REG - Pacific Horizon - Annual Financial Report
17/10/2023 12:30
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RNS Number : 4129Q Pacific Horizon Investment Tst PLC 17 October 2023
Pacific Horizon Investment Trust PLC ('PHI')
Legal Entity Identifier: VLGEI9B8R0REWKB0LN95
Regulated Information Classification: Annual Financial and Audit Reports
Annual Report and Financial Statements
Further to the preliminary statement of audited annual results announced to
the Stock Exchange on 6 October 2023, Pacific Horizon Investment Trust PLC
("the Company") announces that the Company's Annual Report and Financial
Statements for the year ended 31 July 2023, including the Notice of Annual
General Meeting, has today been posted to shareholders and submitted
electronically to the National Storage Mechanism where it will shortly be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
It is also available on the Company page of the Baillie Gifford website at:
pacifichorizon.co.uk (http://www.pacifichorizon.co.uk) (as is the preliminary
statement of audited annual results announced by the Company on 6 October
2023).
Statement of Directors' Responsibilities in respect of the Annual Report and
the Financial Statements
Each of the Directors, whose names and functions are listed within the
Directors and Managers section of the Annual Report and Financial Statements,
confirm that, to the best of their knowledge:
¾ the Financial Statements, which have been prepared in accordance with
applicable law and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice) including FRS 102 'The Financial
Reporting Standard applicable in the UK and Republic of Ireland' give a true
and fair view of the assets, liabilities, financial position and net return of
the Company;
¾ the Annual Report and Financial Statements taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's performance, business model and strategy;
and
¾ the Strategic Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces (as also
set out below).
Principal and Emerging Risks relating to the Company
As explained on page 71 of the Annual Report and Financial Statements there is
a process for identifying, evaluating and managing the risks faced by the
Company on a regular basis. The Directors have carried out a robust assessment
of the principal and emerging risks facing the Company, including those that
would threaten its business model, future performance, regulatory compliance,
solvency or liquidity. There have been no material changes to the principal
risks during the year. A description of these risks and how they are being
managed or mitigated is set out below.
The Board considers the heightened macroeconomic and geopolitical concerns to
be factors which exacerbate existing risks, rather than being new emerging
risks, within the context of an investment trust. Their impact is considered
within the relevant risks.
What is the risk? How is it managed? Current assessment of risk
Financial Risk: The Company's assets consist mainly of listed securities The Board has, in particular, considered the impact of heightened market This risk is increasing due to increased market volatility as a result of
(93.6% of the investment portfolio) and its principal and emerging financial volatility during recent months due to macroeconomic factors such as higher heightened macroeconomic and geopolitical concerns.
risks are therefore market related and include market risk (comprising inflation and interest rates and geopolitical concerns. In order to oversee
currency risk, interest rate risk and other price risk), liquidity risk and this risk, the Board considers at each meeting various metrics including
credit risk. An explanation of those risks and how they are managed is regional and industrial sector weightings, top and bottom stock contributors
contained in note 18 to the Financial Statements on pages 104 to 111. to performance along with sales and purchases of investments. Individual
investments are discussed with the portfolio manager together with general
views on the various investment markets and sectors. A strategy session is
held annually.
What is the risk? How is it managed? Current assessment of risk
Investment strategy risk: Pursuit of an investment strategy to fulfil the To mitigate this risk, the Board regularly reviews and monitors the Company's This risk is increasing as the market's appetite for growth stocks, typically
Company's objective which the market perceives to be unattractive or objective and investment policy and strategy, the investment portfolio and its held by the Company, has decreased during the recent period of heightened
inappropriate, or the ineffective implementation of an attractive or performance, the level of discount/premium to net asset value at which the macroeconomic and geopolitical concern.
appropriate strategy, may lead to reduced returns for shareholders and, as a shares trade and movements in the share register and raises any matters of
result, a decreased demand for the Company's shares. This may lead to the concern with the Managers.
Company's shares trading at a widening discount to their net asset value.
What is the risk? How is it managed? Current assessment of risk
Political and associated economic financial risk: The Board is of the view Political developments are closely monitored and considered by the Board, for This risk is increasing due to the ongoing Russia-Ukraine military conflict
that political change in areas in which the Company invests or may invest may example in respect of tensions between the USA and China regarding tariffs and and tensions between China and the US.
have financial consequences for the Company. unrest in Hong Kong and repercussions from the Russian invasion of Ukraine. It
monitors portfolio diversification by investee companies' primary location, to
mitigate against the negative impact of military action or trade barriers. The
Board believes that the Company's portfolio, which predominantly comprises
companies listed on the stock markets of the Asia Pacific region (excluding
Japan) and the Indian Sub-continent, partially helps to mitigate such
political risks.
What is the risk? How is it managed? Current assessment of risk
Discount risk: The discount/premium at which the Company's shares trade To manage this risk, the Board monitors the level of discount/premium at which The Company's discount widened during the year.
relative to its net asset value can change. The risk of a widening discount is the shares trade and the Company has authority to buy back its existing
that it may undermine investor confidence in the Company. shares, when deemed by the Board to be in the best interests of the Company
and its shareholders.
What is the risk? How is it managed? Current assessment of risk
Regulatory risk: Failure to comply with applicable legal and regulatory To mitigate this risk, Baillie Gifford's Business Risk, Internal Audit and All control procedures are working effectively. There have been no material
requirements such as the tax rules for investment trust companies, the FCA Compliance Departments provide regular reports to the Audit Committee on regulatory changes that have impacted the Company during the year.
Listing Rules and the Companies Act could lead to suspension of the Company's Baillie Gifford's monitoring programmes. Major regulatory change could impose
Stock Exchange listing, financial penalties, a qualified audit report or the disproportionate compliance burdens on the Company. In such circumstances
Company being subject to tax on capital gains. representation is made to ensure that the special circumstances of investment
trusts are recognised. Shareholder documents and announcements, including the
Company's published Interim and Annual Report and Financial Statements, are
subject to stringent review processes and procedures are in place to ensure
adherence to the Transparency Directive and the Market Abuse Directive with
reference to inside information.
What is the risk? How is it managed? Current assessment of risk
Custody and depositary risk: Safe custody of the Company's assets may be To mitigate this risk, the Audit Committee receives six-monthly reports from All control procedures are working effectively.
compromised through control failures by the Depositary, including breaches of the Depositary confirming safe custody of the Company's assets held by the
cyber security. Custodian. Cash and portfolio holdings are independently reconciled to the
Custodian's records by the Managers who also agree uncertificated private
portfolio holdings to confirmations from investee companies. The Custodian's
assured internal controls reports are reviewed by Baillie Gifford's Business
Risk Department and a summary of the key points is reported to the Audit
Committee and any concerns investigated.
What is the risk? How is it managed? Current assessment of risk
Operational risk: Failure of Baillie Gifford's systems or those of other third To mitigate this risk, Baillie Gifford has a comprehensive business continuity All control procedures are working effectively.
party service providers could lead to an inability to provide accurate plan which facilitates continued operation of the business in the event of a
reporting and monitoring or a misappropriation of assets. service disruption. The Audit Committee reviews Baillie Gifford's Report on
Internal Controls and reports by other key third party providers are reviewed
by Baillie Gifford on behalf of the Board and a summary of the key points is
reported to the Audit Committee and any concerns investigated. The other key
third party service providers have not experienced significant operational
difficulties affecting their respective services to the Company.
What is the risk? How is it managed? Current assessment of risk
Leverage risk: The Company may borrow money for investment purposes. If the To mitigate this risk, all borrowings require the prior approval of the Board The Company's revolving loan facility remains undrawn.
investments fall in value, any borrowings will magnify the impact of this and leverage levels are discussed by the Board and Managers at every meeting.
loss. If borrowing facilities are not renewed, the Company may have to sell Covenant levels are monitored regularly. The majority of the Company's
investments to repay borrowings. The Company can also make use of derivative investments are in quoted securities that are readily realisable. Further
contracts. information on leverage can be found on page 118 and the Glossary of Terms and
Alternative Performance Measures on pages 123 and 124 of the Annual Report and
Financial Statements.
What is the risk? How is it managed? Current assessment of risk
Climate and governance risk: Perceived problems on environmental, social and This is mitigated by the Managers' strong ESG stewardship and engagement The Investment Manager continues to employ strong ESG stewardship and
governance ('ESG') matters in an investee company could lead to that company's policies which are available to view on the Managers' website, engagement policies.
shares being less attractive to investors, adversely affecting its share bailliegifford.com, and which have been reviewed and endorsed by the Company,
price, in addition to potential valuation issues arising from any direct and which have been fully integrated into the investment process. Due
impact of the failure to address the ESG weakness on the operations or diligence includes assessment of the risks inherent in climate change (see
management of the investee company (for example in the event of an industrial page 55 of the Annual Report and Financial Statements).
accident or spillage). Repeated failure by the Managers to identify ESG
weaknesses in investee companies could lead to the Company's own shares being
less attractive to investors, adversely affecting its own share price.
What is the risk? How is it managed? Current assessment of risk
Cyber security risk: A cyber attack on Baillie Gifford's network or that of a To mitigate this risk, the Audit Committee reviews Reports on Internal All control procedures are working effectively.
third party service provider could impact the confidentiality, integrity or Controls published by Baillie Gifford and other third party service providers.
availability of data and systems. Cyber security due diligence is performed by Baillie Gifford on third party
service providers which includes a review of crisis management and business
continuity frameworks.
What is the risk? How is it managed? Current assessment of risk
Emerging risk: As explained on page 71 of the Annual Report and Financial This is mitigated by the Managers' close links to the investee companies and No change in emerging risks.
Statements, the Board has regular discussions on principal risks and their ability to ask questions on contingency plans. The Managers believe the
uncertainties, including any risks which are not an immediate threat but could impact of such events may be to slow growth rather than to invalidate the
arise in the longer term. The Board considers that the key emerging risks investment rationale over the long term.
arise from the interconnectedness of global economies and the related exposure
of the investment portfolio to external and emerging threats such as
escalating geopolitical tensions, cyber security risks including developing AI
and quantum computing capabilities, and new coronavirus variants or similar
public health threats.
Increasing risk Decreasing risk No change
Baillie Gifford & Co Limited
Company Secretaries
17 October 2023
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