Annual Financial Report

RNS Number : 7680M

Pacific Assets Trust PLC

28 May 2010

 



PACIFIC ASSETS TRUST PLC

ANNUAL FINANCIAL REPORT FOR YEAR ENDED 31 JANUARY 2010

DATE: 28 May 2010

Following the release on 1 April 2010 of the Company's preliminary results announcement for the year ended 31 January 2010 (the "Preliminary Announcement"), the Company announces that its annual report and financial statements for the year ended 31 January 2010 (the "Annual Report and Financial Statements") will be issued to shareholders today.   

The Annual Report and Financial Statements include the notice of the 2010 Annual General Meeting of the Company to be held on Tuesday 29 June 2010 at 10.30 a.m. at City of London Hall, 19 Old Broad Street, London EC2N 1DS.

Copies of the Annual Report and Financial Statements have also been submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority Viewing Facility located at:

Financial Services Authority

25 The North Colonnade

Canary Wharf

London

E14 5HS

Pursuant to the Disclosure and Transparency Rules, two copies of the proposed changes to the articles of association of the Company, to be put to shareholders for approval at the Annual General Meeting, have also been submitted to the UK Listing Authority. A summary of the proposed changes is contained in the Annual Report and Financial Statements and the draft revised articles of association, highlighting the proposed amendments, are available for inspection at the Company's registered office at 80 George Street, Edinburgh EH2 3BU.

The information below, which is extracted in unedited full text from the Annual Report and Financial Statements, is included in this announcement solely for the purposes of compliance with Disclosure and Transparency Rule 6.3.5 and the requirements it imposes on issuers as to how to make public annual financial reports. It should be read in conjunction with the Preliminary Announcement. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report and Financial Statements.

Principal Risks and Risk Management

The Company's assets consist principally of listed securities and its main risks are therefore market related. The Company is also exposed to currency risk in respect of the markets in which it invests. More detailed explanations of these risks and the way which they are managed are contained in note 1.

Other risks faced by the Company include the following:

·     External - events beyond the control of the Board and the Manager, such as political change, natural disasters, terrorism, protectionism, inflation or deflation, economic recessions and movements in interest rates could affect share prices in particular markets.

·     Investment and strategic - incorrect strategy, country and sector allocation, stock selection, and the use of gearing could all lead to poor returns for shareholders.

·     Regulatory - breach of regulatory rules could lead to suspension of the Company's listing, financial penalties or a qualified audit report. Breach of Section 842 of the Income and Corporation Taxes Act 1988 could lead to the Company being subject to tax on capital gains.

·     Operational - failure of the Manager's accounting systems or disruption to the Manager's business, or that of third party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to a loss of shareholders' confidence.

·     Financial - inadequate controls by the Manager or third party service providers could lead to misappropriation of assets. Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations. Breaching loan covenants could lead to a loss of shareholders' confidence and financial loss for shareholders.

The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual obligations. It also regularly monitors the investment environment and the management of the Company's investment portfolio. The Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council.

Statement of Directors' Responsibilities in Respect of the Annual Report and Financial Statements

The Directors confirm that to the best of their 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 profit or loss of the Company; and

·     The Chairman's Statement, Manager's Review and Business Review contained within the Report of the Directors (together constituting the Management Report) include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.

Notes:

1.         Financial instruments

The Company's financial instruments comprise its investment portfolio, cash balances, a bank loan facility, and debtors and creditors that arise directly from its operations. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective. The Company makes use of borrowings, as detailed in the Chairman's Statement, to achieve improved performance in rising markets. The downside risk of borrowings may be reduced by raising the level of cash balances held.

Listed fixed asset investments held are valued at fair value. For listed securities this is either bid price or the last traded price depending on the convention of the exchange on which the investment is listed. Unlisted investments are valued by the Directors on the basis of all the information available to them at the time of valuation. The fair value of all other financial assets and liabilities is represented by their carrying value in the Balance Sheet.

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

(i) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency rate movements;

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

(iii) foreign currency risk, being the risk that the value of investment holdings, investment purchases, investment sales and income will fluctuate because of movements in currency rates;

(iv) 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

(v) liquidity risk, being the risk that the Company may not be able to liquidate its investments quickly.

Market price risk

The management of market price risk is part of the fund management process and is typical of equity investment. The 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. Derivatives may be used from time to time to hedge specific market risk or gain exposure to a specific market.

Interest rate risk

(a) Floating rate

When the Company retains cash balances the majority of the cash is held in overnight deposit 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.

The Company has floating rate liabilities that are denominated in US dollars. The benchmark rate which determines the interest payments made on the revolving credit facility is based on the rate set by the US Federal Reserve.

(b) Fixed rate

The Company does not hold any fixed interest investments.

Foreign currency risk

The Company invests in overseas securities and holds foreign currency cash balances which give rise to currency risks. It is not the Company's policy to hedge this risk on a continuing basis but it may do so from time to time.

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 investment 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 balance sheet date.

Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the high credit quality of the brokers used. The investment manager monitors the quality of service provided by the brokers used to further mitigate this risk.

All the assets of the Company which are traded on a recognised exchange are held by JPMorgan Chase Bank ('JPM'), the Company's 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 by reviewing the custodian's internal control reports.

The credit risk on liquid funds and derivative financial instruments is controlled because the counterparties are banks with high credit ratings, rated AA or higher, assigned by international credit rating agencies. 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 financial instruments include an investment in an unlisted equity investment which is not traded in an organised public market and which generally may be illiquid. As a result, the Company may not be able to liquidate this investment at an amount close to its fair value.

The Company's listed securities are considered to be readily realisable.

The Company's liquidity risk is managed on an ongoing basis by the investment manager in accordance with policies and procedures in place. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.

The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses. Short term flexibility is achieved, where necessary, through the use of overdraft facilities.

2.         Copies of the Annual Report and Financial Statements are available on the Company's website www.pacific-assets.co.uk. 

For further information contact:

David Nichol                           Director: 01738 813223

Gordon Hay Smith                 F&C Investment Business Limited:  0207 628 8000

 

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