Final Results

RNS Number : 5873C

Pacific Horizon Investment Tst PLC

03 September 2008

 



PACIFIC HORIZON INVESTMENT TRUST PLC

Results for the year to 31 July 2008

For the year to 31 July 2008, Pacific Horizon's net asset value per share declined by 19.5% and the share price declined by 24.7%. The Company's comparative index, the MSCI All Country Far East ex Japan Index in sterling terms, declined by 12.7%.

	Performance suffered despite reducing exposure to expensively valued companies, increasing cash and holding a put option on the Hang Seng China Enterprises Index. Large falls in holdings that had previously performed well, notably, Vietnamese funds, Korean shipbuilders and Chinese companies listed in Hong Kong were the main detractors to performance.
	The Company had no gearing during the course of the year and there were only minor changes made to the distribution of assets by geography and industry.
	During the year a total of 350,000 shares were issued at a minimum premium of 5% to net asset value per share.
	An increased dividend of 1.30p is being recommended by the Board, a rise of 18.2%. Earnings per share for the year rose 31.7%.
	Although the near term outlook for companies is uncertain, valuations for many companies now appear attractive.
	As announced in July, Gerald Smith will be invited to join the Board on 1 February 2009, with Mike Gush becoming the sole portfolio manager. In the interim, Mike has become co-portfolio manager with Gerald to facilitate a smooth transition of responsibilities.

Past performance is no guarantee of future performance. The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. Investment in investment trusts should be regarded as long term. 

Pacific Horizon Investment Trust PLC (Pacific Horizon) aims to achieve capital growth through investment in the stockmarkets of the Asia-Pacific region (excluding Japan) and in the stockmarkets of the Indian Sub-continent. The Company has total assets of £105 million.

Pacific Horizon is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £53 billion under management and advice as at 2 September 2008.

3 September 2008

- ends -

For further information please contact:

Gerald Smith, Manager,

Baillie Gifford & Co                              0131 275 2000

Emma Murphy, Account Director,

Broadgate Marketing                            020 7726 6111

PACIFIC HORIZON INVESTMENT TRUST PLC

Chairman's Statement

Performance

In the year to 31 July 2008 net asset value per share fell by 19.5%, compared with a fall of 12.7% in the MSCI All Country Far East ex Japan Index in sterling terms. 

The performance over the Company's year was disappointing and can be mainly attributed to large falls in the value of holdings that had performed extremely well in prior periods. Notable among these were our holdings of Vietnamese funds, Korean shipbuilding companies and Chinese companies listed on the Hong Kong market. Early in the Company's year holdings of expensively valued companies were reduced, cash was raised and limited downside protection purchased in the form of put options on the Hang Seng China Enterprises Index (an index which measures the value of Chinese companies listed in Hong Kong). These steps proved inadequate, however, to insulate us against the full effects of a general fall in markets and the de-rating of a significant proportion of the stocks in our portfolio. In the first half of the year net asset value per share fell by 7.3%, compared with a fall of 5.2% in the comparative index. In the second half net asset value fell by a further 13.2% and the index by 8.0%. The Managers' report contained within the Annual Report gives a more detailed explanation, together with a summary of the performance of the principal markets in which the Company is invested and the Managers' comments on them.

There was no gearing during the year and at the year end net current assets were equal to 5.2% of shareholders' funds. As mentioned above, put options were purchased during the year in order to limit losses in the event of a large fall in the value of holdings of Chinese shares listed in Hong Kong for which this index is the best available proxy. The result of these operations was a net profit of £875,000. There were no options held at the year end.

Earnings per share rose by 31.7% to 1.91p from 1.45p for last year. The Board is recommending that a dividend of 1.30p should be paid, an increase of 18.2% from the 1.10p for the previous year.

Issue of Shares

Over the year the price of the Company's shares fell by 24.7% and moved from a 2.9% premium to net asset value at the end of the previous year to a discount of 3.8%. At times during the year the premium expanded to more than 5% and in April the Board authorised the issue of new shares at a premium of 5% under the mandate to issue shares granted by shareholders at the last Annual General Meeting. A total of 350,000 shares were issued in this way in order to enhance the asset value per share for existing shareholders and improve liquidity in the Company's shares. We will be asking shareholders to renew this authority at the forthcoming Annual General Meeting. 

PACIFIC HORIZON INVESTMENT TRUST PLC

Chairman's Statement (Continued)

Share buy-back 

During the year we did not buy back any shares but market conditions may change and it may be the case that it will at some point in the future be to the advantage of shareholders for the Company to repurchase and cancel shares. We will therefore be asking shareholders to renew the mandate to repurchase up to 14.99% of the outstanding shares at the forthcoming Annual General Meeting.  

Changes to Articles of Association

Following the introduction of the Companies Act 2006, a number of changes to the Articles of Association are proposed. These are detailed in the Appendix to the Notice of Annual General Meeting, with further information shown in the Directors' Report, both contained in the Annual Report and Accounts. 

Future change to the Board

In July the Board announced that Gerald Smith, a partner in Baillie Gifford & Co, who has been the manager of Pacific Horizon Investment Trust since 1995, will be appointed to the Board on 1 February 2009.

Owing to a rearrangement of duties within the Company's investment manager Baillie Gifford, Gerald will cease to be responsible for the Company's portfolio at that point but his appointment to the Board will enable the Company to continue to benefit from his experience and knowledge of the region's markets. He will be subject to annual re-election as a Director.

With effect from 1 February, Gerald's responsibility for the management of Pacific Horizon will transfer to his colleague Mike Gush, a member of the Emerging Markets Team at Baillie Gifford since 2005. Mike has recently become co-manager of the Pacific Horizon portfolio with Gerald, to facilitate a smooth transition to his becoming sole manager in February.

Outlook

Much of the region is suffering from problems created by rapid growth, most notably inflation. The rapid growth of the Chinese economy in particular has not been matched by an equally rapid expansion in the supply of many key commodities and this has been the main fundamental force behind the increase in the cost of energy and raw materials around the world. Despite price controls and subsidies which have shielded consumers from some of the effects of higher prices for basic commodities, inflation has accelerated in the majority of countries. It is arguable that interest rates have been too low and credit too readily available to prevent prices rising more generally. In response, the tendency has been for interest rates to be increased in order to dampen demand and prevent inflation from getting out of control, or to rein it back in where this has already happened.

PACIFIC HORIZON INVESTMENT TRUST PLC

Chairman's Statement (Continued)

Outlook (Continued)

In the current circumstances a moderation in the rate of global growth could prove to be beneficial. It might allow supply to catch up with demand and so either reduce, or significantly reduce the rate of increase in, commodity prices. This could mean that interest rates would not have to go up much more and markets could start to discount future decreases. There are risks, however, associated with slower growth, notably through the impact on the earnings of companies and the prosperity of workers. Should the slowdown in America turn into a severe recession or Chinese growth decelerate to the rates seen in the late 1990s, the impact on earnings might be such that the prospect of lower interest rates as a result would be of limited comfort. Alternatively, should growth fail to slow sufficiently, inflationary pressures will not abate and policymakers in the region will once again face a choice between inflicting pain today to control inflation or allowing inflation to accelerate leading to more pain tomorrow.

With the near term outlook dependent on factors that are hard to predict, some caution is warranted. The fall in share prices that has occurred over the last year has, however, brought the valuation of many companies down to levels that have been in the past followed by periods of above average long term returns. There is therefore good reason to be optimistic about the long term outlook.

Peter Mackay

Chairman

PACIFIC HORIZON INVESTMENT TRUST PLC

The following is the unaudited preliminary statement for the year to 31 July 2008 which was approved by the Board on 2 September 2008. The Directors of Pacific Horizon Investment Trust PLC are recommending to the Annual General Meeting of the Company to be held on 29 October 2008 the payment of a final dividend of 1.30p net (31 July 2007- 1.10p net) per ordinary share for the year ended 31 July 2008.

INCOME STATEMENT

(unaudited)

	For the year ended 31 July 2008				For the year ended 31 July 2007
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on investments	-	(26,078)	(26,078)		-	46,596	46,596
Currency (losses)/gains	-	(51)	(51)		-	13	13
Income from investments and interest receivable	3,602	-	3,602		3,031	-	3,031
Investment management fee  (note 2)	(1,249)	-	(1,249)		(1,052)	-	(1,052)
Recovered VAT	9	-	9		-	-	-
Other administrative expenses	(263)	-	(263)		(270)	-	(270)
Net return before finance costs and taxation	2,099	(26,129)	(24,030)		1,709	46,609	48,318
Finance costs of borrowings	-	-	-		(103)	-	(103)
Net return on ordinary activities before taxation	2,099	(26,129)	(24,030)		1,606	46,609	48,215
Tax on ordinary activities	(608)	-	(608)		(482)	-	(482)
Net return on ordinary activities after taxation	1,491	(26,129)	(24,638)		1,124	46,609	47,733
Net return per ordinary share (note 3)	1.91p	(33.49p)	(31.58p)		1.45p	60.17p	61.62p

  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.

PACIFIC HORIZON INVESTMENT TRUST PLC

BALANCE SHEET

 (unaudited)

	At 31 July 2008		At 31 July 2007
	£'000	£'000	£'000	£'000
FIXED ASSETS Investments held at fair value through profit or loss		99,696		128,845
CURRENT ASSETS
Debtors	382		288
Cash and short term deposits	5,709		1,718
	6,091		2,006
CREDITORS:  Amounts falling due within one year (note 5)	(541)		(721)
NET CURRENT ASSETS		5,550		1,285
TOTAL ASSETS LESS CURRENT LIABILITIES		105,246		130,130
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation		(78)		(53)
		105,168		130,077
CAPITAL AND RESERVES
Called-up share capital		7,829		7,794
Share premium		3,166		2,615
Special distributable reserve		13,233		13,233
Capital redemption reserve		17,964		17,964
Capital reserve		59,137		85,266
Revenue reserve		3,839		3,205
EQUITY SHAREHOLDERS' FUNDS		105,168		130,077

NET ASSET VALUE PER ORDINARY SHARE	134.34p	166.90p
Ordinary shares in issue (note 6)	78,287,002	77,937,002

PACIFIC HORIZON INVESTMENT TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited)

For the year ended 31 July 2008 

	Note	Called-up share capital £'000	Share premium  £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Capital reserve  £'000	Revenue reserve £'000	Equity shareholders' funds £'000
Shareholders' funds at 1 August 2007		7,794	2,615	13,233	17,964	85,266	3,205	130,077
Net return on ordinary activities after taxation		-	-	-	-	(26,129)	1,491	(24,638)
Shares issued in the year	6	35	551	-	-	-	-	586
Dividends paid during the year	4	-	-	-	-	-	(857)	(857)
Shareholders' funds at 31 July 2008		7,829	3,166	13,233	17,964	59,137	3,839	105,168

For the year ended 31 July 2007 

	Note	Called-up share capital £'000	Share premium  £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Capital reserve £'000	Revenue reserve £'000	Equity shareholders' funds £'000
Shareholders' funds at 1 August 2006		7,649	965	13,233	17,964	38,657	2,922	81,390
Net return on ordinary activities after taxation		-	-	-	-	46,609	1,124		47,733
Shares issued in the year	6	145	1,650	-	-	-	-		1,795
Dividends paid during the year	4	-	-	-	-	-	(841)		(841)
Shareholders' funds at 31 July 2007		7,794	2,615	13,233	17,964	85,266	3,205		130,077

PACIFIC HORIZON INVESTMENT TRUST PLC

CASH FLOW STATEMENT (unaudited)
		For the year ended 31 July 2008			For the year ended 31 July 2007
	Note	£'000	£'000		£'000		£'000
NET CASH INFLOW FROM OPERATING ACTIVITIES				1,740			1,486
SERVICING OF FINANCE
Interest paid		-				(192)
NET CASH OUTFLOW FROM SERVICING OF FINANCE				-			(192)
TAXATION
Corporation tax paid		(549)				(357)
TOTAL TAX PAID				(549)			(357)
FINANCIAL INVESTMENT
Acquisitions of investments		(67,549)				(35,542)
Disposals of investments		70,620				39,817
NET CASH INFLOW FROM FINANCIAL INVESTMENT				3,071			4,275
EQUITY DIVIDEND PAID	4			(857)			(841)
NET CASH INFLOW BEFORE FINANCING				3,405			4,371
FINANCING
Shares issued	6	586				1,795
Loans repaid		-				(7,408)
NET CASH INFLOW/(OUTFLOW) FROM FINANCING				586			(5,613)
INCREASE/(DECREASE) IN CASH				3,991			(1,242)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT)
Increase/(decrease) in cash in the year				3,991			(1,242)
Cash outflow from movement in bank loans				-			7,408
Exchange movement on bank loans				-			173
MOVEMENT IN NET FUNDS IN THE YEAR				3,991			6,339
NET FUNDS/(DEBT) AT 1 AUGUST				1,718			(4,621)
NET FUNDS AT 31 JULY				5,709			1,718
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				(24,030)			48,318
Losses/(gains) on investments - securities				26,078			(46,596)
Currency losses/(gains)				51			(13)
(Increase)/decrease in accrued income				(151)			20
Decrease/(increase) in debtors				46			(9)
(Decrease)/increase in creditors				(77)			85
Realised currency loss				(51)			(160)
Overseas tax suffered				(126)			(159)
NET CASH INFLOW FROM OPERATING ACTIVITIES				1,740			1,486

PACIFIC HORIZON INVESTMENT TRUST PLC  

THIRTY LARGEST EQUITY HOLDINGS at 31 July 2008 (unaudited)

Name	Country	Business	Value £'000	% of total assets ‡
Pacific Basin Shipping	Hong Kong	Shipping company	5,122	4.9
Taiwan Semiconductor Manufacturing	Taiwan	Semiconductor manufacturer	2,925	2.8
ASM Pacific Technology	Hong Kong	Semiconductor equipment manufacturer	2,917	2.8
SFA Engineering	Korea	Engineering company	2,904	2.8
Thoresen Thai Agencies	Thailand	Shipping company	2,851	2.7
Hyunjin Materials	Korea	Industrial machinery manufacturer	2,802	2.7
Bakrie and Brothers	Indonesia	Indonesian conglomerate	2,764	2.6
Samsung Heavy Industries	Korea	Shipbuilder	2,730	2.6
Dongfang Electric	China	Power equipment manufacturer	2,614	2.5
CNPC Hong Kong	Hong Kong	Oil and gas exploration and production	2,392	2.3
China Infrastructure Machinery    Holdings	Hong Kong	Infrastructure machinery manufacturer	2,205	2.1
Hang Seng Bank	Hong Kong	Banking services	2,126	2.0
Singapore Exchange	Singapore	Stock exchange	2,121	2.0
Hon Hai Precision Industries	Taiwan	Electronic manufacturing services    company	2,106	2.0
Sime Darby Berhad	Malaysia	Investment holding company	2,056	2.0
Parkson Holdings	Malaysia	Department store owner and operator	2,021	1.9
Hidili Industry International     Development	Hong Kong	Coal producer	1,848	1.8
Li & Fung	Hong Kong	Supply chain management	1,670	1.6
Hong Kong Exchanges and Clearing	Hong Kong	Stock exchange	1,629	1.5
KS Energy Services	Singapore	Oil services	1,621	1.5
Mermaid Maritime Public	Thailand	Oil services	1,610	1.5
Unisteel Technology	Singapore	Precision engineering company	1,508	1.4
China Shipping Development	China	Shipping company	1,488	1.4
CapitaMall Trust	Singapore	Real estate investment trust	1,482	1.4
Hynix Semiconductor	Korea	Semiconductor manufacturer	1,440	1.4
Singapore Petroleum	Singapore	Oil refiner	1,420	1.4
Sembcorp Marine	Singapore	Shipbuilder	1,405	1.3
CNOOC	China	Oil and gas exploration and production	1,401	1.3
IOI	Malaysia	Palm oil producer and refiner	1,385	1.3
Samsung Fire & Marine	Korea	Non-life insurance provider	1,384	1.3
			63,947	60.8

All stocks are listed overseas.

‡ Total assets less current liabilities and deferred tax.

PACIFIC HORIZON INVESTMENT TRUST PLC

DISTRIBUTION OF ASSETS

 (unaudited)

		At 31 July  2008 %		At 31 July 2007 %
Equities*:	Hong Kong and China	30.4		34.8
	Korea	16.1		19.1
	Singapore	14.3		12.2
	Taiwan	9.0		11.6
	Malaysia	7.9		5.4
	Thailand	5.7		4.2
	Indonesia	4.7		4.6
	India	3.6		2.9
	Philippines	1.7		2.4
	Vietnam	1.4		1.9
Total equities		94.8		99.1
Net liquid assets		5.2		0.9
Total assets ‡		100.0		100.0

* Equities include warrants.

‡ Total assets less current liabilities and deferred tax.

PACIFIC HORIZON INVESTMENT TRUST PLC

NOTES (unaudited)
1.	The financial statements for the year to 31 July 2008 have been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at 31 July 2007. The Directors consider the Company's functional currency to be sterling as the Company's shareholders are predominantly based in the UK and the Company is subject to the UK's regulatory environment.
2.	Related party transactions
	The Directors' fees for the year are detailed in the Directors' Remuneration Report contained within the Annual Report. No Director has a contract of service with the Company. During the year no Director was interested in any contract or other matter requiring disclosure under section 232 of the Companies Act 1985. Baillie Gifford & Co are employed by the Company as Managers and Secretaries under a management agreement which is terminable on not less than twelve months' notice, or on shorter notice in certain circumstances. The fee in respect of each quarter is 0.25% of the total assets less current liabilities.
			2008 £'000					2007 £'000
3.	Net return per ordinary share
	Revenue return		1,491					1,124
	Capital return		(26,129)					46,609
	Total return		(24,638)					47,733
	Weighted average number of ordinary shares in issue		78,025,936					77,461,796
	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 each period. There are no dilutive or potentially dilutive shares in issue.
			2008	2007			2008		2007
							£'000		£'000
4.	Ordinary Dividends
	Amounts recognised as distributions in the period:
	Previous year's final (paid 29 October 2007)		1.10p	1.10p			857		841
	We 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 842 of the Income and Corporation Taxes Act 1988 are considered. The revenue available for distribution by way of dividend for the year is £1,491,000 (2007 - £1,124,000).
			2008	2007			2008		2007
							£'000		£'000
	Dividends paid and proposed in the period:
	Proposed final dividend per ordinary share (payable 31 October 2008)		1.30p	1.10p			1,018		857
	If approved, the proposed final dividend of 1.30p per ordinary share for the year ended 31 July 2008 will be paid on 31 October 2008 to shareholders on the register at the close of business on 10 October 2008. The ex-dividend date is 8 October 2008.

PACIFIC HORIZON INVESTMENT TRUST PLC

NOTES (Continued) (unaudited)
5.	The Company had no borrowings at 31 July 2008 or 31 July 2007.
6.	The Company has authority to allot shares under section 80 of the Companies Act 1985. The Board has authorised the use of this authority to issue new shares at a premium of not less than 5% in order to enhance the net asset value per share for existing shareholders and improve the liquidity of the Company's shares. In the year to 31 July 2008 a total of 350,000 (2007 - 1,450,000) ordinary shares of 10p each fully paid were issued for cash amounting to £586,000 (2007 - £1,795,000) of which £35,000 (2007 - £145,000) has been applied in increasing the share capital and £551,000 (2007 - £1,650,000) in increasing the share premium account. The Company has authority to buy back its ordinary shares. The authority was last renewed at the Annual General Meeting on 24 October 2007 in respect of 11,682,756 shares (equivalent to 14.99% of its issued share capital at that date). In the year to 31 July 2008 no ordinary shares were bought back. As a result at 31 July 2008 the Company's authority to buy back shares remains unchanged at 11,682,756 ordinary shares.
7.	The Company incurred transaction costs on purchases of £129,000 (2007 - £104,000) and on sales of £173,000 (2007 - £116,000).
8.	Principal risks and uncertainties
	The principal risks facing the Company relate to the Companies investment activities. These risks are market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Board monitors closely the Company's exposures to these risks but does so in order to reduce the likelihood of a permanent loss of capital rather than to minimise the short term volatility. Further information on these risks and how they are managed is contained in the Annual Report. In addition, breach of section 842 of the Income and Corporation Taxes Act 1988 could lead to the Company being subject to capital gains tax. The Managers monitor investment movements and the level of forecast income and expenditure to ensure the provisions of section 842 are not breached.
9.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 July 2008. The financial information for 2007 is derived from the statutory accounts for 2007. Those accounts have been delivered to the Registrar of Companies. The Auditors have reported on the 2007 accounts, their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2008 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.	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
11.	The Report and Accounts will be available on the Managers' website www.bailliegifford.com on or around 16 September 2008.

 

END

 

 

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