LONDON STOCK EXCHANGE ANNOUNCEMENT
Pacific Assets
Trust plc
(the “Company” or
the “Trust”)
Unaudited Half
Year Results For The Six Months Ended 31
July 2021
This announcement is not the Company’s Half Year Report. It is
an abridged version of the Company’s full Half Year Report for the
six months ended 31 July 2021. The
full Half Year Report, together with a copy of this announcement,
will shortly be available on 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.
The Company's Half Year Report for the six months ended
31 July 2021 has been submitted to
the UK Listing Authority, and will shortly be available for
inspection on the National Storage Mechanism (NSM):
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further information please contact: Katherine Manson, Frostrow Capital LLP, 020 3709
8734.
Financial Highlights
Key Statistics
|
As
at |
As
at |
|
|
31
July |
31
January |
|
|
2021 |
2021 |
%
change |
Share price |
336.0p |
333.0p |
0.9% |
Net asset value per
share |
359.6p |
344.1p |
4.5% |
Discount of share
price to net asset value per share |
6.5% |
3.2% |
|
Market
capitalisation |
£406.4m |
£402.8m |
0.9% |
Shareholders’
funds |
£435.0m |
£416.2m |
4.5% |
|
Six
months to |
One
year to |
|
|
31
July |
31
January |
|
|
2021 |
2021 |
|
Share price (total
return)*^ |
1.7% |
25.8% |
|
Net asset value per
share (total return)*^ |
5.6% |
22.3% |
|
CPI +
6%1 |
5.1% |
6.8% |
|
MSCI All Country Asia
ex Japan Index (total return, sterling adjusted)* |
(6.6%) |
30.7% |
|
Average discount of
share price to net asset value per share^ |
7.0% |
9.1% |
|
Ongoing charges^ |
1.1% |
1.1% |
|
*Source: Morningstar.
^Alternative Performance Measure (see Glossary).
1UK Consumer Price Index + 6% – the Company’s
Performance Objective (see Glossary).
|
Year
ended |
Year
ended |
|
|
31
January |
31
January |
|
Dividends |
2021 |
2020 |
|
Dividend per
share |
2.4p |
3.0p |
|
Peer Group Performance
Performance Assessment
Pacific Assets Trust plc exists in a competitive environment and
aims to be a leader in its peer group, defined as being
consistently within the top third of that group measured by net
asset value per share total return. The Company is committed to
building a long-term investment record and will assess itself by
reference to its peers on a rolling three to five-year basis. An
analysis of this performance can be found in the Chairman’s
Statement and the Portfolio Manager’s Review.
Peer Group Net Asset Value per Share Total Return^
|
1
Year |
|
3
years |
|
5
years |
|
|
£ |
Rank |
£ |
Rank |
£ |
Rank |
Pacific Horizon |
162.1 |
1 |
222.3 |
1 |
349.3 |
1 |
Schroder Asian Total
Return |
126.0 |
4 |
144.7 |
2 |
207.1 |
2 |
Schroder Asia
Pacific |
123.5 |
6 |
133.6 |
3 |
192.9 |
3 |
Invesco Asia |
125.5 |
5 |
133.5 |
4 |
179.3 |
5 |
Asia Dragon |
117.8 |
7 |
133.0 |
5 |
172.9 |
6 |
Pacific Assets
Trust |
126.6 |
3 |
131.4 |
6 |
166.2 |
7 |
JP Morgan Asian |
116.3 |
8 |
130.9 |
7 |
190.2 |
4 |
Fidelity Asian
Values |
140.2 |
2 |
126.8 |
8 |
152.6 |
9 |
iShares MSCI Asia ex
Jpn ETF |
111.3 |
9 |
119.6 |
9 |
159.9 |
8 |
Peer Group
Average |
127.7 |
|
141.8 |
|
196.7 |
|
CPI +
6%1 |
108.8 |
|
125.9 |
|
149.1 |
|
MSCI AC Asia ex
Japan |
112.4 |
|
122.3 |
|
165.8 |
|
Source: Morningstar. Figures show the value as at 31 July 2021 of £100 invested at the start of the
period.
^ Alternative Performance Measure (see Glossary).
1 The Company’s Performance Objective (see Glossary).
Chairman’s Statement
The interim period for the Company closed on 31st July. At that
time the news was dominated by the delayed Tokyo Olympics being
held behind closed doors, and the financial news by a series of
regulations and prohibitions affecting Chinese companies. These are
just a reminder of how unpredictable things have become, neither
situation could easily have been anticipated a year or two ago.
Over the six months to 31st July
2021, the net asset value of the Company’s shares rose by
5.6%^ on a total return basis. Such a trend was in line
with most global stock markets which had risen comfortably
notwithstanding the seemingly endless economic disruption by the
pandemic. The Company’s annualised net asset value total return per
share has been 9.5% over three years and 10.7% over the last five
years. Over these longer periods, it is comfortably ahead of our
Performance Objective, UK CPI plus 6%, which has increased 8.0% and
8.3% on an annual basis over these periods. We also use a peer
group of Asian investment trusts as a comparator, and while still
in the lower half of the range of returns over three and five
years, your Company has shown relative improvement over the last
year. The latest figures are shown above.
Our relative returns over recent years have been affected by the
Trust’s reluctance to engage fully in the powerful wave of Chinese
investment themes. This approach owed much to the lack of
transparency within Chinese companies, and the belief that the
Chinese Communist Party (“CCP”) could still overpower company
management for ideological or political reasons. The CCP being
synonymous with the Government meant that we could never have full
confidence that our shareholders’ assets could be secure against a
rapid change in political sentiment. Where the larger Chinese
companies are concerned, there seems to be an unhealthy mixture
with geopolitics, so that foreign listings (notably New York) and special purpose vehicles used to
access some (the Variable Interest Entity structure) have been
vulnerable.
All this is now widely understood and possibly discounted as
prominent Chinese shares have fallen substantially, justifying our
Portfolio Manager's long held decision to be underweight Chinese
securities. However, the Trust has ventured modestly into
China, more so recently. It is
invested in less high profile companies, particularly in the fields
of medicine and diagnostics. We are encouraged that the euphoria of
recent years has been punctured, and that more opportunities will
be provided in China. It is easy
to be overwhelmed by the commentary on the politics and miss the
extraordinary creativity and economic dynamism that is flourishing
throughout the country.
Our Portfolio Manager is discriminating in seeking out quality
franchises. Some of these are to be found in China, and many elsewhere, notably in
India. One of the most positive
contributors to return in the period has been Marico, an Indian
stock that has been held by the Trust for more than 10 years. At
the same time, in a sometimes volatile market, it is encouraging
how many new names are appearing in the portfolio, that meet the
exacting standards we apply.
James
Williams
Chairman
25 October 2021
^ Alternative Performance Measure (see Glossary).
Portfolio Manager’s Review
Performance overview
The Company’s net asset value per share total return over the
half year was 5.6%. This compares to an increase in the Company’s
Performance Objective1 of 5.1% and a 6.6% decrease in
the MSCI AC Asia ex Japan Index (measured on a total return,
sterling adjusted basis). These numbers point at a feature of the
year so far, a significant divergence in performance between
countries in the Asia Pacific
region. In China, strengthening
political headwinds had a chilling impact on equities whereas, in
stark contrast, equities in India
proved to be very popular. Six of the portfolio’s largest
detractors were companies operating in China, while seven of the largest positive
contributors were from India. We
have found that quality and sustainability transcend borders and
focusing on geography can be distracting. The Trust invests in
companies and not countries, but we do consider headwinds and
tailwinds and the sheer size of this performance differential bears
examination.
What detracted from our return?
During the interim period many equities in China became less popular as political
headwinds strengthened against certain areas of the economy.
Companies falling foul of greater government scrutiny appeared to
possess three main characteristics: prominent stewards deemed
capable of challenging higher powers; franchises considered to be
misaligned with social development; and foreign investors
facilitated by American Depositary Receipt (“ADR”) listings and/or
corporate structures containing variable interest entities.
American listed education companies were sanctioned heavily. Here,
it was decreed that profit from the provision of private tuition
was incompatible with social development. By prohibiting these
companies from making profit the government effectively confiscated
the assets. Shareholders lost more than 90% within a few weeks.
Fortunately, our focus on quality companies spared shareholders
from the worst of these tribulations, but political anxieties,
particularly in China and
Hong Kong, did have a small
negative impact on performance.
The biggest detractor from performance was Vitasoy, one of the
largest holdings in the portfolio. Vitasoy is a plant-based
beverage manufacturer that is listed in Hong Kong and expanding in China. Following an unpredictable debacle,
external to company purview, Vitasoy featured negatively in the
national and international press. This led to a social media
outcry, a boycott of their products by Chinese consumers and
ultimately a profit warning. A recent call with management
confirmed their competence and that demand for Vitasoy’s products
was rebounding. We are encouraged that the worst of this episode is
in the past and the Trust remains invested in this high-quality
franchise.
Five other companies operating in China were also weak, but the cumulative
detraction was less than from Vitasoy alone. These companies were
Unicharm Corporation, Pigeon Corporation, Vinda International,
Hualan Biological and AK Medical. Rising input prices had a
marginal short-term impact on manufacturers, but there were no
discernible political headwinds facing any of these companies, save
for the possibility of reduced product pricing at AK Medical. This
written, we are not complacent and we continue to evaluate any
challenges to capital preservation with a sharpened focus on
political risk.
Outside China, equities in
South East Asia were mostly
lacklustre. The portfolio suffered small performance detractions
from Philippine Seven, a convenience store operator headquartered
in Manila; Humanica, a human
resources and accounting specialist in Thailand; and Bank OCBC Nisp in Indonesia. These companies are particularly
sensitive to local lockdown and economic challenges and their
recent weakness is understandable. The Trust remains invested in
these companies as their deep financial resilience, excellent
stewardship and strong franchises mean they are well placed to
contribute to future returns as economies recover.
1 Consumer Price Index (“CPI”) + 6%. CPI data is
quoted on a one month lag. See Glossary for further
information.
What contributed to our return?
Indian companies contributed positively to performance
regardless of their sector. The strongest contributor was Dr
Lal Pathlabs which conducts medical
tests in radiology, pathology and cardiology. The title of their
recently released annual report, “Enabling Healthier Lives”,
provides a good explanation for this strength as well as
highlighting excellent sustainability credentials. Dr Lal’s
supplemented their core franchise expansion with Covid testing
facilities and the value of the equity rose by nearly 60% in local
terms. Despite a pandemic induced boost, the company only tests 20
million patients a year and we are comfortable that there is
significant growth potential for this franchise as high-quality
operators continue to take market share in a relatively unorganised
market.
The second largest contributor was Tube Investments. Tube is
expertly stewarded by Mr Vellayan
Subbiah, a descendant of the Murugappa family who founded a
conglomerate spanning 28 businesses across India and beyond over 120 years ago. The
company is currently one of India’s leading manufacturers of metal
formed products for automotive, railway, construction and
agriculture as well as a leading manufacturer of bicycles. Since
taking the reins in 2017, Velleyan has improved the balance sheet,
returns on capital and free cash flow generation. This has set the
scene for Tube’s long-term ambition to evolve into a high-quality
industrial conglomerate capable of reinvesting free cash flow from
existing businesses into new growth engines. This year, we
witnessed their first major move with the acquisition of CG Power,
a high-quality motor franchise that had been severely mismanaged by
previous owners. We have spent a lot of time trying to understand
how successful industrial conglomerates have evolved globally and
believe Tube has many of the right credentials for long-term
success.
The third strongest contributor was Marico. Marico is the
dominant provider of hair conditioning and healthy edible
oils2 in India and is
also present in Bangladesh,
Vietnam and parts of the
Middle East and North Africa. Aided by the pandemic, the
company enjoyed a strong year on the back of a consumer inclination
towards better hygiene and healthier eating. After a number of
years of investment, we are now seeing their healthy foods business
become a material contributor to growth and profitability.
Only slightly less substantial, but no less important, other
notable contributors to performance were Cyient, Sundaram Finance
and Elgi Equipment, all from India. Each of these companies enjoyed a
rebound in operations and investor interest following extreme Covid
related weakness in 2020. Lastly, a relatively new investment in
Tata Consumer Products performed well as the CEO, Sunil D’Souza, showed progress removing
ineffciencies from this newly created consumer franchise.
Of course, India was not the
only focus and three of the top ten contributors were from
China, South Korea and Hong
Kong, namely Silergy, Naver and Techtronic.
Silergy is listed in Taiwan,
but operates in China, and designs
analog semiconductors, mostly for power management and effciency.
Global demand for integrated circuits has continued to be strong
with shortages in supply documented across countries and
industries. Additionally, Silergy also benefits from a localisation
trend as China seeks semiconductor
manufacturing independence from foreign suppliers.
Naver is listed in South Korea
and started in 2000 as a search engine dedicated to Korean users.
Since then, the group has prudently parlayed prodigious cash-flows
from search advertising revenues into a powerful internet ecosystem
offering financial services, media, commerce and cloud
capabilities. The steward here is Seong-sook Han and we have great
admiration for the vibrant, innovative and differentiated culture
she has nurtured. Naver, like all companies, is imperfect and we
have been engaging, with some success, on certain unwelcome
employment practices. During the period Naver benefitted from the
increased need for virtual connectivity making it easier to launch
and develop new services within their expanding eco-system.
The last significant contributor to performance was Techtronic,
which is listed in Hong Kong.
Techtronic is one of only three major competitors in the now
consolidated power tool manufacturing industry. During the period
Techtronic continued to benefit from buoyant demand from personal
and commercial construction activities. They also strengthened
their industry position as the marketplace continues to transition
to cordless power tool technology, which is dominated by
Techtronic.
2 Marico’s domestic market share of coconut oil hair
conditioning and super premium refined edible oils is 61% and 81%.
Marico Investor Presentation, May
2021
https://m.marico.com/investorspdf/Investor_Presentation_May_2021.pdf
Transactions
The Trust purchased three new companies in China: Glodon, which provides digital design
and imaging services to the construction industry; Estun
Automation, a manufacturer of industrial automation; and Amoy
Diagnostics, which specialises in the early-stage detection of
cancer.
Having sold the Trust’s entire holding in Nippon Paint in
November 2020, for reasons of
valuation only, with the share price weakening since that time and
with our confidence in the quality of its people, franchise and
financials undiminished, we reinitiated a holding in the period
under review.
In India, we purchased four new
franchises with strong growth opportunities: CG Power &
Industrial, which has a long history and strong franchise
manufacturing equipment for power generation, transmission and
distribution; Cholamandalam Financial Holdings (a subsidiary of the
Murugappa Group), which provides insurance and investments;
Indiamart Intermesh, which digitally connects buyers and sellers
with over 72,000 mostly industrial components and goods; and
lastly, Biocon, which is a contract researcher and manufacturer of
pharmaceuticals.
The Trust sold out of four investments in the period. Two of
these were banks: OCBC in Singapore and Bank of Central Asia in Indonesia. The environment for banks is
challenging with new competitors and a diminished outlook for
profitable loan growth. We also sold Metropolis Healthcare and
Indigo Paints. Both of these were small holdings which we did not
want to increase for reasons of valuation.
Outlook
The Trust invests in companies and not in countries. When
constructing the portfolio we start with a blank sheet of paper and
invest in companies with strong sustainability positioning and
high-quality franchises, people and financials. When evaluating
companies, we also consider political and economic headwinds and
tailwinds. These exacerbate weaknesses and magnify qualities.
During the interim period under review, political headwinds in
China strengthened. This exposed
the legal or social frailties of many well-known but lower quality
companies. In the future, these political headwinds may wane but
the Trust will not compromise on quality and will continue to
invest in the highest quality stewards, franchises and financials
to preserve and grow shareholders’ capital.
Stewart Investors
25 October 2021
Contribution by investment for the six
months ended 31 July 2021
Top 10 contributors to and detractors
from absolute performance (%)
Top 10 contributors to absolute
performance for the 6 months ended 31 July
2021
|
Contribution
to |
Company |
Returns % |
Dr Lal Pathlabs |
1.23 |
Tube Investments |
1.21 |
Marico |
0.79 |
Silergy |
0.64 |
Cyient |
0.50 |
Tata Consumer
Products |
0.49 |
Sundaram Finance |
0.48 |
NAVER |
0.47 |
Techtronic Industries |
0.47 |
Elgi Equipments |
0.45 |
Top 10 detractors from absolute
performance for the 6 months ended 31 July
2021
|
Contribution
to |
Company |
Returns % |
Vitasoy International Holdings |
-1.63 |
Unicharm
Corporation |
-0.42 |
Pigeon
Corporation |
-0.37 |
Vinda International
Holdings |
-0.30 |
Hualan Biological |
-0.25 |
Philippine Seven |
-0.24 |
Humanica |
-0.24 |
Bank OCBC |
-0.22 |
AK Medical
Holdings |
-0.16 |
Kotak Mahindra Bank |
-0.14 |
Source: Stewart Investors.
Portfolio Valuation
as at 31 July 2021
|
|
|
Val’n |
%
Total |
Company |
Sector |
Country |
£’000 |
Assets |
Hoya Corp |
Health Care |
Japan |
18,374 |
4.2% |
Tube Investments of
India |
Consumer
Discretionary |
India |
17,847 |
4.1% |
Mahindra &
Mahindra |
Consumer
Discretionary |
India |
15,597 |
3.6% |
Marico |
Consumer Staples |
India |
15,257 |
3.5% |
Unicharm |
Consumer Staples |
Japan |
13,322 |
3.1% |
Techtronic
Industries |
Industrials |
Hong
Kong |
12,901 |
3.0% |
Vitasoy International
Holdings |
Consumer Staples |
Hong
Kong |
12,683 |
2.9% |
Voltronic Power
Technology |
Industrials |
Taiwan |
12,080 |
2.8% |
Housing Development
Finance Corporation |
Financials |
India |
11,771 |
2.7% |
NAVER |
Communication
Services |
South
Korea |
11,696 |
2.7% |
Top 10
Investments |
|
|
141,528 |
32.6% |
Dr Lal Pathlabs |
Health Care |
India |
10,910 |
2.5% |
Koh Young
Technology |
Information
Technology |
South
Korea |
9,728 |
2.2% |
Taiwan Semiconductor
Manufacturing |
Information
Technology |
Taiwan |
9,144 |
2.1% |
Tata Consultancy
Services |
Information
Technology |
India |
9,098 |
2.1% |
Tata Consumer
Products |
Consumer Staples |
India |
8,994 |
2.1% |
Kotak Mahindra
Bank |
Financials |
India |
8,844 |
2.0% |
Delta Electronics |
Information
Technology |
Taiwan |
8,539 |
2.0% |
Advantech |
Information
Technology |
Taiwan |
8,420 |
1.9% |
Vinda
International |
Consumer Staples |
China |
8,130 |
1.9% |
Silergy |
Information
Technology |
China |
7,823 |
1.8% |
Top 20
Investments |
|
|
231,158 |
53.2% |
Info Edge |
Communication
Services |
India |
7,260 |
1.7% |
Aavas Financiers |
Financials |
India |
7,198 |
1.7% |
Chroma Ate |
Information
Technology |
Taiwan |
7,178 |
1.7% |
Dabur India |
Consumer Staples |
India |
7,140 |
1.6% |
Elgi Equipments |
Industrials |
India |
7,027 |
1.6% |
Dr. Reddy’s
Laboratories |
Health Care |
India |
6,793 |
1.6% |
PT Uni-Charm
Indonesia |
Consumer Staples |
Indonesia |
6,668 |
1.5% |
CG Power &
Industrial Solutions |
Industrials |
India |
6,590 |
1.5% |
Vitrox |
Information
Technology |
Malaysia |
6,386 |
1.5% |
Tech Mahindra |
Information
Technology |
India |
6,213 |
1.4% |
Top 30
Investments |
|
|
299,611 |
69.0% |
Godrej Consumer
Products |
Consumer Staples |
India |
6,137 |
1.4% |
Sundaram Finance |
Financials |
India |
6,056 |
1.4% |
Tata
Communications |
Communication
Services |
India |
5,705 |
1.3% |
Philippine Seven |
Consumer Staples |
Philippines |
5,646 |
1.3% |
Infosys |
Information
Technology |
India |
5,426 |
1.2% |
Bank OCBC NISP |
Financials |
Indonesia |
5,380 |
1.2% |
Syngene
International |
Health Care |
India |
5,272 |
1.2% |
Hualan Biological
Engineering |
Health Care |
China |
5,241 |
1.2% |
Tokyo Electron |
Information
Technology |
Japan |
5,061 |
1.2% |
PT Selamat
Sempurna |
Consumer
Discretionary |
Indonesia |
4,871 |
1.1% |
Top 40
Investments |
|
|
354,406 |
81.5% |
Marico Bangladesh |
Consumer Staples |
Bangladesh |
4,744 |
1.1% |
Shenzhen Inovance
Technology |
Industrials |
China |
4,707 |
1.1% |
Mahindra
Logistics |
Industrials |
India |
4,453 |
1.0% |
HDFC Life
Insurance |
Financials |
India |
4,133 |
1.0% |
BRAC Bank |
Financials |
Bangladesh |
4,107 |
0.9% |
Shanthi Gears |
Industrials |
India |
4,087 |
0.9% |
Centre Testing
International |
Industrials |
China |
4,079 |
0.9% |
Guangzhou Kingmed
Diagnostics |
Health Care |
China |
3,684 |
0.8% |
Humanica |
Information
Technology |
Thailand |
3,644 |
0.8% |
Glodon |
Information
Technology |
China |
3,031 |
0.7% |
Top 50
Investments |
|
|
395,075 |
90.7% |
Estun Automation |
Industrials |
China |
2,848 |
0.7% |
Delta Brac Housing
Finance |
Financials |
Bangladesh |
2,677 |
0.6% |
Cholamandalam
Financial Holdings |
Financials |
India |
2,427 |
0.6% |
Pigeon
Corporation |
Consumer Staples |
Japan |
2,401 |
0.6% |
MediaTek |
Information
Technology |
Taiwan |
2,223 |
0.5% |
Kasikornbank |
Financials |
Thailand |
2,180 |
0.5% |
Amoy Diagnostics |
Health Care |
China |
2,148 |
0.5% |
Biocon |
Health Care |
India |
2,081 |
0.5% |
Hemas Holdings |
Industrials |
Sri
Lanka |
2,001 |
0.5% |
IndiaMart
InterMesh |
Information
Technology |
India |
1,781 |
0.4% |
AK Medical
Holdings |
Health Care |
China |
1,494 |
0.3% |
Pentamaster
International |
Information
Technology |
Malaysia |
1,371 |
0.3% |
Cyient |
Information
Technology |
India |
831 |
0.2% |
Nippon Paint |
Materials |
Japan |
809 |
0.2% |
Square
Pharmaceuticals |
Health Care |
Bangladesh |
156 |
0.0% |
Total
Investments |
|
|
422,503 |
97.1% |
Net current assets
/ (liabilities) |
|
|
12,470 |
2.9% |
Total Shareholders
Funds |
|
|
434,973 |
100.0% |
Financial Statements
Income Statement
for the six months ended 31 July
2021
|
(Unaudited)
Six months ended
31 July 2021 |
(Unaudited)
Six months ended
31 July 2020 |
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Gains on
investments |
– |
24,349 |
24,349 |
– |
1,966 |
1,966 |
Exchange differences
on currency
balances |
– |
(463) |
(463) |
– |
(87) |
(87) |
Investment Income |
3,094 |
– |
3,094 |
3,035 |
– |
3,035 |
Portfolio Management
and AIFM
fees (note 2) |
(514) |
(1,542) |
(2,056) |
(389) |
(1,166) |
(1,555) |
Other expenses |
(344) |
– |
(344) |
(288) |
– |
(288) |
Return before
taxation |
2,236 |
22,344 |
24,580 |
2,358 |
713 |
3,071 |
Taxation |
(415) |
(2,505) |
(2,920) |
(301) |
1,117 |
816 |
Return after
taxation |
1,821 |
19,839 |
21,660 |
2,057 |
1,830 |
3,887 |
Return per ordinary
share (note 3) |
1.5p |
16.4p |
17.9p |
1.7p |
1.5p |
3.2p |
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 owners of the Company.
Statement of Changes in Equity
for the six months ended 31 July
2021
|
(Unaudited) |
(Unaudited) |
|
Six
months |
Six
months |
|
ended |
ended |
|
31
July 2021 |
31
July 2020 |
|
£’000 |
£’000 |
Opening shareholders’
funds |
416,216 |
345,717 |
Return for the
period |
21,660 |
3,887 |
Dividends paid (note
4) |
(2,903) |
(3,629) |
Closing
shareholders’ funds |
434,973 |
345,975 |
Statement of Financial Position
as at 31 July 2021
|
(Unaudited) |
(Audited) |
|
As
at |
As
at |
|
31
July |
31
January |
|
2021 |
2021 |
|
£’000 |
£’000 |
Fixed
assets |
|
|
Investments (note
5) |
422,503 |
404,714 |
Current
assets |
|
|
Debtors |
3,407 |
232 |
Cash and cash
equivalents |
19,501 |
17,823 |
|
22,908 |
18,055 |
Creditors
(amounts falling due within one year) |
(2,718) |
(1,231) |
Net current
assets |
20,190 |
16,824 |
Non-current
liabilities |
|
|
Provisions (note
6) |
(7,720) |
(5,322) |
Net assets |
434,973 |
416,216 |
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 |
389,114 |
369,275 |
Revenue reserve |
5,708 |
6,790 |
Equity
shareholders’ funds |
434,973 |
416,216 |
Net asset value per
ordinary share (note 7) |
359.6p |
344.1p |
Notes to the Financial Statements
1. Basis of preparation
The condensed Financial Statements for the six months to
31 July 2021 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 issued in October 2019 and
updated in April 2021, using the same
accounting policies as set out in the Company’s Annual Report and
Financial Statements for the year ended 31
January 2021.
Fair value
Under FRS 102 and FRS 104 investments have been classified using
the following fair value hierarchy:
Level 1 – Quoted prices in active markets.
Level 2 – Inputs other than quoted prices included within Level
1 that are observable (i.e. developed using market data), either
directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is
unavailable).
All of the Company’s investments fall into Level 1 for the
periods reported.
2. Portfolio Management and AIFM fees*
|
(Unaudited)
Six months ended
31 July 2021 |
(Unaudited)
Six months ended
31 July 2020 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Portfolio management
fee – Stewart Investors |
456 |
1,369 |
1,825 |
344 |
1,032 |
1,376 |
AIFM fee –
Frostrow |
58 |
173 |
231 |
45 |
134 |
179 |
|
514 |
1,542 |
2,056 |
389 |
1,166 |
1,555 |
* 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 £21,660,000 (six months ended
31 July 2020: return of £3,887,000)
and on 120,958,386 shares (six months ended 31 July 2020: 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 £1,821,000 (six
months ended 31 July 2020:
£2,057,000) by the weighted average number of shares in issue as
above.
The capital return per ordinary share is calculated by dividing
the capital return attributable to shareholders of £19,839,000 (six
months ended 31 July 2020: return of
£1,830,000) by the weighted average number of shares in issue as
above.
4. Dividends
|
(Unaudited) |
(Unaudited) |
|
Six
months |
Six
months |
|
ended |
ended |
|
31
July 2021 |
31
July 2020 |
Amounts recognised
as distributions in the period: |
|
|
Previous year’s final
dividend of 2.4p (2020: interim dividend of 3.0p) |
2,903 |
3,629 |
5. Investments
|
Six months to |
Year
to |
|
31
July |
31
July |
31
January |
|
2021 |
2020 |
2021 |
Investments |
|
|
|
Cost at start of
period |
267,140 |
222,736 |
222,736 |
Investment holding
gains at start of period |
137,574 |
86,781 |
86,781 |
Valuation at start
of period |
404,714 |
309,517 |
309,517 |
Purchases at cost |
37,762 |
63,520 |
110,858 |
Disposal proceeds |
(44,322) |
(41,245) |
(92,887) |
Gains on
investments |
24,349 |
1,966 |
77,226 |
Valuation at end of
period |
422,503 |
333,758 |
404,714 |
Cost at end of
period |
275,584 |
252,451 |
267,140 |
Investment holding
gains at end of period |
146,919 |
81,307 |
137,574 |
Valuation at end of
period |
422,503 |
333,758 |
404,714 |
The Company received £44,322,000 (period to 31 July 2020: £41,245,000; year to 31 January 2021: £92,887,000) from investments
sold in the period. The book cost of these investments when they
were purchased was £29,318,000 (period to 31
July 2020: £33,805,000; year to 31
January 2021: £66,454,000). 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 £63,000 (period to 31 July
2020: £76,000; year to 31 January
2021: £156,000) and transaction costs on sales of £116,000
(period to 31 July 2020: £89,000;
year to 31 January 2021:
£231,000).
6. Provisions
The provision at 31 July 2021 of
£7,720,000 (31 January 2021:
£5,322,000) relates to a 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, based on the net
unrealised taxable capital gain at the period end and on enacted
Indian tax rates. 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 primarily
results 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 £434,973,000 (31 January 2021: £416,216,000) and on 120,958,386
shares in issue (31 January 2021:
120,958,386).
8. 2021 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 2021, 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 2021 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, shareholder relations and operational risks
(including cyber-crime, corporate governance, accounting, legal,
regulatory and political 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
2021. The Company’s principal risks and uncertainties have
not changed materially since the date of that report and are not
expected to change materially for the remaining six months of the
Company’s financial year.
The Board, the AIFM and the Portfolio Manager continually
consider emerging risks and monitor, amongst other things, the
potential for the Company’s portfolio to be a?ected by the Covid-19
pandemic and geopolitical risks.
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 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. For these reasons, they consider it appropriate
to continue to adopt the going concern basis in preparing the
financial statements. In reviewing the position as at the date of
this report, the Board has considered the guidance on this matter
issued by the Financial Reporting Council.
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 interim management 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
James
Williams
Chairman
25 October 2021
Frostrow Capital LLP
Company Secretary
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 |
Year
to |
|
31
July |
31
January |
|
2021 |
2021 |
|
pence |
pence |
Average share price
for the period |
330.0 |
268.1 |
Average net asset
value for the period |
354.9 |
294.9 |
Average
Discount |
7.0% |
9.1% |
Net Asset Value 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.
Net Asset Value 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 |
Year
to |
|
31
July |
31
January |
|
2021 |
2021 |
NAV Total
Return |
pence |
pence |
Opening net asset
value per share |
344.1 |
285.8 |
Increase in net asset
value |
17.9 |
61.3 |
Dividend paid |
(2.4) |
(3.0) |
Closing Net Asset
Value |
359.6 |
344.1 |
% increase in net
asset value |
5.2% |
21.4% |
Impact of reinvested
dividends |
0.4% |
0.9% |
Net Asset Value Per
Share Total Return |
5.6% |
22.3% |
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.
|
Six
months to |
Year
to |
|
31
July |
31
January |
|
2021 |
2021 |
|
£’000 |
£’000 |
Total Operating
Expenses |
2,400 |
4,010 |
Average Net
Assets |
429,540 |
356,104 |
Ongoing
Charges* |
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.
|
Company Net |
|
|
Asset
Value |
|
|
Per
Share |
|
|
Total
Return |
CPI +
6% |
|
(annualised) |
(annualised) |
|
(%) |
(%) |
One year to 31 July
2021 |
26.6 |
8.3 |
Three years to 31 July
2021 |
9.5 |
8.0 |
Five years to 31 July
2021 |
10.7 |
8.3 |
Share Price Discount (or Premium) to the Net Asset Value Per
Share^
A description of the difference between the share price and the
net asset value per share. The size of the discount or premium is
calculated by subtracting the share price from the net asset value
per share and is usually expressed as a percentage (%) of the net
asset value per share. If the share price is higher than the net
asset value per share the result is a premium. If the share price
is lower than the net asset value per share, the shares are trading
at a discount.
Share Price Total Return^
Share price total return to a shareholder, on a last traded
price to a last traded price basis, assuming that all dividends
received were reinvested, without transaction costs, into the
shares of the Company at the time the shares were quoted
ex-dividend.
|
Six
months to |
Year
to |
|
31
July |
31
January |
|
2021 |
2021 |
Share Price Total
Return |
pence |
pence |
Opening share
price |
333.0 |
268.0 |
Increase in share
price |
5.4 |
68.0 |
Dividend Paid |
(2.4) |
(3.0) |
Closing share
price |
336.0 |
333.0 |
% increase in share
price |
1.6% |
25.4% |
Impact of reinvested
dividends |
0.1% |
0.4% |
Share Price Total
Return |
1.7% |
25.8% |
MSCI Disclaimer
The MSCI information may only be used for your internal use, may
not be reproduced or redisseminated in any form and may not be used
as a basis for or a component of any financial instruments or
products or indices. None of the MSCI information is intended to
constitute investment advice or a recommendation to make (or
refrain from making) any kind of investment decision and may not be
relied on as such. Historical data and analysis should not be taken
as an indication or guarantee of any future performance analysis,
forecast or prediction. The MSCI information is provided on an “as
is” basis and the user of this information assumes the entire risk
of any use made of this information. MSCI, each of its a?liates and
each other person involved in or related to compiling, computing or
creating any MSCI information (collectively, the “MSCI Parties”)
expressly disclaims all warranties (including, without limitation,
any warranties of originality, accuracy, completeness, timeliness,
non-infringement, merchantability and fitness for a particular
purpose) with respect to this information. Without limiting any of
the foregoing, in no event shall any MSCI Party have any liability
for any direct, indirect, special, incidental, punitive,
consequential (including, without limitation lost profits) or any
other damages. (www.msci.com)
A member of the Association of Investment Companies
Pacific Assets Trust plc
Address for correspondence – 25 Southampton Buildings,
London WC2A 1AL
www.pacific-assets.co.uk