Annual Report for the Year Ended 31 January 2024

LONDON STOCK EXCHANGE ANNOUNCEMENT

Pacific Assets Trust plc

(the “Company”)

Final Results for the Year Ended 31 January 2024

The Company's annual report for the year ended 31 January 2024 (the “Annual Report”), which includes the notice of the Company’s forthcoming annual general meeting, has been submitted to the UK Listing Authority, and will shortly be available in full, unedited text for inspection on the National Storage Mechanism (NSM): https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Annual Report will be posted to shareholders on 9 May 2024. Members of the public may obtain copies by writing to Frostrow Capital LLP, 25 Southampton Buildings, London WC2A 1AL or from the Company’s website at www.pacific-assets.co.uk where up to date information on the Company, including daily NAV, share prices and fact sheets, can also be found.

Frostrow Capital LLP, Company Secretary

0203 709 8734

30 April 2024

Company Performance

Performance Summary

	As at	As at
	31 January	31 January
	2024	2023
Shareholders’ funds	£464.8m	£473.7m
Market capitalisation	£422.1m	£433.0m

	One year to	One year to
	31 January	31 January
Performance	2024	2023
Share price total return1 2	(1.9)%	5.9%
Net asset value per share total return1 2	(1.3)%	5.7%
CPI +6%3	10.4%	17.3%
MSCI All Country Asia ex Japan Index total return, sterling adjusted1	(10.5)%	(2.2)%
Average discount of share price to net asset value per share1 2	6.4%	10.1%
Ongoing charges2	1.1%	1.1%
Revenue return per share4	4.3p	2.5p
Dividend per share	4.0p	2.3p

1 Source: Morningstar

2 Alternative Performance Measure (see Glossary)

3 The Company’s Performance Objective (see Glossary)

4 See Glossary

Chair’s Statement

Introduction and Results

The net asset value total return for the year ended 31 January 2024 was (1.3)% (2023: +5.7%). While this is a disappointing result relative to the performance objective set by the Board, your Portfolio Manager is to be commended that the Company’s performance over the year was the best of the peer group of four other trusts and an exchange traded fund, all of which also suffered negative returns, with a collective average NAV decline of 9.0% (2023: average decline of 3.0%).

Over longer periods we consider investment return against the UK CPI plus 6% as 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 NAV total return of 7.6% has fallen behind the annualised CPI plus 6% figure of 10.8%. This is a result of the rise and persistence of inflation in Western economies in recent years and we believe that the performance objective remains appropriate.

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 (10.5)%, as well as the strong relative outperformance over the peer group mentioned above. This pleasing relative performance reflects the Portfolio Manager’s emphasis on long term returns and capital preservation. It also reflects, as my predecessor remarked last year, that Asia Pacific markets have not recently delivered the premium return over developed markets, that the asset allocation models suggest should be the case.

Again, the Company’s high exposure to India was helpful to returns: seven of the top ten principal contributors to the return in the year were Indian companies, including CG Power & Industrial Solutions, Tube Investments, and Cholamandalam Financial Holdings. By contrast, China’s weakened economic outlook and lacklustre performance is reflected in the Company’s principal detractors, six of which were companies based in China and Hong Kong including Vitasoy, Glodon and Wuxi Biologics.

Further analysis of the Company’s performance can be found in the Portfolio Manager’s Review.

Sustainability

Shareholders will be well aware that Stewart Investors have long since adopted a sustainable investment strategy and are considered to be amongst the leaders in this field. In selecting the investments that make up the Company’s portfolio, their process aims to generate strong, long-term, risk-adjusted returns by investing in the shares of companies that they consider to be high-quality and particularly well positioned to contribute to and benefit from sustainable development in the Asia Pacific Region.

Pursuant to the Company’s Environmental, Social and Governance (“ESG”) Policy, the Board has chosen to adopt and endorse Stewart Investors’ approach to integrating sustainability into portfolio construction and investee company engagement. This means that, in effect, the Company has a de facto sustainability objective: to achieve long-term capital appreciation by investing in companies which both contribute to, and benefit from, sustainable development, achieving positive social and environmental sustainable outcomes.

Given this long-standing sustainable investment strategy which has been applied in managing the Company’s portfolio, the Company reports against a high standard of sustainability disclosures (Article 9) under the EU Sustainable Finance Disclosure Regulations (“SFDR”) which must be complied with due to the Company being marketed in Ireland. The Company’s annual SFDR Article 9 report, produced by Stewart Investors, begins on page 82 of the Annual Report.

Due to genuine concerns over ‘greenwashing’, in November and after a long delay, the FCA published its Policy Statement on the UK Sustainability Disclosure Requirements (“SDR”), which confirmed that it would be possible for investment companies which met certain qualifying criteria to apply one of four sustainable investment ‘labels’. One of the requirements of the SDR is that any “product” qualifying for a label must have an explicit sustainability objective as part of its investment objective. While sustainability has been and continues to be one of the defining features of Stewart Investors’ strategy, and the de facto sustainability objective is recognised in the Company’s own ESG policy, the Company’s formal, published investment objective does not explicitly reference sustainability.

The Company would therefore need to amend its published investment objective and policy in order to utilise a UK SDR label. The Company’s legal advisers have confirmed that the changes envisaged to explicitly reference sustainability in the objective would be expected to constitute material changes, requiring shareholder approval at a general meeting. This is despite the fact that it has long been the case that the Company only invests in companies that the Portfolio Manager believes are sustainable/have sustainability characteristics.

The Board wishes to understand better whether the adoption of a UK SDR label will bring real benefits to the Company, and have time to consider relevant guidance published by the Association of Investment Companies (the “AIC”), before recommending any changes. Given the proximity of this material change to the Company’s year end, the Board believes it is prudent to take the necessary time to consider if and how the Company’s published investment objective and policy should be developed, rather than formally proposing any changes to shareholders at the AGM in July. As a result, the Company will not apply a sustainability label under UK SDR for the time being.

The Board wishes to emphasise to shareholders that UK SDR will not change Stewart Investors’ strategy in managing the Company’s portfolio. We would also highlight, for the avoidance of doubt, that we have been advised that our existing disclosures are sufficient for maintaining the Company’s classification under Article 9 of the EU SFDR. If any shareholders wish to discuss the implications of the UK SDR with the Board, they are encouraged to contact me through the Company Secretary.

Share price performance

The Company’s shares traded at an average discount to the net asset value per share of 6.4% through the year to the end of January (2023: 10.1%). This was again narrower than the peer group average discount of 9.3%. In line with the investment trust sector generally, the discount narrowed towards the end of December, and at one point the shares briefly traded at a small premium, before the discount widened again towards the end of the financial year to close at 9.2% (2023: 8.6%).

The Board has continued its work to improve the visibility of the Company throughout the year. We wish to bolster our long-standing wealth manager base by attracting a broader range of shareholders, including retail investors who represent a smaller proportion of our shareholder base. The Board has established a new standing subcommittee, the Sales, Marketing and Communications Committee (the “SMCC”), which is chaired by Edward Troughton. The Board has delegated to the SMCC responsibility, together with the Portfolio Manager, for developing and overseeing the marketing and promotional strategy for the Company. It will review all the marketing activities taken by and on behalf of the Company by third parties. The intention is that this will be helpful in increasing wider demand for the Company’s shares. Strong relative performance will assist investor sentiment, as will the Portfolio Manager’s high level of credibility as a sustainable investor; offering an appealing prospect to shareholders who are seeking exposure to Asia through genuinely responsible investing.

Dividend

The Company generated a revenue return of 4.3p per share during the year (2023: 2.5p per share) and, as a result, the Board recommends to shareholders the payment of a final dividend to allow the Company to comply with the investment trust rules regarding distributable income and the Company’s policy to pay out the majority of income earned in any one year.

Subject to shareholder approval at the AGM, a final dividend of 4.0p per share will be paid on 12 July 2024 to shareholders on the register on 14 June 2024. The associated ex-dividend date will be 13 June 2024.

The increased revenue return arose as a result of increased dividend receipts from several companies, most notably Bank OCBC and Overseas Chinese Banking Corporation, in which the Company’s position was increased during the year. We would like to remind shareholders that the Company’s policy is to pursue capital growth, with income being a secondary consideration. Accordingly, shareholders should not expect this higher dividend rate to be maintained.

The Board

During the year, as reported in the Company’s half yearly report, James Williams retired from the Board and I succeeded him as Chair.

In October, we announced the appointment of Nandita Sahgal to the Board, effective 1 January 2024. We were delighted to welcome a Director with extensive expertise both in the financial sector and in Indian and emerging markets. It is intended that Nandita will succeed Charlotta Ginman as Chair of the Audit Committee after Charlotta retires at the conclusion of the AGM in 2024.

In anticipation of her retirement, I would like to extend my sincere gratitude to Charlotta for her dedicated service and incisive contributions during her tenure as Audit Committee Chair. Charlotta’s expertise, professionalism and commitment to upholding the highest standards of financial integrity and governance have been invaluable to the Board.

We adhere to good corporate governance principles that directors should not serve on the Board for over nine years. Accordingly, the Board has appointed an executive search firm to assist in the appointment of a director to replace Sian Hansen when she steps down at the AGM in 2025.

The Annual General Meeting

As some shareholders will be aware, the Company is incorporated in Scotland and our Portfolio Manager, Stewart Investors, have an office in Edinburgh. The Board has decided that this year, the AGM will return to Edinburgh, having last been held there in 2004. The AGM will be held at 12 noon on Tuesday, 9 July 2024, at the Royal College of Physicians of Edinburgh, 11 Queen Street, Edinburgh EH2 1JQ.

As well as the formal proceedings, there will be an opportunity for shareholders to meet the Board and the Portfolio Manager, and to receive an update on the Company’s performance and its key investments.

The meeting, including the Portfolio Manager’s presentation, will be live streamed by Investor Meet Company for the benefit of those shareholders who are unable to attend in person. Shareholders joining the meeting remotely will not be able to speak or vote through the platform but will be able to submit written questions. Full details of how to participate this way are set out on page 104 of the Annual Report.

I encourage all shareholders to exercise their right to vote at the AGM. The Board strongly encourages shareholders to register their votes online in advance. Registering your vote in advance will not restrict shareholders from attending and voting at the meeting in person should they wish to do so. The Board recommends that shareholders vote in favour of all the resolutions set out in the Notice of AGM, as the directors intend to do ourselves.

Outlook

It is always difficult, if not impossible, to predict the short-term future of a region as diverse as the Asia Pacific. However, there is a general expectation that, despite heightened geopolitical tensions and economic challenges, the region will continue its long-term growth trajectory. Key drivers include technological advancements, infrastructure development and increasing consumer demand from the growing middle classes. Ever-present risks posed by trade disputes, currency fluctuations, climate change events and regulatory changes will need to be closely monitored. Notwithstanding these risks, our Portfolio Manager aims to invest for the long term, selecting companies with skilled, successful and experienced management teams, strong balance sheets and sustainable businesses.

Andrew Impey
Chair

29 April 2024

Investment Portfolio

as at 31 January 2024

Company	Country	Sector	Value £’000	% Total Investments
Mahindra & Mahindra	India	Consumer Discretionary	25,830	5.5%
Tube Investments of India	India	Consumer Discretionary	25,749	5.5%
CG Power & Industrial Solutions	India	Industrials	23,346	4.9%
Oversea-Chinese Banking Corporation	Singapore	Financials	14,660	3.1%
UniCharm	Japan	Consumer Staples	13,975	3.0%
Samsung Electronics	South Korea	Information Technology	13,471	2.9%
Marico	India	Consumer Staples	13,373	2.8%
Hoya Corporation	Japan	Health Care	13,370	2.8%
Voltronic Power Technology	Taiwan	Industrials	13,039	2.8%
Midea Group	China	Consumer Discretionary	12,622	2.7%
Top 10 Investments			169,435	36.0%
Cholamandalam Financial Holdings	India	Financials	11,700	2.5%
Shanthi Gears	India	Industrials	11,486	2.4%
Elgi Equipments	India	Industrials	10,644	2.3%
HDFC Bank	India	Financials	10,595	2.3%
Tata Consumer Products	India	Consumer Staples	10,064	2.1%
Taiwan Semiconductor Manufacturing	Taiwan	Information Technology	9,658	2.1%
Shenzhen Inovance Technology	China	Industrials	9,356	2.0%
Bank OCBC NISP	Indonesia	Financials	9,309	2.0%
Koh Young Technology	South Korea	Information Technology	7,770	1.7%
Tokyo Electron	Japan	Information Technology	7,714	1.6%
Top 20 Investments			267,731	57.0%
Selamat Sempurna	Indonesia	Consumer Discretionary	7,403	1.6%
Kotak Mahindra Bank	India	Financials	7,215	1.5%
Chroma ATE	Taiwan	Information Technology	7,144	1.5%
Sheng Siong Group	Singapore	Consumer Staples	6,902	1.5%
Humanica	Thailand	Industrials	6,900	1.5%
Tata Consultancy Services	India	Information Technology	6,650	1.4%
Triveni Turbine	India	Industrials	6,507	1.4%
Advantech	Taiwan	Information Technology	6,306	1.3%
Tech Mahindra	India	Information Technology	6,232	1.3%
Kalbe Farma	Indonesia	Health Care	6,004	1.3%
Top 30 Investments			334,994	71.3%

Company	Country	Sector	Value £’000	% Total Investments
Delta Electronics	Taiwan	Information Technology	5,809	1.2%
Aavas Financiers	India	Financials	5,758	1.2%
Tata Communications	India	Communication Services	5,520	1.2%
Cyient	India	Information Technology	5,472	1.2%
Dr. Lal PathLabs	India	Health Care	4,969	1.1%
Vinda International Holdings	China	Consumer Staples	4,876	1.0%
Godrej Consumer Products	India	Consumer Staples	4,813	1.0%
Advanced Energy Solution Holding	Taiwan	Industrials	4,796	1.0%
Philippine Seven Corporation	Philippines	Consumer Staples	4,688	1.0%
Vitrox	Malaysia	Information Technology	4,587	1.0%
Top 40 Investments			386,282	82.2%
Dr. Reddy’s Laboratories	India	Health Care	4,474	1.0%
Samsung Biologics	South Korea	Health Care	4,138	0.9%
Dabur India	India	Consumer Staples	4,016	0.9%
Tarsons Products	India	Health Care	3,967	0.8%
Amoy Diagnostics	China	Health Care	3,922	0.8%
UniCharm Indonesia	Indonesia	Consumer Staples	3,866	0.8%
Vitasoy International	Hong Kong	Consumer Staples	3,789	0.8%
RBL Bank	India	Financials	3,751	0.8%
Telkom Indonesia	Indonesia	Communication Services	3,730	0.8%
Zhejiang Supor	China	Consumer Discretionary	3,668	0.7%
Top 50 Investments			425,603	90.5%
Glodon	China	Information Technology	3,487	0.7%
Unilever Indonesia	Indonesia	Consumer Staples	3,461	0.7%
Indiamart Intermesh	India	Industrials	3,453	0.7%
Wuxi Biologics	China	Health Care	3,278	0.7%
Marico Bangladesh	Bangladesh	Consumer Staples	3,171	0.7%
Hangzhou Robam	China	Consumer Discretionary	3,152	0.7%
Airtac International	Taiwan	Industrials	2,898	0.6%
Yifeng Pharmacy Chain	China	Consumer Staples	2,798	0.6%
Industri Jamu dan Farmasi Sido Muncul	Indonesia	Consumer Staples	2,716	0.6%
Pigeon Corporation	Japan	Consumer Staples	2,649	0.6%
Kasikornbank	Thailand	Financials	2,571	0.6%
Syngene International	India	Health Care	2,481	0.5%
Guangzhou Kingmed Diagnostics	China	Health Care	2,035	0.4%
Silergy	China	Information Technology	1,973	0.4%
Centre Testing International	China	Industrials	1,965	0.4%
Pentamaster International	Malaysia	Information Technology	1,231	0.3%
DBH Finance	Bangladesh	Financials	1,187	0.3%
Total Investments			470,109	100.0%

Portfolio Manager’s Review

Our Investment Philosophy in Action

Risk as loss of client capital	Long term time horizon	Quality and sustainability positioning
Active share 89%	Average name turnover 10%	Holdings with stewards 80%
Outperformance in down months 80%	Average holding period of top ten 10 years	Holdings with net cash 75%
Downside capture 63%	Average age of holdings 44 years	Carbon footprint relative to benchmark -86%*

Source: Stewart Investors and ISS ESG solutions as at 31 December 2023 and *as at 30 September 2023. Data shown is for a representative Stewart Investors Asia Pacific Sustainability account and the Stewart Investors Asia ex-Japan Sustainable Equity Composite. Please refer to the Glossary for further information on these metrics.

The table above highlights key outcomes of our philosophy; outcomes that have been consistent across the 14 years Stewart Investors have had the privilege of managing the Company. An explanation of the terms used and how the statistics are calculated is provided in the Glossary. It should be noted that the statistics above are for a representative Stewart Investors Asia Pacific sustainability account and the Stewart Investors Asia ex-Japan Sustainable Equity Composite (a weighted average of a group of accounts managed in a similar way by the same portfolio management team). However, as we are consistent in our investment approach, the outcomes for the Company will be broadly similar.

We believe consistency in the application of this philosophy is critical in preserving the trust we are required to earn, and maintain, as stewards of this precious capital. We publish these outcomes so clients may “hold our feet to the fire” should any material changes in these metrics appear.

Over the short term we have very little control over our performance, but over the longer term, periods of over five years, we believe the characteristics presented above have been foundational to the returns, in good times and bad, that the Company has been able to deliver to its shareholders.

Risk as loss of client capital

In most industries there is a standard definition of risk. In the construction of a bridge, engineers would agree that risk is the prospect of the bridge collapsing and lives being lost. In surgery, surgeons see risk in terms of the potential negative health outcomes, including death, which may arise from the procedure. In contrast, the investment industry has failed to settle on such a fundamental concept.

At Stewart Investors we have always seen risk as the possibility of losing clients’ capital rather than deviation from a benchmark. Each of the data points within the “Risk as a loss of client capital” column above are reflections of how we approach the management of risk. Seeing risk in absolutes frees us to build the portfolio bottom-up with a blank sheet of paper. When done with authenticity this should, usually, lead to a high active share: we do not start with an index and work backwards or start with a macro view and work down.

Today, the Company continues to have a material weight invested in India. This is not the result of a “macro overlay”, a view on politics or a desire to gain exposure to a particular theme. Very simply, India is where we continue to find the greatest opportunity to protect and grow the Company’s capital by backing high quality people running great franchises which are wonderfully well-positioned for long-term growth.

Across Asia, the companies in the index (both at the regional and country levels) are not the opportunity set for the long-term, active investor. In India this is very much the case with roughly 75% of the top 100 companies in the MSCI India Index being uninvestible to us due to concerns around quality or sustainability positioning.

Valuations in India are a hot topic. There are certainly pockets of the market where valuation multiples have run far ahead of fundamentals and the risk of mediocre (at best) returns from here feel high. However, our active approach, one with a belief that valuations matter, provides us the freedom to go hunting for long-term value wherever we can find it. Thankfully for the Company’s future returns, the Indian market is wonderfully deep in the treasures it offers the active investor.

Value, for us, is the opportunity to generate attractive returns over the next ten years. This view does not confine us to a particular price/earnings ratio or valuation rule of thumb. We own companies in India on less than 20x price to earnings ratio and others on 50x. In each, we are appraising the long-term potential to create value relative to today’s price. Below we have listed a collection of our Indian holdings lined up against their global peers. Each of these names is potentially a very large company hidden in a small market capitalisation. None of these appear as material weights in the MSCI India Index but they all offer the potential for very attractive returns over the next ten years, and beyond.

Industry	Company	Market cap (USDbn)
Farm equipment	Mahindra & Mahindra	25
	John Deere	110
Industrial conglomerate	Tube Investments	9
	Danaher	177
Air compressors	Elgi Equipments	2
	Atlas Copco	76
Diagnostics	Dr. Lal PathLabs	3
	Quest Diagnostics	14
Business Supplies	IndiaMART	2
	WW Grainger	44

Companies held in the Company.

Source for market capitalisation: FactSet as at 31 January 2024.

In China, due to the dominance of explicitly state-owned or implicitly state-controlled companies and the critical misalignment between the State and minority shareholders, our investable universe is not as deep as in India. However, we would stress that despite the Company long having only a marginal allocation to China, we have not ignored the market. Working our way through China’s listed universe over the last 20 years has occupied a lot of research bandwidth with Chinese meetings and reports accounting for a far higher percentage of our workload than the portfolio allocation would initially suggest. For a team of analysts who crave meeting new people and studying new businesses, it’s been a wonderfully enjoyable experience.

Today, we have roughly 20 Chinese companies that we see as investible but for much of recent history they’ve not been attractively priced. Despite the MSCI China Index being valued on very low multiples, the types of companies we get excited about have traded on very high valuations while typically earning margins in excess of comparable companies overseas: we saw this combination as entailing too much risk to the Company’s capital. Things are beginning to change. Since the beginning of the year, Chinese stocks have come under extreme pressure with no real delineation being made between what companies do, what their balance sheets look like, who owns them or their valuation. All their share prices looked the same. This is the type of environment that excites us as bottom-up stockpickers!

As above, we have some of our China holdings paired against their global peers.

Industry	Company	Market cap (USDbn)
Third party verification	Centre Testing International	2
	SGS	17
Software for building industry	Glodon	2
	Autodesk	54
Industrial automation and electrification	Shenzhen Inovance Tech	18
	Siemens	145
Pharmacy chains	Yifeng Pharmacy Chain	5
	CVS	94
Analog semiconductors	Silergy Corp	5
	Texas Instruments	146

Companies held in the Company.

Source for market capitalisation: FactSet as at 31 January 2024.

In each of these companies we are backing local entrepreneurs, supported by high quality management teams, often boasting multinational experience, to build businesses that will play a key role in China’s development while, vitally, allowing minority shareholders to benefit from their value creation. If the current environment endures, we expect the Company’s weighting in China will continue to increase.

Outperformance in down markets

Our focus on quality, long-term growth and absolute risk leads the Company to own companies that tend not to lose a lot of their value in times of stress.

Over the last 14 years, in over 75% of months when the market has lost value, the Company has outperformed. In value terms, the Company has tended to fall less than two-thirds of the comparable losses of the Index and has done so with less volatility. Protecting capital in such periods means our companies have less ground to make up before they can get back to long-term compounding: this has served as a vital foundation in the long-term protection and growth of the Company’s capital.

Notably, these outcomes are not the result of any successful predication on our part. We have failed to envision any of the major headline grabbing events over the last 14 years. And in Asia, there have been a lot! We don’t believe we add any value in this kind of forecasting. Instead, we seek to ensure the Company’s portfolio is constructed of companies that are suitably diversified from a cash flow perspective (not a MSCI sector) and that their quality and long-term growth positioning means they have a strong likelihood of surviving, and prospering, in most macroeconomic and political environments.

It is important to note that adhering to an investment philosophy that emphasises the minimisation of loss does not preclude the Company from owning companies whose share price can go up multiple fold: we care as much about capital growth as we do about capital protection. We have been fortunate to own numerous such companies across the region over the last 14 years and we hope there are many more in the portfolio today. Crucially, minimising losses in times of stress has allowed our winners to create a lot of value for the Company as their gains have not been diluted by substantial losses elsewhere in the portfolio.

We have always endeavoured to be the best long-term investors in Asia. We just choose to come at the problem of generating great long-term returns from a different angle to many others.

Time horizon

Like the companies we own, we feel very fortunate to be able to take a long-term view. This feels a very advantaged position to hold in a world where US corporate executives now enjoy an average tenure of less than four years and average holding periods of stocks in the US and China are measured in days.

Our average holding period is ten years. With this time horizon, we are not forced to guess what our companies will earn next quarter or which way central banks will lean. As investors allocating capital over the long-term, our philosophy focuses on, and heavily weights, information that:

• Is enduring and doesn’t change quarter to quarter.
• Is heavily qualitative.
• Has a material bearing on long-term outcomes.

This leads us to think about the quality of a business and how it is positioned relative to the many headwinds, tailwinds and evolving profit pools created by the shift to a more sustainable form of development. In our eyes, well positioned, high quality companies have the strongest stream of future cash flows: it is these cash flows that drive share prices over long term. This belief has been a foundational component of our philosophy for over thirty years, long before the advent of ESG or the Sustainable Development Goals.

Our time horizon and view of risk leads to 80% of the companies in the portfolio having some form of economic steward, whether that be an entrepreneur, family or foundation. We feel very fortunate to be able to hand the Company’s precious capital to people who not only have their own money invested alongside us but their family’s legacy on the line. In some cases, they literally have the family’s name above the door and on the product! Simply, they too think about risk in absolutes. For the companies lacking in an economic steward, we are handing the Company’s capital to cultures that exhibit a similar owner’s mindset. These stewards are fanatical about building businesses that solve some of Asia’s deepest problems. Crucially, they do so with a time horizon measured in decades, not quarters. We believe this mindset creates one of the most enduring competitive advantages.

World-class stewards and quality, cash generative, businesses enable many companies in the portfolio to build, and hold, net cash balance sheets. These balance sheets provide enormous value when the inevitable unanticipated event comes along. Whether that be recession, political transition or pandemic. In investing, and in life, all time is not created equal. Some moments matter a lot more than others. Our companies, thanks to institutional memory, greatly appreciate this. On average they are over four decades old. They understand that being able to act independently, and not at the behest of creditors, in times of unavoidable extreme stress, allows them to continue to pay their staff; continue to act as partners with their suppliers, and continue to invest in future growth. Paranoia about surviving extreme events paired with passion for building something of extreme value over the long-term is a rare but vital foundation of great companies. It tends not to be too prevalent with professional management teams incentivised with lucrative short-term stock packages or sleepy state-owned cooperate executives.

We hope our companies continue to go into down-cycles stronger than peers and emerge in an even more advantageous position. This is one of the strongest and simplest examples of how a focus on “not losing” sets the foundation for extreme long-term outperformance. It also frees us of having to predict when the next cycle is coming. When it comes, we know our companies will be prepared.

Investment Returns

Over the year to 31 January, the net asset value of the Company was down 1.3%. As a reference, the MSCI AC Asia ex Japan Index (the “Index”) was down 10.5%.

Extending the time frame of performance to three, five and seven years – time periods more in-line with our investment horizon – the Company has delivered satisfactory levels of capital appreciation.

Cumulative Performance	Since inception	7 years	5 years	3 years	1 year
(% in GBP) to 31 January 2024	(01/07/2010)
NAV	265.6	69.6	44.2	13.8	-1.3
Share Price	267.4	62.7	33.4	6.9	-1.9
CPI + 6%	230.6	97.1	66.3	44.3	10.4
MSCI AC Asia ex Japan Index (Net)	110.1	27.9	9.1	-20.5	-10.5

Source: Lipper IM/Bloomberg/Frostrow. The NAV performance data is calculated on a net basis after deducting all fees (e.g. investment management fee) and costs (e.g. transaction and custody costs) incurred by the Company. The NAV includes dividends reinvested on a net of tax basis. Source for comparator benchmark index: FactSet. Table data is shown versus the MSCI AC Asia ex Japan Index, calculated on an income reinvested net of tax basis. Source for Consumer Price Index (“CPI”) + 6% data: FactSet. CPI data is quoted on a one month lag. Performance calculated from when Stewart Investors became Portfolio Manager of the Trust on 30 June 2010.

Contribution by investment for the year ended 31 January 2024

Top 10 contributors to and detractors from absolute performance (%)

Contributors

During the year under review, the Company’s material ownership of Indian companies, especially those with exposure to capital spending and industrial growth, was a key contributor to absolute performance.

CG Power & Industrial Solutions

(India: Industrials)

Contribution: 2.4%

The Company acquired CG Power in the first quarter of 2021, very quickly after Tube Investments took a controlling stake. Previous owners had abused their power resulting in their creditors taking control of the company, putting it up for sale, and Tube Investments subsequently taking ownership. CG Power is the leading manufacturer of motors in India, a high-quality franchise with fantastic long-term avenues for growth. It has performed well thanks to the opportunities provided by Tube Investments’ ownership as well as very attractive levels of underlying growth. Had we not followed quality people would not have identified CG Power as a potential investment. It certainly would not have appeared in a very favourable light had it been put through a quantitative screen.

Tube Investments of India

(India: Consumer Discretionary)

Contribution: 1.9%

The Company has owned Tube for close to ten years but materially increased its position in 2017 when a new CEO took over this fourth generation family company. His intention was to evolve Tube away from its existing businesses - parts for the auto and rail industries, as well as bicycles - to an industrial conglomerate with leadership positions across higher value industries. This was to be done in a manner similar to that achieved by the high performing conglomerates we have studied in the USA or Europe: taking free cash flow from existing businesses and expanding, both organically and through mergers and acquisitions (“M&A”), into higher quality industries. Since 2017, Tube has grown its sales at more than 20% a year, its free cash flow at a higher rate, while improving its return on capital employed from 22% to 47%1. We have also seen the company embark on high quality M&A while organically entering the fields of electric mobility and manufacturing in the IT industry – most recently in semiconductor inspection.

1 Source: Tube Investments, 2021-22 Annual Report and FactSet

Cholamandalam Financial Holdings

(India: Financials)

Contribution: 1.1%.

Chola Financial is a holding company that owns stakes in a non-banking financial company and a general insurance business. Like CG Power and Tube Investments, Chola Financial is owned and stewarded by the well-respected Murugappa family. The company provides financial services products to around 2.5 million customers in India. They provide vehicle loans for income yielding assets such as trucks, tractors, and business loans plus home loans where they aim to reach lower middle income families in urban and semi-urban markets. Chola’s insurance business provides a safety net for those using it, preventing families from falling (back) into poverty after experiencing a shock.

In their 2022 financial year, the finance business entered into a new segment of consumer and small enterprise loans and micro, small and medium enterprise loans. Their small enterprise loans aim to reach an underpenetrated market and provide economic benefit by specialising in loans for manufacturing, trading and services sectors. During the reporting period the company saw strong growth in the incumbent vehicle financing business as well as new businesses.

Detractors

During the year under review the most significant detractors were companies with substantial business interests in China.

Vitasoy International Holdings

(Hong Kong: Consumer Staples)

Contribution: -1.5%

The Company has owned Vitasoy since Stewart Investors became Portfolio Manager in June 2010. We have written about this family-owned, Hong Kong listed, plant-based beverage provider repeatedly over the years. At Stewart Investors we commit to our Hippocratic Oath2 – a set of principles for effective stewardship. One of these principles is “not to succumb to irrational exuberance in good times, nor to unjustified gloom in bad times”. This is exemplified by Vitasoy. In the Company’s half yearly report in July 2019, when Vitasoy was the strongest contributor to returns by more than 100 basis points, we wrote that we believed valuations had become excessive after the company had become included in a global index. Moreover, we reminded shareholders that companies are much more than just a line on a graph: “If Vitasoy had been viewed merely as a stock ticker, and not a quality business going through a tough time, it would have been very easy to have been scared out of the company at the height of the fear in 1997”. Vitasoy is going through another tough time but now, as then, sober analysis has led us to conclude that there has not been a significant deterioration in the quality of the company and that the current gloom is unjustified.

2 https://www.stewartinvestors.com/uk/en/private-investor.html

Glodon

(China: Information Technology)

Contribution: -1.3%

Glodon designs products and software services for the entire product life cycle of buildings and large-scale construction projects. They provide customers with an enduring cost saving proposition – equivalent to a 1% margin and help to expedite project completion by a third, without compromising on safety. Gloomy headlines on the Chinese economy and the property sector in particular are commonplace. The share price has weakened as investor interest in the property related companies has ebbed. However, Glodon exhibits two important differences from the Chinese property developers making negative headlines. The first is the strength of the balance sheet. Glodon has around USD340 million of net cash. The second is a much quicker cash conversion cycle. Indeed, Glodon has a negative working cycle, meaning that cash comes into the business faster than it goes out. This financial strength is allowing quality stewards to invest in new, exciting and resilient services despite the currently weak operating environment. It is this commitment to the long term that deepens our conviction in the quality of stewardship and the franchise.

Wuxi Biologics

(China: Health Care)

Contribution: -0.9%

Wuxi is a contract research, development and manufacturing organisation offering end-to-end solutions that enable partners to discover, develop and manufacture biologic drugs – from concept to commercialisation. This benefits patients worldwide. Since purchasing Wuxi in the fourth quarter of 2023 the share price has been volatile, mostly weak, driven by speculation of increased political discord between the USA and China that could negatively impact the company. Since then, management have issued statements correcting misperceptions about the company and its founder. To match words with action, management also proposed a share repurchase programme. Wuxi has almost USD500 million in net cash on the balance sheet, a strong/multi-year customer relationship and management team who exhibit honesty and competence. In our opinion these are some of the key assets necessary to overcome current difficulties and prosper in the future.

Significant Transactions

Over the course of the year, the portfolio turnover3 of the Company was 18.3%.

3 See Glossary for definition of portfolio turnover.

New investments

There was a slightly greater number of new initiations than in previous years partly because valuations were lower, particularly in China. During the year, the Company made new purchases in: Cyient (India: Information Technology), Hangzhou Robam (China: Consumer Discretionary), Midea (China: Consumer Discretionary), Telkom Indonesia (Indonesia: Communications), RBL Bank (India: Financials), Samsung Electronics (South Korea: Information Technology), Samsung Biologics (South Korea: Health Care), Triveni Turbines (India: Industrials) and Wuxi Biologics. As usual there is no theme or top-down allocation explaining these purchases. The commonality is high quality companies that are well positioned to contribute to, and benefit from, sustainable development at attractive valuations.

Additions

The comparative weakness in many Chinese company shares allowed us to further add to Midea. We also added to Samsung Electronics, HDFC Bank (India: Financials), Triveni Turbines and Voltronic Power (Taiwan: Industrials).

Reductions

To control country and company position size we reduced CG Power, Tube Investments and Elgi Equipments (India: Industrials). We also reduced Syngene (India: Health Care) over concerns about franchise development.

Disposals

We identified deteriorating quality and sold out of BRAC Bank (Bangladesh: Financials), Foshan Haitian Flavouring & Food (China: Consumer Staples), Public Bank (Malaysia: Financials) and Techtronic Industries (Hong Kong: Industrials). For reasons of valuation, we sold out of Info Edge (India: Communication Services). We retain the greatest respect and admiration for Infosys (India: Information Technology) but we sold the position as we identified superior risk-adjusted returns elsewhere. Finally, we sold Vinda International (Hong Kong: Consumer Staples) due to news of it being acquired.

ESG Backlash

A quick perusal of financial headlines suggests a dramatic fall from grace for, so called, ‘environmental, social and governance’ investing. Sayings like ‘the darling of Wall Street’4 have been replaced by disapproving commentaries containing words like ‘backlash’, ‘unravelling’ or even ‘weaponised’. The latter highlights the peculiar and unhelpful conflation of partisan politics with investing, particularly in the US.

4 Kori Hale, Forbes Magazine. The US$300m unravelling of ESG investing on corporate diversity. November 2023.

‘Anti-ESG’ articles often mention vogue and politicised topics such as ‘culture wars’ and the ‘woke’. Depending on the author there is often a hint of schadenfreude against ESG promoting fund groups or funds which have seen falling sales in recent times. Part of the cause for this dramatic shift in rhetoric rests with the investment industry and the worrying prioritisation of asset accumulation over a principled investment philosophy.

At Stewart Investors we recall at all times the stricture: “those who stand for nothing, fall for anything”. Our investment philosophy of investing in high quality companies that contribute to, and benefit from, sustainable development is sacrosanct. It takes precedence over fund sales and short-term asset growth. In 2020, before the height of ESG enthusiasm we wrote an article5 outlining concerns about ESG driven marketing campaigns and convoluted messaging designed to drive new sales. At first glance this seems like a peculiar article for an investment group with a focus on sustainable development to write. But there is no contradiction or hypocrisy. This is because ESG and sustainability are connected but distinct, with sustainability being a more holistic concept than the ESG metrics supplied by misaligned third-party research providers.

5 https://www.stewartinvestors.com/uk/en/private-investor/insights/challenging-the-greenwash.html

We define sustainability as human development with minimal resource depletion. This is a more encompassing concept than ESG because it considers the utility and purpose of a company’s product or services rather than just detailing the externalities of its operations. The example of a tobacco company may help to clarify the difference. The ESG report from a tobacco company is often very appealing but omits that the product is harmful for people’s health. This highlights the limitations of ESG as an analytical tool, its inadequacy as an investment strategy and its inappropriateness as the bedrock of a marketing campaign.

In the above-mentioned article, we urged savers to be aware of a cynical industry using ESG enthusiasm as a theme to drive asset growth. We raised the possibility of miss-selling. This was not prescience, just a consideration of the misaligned incentives in the investment industry that prioritises fund sales over investment discipline. It is these misaligned incentives which perpetuate cycles in fund sales that are inevitable but inconsequential to our investment philosophy and process.

Against this backdrop of greater scrutiny around greenwashing and wishing to provide shareholders with more transparency on how their capital is being deployed, in 2020 we developed an interactive online tool, now known as Portfolio Explorer6. For every investment held in the Company, users can learn about the investment rationale, stewardship and contribution the company makes to climate solutions and human development. Critically, it provides a balanced view of the companies, not only highlighting the positive contributions, but also the risks and areas to improve. We believe this goes some way to demonstrate the Company’s and Stewart Investors’ commitment to transparency and tells the stories of the investee companies rather than merely attributing quantitative ESG metrics as part of a broader marketing campaign.

6 https://www.stewartinvestors.com/uk/en/private-investor/our-strategies/pacific-assets-trust.html

A more comprehensive description of our investment philosophy and approach to sustainable investing is set out on pages 21 to 24 of the Annual Report.

Looking Forward

Views on investment opportunities in Asia have not changed; on behalf of the Company we continue to look to invest in high-quality companies that are aligned with sustainable development. We seek stewards who are low profile, competent, long-term decision makers, franchises free from political agendas and financials that are resilient, not frail, with the aim to protect and grow the Company’s capital over the long term.

Stewart Investors
Portfolio Manager

29 April 2024

Sustainability and ESG

The Company’s Environmental, Social & Governance Policy

The Board believes that consideration of environmental, social and governance issues within the Company’s operations is of importance to shareholders and other stakeholders, not least because long-term returns are much more likely to be generated by companies that have embedded corporate governance strengths, and which respect the environment and the society in which they operate. The Board believes that this investment approach is readily applicable in the markets in Asia in which the Company invests.

As the Company delegates the management of the portfolio to Stewart Investors, the Board has chosen to adopt and endorse their approach to integrating sustainability into portfolio construction and investee company engagement. Accordingly, the Company seeks to achieve long-term capital appreciation by investing in companies which both contribute to, and benefit from, sustainable development, achieving positive social and environmental sustainable outcomes.

Stewart Investors’ approach is described in detail in the following section. As part of this focus on sustainability, the Board expects sustainability and ESG concerns to be a key topic of engagement with investee companies. The Company expects to maintain, through its Portfolio Manager, a continuous constructive dialogue with the owners and the managers of the companies where it owns shares. Such a relationship is enhanced by the long-term nature of the investment inherent in the Portfolio Manager’s investment approach.

In the same way as the Board expects the Portfolio Manager to challenge investee companies on their sustainability and ESG credentials, the Board will also assess the Company’s principal service providers. The Board asks for assurances that a service provider has taken the necessary steps to mitigate any material negative environmental impact their operations might have, to ensure that their internal governance is compliant with expected high standards, and that they strive to avoid negative social impacts resulting from their activities.

Similarly, the Board itself strives to uphold the highest ESG standards. The Board’s operations mainly consist of governance-related matters, where it is important to the Directors to be at the forefront of best practice.

A corporate governance report for the year, beginning on page 38, forms part of the Annual Report. A description of how the Board has taken the interests of key stakeholders into account in their decision-making is included on pages 32 and 33 of the Annual Report.

As best practice, regulation and disclosure are constantly evolving in this area both for the Company and for the companies in which it invests, the Board regularly discusses sustainability, including ESG policy and practice, with the Portfolio Manager, encouraging where possible further enhancements in both the policy and in reporting to shareholders.

On behalf of the Board

Andrew Impey
Chair

29 April 2024

Stewart Investors’ Approach to Sustainable Investing

Sustainability is core to Stewart Investors’ investment philosophy and integrated into our investment process. We do not have a separate team that looks at sustainability – every investment team member analyses the sustainability positioning of a business and is also responsible for engaging and voting activities.

Stewart Investors only invest in high-quality companies that contribute to, and benefit from, sustainable development. We define development as sustainable if it furthers human development and has an ecological footprint that respects planetary boundaries. All members of the investment team sign the Stewart Investors Hippocratic Oath1, pledging to uphold the principles of stewardship.

1 https://www.stewartinvestors.com/uk/en/private-investor/how-we-invest/sustainable-investing/our-hippocratic-oath.html

We approach sustainability as a means to mitigate risks and as a driver of investment returns. Integrating sustainability into our analysis is a natural extension of having a long-term investment horizon; the sustainability headwinds and tailwinds that affect companies are different from the shorter-term risks that businesses face.

Our consideration of sustainability is holistic; it includes ESG but is more than ESG. We consider financial sustainability – conservatism around the balance sheet, for example – and stewardship by management – the treatment of all stakeholders through a crisis, for example – to be as essential to the sustainability positioning of a company as the product or service the company sells.

When assessing a company’s sustainability we ask ourselves the following questions:

• Products and services – Do the products and services make a valuable contribution to sustainable development?
• Context – Can the company benefit from sustainability tailwinds and navigate headwinds?
• Company ethos – Do the culture and values embody sustainability and continuous improvement?
• Operational impact – Is the company trying to reduce impacts from its operations?

In addition, we assess the contribution of the Company’s investments to positive social and environmental outcomes by reference to two frameworks described below.

Positive social outcomes – Human Development Pillars

Stewart Investors assesses positive social outcomes by reference to the below human development pillars. We have developed these human development pillars by reference to, amongst other things, the UN Human Development Index.

• Health and well-being – improved access to and affordability of nutrition, healthcare and hygiene, water and sanitation
• Physical infrastructure – improved access to and affordability of energy and housing
• Economic welfare – safe employment offering a living wage and opportunities for advancement, access to finance and improved standards of living
• Opportunity and empowerment – improved access to and affordability of education and information technology

Further information about how we use the human development pillars is available on our website2

2 https://www.stewartinvestors.com/uk/en/private-investor/how-we-invest/our-approach/human-development-pillars.html

Positive environmental outcomes – Project Drawdown climate solutions

Stewart Investors assesses positive environmental outcomes by reference to the climate solutions developed by Project Drawdown3, a non-profit organisation that has mapped, measured and modelled over 90 different climate solutions that it believes will contribute to reaching drawdown – i.e. the point in the future when emissions stop increasing and start to decline.

3 Any reference to Project Drawdown is to describe the publicly available materials utilised by Stewart Investors in formulating its sustainability analysis framework. It is not intended to be, and should not be, read as constituting or implying that Project Drawdown has reviewed or otherwise endorsed the Stewart Investors framework. For the list of Project Drawdown climate solutions please go to https://drawdown.org/solutions/table-of-solutions.

Below is a list of climate solutions together with corresponding examples we believe lead to positive environmental outcomes:

• Food system – sustainable farming, food production and distribution of food-related products and services
• Energy – adoption of renewable energy and other clean energy and related technologies
• Circular economy and industries – improved efficiency, reduced waste, and new business models for closing resource loops in linear value chains and production processes
• Human development – advancement of human rights and education that drive environmental conservation and sustainable use of resources
• Transport – efficient transport technologies and growth in fossil fuel-free transportation options
• Buildings – products and services which reduce the environmental footprint of the built environment, including energy efficiency, electrification, improved design, and use of alternative materials
• Water – less energy-intensive methods for treating, transporting and heating water
• Conservation and restoration – supporting deforestation-free and environmentally regenerative supply chains, operations and end-of-life impacts

Further information about how we use the Project Drawdown climate solutions is available on our website4

4 https://www.stewartinvestors.com/uk/en/private-investor/how-we-invest/our-approach/climate-solutions.html

Assessment

In assessing whether a company “contributes to and benefits from” sustainable development, we will consider whether:

1. there is either a direct5 or enabling6 link between the activities of the company and the achievement of a positive social or environmental outcome;

5 A direct link would arise where the goods an entity produces or the services it provides are the primary means through which the positive social or environmental outcome can be achieved (e.g. solar panel manufacturers or installers).

6 An enabling link would arise if the goods a company produces or services it provides enable other companies to contribute towards the achievement of the positive social or environmental outcome (e.g. manufacturers of critical components that are used as inputs in the manufacture of solar panels).

2. any contribution to positive social or environmental outcomes has resulted from revenue or growth drivers inherent in the company’s business model, strategic initiatives that are backed by research and development or capital expenditure, or from the company’s strong culture and sense of stewardship e.g. for equity and diversity; and
3. the company recognises potential negative social or environmental outcomes associated with its product or services and works towards minimising such outcomes, e.g. a company that sells affordable nutritious food products in plastic packaging, but is investigating alternative packaging options.

We avoid companies that do not contribute to sustainable development and engage with companies to improve sustainability outcomes.

We have established a materiality threshold for harmful or controversial activities at 5% of revenues (0% for tobacco production and controversial weapons). We explicitly seek to invest in companies that are making a positive contribution to society. Full details of the activities and practices we find inconsistent with our investment philosophy are available on our website7.

7 https://www.stewartinvestors.com/uk/en/private-investor/insights/our-position-on-harmful-and-controversial-products-and-services.html

Stewart Investors employ the services of an external ESG research provider, Sustainalytics, to provide a quarterly check on the Company to ensure investee companies meet global norms for best practices and raise no exceptions against our thresholds for harmful activities. We also receive controversy reporting from RepRisk.

Issues such as climate change, biodiversity and water, human rights and modern slavery, and diversity and inclusion are integrated into our investment selection and engagement and voting processes. Our approach to climate change is explained in detail in our climate statement8, climate report9 and Annual Stewardship Review10. Our approach to biodiversity and water is reflected in our selection of companies that mitigate their impact on the natural environment or provide services/products that improve efficiencies. We have engaged on a number of related issues such as palm oil, deforestation, plastic waste and the use of harmful chemicals. Human rights and modern slavery are a risk throughout the supply chain of our investee companies. Our approach is to focus on quality companies that treat their employees well and manage the risks in their supply chain effectively. Where we identify problems, we engage. Our recent collaborative engagement on conflict minerals in the semi- conductor supply chain is a good example of this. Our approach to diversity is explained in our statement11 and we provide an update on what we have done in our Annual Stewardship Review. We will provide updates on these issues, amongst others, in our quarterly shareholder updates.

8 https://www.stewartinvestors.com/uk/en/private-investor/insights/climate-change-statement.html

9 https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/PASSET-Climate-2021.pdf

10 https://www.stewartinvestors.com/uk/en/private-investor/how-we-invest/regulations-and-reports.html

11 https://www.stewartinvestors.com/uk/en/private-investor/insights/diversity-statement.html

Transparency

As part of our focus on improved transparency, we have developed a Portfolio Explorer tool12 which provides the contribution that each investee company makes to climate solutions and human development, as well as the investment rationale, Sustainable Development Goals, key risks, and areas for improvement. The company holdings information is updated on a quarterly basis.

12 https://www.stewartinvestors.com/uk/en/private-investor/our-strategies/pacific-assets-trust.html?tabs-anchor=Pacific%20 Assets%25Trust&active-tab=Portfolio%20Explorer

Sustainable Finance Disclosure Regulation

Our report on how the Company has met its sustainable investment objective, in accordance with the requirements of the SFDR, begins on page 85 of the Annual Report.

Thematic Engagement Example – Conflict Minerals

Stewart Investors are progressing with a collaborative engagement initiative on conflict minerals (tantalum, tin, tungsten, gold and cobalt) in the semiconductor supply chain. These minerals are vital materials for the semiconductor industry. Poor traceability along complex supply chains can lead to the inadvertent financing of armed conflict and the abuse of human rights.

The initiative is supported by 160 investors representing US$6.6 trillion of assets under management. In 2022 Stewart Investors wrote to 29 companies encouraging them to develop and invest in traceability technology, to increase transparency/reporting from mine to product, to collaborate to improve industry practices, to impose/ enforce harsher sanctions on non-compliance and to reduce demand for new materials by improving recycling.

• As part of the engagement, we have engaged with industry and civil bodies. We attended the Responsible Minerals Initiative (“RMI”) annual conference in 2022, and understand we are the first known investor to have done so. In 2023, we were the first investor to speak at the Responsible Business Alliance (“RBA”) and RMI’s Annual Conference in Santa Clara, California on the positive role of capital and we hosted a closed-door workshop, endorsed by the RMI, with 16 leading electronic companies. Stewart Investors commissioned Kumi Consulting Ltd (Kumi) to deepen our knowledge, contacts and engagements with companies, trade bodies and organisations like the OECD and with their help developed engagement guidelines for initiative supporters, and other investors, to improve their interactions with companies.

Finally, members of the RMI debated, over a number of months, whether they should allow investors to join their trade body. There were some initial reservations, however a number of company representatives and steering committee members of the RMI and RBA Board Liaison have been strong supporters. There is a growing feeling amongst RMI members that investors could bring a new and constructive perspective to help influence improvements along mineral supply chains. Representatives of the companies and other RMI members believe: “there is a big role for investors, they have a different point of leverage”.

We are delighted that the RMI has taken the significant step of allowing investors to become members of their trade body which was one of our main objectives in 2023. We became the inaugural investor member in 2024 and are now seeking to establish an investor working group.

Case Study – Godrej

Website: https://www.godrejcp.com/

Company profile: Leading emerging markets consumer goods company.

Stewardship: Family. Founded by Ardeshir Godrej in 1897. The Godrej family are the controlling shareholder. Adi Godrej is Chair of the Godrej Group and Nisa Godrej is Chair of Godrej Consumer.

What we like:

• The company is a leading supplier of affordable soap and household insecticides, helping millions of people in tropical climates curtail the spread of waterborne diseases, malaria and other diseases.

• The Godrej family provide long-term stewardship and continue to be actively involved in the business, which is run by a capable and professional management team.
• The business culture is built on integrity and trust and the impressive ‘Godrej Good and Green’ strategy offers a vision for a more inclusive and sustainable India.
• The franchise is highly cash-generative, ambitious and innovative. Revenues are split evenly between India and international markets, with positive growth momentum in Asia, Africa and Latin America.

Risks: We believe that risks for the company include product quality/safety issues and succession challenges.

How the company is contributing to social outcomes:

Godrej Consumer Products is a consumer goods company which manufactures and markets personal care and household products in India. They have over 1.2bn customers. Their main soap and household insecticide products (c.75% of profits) improve health outcomes in India and wider. A lack of regular handwashing spreads diarrheal and waterborne diseases in homes and communities. Poor sanitation has a knock-on effect, hindering development as workers suffer from illnesses, live shorter lives, produce and earn less and are unable to afford education for their children. They also have a range of brands focused on home care, personal care, hair care and baby products. Godrej’s flagship social initiative, Salon-I, is a vocational training programme for women. It is designed entirely in-house to train young women in basic skills involving beauty, skin, hair care, and mehndi application. In addition, life skills and entrepreneurship development modules enable women to take up jobs or pursue self-employment depending on their unique skill sets and circumstances. The programme includes 500-hours of training with audio-visual modules, life skills and entrepreneurship training aimed at women between 18 and 30 years for employment or entrepreneurship. The programme focuses on urban and peri-urban, socio-economically weaker sections of society. Since 2012, more than 220,000 women have been trained. Around 50% of trainees take up some form of employment.

How the company is contributing to environmental outcomes

As part of their strategic pillar for building an inclusive and greener world, Godrej has a goal of zero waste to landfill, which they aim to continue to achieve. As part of their extended producer responsibility commitment, Godrej collects 100% post-consumer plastic packaging waste. They have signed up to the India Plastics Pact and are a plastic neutral company which means they take back the equivalent amount of plastic (c. 20,000 metric tons) that they send to consumers. The company is also reducing plastic use by improving product packaging, developing new products and reducing waste. The Goodknight coil bags made from Post-Consumer Recycled plastic from their own solid waste had a successful trial and would replace 600 tonnes of virgin plastic when implemented more widely. Their ‘Magic’ hand and body wash ready-to-mix powders reduce plastic usage. The body wash uses 16% plastic by weight and the company plan to reduce this to 8% in the future.

Relevant Sustainable Development Goals (“SDGs”):

SDG No. 3 – Good health and well being

Godrej’s personal care products and household insecticides help curtail the spread of malaria and diarrheal diseases plus other waterborne diseases. They sell insecticide solutions for less than one rupee. Since 2015, they have commissioned projects in Madhya Pradesh, Uttar Pradesh and Chhattisgarh to help eliminate mosquito borne endemic diseases, by improving the knowledge and awareness of communities through behaviour change campaigns. Malarial cases in Madhya Pradesh dropped by 96% between 2016 and 2021 and the state is on the path to meeting the goal of malaria elimination. By 2026 the three projects aim to protect 30 million people against vector-borne diseases.

SDG No. 12 – Responsible consumption and production

As a signatory of the Indian Plastics Pact, they have ambitious goals to reduce energy use, waste and address the issue of plastic packaging. They are already plastic neutral and by 2025 aim to reduce packaging consumption per unit of production by 20%; ensure that 100% of their packaging material is recyclable, reusable, recoverable or compostable and use at least 10% Post-Consumer Recycled content in their plastic packaging.

Stewart Investors
Portfolio Manager

29 April 2024

Business Review

The Strategic Report, set out on pages 1 to 35 of the Annual Report, contains a review of the Company’s business model and strategy, an analysis of its performance during the financial year and its future developments as well as details of the principal risks and challenges it faces. Its purpose is to inform shareholders and help them to assess how the Directors have performed their duty to promote the success of the Company.

The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report. Such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Business Model

The Company is an externally managed investment trust and its shares are listed on the premium segment of the Official List and traded on the main market of the London Stock Exchange.

The purpose of the Company is to achieve long-term growth in its shareholders’ capital by providing a vehicle for investors to gain exposure to a portfolio of companies in the Asia Pacific region and the Indian sub-continent (but excluding Japan, Australia and New Zealand), through a single investment.

The Company’s strategy is to create value for shareholders by addressing its investment objective.

As an externally managed investment trust, all of the Company’s day-to-day management and administrative functions are outsourced to service providers. As a result, the Company has no executive directors, employees or internal operations.

The Company employs Frostrow Capital LLP (“Frostrow”) as its Alternative Investment Fund Manager (“AIFM”) and they provide corporate management, risk management, company secretarial and administrative services. The Company employs Stewart Investors as its Portfolio Manager.

The Board remains responsible for all aspects of the Company’s affairs, including setting the parameters for monitoring the investment strategy and the review of investment performance and policy. It also has responsibility for all strategic policy issues, including share issuance and buybacks, share price and discount/ premium monitoring, corporate governance matters, dividends and gearing.

Further information on the Board’s role and the topics it discusses with the Portfolio Manager is provided in the Corporate Governance report.

Investment Objective and Policy

The Company aims to achieve long-term capital growth through investment in selected companies in the Asia Pacific region and the Indian sub-continent, but excluding Japan, Australia and New Zealand (the “Asia Pacific Region”). Up to a maximum of 20% of the Company’s total assets (at the time of investment) may be invested in companies incorporated and/or listed outside the Asia Pacific Region (as defined above); at least 25% of their economic activities (at the time of investment) are within the Asia Pacific Region with this proportion being expected to grow significantly over the long term.

The Company invests in companies which Stewart Investors believe will be able to generate long-term growth for shareholders.

The Company invests principally in listed equities although it is able to invest in other securities, including preference shares, debt instruments, convertible securities and warrants. In addition, the Company may invest in open and closed-ended investment funds and companies.

The Company is only able to invest in unlisted securities with the Board’s prior approval. It is the current intention that such investments are limited to those which are expected to be listed on a stock exchange or which cease to be listed and the Company decides to continue to hold or is required to do so.

Risk is diversified by investing in different countries, sectors and stocks within the Asia Pacific Region. No more than 45% of the Company’s total assets (at the time of investment) may be invested in any single jurisdiction.

If the proportion of the Company’s total assets invested in a single jurisdiction exceeds 49% at any time, the AIFM and the Portfolio Manager should, as soon as reasonably practicable, seek to re-balance the Company’s portfolio below this threshold.

No single investment may exceed 7.5% of the Company’s total assets at the time of investment. This limit is reviewed from time to time by the Board and may be revised as appropriate.

No more than 10% of the Company’s total assets may be invested in other listed closed-ended investment companies unless such investment companies themselves have published investment policies to invest no more than 15% of their total assets in other closed-ended investment companies, in which case the limit is 15%.

When deemed appropriate, the Company may borrow for investment purposes up to the equivalent of 10% of the net asset value of the Company at the time of drawdown of such borrowing.

The use of derivatives is permitted with prior Board approval and within agreed limits. However, Stewart Investors are unlikely to use derivatives as they do not form part of their investment strategy.

Performance Measurement

The Board measures Stewart Investors’ performance against a performance objective, which is to provide shareholders with a net asset value total return in excess of the UK Consumer Price Index (“CPI”) plus 6% (calculated on an annual basis) measured over three to five years (the “Performance Objective”). The Board also monitors the Company’s performance against its peer group. Please refer to the Chair’s Statement and the Glossary for further information.

Dividend Policy

It is the Company’s policy to pursue capital growth for shareholders with income being a secondary consideration. This reflects that the Portfolio Manager is frequently drawn to companies whose future growth profile is more important than the generation of dividend income for shareholders.

The Company complies with the United Kingdom’s investment trust rules which require investment trusts to retain no more than 15% of their distributable income each year. The Company’s dividend policy is that the Company will pay a dividend as a minimum to maintain investment trust status.

The Board

At the date of this report, the Board of the Company comprises Andrew Impey (Chair), Charlotta Ginman (Chair of the Audit Committee), Sian Hansen (Chair of the Engagement and Remuneration Committee), Robert Talbut, (the Senior Independent Director) Edward Troughton (the Chair of the Sales, Marketing and Communications Committee) and Nandita Sahgal. All of these Directors are non-executive, independent Directors. They all served throughout the year except for Nandita Sahgal who joined the Board with effect from 1 January 2024.

Further information on the Directors can be found on pages 36 and 37 of the Annual Report and information on the Board’s diversity can be found in the Corporate Governance Report.

Key Performance Indicators (“KPIs”)

The Board of Directors reviews performance against the following KPIs, which are unchanged from the prior year.

• NAV total return against the Performance Objective*^
• NAV per share total return against the peer group*^
• Average discount/premium of share price to NAV per share over the year^
• Ongoing charges ratio^

*  Calculated on an annual basis and measured over three to five years

^ Alternative Performance Measure (see Glossary)

NAV per share total return – Performance Objective

The Directors regard the Company’s net asset value total return as being the overall measure of value generated by the Portfolio Manager over the long term. Total return reflects both the net asset value growth of the Company and the dividends paid to shareholders. The performance objective of the Company is inflation (represented by the Consumer Price Index) plus 6%, measured over three to five years. The 6% represents what the Board considers to be a reasonable premium on investors’ capital, which investing in the faster growing Asian economies ought to provide over time. The Performance Objective is designed to reflect that the Portfolio Manager’s approach does not consider index composition when building and monitoring the portfolio.

During the year under review, the NAV per share total return was (1.3)% underperforming the Performance Objective by 11.7% (2023: NAV per share total return of 5.7%, underperforming the Performance Objective by 11.6%). Over the past three years, the annualised NAV per share total return was 4.4%, underperforming the Performance Objective by 8.6%. Over five years, the annualised NAV per share total return was 7.6%, underperforming the Performance Objective by 3.2% per annum.

A full description of performance during the year under review is contained in the Portfolio Manager’s Review.

NAV total return – peer group

The Board also monitors the Company’s performance against its peer group of four other investment trusts with similar investment mandates and one exchange traded fund.

Over the one, three and five years ended 31 January 2024, the Company ranked 1st, 1st and 3rd, respectively, in its peer group. The Company’s performance is discussed in the Chair’s Statement; further information can be found in the Portfolio Manager’s Review.

Average discount/premium of share price to NAV per share

The Board believes that the principal drivers of an investment trust’s share price discount or premium over the long term are investment performance and a proactive marketing strategy. However, there can be volatility in the discount or premium during the year. Therefore, the Board takes powers each year to buy back and issue shares with a view to limiting the volatility of the share price discount or premium, in normal market conditions.

During the year under review no new shares were issued or bought back by the Company. The Company’s share price discount to the NAV per share was narrower this year, in comparison with last year, and usually narrower than the peer group average. The Board keeps the level of the discount under close review.

Average discount of share price to NAV per share*^ during the year ended

31 January 2024 31 January 2023

6.4% 10.1%

Peer group average Peer group average

discount 9.3% discount 8.9%

Ongoing charges ratio

Ongoing charges represent the costs that the Company can reasonably expect to pay from one year to the next, under normal circumstances. The Board continues to be conscious of expenses and seeks to maintain a sensible balance between high quality service and costs.

The Board therefore considers the ongoing charges ratio to be a KPI and reviews the figure both in absolute terms and in relation to the Company’s peers.

Ongoing charges ratio^

31 January 2024 31 January 2023

1.1% 1.1%

Peer group average 0.9% Peer group average 0.9%

^  Alternative Performance Measure (see Glossary).

The Board believes that the Company’s relatively low turnover, and the absence of any costs associated with gearing, will mean that the Company’s overall running costs – should these costs be factored into the calculation – are not necessarily as high as some other investment vehicles. It should also be noted that the Company does not have a performance fee. Performance fees are not included in the peer group average ongoing charges ratio.

Risk Management

The Board is responsible for managing the risks faced by the Company. Through delegation to the Audit Committee, the Board has established procedures to manage risk, to review the Company’s internal control framework and to establish the level and nature of the principal risks the Company is prepared to accept in order to achieve its long-term strategic objective. The Board, meeting as the Audit Committee, has carried out a robust assessment of the principal and emerging risks facing the Company with the assistance of the AIFM. A process has been established to identify and assess risks, their likelihood and the possible severity of their impact.

These principal risks are set out below with a high-level summary of their management through mitigation and status arrows to indicate any change in assessment during the year. The risks faced by the Company have been categorised under three headings as follows:

• Investment and financial risks
• Strategic risks
• Operational risks

* Source: Morningstar

^  Alternative Performance Measure (see Glossary)

A summary of these risks and their mitigation is set out below:

Principal Risks and Uncertainties	Mitigation				Change in risk assessment over the last financial year
Investment and Financial Risks
Market and Foreign Exchange Risk					Unchanged
The Company’s portfolio is exposed to fluctuations in market prices (from both individual security prices and foreign exchange rates) in the regions and sectors in which it invests. Emerging markets in the Asia Pacific region, in which the portfolio companies operate, are expected to be more volatile than developed markets.	To an extent, this risk is accepted as being inherent to the Company’s activities. However, the Board has set limits in the investment policy which ensure that the portfolio is diversified, reducing the risks associated with individual stocks and markets. Compliance with the investment objective and policy limits is monitored daily by Frostrow and Stewart Investors and reported to the Board monthly. Stewart Investors report at each Board meeting on the performance of the Company’s portfolio, including the impact of wider market trends and events. As part of its review of the viability of the Company, the Board also considers the sensitivity of the Company to changes in market prices and foreign exchange rates (see note 14), how the portfolio would perform during a market crisis, and the ability of the Company to liquidate its portfolio if the need arose. Further details are included in the Going Concern and Viability Statements.
Investment Performance						Unchanged
Investment performance may not achieve the Company’s investment objective. Stewart Investors’ investment strategy and approach is expected to lead to performance that will deviate from that of both market indices and other investment companies investing in the Asia Pacific Region.	To manage this risk, the Board: reviews and challenges reports from Stewart Investors, which cover portfolio composition, asset allocation, concentration and performance at each Board meeting; reviews investment performance over the long term against the Company’s performance objective and peer group; monitors Stewart Investors’ performance against set KPIs; formally reviews Stewart Investors’ appointment, including their performance, service levels and contractual arrangements, each year.
Principal Risks and Uncertainties		Mitigation		Change in assessment of risk over the last financial year
Strategic Risks
Geopolitical Risk			Unchanged
Geopolitical events may have an adverse impact on the Company’s performance by causing exchange rate volatility, changes in tax or regulatory environments, a reduced investment universe and/or a fall in market prices.	The Board regularly discusses global geopolitical issues and general economic conditions and developments. Political changes in recent years, particularly in the US and Asia Pacific region and more recently in the Middle East, as well as Ukraine and Eastern Europe, have increased uncertainty and volatility in financial markets. The Board discusses such developments and how they may impact decision making with Stewart Investors. The Board’s discussions with the Portfolio Manager often focus on geopolitical themes or trends that affect social and environmental sustainability, in particular e.g. conflict minerals and water scarcity. These are often subjects on which the Portfolio Manager engages with investee companies.
Climate Change Risk	Unchanged
The Board is cognisant of risks arising from climate change and the impact climate change events could have on portfolio companies and their operations, as well as on service providers to the Company.	The Board regularly reviews global environmental, geopolitical and economic developments with the Portfolio Manager and the implications of these risks and events on portfolio construction and the Company’s operations. Given Stewart Investors’ focus on sustainability, the Board considers the portfolio to be relatively well positioned in this regard.
Black Swan Risk	Increased
A significant unpredictable event (e.g. a pandemic/war/closure of a major shipping route) could lead to increased market volatility, and in a worst-case scenario, major global trade and supply chain breakdown resulting in significant volatility/declines in market prices. The Company’s service providers and their operational systems may also be affected.	The Board monitors emerging risks and the robustness of Stewart Investors’ and other service providers’ business continuity plans. Stewart Investors’ investment approach includes a focus on sustainability and stewardship, which emphasises quality investments with strong balance sheets, a proven track record in previous crises, and the protection of shareholders’ funds, leaving them relatively well positioned to deal with unforeseen events. All of the Company’s service providers are required to have business continuity / disaster recovery policies and test them at least annually. Service providers provide updates on contingency plans for coping with major disruption to their operations. In view of the number of extraordinary and unpredictable events in recent years, the Board considered that the likelihood of a Black Swan event had increased.
Principal Risks and Uncertainties		Mitigation		Change in assessment of risk over the last financial year
Strategic Risks
Portfolio Management Key Persons Risk	Unchanged
There is a risk that the team responsible for managing the Company’s portfolio may leave their employment or may be prevented from undertaking their duties.	The Board manages this risk by: receiving regular reports from the Portfolio Manager, including any significant changes in the make-up of the portfolio management team; meeting the wider team supporting the designated lead manager, at both Board meetings and at the Portfolio Manager’s offices; and delegating to the Engagement & Remuneration Committee responsibility to perform an annual review of the service received from the Portfolio Manager, including, inter alia, the team supporting the lead manager and their succession planning.
Share Price Risk	Unchanged
The Company is exposed to the risk, particularly if the investment strategy and approach are unsuccessful, that the Company underperforms its peer group, fails to achieve its Performance Objective and becomes unattractive to shareholders, resulting in a widening of the share price discount to the NAV per share.	In managing this risk the Board: reviews the Company’s investment objective and policy, and Stewart Investors’ investment approach, in relation to investment performance, market and economic conditions and the performance of the Company’s peers; regularly discusses the Company’s future development and strategy; undertakes a regular review of the level of the share price discount/premium to the NAV per share and considers ways in which share price performance may be enhanced, including the effectiveness of marketing, share issuance and share buybacks, where appropriate; and reviews an analysis of the shareholder register at each Board meeting and is kept informed of shareholder sentiment.

Principal Risks and Uncertainties		Mitigation	Change in risk assessment over the last financial year
Operational Risk
Operational Risk	Unchanged
As an externally managed investment trust, the Company is reliant on the systems of its service providers for dealing, trade processing, administration, financial and other functions. If such systems were to fail or be disrupted (including, for example, as a result of cyber-crime or a pandemic) this could lead to a failure to comply with applicable laws, regulations and governance requirements and/or to a financial loss. Credit risk arising from the use of counterparties forms part of this risk. If a counterparty were to fail, the Company could be adversely affected through either delay in settlement or loss of assets.	To manage these risks the Board: periodically visits all key service providers to gain a better understanding of their control environment, and the processes in place to mitigate any disruptive events; receives a monthly report from Frostrow, which includes, inter alia, confirmation of compliance with applicable laws and regulations; reviews internal control reports and key policies of its service providers, including disaster recover procedures and business continuity plans; maintains a risk matrix with details of the risks to which the Company is exposed, the approach to managing those risks, the key controls relied upon and the frequency of the controls operation; receives updates on pending changes to the regulatory and legal environment and progress towards the Company’s compliance with such changes; has considered the increased risk of cyber-attacks and received reports and assurance from its service providers regarding the information security controls in place; has reviewed the arrangements (including sub-custodial arrangements) and services provided by the Custodian to ensure that the security of the Company’s custodial assets is maintained; and reviews Stewart Investors’ approved list of counterparties, the process for monitoring and adding to the approved counterparty list, and the Company’s use of those counterparties. Under the terms of the contract with J.P. Morgan Chase Bank, the Company’s investments are required to be segregated from J.P. Morgan Chase Bank’s own assets. Further information on credit risk and other financial risks can be found in note 14.

Emerging Risks

Emerging risks are discussed as part of the risk review process and also throughout the year to try to ensure that new (as well as known) risks are identified and, so far as practicable, mitigated. Current identified emerging risks are as follows:

1. Supply chain disruptions have increased uncertainty over corporate investment plans and may damage the growth prospects of companies in the Asia Pacific Region.
2. As well as offering investment opportunities, the development and exploitation of technological breakthroughs, such as artificial intelligence, may challenge and damage the addressable market, revenue and operations of portfolio companies to the extent that they no longer offer the promise of returns consistent with the Company’s investment objective.

3. The risk that increasing water scarcity will affect economic development, potentially leading to mass migration and political conflict in the Asia Pacific Region. This is a particular threat in India, where a high proportion of the Company’s assets are invested, and which the UN identifies as one of the most water-stressed countries in the world.
4. The rise of ‘post-truth’ politics is characterised by rising concerns about the perceived decay of political and social norms, the diminishing role of generally accepted truth and reason, and the rise of misinformation, much of it online. This trend appears to be encouraging mistrust in democratic institutions and public discourse and the rise in many countries of more extreme political parties. Businesses and brands can be drawn into such debates which may have uncertain direct or indirect consequences for portfolio companies.

Going Concern

The Company’s portfolio, investment activity, the Company’s cash balances and revenue forecasts, and the trends and factors likely to affect the Company’s performance are reviewed and discussed at each Board meeting. The Board has considered a detailed assessment of the Company’s ability to meet its liabilities as they fall due, including stress tests which modelled the effects of substantial falls in portfolio valuations and liquidity constraints on the Company’s NAV, cash flows and expenses. Further details of the stress tests and scenarios considered can be found in the Audit Committee Report and Notes 1 and 14 to the financial statements. Based on the information available to the Directors at the date of this report, the conclusions drawn in the Viability Statement (including the results of the stress tests undertaken) below and the Company’s cash balances, the Directors are satisfied that the Company has adequate financial resources to continue in operation for at least the next 12 months from the date of signing this report and that, accordingly, it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

Viability Statement

The Directors have carefully assessed the Company’s financial position and prospects as well as the principal risks facing the Company and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five financial years. The Board has chosen a five year horizon in view of the long-term outlook adopted by the Portfolio Manager when making investment decisions.

To make this assessment and in reaching this conclusion, the Audit Committee has considered the Company’s financial position and its ability to liquidate its portfolio and meet its liabilities as they fall due and notes the following:

• The portfolio is comprised of investments traded on major international stock exchanges. Based on historic analysis, it is estimated that approximately 84% of the current portfolio could be liquidated within two weeks (based on current market volumes with 20% participation).
• The Audit Committee has considered the viability of the Company under various scenarios, including periods of acute stock market and economic volatility. In view of the results of these tests, the Board has concluded that it would expect to be able to ensure the financial stability of the Company through the benefits of having a diversified portfolio of listed and realisable assets. Further details of the stress tests can be found in Note 1 to the financial statements;
• With an ongoing charges ratio of 1.1%, the expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments currently foreseen which would alter that position;

• The Board has considered the Company’s average cash balance over the past three years and noted that the Company has consistently retained levels of cash that are significantly higher than its annual operating expenses;
• The Company has no employees, only non-executive Directors. Consequently it does not have redundancy or other employment related liabilities or responsibilities; and
• The closed ended nature of the Company means that, unlike open ended funds, it does not need to realise investments when shareholders wish to sell their shares.

The Directors, as well as considering the potential impact of the principal risks and various severe but plausible downside scenarios, have also made the following assumptions in considering the Company’s longer-term viability:

• There will continue to be demand for investment trusts;
• The Board and the Portfolio Manager will continue to adopt a long-term view when making investments, and anticipated holding periods will be at least five years;
• The Company invests in the securities of listed companies traded on international stock exchanges to which investors will wish to continue to have exposure;
• Regulation will not increase to a level that makes running the Company uneconomical; and
• The performance of the Company will continue to be satisfactory.

Stakeholder Interests and Board Decision-Making (Section 172 of the Companies Act 2006)

The following disclosure, which is required by the Companies Act 2006 and the AIC Code of Corporate Governance, describes how the Directors have had regard to the views of the Company’s stakeholders in their decision-making.

STAKEHOLDER GROUP	HOW THE BOARD HAS ENGAGED WITH THE COMPANY’S STAKEHOLDERS
Investors	The Board’s key mechanisms of engagement with investors include: The Annual General Meeting The Company’s website which hosts reports, articles and insights, and monthly fact sheets One-to-one investor meetings Group meetings with professional investors The Annual and Half yearly Reports The Portfolio Manager and the Company’s broker, on behalf of the Board, completed a programme of investor relations throughout the year, reporting to the Board on the feedback received. In addition, the Chair was (and remains) available to engage with the Company’s shareholders.
Portfolio Manager	The Board met regularly with Stewart Investors (the Portfolio Manager) throughout the year, both formally at quarterly Board meetings and informally, as required. The Board engaged with the portfolio management team, discussing the Company’s overall performance and strategy, as well as developments in individual portfolio companies and wider macroeconomic developments. The Board periodically visits different countries and investee companies in Asia with the Portfolio Manager, to gain first-hand insight into the Portfolio Manager’s investment process and engagement with portfolio companies. The Board considers these visits to be an important part of their oversight of the Portfolio Manager. For environmental and cost reasons, this year the Board held a conference in London with the Portfolio Manager, engaging with representatives from portfolio companies and potential investee companies in online meetings.
Service Providers	The Board met regularly with Frostrow (the AIFM), representatives of which attend every quarterly Board meeting to provide updates on risk management, accounting, administration, corporate governance and regulatory matters. The Board, meeting as the Engagement and Remuneration Committee, reviewed the performance of all the Company’s service providers, receiving feedback from Frostrow in their capacity as AIFM and Company Secretary. The AIFM, which is responsible for the day-to-day operational management of the Company, meets and interacts with the other service providers including the Depositary, Custodian and Registrar, on behalf of the Board, on a daily basis. This can be through email, one-to-one meetings and/or regular written reporting. The Audit Committee met with BDO LLP to review the audit plan for the year, agree their remuneration, review the outcome of the annual audit and to assess the quality and effectiveness of the audit process. Please refer to the Audit Committee Report for further information.

As an externally managed investment trust, the Company has no employees, customers, operations or premises. Therefore, the Company’s key stakeholders (other than its shareholders) are considered to be its service providers, including its Portfolio Manager. The need to foster good business relationships with service providers and maintain a reputation for high standards of business conduct are central to the Directors’ decision-making as the Board of an externally managed investment trust.

KEY AREAS OF ENGAGEMENT	MAIN DECISIONS AND ACTIONS TAKEN
Investors Ongoing dialogue with shareholders concerning the strategy of the Company, performance and the portfolio. Share price performance. The Portfolio Manager’s approach to sustainable development and investment.	The Board and the Portfolio Manager provided updates on performance via RNS, the Company’s website and the usual financial reports and monthly fact sheets. The Board continued to monitor share price movements closely, both in absolute terms and in relation to the Company’s peer group. As the discount narrowed during the year, the Board did not initiate any share buybacks. While recognising that buybacks can generate shareholder value in the short term, the Board decided that buybacks were not in the long-term interests of shareholders, as they would reduce the size of the Company, increase the ongoing charges ratio and reduce the liquidity of the Company’s shares. Instead, the Board continued to take steps to improve the visibility of the Company and the Portfolio Manager’s sustainability credentials, in particular to retail investors. Further information is provided in the Chair’s Statement.
Portfolio Manager Portfolio composition, performance, outlook and business updates. Matters relating to sustainability, including the sustainability credentials of the portfolio companies, and regulatory developments affecting the Company itself. The promotion and marketing strategy of the Company.	The Board agreed that high standards of research and decision-making have been maintained and the Portfolio Manager’s strategy has been implemented consistently, leading to good returns over the past year and over longer periods. The Board concluded that it was in the interests of shareholders for Stewart Investors to continue in their role as Portfolio Manager on the same terms and conditions. The Board continued its focus on improving the marketing strategy of the Company, and established a new Sales, Marketing and Communications Committee to oversee this process. Further information is provided in the Chair’s Statement. The Board’s deliberations on the matter of new sustainability-related regulation are described in the Chair’s Statement. The Board considered that the conference in London was successful. While it will not always be possible or practical to engage with portfolio companies remotely, in view of the environmental and cost benefits associated with reduced long-distance travel, the Board agreed to alternate their due diligence trips to Asia with future London-based events.
Service Providers Regulatory updates, in particular regarding the FCA’s Sustainability Disclosure Rules. The quality of service provision and the terms and conditions under which service providers are engaged. The assessment of the effectiveness of the audit and the Auditor’s reappointment. The terms and conditions under which the Auditor is engaged.	The Board concluded that it was in the interests of shareholders for Frostrow to continue in their role as AIFM on the same terms and conditions. The Board approved the Audit Committee’s recommendation to propose to shareholders that BDO LLP be re-appointed as the Company’s auditor for a further year. Please refer to the Audit Committee Report and the Notice of AGM for further information.

Social, Human Rights and Environmental Matters

As an externally managed investment trust, the Company does not have any employees or maintain any premises, nor does it undertake any manufacturing or other physical operations itself. All its operational functions are outsourced to third party service providers. Therefore the Company has no material, direct impact on the environment or any particular community and, as a result, the Company itself has no environmental, human rights, social or community policies.

The Portfolio Manager engages with the Company’s underlying investee companies in relation to their corporate governance practices and the development of their policies on social, community and environmental matters. The Portfolio Manager (under their parent, legal entity name, First Sentier Investors) is a Tier 1 signatory to the UN Principles of Responsible Investment, an investor signatory of Climate Action 100+ and an investor member of the Institutional Investors Group on Climate Change.

Integrity and Business Ethics

The Board is committed to carrying out the Company’s business in an honest and fair manner with a zero-tolerance approach to bribery, tax evasion and corruption. As such, policies and procedures are in place to prevent this and can be found on the Company’s website. In carrying out the Company’s activities, the Board aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues.

Taskforce for Climate-Related Financial Disclosures (“TCFD”)

The Company notes the TCFD recommendations on climate-related financial disclosures. The Company is an investment trust and, as such, it is exempt from the Listing Rules requirement to report against the TCFD framework.

Stewart Investors is committed to reporting annually on its progress against its climate change objectives which are set out in its climate change statement10. This reporting is modelled on TCFD recommendations to the degree it is relevant to their activities and to support shareholders with their reporting requirements.

10 https://www.stewartinvestors.com/uk/en/private-investor/insights/climate-change-statement.html

Stewart Investors have signed up to the Net Zero Asset Managers Initiative. They published their first climate report11 in 2022 which provides details about their plan; this will be updated annually. They are engaging with their investee companies to set ambitious targets and have credible action plans to achieve net zero by 2050. They are targeting outcomes that are aligned with their commitment to the Net Zero Asset Managers Initiative and prioritising engagement with companies that have inadequate disclosures and targets, and/or rising emissions.

11 https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/Climate- Report-2021.pdf

Climate reporting, at both the Stewart Investors12 and Pacific Asset Trust13 level, is available via the Company’s website.

12 https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/Climate-Report-2021.pdf

13 https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/PASSET-Climate-2021.pdf

Performance and Future Developments

A review of the Company’s performance over the year and the outlook for the Company can be found in the Chair’s Statement and in the Portfolio Manager’s Review.

The Company’s overall strategy remains unchanged.

By order of the Board

Frostrow Capital LLP
Company Secretary

29 April 2024

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102 ‘The Financial Reporting Standard applicable in the UK and the Republic of Ireland’.

Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business; and
• prepare a directors’ report, a strategic report and a directors’ remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and financial statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement which comply with that law and those regulations.

The Directors are responsible for ensuring the Annual Report and the financial statements are made available on the Company’s website, which is maintained by the Portfolio Manager. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.

Disclosure of Information to the Auditor

The Directors who held office at the date of approval of this report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that he/she might reasonably be expected to have taken as a Director to make himself/ herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

Responsibility Statement of the Directors in respect of the Annual Financial Report

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and the return of the Company for the year ended 31 January 2024; and
• the Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that they face.

We consider the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

On behalf of the Board

Andrew Impey
Chair

29 April 2024

Income Statement

for the year ended 31 January 2024

		Year ended 31 January 2024			Year ended 31 January 2023
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£’000	£’000	£’000	£’000	£’000	£’000
(Losses)/gains on investments	8	-	(2,018)	(2,018)	-	27,434	27,434
Exchange differences		-	(642)	(642)	-	1,787	1,787
Income	2	7,861	-	7,861	5,541	-	5,541
Portfolio management
and AIFM fees	3	(1,123)	(3,369)	(4,492)	(1,095)	(3,283)	(4,378)
Other expenses	4	(795)	-	(795)	(813)	-	(813)
Return/(loss) before taxation		5,943	(6,029)	(86)	3,633	25,938	29,571
Taxation	5	(772)	(5,203)	(5,975)	(621)	(3,656)	(4,277)
Return/(loss) after taxation		5,171	(11,232)	(6,061)	3,012	22,282	25,294
Return/(loss) per share (p)	7	4.3	(9.3)	(5.0)	2.5	18.4	20.9

The Total column of this statement represents the Company’s Income Statement. The Revenue and Capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the Income Statement derive from continuing operations.

The Company had no recognised gains or losses other than those shown above and therefore no separate Statement of Other Comprehensive Income has been presented.

The accompanying notes are an integral part of these statements.

Statement of Changes in Equity

for the year ended 31 January 2024

		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 2022		15,120	8,811	1,648	14,572	404,220	6,295	450,666
Return after taxation		-	-	-	-	22,282	3,012	25,294
Ordinary dividends paid	6	-	-	-	-	-	(2,298)	(2,298)
At 31 January 2023		15,120	8,811	1,648	14,572	426,502	7,009	473,662
(Loss)/return after taxation		-	-	-	-	(11,232)	5,171	(6,061)
Ordinary dividends paid	6	-	-	-	-	-	(2,782)	(2,782)
At 31 January 2024		15,120	8,811	1,648	14,572	415,270	9,398	464,819

The accompanying notes are an integral part of these statements.

Statement of Financial Position

as at 31 January 2024

		2024		2023
	Notes	£’000	£’000	£’000	£’000
Fixed assets
Investments	8		470,109		474,399
Current assets
Debtors	9	1,032		333
Cash		6,191		10,535
		7,223		10,868
Creditors (amounts falling due within one year)	10	(1,307)		(1,855)
Net current assets			5,916		9,013
Total assets less current liabilities			476,025		483,412
Non-current liabilities
Provision for liabilities	11		(11,206)		(9,750)
Net assets			464,819		473,662
Capital and reserves
Called up share capital	12		15,120		15,120
Share premium account			8,811		8,811
Capital redemption reserve	15		1,648		1,648
Special reserve	15		14,572		14,572
Capital reserve	15		415,270		426,502
Revenue reserve	15		9,398		7,009
Equity shareholders’ funds			464,819		473,662
Net asset value per Ordinary Share (p)	13		384.3p		391.6p

The financial statements were approved and authorised for issue by the Board of Directors on 29 April 2024 and signed on its behalf by:

Andrew Impey
Chair

The accompanying notes are an integral part of these statements.

Pacific Assets Trust Public Limited Company – Company Registration Number: SC091052 (Registered in Scotland)

Notes to the Financial Statements

1. Accounting Policies

A summary of the principal accounting policies adopted is set out below or as appropriate within the relevant note to the financial statements.

(a) Basis of Accounting

These financial statements have been prepared under UK Company Law, FRS 102 ‘The Financial Reporting Standard applicable in the UK and Ireland’, and in accordance with guidelines set out in the Statement of Recommended Practice (“SORP”), published in July 2022, for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies, the historical cost convention, as modified by the valuation of investments at fair value through profit or loss.

The Company has taken advantage of the exemption from preparing a Cash Flow Statement under FRS 102, as it is an investment fund whose investments are substantially highly liquid, carried at fair (market) value and provides a statement of changes in equity.

The Board is of the opinion that the Company is engaged in a single segment of business, namely investing in accordance with the Investment Objective, and consequently no segmental analysis is provided.

Going concern

The Directors are required to make an assessment of the Company’s ability to continue as a going concern and have concluded that the Company has adequate resources to continue in operational existence for at least 12 months from the date these financial statements were approved.

In making this assessment, the Directors have considered a wide variety of emerging and current risks to the Company, as well as the mitigation strategies that are in place. The Board has also reviewed stress-testing and scenario analyses prepared by the AIFM. The stress tests and scenario analyses considered the effect of various downturns, based on historic bear markets, on the asset value and expenses of the Company. The tests modelled the impact of decreases of up to and over 80% on the value of the investment portfolio and decreases in current market liquidity of up to 80%.

These tests are carried out as an arithmetic exercise, which can apply equally to any set of circumstances in which asset value and income are significantly impaired. It was concluded that even in an extreme downside scenario, the Company would be able to continue to meet its liabilities as they fell due. Whilst the economic future is uncertain, the opinion of the Directors is that there is no foreseeable downside scenario that would threaten the Company’s ability to continue to meet its liabilities as they fall due.

Based on the information available to the Directors at the time of this report, including the results of the stress tests and scenario analyses, and having taken account of the liquidity of the investment portfolio, the Company’s cash flow and borrowing position (the Company is not currently geared), the Directors are satisfied that the Company has adequate financial resources to continue in operation for at least 12 months from the date of signing these financial statements and that, accordingly, it is appropriate to adopt the going concern basis.

Significant Judgement

There is one significant judgement involved in the presentation of the Company’s accounts, being the judgement on the functional currency of the Company.

The Company’s investments are made in foreign currencies, however the Board considers the Company’s functional currency to be sterling. In arriving at this conclusion, the Board considered that the shares of the Company are listed on the London Stock Exchange, it is incorporated in the United Kingdom and pays dividends and expenses in sterling. All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.

Presentation of the Income Statement

In order to reflect better the activities of an investment trust company and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The net revenue return is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Section 1158 of the Corporation Tax Act 2010.

(b) Foreign Currencies

Transactions denominated in foreign currencies are translated into sterling at the exchange rates on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate ruling at the date of the Statement of Financial Position. Profits or losses on the translation of foreign currency balances, whether realised or unrealised, are taken to the capital or revenue column of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature.

(c) Cash and Cash Equivalents

Cash and cash equivalents are defined as cash and demand deposits readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

2. Income

	2024	2023
	£’000	£’000
Income from investments
Overseas dividends	7,701	5,504
Bank interest	160	37
	7,861	5,541

Dividends receivable are recognised on the ex-dividend date. Where no ex-dividend date is quoted, dividends are recognised when the Company’s right to receive payment is established. Foreign dividends are gross of withholding tax.

Where the Company has elected to receive its dividends in the form of additional shares rather than cash the amount of cash foregone is recognised in the revenue column with any excess above this recognised in the capital column.

3. Portfolio Management and AIFM Fees

		2024			2023
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Portfolio management fee
– Stewart Investors	996	2,989	3,985	968	2,904	3,872
AIFM fee – Frostrow	127	380	507	127	379	506
	1,123	3,369	4,492	1,095	3,283	4,378

Frostrow’s AIFM fee is for risk management, corporate management, company secretarial and administrative services. Further information regarding Stewart Investors and Frostrow’s fees can be found on pages 47 and 48 of the Annual Report.

All expenses and interest are accounted for on an accruals basis. Expenses and interest are charged to the Income Statement as revenue items except where incurred in connection with the maintenance or enhancement of the value of the Company’s assets and taking account of the expected long-term returns, when they are split as follows:

    Portfolio Management and AIFM fees payable have been allocated 25% to revenue and 75% to capital.

    Transaction costs incurred on the purchase and sale of investments are taken to the Income Statement as a capital item, within gains on investments held at fair value through profit or loss.

4. Other Expenses

	2024	2023
	£’000	£’000
Directors’ fees	189	183
Employers NIC on directors’ remuneration	15	14
Auditor’s remuneration for annual audit	46	44
Depository fees	57	56
Custody fees	175	190
Registrar fees	25	25
Broker retainer	38	32
Listing fees	24	36
Legal and professional fees	41	43
Other expenses	185	190
Total expenses	795	813

For accounting policy, see note 3.

5. Taxation

(a) Analysis of Charge in the Year

		2024			2023
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Overseas taxation	985	-	985	764	-	764
Indian capital gains tax charge	(213)	5,203	4,990	(143)	3,656	3,513
	772	5,203	5,975	621	3,656	4,277

Overseas tax arose as a result of irrecoverable withholding tax on overseas dividends and Indian capital gains tax.

As an investment trust, the Company is generally not subject to UK tax on capital gains. However, Indian capital gains tax arises on capital gains on the sale of Indian securities at a rate of 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. £1,456,000 (2023: £1,355,000) of the charge arose on unrealised long-term capital gains on securities still held and is included in deferred taxation on unrealised capital gains on Indian securities as set out in note 11. £3,534,000 (2023: £2,158,000) of the charge relates to capital gains tax paid on disposals during the year.

(b) Reconciliation of Tax Charge

The UK corporation tax rate was 19% until 31 March 2023 and 25% from 1 April 2023, giving an effective rate of 24.0% for the year (2023: 19%). The tax assessed for the year is lower than the corporation tax rate. The differences are explained below.

The differences are explained below:

			2024			2023
		Revenue	Capital	Total	Revenue	Capital	Total
		£’000	£’000	£’000	£’000	£’000	£’000
Total return on ordinary activities
	before tax	5,943	(6,029)	(86)	3,633	25,938	29,571
Corporation tax charged at 24.0%
	(2023: 19.0%)	1,428	(1,449)	(21)	690	4,928	5,618
Effects of:
(Losses)/gains on investment not subject to UK
	corporation tax	-	485	485	-	(5,212)	(5,212)
Non-taxable exchange differences		-	154	154	-	(340)	(340)
Unutilised management expenses		422	810	1,232	356	624	980
Income not subject to corporation tax		(1,851)	-	(1,851)	(1,046)	-	(1,046)
Indian capital gains tax charge
	(see note 5a)	(213)	5,203	4,990	(143)	3,656	3,513
Overseas taxation		986	-	986	764	-	764
Tax charge for the year		772	5,203	5,975	621	3,656	4,277

As at 31 January 2024 the Company had unutilised management expenses and other reliefs for taxation purposes of £62,974,000 (2023: £57,846,000). It is not anticipated that these will be utilised in the foreseeable future and as such no related deferred tax asset has been recognised.

In October 2022 it was confirmed that the main rate of corporation tax would increase from 19% to 25% from April 2023. This rate has been enacted as at the date of the Statement of Financial Position.

The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue as set out in this note. The standard rate of corporation tax is applied to taxable net revenue. Any adjustment resulting from relief for overseas tax is allocated to the revenue reserve.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the Statement of Financial Position date where transactions or events that result in an obligation to pay more, or right to pay less, tax in future have occurred at the Statement of Financial Position date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company’s taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Deferred tax is measured without discounting and based on enacted tax rates. Due to the Company’s status as an investment trust, and the intention to meet the conditions required to obtain approval under Section 1158 of the Corporation Tax Act 2010, the Company has not provided for deferred UK tax on any capital gains and losses arising on the revaluation or disposal of investments.

Deferred tax has been provided for on capital gains arising on Indian securities as noted in 5(a) above.

6. Dividends

Amounts recognised as distributable to shareholders for the year ended 31 January 2024, were as follows:

	2024	2023
	£’000	£’000
Final dividend paid for the year ended 31 January 2023 of 2.3p per share	2,782	-
Final dividend paid for the year ended 31 January 2022 of 1.9p per share	-	2,298

In respect of the year ended 31 January 2024, a final dividend of 4.0p per share has been proposed and will be reflected in the Annual Report for the year ending 31 January 2025. Details of the ex-dividend and payment dates are provided on page 47 of the Annual Report.

The Board’s current policy is to pay dividends only out of revenue reserves. Therefore the amount available for distribution as at 31 January 2024 is £9,398,000 (2023: £7,009,000).

The dividends payable in respect of both the current and the previous financial year, which meet the requirements of Section 1158 CTA 2010, are set out below:

	2024	2023
	£’000	£’000
Revenue available for distribution by way of dividend for the year	5,171	3,012
Final dividend of 4.0p per share (2023: final dividend of 2.3p)	(4,838)	(2,782)
Transfer to revenue reserves	333	230

Dividends paid by the Company on its shares are recognised in the financial statements in the year in which they are paid and are shown in the Statement of Changes in Equity.

7. Return per Share

The return per share is as follows:

		2024			2023
	Revenue	Capital	Total	Revenue	Capital	Total
	pence	pence	pence	pence	pence	pence
Basic	4.3p	(9.3)p	(5.0)p	2.5p	18.4p	20.9p

The total return per share is based on the total loss attributable to shareholders of £6,061,000 (2023: return of £25,294,000).

The revenue return per share is based on the net revenue return attributable to shareholders of £5,171,000 (2023: £3,012,000).

The capital loss per share is based on the net capital loss attributable to shareholders of £11,232,000 (2023: return of £22,282,000).

The total return, revenue return and the capital return per share are based on the weighted average number of shares in issue during the year of 120,958,386 (2023: 120,958,386).

The calculations of the returns per Ordinary Share have been carried out in accordance with IAS 33 Earnings per Share.

8. Investments

	2024	2023
	£’000	£’000
Investments
Cost at start of year	320,883	290,337
Investment holding gains at start of year	153,516	146,646
Valuation at start of year	474,399	436,983
Purchases at cost	84,889	77,305
Disposal proceeds	(87,161)	(67,323)
(Losses)/gains on investments	(2,018)	27,434
Valuation at end of year	470,109	474,399
Cost at 31 January	352,944	320,883
Investment holding gains at 31 January	117,165	153,516
Valuation at 31 January	470,109	474,399

The Company received £87,161,000 (2023: £67,323,000) from investments sold in the year. The book cost of these investments when they were purchased was £52,828,000 (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 year the Company incurred transaction costs on purchases of £110,000 (2023: £87,000) and transaction costs on sales of £169,000 (2023: £142,000).

Valuation of Investments

Investments are measured initially and at subsequent reporting dates at fair value. Purchases and sales are recognised on the trade date when a contract exists whose terms require delivery within the time frame established by the market concerned. For quoted securities fair value is either bid price or last traded price, depending on the convention of the exchange on which the investment is listed. Changes in fair value and gains or losses on disposal are included in the Income Statement as a capital item.

In addition, for financial reporting purposes, fair value measurements are categorised into a fair value hierarchy based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 – Quoted prices in active markets.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data), either directly or indirectly.

Level 3 – Inputs are unobservable (i.e. for which market data is unavailable).

All investments are in equity shares and have been classified as Level 1 (2023: All Level 1).

9. Debtors

	2024	2023
	£’000	£’000
Amounts due from brokers	746	-
Accrued income	279	323
Other debtors	7	10
	1,032	333

10. Creditors: Amounts Falling Due Within One Year

	2024	2023
	£’000	£’000
Amounts due to brokers	-	481
Portfolio management fee – Stewart Investors	1,002	1,002
AIFM fee – Frostrow	128	129
Other creditors	177	243
	1,307	1,855

11. Provisions for Liabilities

	2024	2023
	£’000	£’000
Deferred taxation on unrealised capital gains on Indian securities	11,206	9,750

See note 5 for further details and accounting policy.

12. Share Capital

	2024	2023
	£’000	£’000
Allotted and fully paid:
120,958,386 Ordinary shares of 12.5p each (2023: 120,958,386)	15,120	15,120

During the current and prior year, no Ordinary shares were issued or bought back.

The capital of the Company is managed in accordance with its investment policy which is detailed in the Strategic Report.

The Company does not have any externally imposed capital requirements.

13. Net Asset Value Per Share

The net asset value per share of 384.3p (2023: 391.6p) is calculated on net assets of £464,819,000 (2023: £473,662,000) divided by 120,958,386 (2023: 120,958,386) shares, being the number of shares in issue at the year end.

14. Financial Instruments

The Company’s financial instruments comprise its investment portfolio, cash balances, and debtors and creditors that arise directly from its operations. As an investment trust, the Company holds an investment portfolio of financial assets in pursuit of its investment objective.

Fixed asset investments (see note 8) are valued at fair value in accordance with the Company’s accounting policies. The fair value of all other financial assets and liabilities is represented by their carrying value in the Statement of Financial Position.

The main risks that the Company faces arising from its financial instruments are:

(i)      market risk, including:

    other price risk, being the risk that the value of investments will fluctuate as a result of changes in market prices;

    interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in interest rates;

    foreign currency risk, being the risk that the value of financial assets and liabilities will fluctuate because of movements in currency rates;  

(ii)     credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and

(iii)   liquidity risk, being the risk that the Company will not be able to meet its liabilities when they fall due. This may arise should the Company not be able to liquidate its investments. Under normal market trading volumes, the majority of the investment portfolio could be realised within a week.

Other price risk

The management of other price risk is part of the portfolio management process and is typical of equity investment. The investment portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis with an objective of maximising overall returns to shareholders. Further information on how the investment portfolio is managed is set out on page 2 of the Annual Report. Although it is the Company’s current policy not to use derivatives they may be used from time to time, with prior Board approval, to hedge specific market risk or gain exposure to a specific market.

If the investment portfolio valuation rose or fell by 10% at 31 January, the impact on the net asset value would have been £46.3 million (2023: £46.7 million). The calculations are based on the investment portfolio valuation as at the respective Statement of Financial Position dates and are not necessarily representative of the year as a whole.

Interest rate risk

Floating rate

When the Company retains cash balances the majority of the cash is held in overnight call accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate for the relevant currency for each deposit.

Foreign currency risk

The Company invests in overseas securities and holds foreign currency cash balances which give rise to currency risks. Foreign currency risks are managed alongside other market risks as part of the management of the investment portfolio. It is currently not the Company’s policy to hedge this risk on a continuing basis but it can do so from time to time.

Foreign currency exposure:

	2024				2023
	Investments	Cash	Debtors	Creditors/ Provisions	Investments	Cash	Debtors	Creditors/ Provisions
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Chinese renminbi	43,006	-	-	-	39,812	481	-	(481)
Indian rupee	218,067	2,063	783	(11,206)	206,897	15	110	(9,750)
New Taiwanese dollar	51,623	5	-	-	54,280	-	5	-
Hong Kong dollar	13,173	-	-	-	33,134	-	-	-
Philippine peso	4,688	-	-	-	4,835	-	-	-
Indonesian rupiah	36,489	-	-	-	36,718	-	-	-
Japanese yen	37,707	-	106	-	36,161	-	120	-
Bangladesh taka	4,358	-	-	-	6,106	-	1	-
Thai baht	9,471	-	-	-	12,001	-	-	-
Malaysian ringgit	4,586	-	-	-	10,231	-	-	-
Singapore dollar	21,562	688	-	-	23,085	2,898	-	-
US dollar	-	464	-	-	-	3,100	-	-
Korean won	25,379	-	95	-	11,139	-	67	-
Euro	-	2	-	-	-	-	-	-
Total	470,109	3,222	984	(11,206)	474,399	6,494	303	(10,231)

At 31 January 2024 the Company had £2,969,000 of sterling cash balances (2023: £4,041,000).

During the year sterling strengthened by an average of 7.5% (2023: weakened by 1.6%) against all of the currencies in the investment portfolio (weighted for exposure at 31 January). If the value of sterling had strengthened against each of the currencies in the portfolio by 10%, the impact on the net asset value would have been negative £52.9 million (2023: negative £53.4 million). If the value of sterling had weakened against each of the currencies in the investment portfolio by 10%, the impact on the net asset value would have been positive £43.3 million (2023: positive £43.7 million). The calculations are based on the investment portfolio valuation and cash balances as at the year end and are not necessarily representative of the year as a whole.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Portfolio Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum credit risk exposure at the Statement of Financial Position date, and the main exposure to credit risk is via the Custodian which is responsible for the safeguarding of the Company’s investments and cash balances.

At the reporting date, the Company’s financial assets exposed to credit risk amounted to the following:

	2024	2023
	£’000	£’000
Cash	6,191	10,535
Debtors	1,032	333
	7,223	10,868

All the assets of the Company which are traded on a recognised exchange are held by J.P. Morgan Chase Bank, the Custodian. Bankruptcy or insolvency of the Custodian may cause the Company’s rights with respect to securities held by the Custodian to be delayed or limited. The Board monitors the Company’s risk as described in the Strategic Report.

The credit risk on cash is controlled through the use of counterparties or banks with high credit ratings (rated AA or higher), assigned by international credit rating agencies. Cash is currently held at JP Morgan Chase Bank. Bankruptcy or insolvency of such financial institutions may cause the Company’s ability to access cash placed on deposit to be delayed, limited or lost.

Liquidity risk

The Company’s liquidity risk is managed on an ongoing basis by the Portfolio Manager. Substantially all of the Company’s portfolio would be realisable within one week, under normal market conditions. There may be circumstances where market liquidity is lower than normal. Stress tests have been performed to understand how long the portfolio would take to realise in such situations. The Board is comfortable that in such a situation the Company would be able to meet its liabilities as they fall due.

Capital management policies and procedures

The Company’s capital management objectives are to ensure that it will be able to continue as a going concern and to maximise the return to its equity shareholders.

The Company’s policy on gearing and leverage is set out on page 26 of the Annual Report. The Company had no gearing or leverage during the current or prior year.

The capital structure of the Company consists of the equity share capital, retained earnings and other reserves as shown in the Statement of Financial Position.

The Board, with the assistance of the AIFM and the Portfolio Manager, monitors and reviews the broad structure of the Company’s capital on an ongoing basis. This includes a review of:

• the need to buy back equity shares, either for cancellation or to hold in treasury, in light of any share price discount to net asset value per share in accordance with the Company’s share buy-back policy;
• the need for new issues of equity shares, including issues from treasury; and
• the extent to which revenue in excess of that which is required to be distributed should be retained.

The Company’s objectives, policies and processes for managing capital are unchanged from the prior year.

15. Reserves

Capital redemption reserve

This reserve arose when ordinary shares were redeemed by the Company and subsequently cancelled, at which point the amount equal to the par value of the ordinary share capital was transferred from the ordinary share capital to the Capital Redemption Reserve.

Special reserve

The Special Reserve arose following court approval in February 1999 to transfer £24.2 million from the share premium account.

Capital reserve

The following are accounted for in this reserve: gains and losses on the disposal of investments; changes in the fair value of investments; and expenses and finance costs, together with the related taxation effect, charged to capital in accordance with note 5. Any gains in the fair value of investments that are not readily convertible to cash are treated as unrealised gains in the capital reserve.

Revenue reserve

The Revenue Reserve reflects all income and expenses that are recognised in the revenue column of the Income Statement.

Distributable reserves

The Revenue, Special and Capital Reserves are distributable. It is the Board’s current policy to pay dividends only from the revenue reserve.

16. Related Party Transactions and Transactions with the Managers

The following are considered to be related parties:

• Frostrow Capital LLP (under the Listing Rules only)
• Stewart Investors (under the Listing Rules only)
• The Directors of the Company

Details of the relationship between the Company and Frostrow Capital LLP, the Company’s AIFM, are disclosed on pages 47 and 48 of the Annual Report. During the year ended 31 January 2024, Frostrow earned £507,000 (2023: £506,000) in respect of company management fees, of which £128,000 (2022: £129,000) was outstanding at the year end.

The Company employs Stewart Investors as its Portfolio Manager. Details of this arrangement are disclosed on page 47 of the Annual Report. During the year ended 31 January 2024, Stewart Investors earned £3,985,000 (2023: £3,872,000) in respect of portfolio management fees, of which £1,002,000 (2023: £1,002,000) was outstanding at the year end.

All material related party transactions have been disclosed in notes 3 and 4. Details of the remuneration and the shareholdings of all Directors can be found on page 59 of the Annual Report.

The figures and financial information for 2023 are extracted from the published Annual Report for the year ended 31 January 2023 and do not constitute the statutory accounts for that year. The Annual Report for the year ended 31 January 2023 has been delivered to the Registrar of Companies and included the Independent Auditor’s Report which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

The figures and financial information for 2024 are extracted from the Annual Report and financial statements for the year ended 31 January 2024 and do not constitute the statutory accounts for the year.  The Annual Report for the year ended 31 January 2024 includes the Independent Auditor’s Report which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.  The Annual Report and financial statements have not yet been delivered to the Registrar of Companies.

Glossary of Terms and Alternative Performance Measures (unaudited)

Absolute Performance

Absolute performance is the percentage (%) rise or fall in the share price of the investment over the stated period. Relative performance, on the other hand, is the difference between the absolute return and the performance of the market (or other similar investments), which is gauged by a benchmark, or index such as the MSCI AC Asia ex Japan Index.

AIFMD

The Alternative Investment Fund Managers Directive (the ‘Directive’) is a European Union Directive that entered into force on 22 July 2013. The Directive, which was retained in UK law following the withdrawal of the UK from the European Union, regulates fund managers that manage alternative investment funds (including investment trusts).

Where an entity falls within the scope of the Directive, it must appoint a single Alternative Investment Fund Manager (‘AIFM’). The core functions of an AIFM are portfolio and risk management. An AIFM can delegate one but not both of these functions. The entity must also appoint an independent depositary whose duties include the following: safeguarding and verification of the ownership of assets; monitoring cashflows; and ensuring that appropriate valuations are applied to the entity’s assets.

Average Discount

The average share price for the period divided by the average net asset value for the period minus 1.

	2024	2023
	pence	pence
Average share price for the year	363.1	335.9
Average net asset value for the year	388.0	373.8
Average Discount	6.4%	10.1%

Bottom-Up Approach

An investment approach that focuses on the analysis of individual stocks rather than the significance of macroeconomic factors.

Discount or Premium

A description of the difference between the share price and the net asset value per share. The size of the discount or premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share the result is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount.

Gearing

The term used to describe the process of borrowing money for investment purposes. The expectation is that the returns on the investments purchased will exceed the finance costs associated with those borrowings.

There are several methods of calculating gearing and the following has been selected:

Total assets less current liabilities (before deducting any prior charges) minus cash/cash equivalents divided by shareholders’ funds, expressed as a percentage.

Net Asset Value (“NAV”)

The value of the Company’s assets, principally investments made in other companies and cash being held, minus any liabilities. The NAV is also described as “shareholders’ funds” per share. The NAV is often expressed in pence per share after being divided by the number of shares which have been issued. The NAV per share is unlikely to be the same as the share price which is the price at which the Company’s shares can be bought or sold by an investor. The share price is determined by the relationship between the demand for and supply of the shares.

NAV Per Share Total Return

The total return on an investment over a specified period assuming dividends paid to shareholders were reinvested at net asset value per share at the time the shares were quoted ex-dividend. This is a way of measuring investment management performance of investment trusts which is not affected by movements in discounts or premiums.

	31 January	31 January
	2024	2023
NAV Total Return	p	p
Opening NAV	391.6	372.6
(Decrease)/increase in NAV	(5.0)	20.9
Dividend paid	(2.3)	(1.9)
Closing NAV	384.3	391.6
(Decrease)/increase in NAV	(1.3)%	5.6%
Impact of reinvested dividends	0.0%	0.1%
NAV Total Return	(1.3)%	5.7%

Ongoing Charges

Ongoing charges are calculated by taking the Company’s annualised operating expenses as a proportion of the average daily net asset value of the Company over the year. The costs of buying and selling investments are excluded, as are interest costs, taxation, cost of buying back or issuing ordinary shares and other non-recurring costs.

	31 January	31 January
	2024	2023
	£’000	£’000
Operating expenses1	5,287	5,190
Average net assets during the year	469,515	452,081
Ongoing charges	1.1%	1.1%

1 See notes 3 and 4.

Performance Objective

The Company’s performance objective, against which the Portfolio Manager’s performance is measured, is to provide shareholders with a net asset value total return in excess of the UK Consumer Price Index (“CPI”) plus 6% (calculated on an annual basis) measured over three to five years. The Consumer Price Index is published by the UK Office for National Statistics and represents inflation. The additional 6% is a fixed element to represent what the Board considers to be a reasonable premium on investors’ capital which investing in the faster-growing Asian economies ought to provide over time. The performance objective is designed to reflect that the Portfolio Manager’s approach does not consider index composition when investing.

	Total Return (annualised)
	Share Price	NAV	CPI + 6%
	(%)	(%)	(%)
One year to 31 January 2024	(1.9)	(1.3)	10.4
Three years to 31 January 2024	2.3	4.4	13.0
Five years to 31 January 2024	5.9	7.6	10.8

Portfolio Turnover

Portfolio turnover is a measure of how quickly securities in a fund are either bought or sold by the fund’s managers, over a given period of time. The rate of turnover is important for potential investors to consider, as funds that have a high rate will also have higher fees to reflect the turnover costs.

It is calculated as the average of the purchases and sales for the year divided by the average net assets for the year.

Revenue Return per Share

The revenue return per share is calculated by taking the return on ordinary activities after taxation and dividing it by the weighted average number of shares in issue during the year (see note 7 for further information).

Share Price Total Return

The total return on an investment over a specified period assuming dividends paid to shareholders were reinvested in the Company’s shares at the share price at the time the shares were quoted ex-dividend.

	31 January	31 January
	2024	2023
Share Price Total Return	p	p
Opening share price	358.0	340.0
(Decrease)/increase in share price	(6.7)	19.9
Dividend paid	(2.3)	(1.9)
Closing share price	349.0	358.0
(Decrease)/increase in share price	(1.9)%	5.8%
Impact of reinvested dividends	0.0%	0.1%
Share Price Total Return	(1.9)%	5.9%

Volatility

A measure of the range of possible returns for a given security or market index.

Investment Philosophy

The graphic in the Portfolio Manager’s Review contains certain terms which are defined/explained below. Each measure is calculated for a representative Stewart Investors Asia Pacific sustainability account (managed by the same portfolio management team as the Company), unless otherwise stated.

• Active share is the percentage of stock holdings in the portfolio that differs from the MSCI AC Asia ex Japan Index, sterling adjusted with income reinvested net of tax (the “Index”). A higher percentage reflects a higher divergence from the Index.
• Average age of holdings refers to the average age of the companies held in the portfolio.
• Holdings with net cash refers to companies whose total cash is greater than its total liabilities.
• Holdings with stewards refers to companies primarily owned/controlled by second or later generation of its founders, companies primarily owned/controlled by its founder or founders and companies primarily owned/controlled by an organisation, often established by an individual, whose purpose is to support good causes.
• For emissions (footprint) reporting the Portfolio Manager has used the Partnership for Carbon Accounting Financials (PCAF) methodology which calculates a shareholder’s or lender’s share of scope 1 and 2 emissions for each company it invests in. Scope 1 covers all direct greenhouse gas (GHG) emissions from sources that are owned or controlled by the reporting entity. Scope 2 covers indirect GHG emissions from the consumption of purchased electricity, heat or steam. An investor’s share is based on the amount invested over the Enterprise Value Including Cash (EVIC). For example if a shareholder owns 10% of the company, it is allocated 10% of the company’s emissions. For shareholders this is sometimes called ‘financed’ or ‘equity share’ of emissions. To calculate the benchmark comparisons for Stewart Investors’ strategies, they have used the same approach by assuming benchmarks hold the same total value of investments as comparable strategies. They provide the total footprint, which is influenced by the size of the total value of the investment strategy (shown in 1000s of tonnes of CO2-e) and on a ‘per $1 million invested’ basis, which is useful for comparison purposes.
• Outperformance in down months shows the proportion of months where the Composite portfolio outperformed the Index, expressed as a percentage of the total number of months where the Index fell. An outperformance in down months of 80% indicates that the portfolio outperformed in 8 out of 10 months where the Index fell. This measure is calculated using the Composite.

Source for Index: FactSet

• Downside capture is a measure of the Composite portfolio’s overall performance in a down market relative to the Index. A down-market is defined as a period in which the market return is less than 0. Downside capture reflects the portfolio’s cumulative return when the Index was down, divided by the Index’s cumulative return when it was down. A value of less than 100 indicates that the portfolio has lost less than the Index during periods of negative returns for the Index. This measure is calculated using the Composite.
• Average name turnover is a portfolio activity measure indicating how many companies (stocks) have been sold and bought over a given period. This is thus showing the turnover of the portfolio in terms of stock mutation. Data shown is for the 10 years to 31 December 2023.
• Composite means the Stewart Investors Asia ex-Japan Sustainable Equity composite, a weighted average group of accounts managed in a similar way by the same portfolio management team that manages the Company’s portfolio. The Composite portfolio performance is calculated on a net basis by subtracting a model annual management fee of 0.85% from the gross performance figures. No other expenses or costs have been taken into account when calculating the net performance. Income is reinvested and is included on a net of tax basis. Performance and measures are from the Composite inception on 1 February 2006 to 31 December 2023.

ANNOUNCEMENT ENDS

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

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