Pacific Assets Trust Plc - Half-year Report
PR Newswire
LONDON, United Kingdom, October 12
Pacific Assets Trust plc
(the "Company" or the "Trust")
Unaudited Half Year Report
for the six months ended 31 July 2023
Financial Highlights
Key Statistics
| As at | As at | ||
| 31 July | 31 January | ||
| 2023 | 2023 | % change | |
| Share price | 369.0p | 358.0p | 3.1% |
| Net asset value per share | 390.3p | 391.6p | (0.3%) |
| Discount of share price to net asset value per share | 5.5% | 8.6% | |
| Market capitalisation | £446.3m | £433.0m | 3.1% |
| Shareholders' funds | £472.2m | £473.7m | (0.3%) |
| Six months to | One year to | ||
| 31 July | Six months to | 31 January | |
| 2023 | 31 July 2022 | 2023 | |
| Share price (total return)*^ | 3.7% | (3.8%) | 5.9% |
| Net asset value per share (total return)*^ | 0.3% | 0.2% | 5.7% |
| CPI + 6%1 | 6.5% | 9.0% | 17.3% |
| MSCI All Country Asia ex Japan Index (total return, sterling adjusted)* | (3.3%) | (9.0%) | (2.2%) |
| Average discount of share price to net asset value per share^ | 6.5% | 10.5% | 10.1% |
| Ongoing charges^ | 1.1% | 1.1% | 1.1% |
* Source: Morningstar.
^ Alternative Performance Measure (see Glossary).
1UK Consumer Price Index + 6% - the Company's Performance Objective (see Glossary). Figures for six month periods are calculated on a pro rata basis.
| Year ended | Year ended | ||
| 31 January | 31 January | ||
| Dividends | 2023 | 2022 | |
| Final Dividend per share | 2.3p | 1.9p |
Peer Group Performance
Performance Assessment
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 and measured over three to five years.
The Board also monitors the Company's performance against its peer group. An analysis of the Company's performance can be found below, in the Chairman's Statement, and in the Portfolio Manager's Review.
Peer Group Net Asset Value per Share (Total Return)^
| 6 months | 1 Year | 3 years | 5 years | |||||
| £ | Rank | £ | Rank | £ | Rank | £ | Rank | |
| Pacific Assets Trust | 100.3 | 1 | 105.7 | 1 | 139.1 | 1 | 144.1 | 2 |
| Schroder Asian Total Return | 97.6 | 2 | 104.7 | 2 | 119.3 | 3 | 137.4 | 3 |
| Pacific Horizon | 96.1 | 5 | 96.3 | 5 | 132.9 | 2 | 182.4 | 1 |
| Schroder Asia Pacific | 96.5 | 3 | 102.1 | 3 | 113.8 | 4 | 122.7 | 4 |
| abrdn New Dawn | 89.8 | 6 | 94.5 | 6 | 105.6 | 5 | 119.3 | 5 |
| iShares MSCI All Country Asia ex Jpn ETF | 96.1 | 4 | 99.9 | 4 | 101.3 | 6 | 107.6 | 7 |
| Asia Dragon | 89.0 | 7 | 92.6 | 7 | 98.6 | 7 | 111.3 | 6 |
| Peer Group Average | 95.1 | 99.4 | 115.8 | 132.1 | ||||
| CPI + 6%1 | 106.5 | 114.6 | 144.8 | 167.4 | ||||
| MSCI AC Asia Ex Japan | 96.7 | 100.4 | 103.3 | 112.4 |
Source: Morningstar. Figures show the value as at 31 July 2023 of £100 invested at the start of the period.
^ Alternative Performance Measure (see Glossary).
1 The Company's Performance Objective (see Glossary).
Chair's Statement
Return
The net asset value ("NAV") total return for the six months ended 31 July was 0.3% (2022: 0.5%). The NAVs of the five other trusts in our monitored peer group all decreased, with a collective average NAV decline of 9.7% (2022: average decline of 7.3%).
Over longer periods we consider investment return against the UK CPI plus 6%, in that we believe that our largely UK-based investors are seeking to protect their capital in real terms while extracting a premium over their home markets from the faster growing Asian economies. Over the last five years, our annualised return of 7.5% has fallen behind the annualised CPI plus 6% figure of 10.9%. This is of course a result of the rise in inflation in the West, which has persisted into this year and looks likely to take some time to reduce.
While the Board would like to see a higher rate of return from our investments in Asia, we note the negative total return (sterling adjusted) of the MSCI All Country Asia ex Japan Index of -3.3%, as well as the average decline in the net asset values of the Company's peers, during the period. We are pleased that the Portfolio Manager has been able to protect shareholders' capital in a period of muted returns from Asian markets.
The Company's high exposure to India has continued to be helpful to returns: seven of the top ten principal contributors to the return in this six-month period were Indian companies, including CG Power & Industrial Solutions, Cholamandalam Financial Holdings and Tube Investments.
China missed its growth forecasts in July, weakening its economic outlook and this lacklustre performance is reflected in the Company's principal detractors, which were primarily companies based in China and Hong Kong including Vitasoy, Vinda International and Glodon.
Further analysis of the Company's performance can be found in the Portfolio Manager's Review.
Share Price Performance
The Company's shares traded at an average discount of 6.5% during the period (2022: 10.5%). The share price total return of 3.7% exceeds the Company's NAV total return of 0.3%, reflecting a narrowing of the share price discount from 8.6% at the Company's financial year end to 5.5% at the end of July. This improved rating reflects the good relative and absolute performance of the Company.
The Board continues to work on improving investors' awareness of the Company and the attributes that distinguish it from its competitors, including the Portfolio Manager's long-held investment approach which focuses on sustainability and capital preservation. Our aim is to improve demand for the Company's shares which will further reduce the share price discount and, ultimately, place us in a position to grow the Company through the issue of new shares at a premium to NAV.
The Board
During the period, James Williams retired from the Board and I succeeded him as Chair. I would like to thank James for his excellent stewardship of the Company during his time as Chair.
Charlotta Ginman, our Audit Committee Chair, intends to retire at the next Annual General Meeting in 2024. The Board is in the advanced stages of recruiting her successor and hopes to make an announcement in the near future.
The Outlook
Continued high inflation in the UK means that it will be a challenge, in the shorter term, to achieve our objective of exceeding UK CPI plus 6%. However, the long-term outlook for Asian markets looks promising. Asia's constituent economies are expected to outgrow other regions over the coming years, even if the region remains vulnerable to the shorter-term consequences of recession in the US, uncertainties regarding China's economic growth and seemingly ever-present geopolitical concerns. India and Southeast Asia have seen stronger earnings growth in their post-Covid recovery and are expected to be the fastest growing economies this decade. Against that backdrop, our Portfolio Manager will continue to build the portfolio from the bottom up, focusing on identifying and selecting companies with successful and experienced management teams, strong balance sheets and sustainable businesses.
Andrew Impey
Chair
12 October 2023
Portfolio Manager's Review
Performance
Little information of value can be gleaned from short-term performance but it has been a satisfactory period that is consistent with the medium and longer-term performance of the Company. It is noticeable that the top ten contributors to performance are predominantly listed in India and Indonesia where attractive tailwinds are assisting high quality stewards and franchises to innovate and grow.
It is also noticeable that the largest detractors are mostly listed in Hong Kong, China or Taiwan where economic and geopolitical news has been deteriorating, possibly at an accelerating pace. As mentioned in previous reports we believe that news headlines tend to provide low value, short shelf-life information. As such, articles on the economy or speculations on global trade tensions have no influence on the transactions listed below.
Transactions
We aim to build resilient portfolios of high quality companies with diversified streams of cash flows, which have the ability to grow in value over the long term. High quality companies at reasonable valuations tend not to come along too often. In the absence of such opportunities, we are very comfortable long-term owners of investee companies. Accordingly, the turnover figures on a new names basis tends to be in the low teens which is roughly in-line with our investment horizon of at least five years.
Figure 1 shows the new additions and complete sales during the period.
Figure 1
| New Additions | Complete Sales |
| Hangzhou Robam (China, Consumer Discretionary) | Techtronic Industries (Hong Kong, Industrials) |
| Cyient (India, Information Technology) | Infosys (India, Information Technology) |
| Telekom Indonesia (Indonesia, Communication Services) | Info Edge (India, Communication Services) |
| Triveni Turbines (India, Industrials) | Public Bank (Malaysia, Financials) |
New Additions
Over the period, we initiated a new holding in TelkomIndonesia (Indonesia: Communication Services).Telkom Indonesia has a strong track record of growth and profitability servicing as the backbone of Indonesia's digital growth. Telecoms is notoriously a tough industry as there is little in the way of differentiation between what tend to be equally matched players. In Indonesia however, Telkom has significant market leadership in a consolidated market providing them valuable cash flows to reinvest in growth ahead of peers. Telkom is also a unique example of a telecom company which has a robust balance sheet: again differentiating them from most global and local peers. Outcomes such as these do not only provide financial resilience but also exemplify superior governance.
In India we purchased Cyient (India: Information Technology) as we believe the company has set itself on a clear path of improvement under a new and impressive management team. The new CEO, Karthikeyan Natarajan, is focused and determined on building Cyient into a leading provider of outsourced engineering services, globally. We also purchased Triveni Turbines (India: Industrials), India's leadingsteam turbine maker, again, with an eye on global expansion. Stewarded by the Sawhney family, Triveni has ambitions to build a simple, focused business in turbines that can compete on a global scale. Triveni's niche of small turbines is an area that requires long-term, trust-based relationships with customisation of end products and a robust aftermarket presence. These characteristics provide profitable, steady cash generation which help to protect a net cash balance sheet.
Lastly, we purchased Hangzhou Robam (China: Consumer Discretionary). Robam develops, manufactures and sells household electrical appliances where they have established a powerful brand name and a loyal following. Robam's end markets are experiencing weak demand on the back of muted consumer confidence and a fragile housing market. We do not believe we have any ability to pinpoint bottoms and tops but are convinced by the quality of the stewardship, franchise and the nearly US$1billion of net cash on the balance sheet. Longer term, we believe Robam has the ability to transfer its acumen and brand strength into product categories such as dishwashers where penetration levels leave a long runway for growth.
Complete Sales
The most significant sale during the period was Techtronic Industries (Hong Kong: Industrials). Techtronic is a major player in the power tools space where it has curated world-class brands and led the industry's evolution towards battery-powered tools. However, we had grown increasingly uncomfortable with the lack of humility and overconfidence portrayed by the management team and how this may feed into greater fragility of earnings going forward.
In India, we sold the Company's marginal positions in Infosys (India: Information Technology) and Info Edge (India: Communication Services). Both positions were sold to fund higher conviction ideas while maintaining the concentration of the portfolio.
The last disposal to mention was Public Bank (Malaysia: Financials). This was an unusually short time for the Company to hold an investment but this decision was the consequence of our ability to change our minds quickly rather than a shortening of our time horizon. Unfortunately, we believe the economic and competitive dynamics in the industry will provide too strong a headwind for Public Bank to be able to protect and preserve the Company's capital: despite their admirable track record of conservatism and long-termism.
Other Notable Activity
We added to the Company's holding in Tech Mahindra (India: Information Technology). We have been long-term holders of the company and increased the position size following the appointment of a new CEO, a 20-year veteran from Infosys, who we believe has the ability and opportunity to drive this franchise to the next level.
To control position sizes following a long period of strong performance and to manage the concentration in a few names, we trimmed three of the top ten holdings which are in India: CG Power (India: Industrials), Tube Investments (India: Consumer Discretionary) and Mahindra & Mahindra (India: Consumer Discretionary). These reductions should not be interpreted in any way as a loss of confidence in the long-term prospects of these companies. Other subtractions we made were Elgi Equipments (India: Industrials) for reasons of valuation only and Syngene (India: Health Care) after a meeting with the company in India prompted small concerns about the evolution of the culture.
Outlook
There is evidence that the economy in China is deteriorating and that geopolitical headwinds are strengthening. This may cause heightened volatility especially as we near the election in the US in 2024 which is likely to sharpen US rhetoric and actions against China. Such volatility may provide attractive opportunities to invest in high quality companies that are well placed to contribute to, and benefit from, the many sustainability challenges facing the region and the world. We believe that over the longer term investing in companies with high quality stewards, franchises and financials is the best way of protecting and growing shareholder capital through economic and political cycles.
Stewart Investors
Portfolio Manager
12 October 2023
Contribution by Investment
Contribution by investment for the six months ended 31 July 2023
Top 10 contributors to and detractors from absolute performance (%)
| Top 10 Contributors | |
| CG Power & Industrial Solutions | 1.6 |
| Cholamandalam Financial Holdings | 0.7 |
| Bank OCBC NISP | 0.7 |
| Tube Investments of India | 0.7 |
| Elgi Equipments | 0.7 |
| Chroma ATE | 0.6 |
| Shanthi Gears | 0.4 |
| Tata Communications | 0.3 |
| Selamat Sempurna | 0.3 |
| Tata Consumer Products | 0.3 |
| Bottom 10 Detractors | |
| Vitasoy International Holdings | -0.9 |
| Vinda International Holdings | -0.6 |
| Glodon | -0.6 |
| Humanica | -0.5 |
| Koh Young Technology | -0.5 |
| Techtronic Industries | -0.4 |
| Silergy | -0.3 |
| Aavas Financiers | -0.3 |
| Amoy Diagnostics | -0.3 |
| Advanced Energy Solution | -0.2 |
Portfolio Valuation
as at 31 July 2023
| Val'n | % Total | |||
| Company | Country | Sector | £'000 | Assets |
| CG Power & Industrial Solutions | India | Industrials | 29,137 | 6.3% |
| Mahindra & Mahindra | India | Consumer Discretionary | 28,283 | 6.1% |
| Tube Investments of India | India | Consumer Discretionary | 23,974 | 5.2% |
| Oversea-Chinese Banking | Singapore | Financials | 15,057 | 3.3% |
| Unicharm | Japan | Consumer Staples | 14,732 | 3.2% |
| Marico | India | Consumer Staples | 14,205 | 3.1% |
| Voltronic Power Technology | Taiwan | Industrials | 13,453 | 2.9% |
| Shenzhen Inovance Technology | China | Industrials | 12,864 | 2.8% |
| Elgi Equipments | India | Industrials | 12,711 | 2.7% |
| Hoya | Japan | Health Care | 11,856 | 2.5% |
| Top 10 Investments | 176,272 | 38.1% | ||
| Tata Consumer Products | India | Consumer Staples | 10,519 | 2.3% |
| Cholamandalam Financial Holdings | India | Financials | 9,694 | 2.1% |
| Chroma ATE | Taiwan | Information Technology | 9,677 | 2.1% |
| Shanthi Gears | India | Industrials | 9,623 | 2.1% |
| HDFC Bank | India | Financials | 9,524 | 2.1% |
| Bank OCBC Nisp | Indonesia | Financials | 9,370 | 2.0% |
| Taiwan Semiconductor Manufacturing | Taiwan | Information Technology | 8,550 | 1.8% |
| Tech Mahindra | India | Information Technology | 8,255 | 1.7% |
| Kalbe Farma | Indonesia | Health Care | 7,891 | 1.7% |
| Selamat Sempurna | Indonesia | Consumer Discretionary | 7,591 | 1.6% |
| Top 20 Investments | 266,966 | 57.6% | ||
| Delta Electronics | Taiwan | Information Technology | 7,465 | 1.6% |
| Kotak Mahindra Bank | India | Financials | 7,329 | 1.6% |
| Advantech | Taiwan | Information Technology | 7,210 | 1.6% |
| Sheng Siong Group | Singapore | Consumer Staples | 7,183 | 1.6% |
| Vinda International Holdings | China | Consumer Staples | 6,733 | 1.5% |
| Vitasoy International Holdings | Hong Kong | Consumer Staples | 6,465 | 1.4% |
| Koh Young Technology | South Korea | Information Technology | 6,377 | 1.4% |
| Godrej Consumer Products | India | Consumer Staples | 6,251 | 1.3% |
| Humanica | Thailand | Industrials | 6,116 | 1.3% |
| Aavas Financiers | India | Financials | 6,053 | 1.3% |
| Top 30 Investments | 334,148 | 72.2% | ||
| Tata Consultancy Services | India | Information Technology | 6,022 | 1.3% |
| Tokyo Electron | Japan | Information Technology | 5,997 | 1.3% |
| Tata Communications | India | Communication Services | 5,705 | 1.2% |
| Amoy Diagnostics | China | Health Care | 5,568 | 1.2% |
| ViTrox | Malaysia | Information Technology | 5,394 | 1.2% |
| Philippine Seven | Philippines | Consumer Staples | 5,253 | 1.1% |
| Advanced Energy Solution | Taiwan | Industrials | 5,161 | 1.1% |
| Tarsons Products | India | Health Care | 4,920 | 1.1% |
| Uni-Charm Indonesia | Indonesia | Consumer Staples | 4,844 | 1.0% |
| Glodon | China | Information Technology | 4,613 | 1.0% |
| Top 40 Investments | 387,625 | 83.7% | ||
| Dr. Lal PathLabs | India | Health Care | 4,586 | 1.0% |
| Unilever Indonesia | Indonesia | Consumer Staples | 4,452 | 1.0% |
| IndiaMart InterMesh | India | Industrials | 4,338 | 0.9% |
| Dabur India | India | Consumer Staples | 4,271 | 0.9% |
| Hangzhou Robam Appliances | China | Consumer Discretionary | 4,211 | 0.9% |
| Dr. Reddy's Laboratories | India | Health Care | 4,131 | 0.9% |
| Cyient | India | Information Technology | 4,075 | 0.9% |
| Zhejiang Supor | China | Consumer Discretionary | 3,602 | 0.8% |
| Industri Jamu Dan Farmasi Sido Muncul | Indonesia | Consumer Staples | 3,537 | 0.8% |
| Guangzhou Kingmed Diagnostics Group | China | Health Care | 3,482 | 0.7% |
| Top 50 Investments | 428,310 | 92.5% | ||
| Triveni Turbine | India | Industrials | 3,461 | 0.7% |
| Pigeon | Japan | Consumer Staples | 3,206 | 0.7% |
| Marico Bangladesh | Bangladesh | Consumer Staples | 3,050 | 0.7% |
| Telkom Indonesia Persero | Indonesia | Communication Services | 3,038 | 0.6% |
| Centre Testing International Group | China | Industrials | 2,948 | 0.6% |
| Airtac International Group | Taiwan | Industrials | 2,835 | 0.6% |
| Yifeng Pharmacy Chain | China | Consumer Staples | 2,786 | 0.6% |
| Kasikornbank | Thailand | Financials | 2,758 | 0.6% |
| Syngene International | India | Health Care | 2,629 | 0.6% |
| Foshan Haitian Flavouring & Food | China | Consumer Staples | 2,373 | 0.5% |
| Top 60 Investments | 457,394 | 98.7% | ||
| DBH Finance | Bangladesh | Financials | 1,845 | 0.4% |
| Silergy | China | Information Technology | 1,665 | 0.4% |
| Pentamaster International | Malaysia | Information Technology | 1,377 | 0.3% |
| BRAC Bank | Bangladesh | Financials | 804 | 0.2% |
| Total Investments | 463,085 | 100.0% |
Income Statement
for the six months ended 31 July 2023
| (Unaudited) | (Unaudited) | |||||
| Six months ended | Six months ended | |||||
| 31 July 2023 | 31 July 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments | - | 3,112 | 3,112 | - | 988 | 988 |
| Exchange differences on currency balances | - | (976) | (976) | - | 1,175 | 1,175 |
| Investment Income | 5,784 | - | 5,784 | 3,384 | - | 3,384 |
| Portfolio Management and AIFM fees (note 2) | (561) | (1,682) | (2,243) | (531) | (1,592) | (2,123) |
| Other expenses | (386) | - | (386) | (353) | - | (353) |
| Return before taxation | 4,837 | 454 | 5,291 | 2,500 | 571 | 3,071 |
| Taxation | (772) | (3,243) | (4,015) | (470) | (1,840) | (2,310) |
| Return/(loss) after taxation | 4,065 | (2,789) | 1,276 | 2,030 | (1,269) | 761 |
| Return/(loss) per ordinary share (note 3) | 3.4p | (2.3)p | 1.1p | 1.7p | (1.0)p | 0.7p |
The Total column of this statement represents the Company's Income Statement.
The Revenue and Capital columns are supplementary to this and are both prepared under guidance published by the Association of Investment Companies ("AIC").
All revenue and capital items in the Income Statement derive from continuing operations.
The Company had no recognised gains or losses other than those declared in the Income Statement.
All of the return and total comprehensive income for the period is attributable to the shareholders of the Company.
Statement of Changes in Equity
for the six months ended 31 July 2023
| 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 | - | - | - | - | (2,789) | 4,065 | 1,276 | |
| Ordinary dividends paid | 4 | - | - | - | - | - | (2,782) | (2,782) |
| At 31 July 2023 | 15,120 | 8,811 | 1,648 | 14,572 | 423,713 | 8,292 | 472,156 | |
| At 31 January 2022 | 15,120 | 8,811 | 1,648 | 14,572 | 404,220 | 6,295 | 450,666 | |
| (Loss)/return after taxation | - | - | - | - | (1,269) | 2,030 | 761 | |
| Ordinary dividends paid | 4 | - | - | - | - | - | (2,298) | (2,298) |
| At 31 July 2022 | 15,120 | 8,811 | 1,648 | 14,572 | 402,951 | 6,027 | 449,129 |
Statement of Financial Position
as at 31 July 2023
| (Unaudited) | (Audited) | |
| As at | As at | |
| 31 July | 31 January | |
| 2023 | 2023 | |
| £'000 | £'000 | |
| Fixed assets | ||
| Investments (note 5) | 463,085 | 474,399 |
| Current assets | ||
| Debtors | 1,956 | 333 |
| Cash and cash equivalents | 19,827 | 10,535 |
| 21,783 | 10,868 | |
| Creditors (amounts falling due within one year) | (1,307) | (1,855) |
| Net current assets | 20,476 | 9,013 |
| Non-current liabilities | ||
| Provisions (note 6) | (11,405) | (9,750) |
| Net assets | 472,156 | 473,662 |
| Capital and reserves | ||
| Share capital | 15,120 | 15,120 |
| Share premium account | 8,811 | 8,811 |
| Capital redemption reserve | 1,648 | 1,648 |
| Special reserve | 14,572 | 14,572 |
| Capital reserve | 423,713 | 426,502 |
| Revenue reserve | 8,292 | 7,009 |
| Equity shareholders' funds | 472,156 | 473,662 |
| Net asset value per ordinary share (note 7) | 390.3p | 391.6p |
Notes to the Financial Statements
1. Basis of preparation
The condensed financial statements for the six months to 31 July 2023 comprise the statements set out above, including the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the principles of the AIC's Statement of Recommended Practice published in July 2022, using the same accounting policies as set out in the Company's Annual Report and Financial Statements for the year ended 31 January 2023.
Going Concern
The Board has considered a detailed assessment of the Company's ability to meets its liabilities as they fall due, including modelling the effects of substantial falls in markets and significant reductions in market liquidity on the Company's assets and liabilities. In light of the results of these tests, the Company's cash balances, the liquidity of the Company's investments and the absence of any gearing, the Directors are satisfied that the Company has adequate financial resources to continue in operation for at least the next 12 months from the date of approval of these financial statements and that, accordingly, it is appropriate to adopt the going concern basis in preparing these financial statements.
Fair value
Under FRS 102 and FRS 104 investments have been classified using the following fair value hierarchy: Level 1 - Quoted prices in active markets.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data), either directly or indirectly.
Level 3 - Inputs are unobservable (i.e. for which market data is unavailable).
All of the Company's investments fall into Level 1 for the periods reported.
2. Portfolio Management and AIFM fees*
| (Unaudited) | (Unaudited) | |||||
| Six months ended | Six months ended | |||||
| 31 July 2023 | 31 July 2022 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Portfolio management fee - Stewart Investors | 498 | 1,493 | 1,991 | 468 | 1,404 | 1,872 |
| AIFM fee - Frostrow | 63 | 189 | 252 | 63 | 188 | 251 |
| 561 | 1,682 | 2,243 | 531 | 1,592 | 2,123 | |
* Please refer to the most recent annual report for more details of the management fee structure.
3. Return per ordinary share
The total return per ordinary share is based on the return attributable to shareholders of £1,276,000 (six months ended 31 July 2022: £761,000) and on 120,958,386 shares (six months ended 31 July 2022: 120,958,386 shares), being the weighted average number of shares in issue.
The revenue return per ordinary share is calculated by dividing the revenue return attributable to shareholders of £4,065,000 (six months ended 31 July 2022: £2,030,000) by the weighted average number of shares in issue as above.
The capital loss per ordinary share is calculated by dividing the capital loss attributable to shareholders of £2,789,000 (six months ended 31 July 2022: loss of £1,269,000) by the weighted average number of shares in issue as above.
4. Dividends
| (Unaudited) | (Unaudited) | |
| Six months | Six months | |
| ended | ended | |
| 31 July | 31 July | |
| 2023 | 2022 | |
| Amounts recognised as distributions in the period: | ||
| Previous year's final dividend of 2.3p (2022: final dividend of 1.9p) | 2,782 | 2,298 |
5. Investments
| Six months to | Year to | ||
| 31 July | 31 July | 31 January | |
| 2023 | 2022 | 2023 | |
| Investments | |||
| Cost at start of period | 320,883 | 290,337 | 290,337 |
| Investment holding gains at start of period | 153,516 | 146,646 | 146,646 |
| Valuation at start of period | 474,399 | 436,983 | 436,983 |
| Purchases at cost | 28,800 | 24,096 | 77,305 |
| Disposal proceeds | (43,226) | (40,306) | (67,323) |
| Gains on investments | 3,112 | 988 | 27,434 |
| Valuation at end of period | 463,085 | 421,761 | 474,399 |
| Cost at end of period | 322,473 | 289,771 | 320,883 |
| Investment holdings gains at end of period | 140,612 | 131,990 | 153,516 |
| Valuation at end of period | 463,085 | 421,761 | 474,399 |
The Company received £43,226,000 (period to 31 July 2022: £ 40,306,000; year to 31 January 2023: £67,323,000) from investments sold in the period. The book cost of these investments when they were purchased was £27,210,000 (period to 31 July 2022: £24,662,000; year to 31 January 2023: £46,759,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
During the period the Company incurred transaction costs on purchases of £46,000 (period to 31 July 2022: £30,000; year to 31 January 2023: £87,000) and transaction costs on sales of £86,000 (period to 31 July 2022: £80,000; year to 31 January 2023: £142,000).
6. Provision
As an investment trust, the Company is generally not subject to UK tax on capital gains. However, Indian capital gains tax arises on capital gains on the sale of Indian securities at a rate of 15% on short-term capital gains (defined as those where the security was held for less than a year) and 10% on long-term capital gains. The provision at 31 July 2023 of £11,405,000 (31 January 2023: £9,750,000) relates to the potential deferred tax liability for Indian capital gains tax that may arise on the Company's Indian investments should they be sold in the future. The provision is calculated on the net unrealised taxable capital gain at the period end and on the enacted Indian long-term capital gain tax rate. The amount of any future tax amounts payable may differ from this provision, depending on the value and timing of any future sales of such investments and future Indian tax rates.
The capital tax charge shown in the Income Statement results primarily from the movements on this provision.
7. Net asset value per ordinary share
The net asset value per ordinary share is based on the net assets attributable to shareholders of £472,156,000 (31 January 2023: £473,662,000) and on 120,958,386 shares in issue (31 January 2023: 120,958,386).
8. 2023 accounts
These are not statutory accounts in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory accounts for the year to 31 January 2023, which received an unqualified audit report, have been lodged with the Registrar of Companies. No statutory accounts in respect of any period after 31 January 2023 have been reported on by an auditor or delivered to the Registrar of Companies.
Earnings for the first six months should not be taken as a guide to the results for the full year.
Interim Management Report
Principal Risks and Uncertainties
The Company's principal area of risk relates to its investment activity and strategy, including currency risk in respect of the markets in which it invests. Other risks faced by the Company include financial, strategic and operational risks. These risks and the way in which they are managed are described in more detail under the heading Risk Management within the Strategic Report in the Company's Annual Report for the year ended 31 January 2023. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not currently expected to change materially for the remaining six months of the Company's financial year.
The Board, the AIFM and the Portfolio Manager discuss and identify emerging risks as part of the risk identification process and have considered, amongst other things, the potential effects of global supply chain disruption on the Company's performance.
Related Party Transactions
During the first six months of the current financial year no material transactions with related parties have taken place which have affected the financial position or the performance of the Company during the period.
Going Concern
The Directors believe, having considered the Company's investment objective, risk management policies, capital management policies and procedures, and the nature of the portfolio (including its liquidity) and its expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. In addition, there are no material uncertainties pertaining to the Company that would prevent its continued operational existence for at least 12 months from the date of the approval of this half-yearly report. For these reasons, the Directors consider it appropriate to continue to adopt the going concern basis in preparing the financial statements.
Directors' Responsibilities
The Board confirms that, to the best of the Directors' knowledge:
- the condensed set of financial statements contained within the Half Year Report has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting); and
- the Half Year Report includes a fair review of the information required by:
- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
- DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
This Half Year Report has not been audited or reviewed by an auditor.
This Half Year Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
For and on behalf of the Board
Andrew Impey
Chair
12 October 2023
Glossary of Terms
AIFMD
The Alternative Investment Fund Managers Directive (the "Directive") is a European Union Directive that entered into force on 22 July 2013. The Directive, which was retained in UK law following the withdrawal of the UK from the European Union, regulates fund managers that manage alternative investment funds (including investment trusts).
Where an entity falls within the scope of the Directive, it must appoint a single Alternative Investment Fund Manager ("AIFM"). The core functions of an AIFM are portfolio and risk management. An AIFM can delegate one but not both of these functions. The entity must also appoint an independent depositary whose duties include the following: the safeguarding and verification of ownership of assets; the monitoring of cashflows; and ensuring that appropriate valuations are applied to the entity's assets.
Alternative Performance Measures ("APMs")
Measures that are not specifically defined under International Financial Reporting Standards, but which the Board of Directors views as particularly relevant for investment trust companies and which it uses to assess the Company's performance. Definitions of the terms used and the basis of calculation are set out in this Glossary and the APMs are indicated with a caret (^).
Average Discount^
The average share price for the period divided by the average net asset value for the period and expressed as a percentage (%).
| Six months to 31 July 2023 | Six months to 31 July 2022 | Year to 31 January 2023 | |
| pence | pence | pence | |
| Average share price for the period | 362.9 | 322.8 | 335.9 |
| Average net asset value for the period | 388.1 | 360.5 | 373.8 |
| Average Discount | 6.5% | 10.5% | 10.1% |
Bottom Up Approach
An investment approach that focuses on the analysis of individual stocks rather than the significance of macroeconomic factors.
Net Asset Value ("NAV") Per Share
The value of the Company's assets, principally investments made in other companies and cash held in the Company's bank accounts, minus any liabilities and divided by the number of shares in issue. The net asset value is often expressed in pence per share and it may also be described as 'shareholders' funds' per share. The net asset value per share is unlikely to be the same as the share price, which is the price at which the Company's shares can be bought or sold by an investor. The share price is determined by the relationship between the demand for and supply of the shares.
NAV Per Share Total Return^
The theoretical total return on shareholders' funds per share, reflecting the change in net asset value, assuming that dividends paid to shareholders were reinvested at net asset value at the time the shares were quoted ex-dividend. A way of measuring investment management performance of investment trusts which is not affected by movements in the share price.
| Six months to | Six months to | Year to | |
| 31 July 2023 | 31 July 2022 | 31 January 2023 | |
| NAV Total Return | pence | pence | pence |
| Opening NAV per share | 391.6 | 372.6 | 372.6 |
| Increase in NAV | 1.0 | 0.6 | 20.9 |
| Dividend paid | (2.3) | (1.9) | (1.9) |
| Closing NAV | 390.3 | 371.3 | 391.6 |
| % Increase in NAV | 0.3% | 0.2% | 5.6% |
| Impact of reinvested dividends | 0.0% | 0.0% | 0.1% |
| NAV Per Share Total Return | 0.3% | 0.2% | 5.7% |
Ongoing Charges^
Ongoing charges are calculated by taking the Company's annualised operating expenses excluding finance costs, taxation and exceptional items, and expressing them as a percentage of the average daily net asset value of the Company over the period. The costs of buying and selling investments are excluded, as are interest costs, taxation, costs of buying back or issuing shares and other non-recurring costs. These items are excluded because if included, they could distort the understanding of the Company's performance for the period and the comparability between periods.
| Year to | |||
| Six months to | Six months to | 31 January | |
| 31 July 2023 | 31 July 2022 | 2023 | |
| £'000 | £'000 | £'000 | |
| Total Operating Expenses | 2,629 | 2,476 | 5,190 |
| Average Net Assets | 469,886 | 435,376 | 452,081 |
| Ongoing Charges | 1.1%* | 1.1%* | 1.1% |
* Annualised
Performance Objective
The Company's performance objective is to provide shareholders with a net asset value per share total return in excess of the UK Consumer Price Index ("CPI") plus 6 per cent. (calculated on an annual basis) measured over three to five years. The Consumer Price Index is published by the UK Office for National Statistics and represents inflation. The additional 6% is a fixed element to represent what the Board considers to be a reasonable premium on investors' capital which investing in the faster-growing Asian economies ought to provide over time.
| CompanyNAVPer ShareTotal Return(annualised)(%) | CPI + 6%(annualised)(%) | |
| One year to 31 July 2023 | 5.8% | 14.6% |
| Three years to 31 July 2023 | 11.6% | 13.1% |
| Five years to 31 July 2023 | 7.5% | 10.9% |
| Ten years to 31 July 2023 | 9.9% | 9.3% |
Share Price Discount (or Premium) to the NAV Per Share^
A description of the difference between the share price and the net asset value per share. The size of the discount or premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share, the result is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount.
Share Price Total Return^
Share price total return to a shareholder, on a last traded price to a last traded price basis, assuming that all dividends received were reinvested, without transaction costs, into the shares of the Company at the time the shares were quoted ex-dividend.
| Year to | |||
| Six months to | Six months to | 31 January | |
| 31 July 2023 | 31 July 2022 | 2023 | |
| Share Price Total Return | pence | pence | pence |
| Opening share price | 358.0 | 340.0 | 340.0 |
| Increase /(Decrease) in share price | 13.3 | (13.1) | 19.9 |
| Dividend paid | (2.3) | (1.9) | (1.9) |
| Closing share price | 369.0 | 325.0 | 358.0 |
| Increase in share price | 3.7% | (3.9%) | 5.8% |
| Impact of reinvested dividends | 0.0% | 0.1% | 0.1% |
| Share Price Total Return | 3.7% | (3.8%) | 5.9% |
Volatility
A measure of the range of possible returns for a given security or market index.
A copy of the Half Year Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Half Year Report will also shortly be available on the Company's website at www.pacific-assets.co.uk where up to date information on the Company, including NAV, share prices and fact sheets, can also be found.
ENDS
For further information please contact:
Frostrow Capital LLP
Company Secretary
020 3709 8734
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.
