the Directors is that
there is no foreseeable downside scenario that would threaten the Company’s
ability to continue to meet its liabilities as they fall due.
Based on the information available to the Directors at the time of this
report, including the results of the stress tests and scenario analyses, and
having taken account of the liquidity of the investment portfolio, the
Company’s cash flow and borrowing position (the Company is not currently
geared), the Directors are satisfied that the Company has adequate financial
resources to continue in operation for at least 12 months from the date of
signing these financial statements and that, accordingly, it is appropriate to
adopt the going concern basis.
Significant Judgement
There is one significant judgement involved in the presentation of the
Company’s accounts, being the judgement on the functional currency of the
Company.
The Company’s investments are made in foreign currencies, however the Board
considers the Company’s functional currency to be sterling. In arriving at
this conclusion, the Board considered that the shares of the Company are
listed on the London Stock Exchange, it is incorporated in the United Kingdom
and pays dividends and expenses in sterling.
Presentation of the Income Statement
In order to reflect better the activities of an investment trust company and
in accordance with the SORP, supplementary information which analyses the
Income Statement between items of a revenue and capital nature has been
presented alongside the Income Statement. The net revenue return is the
measure the Directors believe appropriate in assessing the Company’s
compliance with certain requirements set out in Section 1158 of the
Corporation Tax Act 2010.
(b) Foreign Currencies
Transactions denominated in foreign currencies are translated into sterling at
the exchange rates on the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated at the rate
ruling at the date of the Statement of Financial Position. Profits or losses
on the translation of foreign currency balances, whether realised or
unrealised, are taken to the capital or revenue column of the Income
Statement, depending on whether the gain or loss is of a capital or revenue
nature.
All values are rounded to the nearest thousand pounds (£’000) except where
otherwise indicated.
(c) Cash
Cash is defined as cash at bank and money market funds that are readily
convertible to known amounts of cash and subject to insignificant risk of
changes in value.
2. Income
2025 2024
£’000 £’000
Overseas dividends 9,469 7,701
Interest income 218 160
9,687 7,861
Dividends receivable are recognised on the ex-dividend date. Where no
ex-dividend date is quoted, dividends are recognised when the Company’s
right to receive payment is established. Overseas dividends are gross of
withholding tax.
Where the Company has elected to receive its dividends in the form of
additional shares rather than cash the amount of cash foregone is recognised
in the revenue column with any excess above this recognised in the capital
column.
3. Portfolio Management and AIFM Fees
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Portfolio management fee
– Stewart Investors 1,075 3,227 4,302 996 2,989 3,985
AIFM fee – Frostrow 136 407 543 127 380 507
1,211 3,634 4,845 1,123 3,369 4,492
Frostrow’s AIFM fee is for risk management, corporate management, company
secretarial and administrative services. Further information regarding Stewart
Investors and Frostrow’s fees can be found on pages 45 and 46.
All expenses and interest are accounted for on an accruals basis. Expenses and
interest are charged to the Income Statement as revenue items except where
incurred in connection with the maintenance or enhancement of the value of the
Company’s assets and taking account of the expected long-term returns, when
they are split as follows:
Portfolio Management and AIFM fees payable have been allocated 25%
to revenue and 75% to capital.
Transaction costs incurred on the purchase and sale of investments
are taken to the Income Statement as a capital item, within gains on
investments held at fair value through profit or loss.
4. Other Expenses
2025 2024
£’000 £’000
Directors’ fees 215 189
Employers NIC on directors’ remuneration 16 15
Auditor’s remuneration for annual audit 48 46
Depository fees 70 57
Custody fees 195 175
Registrar fees 28 25
Broker retainer 45 38
Listing fees 25 24
Legal and professional fees 26 41
Other expenses 195 185
Total expenses 863 795
For accounting policy, see note 3 on the prior page.
5. Taxation
(a) Analysis of Charge in the Year
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Overseas taxation 1,224 - 1,224 985 - 985
Indian capital gains tax charge (175) 7,684 7,509 (213) 5,203 4,990
1,049 7,684 8,733 772 5,203 5,975
Overseas tax arose as a result of irrecoverable withholding tax on overseas
dividends and Indian capital gains tax.
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. £2,439,000 (2024: £1,456,000) of the charge
arose on unrealised long-term capital gains on securities still held and is
included in deferred taxation on unrealised capital gains on Indian securities
as set out in note 11 on page 75. £5,070,000 (2024: £3,534,000) of the
charge relates to capital gains tax paid on disposals during the year.
(b) Reconciliation of Tax Charge
The UK corporation tax rate was 19% until 31 March 2023 and 25% from 1 April
2023, giving an effective rate of 25.0% for the year (2024: 24.0%). The tax
assessed for the year is lower than the corporation tax rate. The differences
are explained below.
The differences are explained below:
2025 2024
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Total return on ordinary activities
before tax 7,613 45,941 53,554 5,943 (6,029) (86)
Corporation tax charged at 25.0%
(2024: 24.0%) 1,903 11,486 13,389 1,428 (1,449) (21)
Effects of:
(Gains)/losses on investment not subject to
UK corporation tax - (12,291) (12,291) - 485 485
Non-taxable exchange differences - (103) (103) - 154 154
Unutilised management expenses 464 908 1,372 422 810 1,232
Income not subject to corporation tax (2,367) - (2,367) (1,850) - (1,850)
Indian capital gains tax charge
(see note 5a) (175) 7,684 7,509 (213) 5,203 4,990
Overseas taxation 1,224 - 1,224 985 - 985
Tax charge for the year 1,049 7,684 8,733 772 5,203 5,975
As at 31 January 2025 the Company had unutilised management expenses and other
reliefs for taxation purposes of £68,461,000 (2024: £62,974,000). It is not
anticipated that these will be utilised in the foreseeable future and as such
no related deferred tax asset has been recognised.
The tax effect of different items of income/gain and expenditure/loss is
allocated between capital and revenue as set out in this note. The standard
rate of corporation tax is applied to taxable net revenue. Any adjustment
resulting from relief for overseas tax is allocated to the revenue reserve.
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the Statement of Financial Position date where
transactions or events that result in an obligation to pay more, or right to
pay less, tax in future have occurred at the Statement of Financial Position
date. This is subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits from which
the future reversal of the underlying timing differences can be deducted.
Timing differences are differences arising between the Company’s taxable
profits and its results as stated in the accounts which are capable of
reversal in one or more subsequent periods. Deferred tax is measured without
discounting and based on enacted tax rates. Due to the Company’s status as
an investment trust, and the intention to meet the conditions required to
obtain approval under Section 1158 of the Corporation Tax Act 2010, the
Company has not provided for deferred UK tax on any capital gains and losses
arising on the revaluation or disposal of investments.
Deferred tax has been provided for on capital gains arising on Indian
securities as noted in 5(a) above.
6. Dividends
Amounts recognised as distributable to shareholders for the year ended 31
January 2025, were as follows:
2025 2024
£’000 £’000
Final dividend paid for the year ended 31 January 2024 of 4.0p per share 4,838 -
Final dividend paid for the year ended 31 January 2023 of 2.3p per share - 2,782
In respect of the year ended 31 January 2025, a final dividend of 4.9p per
share has been proposed and will be reflected in the Annual Report for the
year ending 31 January 2026. Details of the ex-dividend and payment dates are
provided on page 45.
The Board’s current policy is to pay dividends only out of revenue reserves.
Therefore the amount available for distribution as at 31 January 2025 is
£11,124,000 (2024: £9,398,000).
The dividends payable in respect of both the current and the previous
financial year, which meet the requirements of Section 1158 CTA 2010, are set
out below:
2025 2024
£’000 £’000
Revenue available for distribution by way of dividend for the year 6,564 5,171
Final dividend of 4.9p per share (2024: final dividend of 4.0p) (5,818) (4,838)
Transfer to revenue reserves 682 333
Dividends paid by the Company on its shares are recognised in the financial
statements in the year in which they are paid and are shown in the Statement
of Changes in Equity.
7. Return per Share
The return per share is as follows:
2025 2024
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic 5.4 31.7 37.1 4.3p (9.3)p (5.0)p
The total return per share is based on the total return attributable to
shareholders of £44,821,000 (2024: loss of £6,061,000).
The revenue return per share is based on the net revenue return attributable
to shareholders of £6,564,000 (2024: £5,171,000).
The capital return per share is based on the net capital return attributable
to shareholders of £38,257,000 (2024: loss of £11,232,000).
The total return, revenue return and the capital return per share are based on
the weighted average number of shares in issue during the year of 120,899,602
(2024: 120,958,386).
The calculations of the returns per Ordinary Share have been carried out in
accordance with IAS 33 Earnings per Share.
8. Investments
2025 2024
£’000 £’000
Investments
Opening cost 352,944 320,883
Opening investment holding gains 117,165 153,516
Opening Valuation 470,109 474,399
Purchases at cost 123,228 84,889
Disposal proceeds (133,123) (87,161)
Gains/(losses) on investments 49,989 (2,018)
Valuation at end of year 510,203 470,109
Cost at 31 January 372,632 352,944
Investment holding gains at 31 January 137,571 117,165
Valuation at 31 January 510,203 470,109
The Company received £133,123,000 (2024: £87,161,000) from investments sold
in the year. The book cost of these investments when they were purchased was
£103,540,000 (2024: £52,828,000). 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 year the Company incurred transaction costs on purchases of
£155,000 (2024: £110,000) and transaction costs on sales of £263,000 (2024:
£169,000).
Valuation of Investments
Investments are measured initially and at subsequent reporting dates at fair
value. Purchases and sales are recognised on the trade date when a contract
exists whose terms require delivery within the time frame established by the
market concerned. For quoted securities fair value is either bid price or last
traded price, depending on the convention of the exchange on which the
investment is listed. Changes in fair value and gains or losses on disposal
are included in the Income Statement as a capital item.
In addition, for financial reporting purposes, fair value measurements are
categorised into a fair value hierarchy based on the degree to which the
inputs to the fair value measurements are observable and the significance of
the inputs to the fair value measurement in its entirety, which are described
as follows:
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 investments are in equity shares and have been classified as Level 1
(2023: All Level 1).
9. Debtors
2025 2024
£’000 £’000
Amounts due from brokers 1,008 746
Accrued income 179 279
Other debtors 65 7
1,252 1,032
10. Creditors: Amounts Falling Due Within One Year
2025 2024
£’000 £’000
Amounts due to brokers 781 -
Portfolio management fee – Stewart Investors 1,081 1,002
AIFM fee – Frostrow 135 128
Other creditors 400 177
2,397 1,307
11. Provisions for Liabilities
2025 2024
£’000 £’000
Deferred taxation on unrealised capital gains on Indian securities 13,645 11,206
See note 5 for further details and accounting policy.
12. Share Capital
2025 2024
£’000 £’000
Allotted and fully paid:
120,588,386 Ordinary shares of 12.5p each (2024: 120,958,386) 15,074 15,120
During the current and prior year, no Ordinary shares were issued. 370,000
(2024: Nil) Ordinary shares were bought back for cancellation.
The capital of the Company is managed in accordance with its investment policy
which is detailed in the Strategic Report on pages 22 and 23.
The Company does not have any externally imposed capital requirements.
13. Net Asset Value Per Share
The net asset value per share of 417.5 p (2024: 384.3p) is calculated on net
assets of £503,441,000 (2024: £464,819,000) divided by 120,588,386 (2024:
120,958,386) shares, being the number of shares in issue at the year end.
14. Financial Instruments
The Company’s financial instruments comprise its investment portfolio, cash
balances, and debtors and creditors that arise directly from its operations.
As an investment trust, the Company holds an investment portfolio of financial
assets in pursuit of its investment objective.
Fixed asset investments (see note 8 on page 74) are valued at fair value in
accordance with the Company’s accounting policies. The fair value of all
other financial assets and liabilities is represented by their carrying value
in the Statement of Financial Position shown on page 68.
The main risks that the Company faces arising from its financial instruments
are:
(i) market risk, including:
other price risk, being the risk that the value of investments will
fluctuate as a result of changes in market prices;
interest rate risk, being the risk that the future cash flows of a
financial instrument will fluctuate because of changes in interest rates;
foreign currency risk, being the risk that the value of financial
assets and liabilities will fluctuate because of movements in currency rates;
(ii) credit risk, being the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that it has
entered into with the Company; and
(iii) liquidity risk, being the risk that the Company will not be able to
meet its liabilities when they fall due. This may arise should the Company not
be able to liquidate its investments. Under normal market trading volumes, the
majority of the investment portfolio could be realised within a week.
Other price risk
The management of other price risk is part of the portfolio management process
and is typical of equity investment.
The investment portfolio is managed with an awareness of the effects of
adverse price movements through detailed and continuing analysis with an
objective of maximising overall returns to shareholders. Further information
on how the investment portfolio is managed is set out on page 2. Although it
is the Company’s current policy not to use derivatives they may be used from
time to time, with prior Board approval, to hedge specific market risk or gain
exposure to a specific market.
If the investment portfolio valuation rose or fell by 10% at 31 January, the
impact on the net asset value would have been £51.0 million (2024: £46.3
million). The calculations are based on the investment portfolio valuation as
at the respective Statement of Financial Position dates and are not
necessarily representative of the year as a whole.
Interest rate risk
Floating rate
When the Company retains cash balances the majority of the cash is held in
overnight call accounts. The benchmark rate which determines the interest
payments received on cash balances is the bank base rate for the relevant
currency for each deposit.
Foreign currency risk
The Company invests in overseas securities and holds foreign currency cash
balances which give rise to currency risks. Foreign currency risks are managed
alongside other market risks as part of the management of the investment
portfolio. It is currently not the Company’s policy to hedge this risk on a
continuing basis but it can do so from time to time.
Foreign currency exposure:
2025 2024
Investments Cash Debtors Creditors/ Investments Cash Debtors Creditors/
Provisions Provisions
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Indian rupee 208,458 437 1,061 (13,942) 218,067 2,063 783 (11,206)
New Taiwanese dollar 80,473 - - - 51,623 5 - -
Chinese renminbi 53,787 - - - 43,006 - - -
Singapore dollar 27,286 485 - - 21,562 688 - -
Indonesian rupiah 27,224 - 15 - 36,489 - - -
Korean won 27,060 - 74 - 25,379 - 95 -
Japanese yen 23,279 - 29 - 37,707 - 106 -
Philippine peso 20,251 - - (484) 4,688 - - -
Hong Kong dollar 17,927 - - - 13,173 - - -
Thai baht 9,672 - - - 9,471 - - -
US dollar 6,508 434 - - - 464 - -
Malaysian ringgit 5,585 - - - 4,586 - - -
Bangladesh taka 2,693 - - - 4,358 - - -
Euro - 8 - - - 2 - -
Total 510,203 1,364 1,179 (14,426) 470,109 3,222 984 (11,206)
At 31 January 2025 the Company had £7,096,000 of sterling cash balances
(2024: £2,969,000).
During the year sterling weakened 1.1% (2024: strengthened by 7.5%) against
all of the currencies in the investment portfolio (weighted for exposure at 31
January). If the value of sterling had strengthened against each of the
currencies in the portfolio by 10%, the impact on the net asset value would
have been negative £46.4 million (2024: negative £43.3 million). If the
value of sterling had weakened against each of the currencies in the
investment portfolio by 10%, the impact on the net asset value would have been
positive £56.7 million (2024: positive £52.9 million). The calculations are
based on the investment portfolio valuation and cash balances as at the year
end and are not necessarily representative of the year as a whole.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with
the Company. The Portfolio Manager has in place a monitoring procedure in
respect of counterparty risk which is reviewed on an ongoing basis. The
carrying amounts of financial assets best represents the maximum credit risk
exposure at the Statement of Financial Position date, and the main exposure to
credit risk is via the Custodian which is responsible for the safeguarding of
the Company’s investments and cash balances.
At the reporting date, the Company’s financial assets exposed to credit risk
amounted to the following:
2025 2024
£’000 £’000
Cash 8,028 6,191
Debtors 1,252 1,032
9,280 7,223
All the assets of the Company which are traded on a recognised exchange are
held by J.P. Morgan Chase Bank, the Custodian. Bankruptcy or insolvency of the
Custodian may cause the Company’s rights with respect to securities held by
the Custodian to be delayed or limited. The Board monitors the Company’s
risk as described in the Strategic Report on pages 25 to 28.
The credit risk on cash is controlled through the use of counterparties or
banks with high credit ratings (rated AA or higher), assigned by international
credit rating agencies. Cash is currently held at JP Morgan Chase Bank.
Bankruptcy or insolvency of such financial institutions may cause the
Company’s ability to access cash placed on deposit to be delayed, limited or
lost.
Liquidity risk
The Company’s liquidity risk is managed on an ongoing basis by the Portfolio
Manager. Substantially all of the Company’s portfolio would be realisable
within two weeks under normal market conditions. There may be circumstances
where market liquidity is lower than normal. Stress tests have been performed
to understand how long the portfolio would take to realise in such situations.
The Board is comfortable that in such a situation the Company would be able to
meet its liabilities as they fall due.
Capital management policies and procedures
The Company’s capital management objectives are to ensure that it will be
able to continue as a going concern and to maximise the return to its equity
shareholders.
The Company’s policy on gearing and leverage is set out on page 23. The
Company had no gearing or leverage during the current or prior year.
The capital structure of the Company consists of the equity share capital,
retained earnings and other reserves as shown in the Statement of Financial
Position on page 68.
The Board, with the assistance of the AIFM and the Portfolio Manager, monitors
and reviews the broad structure of the Company’s capital on an ongoing
basis. This includes a review of:
* the need to buy back equity shares, either for cancellation or to hold in
treasury, in light of any share price discount to net asset value per share in
accordance with the Company’s share buy back policy;
* the need for new issues of equity shares, including issues from treasury;
and
* the extent to which revenue in excess of that which is required to be
distributed should be retained.
The Company’s objectives, policies and processes for managing capital are
unchanged from the prior year.
15. Reserves
Capital redemption reserve
This reserve arose when ordinary shares were redeemed by the Company and
subsequently cancelled, at which point the amount equal to the par value of
the ordinary share capital was transferred from the ordinary share capital to
the Capital Redemption Reserve.
Special reserve
The Special Reserve arose following court approval in February 1999 to
transfer £24.2 million from the share premium account.
Capital reserve
The following are accounted for in this reserve: gains and losses on the
disposal of investments; changes in the fair value of investments; and
expenses and finance costs, together with the related taxation effect, charged
to capital in accordance with note 5 on page 71. Any gains in the fair value
of investments that are not readily convertible to cash are treated as
unrealised gains in the capital reserve.
Revenue reserve
The Revenue Reserve reflects all income and expenses that are recognised in
the revenue column of the Income Statement.
Distributable reserves
The Revenue, Special and Capital Reserves are distributable. It is the
Board’s current policy to pay dividends only from the revenue reserve.
16. Related Party Transactions and Transactions with the Managers
The following are considered to be related parties:
* Frostrow Capital LLP (under the Listing Rules only)
* Stewart Investors (under the Listing Rules only)
* The Directors of the Company.
Details of the relationship between the Company and Frostrow Capital LLP, the
Company’s AIFM, are disclosed on pages 45 and 46. During the year ended 31
January 2025, Frostrow earned £543,000 (2024: £507,000) in respect of
company management fees, of which £135,000 (2024: £128,000) was outstanding
at the year end.
The Company employs Stewart Investors as its Portfolio Manager. Details of
this arrangement are disclosed on page 45. During the year ended 31 January
2025, Stewart Investors earned £4,302,000 (2024: £3,985,000) in respect of
portfolio management fees, of which £1,081,000 (2024: £1,002,000) was
outstanding at the year end.
All material related party transactions have been disclosed in notes 3 and 4
on pages 70 and 71. Details of the remuneration and the shareholdings of all
Directors can be found on page 57.
The figures and financial information for 2024 are extracted from the
published Annual Report for the year ended 31 January 2024 and do not
constitute the statutory accounts for that year. The Annual Report for the
year ended 31 January 2024 has been delivered to the Registrar of Companies
and included the Independent Auditor’s Report which was unqualified and did
not contain a statement under either section 498(2) or section 498(3) of the
Companies Act 2006.
The figures and financial information for 2025 are extracted from the Annual
Report and financial statements for the year ended 31 January 2025 and do not
constitute the statutory accounts for the year. The Annual Report for the
year ended 31 January 2025 includes the Independent Auditor’s Report which
is unqualified and does not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006. The Annual Report and financial
statements have not yet been delivered to the Registrar of Companies.
Glossary of Terms and Alternative Performance Measures (unaudited)
Absolute Performance
Absolute performance is the percentage (%) rise or fall in the share price of
the investment over the stated period. Relative performance, on the other
hand, is the difference between the absolute return and the performance of the
market (or other similar investments), which is gauged by a benchmark, or
index such as the MSCI AC Asia ex Japan Index.
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: safeguarding and verification
of the ownership of assets; monitoring cashflows; and ensuring that
appropriate valuations are applied to the entity’s assets.
Average Discount
The average share price for the period divided by the average net asset value
for the period minus 1.
2025 2024
pence pence
Average share price for the year 369.1 363.1
Average net asset value for the year 417.3 388.0
Average Discount 11.5% 6.4%
Bottom-Up Approach
An investment approach that focuses on the analysis of individual stocks
rather than the significance of macroeconomic factors.
Discount or Premium
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.
Gearing
The term used to describe the process of borrowing money for investment
purposes. The expectation is that the returns on the investments purchased
will exceed the finance costs associated with those borrowings.
There are several methods of calculating gearing and the following has been
selected:
Total assets less current liabilities (before deducting any prior charges)
minus cash/cash equivalents divided by shareholders’ funds, expressed as a
percentage.
Net Asset Value (“NAV”)
The value of the Company’s assets, principally investments made in other
companies and cash being held, minus any liabilities. The NAV is also
described as “shareholders’ funds” per share. The NAV is often expressed
in pence per share after being divided by the number of shares which have been
issued. The NAV 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 total return on an investment over a specified period assuming dividends
paid to shareholders were reinvested at net asset value per share at the time
the shares were quoted ex-dividend. This is a way of measuring investment
management performance of investment trusts which is not affected by movements
in discounts or premiums.
31 January 31 January
2025 2024
NAV Total Return p p
Opening NAV 384.3 391.6
Increase/(decrease) in NAV 37.2 (5.0)
Dividend paid (4.0) (2.3)
Closing NAV 417.5 384.3
Increase/(decrease) in NAV 9.7% (1.3)%
Impact of reinvested dividends 0.0% 0.0%
NAV Total Return 9.7% (1.3)%
Ongoing Charges
Ongoing charges are calculated by taking the Company’s annualised operating
expenses as a proportion of the average daily net asset value of the Company
over the year. The costs of buying and selling investments are excluded, as
are interest costs, taxation, cost of buying back or issuing ordinary shares
and other non-recurring costs.
31 January 31 January
2025 2024
£’000 £’000
Operating expenses 1 5,708 5,287
Average net assets during the year 504,629 469,515
Ongoing charges 1.1% 1.1%
1 See notes 3 and 4 on pages 70 and 71.
Performance Objective
The Company’s performance objective, against which the Portfolio Manager’s
performance is measured, is to provide shareholders with a net asset value
total return in excess of the UK Consumer Price Index (“CPI”) plus 6%
(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.
The performance objective is designed to reflect that the Portfolio
Manager’s approach does not consider index composition when investing.
Total Return (annualised)
Share Price NAV CPI + 6%
(%) (%) (%)
One year to 31 January 2025 3.7 9.7 8.8
Three years to 31 January 2025 2.5 4.6 12.1
Five years to 31 January 2025 6.9 8.7 11.0
Portfolio Turnover
Portfolio turnover is a measure of how quickly securities in a fund are either
bought or sold by the fund’s managers, over a given period of time. The rate
of turnover is important for potential investors to consider, as funds that
have a high rate will also have higher fees to reflect the turnover costs.
It is calculated as the average of the purchases and sales for the year
divided by the average net assets for the year.
Revenue Return per Share
The revenue return per share is calculated by taking the return on ordinary
activities after taxation and dividing it by the weighted average number of
shares in issue during the year (see note 7 on page 73 for further
information).
Share Price Total Return
The total return on an investment over a specified period assuming dividends
paid to shareholders were reinvested in the Company’s shares at the share
price at the time the shares were quoted ex-dividend.
31 January 31 January
2025 2024
Share Price Total Return p p
Opening share price 349.0 358.0
Increase/(decrease) in share price 13.0 (6.7)
Dividend paid (4.0) (2.3)
Closing share price 358.0 349.0
Increase/(decrease) in share price 3.7% (1.9)%
Impact of reinvested dividends 0.0% 0.0%
Share Price Total Return 3.7% (1.9)%
Volatility
A measure of the range of possible returns for a given security or market
index.
ANNOUNCEMENT ENDS
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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