Half Yearly Report

RNS Number : 7493C

Pacific Horizon Investment Tst PLC

11 March 2011

 



PACIFIC HORIZON INVESTMENT TRUST PLC

Results for the six months to 31 January 2011

In the six months to 31 January 2011, Pacific Horizon's net asset value per share rose 10.8% while the MSCI All Country Far East ex Japan Index in sterling terms rose by 14.6%. The Company's share price rose by 13.2%.

·	A number of the larger holdings such as Li & Fung and Samsung Electronics continued to perform well. Some individual industrial names and Indian holdings demonstrated disappointing short term performance.
·	Earnings per share for the six months were 0.17p compared to 0.10p in the first half of the previous year. As in previous years, no interim dividend will be paid.
·	Economic growth across the region has been robust, building upon the recovery since the global financial crisis.
·	The Board and Managers believe that the quality of companies in which the Company invests remains high and overall valuations continue to be attractive for investors, notwithstanding the recent short term reversal in equity values in many of the region's markets.

Past performance is not a guide to future performance. The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. Investment in investment trusts should be regarded as long term.

Pacific Horizon Investment Trust PLC (Pacific Horizon) aims to achieve capital growth through investment in the stockmarkets of the Asia-Pacific region (excluding Japan) and in the stockmarkets of the Indian Sub-continent. The Company has total assets of £142 million.

Pacific Horizon is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £72 billion under management and advice as at 10 March 2011.

11 March 2011

For further information please contact:

James Budden

Baillie Gifford & Co                                                                              0131 275 2816

Roland Cross, Director,

Broadgate Marketing                                                                            020 7726 6111

The following is the unaudited Half-Yearly Financial Report for the six months

to 31 January 2011

 

PACIFIC HORIZON INVESTMENT TRUST PLC

Half-Yearly Financial Report 31 January 2011

Responsibility Statement

 

We confirm that to the best of our knowledge:

a)   the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement "Half-Yearly Financial Reports";

b)   the Half-Yearly Management Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months, their impact on the financial statements and a description of the principal risks and uncertainties for the remaining six months of the year); and

c)   the Half-Yearly Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

Jean Matterson

Chairman

10 March 2011

PACIFIC HORIZON INVESTMENT TRUST PLC

Half-Yearly Management Report

Results

In the six months to 31 January 2011 the net asset value per share rose 10.8% to 181.01p. Over the same period the MSCI All Country Far East ex Japan Index rose 14.6% in sterling terms.

Performance of the region was strong during the period, although there was much variability at the country level. The best performing markets were Taiwan, Korea and Thailand posting gains of 27.2%, 21.4% and 15.1% in sterling terms respectively. The weakest were Vietnam, India and China with returns of 0.3%, 1.4% and 2.8% respectively in sterling terms.

A number of our top ten holdings continued to perform well such as Li & Fung, the Hong Kong based supply chain manager, Samsung Electronics, the technology company, and ASM Pacific Technology, the semiconductor equipment manufacturer. A number of industrial names, such as shipping companies Pacific Basin Shipping and Thoresen Thai Agencies, were poor performers, as were some of the Indian holdings, namely financial companies Reliance Capital and IFCI. Finally, the low allocation to Taiwan and Korea had a negative impact on the portfolio's relative performance.

Economic growth across the region has been robust, building upon the recovery from the global financial crisis. With inflationary concerns emerging, governments and central banks across the region have been fast to act, using monetary and fiscal tools. Many countries have been faced with high levels of liquidity as foreign investment has returned, with some implementing capital controls to assist tackling these. This had been most marked in emerging ASEAN countries, with equity and debt markets performing very strongly up to the calendar year end, although there has been a reversal in performance more recently.

China remains a focus of investor attention given its scale and global significance. Stock market returns have been lacklustre over the period as investor concerns have focused on the gradual reversal of the supportive fiscal and easy monetary policies in place since November 2008 and inflationary pressures. With economic growth well above the notional 8% target we believe that efforts to rein in liquidity and cool excesses within the property market are welcome and necessary steps towards ensuring a sustainable growth trajectory. Indeed, potentially far more important will be the twelfth five-year plan. Whilst details will be confirmed later this year, investors should take note of government plans to continue rebalancing the economy towards domestic consumption whilst also focusing on supporting a number of 'strategic emerging' industries, such as energy conservation, high end equipment manufacturing and alternative energy. We hold a number of companies that should benefit from these changes such as Kunlun Energy, ZTE and Dongfang Electric.

Despite regional tensions once again flaring up on the Korean peninsula, the market has been one of the better performers during the period. Whilst the ultimate political outcome is difficult to predict, we continue to feel that regional and international political pressures will keep the North Korean situation in check, and have made limited changes to the portfolio. Another area for concern has been India where a number of corruption scandals have emerged in quick succession across various sectors. Although none of our holdings have been implicated directly, our holdings in the financial sector have not fared well. This latter issue outlines the importance of diligent fundamental analysis, a core part of our investment process.

Outlook

The outlook remains bright for the markets of the Asia Pacific region. Economic performance is expected to be robust with the many structural drivers of growth continuing to present an attractive backdrop for our companies. Most important of all remains the task of identifying those companies that will deliver on this opportunity. We believe that the quality of the companies in which we invest remains high and that overall valuations continue to be attractive. The Company remains ungeared with a low cash balance and expects to be able to take advantage of future opportunities as they arise.

The principal risks and uncertainties facing the Company are set out in note 9 of this report.

PACIFIC HORIZON INVESTMENT TRUST PLC

INCOME STATEMENT

(unaudited)

	for the six months ended 31 January 2011				for the six months ended 31 January 2010				for the year ended 31 July 2010
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
Gains on sales of investments	-	1,646	1,646		-	6,640	6,640		-	10,567	10,567
Changes in investment holding gains/(losses)	-	13,039	13,039		-	5,580	5,580		-	11,788	11,788
Currency losses	-	(27)	(27)		-	(72)	(72)		-	(153)	(153)
Income from investments and interest receivable	1,021	-	1,021		846	-	846		2,999	-	2,999
Investment management fee	(698)	-	(698)		(570)	-	(570)		(1,224)	-	(1,224)
Other administrative expenses	(163)	-	(163)		(159)	-	(159)		(293)	-	(293)
Net return on ordinary activities before taxation	160	14,658	14,818		117	12,148	12,265		1,482	22,202	23,684
Tax on ordinary activities	(31)	-	(31)		(39)	-	(39)		(187)	-	(187)
Net return on ordinary activities after taxation	129	14,658	14,787		78	12,148	12,226		1,295	22,202	23,497
Net return per ordinary share (note 4)	0.17p	18.72p	18.89p		0.10p	15.52p	15.62p		1.65p	28.36p	30.01p
Note: Dividend paid and proposed per ordinary share (note 5)	-				-				1.30p

    The total column of this statement is the profit and loss account of the Company.

    All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.

   A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.

  PACIFIC HORIZON INVESTMENT TRUST PLC

BALANCE SHEET

 (unaudited)

	At 31 January 2011		At 31 January 2010		At 31 July 2010
	£'000		£'000		£'000
FIXED ASSETS
Investments held at fair value through profit or loss	139,924		115,731		125,145
CURRENT ASSETS
Debtors	207		155		445
Cash and short term deposits	1,972		1,772		2,878
	2,179		1,927		3,323
CREDITORS Amounts falling due within one year (note 6)	(395)		(990)		(529)
NET CURRENT ASSETS	1,784		937		2,794
TOTAL NET ASSETS	141,708		116,668		127,939
CAPITAL AND RESERVES
Called-up share capital	7,829		7,829		7,829
Share premium	3,166		3,166		3,166
Special distributable reserve	13,233		13,233		13,233
Capital redemption reserve	17,964		17,964		17,964
Capital reserve	95,783		71,071		81,125
Revenue reserve	3,733		3,405		4,622
SHAREHOLDERS' FUNDS	141,708		116,668		127,939

NET ASSET VALUE PER ORDINARY SHARE	181.01p	149.03p	163.42p
ORDINARY SHARES IN ISSUE (note 7)	78,287,002	78,287,002	78,287,002

 

  PACIFIC HORIZON INVESTMENT TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited)

For the six months ended 31 January 2011

	Called-up share capital £'000	Share premium £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Capital reserve† £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 August 2010	7,829	3,166	13,233	17,964	81,125	4,622	127,939
Net return on ordinary activities after taxation	-	-	-	-	14,658	129	14,787
Dividends paid during the period (note 5)	-	-	-	-	-	(1,018)	(1,018)
Shareholders' funds at 31 January 2011	7,829	3,166	13,233	17,964	95,783	3,733	141,708

For the six months ended 31 January 2010

 

	Called-up share capital £'000	Share premium £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Capital reserve† £000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 August 2009	7,829	3,166	13,233	17,964	58,923	4,736	105,851
Net return on ordinary activities after taxation	-	-	-	-	12,148	78	12,226
Dividends paid during the period (note 5)	-	-	-	-	-	(1,409)	(1,409)
Shareholders' funds at 31 January 2010	7,829	3,166	13,233	17,964	71,071	3,405	116,668

 

For the year ended 31 July 2010

	Called-up share capital £'000	Share premium £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Capital reserve† £000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 August 2009	7,829	3,166	13,233	17,964	58,923	4,736	105,851
Net return on ordinary activities after taxation	-	-	-	-	22,202	1,295	23,497
Dividends paid during the year (note 5)	-	-	-	-	-	(1,409)	(1,409)
Shareholders' funds at 31 July 2010	7,829	3,166	13,233	17,964	81,125	4,622	127,939

^{†The Capital Reserve balance at 31 January 2011 includes investment holding gains on fixed asset investments of £44,543,000 (31 January 2010 - gains of £25,297,000 and 31 July 2010 - gain of £31,504,000).}

PACIFIC HORIZON INVESTMENT TRUST PLC

CONDENSED CASH FLOW STATEMENT (unaudited)
	Six months to 31 January 2011	Six months to 31 January 2010			Year to 31 July 2010
	£'000			£'000		£'000
Net cash inflow from operating activities	370			221		1,153
Total tax paid	-			(140)		(140)
Net cash (outflow)/inflow from financial investment	(258)			981		1,155
Equity dividend paid (note 5)	(1,018)			(1,409)		(1,409)
(DECREASE)/INCREASE IN CASH	(906)			(347)		759
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
(Decrease)/increase in cash in the period	(906)			(347)		759
MOVEMENT IN NET FUNDS IN THE PERIOD	(906)			(347)		759
Net funds at start of the period	2,878			2,119		2,119
NET FUNDS AT END OF THE PERIOD	1,972			1,772		2,878
RECONCILIATION OF NET RETURN BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Net return on ordinary activities before taxation	14,818			12,265		23,684
Gains on investments - securities	(14,685)			(12,220)		(22,355)
Currency losses	27			72		153
Changes in debtors and creditors	286			226		8
Realised currency loss	(27)			(72)		(153)
Overseas tax suffered	(49)			(50)		(184)
NET CASH INFLOW FROM OPERATING ACTIVITIES	370			221		1,153

PACIFIC HORIZON INVESTMENT TRUST PLC      

THIRTY LARGEST EQUITY HOLDINGS  at 31 January 2011 (unaudited)

Name	Country	Business	Value £'000	% of total assets†
Samsung Electronics	Korea	Semiconductor manufacturer	7,920	5.6
Taiwan Semiconductor Manufacturing	Taiwan	Semiconductor manufacturer	5,015	3.5
Li & Fung	Hong Kong and China	Supply chain management	4,382	3.1
Kunlun Energy Company	Hong Kong and China	Oil and gas exploration and production	4,218	3.0
ASM Pacific Technology	Hong Kong and China	Semiconductor equipment manufacturer	3,880	2.7
Hon Hai Precision Industries	Taiwan	Electronic manufacturing services company	3,782	2.7
Hyundai Mobis	Korea	Automotive parts producer	3,634	2.6
Singapore Exchange	Singapore	Stock exchange	3,479	2.5
CNOOC	Hong Kong and China	Oil and gas exploration and production	3,467	2.4
Mediatek	Taiwan	Integrated circuit design house	3,402	2.4
Parkson Holdings	Malaysia	Department store owner and operator	3,348	2.4
Baidu	Hong Kong and China	Internet search provider	2,981	2.1
Mahindra & Mahindra	India	Indian conglomerate	2,808	2.0
Hyundai Marine and Fire Insurance	Korea	Non-life insurance provider	2,478	1.7
ZTE	Hong Kong and China	Telecommunications equipment provider	2,428	1.7
Sembcorp Marine	Singapore	Shipbuilder	2,395	1.7
Kuala Lumpur Kepong	Malaysia	Palm oil producer and refiner	2,252	1.6
Samsung Fire & Marine	Korea	Non-life insurance provider	2,238	1.6
Ping An Insurance	Hong Kong and China	Life insurance provider	2,224	1.6
China Life Insurance (Taiwan)	Taiwan	Life insurance provider	2,169	1.5
SATS Limited	Singapore	Airport services provider	2,151	1.5
China National Building Material	Hong Kong and China	Building materials manufacturer	2,094	1.5
China Petroleum & Chemical    Corporation	Hong Kong and China	Integrated oil and gas producer	2,045	1.4
China Railway Construction	Hong Kong and China	Construction company	2,040	1.4
Shinsegae	Korea	General retailer	2,017	1.4
Phison Electronics	Taiwan	Semiconductor products	1,863	1.3
Bank Negara Indonesia	Indonesia	Commercial bank	1,859	1.3
Hong Kong Exchanges and Clearing	Hong Kong and China	Stock exchange	1,783	1.3
Dongfang Electric	Hong Kong and China	Power equipment manufacturer	1,758	1.2
Real Gold Mining	Hong Kong and China	Gold mining	1,742	1.2
			87,852	61.9

All stocks are listed overseas.

^† Total assets less current liabilities.

 

PACIFIC HORIZON INVESTMENT TRUST PLC

 

DISTRIBUTION OF ASSETS

 (unaudited)

		At 31 January 2011 %		At 31 January 2010 %		At 31 July 2010 %
Equities:	Hong Kong and China	39.8		42.9		40.1
	Korea	14.9		13.2		14.5
	Taiwan	13.9		11.6		11.8
	Singapore	9.2		8.3		9.7
	India	6.5		5.0		5.9
	Indonesia	5.4		5.6		6.5
	Malaysia	4.5		5.3		4.7
	Thailand	2.5		5.1		3.4
	Vietnam	1.1		1.1		1.2
	Philippines	0.9		1.1		0.0
Total equities		98.7		99.2		97.8
Net liquid assets		1.3		0.8		2.2
Total assets †		100.0		100.0		100.0

^† Total assets less current liabilities.

PACIFIC HORIZON INVESTMENT TRUST PLC

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited)

1.   1.	The condensed financial statements for the six months to 31 January 2011 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 31 July 2010 and in accordance with the ASB's Statement 'Half-Yearly Financial Reports' and have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. The Company has no loans. In accordance with the Company's Articles of Association, the shareholders have the right to vote on the continuation of the Company every five years, the next vote being in 2011. The Directors have no reason to believe that the continuation resolution will not be passed later in the year; accordingly, the Half-Yearly Financial Report has been prepared on the going concern basis as it is the Directors' opinion that the Company will continue in operational existence for the foreseeable future. The Directors consider the Company's functional currency to be sterling as the Company's shareholders are predominantly based in the UK and the Company is subject to the UK's regulatory environment.
2.	The financial information contained within this Half-Yearly Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 31 July 2010 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditors' Report on those accounts was not qualified and did not contain statements under the sections 498(2) or (3) of the Companies Act 2006.
3.	Related party transactions Baillie Gifford & Co are employed by the Company as investment managers and secretaries under a management agreement. The Managers may terminate the Management Agreement on six months' notice and the Company may terminate on three months' notice. The fee in respect of each quarter is 0.25% of the total assets less current liabilities of the Company on the last day of that quarter. Mr GTE Smith, who was appointed as a Director of the Company in 2009, is a partner of Baillie Gifford & Co.
		Six months to  31 January 2011 £'000		Six months to 31 January 2010 £'000		Year  to 31 July 2010 £'000
4.	Net return per ordinary share
	Revenue return on ordinary activities after taxation	129		78		1,295
	Capital return on ordinary activities after taxation	14,658		12,148		22,202
	Total net return	14,787		12,226		23,497
	Weighted average number of ordinary shares in issue	78,287,002		78,287,002		78,287,002
	The net return per ordinary share figures is based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue.

PACIFIC HORIZON INVESTMENT TRUST PLC

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited) (Ctd)

		Six months to  31 January 2011 £'000		Six months to 31 January 2010 £'000		Year  to 31 July 2010 £'000
5.	Dividends
	Amounts recognised as distributions in the      period:
	Previous year's final dividend of 1.30p (2009 - 1.80p), paid 1 November 2010	1,018		1,409		1,409
	No interim dividend will be declared.
6.	The Company had no borrowings at 31 January 2011, 31 January 2010 or 31 July 2010.
7.	The Company has authority to allot shares under section 551 of the Companies Act 2006. In the six months to 31 January 2011, the six months to 31 January 2010 and the year to 31 July 2010 no shares were issued. The Company has authority to buy back its ordinary shares. The authority was last renewed at the Annual General Meeting in October 2010. In the six months to 31 January 2011 no ordinary shares were bought back. As a result, at 31 January 2011, the Company's authority to buy back shares remained unchanged at 11,735,221 ordinary shares.
8.	During the period, transaction costs on purchases amounted to £53,000 (31 January 2010 - £59,000; 31 July 2010 - £90,000) and transaction costs on sales amounted to £42,000 (31 January 2010 - £44,000; 31 July 2010 - £83,000).
9.	Principal Risks and Uncertainties The principal risks facing the Company relate to the Company's investment activities. These risks are market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. An explanation of these risks and how they are managed is contained in note 18 of the Company's Annual Report and Financial Statements for the year to 31 July 2010. The principal risks and uncertainties have not changed since the publication of the Annual Report which can be obtained free of charge from Baillie Gifford & Co and is available on the Pacific Horizon page of the Managers' website: www.pacifichorizon.co.uk‡. Other risks facing the Company include the following: regulatory risk (that the loss of investment trust status or a breach of the applicable legal and regulatory requirements could have adverse financial consequences and cause reputational damage); operational/financial risk (failure of service providers' accounting systems could lead to inaccurate reporting or financial loss); and the risk to shareholders that the discount can widen. Further information can be found on page 18 of the Annual Report and Financial Statements.
10.	The Half-Yearly Financial Report is available at www.pacifichorizon.co.uk‡ and will be posted to shareholders on or around 21 March 2011.
	None of the views expressed in this document should be construed as advice to buy or sell a particular investment. ‡ Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

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