Annual Financial Report

RNS Number : 3690J

Pacific Horizon Investment Tst PLC

09 September 2016

 

RNS Announcement: Preliminary Results

Pacific Horizon Investment Trust PLC

Results for the year to 31 July 2016

The following is the unaudited preliminary statement for the year to 31 July 2016 which was approved by the Board on 8 September 2016.

Chairman's Statement

Performance

In the year to 31 July 2016, the Company's net asset value per share (NAV) total return was 13.3%. During the same period the Company's comparative index, the MSCI All Country Asia ex Japan Index, total return was 16.2% in sterling terms. The share price total return was 10.9%, and the discount widened from 8.2% to 10.1%. Over the five years to 31 July 2016 the Company's NAV and share price returned 29.8% and 26.8% respectively; over the same period the Company's comparative index, the MSCI All Country Asia ex Japan Index, returned 30.3% in sterling terms.

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 0.35p to a deficit of 0.30p. The Company's objective is to invest for capital growth rather than income and all expenses, including borrowing costs, are charged to revenue. The Company has revenue reserves and the Board is recommending that a final dividend of 0.35p (2015 - 0.35p) be paid on this occasion. Any dividend payable in future will be determined as being the minimum permissible in order to maintain investment trust status and be paid by way of one final payment per year. As the Company's objective is to achieve capital growth, it is not recommended that investors consider investing in this Company if they require income from this investment.

The ongoing charges increased to 1.13% (2015 - 1.02%). Although the Company's NAV per share increased over the financial year, shareholders' funds averaged less than in the prior year partly as a result of the bi-annual tender offers. Consequently, the fixed administrative expenses accounted for a higher proportion of shareholders' funds.

The Board and Managers believe that the long term stock picking approach, focussing on growth companies in the Asia Pacific ex Japan region and markets of the Indian Sub-continent, will generate competitive positive long term returns. Although the Company can invest in a broad spread of markets and sectors, it remains differentiated from its peers at present not only through its geographic exposure (being mainly China/Hong Kong, South Korea, Taiwan, India and increasingly Vietnam), but also as a result of its focus on asset light innovating companies. There continues to be a bias to companies which have the potential to benefit significantly from the growing wealth and sophistication of the Asian consumer. The overlap between the Company's portfolio and index was 19% as at 31 July 2016, meaning that the active share was over 81%, again demonstrating a very distinct investment style.

Continuation of the Company

At this year's Annual General Meeting ('AGM') the Directors are proposing, in accordance with the Articles, that the life of the Company be extended for a further five years. Having conducted a thorough review of the Managers' approach and resources, the Board judges them to have the right team to manage a portfolio in what it considers to be a region with superior long term prospects for investment.

Your Directors therefore believe that it is desirable to extend the Company's life and recommend that shareholders vote in favour of the extension for a further period of five years. A fuller outline of the proposal will be set out in the circular containing the Notice of the AGM accompanying the Annual Report and Financial Statements.

Tender Mechanism

At the Company's 2015 AGM, shareholders once again authorised the implementation of bi-annual tender offers for up to 5% of the Company's shares at a 2% discount to NAV, less costs. The decision to implement the tender was 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 2016. Over the six month periods to 31 July 2015 and 31 January 2016 the Company's average discounts were 9.6% and 10.3% respectively and consequently the Board implemented tender offers in October 2015 and April 2016. The Company's average discount for the six month period to 31 July 2016 was 11.9% and the Board has again decided to implement a 5% tender offer, applicable to shareholders on the register on 9 August 2016. Details of how to tender your shares in respect of this 5% tender offer will be contained within the Tender Offer Circular accompanying the Annual Report and Financial Statements.

Through tender offers implemented on 31 July 2015 and 31 January 2016, the Company bought back a total of 6,170,662 ordinary shares, representing 9.7% of the issued share capital as at 31 July 2015, at a cost of £11,618,000.

Following consultation with a number of shareholders, the Board is not proposing to seek authority for the existing bi-annual 5% tender to be continued for a period of at least the next three years. Some investors have commented that they require the Company to have liquidity and scale and have found the existing size and/or frequency of tenders unhelpful. In addition, they felt that the trigger for tenders can be over influenced by market sentiment towards the asset class, rather than by the Company's performance. Instead, the Board is proposing a tender that will be triggered if the Company's NAV, 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 NAV less costs.

This would be subject to shareholders' approval of the tender authority that will be put to shareholders at the 2018 AGM. If the authority is obtained and the tender is subsequently triggered, 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.

Share Buy-backs

At the forthcoming AGM, the Board will be asking shareholders to renew the mandate to repurchase up to 14.99% of the outstanding 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 whilst being cognisant that current and potential shareholders require continuing liquidity.

Gearing

The Board sets the gearing parameters within which the portfolio managers are permitted to operate and these are reviewed at each Board meeting. At present, the agreed range of equity gearing is minus 15% to plus 10%. At the year end, equity gearing was relatively low at 2.9%, having started the year at 7.9%. Gearing ranged between a negative of 8.3% (i.e. holding net cash) and a positive of 8.1%. Gearing is achieved through the use of bank borrowings. At present the Company has a Royal Bank of Scotland £10 million multi-currency revolving credit facility, of which £5 million was drawn at 31 July 2016. In addition the Company benefits from a £10 million one year uncommitted revolving credit facility with The Bank of New York Mellon which was undrawn at 31 July 2016.

Annual General Meeting

This year's AGM will take place on 9 November 2016 at the offices of Baillie Gifford & Co in Edinburgh at 11.00am. I would encourage shareholders to arrive by 10.50am to allow time to register. 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

Over the year, the performance of stockmarkets across Asia was mixed. In local currency terms, the Chinese and Hong Kong markets were weaker, whilst South Korea and India were largely unchanged, albeit with some volatility during the year. These are the areas where we have most of our exposure. The headline economic numbers indicate reasonable growth potential and we believe that there are good opportunities across the Asian markets to find entrepreneurial companies on valuations which look reasonably priced. Our exposure to technologies of differing types - such as internet search tools, online services and biotechnology - offer us plenty of scope to invest in growing businesses with the opportunity to take market share from traditional businesses and benefit from the disruption which is now occurring internationally.

Jean Matterson

Chairman

8 September 2016

Past performance is not a guide to future performance.

Managers' Review

Overview

Management of Pacific Horizon's portfolio is focussed on finding and investing in attractive growth companies within Asia Ex-Japan and the Indian Sub-continent. We believe that investing for the long-term in companies that can deliver significantly faster growth than the market will, over time, deliver rewards. We are looking to invest in companies that have the potential to grow their revenue and earnings at around 15% per annum for at least the next five years and where we feel the growth prospects have not been fully recognised. This investment approach can lead to significant concentration in certain areas of the market.

Over the Company's financial year the NAV total return was 13.3% compared with 16.2% for the comparative index in sterling terms. We are disappointed with this relative performance, but we believe that our investment stance will be vindicated over the longer-term. As at the Company's year end we had equity gearing of 2.9% and we would look to be adding investment exposure if there were to be any significant weakness in markets or were we to find opportunities to invest in new exciting companies with significant growth potential.

The Portfolio

The weighting in technology companies increased from 47.9% to 50.9% following outperformance of the sector during the year and additions to our Chinese holdings. The consumer internet names in China now represent the largest concentration in our portfolio at 22%; we see significant upside from both earnings growth and a potential re-rating of valuations in this sector, which have been significantly de-rated over the last year due to fear of an overall Chinese slowdown. We feel that the sector represents one of the most compelling long-term investments within our region.

Tencent Holdings, which is the portfolio's largest holding at just over 10%, significantly beat consensus earnings expectations recently, growing its revenues by 52% and net profit by 47% year on year, which is impressive for a $250bn company. With the second largest user base in the world after Facebook, we see tremendous opportunity for Tencent to monetise its network through games, video, music and advertising. Alibaba accounts for 3% of the portfolio and announced recent revenue growth of 59%. Five of the Company's top six largest holdings and 25% of the portfolio as a whole represent companies that profit from the supply of information through their respective networks.

Our technology holdings, in China and elsewhere, helped our overall performance, with Sunny Optical, Tencent and NAVER being our top contributors to overall performance. On the other hand, not holding sufficient positions in TSMC and Samsung Electronics and severe weakness in some of our Chinese names: JD.com, Kingdee, Kingsoft and Jumei International dampened portfolio returns.

Within China we made only one new purchase during the year, China Harmony New Energy Auto, a leading car dealer and after-market operator in China, which is investing in a partnership with Tencent and Hon Hai to create a leading electric vehicle. We bought the stock on a price earnings ratio of 8x and with potential three year earnings growth of 20% per annum.

Korean investments represent some 30% of the portfolio and we continue to find plenty of interesting innovative growth companies in this market; this is at odds with the consensus judgement on the country. We took a position in Finetex EnE which is one of the world's leading companies in nano-materials. We believe the company is in late stage negotiations to supply innovative materials to Nike, improved performance facial masks in Korea and China, and has the potential to revolutionise the membranes and materials used in air conditioning systems.

We hold a number of smaller technology companies in Korea, where we believe the growth potential is underappreciated; for example, Koh Young, a $500m company where our holding represents 2.2% of the portfolio, the world leader in automated 3D inspection equipment. Koh Young's combination of leading algorithms and hardware has led it to achieve a 49% market share in the Silicon Paste Inspection industry and potential leadership in adjacent semiconductor inspection markets.

Our Korean healthcare investments experienced a mixed year. We hold 9.2% of the portfolio in a number of small biotech companies in both Korea and Taiwan, all of which we believe are at or close to the leading edge of their technology specialisation or have a distinct technological manufacturing advantage. The volatility of this sector and the size of the individual companies has meant that they are under-researched and tend to have been overlooked by many institutional investors. By taking a long-term approach and by investing alongside management we believe we can add significant value to the Company over time from these investments.

We repositioned our Indian exposure away from the IT services sector where, after many years of positive performance, we became worried that the longer-term growth outlook was slowing due to changes in the outsourcing model and the need to invest in digitalisation which favoured larger and western players. Consequently, Tech Mahindra and HCL Technologies were sold and our Indian weighting reduced from 21.3% to 14.3%. We purchased a holding in Arvind Ltd, a leading textile and consumer brand company in India. There appears to be a general economic trigger point of a per capita income of $1,500 per annum when demand for apparel takes off quite rapidly and we believe India is at this turning point. We feel that the market may be underestimating the effect on margins and asset turnover that this increase in demand can have and hence improve profitability. We like the longer-term outlook for the Indian market and will be looking for interesting companies on any valuation pull-back.

We increased our Vietnamese market exposure from 1.3% to 4.8% of the portfolio. We believe that Vietnam is at a very early stage of becoming part of the global market. Given its large and educated workforce and the geographical benefits of being near the centre of Asia, we see probability of a very positive long-term outlook for the country. The Vietnam Hanoi Index is currently cheap at a price earnings ratio of around 11x and is under-researched by foreign investors. We have an indirect holding via the Dragon Capital Vietnam Enterprise Investments where we are impressed by the domestic managers' ability to source interesting ideas; their long-term active approach fits our philosophy. We have also acquired holdings in two domestic companies, Military Commercial Joint Stock Bank, the fourth largest bank and largest private sector operator in the country, and Vingroup, a real-estate and consumer conglomerate, which we believe has the potential to increase its earnings significantly.

In Taiwan we added an innovative biotech manufacturing company called TTY Biopharm to our portfolio. It is a leading global manufacturer of liposomal products with a significant technological edge that has allowed it to be the key licensed partner for Johnson & Johnson's Doxil drug. With this technological manufacturing know-how, we see significant market opportunities for a pipeline of high margin drugs to deliver 20% plus earnings growth in the long term.

Our largest country exposures are in China/Hong Kong, followed by Korea and then Taiwan. With the exception of Vietnam we retain little exposure to the smaller ASEAN markets. Our investment philosophy means that we inevitably focus on technology and currently 50.9% of the portfolio is invested in this sector. After technology, consumer discretionary and financials make up the largest sector investments.

We believe that the broader economic environment is driven by cycles of innovation rather than being the creator of change. For example, many of the structural issues affecting China and much of Asia today are the result of a technological shift to a more productive economic structure which is leaving investments in fixed assets, heavy industry and other "old economy" assets in severe overcapacity. Within this changing economic structure the affluent Asian consumer stands out as a key beneficiary of rising wealth and increased penetration of technology. Around 30% of the portfolio is invested in consumer, outside of technology, companies that benefit from the rise of the middle class in Asia.

We are also looking for companies that are innovating and moving up their respective value chain. Geely Automotive, a leading Chinese automotive manufacturer, has managed to upgrade its manufacturing capability substantially following its acquisition of Volvo and is launching new sports utility vehicle models, a segment in the car market that is forecast to grow above 20% for the next few years due to the rise in the affluent middle-class. Positive shorter-term growth prospects are starting to be recognised by the market; however, the company's strategic goal to make electric vehicles 90% of its output by 2020 is still being under-appreciated by investors.

Financials represent our third largest sector position although we do not hold investments in banks in a number of the larger countries, including China, Korea and Taiwan, where we feel returns are likely to be challenged or depressed for many years. In line with our investment approach, our holdings are focused on the merits of the individual companies, for example, in India, where we see the return of a structural growth story, and in Vietnam. We find the insurance industry a more compelling investment proposition. We hold significant positions in the Korean insurers, Samsung Fire & Marine and Hyundai Marine & Fire, and in Taiwan's China Life Insurance. These should all benefit from a number of fundamental social and economic changes in the coming years, such as demographics, increased financial sophistication and increasing wealth; we are of the view that there will be significant development of the insurance markets to provide mitigation for the increased risks to which a more wealthy society is exposed.

Investment Approach

The growth characteristics of the portfolio remain strong with historic earnings growth at 11%, almost double the market's 5.7%, and one year forecast earnings growth at 12.2%, double that for the comparative index, the MSCI All Country Asia ex Japan Index. The price earnings ratio of the Company is 19.2x on the current year, versus 13x for the comparative index. Over the longer-term time frame, we believe the higher growth potential of our holdings more than justifies the additional multiple.

Our comparative index has changed materially over the year with the average company size moving from around £35bn to £45bn largely due to the inclusion of US-listed Chinese internet names, several of which we own, and the outperformance of large capitalisation stocks. Over 20% of our portfolio is invested in companies with a market capitalisation below £1bn; a further 34% is invested in companies with a market capitalisation less than £10bn. This compares with 0.1% and 35% respectively for the comparative index. The portfolio's active share has decreased slightly, to 81%, largely due to the inclusion of the Chinese US-listed internet companies within the comparative index.

We continue to implement our strategy of investing in companies with good long-term growth prospects. The corporate characteristics we look for include strong growth potential, sustainable competitive advantage, attractive financials and sensible management. In addition, we target stocks that we consider to have very significant long-term opportunities to enhance future profitability.

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 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 impact these 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 the companies in which we invest must add value to society. We see this being achieved 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, and our technology holdings that are helping to enable the greatest and most rapid increase in human connectivity and information availability in human history.

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

Outlook

It is our view that there is significant potential for positive returns from the region 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. After almost five years of slow GDP growth we feel that the region may be gradually recovering. Cheap assets and an improving growth profile may be all that is needed to generate strong positive absolute returns to investors. We believe that our philosophy, process and investment style will reward our shareholders over the medium to long-term.

Income Statement (unaudited)

	For the year ended 31 July 2016			For the year ended 31 July 2015 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on investments	-	13,414	13,414	-	(338)	(338)
Currency gains/(losses)	-	1,140	1,140	-	(322)	(322)
Income (note 2)	1,331	-	1,331	1,886	-	1,886
Investment management fee (note 3)	(899)	-	(899)	(1,032)	-	(1,032)
Other administrative expenses	(389)	-	(389)	(397)	-	(397)
Net return before finance costs and taxation	43	14,554	14,597	457	(660)	(203)
Finance costs of borrowing	(127)	-	(127)	(93)	-	(93)
Net return on ordinary activities before taxation	(84)	14,554	14,470	364	(660)	(296)
Tax on ordinary activities	(98)	-	(98)	(133)	-	(133)
Net return on ordinary activities after taxation	(182)	14,554	14,372	231	(660)	(429)
Net return per ordinary share (note 4)	(0.30p)	24.25p	23.95p	0.35p	(0.99p)	(0.64p)

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 this 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 July 2016		At 31 July 2015 (audited)
	£'000	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		131,417		135,133
Current assets
Debtors	359		276
Cash and cash equivalents	1,323		4,061
	1,682		4,337
Creditors
Amounts falling due within one year (note 6)	(5,397)		(14,300)
Net current liabilities		(3,715)		(9,963)
Net assets		127,702		125,170
Capital and reserves
Called up share capital		5,712		6,329
Share premium		3,166		3,166
Capital redemption reserve		20,081		19,464
Capital reserve		94,377		91,441
Revenue reserve		4,366		4,770
Shareholders' funds		127,702		125,170
Net asset value per ordinary share		223.58p		197.78p
Ordinary shares in issue (note 7)	57,118,191		63,288,853

Statement of Changes in Equity (unaudited)

For the year ended 31 July 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	-	-	-	14,554	(182)	14,372
Shares purchased for cancellation (note 7)	(617)	-	617	(11,618)	-	(11,618)
Dividends paid during the year (note 5)	-	-	-	-	(222)	(222)
Shareholders' funds at 31 July 2016	5,712	3,166	20,081	94,377	4,366	127,702

For the year ended 31 July 2015 (audited)

	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 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

†      The Capital Reserve balance at 31 July 2016 includes investment holding gains on fixed asset investments of £38,808,000 (31 July 2015 - gains of £22,555,000).

Cash Flow Statement (unaudited)

	For the year ended 31 July 2016		For the year ended 31 July 2015 (audited)
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Net return on ordinary activities before taxation ‡		14,470		(296)
Net (gains)/losses on investments		(13,414)		338
Currency (gains)/losses		(1,140)		322
Finance costs of borrowings		127		93
Overseas tax incurred		(84)		(150)
Changes in debtors and creditors		(86)		155
Cash from operations		(127)		462
Interest paid		(134)		(84)
Net cash (outflow)/inflow from operating activities		(261)		378
Cash flows from investing activities
Acquisitions of investments	(29,853)		(70,065)
Disposals of investments	47,072		78,263
Net cash inflow from investing activities		17,219		8,198
Cash flows from financing activities
Equity dividends paid (note 5)	(222)		(982)
Shares purchased for cancellation (note 7)	(11,618)		(14,336)
Borrowings (repaid)/drawn down	(9,369)		9,518
Net cash outflow from financing activities		(21,209)		(5,800)
(Decrease)/increase in cash and cash equivalents		(4,251)		2,776
Exchange movements		1,513		11
Cash and cash equivalents at 1 August		4,061		1,274
Cash and cash equivalents at 31 July		1,323		4,061

‡   Dividends received in the year amounted to £1,220,000 (2015 - £2,062,000). 

List of Investments as at 31 July 2016 (unaudited)

Name	Country	Business		Value £'000	% of total assets ‡
Tencent Holding	HK/China	Online gaming and social networking		13,457	10.1
NAVER	Korea	Online search and messaging		5,413	4.1
Baidu ADR	HK/China	Internet search engine		4,855	3.7
Alibaba Group ADR	HK/China	Online and mobile commerce		4,012	3.0
Hon Hai Precision Industries	Taiwan	Electronic manufacturing		3,849	2.9
JD.com	HK/China	Online mobile commerce		3,729	2.8
Dragon Capital Vietnam Enterprise Investments	Vietnam	Vietnam investment fund		3,707	2.8
Sunny Optical Technology	HK/China	Small optical lenses manufacturer		3,368	2.5
Geely Automobile	HK/China	Automobile manufacturer		3,047	2.3
Koh Young Technology	Korea	3D inspection machine manufacturer		2,952	2.2
China Life Insurance (Taiwan)	Taiwan	Life insurance provider		2,760	2.1
Mahindra & Mahindra	India	Tractor and SUV manufacturer		2,688	2.0
Advantech	Taiwan	Computer manufacturer		2,636	2.0
SK Hynix	Korea	Electronic component and device manufacturer		2,609	2.0
Reliance Industries	India	Indian petrochemical conglomerate		2,602	2.0
Taiwan Semiconductor Manufacturing	Taiwan	Semiconductor foundry		2,383	1.8
Ctrip.com International ADR	HK/China	Chinese online travel agency		2,332	1.8
ICICI Bank	India	Retail and corporate bank		2,270	1.7
Indusind Bank	India	Commercial bank focusing on consumer lending		2,046	1.5
Samsung Fire & Marine Insurance	Korea	Non-life insurance provider		2,006	1.5
CJ E&M	Korea	Media and entertainment creator and supplier		1,962	1.5
Samsung Electronics	Korea	Memory, phones and electronic components     manufacturer		1,929	1.5
Techtronic Industries	HK/China	Power tool manufacturer		1,892	1.4
WH Group	HK/China	Pork processor and distributor		1,872	1.4
Bioneer	Korea	Drug researcher and development		1,861	1.4
Himax Technologies ADR	Taiwan	Markets semiconductors		1,683	1.3
Medy-Tox	Korea	Global biopharmaceutical company		1,674	1.3
Infosys	India	Software development		1,632	1.2
Container Corporation of India	India	Transportation services provider		1,565	1.2
Seegene	Korea	In vitro diagnostic screening producer		1,549	1.2
Samsung C&T	Korea	Korean conglomerate		1,544	1.2
MediaTek	Taiwan	Integrated circuit design house		1,526	1.1
EO Technics	Korea	Laser equipment manufacturer and distributor		1,493	1.1
Finetax EnE	Korea	Nano-technology material manufacturer		1,492	1.1
Genexine	Korea	Therapeutic vaccine researcher and developer		1,479	1.1
Vingroup	Vietnam	Property developer		1,451	1.1
NCSOFT	Korea	Online games developer		1,426	1.1
Phison Electronics	Taiwan	Designer and manufacturer of flash memory controllers		1,411	1.1
List of Investments as at 31 July 2016 (unaudited) (ctd)

Name	Country	Business	Value £'000	% of total assets ‡
Mindtree	India	IT services provider	1,356	1.0
Eclat Textile	Taiwan	Textile manufacturer	1,322	1.0
China Harmony New Energy Auto	HK/China	Luxury car dealership	1,300	1.0
Delta Electronics	Taiwan	Power supplies and video display product  manufacturer	1,292	1.0
Persistent Systems	India	Outsourced software product developer	1,280	1.0
Info Edge	India	Jobseekers, housing sales and restaurant online review provider	1,254	0.9
Military Commercial Joint Stock Bank	Vietnam	Retail and corporate bank	1,245	0.9
Orion Corp	Korea	Consumer conglomerate	1,231	0.9
Intron Biotechnology	Korea	Antibiotics drug researcher	1,226	0.9
Duzonbizon	Korea	Enterprise resource planning software developer	1,194	0.9
Arvind	India	Consumer textile brand owner and manufacturer	1,186	0.9
SK Telecom	Korea	Telecoms operator	1,171	0.9
Kingdee International Software	HK/China	Enterprise management software distributor	1,130	0.8
Mahindra CIE Automotive	India	Truck parts manufacturer	1,092	0.8
Haier Electronics Group	HK/China	Washing machine and water heater manufacturer	1,035	0.8
Hansol Technics	Korea	Electrical components manufacturer	937	0.7
Sarine Technologies	Singapore	Diamond grading measurement systems   Developer	921	0.7
Hermes Microvision	Taiwan	Electron beam inspection tool manufacturer	892	0.7
HTC	Taiwan	Smartphone and virtual reality manufacturer	844	0.6
Interpark	Korea	Internet-based shopping mall	835	0.6
Johnson Electric Holding	HK/China	Electric motor manufacturer	802	0.6
Kingsoft	HK/China	Gaming, cloud and digital advertiser	796	0.6
Qurient	Korea	Antibiotics and cancer drug researcher	693	0.5
Theragen Etex	Korea	Genetics researcher and developer	674	0.5
TTY Biopharm	Taiwan	Manufacturer of specialist genetics	656	0.5
ST Pharm	Korea	Manufacturer of specialist pharmaceutical   ingredients	652	0.5
Viromed	Korea	Drug developer of recombinant DNA	613	0.5
JHL Biotech	Taiwan	Biologics manufacturer	565	0.4
Crystalgenomics	Korea	Proteomic drug discovery investigator	557	0.4
Hyundai Marine and Fire Insurance	Korea	Non-life insurance provider	504	0.4
Philtown Properties*	Phillippines	Property developer	0	0.0
Total Investments			131,417	99.0
Net Current Assets			1,285	1.0
Total Assets			132,702	100.0

HK/China denotes Hong Kong and China.

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

* Denotes unlisted security.

Distribution of Total Assets‡ (unaudited)

Geographical Analysis

		At 31 July 2016 %	At 31 July 2015 %
Equities:	Hong Kong and China	32.9	35.6
	Korea	29.9	23.1
	Taiwan	16.4	15.0
	India	14.3	21.3
	Vietnam	4.8	1.3
	Singapore	0.7	0.8
Total equities		99.0	97.1
Net current assets		1.0	2.9
Total assets		100.0	100.0

Sectoral Analysis

		At 31 July 2016 %	At 31 July 2015 %
Equities:	Energy	2.0	-
	Consumer Discretionary	16.9	17.3
	Consumer Staples	2.3	2.2
	Financials	12.0	14.8
	Health Care	9.2	7.9
	Industrials	4.8	6.0
	Information Technology	50.9	47.9
	Telecommunication Services	0.9	0.9
	Utilities	-	0.1
Total equities		99.0	97.1
Net current assets		1.0	2.9
Total assets		100.0	100.0

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

Notes to the Condensed Financial Statements (unaudited)

3.    

3.    

3.    

3.    

3.    

3.    

There are no dilutive or potentially dilutive shares in issue.

1.	The Financial Statements for the year to 31 July 2016 have been prepared in accordance with The Financial Reporting Standard applicable in the UK and Republic of Ireland ('FRS 102') which the Company must adopt for its financial year ending 31 July 2016. Following the application of the new reporting standard and the AIC's issued Statement of Recommended Practice, there has been no change in the Company's Income Statement, Balance Sheet or Statement of Changes in Equity (previously called the Reconciliation of Movements in Shareholders' Funds) from the period previously reported. The Cash Flow Statement reflects the presentational requirements of FRS 102, which are different to FRS 1. In addition, the Cash Flow Statement reconciles to cash and cash equivalents whereas under previous UK GAAP the Cash Flow Statement reconciled to net funds/debt. The Company has already adopted the amendments to Section 34 of FRS 102 regarding fair value hierarchy disclosures. 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 continuation of the Company every five years, the next vote being in 2016. The Directors have no reason to believe that the continuation resolution will not be passed this year. 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 a period of at least twelve months from the date of approval of these Financial Statements. 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 2016 £'000			31 July 2015                      (audited) £'000
2.	Income from financial assets designated at fair value through profit or loss
	Listed overseas dividends	1,331			1,886
		1,331			1,866
3.	The Company has appointed Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford & Co, as its Alternative Investment Fund Manager (AIFM) and Company Secretaries. Baillie Gifford & Co Limited has delegated portfolio 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. The annual management fee payable is 0.95% on the first £50m of net assets and 0.65% on the balance. Management fees are calculated and payable on a quarterly basis.
4.			31 July 2016 £'000	31 July 2015 (audited) £'000
	Net return per ordinary share
	Revenue return on ordinary activities after taxation		(182)	231
	Capital return on ordinary activities after taxation		14,554	(660)
	Total return		14,372	(429)
	Weighted average number of ordinary shares in issue		60,007,258	66,526,663
	The figures for net return per ordinary share 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)

8.    

Previous year's final (paid 11 November 2015)

5.	Ordinary Dividends	31 July 2016	31 July 2015 (audited)	31 July 2016 £'000	31 July 2015 (audited) £'000
	Amounts recognised as distributions in the year:	0.35p	1.40p	222	982
	Also set out below are 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. There is no revenue for distribution by way of dividend for the year (31 July 2016 - revenue loss of £182,000; 2015 - revenue gain of £231,000).
	Ordinary Dividends	31 July 2016	31 July 2015 (audited)	31 July 2016 £'000	31 July 2015 (audited) £'000
	Amounts paid and proposed in respect of the financial year: Proposed final dividend per ordinary share (payable 11 November 2016)	0.35p	0.35p	200	222
	If approved, the recommended final dividend of 0.35p per ordinary share for the year ended 31 July 2016 will be paid on 11 November 2016 to shareholders on the register at the close of business on 14 October 2016. The ex-dividend date is 13 October 2016. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for elections for this dividend is 21 October 2016.
6.	The Company has a one year £10 million multi-currency revolving credit facility with The Royal Bank of Scotland Plc (2015 - one year £14 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 (2015 - £20 million one year uncommitted, unsecured floating rate revolving credit facility with The Bank of New York Mellon). At 31 July 2016 there were outstanding drawings of £5,000,000, at an interest rate of 1.02906% (2015 - £10,500,000 and US$5,456,850 at interest rates of 0.97188% and 0.68625% per annum respectively) under The Royal Bank of Scotland Plc facility. There were no drawings under The Bank of New York Mellon facility at either date. The main covenant relating to the loan is that borrowings should not exceed 20% of the Company's net asset value. There were no breaches in the loan covenants during the year.
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 net asset value, less costs, in the event that the discount averaged more than 9% during the six months period to 31 January and 31 July in the years 2014, 2015 and 2016. The Board implemented a 5% tender offer in October 2015 and April 2016 in respect of the tender periods to 31 July 2015 and 31 January 2016. Through the exercise of both of these tenders during the year, the Company bought back a total of 6,170,662 (31 July 2015 - 6,837,299) ordinary shares at a total cost of £11,618,000 (2015 - £14,336,000). The nominal value of these shares was £617,000 and represented 9.75% of the issued share capital at 31 July 2016. At 31 July 2015 the Company had authority to buy back a further 9,012,649 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 2016 no shares were issued.
8.	The Company incurred transaction costs on purchases of £46,000 (2015 - £157,000) and on sales of £133,000 (2015 - £239,000), being £179,000 (2015 - £396,000) in total.

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

9.

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 July 2016. The financial information for 2015 is derived from the statutory accounts for 2015. Those accounts have been delivered to the Registrar of Companies. The Auditors have reported on the 2015 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 2016 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 29 September 2016.

‡      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 £132.7 million (before deduction of loans of £5 million) at 31 July 2016.

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 public listed company and is not authorised or regulated by the Financial Conduct Authority. 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 on 9 November 2016. 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.

9 September 2016

For further information please contact:

Anzelm Cydzik,

Baillie Gifford & Co                               0131 275 2000

Roland Cross, Account Director,

Broadgate Marketing                                             0203 697 4200 or 07831 401309

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