Half Yearly Report

RNS Number : 6804N

Pacific Horizon Investment Tst PLC

20 February 2009

 



PACIFIC HORIZON INVESTMENT TRUST PLC

Results for the six months to 31 January 2009

In the six months to 31 January 2009, the Company's net asset value per share declined by 32.3% whilst the MSCI All Country Far East ex Japan Index in sterling terms declined by 21.3%.

	Performance suffered due to positions in companies exposed to Shipping, Shipbuilding and Offshore oil & gas exploration along with a position in Bakrie & Brothers.
	Chinese growth, although remaining at a relatively high level, has slowed and regional trade has suffered significantly from the global reduction in demand for goods.
	Markets across the region have been, and are expected to remain, volatile. This volatility is presenting opportunities to buy companies with sound business models and long term competitive advantages at attractive valuations.
	The Company remained ungeared during the period with cash representing 5.6% of the portfolio, as at period end, compared to 5.2% as at 31 July 2008.
	Over the period the Company's share price declined by 36.2% moving from a 3.8% to 9.2% discount to net asset value.
	Earnings per share for the six months of 1.33p were up 129.3% on the same period last year. This was due largely to sterling weakness against local currencies and income from investment in convertible securities. As in previous years, no interim dividend will be paid.
	As at 1 February 2009, Mike Gush has become sole Portfolio Manager and Gerald Smith has been appointed to the Board.

Past performance is not a guide to future performance. The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. This is because the share price is determined by the changing conditions in the relevant stockmarkets in which the Company invests and by the supply and demand for the Company's shares. You can find up to date performance information about Pacific Horizon Investment Trust PLC at www.pacifichorizon.co.uk.

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 £71million.

Baillie Gifford & Co, the Edinburgh based fund management group with around £40 billion under management and advice, as at 20 February 2009, is appointed as investment managers and secretaries to Pacific Horizon. 

20 February 2009

• ends - 

For further information please contact:

Anzelm Cydzik

Baillie Gifford & Co                              0131 275 3276

Roland Cross, Director,

Broadgate Marketing                            020 7726 6111

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

to 31 January 2009

PACIFIC HORIZON INVESTMENT TRUST PLC

Half-Yearly Financial Report 31 January 2009

Responsibility Statement

We confirm that to the best of our knowledge:

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

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

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

By order of the Board

Peter Mackay

Chairman

      20 February 2009

PACIFIC HORIZON INVESTMENT TRUST PLC

Half-Yearly Management Report

Results

In the six months to 31 January 2009 the net asset value per share fell 32.3% to 90.88p. Over the same period the MSCI All Country Far East ex Japan Index fell 21.3% in sterling terms. 

Performance of regional markets was disappointing during the period, and even with the benefit of significant sterling weakness negative returns were recorded everywhere. Malaysia, the Philippines and Thailand were the best performing markets with falls (in sterling terms) of 5.7%, 9.3% and 14.9% respectively. This contrasts with falls of 36.5% in Indonesia and 26.5% in Korea. These headline numbers mask significant volatility in individual stocks and markets.  

Performance of the portfolio during this period has been unsatisfactory for a number of reasons. First, the large positions in companies exposed to shipping, shipbuilding and offshore oil & gas exploration have been particularly damaging. This is principally due to a much weaker global economic outlook than had been expected. Second, the trust suffered some stock specific issues. Notably the holding in Bakrie & Brothers turned out to be an expensive mistake. Finally, it is worth noting that several of the poorest performers over the period in question were some of the strongest performing stocks in previous periods, although this does little to temper our disappointment. On a more positive note our purchases of a number of convertible securities during the period did help performance.

Economic fundamentals have continued to deteriorate whilst previous concerns over inflation have abated for the time being. Governments have reacted quickly to the worsening economic environment and large stimulus measures have been noteworthy features in almost all markets. An area of particular concern is regional trade, where many exporters have never experienced the impact of a simultaneous global slowdown before. Business conditions for these companies are tough at present, albeit valuations, in many instances, are already pricing in a very pessimistic scenario.  

The brightest spot in the region appears to be China. Whilst growth is slowing this should be kept at a relatively high level. A US$580bn stimulus package has been announced and this has been combined with a centrally mandated policy to loosen credit conditions. These factors should ensure a revival in economic activity. Other members of the greater China trio are not so fortunate. Hong Kong has suffered on two fronts - first, due to its proximity to the mainland's manufacturing base, and second due to its status as a leading global financial hub. Business conditions have deteriorated rapidly, and this has spread to lower levels of consumer confidence and weakness in the property market. Taiwan has different, although equally challenging, problems. External demand for its exports has evaporated, which has dire consequences for the technology-heavy market, and the financial sector has burdened itself by investing in more 'exciting' opportunities overseas.

PACIFIC HORIZON INVESTMENT TRUST PLC

Half-Yearly Management Report (Ctd)

Other markets worthy of comment are Korea and India. In Korea, the currency is perhaps the most notable feature with deteriorating economic conditions and the country's heavy reliance on exports causing a marked depreciation in the won. This depreciation was accentuated by a banking sector in dire straits, whose aggressive lending policies resulted in a 'dollar shortage'. This has now been largely resolved. India had rather different problems, with the economic situation actually better than most expected, because of lower commodity prices. The Satyam scandal shortly after Christmas shook Asian markets and has brought a great deal of focus on corporate governance issues in recent weeks.

Outlook

In the short term, the outlook for the economies of the Asia Pacific region is not good with a number of challenges to overcome.  External demand is expected to remain weak and there is a significant risk that corporate profitability will suffer as economies deteriorate. Share price volatility is likely to remain a feature. However, difficult though it may be to peer through the gloom and harder still to predict the timing of the recovery, there are reasons for optimism. Monetary policy has turned on a sixpence and is aggressively stimulatory; fiscal policy is being warmed up and has plenty of scope to expand; and inventory levels have been reduced significantly by the near-cessation of global trade in recent months. In the long term, the attractions of the Asia Pacific region remain intact, underpinned by structural factors that should deliver strong growth over many years to come. Currently the missing element appears to be consumer confidence; and this should start to pick up as stockmarkets commence their first tenuous steps in a positive direction. In the meantime, volatile markets present excellent opportunities to buy companies with sound business models and long term competitive advantages at attractive valuations. The Company remains ungeared with a reasonable cash balance and expects to be able to take advantage of opportunities created by further volatility in markets. 

By Order of the Board

Baillie Gifford & Co

        20 February 2009

PACIFIC HORIZON INVESTMENT TRUST PLC

INCOME STATEMENT

(unaudited)

	for the six months ended 31 January 2009				for the six months ended 31 January 2008				for the year ended 31 July 2008
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
Realised (losses)/gains on investments	-	(8,701)	(8,701)		-	13,725	13,725		-	19,589	19,589
Changes in fair value	-	(26,307)	(26,307)		-	(22,765)	(22,765)		-	(45,667)	(45,667)
Currency gains/(losses)	-	968	968		-	(3)	(3)		-	(51)	(51)
Income from investments and interest receivable	1,903	-	1,903		1,450	-	1,450		3,602	-	3,602
Investment management fee	(334)	-	(334)		(679)	-	(679)		(1,249)	-	(1,249)
Recovered VAT	-	-	-		-	-	-		9	-	9
Other administrative expenses	(125)	-	(125)		(146)	-	(146)		(263)	-	(263)
Net return before finance costs and taxation	1,444	(34,040)	(32,596)		625	(9,043)	(8,418)		2,099	(26,129)	(24,030)
Finance costs of borrowings	-	-	-		-	-	-		-	-	-
Net return on ordinary activities before taxation	1,444	(34,040)	(32,596)		625	(9,043)	(8,418)		2,099	(26,129)	(24,030)
Tax on ordinary activities	(404)	-	(404)		(176)	-	(176)		(608)	-	(608)
Net return on ordinary activities after taxation	1,040	(34,040)	(33,000)		449	(9,043)	(8,594)		1,491	(26,129)	(24,638)
Net return per ordinary share (note 4)	1.33p	(43.48p)	(42.15p)		0.58p	(11.60p)	(11.02p)		1.91p	(33.49p)	(31.58p)
Note: Dividend paid and proposed per ordinary share (note 5)	-				-				1.30p

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

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

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

  PACIFIC HORIZON INVESTMENT TRUST PLC

BALANCE SHEET

 (unaudited)

	At 31 January 2009		At 31 January  2008		At 31 July  2008
	£'000		£'000		£'000
FIXED ASSETS
Investments held at fair value through profit or loss	67,145		117,282		99,696
CURRENT ASSETS
Debtors	212		614		382
Cash and short term deposits	4,430		3,597		5,709
	4,642		4,211		6,091
CREDITORS Amounts falling due within one year (note 6)	(608)		(829)		(541)
NET CURRENT ASSETS	4,034		3,382		5,550
TOTAL ASSETS LESS CURRENT LIABILITIES	71,179		120,664		105,246
PROVISIONS FOR LIABILITIES AND CHARGES Deferred taxation	(29)		(38)		(78)
	71,150		120,626		105,168
CAPITAL AND RESERVES
Called-up share capital	7,829		7,794		7,829
Share premium	3,166		2,615		3,166
Special distributable reserve	13,233		13,233		13,233
Capital redemption reserve	17,964		17,964		17,964
Capital reserve	25,097		76,223		59,137
Revenue reserve	3,861		2,797		3,839
EQUITY SHAREHOLDERS' FUNDS	71,150		120,626		105,168

NET ASSET VALUE PER ORDINARY SHARE	90.88p	154.77p	134.34p
ORDINARY SHARES IN ISSUE (note 7)	78,287,002	77,937,002	78,287,002

    PACIFIC HORIZON INVESTMENT TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited)

For the six months ended 31 January 2009

	Called-up share capital £'000	Share premium £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Capital Reserve Realised    Unrealised   £'000                   £'000		Revenue reserve £'000	Equity shareholders' funds £'000
Shareholders' funds at 1 August 2008	7,829	3,166	13,233	17,964	45,797	13,340	3,839	105,168
Net return on ordinary activities after taxation	-	-	-	-	(7,733)	(26,307)	1,040	(33,000)
Shares issued in the period (note 7)	-	-	-	-	-	-	-	-
Dividends paid during the period (note 5)	-	-	-	-	-	-	(1,018)	(1,018)
Shareholders' funds at 31 January 2009	7,829	3,166	13,233	17,964	38,064	(12,967)	3,861	71,150

For the six months ended 31 January 2008

	Called-up share capital £'000	Share premium £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Capital Reserve Realised     Unrealised   £'000                 £'000		Revenue reserve £'000	Equity shareholders' funds £'000
Shareholders' funds at 1 August 2007	7,794	2,615	13,233	17,964	26,259	59,007	3,205	130,077
Net return on ordinary activities after taxation	-	-	-	-	13,722	(22,765)	449	(8,594)
Shares issued in the period (note 7)	-	-	-	-	-	-	-	-
Dividends paid during the period (note 5)	-	-	-	-	-	-	(857)	(857)
Shareholders' funds at 31 January 2008	7,794	2,615	13,233	17,964	39,981	36,242	2,797	120,626

For the year ended 31 July 2008

	Called-up share capital £'000	Share premium £'000	Special distributable reserve £'000	Capital redemption reserve £'000	Capital Reserve Realised     Unrealised          £'000            £'000		Revenue reserve £'000	Equity shareholders' funds £'000
Shareholders' funds at 1 August 2007	7,794	2,615	13,233	17,964	26,259	59,007	3,205	130,077
Net return on ordinary activities after taxation	-	-	-	-	19,538	(45,667)	1,491	(24,638)
Shares issued in the period (note 7)	35	551	-	-	-	-	-	586
Dividends paid during the period (note 5)	-	-	-	-	-	-	(857)	(857)
Shareholders' funds at 31 July 2008	7,829	3,166	13,233	17,964	45,797	13,340	3,839	105,168

  PACIFIC HORIZON INVESTMENT TRUST PLC

CONDENSED CASH FLOW STATEMENT (unaudited)
	Six months to 31 January 2009	Six months to 31 January  2008			Year to 31 July  2008
	£'000			£'000		£'000
Net cash inflow from operating activities	2,281			621		1,740
Total tax paid	(226)			-		(549)
Net cash (outflow)/inflow from financial investment	(2,316)			2,115		3,071
Equity dividend paid (note 5)	(1,018)			(857)		(857)
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING	(1,279)			1,879		3,405
Proceeds from issue of shares (note 7)	-			-		586
(DECREASE)/INCREASE IN CASH	(1,279)			1,879		3,991
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
(Decrease)/increase in cash in the period	(1,279)			1,879		3,991
MOVEMENT IN NET FUNDS IN THE PERIOD	(1,279)			1,879		3,991
Net funds at start of the period	5,709			1,718		1,718
NET FUNDS AT END OF THE PERIOD	4,430			3,597		5,709
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	(32,596)			(8,418)		(24,030)
Losses on investments - securities	35,008			9,040		26,078
Currency (gains)/losses	(968)			3		51
Amortisation of fixed interest book cost	(140)			-		-
Changes in debtors and creditors	75			45		(182)
Realised currency gain/(loss)	968			(3)		(51)
Overseas tax suffered	(66)			(46)		(126)
NET CASH INFLOW FROM OPERATING ACTIVITIES	2,281			621		1,740

  PACIFIC HORIZON INVESTMENT TRUST PLC  

THIRTY LARGEST HOLDINGS  at 31 January 2009 (unaudited)

Name	Country	Business	Market value £'000	% of total assets†
Taiwan Semiconductor Manufacturing	Taiwan	Semiconductor manufacturer	2,947	4.1
Pacific Basin Shipping *	Hong Kong and China	Shipping company	2,548	3.6
Samsung Electronics	Korea	Semiconductor manufacturer	2,527	3.6
CNPC Hong Kong	Hong Kong and China	Oil and gas exploration and production	2,198	3.1
Singapore Exchange	Singapore	Stock exchange	2,005	2.8
PT Telekomunikasi	Indonesia	Diversified telecommunications provider	1,935	2.7
Hang Seng Bank	Hong Kong and China	Banking services	1,806	2.5
Parkson Holdings	Malaysia	Department store owner and operator	1,792	2.5
ASM Pacific Technology	Hong Kong and China	Semiconductor equipment manufacturer	1,738	2.5
Li & Fung	Hong Kong and China	Supply chain management	1,722	2.4
ZTE	Hong Kong and China	Telecommunications equipment provider	1,647	2.3
China Unicom	Hong Kong and China	Diversified telecommunications provider	1,594	2.2
CNOOC	Hong Kong and China	Oil and gas exploration and production	1,529	2.1
Lonking *	Hong Kong and China	Infrastructure machinery manufacturer	1,522	2.1
Thoresen Thai Agencies *	Thailand	Shipping company	1,423	2.0
Digi.com	Malaysia	Wireless telecommunications provider	1,399	2.0
China Mobile	Hong Kong and China	Wireless telecommunications provider	1,391	2.0
MobileOne	Singapore	Wireless telecommunications provider	1,349	1.9
China Resources Enterprise	Hong Kong and China	Consumer conglomerate	1,232	1.7
Hon Hai Precision Industries	Taiwan	Electronic manufacturing services company	1,198	1.7
Kuala Lumpur Kepong	Malaysia	Palm oil producer and refiner	1,162	1.7
Hyunjin Materials	Korea	Industrial machinery manufacturer	1,160	1.6
China National Building Material	Hong Kong and China	Building materials manufacturer	1,041	1.5
Ayala Corp	Philippines	Investment holding company	1,028	1.5
Samsung Heavy Industries	Korea	Shipbuilder	1,027	1.5
China High Speed *	Hong Kong and China	Transmission system manufacturer	1,024	1.4
SK Telecom	Korea	Wireless telecommunications provider	1,020	1.4
CapitaMall Trust	Singapore	Real estate investment trust	987	1.4
Dongfang Electric	Hong Kong and China	Power equipment manufacturer	955	1.3
IOI Resources *	Malaysia	Palm oil producer and refiner	930	1.3
			45,836	64.4

All stocks are listed overseas.

† Total assets less current liabilities and deferred tax.

* Holding wholly or partly in convertible bonds.

PACIFIC HORIZON INVESTMENT TRUST PLC

DISTRIBUTION OF ASSETS

 (unaudited)

		At 31 January 2009 %		At 31 January 2008 %		At 31 July  2008 %
Equities*:	Hong Kong and China	39.4		35.4		30.4
	Korea	11.8		15.2		16.1
	Singapore	11.6		11.0		14.3
	Taiwan	9.5		11.2		9.0
	Malaysia	8.3		5.7		7.9
	Thailand	4.2		3.1		5.7
	Indonesia	3.8		6.1		4.7
	India	2.7		5.5		3.6
	Vietnam	1.6		1.9		1.4
	Philippines	1.5		2.1		1.7
Total equities		94.4		97.2		94.8
Net liquid assets		5.6		2.8		5.2
Total assets †		100.0		100.0		100.0

† Total assets less current liabilities and deferred tax.

* Includes convertibles.

PACIFIC HORIZON INVESTMENT TRUST PLC

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited)

1. 2. 3.	The condensed set of financial statements for the six months to 31 January 2009 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Financial Statements at 31 July 2008 and in accordance with the ASB's Statement 'Half-Yearly Financial Reports' and have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'.  The financial information contained within this Half-Yearly Financial Report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the year ended 31 July 2008 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditors' Report on those accounts was not qualified and did not contain statements under the sections 237(2) or (3) of the Companies Act 1985. Related party transactions  Baillie Gifford & Co are employed by the Company as investment managers and secretaries under a management agreement which can be terminated on not less than 12 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 of the Company on the last day of that quarter.  Mr Gerald Smith, who was appointed as a Director of the Company on 1 February 2009, is a partner of Baillie Gifford & Co.
		Six months to 31 January 2009 £'000		Six months to  31 January  2008 £'000		Year to  31 July  2008 £'000
4.	Net return per ordinary share
	Revenue return	1,040		449		1,491
	Capital return	(34,040)		(9,043)		(26,129)
	Total return	(33,000)		(8,594)		(24,638)
	Weighted average number of ordinary shares in issue	78,287,002		77,937,002		78,025,936
	Net return per ordinary share is based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue.
5.	Dividends
	Amounts recognised as distributions in the period:
	Previous year's final dividend of 1.30p (2007 - 1.10p), paid 31 October 2008	1,018		857		857
	No interim dividend will be declared.
6.	The Company had no borrowings at 31 January 2009, 31 January 2008 or 31 July 2008.

  PACIFIC HORIZON INVESTMENT TRUST PLC

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

7.	The Company has authority to allot shares under section 80 of the Companies Act 1985. In the six months to 31 January 2009 and the six months to 31 January 2008 no shares were issued. In the year to 31 July 2008 a total of 350,000 ordinary shares of 10p each fully paid were issued for cash amounting to £586,000. The Company has authority to buy back its ordinary shares. The authority was last renewed at the Annual General Meeting in October 2008. In the six months to 31 January 2009 no ordinary shares were bought back. As a result, at 31 January 2009, the Company's authority to buy back shares remains unchanged at 11,735,221 ordinary shares.
8.	During the period, transaction costs on purchases amounted to £44,000 (31 January 2008 - £70,000; 31 July 2008 - £129,000) and transaction costs on sales amounted to £65,000 (31 January 2008 - £88,000; 31 July 2008 - £173,000).
9.	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.
10.	Principal Risks and Uncertainties The principal risks facing the Company relate to the Company's investment activities. These risks are market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. Other risks facing the Company include the following: the risk that the discount can widen and regulatory risk (that the loss of investment trust status or a breach of the UKLA Listing Rules could have adverse financial consequences and cause reputational damage). An explanation of these risks and how they are managed is contained in note 20 of the Company's Annual Report and Accounts for the year to 31 July 2008. Since then, the volatility of the Company's net asset value has increased with the volatility of share prices. The Annual Report can be obtained free of charge from Baillie Gifford & Co and is available on the Pacific Horizon page of the Managers' website: www.pacifichorizon.co.uk.
11.	The Half-Yearly Financial Report is available at www.pacifichorizon.co.uk and will be posted to shareholders on or around 2 March 2009.

 

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