Pacific Horizon Investment Trust half-year results

RNS Number : 1242Y

Pacific Horizon Investment Tst PLC

01 March 2017

 

RNS Announcement

Pacific Horizon Investment Trust PLC

Results for the six months to 31 January 2017

Legal Entity Identifier: VLGEI9B8R0REWKB0LN95

Regulated Information Classification: Half Yearly Financial Report

The following is the unaudited Interim Financial Report for the six months to 31 January 2017.

Responsibility statement

We confirm that to the best of our knowledge:
 

a)   the condensed set of Financial Statements has been prepared in accordance with FRS 104 'Interim Financial Reporting';

b)   the Interim 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 Interim 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

28 February 2017

Interim management report

Results

In the six months to 31 January 2017, Pacific Horizon's net asset value (NAV) per share total return was 9.7%. The share price total return was 8.0% as the discount widened from 10.1% to 11.4%. Over the same period the MSCI All Country Asia ex Japan Index's total return was 10.4% in sterling terms. In capital only terms, the relative performance of the Company's NAV versus the comparative index* was similar over the period at 9.4%.

In summary, portfolio gains in Hong Kong and China were partly offset by losses in South Korea. A number of our high conviction positions recorded significant share price increases, but the relative and absolute share price performance of many of our smaller companies, especially in the biotechnology sector, was weak; the relative underweight position in Samsung Electronics also detracted from returns.

Performance

Our Indian investments, which accounted for 17.0% of the Company's total assets at the end of January 2017, were a significant drag on relative and absolute performance, with the index rising only 2.7% in sterling terms. In absolute terms, the Philippines was the worst performing market in the region, down 9.3% in sterling terms, followed by Malaysia, which ended 1.9% lower in sterling terms. Both suffered from a strengthening US dollar. We had, and continue to have, no direct listed exposure to either country. Hong Kong and China performed well as the market reacted positively to signs of an improving domestic Chinese economy. The best performing market was Taiwan, driven by Taiwan Semiconductor Manufacturing (TSMC), a portfolio holding, and the banking sector where, in contrast, we have little exposure.

In China, Geely Automotive rose 91% after announcing that sales had doubled over the year; the company is incorporating technology and manufacturing process from its Volvo acquisition, propelling its strategy of transformation from being a low end domestic Chinese car company to a global automotive brand. Sunny Optical rose 56%. It is the world leader in automotive cameras, a market which is growing at 30% per annum and where we see it gaining market share from its current mid 30%.

It was disappointing to see some of our smaller South Korean biotechnology stocks fell between 30-40%, driven by a number of external factors. First, a large South Korean biotechnology company, which we did not own and which had previously been awarded two international contracts in 2014, stopped clinical trials. Second, the impeachment saga of the South Korean President dramatically reduced investor confidence, notably among domestic retail investors who subsequently sold smaller South Korean companies aggressively. For all our South Korean biotechnology holdings, the news from the companies continued to be encouraging. We remain holders and continue to have a positive view on their long-term outlook, despite their current share price volatility.

Investment Backdrop

Globally, value investing performed well relative to growth as the global economic cycle, which has been muted for several years, shows nascent signs of life. We see this as both a threat and an opportunity. Poorer quality value companies often temporarily outperform growth stocks when an economic cycle turns positive. In these circumstances, companies that had exhibited earnings certainty and been rewarded in share price terms can tend to look expensive by comparison and run the risk of being de-rated. We foresee acceleration in the growth outlook for a number of our larger economically-sensitive holdings and feel this acceleration will also have a positive impact on our portfolio, given our bias to smaller companies.

The global investment climate has changed over the last six months. The election of Donald Trump as President of the United States is creating a schism between an old and new political order. The consequences of change are still unknown but are sure to reverberate in world markets for some time to come. Put simply, globalisation is slowing; the new economic order is changing to one of more limited international intervention and integration, with a greater focus on internal domestic issues than external foreign ones, especially in North America. Technological change, in the form of automation and artificial intelligence, and demographic change in the form of ageing populations and less immigration, has been a precursor to these political changes and will continue to drive global economies in the future. The ramifications for Asian economies are still uncertain. The most likely outcome is that China and eventually India will rise to fill the global power vacuum and continue to support a form of nation-first globalisation; we heard this from the Chinese President who delivered the most pro-globalisation speech yet at Davos this year.

In India, Narendra Modi is cementing his position as an authoritarian populist leader following his successful demonetisation of large denomination notes. We continue to believe that India, under Modi, is adopting the Asian Tiger model of economic growth which is likely to ensure increasing and sustainable economic activity. In our opinion, the high cost of capital within the domestic market, together with the large number of quality companies, justifies our notable Indian weighting. Over the last six months we have been reducing our holdings in IT outsourcing companies and focusing on companies that benefit from domestic demand, especially banks, as we believe loan growth is at an inflection point. Having spent almost a decade with credit growth growing in line with GDP, we expect an acceleration in the near future.

Vietnam, at around 4.8% of the Company's total assets, has been a significant focus for us. We believe this frontier market country, with 90 million young, educated people, should no longer be overlooked. A combination of economic reforms, foreign direct investment flows, market gains from China and a cheap stock market is likely to lead to significant economic growth and stock market outperformance.

Positioning

The portfolio is focused on taking advantage of the value creating effect of technological change on economies and existing businesses. In this period of disinflationary growth, our investment focus is on companies which generate 'ideas' rather than 'things', companies that are asset light rather than asset heavy and that have output that is scalable rather than bespoke. Our philosophy is that 'innovation' beats 'stability' and 'new' businesses have the advantage over 'old'. The portfolio is positioned to reflect the underlying disinflationary forces that are affecting the world today and is likely to remain positioned this way over the coming years.

At 49.3% of total assets, technology companies continue to account for the largest proportion of the stocks held. A number of these companies have great potential to benefit from economic advances expected in developed markets. Good examples are global technology leaders, TSMC, Hon Hai Precision Industries and SK Hynix (which rose around 60% in the period). These are all companies which benefit from the smartphone and automation revolutions, either directly, by producing hardware, or indirectly, by managing the software that allows companies to harness these new business techniques.

We believe that artificial intelligence and a rapid increase in computing power will drive company fortunes over the coming years. A combination of big data, analytics and deep learning will allow huge costs to be removed from the economic system and significantly greater profits to be made. The spread and sophistication of e-commerce - particularly as ease of use improves -  is going to dramatically reduce the cost base of companies undertaking business online, giving an even greater comparative cost advantage versus brick and mortar businesses. We believe this cost advantage will propel growth of those companies who have the ability and the determination to adopt these new approaches to doing business into the high 20% area for many years, allowing significant comparative economies of scale to be derived.

As a result of the growth of an ageing population and the arrival of new regenerative medicines, healthcare demand is, and will continue to be, a key growth sector globally. We have 5.7% of total assets invested in South Korean biotechnology stocks which we believe can make a substantial improvement to the quality of people's lives via regenerative and personalised medicine. We see this as a growing area of South Korea's new competitive edge.

In terms of concentration, the top 10 holdings account for 40.4% of the Company's total assets and the top 30 account for 73.2%. The portfolio also has a bias to mid and smaller companies when measured against the comparative index and the majority of immediate peer trusts. The Company has potential gearing of 7.5% of assets and is fully invested at present.

Prospects

Asia ex Japan stands out as a region with high positive real economic growth in an otherwise slow growth world. India is likely to grow at an annual rate of 6%-9% due to its demographics, a rising middle class and the absence of an overhanging debt burden. Chinese growth is stabilising at around 4%-5% and Vietnam has the potential to grow at 6%-7% year on year. It is our contention that the best way to generate long-term absolute and relative returns is to invest in growth companies in growth regions. Once near-term uncertainties are removed, the premium paid for this rapid growth will increase given its relative scarcity.

In line with our long-term investment philosophy, we believe that the investments held represent attractive opportunities which have the potential to create future value and to generate superior returns for shareholders over the next few years.

Management Fee

On 18 January 2017 the Company announced a change in the calculation of the annual management fee payable to Baillie Gifford & Co Limited, with the introduction of a third tier of 0.55% at £250 million of net assets. With effect from 1 January 2017, the annual management fee will be charged at a rate of 0.95% on the first £50 million of net assets, at 0.65% on the next £200 million of net assets and at 0.55% on the net assets beyond £250 million. The fee will continue to be calculated and paid on a quarterly basis.

Appointment of New Director

Since the period end, the Company has announced the appointment of Mr Angus Macpherson as a non-executive Director of the Company with effect from 28 February 2017. Mr Macpherson is Chief Executive of Noble and Company (UK) Limited, an independent Scottish corporate finance business. He is currently chairman of JP Morgan Elect PLC and is a director of Henderson Diversified Income Limited. He is also a member of the Scottish Government's Financial Services Advisory Board. He was based in Asia between 1995 and 2004, working in Singapore and Hong Kong, latterly as Head of Capital Markets and Financing (Asia) for Merrill Lynch.

The principal risks and uncertainties facing the Company are set out in note 10.

Past performance is not a guide to future performance.

* Comparative Index - MSCI All Country Asia ex Japan Index (in sterling terms).

Baillie Gifford & Co Limited

Managers & Secretaries

Glossary of Terms, see note 11.

 

Income statement (unaudited)

	For the six months ended 31 January 2017			For the six months ended 31 January 2016			For the year ended 31 July 2016
								(audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on sales of investments	-	7,382	7,382	-	(1,236)	(1,236)	-	(2,839)	(2,839)
Changes in investment holding gains and losses	-	5,405	5,405	-	(6,685)	(6,685)	-	16,253	16,253
Currency (losses)/gains	-	(20)	(20)	-	615	615	-	1,140	1,140
Income from investments and interest receivable	547	-	547	541	-	541	1,331	-	1,331
Investment management fee (note 3)	(513)	-	(513)	(440)	-	(440)	(899)	-	(899)
Other administrative expenses	(227)	-	(227)	(192)	-	(192)	(389)	-	(389)
Net return before finance costs and taxation	(193)	12,767	12,574	(91)	(7,306)	(7,397)	43	14,554	14,597
Finance costs of borrowings	(52)	-	(52)	(66)	-	(66)	(127)	-	(127)
Net return on ordinary activities before taxation	(245)	12,767	12,522	(157)	(7,306)	(7,463)	(84)	14,554	14,470
Tax on ordinary activities	(64)	-	(64)	(53)	-	(53)	(98)	-	(98)
Net return on ordinary activities after taxation	(309)	12,767	12,458	(210)	(7,306)	(7,516)	(182)	14,554	14,372
Net return per ordinary share (note 4)	(0.55p)	22.95p	22.40p	(0.34p)	(11.85p)	(12.19p)	(0.30p)	24.25p	23.95p
Note: Dividend paid and proposed per ordinary share (note 5)	-			-			0.35p

The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

A Statement of Comprehensive Income is not required as there is no other comprehensive income.

 

Balance sheet (unaudited)

	At 31 January 2017 £'000	At 31 July 2016 (audited) £'000
Fixed assets
Investments held at fair value through profit or loss (note 6)	141,341	131,417
Current assets
Debtors	265	359
Cash and cash equivalents	1,422	1,323
	1,687	1,682
Creditors
Amounts falling due within one year:
Bank loan (note 7)	(9,965)	(5,000)
Other creditors	(316)	(397)
	(10,281)	(5,397)
Net current liabilities	(8,594)	(3,715)
Net assets	132,747	127,702
Capital and reserves
Called up share capital	5,426	5,712
Share premium	3,166	3,166
Capital redemption reserve	20,367	20,081
Capital reserve	99,931	94,377
Revenue reserve	3,857	4,366
Shareholders' funds	132,747	127,702
Net asset value per ordinary share	244.64p	223.58p
Ordinary shares in issue (note 8)	54,262,282	57,118,191

 

Statement of changes in equity (unaudited)

For the six months ended 31 January 2017

	Called up share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 August 2016	5,712	3,166	20,081	94,377	4,366	127,702
Net return on ordinary activities after taxation	-	-	-	12,767	(309)	12,458
Shares purchased for cancellation (note 8)	(286)	-	286	(7,213)	-	(7,213)
Dividends paid during the period (note 5)	-	-	-	-	(200)	(200)
Shareholders' funds at 31January 2017	5,426	3,166	20,367	99,931	3,857	132,747

For the six months ended 31 January 2016

	Called up share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 August 2015	6,329	3,166	19,464	91,441	4,770	125,170
Net return on ordinary activities after taxation	-	-	-	(7,306)	(210)	(7,516)
Shares purchased for cancellation	(316)	-	316	(5,819)	-	(5,819)
Dividends paid during the period (note 5)	-	-	-	-	(222)	(222)
Shareholders' funds at 31January 2016	6,013	3,166	19,780	78,316	4,338	111,613

*    The Capital Reserve balance at 31 January 2017 includes investment holding gains on fixed asset investments of £44,213,000 (31 January 2016 - gains of £15,870,000).

 

Condensed cash flow statement (unaudited)

	Six months to 31 January 2017 £'000	Six months to  31 January 2016 £'000
Cash flows from operating activities
Net return on ordinary activities before taxation*	12,522	(7,463)
Net (gains)/losses on investments	(12,787)	7,921
Currency losses/(gains)	20	(615)
Finance costs of borrowings	52	66
Overseas tax incurred	(52)	(38)
Changes in debtors and creditors	70	37
Cash from operations	(175)	(92)
Interest paid	(37)	(64)
Net cash outflow from operating activities	(212)	(156)
Net cash inflow from investing activities	2,779	14,899
Equity dividends paid (note 5)	(200)	(222)
Shares bought back (note 8)	(7,213)	(5,819)
Net cash inflow/(outflow) from bank loans (note 7)	4,771	(124)
Net cash outflow from financing activities	(2,642)	(6,165)
(Decrease)/increase in cash and cash equivalents	(75)	8,578
Exchange movements	174	956
Cash and cash equivalents at start of period	1,323	4,061
Cash and cash equivalents at end of period†	1,422	13,595

* Dividends received in the period amounted to £645,000 (31 January 2016 - £600,000).

† Cash and cash equivalents represent cash at bank and short term money market deposits repayable on demand.

 

Thirty largest equity holdings at 31 January 2017 (unaudited)

Name	Country	Business	Value £'000	% of total assets*
Tencent Holdings	Hong Kong/China	Online gaming and social networking	8,828	6.2
Alibaba Group ADR	Hong Kong/China	Online and mobile commerce	8,180	5.7
JD.com	Hong Kong/China	Online mobile commerce	6,551	4.6
NAVER	Korea	Online search and messaging	5,692	4.0
Geely Automotive	Hong Kong/China	Automobile manufacturer	5,630	3.9
Baidu ADR	Hong Kong/China	Internet search engine	5,442	3.8
Sunny Optical Technology	Hong Kong/China	Small optical lenses manufacturer	5,089	3.6
Hon Hai Precision Industries	Taiwan	Electronic manufacturing	4,195	2.9
Dragon Capital Vietnam Enterprise   Investments	Vietnam	Vietnam investment fund	4,084	2.9
SK Hynix	Korea	Electronic component and device   manufacturer	4,016	2.8
China Life Insurance (Taiwan)	Taiwan	Life insurance provider	3,341	2.3
Advantech	Taiwan	Computer manufacturer	2,932	2.1
Indusind Bank	India	Commercial bank focusing on consumer   lending	2,931	2.1
Koh Young Technology	Korea	3D inspection machine manufacturer	2,723	1.9
Reliance Industries	India	Indian petrochemical conglomerate	2,703	1.9
Taiwan Semiconductor Manufacturing	Taiwan	Semiconductor foundry	2,665	1.9
Samsung Electronics	Korea	Memory, phones and electronic   components manufacturer	2,475	1.7
CJ & EM	Korea	Media and entertainment creator and   supplier	2,415	1.7
Samsung SDI	Korea	Lithium-ion batteries manufacturer	2,375	1.7
Ctrip.com International ADR	Hong Kong/China	Chinese online travel agency	2,357	1.7
ICICI Bank	India	Retail and corporate bank	2,335	1.6
Mahindra & Mahindra	India	Tractor and SUV manufacturer	2,292	1.6
Kingdee International Software	Hong Kong/China	Enterprise management software   distributor	2,086	1.5
Samsung Fire & Marine Insurance	Korea	Non-life insurance provider	1,985	1.4
Arvind	India	Consumer textile brand owner and   manufacturer	1,907	1.3
Infosys	India	Outsourced software developer	1,883	1.3
China Harmony New Energy Auto	Hong Kong/China	Luxury car dealership	1,849	1.3
WH Group	Hong Kong/China	Pork processor and distributor	1,845	1.3
Finetext EnE	Korea	Nano-technology material manufacturer	1,818	1.3
NCSOFT	Korea	Online games developer	1,728	1.2
			104,352	73.2

Hong Kong/China denotes Hong Kong and China

*      Total assets less current liabilities, before deduction of borrowings.

 

Distribution of total assets* (unaudited)

Geographical Analysis

		At 31 January 2017 %	At 31 July 2016 %
Equities:	Hong Kong and China	36.1	32.9
	Korea	28.4	29.9
	India	17.0	14.3
	Taiwan	12.1	16.4
	Vietnam	4.8	4.8
	Singapore	0.6	0.7
Total equities		99.0	99.0
Net current assets		1.0	1.0
Total assets		100.0	100.0

Sectoral Analysis

		At 31 January 2017 %	At 31 July 2016 %
Equities:	Consumer Discretionary	20.3	16.9
	Consumer Staples	1.3	2.3
	Energy	1.9	2.0
	Financials	12.5	11.0
	Health Care	6.6	9.2
	Industrials	4.4	4.8
	Information Technology	49.3	50.9
	Materials	0.8	-
	Telecommunications Services	0.8	0.9
	Real Estate	1.1	1.0
Total equities		99.0	99.0
Net current assets		1.0	1.0
Total assets		100.0	100.0

* Total assets less current liabilities, before deduction of borrowings.

 

Notes to the condensed financial statements (unaudited)

1.	The condensed Financial Statements for the six months to 31 January 2017 comprise the statements set out above together with the related notes below. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Financial Statements for the six months to 31 January 2017 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 2016 which included the early adoption of Amendments to FRS102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland - fair value hierarchy disclosures'. Going Concern Having considered the nature of the Company's assets, its liabilities, projected income and expenditure together with the Company's investment objectives and principal risks and uncertainties, as set out in note10 below, it is the Directors' opinion that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. The Board approves borrowing and gearing limits and reviews regularly the amounts of any borrowing and the level of gearing as well as compliance with borrowing covenants. 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 2021. The Directors have no reason to believe that the continuation resolution will not be passed at that Annual General Meeting. Accordingly, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements and confirm that they are not aware of any material uncertainties which may affect its ability to continue to do so over a period of at least twelve months from the date of approval of these Financial Statements.
2.	The financial information contained within this Interim 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 2016 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006.
3.	Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, has been appointed by the Company as its Alternative Investment Fund Manager and Company Secretary. Baillie Gifford & Co Limited has delegated the investment management services to Baillie Gifford & Co. The Managers may terminate the Management Agreement on six months' notice and the Company may terminate on three months' notice. With effect from 1 January 2017 the annual management fee is 0.95% on the first £50m of net assets, 0.65% on the next £200m of net assets and 0.55% on the remaining net assets. Prior to 1 January 2017 the fee was 0.95% on the first £50m of net assets and 0.65% on the remaining net assets. Management fees are calculated and payable on a quarterly basis.
4.	Net return per ordinary share	Six months to  31 January 2017 £'000	Six months to 31 January 2016 £'000	Year to 31 July 2016 (audited) £'000
	Revenue return on ordinary activities after taxation	(309)	(210)	(182)
	Capital return on ordinary activities after taxation	12,767	(7,306)	14,554
	Total net return	12,458	(7,516)	14,372
	Weighted average number of ordinary shares in issue	55,643,673	61,672,236	60,007,258
	The net return per ordinary share figures are 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.

Notes to the condensed financial statements (unaudited) (ctd)

5.	Dividends		Six months to  31 January 2017 £'000		Six months to 31 January 2016 £'000		Year to 31 July 2016 (audited) £'000
	Amounts recognised as distributions in the period:
	Previous year's final dividend of 0.35p (2015 - 0.35p), paid 11 November 2016		200		222		222
	No interim dividend has been declared.
6.	Fair Value Hierarchy The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit and loss account are measured is described below. The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety. Level 1 - using unadjusted quoted prices for identical instruments in an active market; Level 2 - using inputs, other than quoted prices included within level 1, that are directly or indirectly observable (based                 on market data); and Level 3 - using inputs that are unobservable (for which market data is unavailable). The Company's investments are financial assets held at fair value through profit or loss. An analysis of the Company's financial asset investments based on the fair value hierarchy described above is shown below. Investments held at fair value through profit or loss
	As at 31 January 2017	Level 1 £'000		Level 2 £'000		Level 3 £'000		Total £'000
	Listed equities	141,341		-		-		141,341
	Unlisted equities	-		-		-		-
	Total financial asset investments	141,341		-		-		141,341
	As at 31 July 2016	Level 1 £'000		Level 2 £'000		Level 3 £'000		Total £'000
	Listed equities	131,417		-		-		131,417
	Unlisted equities	-		-		-		-
	Total financial asset investments	131,417		-		-		131,417
	There have been no transfers between levels of the fair value hierarchy during the period. The fair value of listed investments is bid price or, in the case of FTSE 100 constituents or holdings on certain recognised overseas exchanges, last traded price. Listed Investments are categorised as level 1 if they are valued using unadjusted quoted prices for identical instruments in an active market and as level 2 if they do not meet all these criteria but are, nonetheless, valued using market data. Unlisted investments are valued at fair value by the Directors following a detailed review and appropriate challenge of the valuations proposed by the Managers. The Managers' unlisted investment policy applies methodologies consistent with the International Private Equity and Venture Capital Valuation guidelines ('IPEV'). These methodologies can be categorised as follows: (a) market approach (price of recent investment, multiples, industry valuation benchmarks and available market prices); (b) income approach (discounted cash flows); and (c) replacement cost approach (net assets). The Company's holdings in unlisted investments are categorised as level 3 as unobservable data is a significant input to their fair value measurements. The Company's one unlisted investment, Philtown Properties, which is valued at £nil at 31 January 2017 and 31 July 2016 arose from a distribution by its parent company RFM Corporation.
7.	The Company has a one year £10 million multi-currency revolving credit facility with The Royal Bank of Scotland Plc (31 July 2016 - one year £10 million multi-currency revolving credit facility with The Royal Bank of Scotland Plc and a £10 million one year uncommitted, unsecured floating rate revolving credit facility with The Bank of New York Mellon). At 31 January 2017 there were outstanding drawings of £5,000,000 and US$6,246,500 at interest rates of 0.84221% and 1.33403% under The Royal Bank of Scotland facility (31 July 2016 - £5,000,000 at an interest rate of 1.02906%, there were no drawings under The Bank of New York Mellon facility).

Notes to the condensed financial statements (unaudited) (ctd)

8.	The Company has authority to buy back up to 14.99% of its shares on an ad hoc basis and had authority to implement, at the Board's discretion, bi-annual tender offers for up to 5% of its shares at a 2% discount to net asset value, less costs, in the event that the discount averaged more than 9% during the six months periods to 31 January and 31 July in the years 2014, 2015 and 2016. In the six months to 31 January 2017 the Company bought back a total of 2,855,909 ordinary shares at a total cost of £7,213,000 through the exercise of a tender offer in October 2016 (31 July 2016 - 6,170,662 ordinary shares at a total cost of £11,618,000). The nominal value of these shares was £286,000 and represented 5.0% of the issued share capital at 31 July 2016. At 31 January 2017 the Company had authority to buy back a further 8,133,916 ordinary shares. Following consultation with a number of shareholders, the Board did not seek authority at the Annual General Meeting on 9 November 2016 for the existing bi-annual 5% tenders to be continued for a period of at least the next three years. Instead, the Board proposed a tender that will be triggered if the Company's net asset value, calculated at fair value cum income, total return fails to exceed the Company's comparative index by at least 1% per annum over a three year period to 31 July 2019 on a cumulative basis. If this performance target is not met, it is the intention that the Directors will propose a 25% tender of the Company's issued share capital at the time of calculation. The tender would be at a 2% discount to net asset value less costs. This would be subject to shareholders' approval of the tender authority that will be put to shareholders at the 2018 Annual General Meeting. The Company also has authority to allot shares under section 551 of the Companies Act 2006. The Board has authorised use of this authority to issue new shares at a premium to net asset value in order to enhance the net asset value per share for existing shareholders and improve the liquidity of the Company's shares. In the six months to 31 January 2017 and the year to 31 July 2016 no shares were issued.
9.	During the period, transaction costs on purchases amounted to £24,000 (31 January 2016 - £18,000; 31 July 2016 - £46,000) and transaction costs on sales amounted to £52,000 (31 January 2016 - £56,000; 31 July 2016 - £133,000).
10.	Principal risks and uncertainties The principal risks facing the Company are financial risk, regulatory risk, custody and depositary risk, operational risk, discount/premium volatility, leverage risk and political and associated economic risk. An explanation of these risks and how they are managed is set out on pages 7 and 8 of the Company's Annual Report and Financial Statements for the year to 31 July 2016 which is available on the Company's website: www.pacifichorizon.co.uk.‡ The principal risks and uncertainties have not changed since the date of that report
11.	Glossary of Terms Total Assets Total assets less current liabilities, before deduction of all borrowings. Net Asset Value Net Asset Value (NAV) is the value of total assets less liabilities (including borrowings). The NAV per share is calculated by dividing this amount by the number of ordinary shares in issue. Discount/Premium As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, this situation is called a premium. Total Return The total return is the return to shareholders after reinvesting the net dividend on the date that the share price goes ex-dividend. Ongoing Charges The total expenses (excluding borrowing costs) incurred by the Company as a percentage of the average net asset value (with debt at fair value). Active Share Active share, a measure of how actively a portfolio is managed, is the percentage of the portfolio that differs from its comparative index. It is calculated by deducting from 100 the percentage of the portfolio that overlaps with the comparative index. An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index. Gearing At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets. Gearing represents borrowings at par less cash and cash equivalents expressed as a percentage of shareholders' funds. Potential gearing is the Company's borrowings expressed as a percentage of shareholders' funds. Equity gearing is the Company's borrowings adjusted for cash and bonds expressed as a percentage of shareholders' funds.
12.	The Interim Financial Report will be available on the Company's page on the Managers' website www.pacifichorizon.co.uk‡ on or around 10 March 2017.

‡    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.

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

Pacific Horizon Investment Trust PLC (Pacific Horizon) aims to achieve capital growth through investment in the Asia-Pacific region (excluding Japan) and in the Indian Sub-continent. At 31 January 2017 the Company had total assets of £143 million (before deduction of loans of £10 million).

Pacific Horizon is managed by Baillie Gifford & Co Limited, the Edinburgh based fund management group.

Past performance is not a guide to future performance. Pacific Horizon is a listed UK Company. The value of its shares and any income from those shares can fall as well as rise and you may not get back the amount invested. Pacific Horizon invests in overseas securities, changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up. Pacific Horizon invests in emerging markets where difficulties in dealing, settlement and custody could arise, resulting in a negative impact on the value of your investment. Shareholders in Pacific Horizon have the right to vote every five years, on whether to continue Pacific Horizon, or wind it up. If the shareholders decide to wind the Company up, the assets will be sold and you will receive a cash sum in relation to your shareholding. The next vote will be held at the Annual General Meeting in 2021. You can find up to date performance information about Pacific Horizon on the Pacific Horizon page of the Managers' website at www.pacifichorizon.co.uk. 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

1 March 2017

For further information please contact:

Anzelm Cydzik, Baillie Gifford & Co

Tel: [phone]

Roland Cross, Director, Four Broadgate

Tel: [phone] or 07831 401309

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