Results for the year to 31 July 2015

RNS Number : 6042Y

Pacific Horizon Investment Tst PLC

10 September 2015

 

RNS Announcement: Preliminary Results

Pacific Horizon Investment Trust PLC

Results for the year to 31 July 2015

The following is the unaudited preliminary statement for the year to 31 July 2015 which was approved by the Board on 9 September 2015.

Chairman's Statement

Performance

In the year 1 July 2015, the Company's net asset value per share (NAV) fell 1.6%; during the same period the Company's comparative index, the MSCI All Country Asia ex Japan Index, decreased 0.9% in sterling terms. The share price increased by 2.2% and the discount narrowed from 11.5% to 8.2%.

For much of the financial year the Company was in a position to report positive absolute returns. It is, however, frustrating to note that weak performance at the end of July, which is the last month of the financial year, resulted in an overall annual loss for the portfolio. The Company's NAV performance was hit particularly hard by falls in the Chinese market in the last ten days of the month.

The Managers' Review provides a more detailed review of the Company's performance along with comment on the various markets in which the Company invests.

Earnings per share decreased from 1.40p to 0.35p, as a result of moving into lower yielding companies. The Board is recommending that a final dividend of 0.35p (2014 - 1.40p) should be paid. The ongoing charges incurred by the Company were 1.02% (2014 - 1.01%).

Share Buy-backs and Discount

The Company obtained shareholder authority to implement bi-annual tender offers for up to 5% of the Company's shares at a 2% discount to NAV, less costs, at the Board's discretion in the event that the discount averaged more than 9% during the six month periods to 31 January and 31 July 2014 and 2015. Over the six month period to 31 July 2014 and 31 January 2015 the Company's average discount was 10.2% and 9.9% respectively and consequently the Board made the decision to implement tender offers in October 2014 and April 2015. The Company's average discount for the six month period to 31 July 2015 was 9.6% and it has again been decided to implement a further 5% tender offer, applicable to shareholders on the register on 11 August 2015. Details of how to tender your shares in respect of this 5% tender offer are contained within the Circular accompanying this Report.

Through tender offers implemented in respect of the six months to 31 July 2014 and 31 January 2015, the Company bought back a total of 6,837,299 ordinary shares, representing 9.75% of the issued share capital as at 31 July 2014, at a cost of £14,336,000.

In addition to the bi-annual tender offers, the Company has authority to buy back up to 14.99% of its shares on an ad hoc basis. The Board uses this authority opportunistically, taking into account not only the level of the discount but also the underlying liquidity and trading volumes in the Company's shares. This approach allows the Board to seek to address any imbalance between the supply and demand for the Company's shares that results in a large discount to NAV; the Board is also mindful that current and potential shareholders require ongoing liquidity.

Subject to receiving the necessary shareholder approval at the forthcoming Annual General Meeting (AGM), the Board intends to renew its authority to implement bi-annual 5% tender offers, on the same terms as approved at the 2014 AGM, for the six month periods to 31 January 2016 and 31 July 2016. Shareholders should note that these tender offers will, however, remain at the discretion of the Board and will be subject to prevailing market conditions, so they should place no expectation on these tender offers being implemented as a matter of course. If such a tender offer is implemented, a separate circular and tender form will be sent to shareholders which will set out the full terms and conditions of the tender offer and the procedure for tendering shares. At the forthcoming AGM, the Board will also be asking shareholders to renew the mandate to repurchase up to 14.99% of the outstanding shares. Further details on both resolutions are set out in the Directors' Report on pages 18 and 19 in the Annual Report and Financial Statements.

Gearing

In May 2015 the Company increased its potential exposure to equities through the use of additional borrowings. The US$7,000,000 drawings with The Bank of New York Mellon were repaid and the Company entered into a new credit facility with The Royal Bank of Scotland Plc under which £10,500,000 and US$5,456,850 was drawn down. At the year end, net gearing was equal to 8% (2014 : 2%) of shareholders' funds. Some of the gearing was used to invest in a basket of Korean biotech stocks.

Annual General Meeting

This year's AGM will take place on 6 November 2015 at the offices of Baillie Gifford & Co in Edinburgh at 10.45am. The Managers will make a presentation and, along with the Directors, will answer any questions from shareholders. I hope to see as many of you as possible there.

Outlook

Asian markets have been extremely volatile over the last year and continue to be so. This is despite some encouraging signs of growth from specific companies and selected sectors. The Chinese market moved up sharply in the early part of the year and then fell just as rapidly; this had a negative impact on Hong Kong's Hang Seng index where a number of companies in the portfolio are listed. The Company's other major exposure is to the Korean market where some of the gains were eroded by the weakness of the currency. The Indian investments continue to make progress, albeit more modest than in the previous year. Notwithstanding the recent and continuing volatility, the Directors continue to believe that these markets, and in particular the information technology stocks held within them, offer the potential for good returns.

Jean Matterson

Chairman

9 September 2015

Past performance is not a guide to future performance.

 

Managers' Review

Overview

We believe that the Asian region has some of the most exciting markets in the world and that over the next decade three main themes will drive equity returns there: firstly, the growth of the economy as a result of innovation and technological improvement, especially in the two largest economies, China and India; secondly, extensive structural reforms, again mostly in India and China; and lastly, the growth of middle income consumers across the region. Over the course of the Company's financial year, portfolio exposure to these overarching themes has been increased. The growth characteristics exhibited by the holdings are more pronounced and the average company size is smaller, with the overall composition of the portfolio having even less commonality with the index.

The portfolio contains more growth companies which are dependent on innovation for their success. This move has been partly in response to the recognition that global trade and Asian domestic growth rates are slowing, that growth is becoming increasingly scarce, and most evident where it is driven by productivity and innovation.

The active share, which measures the deviation of the portfolio from the comparative index, has risen from 77% to 88%. As the active share increases we would expect not only greater near-term volatility of returns compared to the index but also improved performance. For instance, we are finding that technological change and changing economic structures, (for example, the move within China away from fixed asset investment to services) are disrupting the established business models of companies within many parts of the region.

Through focus on these trends we have found many more interesting opportunities within the medium to smaller companies than in larger companies, and believe strongly that, in growth markets, superior returns should be found within this market sector. Today the company holds 65% of its investments in smaller and medium sized stocks; this compares to 53% 12 months ago.

Our technology holdings reduced overall performance, as markets concentrated on shorter term slowdowns in demand due to China economic weakness. NAVER was the biggest single detractor as its social media platform was de-rated due to worries over slower near-term growth and the need for more aggressive capital expenditure. We believe that the market currently fails to appreciate the potential comparative return on investment which this business has the ability to generate. The financial and industrial sector held back performance; the rally in Chinese banks had a negative impact on our comparative performance as did moves in Chinese state owned enterprises, areas where we have little or no exposure.

On the positive side, our healthcare investments had a strong year, rising on average 50%, and were the largest single positive contributor. Genexine was the best performing holding up 135%, in the year followed by Viromed.  This performance supported our view that this sector is likely significant see significant future profitable growth.

Stock selection in Korea was the biggest positive contributor to performance, followed by our limited ASEAN exposure. Hong Kong and China was the biggest relative detractor.

The Company continues with its philosophy of investing in companies with good long term growth prospects. The corporate characteristics we look for include strong growth potential, sustainable competitive advantages, attractive financials and sensible management. In addition, we target stocks with what we consider to be very significant long term opportunities for enhanced future profitability, where a wider range of positive potential outcomes may lead to current mispricing.

Investment Background

The last twelve months have been volatile for Asian economies. China has continued to slow in terms of GDP growth, whilst the stock market has been fickle, rising rapidly then falling within the year. The underlying investment environment, however, has been one of continued financial liberalisation, a trend we believe eventually will bring positive returns to investors.

The Chinese government has been active in determining its next five year plan and the trajectory in which it wants the country to head. In particular, we are interested in its "Manufacturing 2020 plan", the core of which is to build infrastructure for a strong domestic economy: on advanced transport systems (high-speed rail, metro systems, efficient airports); sustainable technologies (new energy cars, new materials), and technologies that will decisively shift China's manufacturers up the value chain (new IT, robots, electronics, high end medical devices). This, we believe, is vitally important as to date manufacturing has been the principal driver of technical innovation, and technical innovation in turn has been the most important source of economic growth in most modern societies. China remains gripped in its transition from the old to the new economies, the former based on industrial commodities and the latter driven by new services and technology. We are heavily invested in the latter and have little exposure to the former.

This transition from an investment-led to an innovation-led Chinese economy significantly influences our investment approach. We have no holdings in the materials sector at present, driven by a belief that weakening investment spending from China will likely have a detrimental effect on the worldwide demand for commodities in general. We are cautious on the outlook for the heavy industrial sector given significant excess capacity in these areas.

In India, the GDP rate of growth has bottomed and is slowly improving. The new government of Narendra Modi has implemented much needed economic reforms, albeit at a slower speed than some expected. We believe that the reform process in India is one, which by necessity, will stretch over many years. The current government is unusual in an Indian context, in that it has not interfered in the business world; it has reduced its own bureaucracy and in doing so is indirectly helping the economic agenda. India remains in a cyclical and structural recovery with earnings poised to grow substantially and growth likely to outperform the broader region for many years to come.

We expect the US economy to continue to recover gradually, but at a pace that does not elicit either a strong wage response or a significant tightening cycle. Arguably, any significant rate rises are unlikely for the foreseeable future given the deflationary impact that a slowing China is having on commodity production.

We believe that the spread and use of smartphone technology globally will be seen as the defining economic and social change of our era. The positive network benefits of connecting 5 billion people to an instantaneous information system are only just beginning to be realised. For the next few years, much of the global economy will be rewritten and reorganised so that it can be traded over the mobile phone network; the digitalisation and visualisation of the global economy is accelerating.

These changes can be seen in the rapid pace of ecommerce expansion in China and India, the growth in data packets globally and in the rise of rapidly growing new economy companies. We think that Asian economies and companies are able to embrace these trends far quicker than developed markets, for two main reasons: firstly, there is little in terms of existing old economy infrastructure; and secondly, and maybe more importantly, the societal system has not fully developed and become comfortable with old technologies, such as the retail industry in the USA and Europe. Smartphones have expanded the quantity of information, providing vastly better prices and choice of goods and services to the average consumer and making retail activity an electronic process.

A good example of these trends would be the growth of JD.com and its e-commerce offering, its last mile bespoke delivery service is helping its revenue to double from $18 billion in 2014 towards estimates of $38 billion by 2016. Part of this rapid growth is due to the Chinese use of social media which allows a much quicker response to and acceptance of new economic and social ideas.

We see the rise of mobile communications use in Asia as an enabler in breaking down previous barriers to entry for many companies, increasing competition and forcing all companies to have a digital strategy. Given the technology and export focus of Korean and Taiwanese industry, these former 'Tiger economies' are well placed to capitalise on the regional corporate need to upgrade technology systems. Companies that should be beneficiaries include SK Hynix, Advantech and MediaTek.

We highlighted last year that the smaller emerging ASEAN markets were pricing in growth that we believed was unsustainable; as a result, the Company had low investment exposure here. We are resolute in our view that, in the absence of social and political reform, these economies are doing little more than storing up problems for the future.  ASEAN markets have been weak this year, especially as a result of depreciation of their currencies. Malaysia is the standout candidate where a combination of falling commodity prices has coincided with high level corruption scandals.  We believe these countries' credit cycles remain over extended and they do not appear to be benefiting from innovation led growth. The Company's exposure to these markets remains limited.

Portfolio Review

Technology companies now account for over 47% of the Company's investments by value. Rather than being a homogenous group, the underlying companies benefit from a number of different commercial advantages. The largest single holding for the Company in the sector is Tencent, the big Chinese gaming, social media and advertising giant - the leader in driving the mobile communications revolution in China with over 1billion users. During the year we added to our large internet investments, Alibaba, Baidu and Just Dial, which we believe offer tremendous value given their long-term earnings growth. The consumer related internet companies now make up 25% of the portfolio. In our view, each investment demonstrates a combination of strong growth potential, excellent business models and an entrepreneurial management approach.

We bought Sunny Optical, a camera lens specialist for mobile phones and the world's leading camera module maker for the automotive industry. We have been reducing our holdings in Samsung Electronics over worries on the medium-term outlook for its smartphone business as Chinese competition increases. Elsewhere, we bought Himax, a company supplying components to a number of virtual reality headsets, which we expect will come to the market in 2016.

Our holdings in IT service companies have increased slightly and we believe that the need for outsourcing and increased digitalisation will continue to drive top-line growth for innovative Indian companies. In the year we also acquired holdings in Kingdee and Kingsoft, Chinese outsourcing software development companies that are providing innovation to domestic markets.

The financial sector represents another of the Company's largest positions although we do not hold banks in a number of the larger countries - China, Korea and Taiwan - where we feel returns are likely to be challenged or depressed for many years. In line with our investment approach, holdings are focused on the merits of the individual companies, be it the turnaround potential that new management brings at Federal Bank, or newer holdings like ICICI, where we see the company benefitting from Indian structural growth. Insurance is an altogether more exciting prospect for us; the Company holds significant positions in the Korean insurers Samsung Fire & Marine and Hyundai Marine & Fire and in Taiwan China Life Insurance. These should all benefit from social and economic changes in the coming years, such as demographics, increased financial sophistication, increasing wealth and consequent development of the insurance markets to provide mitigation for the increased risks to which a more wealthy society is exposed.

In the energy sector we sold our investments in both China Petroleum and Chemical (Sinopec) and Daewoo Industrial after the reversal in Saudi Arabia policy towards the oil markets. We hold no assets related to the oil and gas industry and in the short-term believe that the market is being revalued at a much lower price. In the long-term, Western oil demand may have peaked due to rapid innovation in the transport industry. In China we are sceptical that the government will allow a gasoline auto industry to grow rapidly due to environmental costs and would expect in the medium term that China overtakes California as the leader in the electric vehicle industry.

The healthcare sector which we originally invested into last year, was added to, with two additional holdings. Viromed is conducting phase 3 clinical trials into diabetic peripheral neuropathy and critical limb ischemia in the US this year. We invested in Seegene in Korea, the world's leading developer of leading edge diagnostics equipment. We continue to believe that new personalised medicine will have a revolutionary impact upon the pharma industry through the creation of drugs that cure disease rather than just alleviate symptoms. Our healthcare holdings now account for 8% of the portfolio.

The largest country exposures are Hong Kong and China, followed by Korea and then India. The Company retains little exposure to the smaller ASEAN markets. The Chinese/Hong Kong weight increased as we invested in more new economy companies. Our investment exposure to India grew as a result of additions and outperformance, whilst Taiwan was reduced to fund the increase in Hong Kong and China. 

Environmental, Social and Governance Matters

As growth investors we are looking for companies whose products will benefit from strong future demand. These companies not only have to produce better and cheaper products and services than their competitors but they also have to be alert to the changing nature and views of the societies in which they exist. Companies who do not change, tend to fail either due to falling demand for their product or as a result of government intervention. When we invest we take into account the potential positive and negative impacts our companies have on the world today and how their commercial activities will be perceived in the future.

For our long-term investments to be successful they must add value to society.  We see this in a variety of ways: the regenerative biotech companies we own, whose products may allow many people to gain otherwise unachievable medical benefits, our internet companies which provide goods and services to people at prices and quantities previously unobtainable, or our technology holdings that are helping to enable the greatest and most rapid increase in human connectivity and available information in human history.

Lastly, to be rewarded as a shareholder, minority interests must be upheld; we remain careful to make sure our investments are aligned with those of the majority shareholder and owners. 

Outlook

Recently global markets have sold off violently, precipitated by the Chinese devaluation. This we believe is creating buying opportunities, especially true for the leading markets: US, Internet and Biotech sectors. Commodities and their associated countries remain in deep bear markets with only temporary respite possible. The upside from low oil prices in particular will eventually help the global consumer and help stabilise markets. Given this we feel the portfolio and our companies are well-positioned to benefit from the next upswing and survive the current patch of volatility.

It is our view that there is significant potential for positive returns from the markets in which we invest over the coming years. Our focus remains on investment in individual stocks which will benefit from the economic, social and technological changes which are in evidence across the region. The Company has taken on 10% gross gearing, at the time of draw down, and we see current volatility in the asset class as an ideal opportunity to add to positions in fast growing companies. Despite the short term volatility that we have experienced over the last twelve months, we believe that our philosophy, process and investment style will reward and benefit our shareholders over the medium to long term.

 

Income Statement (unaudited)

	For the year ended 31 July 2015			For the year ended 31 July 2014 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Loss)/gains on investments	-	(338)	(338)	-	13,723	13,723
Currency losses	-	(322)	(322)	-	(388)	(388)
Income (note 2)	1,886	-	1,886	2,550	-	2,550
Investment management fee (note 3)	(1,032)	-	(1,032)	(1,029)	-	(1,029)
Other administrative expenses	(397)	-	(397)	(342)	-	(342)
Net return before finance costs and taxation	457	(660)	(203)	1,179	13,335	14,514
Finance costs of borrowing	(93)	-	(93)	(6)	-	(6)
Net return on ordinary activities before taxation	364	(660)	(296)	1,173	13,335	14,508
Tax on ordinary activities	(133)	-	(133)	(154)	-	(154)
Net return on ordinary activities after taxation	231	(660)	(429)	1,019	13,335	14,354
Net return per ordinary share (note 4)	0.35p	(0.99p)	(0.64p)	1.40p	18.32p	19.72p

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

All revenue and capital items in this 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.

 

Balance Sheet (unaudited)

	At 31 July 2015		At 31 July 2014 (audited)
	£'000	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		135,133		143,675
Current assets
Debtors	276		431
Cash and short term deposits	4,061		1,274
	4,337		1,705
Creditors
Amounts falling due within one year (note 6)	(14,300)		(4,463)
Net current liabilities		(9,963)		(2,758)
Net assets		125,170		140,917
Capital and reserves
Called up share capital		6,329		7,013
Share premium		3,166		3,166
Capital redemption reserve		19,464		18,780
Capital reserve		91,441		106,437
Revenue reserve		4,770		5,521
Shareholders' funds		125,170		140,917
Net asset value per ordinary share		197.78p		200.95p
Ordinary shares in issue (note 7)	63,288,853		70,126,152

 

Reconciliation of Movements in Shareholders' Funds (unaudited)

For the year ended 31 July 2015

	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 2014	7,013	3,166	-	18,780	106,437	5,521	140,917
Net return on ordinary activities after taxation	-	-	-	-	(660)	231	(429)
Shares purchased for cancellation (note 7)	(684)	-	-	684	(14,336)	-	(14,336)
Dividends paid during the year (note 5)	-	-	-	-	-	(982)	(982)
Shareholders' funds at 31 July 2015	6,329	3,166	-	19,464	91,441	4,770	125,170

For the year ended 31 July 2014 (audited)

	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 2013	7,397	3,166	6,499	18,396	93,569	5,611	134,638
Net return on ordinary activities after taxation	-	-	-	-	13,335	1,019	14,354
Shares purchased for cancellation (note 7)	(384)	-	(6,499)	384	(467)	-	(6,966)
Dividends paid during the year (note 5)	-	-	-	-	-	(1,109)	(1,109)
Shareholders' funds at 31 July 2014	7,013	3,166	-	18,780	106,437	5,521	140,917

†      The Capital Reserve balance at 31 July 2015 includes investment holding gains on fixed asset investments of £22,555,000 (31 July 2014 - gains of £47,847,000).

 

Cash Flow Statement (unaudited)

	For the year ended 31 July 2015		For the year ended 31 July 2014 (audited)
	£'000	£'000	£'000	£'000
Net cash inflow from operating activities		462		889
Servicing of finance
Interest paid	(84)		-
Net cash outflow from servicing of finance		(84)		-
Financial investment
Acquisitions of investments	(70,065)		(38,780)
Disposals of investments	78,263		41,909
Net cash inflow from financial investment		8,198		3,129
Equity dividend paid (note 5)		(982)		(1,109)
Net cash inflow before financing		7,594		2,909
Financing
Shares bought back (note 7)	(14,336)		(6,966)
Bank loans repaid	(32,563)		-
Bank loans drawn down	42,081		4,124
Net cash outflow from financing		(4,818)		(2,842)
Increase in cash		2,776		67
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year		2,776		67
Translation difference		11		(366)
Increase in bank loans		(9,518)		(4,124)
Exchange movement on bank loans		(333)		(22)
Movement in net debt in the year		(7,064)		(4,445)
Net funds at 1 August		(2,872)		1,573
Net debt at 31 July		(9,936)		(2,872)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return on ordinary activities before finance costs and taxation		(203)		14,514
Losses/(gains) on investments		338		(13,723)
Currency losses		322		388
Decrease/(increase) in accrued income		176		(157)
Decrease in other debtors		2		12
Decrease in creditors		(23)		(9)
Overseas tax suffered		(150)		(136)
Net cash inflow from operating activities		462		889

 

List of Investments as at 31 July 2015 (unaudited)

Name	Country	Business	Value £'000	% of total assets ‡
Tencent Holdings	HK/China	Internet business	9,057	6.5
Baidu	HK/China	Internet search provider	5,279	3.8
Alibaba Group	HK/China	Online and mobile commerce company	4,622	3.3
Hon Hai Precision Industries	Taiwan	Electronic manufacturing services company	4,067	2.9
Tech Mahindra	India	IT services provider	3,790	2.7
Haier Electronics Group	HK/China	Washing machine and water heater manufacturer	3,405	2.4
Just Dial	India	Local search and e-commerce provider	3,382	2.4
China Life Insurance (Taiwan)	Taiwan	Life insurance provider	3,149	2.3
NAVER	Korea	Internet company	3,073	2.2
Federal Bank	India	Commercial bank	2,927	2.1
JD.com	HK/China	Online direct sales company	2,914	2.1
SK Hynix	Korea	Electronic component and device manufacturer	2,869	2.1
ICICI Bank	India	Retail and corporate bank	2,709	1.9
Mahindra & Mahindra	India	Conglomerate	2,584	1.9
HCL Technologies	India	IT services provider	2,569	1.8
Advantech	Taiwan	Computer manufacturer	2,440	1.8
Jumei International Holding	HK/China	Online retailer of beauty products	2,363	1.7
MediaTek	Taiwan	Integrated circuit design house	2,228	1.6
Seegene	Korea	Develops molecular diagnostic reagents	2,200	1.6
Samsung Fire & Marin Insurance	Korea	Non-life insurance provider	2,149	1.5
CJ E&M	Korea	Media and entertainment business	2,083	1.5
Geely Automobile	HK/China	Automobile manufacturer	2,067	1.5
Qunar Cayman Islands	HK/China	Provides travel production information	1,950	1.4
Naturalendo Technology	Korea	Biotech company specialising in R&D	1,950	1.4
Taiwan Semiconductor Manufacturing	Taiwan	Semiconductor manufacturer	1,943	1.4
Cheil Industries	Korea	Leading lifestyles solutions company	1,942	1.4
Sunny Optical Technology	HK/China	Optical related products	1,907	1.4
Koh Young Technology	Korea	3D inspection machines	1,876	1.3
Kingdee International Software	HK/China	Develops and sells enterprise management   software	1,843	1.3
Dragon Capital Vietnam Enterprise   Investments	Vietnam	Vietnam investment fund	1,814	1.3
Hermes Microvision	Taiwan	Electron beam inspection tool manufacturer	1,790	1.3
Container Corporation of India	India	Transportation services	1,774	1.3
Indusind Bank	India	Commercial bank	1,756	1.3
Mahindra CIE Automotive	India	Provider of forging parts for trucks	1,602	1.2
Shiram Transport Finance	India	Hire purchase finance for trucks	1,589	1.1
Orion Corp	Korea	Consumer conglomerate	1,566	1.1
Mindtree	India	IT services provider	1,546	1.1
W H Group	HK/China	Port processing company	1,532	1.1
Interpark	Korea	Internet-based shopping mall	1,531	1.1
Samsung Electronics	Korea	Electronics company	1,509	1.1
Name	Country	Business	Value £'000	% of total assets ‡
Genexine	Korea	Biopharmaceuticals	1,496	1.1
Techtronic Industries	HK/China	Power tool manufacturer	1,467	1.1
Dalian Wanda Commercial Properties	HK/China	Commercial property developer	1,459	1.0
Viromed	Korea	Biomedical research	1,447	1.0
China Vanke	HK/China	Residential property development company	1,348	1.0
Kingsoft	HK/China	Software company	1,340	1.0
Info Edge	India	Internet based service company	1,324	0.9
Phison Electronics	Taiwan	Semiconductor products	1,311	0.9
Persistent Systems	India	Provides outsourced software product    development	1,282	0.9
Delta Electronics	Taiwan	Power supplies and video display	1,278	0.9
CAR Inc	HK/China	Car rental company	1,272	0.9
Himax Technologies	Taiwan	Develops and markets semiconductors	1,265	0.9
Legend Holdings	HK/China	Investment holding company	1,241	0.9
Bioneer	Korea	Biotechnology business	1,229	0.9
China Taiping Insurance International	HK/China	Insurance underwriter	1,209	0.9
SK Telecom	Korea	Telecoms operator	1,201	0.9
Pharmicell	Korea	Biopharmaceutical business	1,051	0.8
Nagacorp	HK/China	Hotels, restaurants and leisure	1,047	0.8
Sarine Technologies	Singapore	Develops  measurement systems for diamond    grading	1,038	0.7
Johnson Electric Holding	HK/China	Electric motor manufacturer	1,007	0.7
Infosys	India	Software developer	978	0.7
Brilliance China Automotive	HK/China	Manufacture and sale of minibuses and   automotive components	969	0.7
Haiwin Technologies	Taiwan	Automation equipment manufacturer	951	0.7
Theragen Etex	Korea	Pharmaceutical business	872	0.6
Green Cross Cell	Korea	Electric component manufacturer	776	0.6
Crystalgenomics	Korea	Biotechnology services	753	0.5
Hyundai Marine and Fire Insurance	Korea	Non-life insurance provider	539	0.4
Airtac International Group	Taiwan	Automation equipment manufacturer	379	0.3
Huadin Power International	HK/China	Electric utility	187	0.1
Elec and Eltek International	Singapore	Circuit board manufacturer	71	0.1
Philtown Properties*	Philippines	Property developer	0	0.0
Total Investments			135,133	97.1
Net Current Assets			4,034	2.9
Total Assets			139,167	100.0

HK/China denotes Hong Kong and China

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

* Denotes unlisted security.

 

Distribution of Portfolio (unaudited)

		At 31 July 2015 %	At 31 July 2014 %
Equities:	Hong Kong and China	35.6	28.8
	Korea	23.1	28.0
	India	21.3	15.3
	Taiwan	15.0	18.7
	Vietnam	1.3	1.2
	Singapore	0.8	5.2
	Thailand	-	1.2
	Indonesia	-	0.6
Total equities		97.1	99.0
Net current assets		2.9	1.0
Total assets‡		100.0	100.0

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

 

Notes to the Condensed Financial Statements (unaudited)

There are no dilutive or potentially dilutive shares in issue.

1.	The financial information within this preliminary announcement has been extracted from the unaudited Financial Statements for the year to 31 July 2015 and has been prepared on the basis of the accounting policies set out in the Company's Annual Report and Financial Statements at 31 July 2014. In accordance with the Financial Reporting Council's guidance on going concern and liquidity risk, the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. 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, shareholders have the right to vote on the continuance of the Company every five years, the next vote being in 2016. After making enquiries and considering the future prospects of the Company and notwithstanding the above, the financial statements have 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.
		31 July 2015 £'000			31 July 2014 (audited) £'000
2.	Income
	Income from investments	1,886			2,550
		1,866			2,550
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 (AIFM) and Company Secretary with effect from 1 July 2014. The investment management function has been delegated to Baillie Gifford & Co. The Managers may terminate the Management Agreement on six months' notice and the Company may terminate on three months' notice. The annual management fee is 0.95% on the first £50m of net assets and 0.65% on the balance. Management fees are calculated on a quarterly basis.
4.			31 July 2015 £'000	31 July 2014 (audited) £'000
	Net return per ordinary share
	Revenue return on ordinary activities after taxation		231	1,019
	Capital return on ordinary activities after taxation		(660)	13,335
	Total return		(429)	14,354
	Weighted average number of ordinary shares in issue		66,526,663	72,777,640
	The net return per ordinary share figures are based on the above totals for revenue and capital and the weighted average number of ordinary shares in issue during the year.

 

Notes to the Condensed Financial Statements (unaudited) (ctd)

5.	Ordinary Dividends Amounts recognised as distributions in the year:	31 July 2015	31 July 2014 (audited)	31 July 2015 £'000	31 July 2014 (audited) £'000
	Previous year's final (paid 5 November 2014)	1.40p	1.50p	982	1,109
	Also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered. The revenue for the year available for distribution by way of dividend is £231,000 (31 July 2014 - £1,019,000).
	Ordinary Dividends Amounts paid and proposed in respect of the financial year:	31 July 2015	31 July 2014 (audited)	31 July 2015 £'000	31 July 2014 (audited) £'000
	Proposed final dividend per ordinary share (payable 11 November 2015)	0.35p	1.40p	222	982
	If approved, the recommended final dividend of 0.35p per ordinary share for the year ended 31 July 2015 will be paid on 11 November 2015 to shareholders on the register at the close of business on 16 October 2015. The ex-dividend date is 15 October 2015. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for this dividend is 21 October 2015.
6.	The Company has a £20 million one year uncommitted, unsecured, floating rate revolving credit facility with The Bank of New York Mellon and a one year £14 million unsecured floating rate multi-currency revolving credit facility with The Royal Bank of Scotland Plc. At 31 July 2015 there were outstanding drawings of £10,500,00 and US$5,456,850 under The Royal Bank of Scotland facility (31 July 2014 - US$7,000,000 under The Bank of New York Mellon facility).
7.	The Company has authority to buy back up to 14.99% of its shares on an ad hoc basis and to implement, at the Board's discretion, bi-annual tender offers for up to 5% of its shares at a 2% discount to NAV, 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 and 2015. The Board implemented a 5% tender offer in October 2014 and April 2015 in respect of the tender periods to 31 July 2014 and 31 January 2015. Through the exercise of both of these tenders the Company bought back a total of 6,837,299 (31 July 2014 - 3,845,850; 155,000 under the buy back authority and 3,690,850 through the exercise of a tender offer) ordinary shares at a total cost of £14,336,000 (31 July 2014 - £6,966,000). The nominal value of these shares was £684,000 and represented 9.75% of the issued share capital at 31 July 2014. At 31 July 2015 the Company had authority to buy back a further 9,986,314 ordinary shares. The Company also has authority to allot shares under Section 551 of the Companies Act 2006. In the years to 31 July 2015 and 31 July 2014 no shares were issued.
8.	The Company incurred transaction costs on purchases of £157,000 (31 July 2014 - £65,000) and on sales of £239,000 (31 July 2014 - £97,000), being £396,000 (31 July 2014 - £162,000) in total.
9.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 July 2015. The financial information for 2014 is derived from the statutory accounts for 2014. Those accounts have been delivered to the Registrar of Companies. The Auditors have reported on the 2014 accounts, their report was unqualified and did not contain a statement under Section 495, 496 and 497 of the Companies Act 2006. The statutory accounts for 2015 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
10.	The Annual Report and Financial Statements will be available on the Company's page on the Managers' website www.pacifichorizon.co.uk‡ on or around 28 September 2015.

‡      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. The Company has total assets of £139 million at 31 July 2015.

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.

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

Investment Trusts are UK public listed company and are not authorised or regulated by the Financial Conduct Authority

Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise and investors may not get back the amount invested. As 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 2016.

10 September 2015

- ends -

For further information please contact:

Anzelm Cydzik,

Baillie Gifford & Co                               0131 275 2000

Roland Cross, Director,

Four Broadgate                                        020 3697 4200

 

END

 

 

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