Pacific Assets Trust plc - Annual Report for the Year Ended 31 January 2025

LONDON STOCK EXCHANGE ANNOUNCEMENT

Pacific Assets Trust plc

(the “Company”)

Annual Results for the Year Ended 31 January 2025

The statements below are extracted from the Company’s annual report for the year ended 31 January 2025 (the “Annual Report”).  The Annual Report, which includes the notice of the Company’s forthcoming annual general meeting, will be submitted to the Financial Conduct Authority and will shortly be available in full, unedited text for inspection on the National Storage Mechanism (NSM): https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Annual Report will be posted to shareholders on 9 May 2025. Members of the public may obtain copies by writing to Frostrow Capital LLP, 25 Southampton Buildings, London WC2A 1AL or from the Company’s website at www.pacific-assets.co.uk where up to date information on the Company, including daily NAV, share prices and fact sheets, can also be found.

Frostrow Capital LLP, Company Secretary

0203 709 8734

30 April 2025

 

Company Performance

Performance Summary

 

1 Source: Morningstar

2 Alternative Performance Measure (see Glossary beginning on page 80).

3 The Company’s Performance Objective (see Glossary beginning on page 80).

4 See Glossary beginning on page 80.

Chair’s Statement

Introduction and Results

I am pleased to present this Annual Report for the year ended 31 January 2025. The Company’s net asset value total return for the year was 9.7% (2024: -1.3%), exceeding the performance objective of UK CPI + 6% which was 8.8% (2024: 10.4%).

While this is a good absolute return, which is the Company’s primary objective, the Company lagged the MSCI AC Asia ex Japan Index total return of 22.3%, and the Company’s bespoke peer group of four other trusts and an exchange traded fund. The year presented a number of challenges, in particular a strong market rally in China driven by stimulus measures and weaker performance in Indian equities towards the end of the year. Our portfolio is relatively underweight in China and overweight in India and so these conditions were not conducive to performance.

This performance is characteristic of Stewart Investors’ investment strategy, which typically leads the Company to underperform in sharply rising markets but has historically preserved capital during times of market stress; a particularly pertinent quality for investors to keep in mind today as global markets enter an increasingly volatile period. Capital preservation remains the Portfolio Manager’s primary focus and shareholders may recall that the Company’s performance in a weak market in 2023 was the best of the peer group, when overweight positioning in India and underweight allocation to China contributed to outperformance.

The Board also notes that, over the longer periods against which we assess investment return, the Company’s performance is the best within the peer group over three years and third over five years. We have not done so well, however, against the long-term performance objective: over the last five years, our annualised NAV total return of 8.7% is behind the UK CPI + 6% figure of 11.0%, reflecting the period of persistently high inflation in Western economies during that time.

Despite these headwinds, Stewart Investors remain optimistic about the prospects for finding high-quality companies with strong growth prospects in the Asia Pacific Region. One of the year’s key developments was our increasing exposure to China and Hong Kong, as our Portfolio Manager has been able to identify a greater number of strong businesses, with attractive valuations, in those jurisdictions.

The downturn in the Indian market, and the increasing fund flows into China, continued to affect the Company’s performance after the year end. The Company has also been impacted by the significant volatility caused by President Trump’s tariff announcements, along with the rest of the market. However, SI’s bottom-up approach to stock picking and long-term view ensures they stay focused on identifying high-quality, resilient companies, rather than simply following market trends. As you will read in their review, beginning on page 12, they continue to find good opportunities in India, as well as other markets.

The top two contributors to performance were, once again, Indian companies: Mahindra & Mahindra and CG Power and Industrial Solutions continue to be excellent investments for the Company. We note that Taiwanese companies also performed well, with four of the top ten contributors based in Taiwan. By contrast, South Korean companies performed poorly and the Portfolio Manager has sold Koh Young Technology, one of the top two detractors from performance.

Further analysis of the Company’s performance can be found in the Portfolio Manager’s Review beginning on page 12.

Share price performance

The Company’s shares traded at an average discount to the net asset value per share of 11.5% through the 12-month period to the end of January (2024: 6.4%). In line with the investment trust sector generally, the discount widened during the financial year to close at 14.4% (2024: 9.2%) and this is reflected in the Company’s share price total return of 3.7%, which fell short of the net asset value total return.

During the year, the Company repurchased 370,000 shares, at a total cost of £1.4 million, and at an average discount of 14.0%. The Company has continued to buy back shares since the year end and, at the time of writing, had repurchased a further 1,855,000 shares, at a cost of £6.3m, at an average discount of 13.0%. The Board continues to carefully weigh up the circumstances in which the Company should buy back shares in the market. We have been conscious that share buybacks have their drawbacks and are not always effective but we are prepared to take action when the discount widens materially.

Buybacks are an immediate way of addressing the share rating but the Board continues to believe that a combination of effective marketing and good performance offers the potential to improve the Company’s rating on a more sustained basis. Accordingly, the Sales, Marketing and Communications Committee, working together with the Portfolio Manager, has continued to develop and oversee the marketing and promotional strategy for the Company. During the year, the Board appointed Kepler Partners LLP to produce research on and provide PR services to the Company. We hope that this will be effective in increasing demand for the Company’s shares.

Investment Policy

Shareholders will be aware that the definition of ‘Asia Pacific Region’ in the Company’s investment objective currently excludes Australia, New Zealand and Japan. The Board reviews the Company’s investment objective and policy at every Board meeting and reviews the Company’s strategy annually. This year, following discussions with our AIFM and our Portfolio Manager, it was agreed to propose to shareholders that we broaden the Company’s investable universe by permitting investment in Australia and New Zealand. We also considered permitting investment in Japan but understand that many investors prefer to invest in that country on a standalone basis.

While there are a number of high-quality companies in Australia and New Zealand that Stewart Investors believe to be attractive, these companies are currently highly valued and consequently the proposed change is unlikely to result in many immediate new purchases and will not entail a material rebalancing of the portfolio. Nevertheless, this is considered to be a material change to the investment policy and therefore it will be put to shareholders at the forthcoming annual general meeting (“AGM”). Further information can be found on pages 101 to 108 of this report.

Dividend

The Company generated a revenue return of 5.3p per share during the year (2024: 4.3p per share) and, as a result, the Board recommends to shareholders the payment of a final dividend to ensure the Company complies with the investment trust rules regarding distributable income.

Subject to shareholder approval at the AGM, a final dividend of 4.9p per share will be paid on 11 July 2025 to shareholders on the register on 13 June 2025. The associated ex-dividend date will be 12 June 2025.

The Board

During the year, and as previously announced, we were very pleased to appoint June Ang as a non-executive director with effect from 26 September 2024. In addition, Nandita Sahgal became Chair of the Audit Committee as planned.

Having served on the Board for just over nine years now, Sian Hansen will retire at the AGM in July. On behalf of the Board, I would like to express our gratitude to Sian for her outstanding contribution to the Company during her tenure as a non-executive director. Sian’s insight, sound judgement and unwavering commitment have been invaluable in guiding the Company through key challenges. We will miss her presence on the Board and wish her the very best for the future.

Following Sian’s retirement, June Ang will take over as Chair of the Engagement and Remuneration Committee.

Management

David Gait has ably led the Company’s investment management team since Stewart Investors’ appointment 15 years ago, with Douglas Ledingham as the co-manager for almost seven years. It has been agreed that, with effect from 1st July 2025, David will hand over the lead portfolio manager role to Douglas whilst continuing to play an integral role as co-portfolio manager (as well as head of the investment team at Stewart Investors). This swapping of roles is a natural evolution in the management of the Company and reflects Stewart Investors’ focus on team development and long-term succession planning. There are also practical advantages of having the lead manager based in the UK, to facilitate the opportunity for more regular and direct engagement with the Board and shareholders. This initiative by Stewart Investors has the full backing of the Board and we are confident that this will be a seamless transition, ensuring both the continuity of the investment strategy and depth of experience.

The Annual General Meeting

After holding our AGM in Edinburgh last year, this year the AGM will return to London. The AGM will be held at 12 noon on Tuesday, 1 July 2025, at the offices of Stewart Investors, Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB.

As well as the formal proceedings, there will be an opportunity for shareholders to meet the Board and the Portfolio Manager, and to receive an update on the Company’s performance and its key investments.

The meeting, including the Portfolio Manager’s presentation, will again be live streamed by Investor Meet Company for the benefit of those shareholders who are unable to attend in person. Shareholders joining the meeting remotely will not be able to speak or vote but will be able to submit questions via the platform and vote in advance of the meeting in the usual way. Full details of how to participate this way are set out on page 99.

I encourage all shareholders to exercise their right to vote at the AGM. The Board strongly encourages shareholders to register their votes online in advance (information on how to vote can be found on page 99). Registering your vote in advance will not restrict shareholders from attending and voting at the meeting in person should they wish to do so. The Board recommends that shareholders vote in favour of all the resolutions set out in the Notice of AGM, beginning on page 101, as the directors intend to do ourselves.

Outlook

The outlook for the Asia Pacific Region has become more uncertain following renewed trade tensions, in particular between the United States and China, prompted by the recent tariff announcements from the Trump administration. While the region had been expected to see modest economic growth supported by easing inflation and proactive monetary policies, the re-emergence of a trade war poses fresh challenges to supply chains, investor sentiment, and export-led growth.

While long-term opportunities persist—particularly in areas aligned with sustainable development—our Portfolio Manager’s investment approach will need to account for heightened geopolitical risk and potential market dislocations. Their focus will continue to be on selecting high-quality companies with strong fundamentals, resilient balance sheets, and capable management teams that can navigate volatility and adapt to a more fragmented global trade environment.

Our Portfolio Manager’s long-term investment horizon, careful risk management, and commitment to engaging actively with portfolio companies remain their key strengths. The Board continues to believe their approach is well-suited to delivering sustainable value for shareholders, even in a more complex and fast-evolving regional landscape.

 

Andrew Impey
Chair

29 April 2025

Investment Portfolio

as at 31 January 2025

 

 

 

Portfolio Manager’s Review

Over the year to 31 January 2025, the net asset value of the Company returned 9.7%. As a reference, the MSCI AC Asia ex Japan Index (the ‘Index’) return was 22.3% over the same period.

The performance was in keeping with the characteristic outcome of our investment philosophy. Historically, we trail rapidly rising markets but preserve capital better than others when markets are weak.

During the period, the Chinese government announced a stimulus package that resulted in a large and swift appreciation from the market as a whole and lower quality companies which are financially strained in particular. We do not invest in lower quality companies. This, along with some weakness in Indian equities towards the end of the year, created a challenging environment for performance.

More specific details on performance are in the Contributors and Detractors sections.

Investing in China and India

Over the last decade critics of the Company’s management have, from time to time, focused on a ‘failure to allocate’ capital to China. Typically, this criticism is greatest after a rapid appreciation in Chinese equity prices following a change in government policy or economic stimulus. Generally, the criticism ebbs as the China rally fades. We have experienced this at least three times over the years. It should be noted that a historic ‘failure to allocate’ to China has been beneficial for shareholders. Moreover, this criticism is increasingly unfounded.

Today, the Company is invested in a greater number of high-quality Chinese businesses than ever before. As little as five years ago the Company invested in only one company in China, or 0.6% of shareholder funds. As at the end of this period the Company is invested in eight Chinese companies which amount to 10.4% of shareholder funds. This is a considerable change over a short period of time. Moreover, this understated the true position in China. When the Company’s geographic outcome by revenue is considered, the ‘allocation to China’ is almost double that amount. Companies such as Vitasoy (Hong Kong: Consumer Staples), AirTAC International (Taiwan: Industrials), Silergy (Taiwan: Information Technology) and Unicharm (Japan: Consumer Staples) all have substantial businesses and revenues from China.

The reason we are finding more investments in China is due to attractive valuations not a decrease in our quality standards. High quality people, franchises and financials exist in China, and at attractive valuations. It is valuation which explains why we have been trimming some investments in India and adding to some high-quality companies in China. Despite the contrasting economic fortunes, we are finding new exciting investments in both China and India. This is because we invest in companies not countries. Dongguan Yiheda Automation (China: Industrials) and Sundaram Finance (India: Financials) are two of the latest investments.

Dongguan Yiheda Automation is a one-stop supply chain solution for factory automation across China. Last year they shipped 3.3 million items with an average price of USD$3.50. This is not a robot company, it supplies essential items to manufacturing companies, that need to automate, in a timely and cost-effective manner. The ageing population and falling workforce combined with the low penetration of automation in China are compelling long-term tailwinds here.

We first met the company in 2021 and noted high-quality owner/founder/manager stewards who exhibited intentions to build a strong franchise in the long term rather than a speedy enrichment programme. The market capitalisation after the initial public offering (“IPO”) in 2021 peaked around US$6 billion on a price-earnings ratio of over 100 times. After studying and meeting the company we recognised that it was vulnerable to cyclical end demand. This has impacted the rating severely, even though the absolute amount of net income has grown every year since listing. Today, the company has $179 million of net cash on the balance sheet and makes cyclically depressed gross margins of 35%1. We recently invested in Dongguan Yiheda when the market capitalisation was two-thirds off peak levels and the price earnings ratio was in the low twenties. Dongguan Yiheda may have to continue to endure some cyclical challenges but the long-term opportunity for growth is extremely attractive.

A recent visit to Chennai in the state of Tamil Nadu reacquainted us with Sundaram Finance, an extremely high-quality non-banking financial company. Sundaram Finance is a deposit-taking institution that has been trusted by over three generations of savers. The company proudly showcases its charter – the Sundaram Way2 - on the wall of each meeting room. The Sundaram Way consists of nine idioms and each is compelling but it was the final idiom that resonated most: “to know that we are not merely the holders of people’s money; but more importantly the custodians of their trust”.

Trust is key in finance – not only for deposit taking but also to lend or invest. We met the new managing director of this family-owned franchise, Rajiv Lochan. His curriculum vitae of experience was as impressive as his humility and competence. Rajiv trained at American Express before becoming a partner at McKinsey for 12 years. After a brief stint running a newspaper, he answered the call of his family friends to step up and run Sundaram Finance. Under his guidance we are confident that Rajiv will increase the growth part of the firm’s holy trinity: ‘quality, profitability and growth’. Such is his personal commitment to the organisation and the scale of the under-penetration of financial services that we were able to enjoy conversations about how the firm may look in 2040. It is this sort of meeting that makes the head and tummy ache of travel in India so rewarding, and the outlook for the Company’s investments so bright.

1 Stewart Investors, Bloomberg 24 February 2025

2 https://www.sundaramfinance.in/sundaram-way

China requires four rather than three golden rules

We have four golden rules when investing in China, compared with our normal three. First, the company must meet our quality requirements of management, franchise and financials. A growing number of listed Chinese companies are meeting these requirements. Second, they must be well positioned to contribute to China’s sustainable development. On this, we are particularly well aligned with the Chinese Government in almost all aspects of sustainable development. Sustainability talk is cheap, but very few countries have walked the walk as purposefully or far as China in terms of reorientating development toward a genuine sustainable path. Human rights risk is the clear and present exception. We try to navigate this challenge with an approach based on individual companies. Third, valuations must be attractive. The prolonged sell-off in Chinese assets has brought many companies back to attractive levels. We believe despite the recent bounce-from-the-bottom, valuations are still reasonable, particularly when factoring in a recovery in earnings.

Our fourth “China-specific” golden rule is the need to form a view on the Chinese Government’s “allowable return” for a particular company. This tries to capture the idea that in China, returns can erode not just with new capital and competition entering a market, but with a change of strategic view by the Chinese Government. In other words, all Chinese companies are actively regulated by the Chinese Government, whether they sell soy sauce, build toll roads or connect small businesses with consumers via online shopping platforms. Over the past decade or so, the Chinese Government appears to have taken a much more proactive approach to allowable return, built on their goals and ambitions. Great companies are not just tolerated by Beijing but embraced and encouraged as part of the development solution, but excess returns are only acceptable to facilitate national development. In order to earn extended supernormal returns in China, not only must companies have sound business fundamentals, they must also be operating in the “build-out” phase of industries of national importance, as decided by the government. The Chinese Government has been notably transparent in spelling out just what these industries are, with clear long-term development plans reaching out to 2035 and beyond.

Investing in a world of “allowable” or “capped” returns comes with challenges of its own and we are still learning. Long-term sustainable development alignment is a critical first step, but looking through a “toll-road” lens is also helpful. By this we mean, so long as new roads need to be built, toll-road companies are usually allowed to generate attractive returns well in excess of their cost of capital in order to reinvest in new roads. This cycle usually comes to an abrupt end once the last roadbuilding project is in sight. We are trying to apply this lens not just to our Chinese companies but more broadly. Where China leads, other countries often follow.

Contributors

During the year under review, the Company’s material ownership of Indian companies, especially those with exposure to capital spending and industrial growth, was a key contributor to performance.

Mahindra & Mahindra

(India: Consumer Discretionary)

Contribution: 3.9%

Mahindra & Mahindra have leadership positions in farm equipment, utility SUVs, information technology and financial services in India. It is the world’s largest tractor company by volume. Since Dr Anish Shah was appointed as group CEO and Managing Director, replacing the Chairman, Mr Anand Mahindra, the group has enjoyed superior decisions on capital allocation and improved operating metrics at key subsidiaries. Dr Shah, previously of GE Capital, is an excellent example of the powerful returns that can be derived from the combination of professional management within family-owned companies.

CG Power & Industrial Solutions

(India: Industrials)

Contribution: 1.8%

CG Power is the leading manufacturer of motors in India with a high-quality franchise and fantastic long-term avenues for growth. Historically the quality of stewardship was poor at CG Power but this changed when Tube Investments (India: Consumer Discretionary) took control of the company, at a low valuation, after a scandal with creditors. The company invested quickly after Tube Investments took control and has benefited from strong investment returns as high-quality stewardship maximises the opportunities of this high quality, but previously badly run, franchise.

Taiwan Semiconductor Manufacturing Company

(Taiwan: Information Technology)

Contribution: 1.5%

TSMC is the world’s largest independent semiconductor foundry. It benefits from economies of scale, engineering expertise, leading-edge technology, excellent operational execution and high levels of trust from clients. It continues to benefit from strong demand and positive sentiment regarding the long-term benefits of AI to semiconductor demand. It has delivered strong results.

Detractors

During the year under review the most significant detractors were technology companies operating in South Korea.

Samsung Electronics

(South Korea: Information Technology)

Contribution: -1.1%

Improving governance of the Samsung Chaebol meant the Company was able to invest in this franchise for which we have the utmost respect. Samsung has progressed from bankruptcy in 1997 to a world-renowned brand capable of spending tens of billions of US dollars a year on capital expenditure. Samsung Electronics has suffered over the year as it failed to compete with Hynix (South Korea: Information Technology), Micron (US: Information Technology) and TSMC in the manufacturing of semiconductors which enable growth in artificial intelligence. It is our contention that this is a short-term challenge rather than a fundamental weakness in the manufacturing capabilities of Samsung Electronics. We have been able to build the majority of our position at valuations last seen during previous fiscal crises. History teaches us that Samsung are formidable competitors with the human and financial capital to compete successfully.

Koh Young Technology

(South Korea: Information Technology)

Contribution: -0.8%

Koh Young manufactures and develops 3D measurement and inspection devices which detect accuracy and reliability in various machines. The Company was invested in Koh Young for many years but our concerns about the quality of the franchise were raised when we, accompanied by the Pacific Assets Trust Board, toured their plant in Seoul in November 2022. Since then, operating metrics were patchy, and our concerns grew on learning about higher-than-normal staff turnover. We have sold the holding.

Tube Investments

(India: Consumer Discretionary)

Contribution: -0.7%

Tube Investments is a manufacturer of precision-engineered metal-formed products and India’s largest bicycle maker. The founding Murugappa family are the largest shareholders. It saw its share price increase significantly over the last five years but short-term declines in the share price at the end of the reporting period have given back some of these gains. It fell following slower than expected growth in the core business but it is important that this is seen in the context of its longer term evolution.

Significant transactions

Over the course of the year, the portfolio turnover of the Company was 24.7%. This is higher than the previous year (18.3%) and is an outcome of finding a greater number of new ideas. Furthermore we have been strict this year on cutting smaller holdings in the tail of the portfolio. New ideas were driven by attractive valuations given how much investor despondency there is within the region.

New investments

During the year the Company made new investments in MediaTek (Taiwan: Information Technology), Ayala (Philippines: Industrials), Techtronic Industries (Hong Kong: Industrials), Info Edge (India: Communication Services), Dongguan Yiheda Automation, DFI Retail (Hong Kong: Consumer Staples), Naver (South Korea: Communication Services), MANI (Japan: Health Care), Blue Dart Express (India: Industrials) and Sundaram Finance.

Additions

The comparative weakness in many companies, particularly in China, allowed us to add to Midea (China: Consumer Discretionary) and Shenzhen Inovance Technology (China: Industrials). We also added to Kasikornbank (Thailand: Financials).

Reductions

As mentioned, most of the reductions were either to control position size or because of valuation concerns in India. We reduced Mahindra & Mahindra, CG Power and Marico (India: Consumer Staples). We also reduced companies where the valuation appeared to incorporate excess enthusiasm for the benefit to earnings of artificial intelligence. In this regard, we trimmed Chroma ATE (Taiwan: Information Technology) and Tokyo Electron (Japan: Information Technology).

Disposals

We also identified deteriorating quality and/or found better investments elsewhere. Accordingly the Company sold out of Koh Young Technology, Kotak Mahindra Bank (India: Financials), Advanced Energy Solution, (Taiwan: Industrials), Amoy Diagnostics (China: Health Care), RBL Bank (India: Financials), Telekom Indonesia (Indonesia, Communication Services), Unilever Indonesia (Indonesia: Consumer Staples), IndiaMART (India: Industrials), WuXi Biologics (China: Health Care), Samsung C&T (South Korea: Industrials), Pigeon (Japan: Consumer Staples), Kingmed Diagnostics (China: Health Care), Pentamaster (Malaysia: Information Technology), DBH Finance (Bangladesh: Financials) and lastly Vinda International (China: Consumer Staples) after it was acquired by a trade buyer.

Looking forward

Given the number of attractively valued companies in Asia at present it’s hard not to get excited about future returns. As always, there are plenty of things that could go wrong at any time. Political risk is rising in almost every Asian country, with impeachments, International Criminal Court arrests and attempted coups a growing feature in the region. If the US economy falters and global demand falls, Asian economies will all be impacted, to differing degrees. Asia’s technology hub, built around Taiwan, South Korea and China, is particularly vulnerable. Elsewhere, India remains largely isolated from the global economy, while the Philippines would receive a significant economic boost from falling oil prices. Very recently we have seen dramatic share price moves as Asia markets caught up with US-imposed tariff announcements and subsequent global share price movements. Fortunately an outcome of our investment philosophy means our companies are both financially strong and comparatively isolated from sales to the USA. Predicting these events is beyond us though. Fortunately, most of our Asian companies have very long memories and the scar tissue from multiple previous crises from which to learn and adapt. We hope they are set up not just to sail in fair weather but to navigate safely through unpredictable political and economic storms which could appear at any time. Ultimately, the key attraction lies in the opportunity to invest in such companies in Asia.

 

Stewart Investors
Portfolio Manager

29 April 2025

 

 

Business Review

The Strategic Report, set out on pages 1 to 32, contains a review of the Company’s business model and strategy, an analysis of its performance during the financial year and its future developments as well as details of the principal risks and challenges it faces. Its purpose is to inform shareholders and help them to assess how the Directors have performed their duty to promote the success of the Company.

The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report. Such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Business Model

The Company is an externally managed investment trust and its shares are admitted to the closed-ended investment funds category of the FCA’s Official List and to trading on the main market of the London Stock Exchange.

The purpose of the Company is to achieve long-term growth in its shareholders’ capital by providing a vehicle for investors to gain exposure to a portfolio of companies in the Asia Pacific region and the Indian sub-continent, but excluding Japan, Australia and New Zealand, through a single investment.

The Company’s strategy is to create value for shareholders by addressing its investment objective.

As an externally managed investment trust, all of the Company’s day-to-day management and administrative functions are outsourced to service providers. As a result, the Company has no executive directors, employees or internal operations.

The Company is an Alternative Investment Fund (“AIF”) pursuant to the Alternative Investment Fund Managers Regulations and the EU AIFM Directive. The Company employs Frostrow Capital LLP (“Frostrow”) as its Alternative Investment Fund Manager (“AIFM”) and they provide corporate management, risk management, company secretarial and administrative services. The Company employs Stewart Investors as its Portfolio Manager (see page 45 for further information).

The Board remains responsible for all aspects of the Company’s affairs, including setting the parameters for monitoring the investment strategy and the review of investment performance and policy. It also has responsibility for all strategic policy issues, including share issuance and buybacks, share price and discount/ premium monitoring, corporate governance matters, dividends and gearing.

Further information on the Board’s role and the topics it discusses with the Portfolio Manager is provided in the Corporate Governance report beginning on page 36.

Investment Objective and Policy

The Company aims to achieve long-term capital growth through investment in selected companies in the Asia Pacific region and the Indian sub-continent, but excluding Japan, Australia and New Zealand (the “Asia Pacific Region”). Up to a maximum of 20% of the Company’s total assets (at the time of investment) may be invested in companies incorporated and/or listed outside the Asia Pacific Region (as defined above); at least 25% of their economic activities (at the time of investment) are within the Asia Pacific Region with this proportion being expected to grow significantly over the long term.

The Company invests in companies which Stewart Investors believe will be able to generate long-term growth for shareholders.

The Company invests principally in listed equities although it is able to invest in other securities, including preference shares, debt instruments, convertible securities and warrants. In addition, the Company may invest in open and closed-ended investment funds and companies.

The Company is only able to invest in unlisted securities with the Board’s prior approval. It is the current intention that such investments are limited to those which are expected to be listed on a stock exchange or which cease to be listed and the Company decides to continue to hold or is required to do so.

Risk is diversified by investing in different countries, sectors and stocks within the Asia Pacific Region. No more than 45% of the Company’s total assets (at the time of investment) may be invested in any single jurisdiction.

If the proportion of the Company’s total assets invested in a single jurisdiction exceeds 49% at any time, the AIFM and the Portfolio Manager will, as soon as reasonably practicable, seek to re-balance the Company’s portfolio below this threshold.

No single investment may exceed 7.5% of the Company’s total assets at the time of investment. This limit is reviewed from time to time by the Board and may be revised as appropriate.

No more than 10% of the Company’s total assets may be invested in other listed closed-ended investment companies unless such investment companies themselves have published investment policies to invest no more than 15% of their total assets in other closed-ended investment companies, in which case the limit is 15%.

When deemed appropriate, the Company may borrow for investment purposes up to the equivalent of 10% of the net asset value of the Company at the time of drawdown of such borrowing.

The use of derivatives is permitted with prior Board approval and within agreed limits. However, Stewart Investors are unlikely to use derivatives as they do not form part of their investment strategy.

Proposed Change to Investment Policy

As noted in the Chair’s Statement on page 7, the definition of ‘Asia Pacific Region’ in the Company’s investment objective currently excludes Australia, New Zealand and Japan. The Board is proposing to broaden the Company’s investable universe by removing the exclusion of Australia and New Zealand from the definition of ‘Asia Pacific Region’ in the investment objective.

Accordingly, an ordinary resolution to approve this amendment to the investment objective is included in the Notice of AGM, beginning on page 101, and the full text of the proposed new investment policy can be found in the explanatory notes on pages 106 and 107. For the avoidance of doubt, the amendment of the investment objective is the only proposed change to the Company’s investment policy. The proposed amendment has been approved in principle by the Financial Conduct Authority in accordance with the requirements of the Listing Rules.

Performance Measurement

The Board measures Stewart Investors’ performance against a performance objective, which is to provide shareholders with a net asset value total return in excess of the UK Consumer Price Index (“CPI”) plus 6% (calculated on an annual basis) measured over three to five years (the “Performance Objective”). The Board also monitors the Company’s performance against its peer group (see page 4 for details). Please refer to the Chair’s Statement beginning on page 6 and the Glossary on page 80 for further information.

Dividend Policy

It is the Company’s policy to pursue capital growth for shareholders with income being a secondary consideration. This reflects that the Portfolio Manager is frequently drawn to companies whose future growth profile is more important than the generation of dividend income for shareholders.

The Company complies with the United Kingdom’s investment trust rules which require investment trusts to retain no more than 15% of their distributable income each year. The Company’s dividend policy is that the Company will pay a dividend as a minimum to maintain investment trust status.

The Board

At the date of this report, the Board of the Company comprises Andrew Impey (Chair), Nandita Sahgal (Chair of the Audit Committee), Sian Hansen (Chair of the Engagement and Remuneration Committee), Robert Talbut, (the Senior Independent Director) Edward Troughton (the Chair of the Sales, Marketing and Communications Committee) and June Ang. All of these Directors are non-executive, independent Directors. They all served throughout the year except for June Ang who joined the Board with effect from 26 September 2024.

Further information on the Directors can be found on pages 34 and 35 and information on the Board’s diversity can be found in the Corporate Governance Report on pages 42 and 43.

Key Performance Indicators (“KPIs”)

The Board of Directors reviews performance against the following KPIs, which are unchanged from the prior year.

• NAV total return against the Performance Objective*^
• NAV per share total return against the peer group*^
• Average discount/premium of share price to NAV per share over the year^
• Ongoing charges ratio^

* Calculated on an annual basis and measured over three to five years.

^ Alternative Performance Measure (see Glossary beginning on page 80).

NAV per share total return – Performance Objective

The Directors regard the Company’s net asset value total return as being the overall measure of value generated by the Portfolio Manager over the long term. Total return reflects both the net asset value growth of the Company and the dividends paid to shareholders. The performance objective of the Company is inflation (represented by the Consumer Price Index) plus 6%, measured over three to five years. The 6% represents what the Board considers to be a reasonable premium on investors’ capital, which investing in the faster growing Asian economies ought to provide over time. The Performance Objective is designed to reflect that the Portfolio Manager’s approach does not consider index composition when building and monitoring the portfolio.

During the year under review, the NAV per share total return was 9.7% outperforming the Performance Objective by 0.9% (2024: NAV per share total return of 1.3%, underperforming the Performance Objective by 11.7%). Over the past three years, the annualised NAV per share total return was 4.6%, underperforming the Performance Objective by 7.5%. Over five years, the annualised NAV per share total return was 8.7%, underperforming the Performance Objective by 2.3% per annum.

A full description of performance during the year under review is contained in the Portfolio Manager’s Review beginning on page 12.

NAV total return – peer group

The Board also monitors the Company’s performance against its peer group of four other investment trusts with similar investment mandates and one exchange traded fund.

Over the one, three and five years ended 31 January 2025, the Company ranked 6th, 1st and 3rd, respectively, in its peer group. The Company’s performance is discussed in the Chair’s Statement beginning on page 6; further information can be found in the Portfolio Manager’s Review beginning on page 12.

Average discount/premium of share price to NAV per share

The Board believes that the principal drivers of an investment trust’s share price discount or premium over the long term are investment performance and a proactive marketing strategy. However, there can be volatility in the discount or premium during the year. Therefore, the Board takes powers each year to buy back and issue shares with a view to limiting the volatility of the share price discount or premium, in normal market conditions.

During the year under review no new shares were issued by the Company. The Company’s share price discount to the NAV per share was wider this year, in comparison with last year. As a result, the Company repurchased 370,000 shares during the year, at a total cost of £1.4 million, and at an average discount of 14.0%. The Board keeps the level of the discount under close review. Please refer to the Chair’s Statement and pages 30 and 31 for further information regarding how the Board addressed this issue during the year.

Average discount of share price to NAV per share*^ during the year ended

31 January 2025 31 January 2024

11.5% 6.4%

Peer group average Peer group average

discount 10.8% discount 9.3%

* Source: Morningstar.

^ Alternative Performance Measure (see Glossary beginning on page 80).

Ongoing charges ratio

Ongoing charges represent the costs that the Company can reasonably expect to pay from one year to the next, under normal circumstances. The Board continues to be conscious of expenses and seeks to maintain a sensible balance between high quality service and costs.

The Board therefore considers the ongoing charges ratio to be a KPI and reviews the figure both in absolute terms and in relation to the Company’s peers.

Ongoing charges ratio^

31 January 2025 31 January 2024

1.1% 1.1%

Peer group average 0.9% Peer group average 0.9%

^ Alternative Performance Measure (see Glossary beginning on page 80).

The Board believes that the Company’s relatively low turnover, and the absence of any costs associated with gearing, will mean that the Company’s overall running costs – should these costs be factored into the calculation – are not necessarily as high as some other investment vehicles. It should also be noted that the Company does not have a performance fee. Performance fees are not included in the peer group average ongoing charges ratio.

Risk Management

The Board is responsible for managing the risks faced by the Company. Through delegation to the Audit Committee, the Board has established procedures to manage risk, to review the Company’s internal control framework and to establish the level and nature of the principal risks the Company is prepared to accept in order to achieve its long-term strategic objective. The Board, meeting as the Audit Committee, has carried out a robust assessment of the principal and emerging risks facing the Company with the assistance of the AIFM. A process has been established to identify and assess risks, their likelihood and the possible severity of their impact.

These principal risks are set out on the following pages with a high-level summary of their management through mitigation and arrows to indicate any change in assessment during the year. The risks faced by the Company have been categorised under three headings as follows:

• Investment and financial risks
• Strategic risks
• Operational risks

A summary of these risks and their mitigation is set out below:

 

 

Emerging Risks

Emerging risks are discussed as part of the risk review process. During the year the Board identified the following emerging risks:

1. As well as offering investment opportunities, the development and exploitation of technological breakthroughs, such as artificial intelligence, may challenge and damage the addressable market, revenue and operations of portfolio companies to the extent that they no longer offer the promise of returns consistent with the Company’s investment objective.
2. The risk that increasing water scarcity will affect economic development, potentially leading to mass migration and political conflict in the Asia Pacific Region. This is a particular threat in India, where a high proportion of the Company’s assets are invested, and which the UN identifies as one of the most water-stressed countries in the world.
3. The continued rise of misinformation is contributing to the perceived decay of political and social norms, and the diminishing role of generally accepted truth and reason. This trend has encouraged mistrust in democratic institutions and public discourse and the success in many countries of more extreme political parties. Businesses and brands can be drawn into such debates which may have uncertain direct or indirect consequences for portfolio companies.
4. Heightened geopolitical tensions and assertive state behaviour are increasing the risk of state-backed armed conflicts. Governments may leverage military capabilities to advance strategic interests, potentially engaging in proxy wars or direct military confrontations. This emerging risk could lead to regional instability, disrupted supply chains and trade flows, regulatory unpredictability, significant market volatility and adverse impacts on economic growth.

Going Concern

The Company’s portfolio, investment activity, the Company’s cash balances and revenue forecasts, and the trends and factors likely to affect the Company’s performance are reviewed and discussed at each Board meeting. The Board has considered a detailed assessment of the Company’s ability to meet its liabilities as they fall due, including stress tests which modelled the effects of substantial falls in portfolio valuations and liquidity constraints on the Company’s NAV, cash flows and expenses. Further details of the stress tests and scenarios considered can be found in the Audit Committee Report beginning on page 51 and Notes 1 and 14 to the financial statements. Based on the information available to the Directors at the date of this report, the conclusions drawn in the Viability Statement (including the results of the stress tests undertaken) below and the Company’s cash balances, the Directors are satisfied that the Company has adequate financial resources to continue in operation for at least the next 12 months from the date of signing this report and that, accordingly, it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

Viability Statement

The Directors have carefully assessed the Company’s financial position and prospects as well as the principal risks facing the Company and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five financial years. The Board has chosen a five year horizon in view of the long-term outlook adopted by the Portfolio Manager when making investment decisions.

To make this assessment and in reaching this conclusion, the Audit Committee has considered the Company’s financial position and its ability to liquidate its portfolio and meet its liabilities as they fall due and notes the following:

• The portfolio is comprised of investments traded on major international stock exchanges. Based on historic analysis, it is estimated that approximately 72% of the current portfolio could be liquidated within two weeks (based on current market volumes with 20% participation);
• The Audit Committee has considered the viability of the Company under various scenarios, including periods of acute stock market and economic volatility. In view of the results of these stress tests, the Board has concluded that it would expect to be able to ensure the financial stability of the Company through the benefits of having a diversified portfolio of listed and realisable assets. Further details of the stress tests can be found in Note 1 to the financial statements;
• With an ongoing charges ratio of 1.1%, the expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments currently foreseen which would alter that position;
• The Board has considered the Company’s average cash balance over the past three years and noted that the Company has consistently retained levels of cash that are significantly higher than its annual operating expenses;
• The Company has no employees, only non-executive Directors. Consequently it does not have redundancy or other employment related liabilities or responsibilities; and
• The closed ended nature of the Company means that, unlike open ended funds, it does not need to realise investments when shareholders wish to sell their shares.

The Directors, as well as considering the potential impact of the principal risks and various severe but plausible downside scenarios, have also made the following assumptions in considering the Company’s longer-term viability:

• There will continue to be demand for investment trusts;
• The Portfolio Manager will continue to adopt a long-term view when making investments, and anticipated holding periods will be at least five years;
• The Company invests in the securities of listed companies traded on international stock exchanges to which investors will wish to continue to have exposure;
• Regulation will not increase to a level that makes running the Company uneconomical; and
• The performance of the Company will continue to be satisfactory.

Stakeholder Interests and Board Decision-Making (Section 172 of the Companies Act 2006)

As an externally managed investment trust, the Company has no employees, customers, operations or premises. Therefore, the Company’s key stakeholders (other than its shareholders) are considered to be its service providers, including its Portfolio Manager. The need to foster good business relationships with service providers and maintain a reputation for high standards of business conduct are central to the Directors’ decision-making as the Board of an externally managed investment trust.

The following disclosure, which is required by the Companies Act 2006 and the AIC Code of Corporate Governance, describes how the Directors have had regard to the views of the Company’s stakeholders in their decision-making.

 

Social, Human Rights and Environmental Matters

As an externally managed investment trust, the Company does not have any employees or maintain any premises, nor does it undertake any manufacturing or other physical operations itself. All its operational functions are outsourced to third party service providers. Therefore the Company has no material, direct impact on the environment or any particular community and, as a result, the Company itself has no environmental, human rights, social or community policies.

The Portfolio Manager engages with the Company’s underlying investee companies in relation to their corporate governance practices and the development of their policies on social, community and environmental matters. The Portfolio Manager (under their parent, legal entity name, First Sentier Investors) is a Tier 1 signatory to the UN Principles of Responsible Investment, an investor signatory of Climate Action 100+ and an investor member of the Institutional Investors Group on Climate Change.

Integrity and Business Ethics

The Board is committed to carrying out the Company’s business in an honest and fair manner with a zero-tolerance approach to bribery, tax evasion and corruption. As such, policies and procedures are in place to prevent this and can be found on the Company’s website. In carrying out the Company’s activities, the Board aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues.

Taskforce for Climate-Related Financial Disclosures (“TCFD”)

The Company notes the TCFD recommendations on climate-related financial disclosures. The Company is an investment trust and, as such, it is exempt from the Listing Rules requirement to report against the TCFD framework.

Stewart Investors is committed to reporting annually on its progress against its climate change objectives which are set out in its climate change statement10. This reporting is modelled on TCFD recommendations to the degree it is relevant to their activities and to support shareholders with their reporting requirements.

10 https://www.stewartinvestors.com/uk/en/private-investor/insights/climate-change-statement.html

Stewart Investors have signed up to the Net Zero Asset Managers Initiative. They published their first climate report11 in 2022 which provides details about their plan; this will be updated annually. They are engaging with their investee companies to set ambitious targets and have credible action plans to achieve net zero by 2050. They are targeting outcomes that are aligned with their commitment to the Net Zero Asset Managers Initiative and prioritising engagement with companies that have inadequate disclosures and targets, and/or rising emissions.

11 https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/Climate-Report-2021.pdf

Climate reporting, at both the Stewart Investors12 and Pacific Assets Trust13 level, is available via the Company’s website.

12 https://www.stewartinvestors.com/all/insights/annual-report-2023.html

13 https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/PAC-TCFD-report.pdf
https://www.stewartinvestors.com/content/dam/stewartinvestors/pdf/annual-report-2023/pac/pac-annual-review-2023.pdf

Performance and Future Developments

A review of the Company’s performance over the year and the outlook for the Company can be found in the Chair’s Statement beginning on page 6 and in the Portfolio Manager’s Review beginning on page 12.

The Company’s overall strategy remains unchanged.

By order of the Board

 

Frostrow Capital LLP
Company Secretary

29 April 2025

Report of the Directors

The Directors present this Annual Report on the affairs of the Company together with the audited financial statements and the Independent Auditor’s Report for the year ended 31 January 2025.

Business and Status of the Company

The Company is registered as a public limited company in Scotland (Registered Number SC091052) and is an investment company within the terms of Section 833 of the Companies Act 2006 (the “Act”). Its shares are admitted to the closed-ended investment funds category of the FCA’s Official List and to trading on the main market of the London Stock Exchange, which is a regulated market as defined in Section 1173 of the Act.

The Company has been accepted as an investment trust under Section 1158 of the Corporation Taxes Act 2010 and Part 2 Chapter 1 of Statutory Instrument 2011/2999. This approval relates to accounting periods commencing on or after 1 February 2012. The Directors are of the opinion that the Company has conducted its affairs so as to be able to retain such approval.

It is the Directors’ intention that the Company should continue to manage its affairs so as to be a qualifying investment for inclusion in the stocks and shares components of an Individual Savings Account (“ISA”) and Junior ISA.

The Company is a member of the Association of Investment Companies.

Alternative Performance Measures

The financial statements (on pages 66 to 79) set out the required statutory reporting measures of the Company’s financial performance. In addition, the Board assesses the Company’s performance against a range of criteria which are viewed as particularly relevant for investment trusts. These measures are summarised on page 1 and explained in greater detail in the Strategic Report, under the heading ‘Key Performance Indicators’ on pages 24 and 25. The Directors believe that these measures enhance the comparability of information between reporting periods and aid investors in understanding the Company’s performance.

The measures used for the year under review have remained consistent with the prior year.

Definitions of the terms used and the basis of their calculation are set out in the Glossary beginning on page 80.

Annual General Meeting

THE FOLLOWING INFORMATION TO BE DISCUSSED AT THE FORTHCOMING ANNUAL GENERAL MEETING IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt about the action you should take, you should seek advice from your stockbroker, bank manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets Act 2000 (as amended). If you have sold or transferred all of your ordinary shares in the Company, you should pass this document, together with any other accompanying documents, including the form of proxy, at once to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for onward transmission to the purchaser or transferee.

Resolutions relating to the following items of business will be proposed at the Annual General Meeting to be held on 1 July 2025.

Resolution 11 Approval of the proposed, amended Investment Policy

Resolution 12 Authority to allot shares

Resolution 13 Authority to disapply pre-emption rights

Resolution 14 Authority to buy back shares

Resolution 15 Authority to hold General Meetings (other than the AGM) on at least 14 clear days’ notice The full text of the resolutions can be found in the Notice of Annual General Meeting on pages 101 and 102.

Explanatory notes regarding the resolutions can be found on pages 106 to 108.

Results and Dividend

The results attributable to shareholders for the year are shown on page 66. Details of the Company’s dividend record can be found on page 5 and the dividend policy is outlined in the Strategic Report on page 23.

A final dividend of 4.9p per ordinary share has been proposed and, subject to shareholder approval, will be paid on 11 July 2025 to shareholders on the register on 13 June 2025. The associated ex-dividend date is 12 June 2025.

Capital Structure

As at 31 January 2025, there were 120,588,386 ordinary shares of 12.5p each (“shares”) in issue (2024: 120,958,386). All shares rank equally for dividends and distributions. Each shareholder is entitled to one vote on a show of hands and, on a poll, to one vote for every share held. Details of the substantial shareholders in the Company are listed on page 47.

At the start of the year under review, the Directors had shareholder authority to issue up to 12,095,838 shares on a non-pre-emptive basis and to buy back up to 18,131,662 shares in the market. At the Company’s annual general meeting held on Tuesday, 9 July 2024, these authorities expired and new authorities to allot up to 12,095,838 shares (representing 10% of the Company’s issued share capital) on a non-pre-emptive basis and to buy back up to 18,131,662 shares (representing 14.99% of the Company’s issued share capital) were granted.

During the year, no new shares were issued (2024: nil). 370,000 shares were repurchased and then cancelled during the year (2024: nil) and there are no shares held in Treasury.

The powers to issue or buy back the Company’s shares require the relevant resolution to be passed by shareholders. Proposals for the renewal of the Board’s authorities to issue and buy back shares are detailed in the Notice of AGM beginning on page 101.

There are no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no restrictions on voting rights; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control following a successful takeover bid.

Financial Instruments

The Company’s financial instruments comprise its investment portfolio, cash balances, debtors and creditors which arise directly from its operations such as sales and purchases awaiting settlement, and accrued income. The financial risk management objectives and policies arising from its financial instruments and the exposure of the Company to risk are disclosed in note 14 to the financial statements, beginning on page 75.

Principal Service Providers

Portfolio Manager

The Company’s investment portfolio has been managed by Stewart Investors since 1 July 2010. Stewart Investors are engaged under the terms of a Portfolio Management Agreement (the “PMA”) effective from 24 March 2025, which replaced two previous agreements.

Under the terms of the PMA, Stewart Investors provide, inter alia, the following services:

• seeking out and evaluating investment opportunities;
• recommending the manner by which cash should be invested, divested, retained or realised;
• advising on how rights conferred by the investments should be exercised;
• analysing the performance of investments made;
• advising the Company in relation to trends, market movements and other matters which may affect the investment objective and policy of the Company; and
• marketing and investor relations services.

The PMA is terminable by six months’ notice. Stewart Investors complied with the terms of the PMA dated 30 April 2021 throughout the year to 31 January 2025. Stewart Investors are entitled to a fee, paid quarterly, of 0.85% of the Company’s net assets.

Alternative Investment Fund Manager

Frostrow Capital LLP acts as the AIFM. It is an independent provider of services to the investment companies sector.

The Board resolved to appoint Frostrow Capital LLP as the Company’s AIFM with effect from 30 April 2021 on the terms and subject to the conditions of the alternative investment fund management agreement between the Company and Frostrow (the “AIFM Agreement”). The AIFM Agreement assigns to Frostrow overall responsibility to manage the Company, subject to the supervision, review and control of the Board, and ensures that the relationship between the Company and Frostrow is compliant with the requirements of the AIFMD. Frostrow, under the terms of the AIFM Agreement provides, inter alia, the following services:

• risk management services;
• administrative and secretarial services;
• advice and guidance in respect of corporate governance requirements;
• maintenance of the Company’s accounting records;
• preparation and dispatch of the annual and half yearly reports; and
• ensuring compliance with applicable tax, legal and regulatory requirements.

Under the AIFM Agreement, Frostrow receives a fixed fee of £75,000 per annum plus 0.11% per annum of net assets up to £250 million, plus 0.075% per annum of net assets in excess of £250 million.

The AIFM Agreement is terminable on six months’ notice given by either party.

Further details of the fees payable to Stewart Investors and Frostrow Capital LLP during the year are set out in note 3 to the financial statements on page 70.

Depositary and Custodian

The Board resolved to appoint J.P. Morgan Europe Limited (the “Depositary”) as the Company’s depositary in accordance with the AIFMD on the terms and subject to the conditions of the depositary agreement between the Company, Frostrow and the Depositary (the “Depositary Agreement”), with effect from 30 April 2021.

The Depositary provides the following services, inter alia, under its agreement with the Company:

• safekeeping and custody of the Company’s custodial investments and cash;
• processing of transactions; and
• foreign exchange services.

The Depositary must take reasonable care to ensure that the Company is managed in accordance with the Financial Conduct Authority’s Investment Funds Sourcebook, the AIFMD and the Company’s Articles of Association.

Under the terms of the Depositary Agreement, the Depositary is entitled to receive an annual fee of the higher of £30,000 or 0.015% of the net assets of the Company up to £150 million, 0.0125% of the net assets in excess of £150 million and up to £300 million, 0.01% of the net assets in excess of £300 million and up to £500 million and 0.005% of the net assets in excess of £500 million.

The Depositary has delegated the custody and safekeeping of the Company’s assets to JPMorgan Chase Bank N.A., London branch under a Global Custody Agreement. Custody fees are charged according to the jurisdiction in which the holdings are based. Variable transaction fees are also chargeable.

The notice period on the Depositary Agreement is 90 days if terminated by the Company and 120 days if terminated by the Depositary.

Portfolio Manager and AIFM Evaluation and Re-Appointment

The review of the performance of Stewart Investors as Portfolio Manager and Frostrow Capital LLP as AIFM is a continuous process carried out by the Board and the Engagement and Remuneration Committee (the “ERC”), with a formal evaluation being undertaken each year. As part of this process the Board monitors the services provided by Stewart Investors and Frostrow and receives regular reports and views from them. The Board also receives comprehensive performance measurement reports to enable it to determine whether or not the Performance Objective set by the Board has been met.

The ERC formally reviewed the appointment of Stewart Investors in January 2025 with a recommendation being made to the Board to continue their appointment on the existing terms.

The Board believes the continuing appointment of Stewart Investors, under the terms described earlier in this report, is in the interests of shareholders. In coming to this decision the Board took into consideration the following reasons:

• the terms of the Portfolio Management Agreement, in particular the level and method of remuneration and the notice period, and the comparable arrangements of a group of the Company’s peers; and
• the quality and depth of experience of the Stewart Investors team and the level of performance of the portfolio in absolute terms and also by reference to the Performance Objective and the Company’s peer group over the medium to longer term.

The ERC also formally reviewed Frostrow’s appointment in January 2025 with a formal recommendation being made to the Board. The Board believes the continuing appointment of Frostrow Capital LLP, under the terms described earlier in this report, is in the interests of shareholders. In coming to this decision, the Board took into consideration the quality and depth of experience of the management, administrative and company secretarial team that Frostrow allocates to the Company.

Directors

Directors’ and Officers’ Liability Insurance Cover

Directors’ and officers’ liability insurance cover was maintained by the Board during the year ended 31 January 2025 and to the date of this report. It is intended that this cover will continue throughout the year ending 31 January 2026 and subsequent years.

Directors’ Indemnities

As at the date of this report, a deed of indemnity has been entered into by the Company and each of its Directors under which the Company has agreed to indemnify each Director, to the extent permitted by law, in respect of certain liabilities as a result of carrying out his or her role as a Director of the Company. Each Director is indemnified against the costs of defending any criminal or civil proceedings or any claim by the Company or a regulator as they are incurred provided that where the defence is unsuccessful the Director must repay those defence costs to the Company. The indemnities are qualifying third party indemnity provisions for the purposes of the Companies Act 2006.

A copy of each deed of indemnity is available for inspection at Frostrow’s offices during normal business hours and will be available for inspection at the AGM.

Articles of Association

Amendment of the Company’s Articles of Association requires a special resolution to be passed by shareholders.

The Directors have not proposed any changes to the Articles of Association this year.

Substantial Interests in Share Capital

As at 31 January 2025 the Company had been notified of the following substantial interests in the Company’s voting rights:

These disclosures reflect those shareholders that have notified the Company of a substantial interest in its shares when they have crossed certain thresholds and may not reflect their current holdings. The table does not reflect the full range of investors in the Company. The shareholder register is principally comprised of private wealth managers and retail investors who own their shares through a variety of online platforms. A profile of the Company’s ownership is shown on page 99.

After the year end, on 4 February 2025, EQ Investors notified the Company that they held 4,099,121 shares (3.4%) in the Company. At the date of this report, there had been no other substantial interests or changes to substantial interests notified to the Company.

Beneficial Owners of Shares – Information Rights

The beneficial owners of shares who have been nominated by the registered holder of those shares to receive information rights under Section 146 of the Companies Act 2006 are required to direct all communications to the registered holder of their shares rather than to the Company’s registrar, Equiniti, or to the Company directly.

Modern Slavery Act 2015

The Company does not provide goods or services in the normal course of business, and as a financial investment vehicle, does not have customers. Therefore, the Directors do not consider that the Company is required to make a statement under the Modern Slavery Act 2015 in relation to slavery or human trafficking. The Company’s suppliers are typically professional advisers and the Company’s supply chains are considered to be low risk in this regard.

Anti-Bribery and Corruption Policy

The Board has adopted a zero tolerance approach to instances of bribery and corruption. Accordingly, it expressly prohibits any Director or associated persons when acting on behalf of the Company, from accepting, soliciting, paying, offering or promising to pay or authorise any payment, public or private, in the United Kingdom or abroad to secure any improper benefit for themselves or for the Company.

The Board applies the same standards to its service providers in their activities for the Company.

A copy of the Company’s Anti Bribery and Corruption Policy can be found on its website at www.pacific-assets.co.uk. The policy is reviewed annually by the Audit Committee.

Prevention of the Facilitation of Tax Evasion

In response to the implementation of the Criminal Finances Act 2017, the Board adopted a zero-tolerance approach to the criminal facilitation of tax evasion. A copy of the Company’s policy on preventing the facilitation of tax evasion can be found on the Company’s website www.pacific-assets.co.uk. The policy is reviewed annually by the Audit Committee.

Global Greenhouse Gas Emissions

The Company is an investment trust, with no employees or premises, nor has it any financial or operational control of the assets it owns. It has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Reports and Directors’ Reports) Regulations 2013 or the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, including those within the Company’s underlying investment portfolio. The Company consumed less than 40,000 kWh of energy during the year and therefore is exempt from the disclosures required under the Streamlined Energy and Carbon Reporting criteria.

Political Donations

The Company has not made and does not intend to make any political donations.

Corporate Governance

The Corporate Governance report, which includes the Company’s corporate governance policies and forms part of the Report of the Directors, is set out on pages 36 to 43.

Common Reporting Standard (“CRS”)

CRS is a global standard for the automatic exchange of information commissioned by the Organisation for Economic Cooperation and Development and incorporated into UK law by the International Tax Compliance Regulations 2015. CRS requires the Company to provide certain additional details to HMRC in relation to certain shareholders. The reporting obligation began in 2016 and is an annual requirement. The Registrar, Equiniti, has been engaged to collate such information and file the reports with HMRC on behalf of the Company.

UK Sanctions

The Board has made due diligence enquiries of the service providers that process the Company’s shareholder data, to ensure the Company’s compliance with the UK sanctions regime. The relevant service providers have confirmed that they check the Company’s shareholder data against the UK sanctions list on a daily basis. At the date of this report, no sanctioned individuals had been identified on the Company’s shareholder register. The Board notes that stockbrokers and execution-only platforms also carry out their own due diligence.

By order of the Board

 

Frostrow Capital LLP
Company Secretary

29 April 2025

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102 ‘The Financial Reporting Standard applicable in the UK and the Republic of Ireland’.

Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business; and
• prepare a directors’ report, a strategic report and a directors’ remuneration report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the Annual Report and financial statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement which comply with that law and those regulations.

The Directors are responsible for ensuring the Annual Report and the financial statements are made available on the Company’s website, which is maintained by the Portfolio Manager. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.

Disclosure of Information to the Auditor

The Directors who held office at the date of approval of this report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that he/she might reasonably be expected to have taken as a Director to make himself/ herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

Responsibility Statement of the Directors in respect of the Annual Financial Report

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and the return of the Company for the year ended 31 January 2025; and
• the Annual Report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that they face.

We consider the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

On behalf of the Board

 

Andrew Impey
Chair

29 April 2025

Income Statement

for the year ended 31 January 2025

The Total column of this statement represents the Company’s Income Statement. The Revenue and Capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the Income Statement derive from continuing operations.

The Company had no recognised gains or losses other than those shown above and therefore no separate Statement of Other Comprehensive Income has been presented.

The accompanying notes on pages 69 to 79 are an integral part of these statements.

Statement of Changes in Equity

for the year ended 31 January 2025

The accompanying notes on pages 69 to 79 are an integral part of these statements.

Statement of Financial Position

as at 31 January 2025

The financial statements on pages 66 to 79 were approved and authorised for issue by the Board of Directors on 29 April 2025 and signed on its behalf by:

 

Andrew Impey
Chair

The accompanying notes on pages 69 to 79 are an integral part of these statements.

Pacific Assets Trust Public Limited Company – Company Registration Number: SC091052 (Registered in Scotland)

Notes to the Financial Statements

1. Accounting Policies

A summary of the principal accounting policies adopted is set out below or as appropriate within the relevant note to the financial statements.

(a) Basis of Accounting

These financial statements have been prepared under UK Company Law, FRS 102 ‘The Financial Reporting Standard applicable in the UK and Ireland’, and in accordance with guidelines set out in the Statement of Recommended Practice (“SORP”), published in July 2022, for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies, the historical cost convention, as modified by the valuation of investments at fair value through profit or loss.

The Company has taken advantage of the exemption from preparing a Cash Flow Statement under FRS 102, as it is an investment fund whose investments are substantially highly liquid, carried at fair (market) value and provides a statement of changes in equity.

The Board is of the opinion that the Company is engaged in a single segment of business, namely investing in accordance with the Investment Objective, and consequently no segmental analysis is provided.

Going concern

The Directors are required to make an assessment of the Company’s ability to continue as a going concern and have concluded that the Company has adequate resources to continue in operational existence for at least 12 months from the date these financial statements were approved.

In making this assessment, the Directors have considered a wide variety of emerging and current risks to the Company, as well as the mitigation strategies that are in place. The Board has also reviewed stress-testing and scenario analyses prepared by the AIFM. The stress tests and scenario analyses considered the effect of various downturns, based on historic bear markets, on the asset value and expenses of the Company. The tests modelled the impact of decreases of up to and over 80% on the value of the investment portfolio and decreases in current market liquidity of up to 80%.

These tests are carried out as an arithmetic exercise, which can apply equally to any set of circumstances in which asset value and income are significantly impaired. It was concluded that even in an extreme downside scenario, the Company would be able to continue to meet its liabilities as they fell due. Whilst the economic future is uncertain, the opinion of the Directors is that there is no foreseeable downside scenario that would threaten the Company’s ability to continue to meet its liabilities as they fall due.

Based on the information available to the Directors at the time of this report, including the results of the stress tests and scenario analyses, and having taken account of the liquidity of the investment portfolio, the Company’s cash flow and borrowing position (the Company is not currently geared), the Directors are satisfied that the Company has adequate financial resources to continue in operation for at least 12 months from the date of signing these financial statements and that, accordingly, it is appropriate to adopt the going concern basis.

Significant Judgement

There is one significant judgement involved in the presentation of the Company’s accounts, being the judgement on the functional currency of the Company.

The Company’s investments are made in foreign currencies, however the Board considers the Company’s functional currency to be sterling. In arriving at this conclusion, the Board considered that the shares of the Company are listed on the London Stock Exchange, it is incorporated in the United Kingdom and pays dividends and expenses in sterling.

Presentation of the Income Statement

In order to reflect better the activities of an investment trust company and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The net revenue return is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Section 1158 of the Corporation Tax Act 2010.

(b) Foreign Currencies

Transactions denominated in foreign currencies are translated into sterling at the exchange rates on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate ruling at the date of the Statement of Financial Position. Profits or losses on the translation of foreign currency balances, whether realised or unrealised, are taken to the capital or revenue column of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature.

All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.

(c) Cash

Cash is defined as cash at bank and money market funds that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

2. Income

Dividends receivable are recognised on the ex-dividend date. Where no ex-dividend date is quoted, dividends are recognised when the Company’s right to receive payment is established. Overseas dividends are gross of withholding tax.

Where the Company has elected to receive its dividends in the form of additional shares rather than cash the amount of cash foregone is recognised in the revenue column with any excess above this recognised in the capital column.

3. Portfolio Management and AIFM Fees

Frostrow’s AIFM fee is for risk management, corporate management, company secretarial and administrative services. Further information regarding Stewart Investors and Frostrow’s fees can be found on pages 45 and 46.

All expenses and interest are accounted for on an accruals basis. Expenses and interest are charged to the Income Statement as revenue items except where incurred in connection with the maintenance or enhancement of the value of the Company’s assets and taking account of the expected long-term returns, when they are split as follows:

    Portfolio Management and AIFM fees payable have been allocated 25% to revenue and 75% to capital.

    Transaction costs incurred on the purchase and sale of investments are taken to the Income Statement as a capital item, within gains on investments held at fair value through profit or loss.

4. Other Expenses

For accounting policy, see note 3 on the prior page.

5. Taxation

(a) Analysis of Charge in the Year

Overseas tax arose as a result of irrecoverable withholding tax on overseas dividends and Indian capital gains tax.

As an investment trust, the Company is generally not subject to UK tax on capital gains. However, Indian capital gains tax arises on capital gains on the sale of Indian securities at a rate of 20% on short-term capital gains (defined as those where the security was held for less than a year) and 12.5% on long-term capital gains. £2,439,000 (2024: £1,456,000) of the charge arose on unrealised long-term capital gains on securities still held and is included in deferred taxation on unrealised capital gains on Indian securities as set out in note 11 on page 75. £5,070,000 (2024: £3,534,000) of the charge relates to capital gains tax paid on disposals during the year.

(b) Reconciliation of Tax Charge

The UK corporation tax rate was 19% until 31 March 2023 and 25% from 1 April 2023, giving an effective rate of 25.0% for the year (2024: 24.0%). The tax assessed for the year is lower than the corporation tax rate. The differences are explained below.

The differences are explained below:

As at 31 January 2025 the Company had unutilised management expenses and other reliefs for taxation purposes of £68,461,000 (2024: £62,974,000). It is not anticipated that these will be utilised in the foreseeable future and as such no related deferred tax asset has been recognised.

The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue as set out in this note. The standard rate of corporation tax is applied to taxable net revenue. Any adjustment resulting from relief for overseas tax is allocated to the revenue reserve.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the Statement of Financial Position date where transactions or events that result in an obligation to pay more, or right to pay less, tax in future have occurred at the Statement of Financial Position date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company’s taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Deferred tax is measured without discounting and based on enacted tax rates. Due to the Company’s status as an investment trust, and the intention to meet the conditions required to obtain approval under Section 1158 of the Corporation Tax Act 2010, the Company has not provided for deferred UK tax on any capital gains and losses arising on the revaluation or disposal of investments.

Deferred tax has been provided for on capital gains arising on Indian securities as noted in 5(a) above.

6. Dividends

Amounts recognised as distributable to shareholders for the year ended 31 January 2025, were as follows:

In respect of the year ended 31 January 2025, a final dividend of 4.9p per share has been proposed and will be reflected in the Annual Report for the year ending 31 January 2026. Details of the ex-dividend and payment dates are provided on page 45.

The Board’s current policy is to pay dividends only out of revenue reserves. Therefore the amount available for distribution as at 31 January 2025 is £11,124,000 (2024: £9,398,000).

The dividends payable in respect of both the current and the previous financial year, which meet the requirements of Section 1158 CTA 2010, are set out below:

Dividends paid by the Company on its shares are recognised in the financial statements in the year in which they are paid and are shown in the Statement of Changes in Equity.

7. Return per Share

The return per share is as follows:

The total return per share is based on the total return attributable to shareholders of £44,821,000 (2024: loss of £6,061,000).

The revenue return per share is based on the net revenue return attributable to shareholders of £6,564,000 (2024: £5,171,000).

The capital return per share is based on the net capital return attributable to shareholders of £38,257,000 (2024: loss of £11,232,000).

The total return, revenue return and the capital return per share are based on the weighted average number of shares in issue during the year of 120,899,602 (2024: 120,958,386).

The calculations of the returns per Ordinary Share have been carried out in accordance with IAS 33 Earnings per Share.

8. Investments

The Company received £133,123,000 (2024: £87,161,000) from investments sold in the year. The book cost of these investments when they were purchased was £103,540,000 (2024: £52,828,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

During the year the Company incurred transaction costs on purchases of £155,000 (2024: £110,000) and transaction costs on sales of £263,000 (2024: £169,000).

Valuation of Investments

Investments are measured initially and at subsequent reporting dates at fair value. Purchases and sales are recognised on the trade date when a contract exists whose terms require delivery within the time frame established by the market concerned. For quoted securities fair value is either bid price or last traded price, depending on the convention of the exchange on which the investment is listed. Changes in fair value and gains or losses on disposal are included in the Income Statement as a capital item.

In addition, for financial reporting purposes, fair value measurements are categorised into a fair value hierarchy based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 – Quoted prices in active markets.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data), either directly or indirectly.

Level 3 – Inputs are unobservable (i.e. for which market data is unavailable).

All investments are in equity shares and have been classified as Level 1 (2023: All Level 1).

9. Debtors

10. Creditors: Amounts Falling Due Within One Year

11. Provisions for Liabilities

See note 5 for further details and accounting policy.

12. Share Capital

During the current and prior year, no Ordinary shares were issued. 370,000 (2024: Nil) Ordinary shares were bought back for cancellation.

The capital of the Company is managed in accordance with its investment policy which is detailed in the Strategic Report on pages 22 and 23.

The Company does not have any externally imposed capital requirements.

13. Net Asset Value Per Share

The net asset value per share of 417.5 p (2024: 384.3p) is calculated on net assets of £503,441,000 (2024: £464,819,000) divided by 120,588,386 (2024: 120,958,386) shares, being the number of shares in issue at the year end.

14. Financial Instruments

The Company’s financial instruments comprise its investment portfolio, cash balances, and debtors and creditors that arise directly from its operations. As an investment trust, the Company holds an investment portfolio of financial assets in pursuit of its investment objective.

Fixed asset investments (see note 8 on page 74) are valued at fair value in accordance with the Company’s accounting policies. The fair value of all other financial assets and liabilities is represented by their carrying value in the Statement of Financial Position shown on page 68.

The main risks that the Company faces arising from its financial instruments are:

(i)      market risk, including:

    other price risk, being the risk that the value of investments will fluctuate as a result of changes in market prices;

    interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in interest rates;

    foreign currency risk, being the risk that the value of financial assets and liabilities will fluctuate because of movements in currency rates;

(ii)     credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and

(iii)   liquidity risk, being the risk that the Company will not be able to meet its liabilities when they fall due. This may arise should the Company not be able to liquidate its investments. Under normal market trading volumes, the majority of the investment portfolio could be realised within a week.

Other price risk

The management of other price risk is part of the portfolio management process and is typical of equity investment.

The investment portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis with an objective of maximising overall returns to shareholders. Further information on how the investment portfolio is managed is set out on page 2. Although it is the Company’s current policy not to use derivatives they may be used from time to time, with prior Board approval, to hedge specific market risk or gain exposure to a specific market.

If the investment portfolio valuation rose or fell by 10% at 31 January, the impact on the net asset value would have been £51.0 million (2024: £46.3 million). The calculations are based on the investment portfolio valuation as at the respective Statement of Financial Position dates and are not necessarily representative of the year as a whole.

Interest rate risk

Floating rate

When the Company retains cash balances the majority of the cash is held in overnight call accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate for the relevant currency for each deposit.

Foreign currency risk

The Company invests in overseas securities and holds foreign currency cash balances which give rise to currency risks. Foreign currency risks are managed alongside other market risks as part of the management of the investment portfolio. It is currently not the Company’s policy to hedge this risk on a continuing basis but it can do so from time to time.

Foreign currency exposure:

At 31 January 2025 the Company had £7,096,000 of sterling cash balances (2024: £2,969,000).

During the year sterling weakened 1.1% (2024: strengthened by 7.5%) against all of the currencies in the investment portfolio (weighted for exposure at 31 January). If the value of sterling had strengthened against each of the currencies in the portfolio by 10%, the impact on the net asset value would have been negative £46.4 million (2024: negative £43.3 million). If the value of sterling had weakened against each of the currencies in the investment portfolio by 10%, the impact on the net asset value would have been positive £56.7 million (2024: positive £52.9 million). The calculations are based on the investment portfolio valuation and cash balances as at the year end and are not necessarily representative of the year as a whole.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Portfolio Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum credit risk exposure at the Statement of Financial Position date, and the main exposure to credit risk is via the Custodian which is responsible for the safeguarding of the Company’s investments and cash balances.

At the reporting date, the Company’s financial assets exposed to credit risk amounted to the following:

All the assets of the Company which are traded on a recognised exchange are held by J.P. Morgan Chase Bank, the Custodian. Bankruptcy or insolvency of the Custodian may cause the Company’s rights with respect to securities held by the Custodian to be delayed or limited. The Board monitors the Company’s risk as described in the Strategic Report on pages 25 to 28.

The credit risk on cash is controlled through the use of counterparties or banks with high credit ratings (rated AA or higher), assigned by international credit rating agencies. Cash is currently held at JP Morgan Chase Bank. Bankruptcy or insolvency of such financial institutions may cause the Company’s ability to access cash placed on deposit to be delayed, limited or lost.

Liquidity risk

The Company’s liquidity risk is managed on an ongoing basis by the Portfolio Manager. Substantially all of the Company’s portfolio would be realisable within two weeks under normal market conditions. There may be circumstances where market liquidity is lower than normal. Stress tests have been performed to understand how long the portfolio would take to realise in such situations. The Board is comfortable that in such a situation the Company would be able to meet its liabilities as they fall due.

Capital management policies and procedures

The Company’s capital management objectives are to ensure that it will be able to continue as a going concern and to maximise the return to its equity shareholders.

The Company’s policy on gearing and leverage is set out on page 23. The Company had no gearing or leverage during the current or prior year.

The capital structure of the Company consists of the equity share capital, retained earnings and other reserves as shown in the Statement of Financial Position on page 68.

The Board, with the assistance of the AIFM and the Portfolio Manager, monitors and reviews the broad structure of the Company’s capital on an ongoing basis. This includes a review of:

• the need to buy back equity shares, either for cancellation or to hold in treasury, in light of any share price discount to net asset value per share in accordance with the Company’s share buy back policy;
• the need for new issues of equity shares, including issues from treasury; and
• the extent to which revenue in excess of that which is required to be distributed should be retained.

The Company’s objectives, policies and processes for managing capital are unchanged from the prior year.

15. Reserves

Capital redemption reserve

This reserve arose when ordinary shares were redeemed by the Company and subsequently cancelled, at which point the amount equal to the par value of the ordinary share capital was transferred from the ordinary share capital to the Capital Redemption Reserve.

Special reserve

The Special Reserve arose following court approval in February 1999 to transfer £24.2 million from the share premium account.

Capital reserve

The following are accounted for in this reserve: gains and losses on the disposal of investments; changes in the fair value of investments; and expenses and finance costs, together with the related taxation effect, charged to capital in accordance with note 5 on page 71. Any gains in the fair value of investments that are not readily convertible to cash are treated as unrealised gains in the capital reserve.

Revenue reserve

The Revenue Reserve reflects all income and expenses that are recognised in the revenue column of the Income Statement.

Distributable reserves

The Revenue, Special and Capital Reserves are distributable. It is the Board’s current policy to pay dividends only from the revenue reserve.

16. Related Party Transactions and Transactions with the Managers

The following are considered to be related parties:

• Frostrow Capital LLP (under the Listing Rules only)
• Stewart Investors (under the Listing Rules only)
• The Directors of the Company.

Details of the relationship between the Company and Frostrow Capital LLP, the Company’s AIFM, are disclosed on pages 45 and 46. During the year ended 31 January 2025, Frostrow earned £543,000 (2024: £507,000) in respect of company management fees, of which £135,000 (2024: £128,000) was outstanding at the year end.

The Company employs Stewart Investors as its Portfolio Manager. Details of this arrangement are disclosed on page 45. During the year ended 31 January 2025, Stewart Investors earned £4,302,000 (2024: £3,985,000) in respect of portfolio management fees, of which £1,081,000 (2024: £1,002,000) was outstanding at the year end.

All material related party transactions have been disclosed in notes 3 and 4 on pages 70 and 71. Details of the remuneration and the shareholdings of all Directors can be found on page 57.

 

The figures and financial information for 2024 are extracted from the published Annual Report for the year ended 31 January 2024 and do not constitute the statutory accounts for that year. The Annual Report for the year ended 31 January 2024 has been delivered to the Registrar of Companies and included the Independent Auditor’s Report which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

The figures and financial information for 2025 are extracted from the Annual Report and financial statements for the year ended 31 January 2025 and do not constitute the statutory accounts for the year.  The Annual Report for the year ended 31 January 2025 includes the Independent Auditor’s Report which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.  The Annual Report and financial statements have not yet been delivered to the Registrar of Companies.

 

Glossary of Terms and Alternative Performance Measures (unaudited)

Absolute Performance

Absolute performance is the percentage (%) rise or fall in the share price of the investment over the stated period. Relative performance, on the other hand, is the difference between the absolute return and the performance of the market (or other similar investments), which is gauged by a benchmark, or index such as the MSCI AC Asia ex Japan Index.

AIFMD

The Alternative Investment Fund Managers Directive (the ‘Directive’) is a European Union Directive that entered into force on 22 July 2013. The Directive, which was retained in UK law following the withdrawal of the UK from the European Union, regulates fund managers that manage alternative investment funds (including investment trusts).

Where an entity falls within the scope of the Directive, it must appoint a single Alternative Investment Fund Manager (‘AIFM’). The core functions of an AIFM are portfolio and risk management. An AIFM can delegate one but not both of these functions. The entity must also appoint an independent depositary whose duties include the following: safeguarding and verification of the ownership of assets; monitoring cashflows; and ensuring that appropriate valuations are applied to the entity’s assets.

Average Discount

The average share price for the period divided by the average net asset value for the period minus 1.

Bottom-Up Approach

An investment approach that focuses on the analysis of individual stocks rather than the significance of macroeconomic factors.

Discount or Premium

A description of the difference between the share price and the net asset value per share. The size of the discount or premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share the result is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount.

Gearing

The term used to describe the process of borrowing money for investment purposes. The expectation is that the returns on the investments purchased will exceed the finance costs associated with those borrowings.

There are several methods of calculating gearing and the following has been selected:

Total assets less current liabilities (before deducting any prior charges) minus cash/cash equivalents divided by shareholders’ funds, expressed as a percentage.

Net Asset Value (“NAV”)

The value of the Company’s assets, principally investments made in other companies and cash being held, minus any liabilities. The NAV is also described as “shareholders’ funds” per share. The NAV is often expressed in pence per share after being divided by the number of shares which have been issued. The NAV per share is unlikely to be the same as the share price which is the price at which the Company’s shares can be bought or sold by an investor. The share price is determined by the relationship between the demand for and supply of the shares.

NAV Per Share Total Return

The total return on an investment over a specified period assuming dividends paid to shareholders were reinvested at net asset value per share at the time the shares were quoted ex-dividend. This is a way of measuring investment management performance of investment trusts which is not affected by movements in discounts or premiums.

Ongoing Charges

Ongoing charges are calculated by taking the Company’s annualised operating expenses as a proportion of the average daily net asset value of the Company over the year. The costs of buying and selling investments are excluded, as are interest costs, taxation, cost of buying back or issuing ordinary shares and other non-recurring costs.

 

1 See notes 3 and 4 on pages 70 and 71.

Performance Objective

The Company’s performance objective, against which the Portfolio Manager’s performance is measured, is to provide shareholders with a net asset value total return in excess of the UK Consumer Price Index (“CPI”) plus 6% (calculated on an annual basis) measured over three to five years. The Consumer Price Index is published by the UK Office for National Statistics and represents inflation. The additional 6% is a fixed element to represent what the Board considers to be a reasonable premium on investors’ capital which investing in the faster-growing Asian economies ought to provide over time. The performance objective is designed to reflect that the Portfolio Manager’s approach does not consider index composition when investing.

Portfolio Turnover

Portfolio turnover is a measure of how quickly securities in a fund are either bought or sold by the fund’s managers, over a given period of time. The rate of turnover is important for potential investors to consider, as funds that have a high rate will also have higher fees to reflect the turnover costs.

It is calculated as the average of the purchases and sales for the year divided by the average net assets for the year.

Revenue Return per Share

The revenue return per share is calculated by taking the return on ordinary activities after taxation and dividing it by the weighted average number of shares in issue during the year (see note 7 on page 73 for further information).

Share Price Total Return

The total return on an investment over a specified period assuming dividends paid to shareholders were reinvested in the Company’s shares at the share price at the time the shares were quoted ex-dividend.

Volatility

A measure of the range of possible returns for a given security or market index.

 

ANNOUNCEMENT ENDS

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