Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Contact details
Pacific Assets Trust plc
25 Southampton Buildings
London
WC2A 1AL
www.pacific-assets.co.uk
Pacific Assets Trust plc
Annual Report for the year ended 31 January 2023
This report is printed on Revive 100% White Silk a totally recycled paper produced using 100% recycled
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Contents
Strategic Report
1 Financial Highlights
2 Key Information
3 Company Performance
6 Chairman’s Statement
10 Investment Portfolio
13 Portfolio Manager’s Review
18 Sustainability and ESG
22 Business Review
Governance
34 Board of Directors
36 Corporate Governance
44 Report of the Directors
49 Statement of Directors’ Responsibilities
51 Audit Committee Report
56 Directors’ Remuneration Report
59 Independent Auditor’s Report
Financial Statements
66 Income Statement
67 Statement of Changes in Equity
68 Statement of Financial Position
69 Notes to the Financial Statements
Further Information
79 Glossary of Terms and Alternative Performance
Measures (unaudited)
82 Sustainable Finance Disclosure
Regulation (“SFDR”) Report (unaudited)
96 Shareholder Information
97 How to Invest
98 Notice of the Annual General Meeting
103 Explanatory Notes to the Resolutions
106 Company Information
The photograph on the front cover depicts Chinese lanterns in Hoi An, Vietnam
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
1
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
17.3%
UK Consumer Price Index (“CPI”) + 6%
3
†
2023
1
17.3%
2022
2
11.5%
10.1%
Average discount of share price to net asset value
per share during the year*^
2023
1
10.1%
2022
2
7.3%
5.7%
Net asset value per share total return*^
2023
1
5.7%
2022
2
9.1%
5.9%
Share price total return*^
2022
2
2.9%
1.1%
Ongoing charges
3
^
2023
1
2022
2
(2.2)%
MSCI All Country Asia ex Japan Index (total return
sterling adjusted)*
2023
1
(2.2)%
2022
2
(9.2%)
1
For the year ended 31 January 2023
2
For the year ended 31 January 2022
3
Source: Frostrow Capital LLP
* Source: Morningstar
† The Company’s Performance Objective (See Glossary beginning on page 79)
^ Alternative Performance Measure (See Glossary beginning on page 79)
Net Asset Value Per Share Total Return for the Five Years to 31 January 2023
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Source: Morningstar. Rebased to 100 as at 31 January 2018
Financial
Highlights
1.1%
1.1%
2023
1
5.9%
2
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Pacific Assets Trust plc (the “Company” or the “Trust”) 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 (asdefined 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.
Management
Stewart Investors have been the Company’s Portfolio
Manager since 1 July 2010. They adopt a sustainable
investment strategy in selecting the investments that make
up the Company’s portfolio. They operate through the
regulatory licences of First Sentier Investors (UK) IM
Limited, which is the legal entity appointed as the
Company’s Portfolio Manager. Their ultimate owner is the
Mitsubishi UFJ Trust and Banking Corporation.
Frostrow Capital LLP is the Company’s Alternative
Investment Fund Manager (“AIFM”).
Investment Aims
Stewart Investors aim to generate strong long-term,
risk-adjusted returns by investing in the shares of
high-quality companies that are particularly well
positioned to contribute to and benefit from sustainable
development in the Asia Pacific Region. Sustainability is
fully integrated into the management of risk and return.
The team seeks to improve sustainable outcomes by
avoiding businesses linked to harmful activities, investing
in companies contributing to solutions, and engaging and
voting for positive change.
Investment Philosophy
The foundations of Stewart Investors’ investment
philosophy and approach remain largely unchanged since
1988 and since their first dedicated sustainability
strategy was launched in 2005.
The Stewart Investors investment philosophy is
summarised below:
> They are stewards. They believe their role is to
allocate society’s capital to productive uses,
inaccordance with their Hippocratic Oath
1
.
> They are long-term investors. Their time horizon is
measured in years, not weeks, and they value
companies accordingly.
> They invest only in companies they believe are
contributing to a more sustainable future. They
engage constructively as owners to help companies
on their sustainability journeys.
> They invest only in high-quality companies.
Theyinvest in companies with exceptional cultures,
strong franchises and resilient financials.
> They believe capital preservation is important for
capital growth. They define risk as the possibility of
the permanent loss of client capital.
1
https://www.stewartinvestors.com/all/about-us/our-hippocratic-oath.html
Key Information
3
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Performance Summary
As at As at
31 January 31 January
2023 2022
Shareholders’ funds £473.7m £450.7m
Market capitalisation £433.0m £411.3m
One year to One year to
31 January 31 January
Performance 2023 2022
Share price total return
1 2
5.9% 2.9%
Net asset value per share total return
1
2
5.7% 9.1%
CPI +6%
3
17.3% 11.5%
MSCI All Country Asia ex Japan Index total return, sterling adjusted
1
(2.2)% (9.2)%
Average discount of share price to net asset value per share
1 2
10.1% 7.3%
Ongoing charges
2
1.1% 1.1%
Revenue return per share
4
2.5p 2.0p
Dividend per share 2.3p 1.9p
1
Source: Morningstar
2
Alternative Performance Measure (see Glossary beginning on page 79)
3
The Company’s Performance Objective (see Glossary beginning on page 79)
4
See Glossary beginning on page 79
Total Return since 30 June 2010
(the date of appointment of Stewart Investors as the Portfolio Manager)
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Company
Performance
Source: Morningstar. Rebased to 100 as at 30 June 2010
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Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Performance Assessment
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”) plus6%, calculated on
an annual basis and measured over three to five years. The Board also monitors the Company’s performance against its
peer group. An analysis of performance and the Board’s approach to monitoring it can be found below and in the
Chairman’s Statement beginning on page 6; further information can be found in the Portfolio Manager’s Review
beginning on page13 and details of the Key Performance Indicators begin on page 23.
Peer Group NAV per Share Total Return
1 Year 3 years 5 years
£ Rank £ Rank £ Rank
Pacific Assets Trust 105.7 1 140.3 2 152.9 2
Pacific Horizon 89.1 7 191.1 1 186.6 1
Schroder Asian Total Return 97.5 3 135.9 3 141.7 3
abrdn New Dawn 98.5 2 124.5 5 129.9 4
Schroder Asia Pacific 97.1 4 128.6 4 124.5 5
Asia Dragon Ord 94.8 6 116.6 6 122.9 6
iShares MSCI Asia ex Japan ETF 96.1 5 113.7 7 109.0 7
Peer Group Average 97.0 135.8 138.2
CPI + 6%† 117.3 140.1 163.3
MSCI AC Asia ex Japan Index 97.8 116.0 112.5
Source: Morningstar. Figures show the value of £100 invested at the start of the period as at 31 January 2023.
† The Company’s Performance Objective (see Glossary beginning on page 79)
Company Performance continued
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Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Five Year Record – Dividend and Costs
Five Year Record - Net Asset Value Per Share, Share Price and Discount
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Source: Morningstar. Data for Pacific Assets Trust plc as at 31 January.
Source: Frostrow. Data for Pacific Assets Trust plc as at 31 January.
6
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
We have seen confiscation of
central bank reserves, the
freezing of stock markets and
the impounding of luxury yachts
and assets belonging to nationals
of an unfavoured country. We
can argue that Russia is
exceptional and that our
well-managed Asian markets would never be forced to
succumb to such international pressure. Yet it wasn’t so
long ago that mainstream investors were being
encouraged to have some diversification into Russia, so
blessed with energy and other resources with its
technically literate, educated young millennials.
It is not my intention from my vantage point of chairing
this Trust to alarm our shareholders. However, one of the
more significant developments in recent years has been
the weaponisation of the dollar and other Western
currencies, and that it has become seemingly legitimate
to seize the assets of a country that has crossed a line of
political respectability. It can be argued that it was ever
thus in emerging markets, but we have seen global
polarisation on a somewhat different scale exacerbated
by the Ukrainian war. In short, the nature of ‘country risk’
has altered in the last 12 months.
However, in the end we must do our job in optimising
returns from investing in these vibrant Asian countries.
You, as shareholders, must consider the exposure that you
should have in a part of the world that provides you with
something different from what can be found at home.
We are usually agnostic about politics, domestic and global,
but we have taken note by introducing a new line of control.
Pacific Assets belies its name by having high exposure to
India, something which has been helpful to returns in this
difficult last year. During the year, the Board agreed with the
Portfolio Manager the introduction of an upper limit to
weighting in any one country. In particular, no more than
45% of the Company’s total assets may be invested in any
one country at the time of investment and the Portfolio
manager shall seek to rebalance the portfolio if any country
accounts for 49% of total assets at any time. India and China
have become so dominant economically and politically in the
Asia Pacific region, as have their stock markets. The Trust’s
portfolio is built from the bottom up which will of course
remain the case, but the limit prevents there being
accidental overload in a country possibly exposing our
shareholders to higher political risk.
The Board is proposing to shareholders at the forthcoming
Annual General Meeting (“AGM”) that this limit be formalised
as part of the Company’s investment policy. Further
information can be found on pages 98 to 105 of this report.
Outcomes in the Year
The detailed performance data is to be found on page 3 of
this report. In absolute terms, Pacific Assets was the only
member of its peer group of Asian investment trusts to
produce an increase in value for its shareholders, with a rise
of 5.7%. While this is satisfactory, the Trust failed to achieve
its performance objective of exceeding UK CPI plus 6%
(+17.3%). We have noted in the past that the Trust, under the
management of Stewart Investors, tends to be able to ride
out difficult markets, and this is again vindicated in absolute
terms by the outcome of the last 12 months.
To look a little at the longer term, the annualised NAV
return of the Trust (and the corresponding CPI plus 6%
figure in parantheses) is 11.9% over 3 years (11.9%), 8.8%
over 5years (10.3%), and 10.9% since Stewart Investors
began to manage the Trust in June 2010 (9.1%).
It is also worth looking at the MSCI AC Asia ex Japan
Index (the “Index”) over the longer periods. It is
interesting to see how the Index has lagged active
managers over both long and short periods. This is an
unusual phenomenon in that most market indices,
especially in developed markets, tend to be very difficult
to overcome. Managers, if they care to do so, can make
quite significant choices as to how they differ from the
Index within Asia, either by not including some of the
larger components (Chinese internet stocks, for
instance) or by accentuating positions in one country or
another. As the last year has shown, correlations
between the two major markets (China and India) can fall
to very low levels. Whatever means you use to analyse
Chairman’s
Statement
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Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
this, it is rather heartening if you philosophically believe
in the powers of active management over passive, and in
good stock picking, to find that Asia can still be rewarding
in relative terms.
Less so, perhaps, in absolute terms. Both the United
States and Europe over the last five years have produced
better annualised returns than Asia as a whole. Attempts
to explain this could dominate the rest of this Chairman’s
statement but suffice to say that Asia Pacific markets
have not delivered the premium return over developed
markets that the asset allocation models suggest should
be normal.
Impact
It has been rather bewildering to be associated with
Pacific Assets Trust these past ten years, to see the
investment industry become fixated on ‘sustainability’. It
almost suggests that there is a choice once you have
excluded the polluters as to whether you invest in a clean
manner or not. Those of you who have met our portfolio
managers will be only too aware that they simply do not
understand whether there should be a distinction or not.
Sustainable investing is embedded in their psyche and
must be for any new member joining their team. Hence
the somewhat confused look when someone asks
whether they are ESG compliant, or how they can be
accredited as a sustainable investor by an algorithm that
is fed by multiple choice answers.
When the Board visits an Asian country with the
Portfolio Manager, we participate in an intense
programme of company meetings. When meeting one of
the world’s largest semiconductor manufacturers, the
questions were not about earnings growth, but about the
use of conflict minerals in the supply chain and their
excessive consumption of fresh water. In India, we have
met senior board members where the questions are
about their personal journey and about the fit of
professional managers with the company’s founders. I
should add that the spreadsheet with the numbers is
there as well, but the criteria applied are distinctly
long-term in their nature.
The large weighting in Indian companies and the
relatively light weighting in China does not result from
some strategic decision. It comes down to the availability
of companies that meet the criteria of good governance.
A few years ago in Shanghai, we visited some interesting
companies with the Portfolio Manager which appeared to
show considerable potential. Hardly any of these ended
up in Pacific Assets’ portfolio, with too many having
dubious association with government agencies, or
alternatively they had unexpectedly diversified into an
area that bore no relationship to the company’s core
business. In India, on the other hand, there is a surprising
depth of able companies that display the kind of positive
impacts that increasingly investors are looking for. Two of
our three largest holdings, Tube Investments and CG
Power (together 12.5% of the portfolio) have been
outstanding under the stewardship of the Murugappa
family, first recognised by Stewart Investors 12 years ago.
Company Balance Sheets and
Gearing
To begin with, our Portfolio Manager believes that the
cleaner the balance sheet, the more resilient the
business in tough times. This does not mean to say that
only debt free businesses are owned in the Trust’s
portfolio, but financial vulnerability must be kept to a
minimum. The longer standing businesses in Asia,
especially those controlled by multi-generation families,
will have seen economic, political, and military
turbulence far beyond our own experience in the West.
Take, for example, the Lee family who founded Oversea-
Chinese Banking Corporation in Singapore in the early
1930s, who still manage a forward looking but
conservative leaning bank today. It remains one of the
Trust’s largest holdings.
Investors may be preoccupied in trying to second guess
the world’s central banks. However, an over-arching
question is what happens further on in this cycle. The
longer-term effect of more than a decade of zero or
negative interest rates is still not really understood.
Within the Asian region, there are questions about the
economic sustainability of an indebted China, with its
shadow banking system seemingly supported by a
network of state inspired safety nets. Is the assumption
correct that we must return to negligible interest rates
everywhere, with all the effects of supporting zombie
companies and entrenching the misallocation of capital?
Financial engineering may have distorted true
profitability amongst more unscrupulous companies. Off
balance sheet finance is another unknown.
I have talked about sustainability, a hard to define
concept. Similarly, ‘quality’ is another which cannot easily
or neatly be defined. Looking forward as the post
Covid-19 interest rate cycle unravels, and with it,
hopefully but not with any certainty, inflation, we may
not quickly return to a low-risk world that many
investors expect. Financial sustainability is an important
aspect of the portfolio of Asian companies that the Trust
holds. It also goes some way to answering the question
about how the downside is protected during difficult
markets such as the last year.
There is linkage here to the use of leverage within the
Trust’s portfolio. Gearing can be a differentiating factor
8
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
that is available to investment companies but not to
open-ended funds and can be appropriate, especially
when secured against a portfolio of soundly financed
companies. When used, it will add to the NAV
performance of the Company in rising markets but,
conversely, detract in falling markets. This has the effect
of amplifying market movements but, over time, the
intention is that it should enhance the return to
shareholders. Last year shareholders approved the use
of gearing in principle but, to date, no borrowing facilities
have been put in place. Your Board will continue to
consider the use of gearing but will be mindful that,
among other factors, the prevailing cost of borrowing is
relatively unattractive.
Total Return
We think of this when considering the discount that may
exist between the share price and the net asset value of
the Trust.
The Trust’s shares traded at an average discount to the net
asset value per share of 10.1% through the 12- month period
to the end of January. In line with the investment companies
sector overall, the share price discount widened materially
at the time of the Russian invasion of Ukraine, and then
steadily narrowed over the remainder of the financial year
to close at 8.6% (2022: 8.8%). Strong relative performance is
assisting investor sentiment, as will the Portfolio Manager’s
high level of credibility as a sustainable investor, attractive to
shareholders who are seeking exposure to Asia through
genuinely responsible investing.
The Board is working to introduce improvements to the
visibility of the Trust. We wish to see a broader range of
shareholders including retail investors who are less
present on our shareholder register than we would like.
Stewart Investors, on their marketing side, are raising
their already high standards of printed materials and
electronic communications. All of this will be helpful in
ensuring continuing demand for the Trust’s shares, but
only if the Trust can continue to provide positive relative
returns in the way that it has done over the last five years.
Dividend
The Company generated a revenue return of 2.5p
per share during the year (2022: 2.0p per share) and, as a
result, the Board recommends to shareholders the
payment of a final dividend to allow the Company to
comply with the investment trust rules regarding
distributable income.
Subject to shareholder approval at the AGM, a final
dividend of 2.3p per share will be paid on 6 July 2023 to
shareholders on the register on 9 June 2023. The
associated ex-dividend date will be 8 June 2023.
The Board
We adhere to good corporate governance principles that
we should be looking to replace a director after they
have served on the Board for over nine years. We do not
agree with the assertion that extreme longevity
compromises independence, but we do believe that
there is room for fresh thinking and approach after a
certain time.
I will be leaving the Company at the end of May 2023
having been a director since 2013 and Chairman since
2015. Andrew Impey will take over from me and will be
chairing the AGM. His biography is on page 35. Andrew
brings a lifetime of professional involvement in
investment management and is already an experienced
leader of an investment company board, and I am sure he
will provide capable leadership to Pacific Assets Trust
and its Board.
There will be other retirements in subsequent years. The
challenge of ensuring continuity of the Board and
managing the relationships with the Portfolio Manager
and others is something that we are acutely conscious of.
We are very focused on successfully managing the
transitions with the right individuals and mix of people.
We are asking shareholders to approve an increase to
the ceiling on Directors’ fees collectively to £300,000.
Our total combined fees are well below this, but it
enables us where necessary, to carry an extra member of
a Board to ensure overlap with a new position.
I would like to say in my final Chairman’s statement how
much I appreciate the professionalism and the skills of
our two key service providers, Stewart Investors as the
Portfolio Manager and Frostrow, as our AIFM,
administrator and company secretary. Although my time
in the investment industry now exceeds 50 years, I never
stop learning, and it has been a privilege to work with
such able people. Where Stewart Investors are
concerned, their team of portfolio managers are
dedicated to understanding their companies and are fully
grafted to a unique investment philosophy. I shall of
course continue to be a shareholder, expecting to be well
satisfied with what the Trust will offer.
Regulatory Developments
The Company looks forward to the publication of the
FCA’s policy statement on, and the implementation of,
the UK Sustainability Disclosure Requirements (“UK
SDR”). Stewart Investors adopt a sustainable investment
strategy in selecting the investments that make up the
Company’s portfolio and aim to generate strong long-
term, risk-adjusted returns by investing in the shares of
high-quality companies that are particularly well
positioned to contribute to and benefit from sustainable
Chairman’s Statement continued
9
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
development in the Asia Pacific Region. Given this
long-standing sustainable investment strategy, the
Company will seek to comply with, and report against, a
high standard of sustainability disclosures under the UK
SDR once the categorisations and requirements of this
regime have been confirmed. Although it is not currently
expected that the UK SDR will change Stewart Investors’
strategy in managing the Company’s portfolio, the Board
notes that the Company’s investment objective and
policy may require further amendment, and approval by
shareholders, in order to meet the regulatory
requirements governing sustainability disclosures going
forward. The FCA has stated its intention to publish the
UK SDR policy statement in the third quarter of 2023.
The Board will provide a further update to shareholders
in due course and, to the extent required, seek
shareholder approval for any necessary changes to the
Company’s investment objective and policy once the
details of the UK SDR are known.
The Annual General Meeting
This year’s Annual General Meeting will be held at
12 noon on Monday, 3 July 2023, 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
strategy and its key investments.
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 96).
Registering your vote in advance will not restrict
shareholders from attending and voting at the meeting in
person should they wish to do so. As investors we take
corporate governance seriously among the companies
that we own in the Trust’s portfolio, and we urge you, our
shareholders, to follow suit and vote on the resolutions
that are proposed, as we directors intend to do
ourselves.
The Outlook
Our investment universe covers an area that contains
over 60% of the world’s population, and an ever growing
proportion of global GDP. Generalising about such
varied countries is always hazardous, which makes
predicting the short-term future hard. However, we note
that the anxieties about interest rates, inflation, and
financial accidents seem to diminish the further you
move away from the developed world. There can be no
isolation from difficult global trends, but there is a feeling
of greater self-sufficiency in Asia than there was a few
years ago. Our goal is to invest for the long term
alongside successful and experienced local business
leaders. The rewards that will accrue come from
satisfying the needs of a huge and growing middle class,
from exploitation of technological inventiveness, and
from skilful management.
James Williams
Chairman
9 May 2023
10
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Market
valuation %Net
Company Country MSCI Sector £’000 assets
CG Power & Industrial Solutions India Industrials 33,106 7.0%
Mahindra & Mahindra India Consumer Discretionary 28,591 6.0%
Tube Investments of India India Consumer Discretionary 25,997 5.5%
Unicharm Japan Consumer Staples 15,805 3.3%
Oversea-Chinese Banking
Corporation Singapore Financials 15,454 3.3%
Marico India Consumer Staples 13,204 2.8%
Voltronic Power Technology Taiwan Industrials 12,698 2.7%
Shenzhen Inovance Technology China Industrials 11,595 2.5%
Hoya Japan Health Care 11,581 2.4%
Techtronic Industries Hong Kong Industrials 11,513 2.4%
Top10Investments 179,544 37.9%
Koh Young Technology South Korea Information Technology 11,139 2.3%
Vitasoy International Hong Kong Consumer Staples 10,787 2.3%
Housing Development Finance
Corporation India Financials 10,449 2.2%
Elgi Equipments India Industrials 9,827 2.1%
Vinda International China Consumer Staples 9,654 2.0%
Tata Consumer Products India Consumer Staples 9,382 2.0%
PT Kalbe Farma Indonesia Health Care 8,905 1.9%
Taiwan Semiconductor
Manufacturing Taiwan Information Technology 8,657 1.8%
Humanica Thailand Information Technology 8,545 1.8%
Shanthi Gear India Industrials 7,634 1.6%
Top 20 Investments 274,522 57.9 %
Sheng Siong Group Singapore Consumer Staples 7,631 1.6%
Aavas Financiers India Financials 7,402 1.6%
Glodon China Information Technology 7,369 1.6%
Kotak Mahindra Bank India Financials 7,174 1.5%
Chroma ATE Taiwan Information Technology 7,108 1.5%
Delta Electronics Taiwan Information Technology 6,454 1.4%
Advanced Energy Solution Taiwan Industrials 6,405 1.3%
Bank OCBC NISP Indonesia Financials 6,310 1.3%
Selamat Sempurna Indonesia Consumer Discretionary 6,285 1.3%
Advantech Taiwan Information Technology 6,246 1.3%
Top 30 Investments 342,908 72.3%
Investment
Portfolio
as at 31 January 2023
11
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Market
valuation %Net
Company Country MSCI Sector £’000 assets
Cholamandalam Financial India Financials 6,217 1.3%
Tata Consultancy Services India Information Technology 6,213 1.3%
Vitrox Malaysia Information Technology 5,943 1.3%
Godrej Consumer Products India Consumer Staples 5,800 1.2%
PT Unilever Indonesia Indonesia Consumer Staples 5,665 1.2%
Amoy Diagnostics China Health Care 5,414 1.1%
Unicharm Indonesia Indonesia Consumer Staples 5,161 1.1%
Tokyo Electron Japan Information Technology 4,848 1.0%
Philippine Seven Philippines Consumer Staples 4,835 1.0%
Guangzhou Kingmed Diagnostics China Health Care 4,496 1.0%
Top 40 Investments 397,501 83.8%
PT Industri Jamu dan Farmasi Sido
Muncul Indonesia Consumer Staples 4,393 0.9%
Dr Lal Pathlabs India Health Care 4,364 0.9%
Infosys India Information Technology 4,339 0.9%
Dabur India India Consumer Staples 4,328 0.9%
Public Bank Malaysia Financials 4,288 0.9%
Tarsons Products India Health Care 4,265 0.9%
Tata Communications India Communication Services 4,121 0.9%
Pigeon Corporation Japan Consumer Staples 3,926 0.8%
Centre Testing International Group China Industrials 3,834 0.8%
Kasikornbank Thailand Financials 3,456 0.7%
Top 50 Investments 438,813 92.5%
Airtac International Taiwan Industrials 3,394 0.7%
Silergy China Information Technology 3,317 0.7%
Dr. Reddy’s Laboratories India Health Care 3,309 0.7%
Indiamart Intermesh India Industrials 3,309 0.7%
Yifeng Pharmacy Chain China Consumer Staples 3,284 0.7%
Tech Mahindra India Information Technology 3,280 0.7%
Marico Bangladesh Bangladesh Consumer Staples 3,240 0.7%
Syngene International India Health Care 2,668 0.6%
Foshan Haitian Flavouring & Food China Consumer Staples 1,988 0.4%
DBH Finance Bangladesh Financials 1,960 0.4%
Info Edge India Communication Services 1,918 0.4%
Zhejiang Supor China Consumer Discretionary 1,831 0.4%
Pentamaster International Malaysia Information Technology 1,181 0.3%
Brac Bank Bangladesh Financials 906 0.2%
Total Investments 474,399 100.0%
12
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Portfolio Distribution
Geographical Analysis
0 5 10 15 20 25 30 35 40 45 50 55
India
China
Taiwan
Indonesia
Japan
Singapore
Hong Kong
Thailand
Malaysia
South Korea
Bangladesh
Philippines
Liquidity
As at 31 January 2022
As at 31 January 2023
%
Source: Frostrow Capital LLP
Sector Analysis
Consumer Staples
Industrials
Information Technology
Financials
Consumer Discretionary
Health Care
Communication Services
Materials
Liquidity
%
0 5 10 15 20 25 30
As at 31 January 2022
As at 31 January 2023
Source: Frostrow Capital LLP
Investment Portfolio continued
13
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
“The opportunities for high quality companies to contribute to, and benefit
from, the sustainable development of the region are immense.”
The Company is managed with a long-term philosophy
that values capital preservation alongside capital
growth. We do not believe that the respect given to
downside protection constrains the long-term potential
to grow the net asset value of the Trust in any way.
Rather, we see it as a vital component in the ability to
generate long-term growth.
There are common characteristics that companies which
fail to protect and grow capital share with one another.
These include, but are not limited to, a history of
corruption, short-time horizons, government
connections, bad capital allocation, poor sustainability
positioning, lack of pricing power, unproven business
models, mountains of debt and fragile cash flows.
We aim to filter out these poor-quality features as we
believe their presence increases the vulnerability of the
business, its stream of cash flows, and ultimately its
share price. The presence of such characteristics by no
means guarantees that a company will automatically fall
foul of some universal law of failure, only that it will tend
to fail our quality threshold criteria and desire to own the
company for the next ten years.
An emphasis on capital preservation allows us to quickly
eliminate many companies across the region, leaving a
far smaller set of companies with which to study quality
in greater detail. From here, we spend the vast majority
of our time trying to understand the people that make up
a business, whether that be the ultimate owner, the
management team or the culture that proliferates the
whole organisation. We do so because we believe it is the
quality of the people and the decisions they make on a
daily basis that creates, and protects the pricing power,
exceptional returns on capital or enduring growth
outcomes enjoyed by quality businesses. Simply, it is
people who impact the long-term success or failure of a
business. Importantly we do not rely on auditors, ESG
scores or other outside entities to tell us who totrust.
A consequence of looking for people we trust to take a
long-term view and behave in the best interests of
stakeholders is that 90% of companies in the Trust have
a long-term owner at the helm. These stewards have
their own capital invested alongside the Trust while also
sharing the Trust’s time horizon and philosophy of
long-term capital protection and growth. For those
companies without a long-term steward, we are looking
for cultures that exhibit the same values. Because we are
free from having to use a benchmark index as a starting
point when constructing our portfolio, there is no
pressure for us to expose the Trust’s capital to a
particular company, sector or country if we believe the
risk of capital loss is too high.
Macroeconomic Volatility
Much has been written, and forecast, about the direction
of travel for interest rates and inflation. We aim to avoid
falling into the trap of allowing top-down noise to
distract and shorten time horizons. If we are true to our
philosophy and build a diversified portfolio of high-
quality businesses at reasonable valuations, there should
be little need for us to alter geographic or sector
exposure on account of a shift in economic rhetoric. We
invest in companies not countries. This was the case last
year and over every period Stewart Investors has had
the privilege of managing the Trust. As stewards, we
would not be fulfilling our obligation to shareholders if
we built a portfolio with a high likelihood of severe
capital loss should there be any slight variation in the
macroeconomic environment.
Portfolio
Manager’s
Review
14
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
A bottom-up approach to filtering out poor quality
companies leads us to companies which should have a
greater ability than most to survive, and prosper, across
macroeconomic cycles. The Trust is home to companies
who enjoy attractive margins and long track records of
pricing power. The average age of the companies in the
Trust is 45; inflation is not new to these businesses.
Institutional memory of years when inflation sat at levels
materially higher than today ensures these businesses are
purposefully robust. These businesses should also be
relatively resilient to changes in interest rates. The vast
majority of the companies in the Trust have more cash than
debt on their balance sheets and can fund investment in
future growth through their own cash flow generation. This
offers freedom from the pressure to appease banks and
capital markets - stakeholders who tend to be very
short-term.
Political Volatility
Unanticipated political change is not new to Asian
markets but last year perhaps marked one of the most
significant junctures in the region’s history. With Xi
Jingping being confirmed as President of the Chinese
Communist Party (“CCP”) for an unprecedented third
term, his preferences, fears and ambitions will be those
that drive China for the foreseeable future. The Trust has
had minimal exposure to Chinese listed companies over
the course of the last ten years. This is not the result of a
top-down view of politics, or growth, or demographics
but due to an inability to find companies that meet our
quality and valuation thresholds. Most companies in
China are either state-controlled or state-owned so are
easily avoided by us on ‘quality of people’ grounds;
misalignment with controlling shareholders, especially
governments, is an easy way of losing capital.
The Trust now owns nine Chinese companies: each has a
private entrepreneur, family or steward behind it who we
trust to continue their track record of treating minority
investors fairly while building unique and enduring
franchises. A consequence of our lens of asking “what
could go wrong?” as well as “what can go right?” has been
our need to appraise how businesses in China are aligned
with the objectives and aims of Xi and his CCP. This focus
on capital protection allowed the Trust to avoid the
redrawing of the rules in the Chinese education and
fintech sectors. Again, thanks to our ability to be truly
bottom up, we can be very picky in the companies we
choose to own in China. If we were to see a deterioration
in the industries in which our companies operate, greater
political involvement or stretched valuations there
should be no surprise if the Trust’s exposure to China
were to fall again.
Investment Returns
Over the year to 31 January, the net asset value of the
Trust returned 5.7%. Using the MSCI All Country Asia ex
Japan Index (the “Index”) as a reference point, the chart
overleaf provides one way of visualising the Trust’s track
record. Every one-year rolling period since Stewart
Investors started managing the Trust is represented by a
dot (taken at quarterly intervals). Every dot below the
line represents a year of underperformance against the
Index, every dot above the line, outperformance.
Focusing only on years where the Index has delivered
returns of less than 0% highlights the ability of
companies owned within the Trust to survive and
prosper under most periods of stress.
Portfolio Manager’s Review continued
15
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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CumulativePerformance
(%inGBP)to31January2023
Sinceinception
(01/07/2010)
7 years 5 years 3 years 1 year
NAV
270.2% 118.5% 52.9% 40.3% 5.7%
Share Price 274.5% 102.7% 47.0% 37.1% 5.9%
CPI+6% 199.7% 92.5% 63.3% 40.1% 17.3%
MSCIACAsiaexJapanIndex(Net) 134.7% 95.3% 12.5% 16.0% -2.2%
Annual Performance
(%inGBP)to31January2023
12mths to
31/01/23
12mths to
31/01/22
12mths to
31/01/21
12mths to
31/01/20
12mths to
31/01/19
NAV
5.7 9.0 21.8 4.1 4.7
Share Price 5.9 2.9 25.8 -0.8 8.1
CPI+6% 17.3 11.9 6.8 7.5 8.4
MSCIACAsiaexJapanIndex(Net) -2.2 -9.2 30.7 5.0 -7.7
Marketswith<0%return(rolling1yrbasis) %
Pacific Assets Trust NAV Total Return – average % -1.1
MSCI AC Asia ex Japan Index – average % -9.6
The chart also shows that the Trust tends to, more often than not, underperform fast rising markets; these are often
markets where the types of poor-quality companies we aim to avoid are in favour. It may not be the most exciting
proposition, growing wealth over the long term by focusing on the downside, but we believe it offers shareholders an
attractive way to gain exposure to the fantastic opportunities available in the Asian region.
Thesefiguresrefertothepast.Pastperformanceisnotindicativeoffutureperformance.Forinvestorsbasedincountrieswithcurrenciesother
thanGBP,thereturnmayincreaseordecreaseasaresultofcurrencyfluctuations. Source for Pacific Assets Trust plc: Lipper IM/Bloomberg/
Trust Administrator. The NAV performance data is calculated on a net basis after deducting all fees (e.g. investment management fee) and costs (e.g.
transaction and custody costs) incurred by the Trust. The NAV includes dividends reinvested on a net of tax basis. Source for comparator benchmark
index: FactSet. Table data is shown versus the MSCI AC Asia ex Japan Index, calculated on an income reinvested net of tax basis. Source for
Consumer Price Index (CPI) + 6% data: FactSet. CPI data is quoted on a one month lag. Performance calculated from when Stewart Investors became
Portfolio Manager of the Trust on 1 July 2010.
Extending the frame of performance to three, five and seven years – time periods more in-line with our investment
horizon - the Trust has delivered satisfactory levels of capital appreciation.
16
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Contributors
During the year under review, the Trust’s material
ownership of Indian companies, especially those with
exposure to a return of capital spending and industrial
growth, was a key contributor to absolute performance.
CGPower&IndustrialSolutions
(India: Industrials)
Contribution: 3.3%
We acquired CG Power in the first quarter of 2021, very
quickly after Tube Investments took a controlling stake.
Previous owners had abused their power resulting in their
creditors taking control of the company, putting it up for
sale, and Tube Investments subsequently taking ownership.
CG Power is the leading manufacturer of motors in India, a
high-quality franchise with fantastic long-term avenues for
growth. It has performed well thanks to a greater
appreciation of the opportunities under Tube Investment’s
ownership as well as very attractive levels of underlying
growth. Had we not followed the actions of quality people
we trust we would not have found nor invested in CG Power.
It certainly would not have appeared in a very favourable
light had it been put through a quantitative screen.
Mahindra&MahindraLtd
(India: Consumer Discretionary)
Contribution: 2.6%
The Trust has owned this company for more than five
years and, again, a change in the management team
drove us to increase our position size. During the depths
of the Covid-19 pandemic, Mahindra & Mahindra
appointed a new CEO with the remit to address issues
stemming from historically poor capital allocation. Since
then we have seen material improvement in the quality
of the business, continued dominance of the tractor
market and the development of ambitious plans for their
farm equipment and electric mobility businesses.
TubeInvestmentsofIndia
(India: Consumer Discretionary)
Contribution: 2.6%
The Trust has owned Tube for close to ten years but
materially increased its position in 2017 when a new
CEO took over this fourth generation family company.
His intention was to evolve Tube away from its existing
businesses - parts for the auto and rail industries, as well
as bicycles - to an industrial conglomerate with
leadership positions across higher value industries. This
was to be done in a manner similar to that achieved by
the high performing conglomerates we have studied in
the US or Europe: taking free cash flow from existing
businesses and expanding, both organically and through
mergers and acquisitions (“M&A”), into higher quality
industries. Since 2017, Tube has grown its sales at more
than 20% a year, its free cash flow at a higher rate, while
improving its return on capital employed (“ROCE”) from
22% to 47%
1
. We have also seen the company embark on
high quality M&A while organically entering the fields of
electric mobility and manufacturing in the IT industry.
Portfolio Manager’s Review continued
1
Source: Tube Investments, 2021-22 Annual Report and FactSet
Contribution by investment for the year ended 31 January 2023
Top 10 contributors to and detractors from absolute performance (%)
-3 -2 -1 01234
CG Power & Industrial Soluঞons
Mahindra & Mahindra
Tube Investments of India Limited
Shanthi Gear Ltd
Elgi Equipments Ltd
Shenzhen Inovance Technology Co Ltd
Vitasoy Internaঞonal Holdings
Bank Ocbc Nisp Pt
Selamat Sempurna Pt
Voltronic Power Te chnology Corp
3.3
2.6
2.6
0.9
0.5
0.4
0.4
0.3
0.3
0.3
Aavas Financiers Ltd.
NAVER Corp.
Dr Lal Pathlabs Ltd
Taiwan Semiconductor Manufacturing Co. Ltd.
Silergy Corp
Te chtronic Industries Co., Ltd.
Koh Yo ung Te chnology Inc
Tokyo Electron Ltd.
Hoya Corp.
Te ch Mahindra Limited
-0.7
-0.7
-0.4
-0.4
-0.4
-0.4
-0.3
-0.3
-0.3
-0.3
To p 10 Stocks
Boom 10 Stocks
17
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Detractors
Aavas Financiers
(India: Financial Services)
Contribution: -0.7%
The Trust has owned Aavas since 2020 as we believe the
company to be a very well run, conservative provider of
mortgages to low income households in India. The share
price looks to have come under pressure as Aavas has
chosen to constrain short-term profitability as they
invest in scaling the business. We are very comfortable
with this approach as the long-term potential remains
vast and this kind of behaviour is usually emblematic of a
patient mindset. We have added to the position in recent
months.
NAVER Corp.
(South Korea: Information Technology)
Contribution: -0.7%
NAVER has struggled to find new avenues for profitable
growth as it seeks to diversify away from its core search
business. We sold the position during the year as we
failed to gain conviction in the long-term growth profile
of the company as well as their capital discipline.
Dr Lal Pathlabs
(India: Healthcare)
Contribution: -0.4%
Like so many other companies that enjoyed spectacular
growth on the back of Covid-19-induced tailwinds, Dr
Lal’s earnings growth has deteriorated dramatically over
the short term. Alongside the reversal of unsustainable
growth in testing volumes, the Indian diagnostic industry
has also experienced increased intensity of pricing: this
combination of headwinds has led to heightened levels of
uncertainty in the sector. We remain long-term owners
of the company as we believe Dr Lal’s brand and scale
advantages should allow them to survive the current
period of stress and become a long-term winner as the
market consolidates around trusted players.
Significant Transactions
Over the course of the year, the turnover of the Trust
was 16%. The majority of the turnover was driven by the
need to control the weight of the largest positions
namely, Tube Investments and CG Power. Without
intervention, these two positions would have run to
more than 20% of the portfolio. Although we believe in a
portfolio that honestly reflects our conviction, we do not
want the Trust to become overly exposed to a few
companies, particularly if they operate in
similarindustries.
We initiated positions in six new companies last year
with the purchases of Public Bank (Malaysia: Financials),
Kalbe Farma (Indonesia: Healthcare) and Oversea-
Chinese Banking Corporation (Singapore: Financials)
being discussed in the Company’s last half year report.
The most significant new holding in the second half of
the year was Advanced Energy Solutions (“AES”)
(Taiwan: Industrials), a company focused on the design
and manufacture of battery packs used in electric bikes,
electric vehicles and servers. Despite the very obvious
tailwinds created by growing demand and investment in
electric mobility, as well as lithium batteries, we have
struggled to find companies that meet our quality
threshold. AES bucks that trend with robust margins and
attractive returns thanks to long-standing relationships
with customers who trust AES to build a valuable input
that has a significant bearing on the quality and
performance of the end product.
As discussed earlier, the Trust’s exposure to India had a
positive contribution to performance last year. With that
outperformance came some extended valuations that
required reducing position sizes. Holdings in consumer
names such as Dabur India (India: Consumer Staples) and
Marico (India: Consumer Staples) were trimmed as was
the large holding in the air compressor manufacturer
Elgi Equipments (India: Industrials). The relative
weakness in Chinese markets offered the opportunity
toadd to some of our favourite names: Shenzhen
Inovance (Industrials), Kingmed Diagnostics (Health
Care), Glodon (Information Technology) and Amoy
Diagnostics (Health Care).
Looking Forward
As always, we remain excited about the potential for the
long-term, active investor in the Asian region. Our
continued focus on owning high-quality companies run
by high-quality people should continue to provide capital
preservation in times of stress while allowing the Trust to
participate in the exceptional long-term growth
opportunities that Asia offers.
Stewart Investors
Portfolio Manager
9 May 2023
18
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Environmental, Social &
Governance Policy
The Board believes that consideration of environmental, social
and governance (“ESG”) issues within the Company’s
operations is of importance to shareholders and other
stakeholders, not least because long-term returns are much
more likely to be generated by companies that have embedded
corporate governance strengths, and which respect the
environment and the society in which they operate. The Board
believes that this investment approach is readily applicable in
the markets in Asia in which the Company invests.
As the Company delegates the management of the
portfolio to Stewart Investors, the Board has chosen to
adopt and endorse their approach to integrating
sustainability into portfolio construction and investee
company engagement. This approach is described in detail
in this section. As part of this focus on sustainability, the
Board expects ESG concerns to be a key topic of
engagement with investee companies. The Company
expects to maintain, through its Portfolio Manager, a
continuous constructive dialogue with the owners and the
managers of the companies where it owns shares. Such a
relationship is enhanced by the long-term nature of the
investment inherent in the Portfolio Manager’s
investment approach, reassuring companies of stability.
In the same way as the Board expects the Portfolio
Manager to test investee companies on their ESG
adherence, the Board will also assess the Company’s
principal service providers. The Board asks for
assurances that a service provider has taken the
necessary steps to mitigate any negative environmental
impact their operations might have, to ensure that their
internal governance is compliant with expected high
standards, and that they strive to avoid negative social
impacts resulting from their activities.
Similarly, the Board itself strives to uphold the highest
ESG standards. The Board’s operations mainly consist of
governance-related matters, where it is important to the
Directors to be at the forefront of best practice.
As best practice, regulation and disclosure are evolving
rapidly in this area both for the Company and for the
companies in which it invests, the Board regularly
discusses sustainability, including ESG policy and
practice, with the Portfolio Manager, encouraging where
possible further enhancements in both the policy and in
reporting to shareholders.
Stewart Investors’ Approach to
Sustainable Investing and ESG
Sustainability is core to Stewart Investors’ investment
philosophy and integrated into their investment process.
They do not have a separate team that looks at
sustainability – every investment team member analyses
the sustainability positioning of a business, and is also
responsible for engaging and voting activities.
Stewart Investors only invest in high-quality companies
that contribute to, and benefit from, sustainable
development. They define development as sustainable if it
furthers human development and has an ecological
footprint that respects planetary boundaries. All
members of the investment team sign the Stewart
Investors, Hippocratic Oath
1
, pledging to uphold the
principles of stewardship.
They approach sustainability as a means to mitigate risks
and as a driver of investment returns. Integrating
sustainability into their analysis is a natural extension of
having a long-term investment horizon; the sustainability
headwinds and tailwinds that affect companies are
different from the shorter-term risks that businesses face.
Their consideration of sustainability is holistic; it includes
ESG but is more than ESG. They consider financial
sustainability – conservatism around the balance sheet,
for example – and stewardship by management – the
treatment of all stakeholders through a crisis, for example
– to be as essential to the sustainability positioning of a
company as the product or service the company sells.
1
https://www.stewartinvestors.com/uk/en/private-investor/how-we-invest/sustainable-investing/our-hippocratic-oath.html
Sustainability
and ESG
19
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
When assessing a company’s sustainability they ask
themselves the following questions:
> Products and services – Do the products and
services make a valuable contribution to sustainable
development?
> Context – Can the company benefit from
sustainability tailwinds and negative headwinds?
> Company ethos – Do the culture and values embody
sustainability and continuous improvement?
> Operational impact – Is the company trying to
reduce impacts from its operations?
They avoid companies that do not contribute to
sustainable development and engage with companies to
improve sustainability outcomes.
Stewart Investors has established a materiality threshold
for harmful or controversial activities at 5% of revenues
– 0% for tobacco production and controversial weapons.
They explicitly seek to invest in companies that are
making a positive contribution to society. Full details of
the activities and practices Stewart Investors finds
inconsistent with their investment philosophy are
available on their website
2
.
Stewart Investors employ the services of an external
ESG research provider to provide a quarterly check on
the Trust to ensure companies meet global norms for
best practices and raise no exceptions against their
thresholds for harmful activities. They also receive
controversy reporting from RepRisk.
Issues such as climate change, biodiversity and water,
human rights and modern slavery, and diversity and
inclusion are integrated into Stewart Investors’
investment selection and engagement and voting
processes. Their approach to climate change is explained
in detail in their climate statement
3
and recently
published climate report
4
. Their approach to biodiversity
and water is reflected in their selection of companies
that mitigate their impact on the natural environment or
provide services/products that improve efficiencies.
They have engaged on a number of related issues such as
palm oil, deforestation, plastic waste and the use of
harmful chemicals. Human rights and modern slavery are
a risk throughout the supply chain of their investee
companies. Their approach is to focus on quality
companies that treat their employees well and manage
the risks in their supply chain effectively. Where they
identify problems they engage. Their recent
collaborative engagement on conflict minerals in the
semi-conductor supply chain is a good example of this.
Their approach to diversity is explained in their
statement
5
and article
6
about what they have done so far.
They will provide updates on these issues, amongst
others, in their quarterly shareholder updates.
Transparency
As part of their focus on improved transparency, Stewart
Investors have developed a Portfolio Explorer tool
9
which provides four views of sustainable development
for the Trust:
Map: This global view provides detailed company
information including investment rationales, risks and
engagement priorities.
Sustainable Development Goals (“SDGs”): The 17 SDGs
are globally agreed goals that countries have committed to
achieving by 2030. The SDGs offer a vision for the future
towards which sustainable investment efforts can
bedirected.
Climate solutions: Companies are mapped to Project
Drawdown’s c.90 climate change solutions, which if scaled
up, can deliver the Paris Agreement’s 1.5
o
C temperature
goal. Project Drawdown is a non-profit organisation
providing analysis of the solutions which can help the
world reach ‘drawdown’ – i.e. the future point in time when
levels of greenhouse gases in the atmosphere stop
climbing and start to decline. The solutions are diverse and
cross-cutting, and show the systemic change needed to
avoid catastrophic warming. The full set of solutions along
with the research that backs them are publicly available on
www.drawdown.org.
Human development pillars: Stewart Investors have
developed 10 human development pillars inspired by the
UN Human Development Index that they believe are
essential for lifting people out of poverty and empowering
them to achieve their potential.
Sustainable Finance Disclosure
Regulation
The Portfolio Manager reports on how the Trust has met
its sustainable investment objective, in accordance with
the requirements of the Sustainable Finance Disclosure
Regulation (“SFDR”), beginning on page 82 of this
AnnualReport.
2
https://www.stewartinvestors.com/uk/en/private-investor/insights/our-position-on-harmful-and-controversial-products-and-services.html
3
https://www.stewartinvestors.com/uk/en/private-investor/insights/climate-change-statement.html
4
https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/PASSET-Climate-2021.pdf
5
https://www.stewartinvestors.com/uk/en/private-investor/insights/diversity-statement.html
6
https://www.stewartinvestors.com/uk/en/private-investor/insights/diversity-what-have-we-done.html
20
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Sustainability and ESG continued
Case Study – CG Power
Website: https://www.cgglobal.com
Company profile: Motors and transmission equipment.
Stewardship: Family. Majority-owned by Tube Investments, which is part of the Murugappa family.
What Stewart Investors like:
> A reasonable quality franchise which is now well placed to return to its former glory under the quality stewardship
of its new owners Tube Investments. The company was earlier driven to bankruptcy by its previous owners due to
fraud and poor governance.
> A long overdue revival in India’s industrial cycle could potentially fast track this turnaround.
> CG Power’s products (motors, switchgears and transmission equipment) are crucial to the building and
maintenance of key sustainable infrastructure in the subcontinent.
Risks: Stewart Investors believe that risks for the company include the new owners discovering more skeletons in the
closet; and Indian industrial capex growth is lower than expected in the coming decade.
How the company is contributing to environmental outcomes
CG Power has developed ester oil filled transformers as a more sustainable alternative to mineral oil transformers, and
are manufacturing polymer insulators instead of porcelain ones which are more prone to environmental destruction. The
company’s industrial systems segment includes electric motor products including for electric vehicles, electric buses,
drives and industrial automation solutions and railways including traction equipment, traction electronics and signalling.
How the company is contributing to social outcomes:
CG Power is in the business of designing and manufacturing power generation and transmission products. Their
transformers and motors are required in furthering access to uninterrupted electricity. They have also developed a
Controlled Switching Device which limits inrush of current and helps protect infrastructure.
Relevant Sustainable Development Goals (“SDGs”):
SDG No. 9 – Industry, innovation and infrastructure
CG Power provide a comprehensive range of products, solutions and services for energy, water, infrastructure and
agriculture industries, as well as many others.
SDG No. 11 – Sustainable cities and communities
CG Power supply high quality, “smart” electrical, industrial and consumer products and solutions all over the world helping
customers to reduce emissions, noise and cost, as well as improving the reliability and safety of their operations.
21
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Thematic Engagement Example – Conflict Minerals
Stewart Investors are progressing with a collaborative engagement initiative on conflict minerals (tantalum, tin,
tungsten, gold and cobalt) in the semiconductor supply chain. These minerals are vital materials for the semicon-
ductor industry. Poor traceability along complex supply chains can lead to the inadvertent financing of armed
conflict and the abuse of human rights.
The initiative is supported by 160 investors representing US$6.6 trillion of assets under management. In 2022
Stewart Investors wrote to 29 companies encouraging them to develop and invest in traceability technology, to
increase transparency/reporting from mine to product, to collaborate to improve industry practices, to impose/
enforce harsher sanctions on non-compliance and to reduce demand for new materials by improving recycling. To
date they have received responses from 22 companies, and met with 13 of them.
As part of the engagement, Stewart Investors have engaged with industry and civil bodies. They attended the
Responsible Minerals Initiative (RMI) annual conference, and understand they are the first known investor to have
done so. In addition, Stewart Investors have met with Global Witness to discuss their report: The ITSCI Laundro-
mat: How a due diligence scheme appears to launder conflict minerals
7
. A summary of the findings is available in a
short interview with Alex Kopp, an investigator at Global Witness
8
.
It is extremely early days for this multi-year engagement but it is clear that tracing mineral provenance is a complex
challenge and progress is likely to be slow.
7
https://www.globalwitness.org/documents/20347/The_ITSCI_Laundromat_-_April_2022.pdf
8
https://www.stewartinvestors.com/eea/en/professional/conflict-minerals-interview.html
9
https://www.stewartinvestors.com/uk/en/private-investor/our-strategies/pacific-assets-trust.html?tabs-anchor=Pacific%20
Assets%25Trust&active-tab=Portfolio%20Explorer
22
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
The Strategic Report, set out on pages 1 to 33, 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
theCompany.
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 listed on the premium segment of the
Official List and traded on the main market of the
London Stock Exchange.
The purpose of the Company is to achieve long-term
growth in our shareholders’ wealth 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. Asa
result, the Company has no executive directors,
employees or internal operations.
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 pages 45 and 46 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. There
are no defined limits on countries or sectors but no single
investment may exceed 7.5% of the Company’s total
Business
Review
23
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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 Chairman’s Statement on page 6, the
Board is proposing to formalise an internal limit that was
agreed with the Portfolio Manager during the year, to
limit exposure to a single country or jurisdiction to 45%
of total assets at the time of investment and 49% of total
assets at any time.
Accordingly, an ordinary resolution to approve this
amendment to the investment policy is included in the
Notice of AGM, beginning on page 98, and the full text of
the proposed new investment policy can be found in the
explanatory notes on pages 103 and 104. For the
avoidance of doubt, the formalisation of the single
country investment limit 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
Chairman’s Statement beginning on page 6 and the
Glossary on page 79 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 James Williams (Chairman), Charlotta Ginman,
Sian Hansen, Robert Talbut, Edward Troughton and
Andrew Impey. All of these Directors are non-executive,
independent Directors. They all served throughout the
year except for Andrew Impey who was appointed to the
Board with effect from 1 August 2022.
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
page 42.
Key Performance Indicators
The Board of Directors reviews performance against the
following measures (“KPIs”). The KPIs are unchanged
from the prior year.
> NAV total return against the Consumer Price Index
+6% (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
page79)
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.
24
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
During the year under review, the NAV per share total
return was 5.7% underperforming the Performance
Objective by 11.6% (2022: NAV per share total return
of 9.1%, underperforming the Performance Objective
by 2.4%). Over the past three years, the annualised NAV
per share total return was 11.9%, matching the
Performance Objective. Over five years, the annualised
NAV per share total return was 8.8%, underperforming
the Performance Objective by1.5%perannum.
A full description of performance during the year under
review is contained in the Portfolio Manager’s Review
beginning on page 13.
NAV total return – peer group
The Board also monitors the Company’s performance
against its peer group of five other investment trusts
with similar investment mandates and one exchange
traded fund (“ETF”).
Over the three and five years ended 31 January 2023,
the Company ranked second in its peer group.
TheCompany’s performance is discussed in the
Chairman’s Statement beginning on page6; further
information can be found in the Portfolio Manager’s
Review beginning on page 13.
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 and no shares were bought back by the
Company. The Company’s share price discount to the
NAV per share was at times wider than the peer group
average and the Board kept this under close review.
Please see pages 30 and 31 for information regarding
how the Board addressed this issue during theyear.
Average discount of share price to NAV per share*^
during the year ended
31 January 2023 31 January 2022
10.1% 7.3%
Peer group average Peer group average
discount 8.9% discount 5.0%
* Source: Morningstar
^ Alternative Performance Measure (see Glossary beginning on
page79)
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.
TheBoard 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 2023 31 January 2022
1.1% 1.1%
Peer group average 0.9% Peer group average 0.9%
^ Alternative Performance Measure (see Glossary beginning on
page79).
The Board believes that the Company’s relatively low
turnover, and the absence of any cost of capital
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. Itshould also be noted that
the Trust 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. Aprocess 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 status 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
Business Review continued
25
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
A summary of these risks and their mitigation is set out below:
Principal Risks and Uncertainties Mitigation
Change in risk assessment
over the last financial year
Investment and Financial Risks
Market and Foreign Exchange Risk
The Company’s portfolio is exposed
to fluctuations in market prices
(from both individual security prices
and foreign exchange rates) in the
regions and sectors in which it
invests. Emerging markets in the
Asia Pacific region, in which the
portfolio companies operate, are
expected to be more volatile than
developed markets.
Stewart Investors’ approach is
expected to lead to performance
that will deviate from that of
comparators, including both market
indices and other investment
companies investing in the Asia
Pacific Region.
To manage these risks the Board has appointed Stewart Investors to
manage the portfolio within the remit of the investment objective and
policy. Compliance with the investment objective and investment policy
limits is monitored daily by Frostrow and Stewart Investors and reported to
the Board monthly. The investment policy limits ensure that the portfolio is
diversified, reducing the risks associated with individual stocks and markets.
Stewart Investors report at each Board meeting on the performance of the
Company’s portfolio, including the rationale for investment decisions, the
make-up of the portfolio, and the investment strategy.
As part of its review of the viability of the Company, the Board also
considers the sensitivity of the Company to changes in market prices and
foreign exchange rates (see note 14 beginning on page 75), how the
portfolio would perform during a market crisis, and the ability of the
Company to liquidate its portfolio if the need arose. Further details are
included in the Going Concern and Viability Statements on page 32.
During the year, the Board took further steps to mitigate market risk by
introducing a new investment guideline limiting exposure to single
jurisdictions (please refer to the Chairman’s Statement for further details).
Counterparty Risk
The Company is exposed to credit
risk arising from the use of
counterparties. If a counterparty
were to fail, the Company could be
adversely affected through either
delay in settlement or loss of assets.
The most significant counterparty to
which the Company is exposed is
J.P.Morgan Chase Bank, the
Custodian, which is responsible for
the safekeeping of the Company’s
assets.
Counterparty risk is managed by the Board through:
> review of the arrangements with, and services provided by, the
Custodian to ensure that the security of the Company’s custodial assets
is maintained;
> monitoring the Custodian, including review of internal control reports
and sub-custodial arrangements, asappropriate; and
> review of Stewart Investors’ approved list of counterparties, the process
for monitoring and adding to the approved counterparty list, and the
Company’s use of those counterparties.
Under the terms of the contract with J.P. Morgan Chase Bank, the
Company’s investments are required to be segregated from J.P.Morgan
Chase Bank’s own assets.
Further information on other financial risks can be found in note14
beginning on page75.
No change Increased Decreased
26
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Principal Risks and Uncertainties Mitigation
Change in assessment
of risk over the last financial year
Strategic Risks
Geopolitical Risk
Geopolitical events may have an
adverse impact on the Company’s
performance by causing exchange
rate volatility, changes in tax or
regulatory environments, a reduced
investment universe and a fall in
market prices.
The Board regularly discusses global geopolitical issues and general
economic conditions and developments.
Political changes in recent years, particularly in the US and Asia Pacific
region and more recently in Ukraine and Eastern Europe, have increased
uncertainty and volatility in financial markets. The Board discusses such
developments and how they may impact decision making with
StewartInvestors.
As a result of the instability caused by the ongoing war in Ukraine, and
increasing tensions between the West and China, the Board considers that
geopolitical risk has increased during the year.
Climate Change Risk
The Board is cognisant of risks
arising from climate change and the
impact climate change events could
have on portfolio companies and
their operations, as well as on
service providers to the Company.
The Board regularly reviews global environmental, geopolitical and
economic developments with the Portfolio Manager and the implications of
these risks and events on portfolio construction and the Company’s
operations. Given Stewart Investors’ focus on sustainability as set out on
pages18 to 21, the Board considers the portfolio to be relatively well
positioned in this regard.
Black Swan Risk
A significant unpredictable event
(e.g. a pandemic/war/closure of a
major shipping route) could lead to
increased market volatility, and in a
worst-case scenario, major global
trade and supply chain breakdown
resulting in significant volatility/
declines in market prices. The
Company’s service providers and
their operational systems may also
be affected.
The Board monitors emerging risks and the robustness of Stewart Investors’
and other service providers’ business continuity plans.
Stewart Investors’ investment approach includes a focus on sustainability and
stewardship, which emphasises quality investments with strong balance sheets,
a proven track record in previous crises, and the protection of shareholders’
funds, leaving them relatively well positioned to deal with unforeseen events.
All of the Company’s service providers are required to have business continuity /
disaster recovery policies and test them at least annually. Service providers
provide updates on contingency plans for coping with major disruption to their
operations.
No change Increased Decreased
Business Review continued
27
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Principal Risks and Uncertainties Mitigation
Change in assessment
of risk over the last financial year
Portfolio Management Key Persons Risk
There is a risk that the team
responsible for managing the
Company’s portfolio may leave their
employment or may be prevented
from undertaking their duties.
The Board manages this risk by:
> receiving regular reports from the Portfolio Manager, including any
significant changes in the make-up of the portfolio management team;
> meeting the wider team supporting the designated lead manager,
atboth Board meetings and at the Portfolio Manager’s offices; and
> delegating to the Engagement & Remuneration Committee
responsibility to perform an annual review of the service received from
the Portfolio Manager, including, inter alia, the team supporting the lead
manager and their succession planning.
Share Price Risk
The Company is exposed to the risk,
particularly if the investment
strategy and approach are
unsuccessful, that the Company
underperforms its peer group, fails
to achieve its Performance
Objective and becomes unattractive
to shareholders, resulting in a
widening of the share price discount
to the NAV per share.
In managing this risk the Board:
> reviews the Company’s investment objective and policy, and Stewart
Investors’ investment approach, in relation to investment performance,
market and economic conditions and the performance of the Company’s
peers;
> regularly discusses the Company’s future development and strategy;
> undertakes a regular review of the level of the share price discount/
premium to the NAV per share and considers ways in which share price
performance may beenhanced, including the effectiveness of
marketing, share issuance and share buybacks, where appropriate; and
> reviews an analysis of the shareholder register at each Board meeting
and is kept informed of shareholder sentiment.
No change Increased Decreased
28
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Principal Risks and Uncertainties Mitigation
Change in assessment
of risk over the last financial year
Operational Risk
Operational Risk
As an externally-managed
investment trust, the Company is
reliant on the systems of its service
providers for dealing, trade
processing, administration, financial
andother functions. If such systems
were to fail or be disrupted
(including, for example, as a result of
cyber-crime or a pandemic) this
could lead to a failure to comply with
applicable laws, regulations and
governance requirements and/or to
a financial loss.
To manage these risks the Board:
> periodically visits all key service providers to gain a better
understanding of their control environment, and the processes in place
to mitigate any disruptive events;
> receives a monthly report from Frostrow, which includes, inter alia,
confirmation of compliance with applicable laws and regulations;
> reviews internal control reports and key policies of its service providers,
including disaster recover procedures and business continuity plans;
> maintains a risk matrix with details of the risks to which the Company is
exposed, the approach to managing those risks, the key controls relied
upon and the frequency of the controls operation;
> receives updates on pending changes to the regulatory and legal
environment and progress towards the Company’s compliance with
such changes; and
> has considered the increased risk of cyber-attacks and received reports
and assurance from its service providers regarding the information
security controls inplace.
As a result of the Board’s ongoing assessment of cyber risk, the Board
decided during the year that the risk of cybercrime had increased.
No change Increased Decreased
Business Review continued
29
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Emerging Risks
Emerging risks are discussed in detail as part of the risk review process and also throughout the year to try to ensure
that new (as well as known) risks are identified and, so far as practicable, mitigated. Current identified emerging risks
are as follows:
1. The risk that ‘onshoring’ will increase uncertainty over corporate investment plans and damage the growth
prospects of companies in the Asia Pacific Region. ‘Onshoring’ refers to the recent trend for corporations to
try to secure their supply chains by relocating their business production and operations within their domestic
national borders. The trend has taken hold in response to the disruptions of the Covid-19 pandemic and
increased concerns over the impact of geopolitical uncertainty.
2. The risk that persistent inflation will continue to undermine equity markets and cause greater volatility in
Asian markets.
3. 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.
30
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Stakeholder Interests and Board Decision-Making (Section 172 of the
Companies Act 2006)
The following disclosure, which is required by the Companies Act 2006 and the AIC Code, describes how the
Directors have had regard to the views of the Company’s stakeholders in their decision-making.
Stakeholder Group How the Board has engaged with the Company’s Stakeholders
Investors The Board’s key mechanisms of engagement with investors include:
> The Annual General Meeting
> The Company’s website which hosts reports, articles and insights, and monthly
factsheets
> One-to-one investor meetings
> Group meetings with professional investors
> The Annual and Half yearly Reports
The Portfolio Manager and the Company’s broker, on behalf of the Board,
completed a programme of investor relations throughout the year, reporting to the
Board on the feedback received. In addition, the Chairman was (and remains)
available to engage with the Company’s shareholders.
Portfolio Manager The Board met regularly with Stewart Investors (the Portfolio Manager) throughout
the year, both formally at quarterly Board meetings and informally, as required. The
Board engaged with the portfolio management team, discussing the Company’s
overall performance, as well as developments in individual portfolio companies and
wider macroeconomic developments.
This year, the Board also visited Seoul in South Korea with the Portfolio Manager,
meeting representatives from portfolio companies and potential investee
companies. The trip gave the Directors an insight into the Portfolio Manager’s
investment process and engagement with portfolio companies.
The Board, meeting as the Audit Committee, also met with members of the risk
management and investment compliance teams to better understand the Portfolio
Manager’s internal controls.
Service Providers The Board met regularly with Frostrow (the AIFM), representatives of which attend
every quarterly Board meeting to provide updates on risk management, accounting,
administration and corporate governance matters.
The Board, meeting as the Engagement and Remuneration Committee, reviewed
the performance of all the Company’s service providers, receiving feedback from
Frostrow in their capacity as AIFM and Company Secretary. The AIFM, which is
responsible for the day to day operational management of the Company, meets and
interacts with the other service providers including the Depositary, Custodian and
Registrar, on behalf of the Board, on a daily basis. This can be through email,
one-to-one meetings and/or regular written reporting.
The Audit Committee met with BDO LLP (“BDO”) to review the audit plan for the
year, agree their remuneration, review the outcome of the annual audit and to assess
the quality and effectiveness of the audit process. Please refer to the Audit
Committee Report beginning on page 51 for further information.
Business Review continued
31
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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. 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.
Key Areas of Engagement Main decisions and actions taken
> Ongoing dialogue with
shareholders concerning the
strategy of the Company,
performance and the portfolio.
> The impact of market volatility
caused by certain geopolitical
events on the portfolio.
> Share price performance.
> The Portfolio Manager’s
approach to sustainable
development and investment.
The Board and the Portfolio Manager provided updates on performance
via RNS, the Company’s website and the usual financial reports and
monthly fact sheets.
The Board continued to monitor share price movements closely, both in
absolute terms and in relation to the Company’s peer group. As the
discount remained relatively stable throughout the year, and narrowed in
the second half, the Board did not initiate any share buybacks. While
recognising that buybacks can generate shareholder value in the short
term, the Board decided that buybacks were not in the long-term interests
of shareholders, as they would reduce the size of the Company, increase
the ongoing charges ratio and reduce the liquidity of the Company’s
shares.
Instead, the Board continued to take steps to improve the visibility of the
Company and the Portfolio Manager’s sustainability credentials,
inparticular to retail investors. Further information is provided in the
Chairman’s Statement beginning on page 6.
> Portfolio composition,
performance, outlook and
business updates.
> The integration of sustainability
and ESG factors to the Portfolio
Manager’s investment process.
> The promotion and marketing
strategy of the Company.
> The Portfolio Manager’s system
of internal controls and
investment risk management.
The Board agreed that high standards of research and decision-making
have been maintained and the Portfolio Manager’s strategy has been
implemented consistently, leading to good returns over the past year and
over longer periods. The Board concluded that it was in the interests of
shareholders for Stewart Investors to continue in their role as Portfolio
Manager on the same terms and conditions. Further information is
provided on pages 46 and 47.
The Board continued its focus on improving the marketing strategy of the
Company, to highlight in particular the Portfolio Manager’s sustainability
credentials. Further information is provided in the Chairman’s Statement
beginning on page 6.
The Board, meeting as the Audit Committee, concluded that the Portfolio
Manager’s internal controls were satisfactory. See the Audit Committee
Report, beginning on page 51, for further information.
> The quality of service provision
and the terms and conditions
under which service providers
are engaged.
> The assessment of the
effectiveness of the audit and the
Auditor’s reappointment.
> The terms and conditions under
which the Auditor is engaged.
The Board concluded that it was in the interests of shareholders for
Frostrow to continue in their role as AIFM on the same terms and
conditions. See pages 46 and 47 for further details.
The Board approved the Audit Committee’s recommendation to propose
to shareholders that BDO LLP be re-appointed as the Company’s auditor
for a further year. Please refer to the Audit Committee Report beginning
on page 51 and the Notice of AGM beginning on page 98 for further
information.
32
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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. 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 55% of the
current portfolio could be liquidated within seven
trading days. There is no expectation that the nature
of the investments held within the portfolio will be
materially different in future;
> The Board has considered the viability of the Company
under various scenarios, including periods of acute
stock market and economic volatility, and 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. As illustrated in note 14 to the accounts, the
Board has considered price sensitivity risk (the
sensitivity of the profit after taxation for the year and
the value of the shareholders’ funds to changes in the
fair value of the Company’s investments) and foreign
currency sensitivity (the sensitivity to changes in key
exchange rates to which the portfolio is exposed).
> 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 Board and 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.
Business Review continued
33
Strategic Report
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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. ThePortfolio Manager (under their parent, legal
entity name, First Sentier Investors) is a Tier 1 signatory
to the UNPrinciples 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 Company is committed to carrying out 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 its
activities, the Company 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 with no employees, internal operations or
property 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 statement
10
. This reporting is
modelled on TCFD recommendations to the degree it is
relevant to their activities and to support shareholders
with their reporting requirements.
Stewart Investors have signed up to the Net Zero Asset
Managers Initiative. They published their first climate
report
11
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.
Climate reporting, at both the Stewart Investors
12
and
Pacific Asset Trust
13
level, is available via the Trust’s
website.
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
Chairman’s Statement beginning on page 6 and in the
Portfolio Manager’s Review beginning on page 13.
The Company’s overall strategy remains unchanged.
By order of the Board
Frostrow Capital LLP
Company Secretary
9 May 2023
10
https://www.stewartinvestors.com/uk/en/private-investor/insights/climate-change-statement.html
11
https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/Climate-
Report-2021.pdf
12
https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/Climate-
Report-2021.pdf
13
https://www.stewartinvestors.com/content/dam/pacific-assets/trust-information/climate-report/PASSET-
Climate-2021.pdf
34
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Board of Directors
James Williams
Independent Non-Executive Chairman
Charlotta Ginman, FCA
Independent Non-Executive Director
Sian Hansen
Independent Non-Executive Director
Joined the Board in 2013 and became
Chairman in June 2015
James is Chairman of the Nomination
Committee.
Shareholding in the Company: 56,000
Joined the Board in 2014
Charlotta is Chair of the Audit Committee.
Shareholding in the Company: 13,789
Joined the Board in 2015
Sian is Chair of the Engagement &
Remuneration Committee.
Shareholding in the Company: 15,880
Skills and Experience
James has worked in investment management
for 50 years. He was formerly the Chief
Investment Officer of Baring Asset
Management. He was a founder in Asia of the
Henderson Baring group. James has also held
several non-executive directorships and senior
advisory roles.
His leadership of the Board draws on his long
and varied experience on investment and
public company boards, and his knowledge of
the fund management industry. His focus is on
long-term strategic issues, which are a key
characteristic of Board discussion.
Skills and Experience
Charlotta has held senior positions in the
investment banking and the technology/
telecom sectors.
As a chartered accountant, Charlotta brings to the
Board, and especially as Chair of the Audit
Committee, an incisive and detailed perspective
of the Company’s financial position and its risk
control environment. Charlotta is not afraid to
confront complex issues on a range of topics.
Skills and Experience
Previously Sian was Executive Director of the
Legatum Institute and before that, Managing
Director of the UK think tank Policy Exchange.
Earlier in her career, Sian was a senior equity
analyst and Co-Director of Sales for Asian
Emerging Markets at Société Générale.
Sian enhances the Board’s knowledge of
sustainability, enabling meaningful debates with
the Portfolio Manager to take place. As a thought
leader in political and other forums, she brings a
valuable perspective on geo-political matters.
Other Appointments
Charlotta is a non-executive director and
Chairof the Audit Committee of Polar Capital
Technology Trust plc, Keywords Studios plc
(where she is also the Senior Independent
Director) and Gamma Communications plc. She
is a non-executive director of Unicorn AIM VCT
plc, a Venture Capital Trust where she is also
the Senior Independent Director), and Boku Inc.
As three of Charlotta’s roles are with
investment companies which typically have
only 4-5 meetings a year and the other
companies are AIM listed, with less regulatory
burden than a premium listing on the Main
Market, Charlotta has sufficient time to devote
to each of her roles.
Other Appointments
Sian is currently Chief Operating Officer of
CITGroup and a non-executive director of
JPMorgan Multi-Asset Growth and Income plc.
Standing for re-election
No
Standing for re-election
Yes
Standing for re-election
Yes
35
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Robert Talbut
Independent Non-Executive Director
Edward Troughton
Independent Non-Executive Director
Andrew Impey
Independent Non-Executive Director
Joined the Board in 2016
Robert is the Senior Independent Director.
Shareholding in the Company: 9,611
Joined the Board in 2019
Shareholding in the Company: 18,357
Joined the Board in 2022
Shareholding in the Company: 10,000
Skills and Experience
Robert was formerly a director and Chief
Investment Officer at Royal London Asset
Management Limited.
His ongoing knowledge of the asset
management industry and the strategic
challenges it faces is useful in many board
debates. His understanding of today’s
corporate governance best practice and the
matters that a Board must confront, helps to
ensure that the Company is run in accordance
with best practice.
Given his wide-ranging board and sector
experience Robert is well positioned to bring
alternative perspectives on issues that may
arise.
Skills and Experience
Edward has been in the investment industry for
over 35 years, starting his career with Barings
Asset Management as an Asian equity portfolio
manager. He spent the rest of his career after
that in business development and marketing. He
managed NatWest Investment Management’s
office in Hong Kong for 5 years. For 7 years, he
was with BlackRock where at one stage, as
Managing Director, he ran their Asian regional
office out of Hong Kong. Latterly he was
Managing Director at Alliance Trust Investments
and Principal Representative Officer for Bank of
London and the Middle East based in Dubai.
Edward’s experience in the investment sector
and first-hand knowledge of living and working
in Asia enables the Board to engage
authoritatively with the Portfolio Manager on
their investment strategy. His knowledge of
business development and marketing within the
UK wealth sector is also extremely useful as the
Board looks to widen the Company’s overall
appeal and shareholder base.
Skills and Experience
Andrew has over 34 years’ experience in
institutional investment management and
wealth management. He has been lead manager
on a broad range of funds including a sovereign
wealth mandate, unit trusts and several
investment trusts. He was previously a
consultant at Rathbones Investment
Management, a partner of Albion Capital Group,
joint managing director at OLIM Limited and
Chief Investment Officer at Singer &
Friedlander.
Andrew’s wide investment experience allows
him to engage knowledgeably with the Portfolio
Manager. He also brings current knowledge of
the industry and in corporate governance
andstrategy.
He is a charity trustee and on a number of
investment committees including the HMS
Victory Preservation Company.
Other Appointments
Robert is non-executive chairman of Shires
Income PLC and Schroder UK Mid Cap Fund
PLC. He is a non-executive director of
JPMorgan American Investment Trust plc.
Other Appointments
Edward is a partner at Oldfield Partners LLP.
Other Appointments
Andrew is the non-executive chairman of
JPMorgan UK Smaller Companies Investment
Trust plc.
Standing for re-election
Yes
Standing for re-election
Yes
Standing for election
Yes
36
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Corporate
Governance
The Board and Committees
Responsibility for effective governance lies with the Board whose role is to promote the long-term success of the
Company. Thegovernance framework of the Company reflects the fact that as an externally managed investment
company it has no employees and outsources portfolio management to Stewart Investors and risk management,
corporate management, company secretarial and administrative services to Frostrow Capital LLP. The Board
generates value for shareholders through its oversight of the service providers and management of costs associated
with running the Company.
Copies of the full terms of reference, which clearly define the responsibilities of each Committee, can be obtained
from the Company Secretary and will be available for inspection on the day of the Annual General Meeting. They can
also be found on the Company’s website at www.pacific-assets.co.uk.
Chairman – James Williams
Senior Independent Director – Robert Talbut
Four additional non-executive Directors, all considered independent.
Key responsibilities:
> to provide leadership and set the strategy, values and standards of the Company within a framework of effective controls
which enable risk to be assessed and managed;
> to ensure that a robust corporate governance framework is implemented; and
> to challenge constructively and scrutinise the performance of all third-party service providers.
The Board
Chair
Sian Hansen
All Independent Directors
Key responsibilities:
> to review the contracts, the
performance and remuneration
of the Company’s principal
service providers;
> to set the Directors’
remuneration policy; and
> to review the terms and
conditions of the Directors’
appointments.
Engagement & Remuneration
Committee
Chair
Charlotta Ginman, FCA
All Independent Directors
Key responsibilities:
> to review the Company’s
financial reports;
> to oversee the risk and control
environment; and
> to have primary responsibility
for the relationship with the
Company’s external auditor, to
review their independence and
performance, and to determine
their remuneration.
Audit Committee
Chairman
James Williams
All Independent Directors
Key responsibilities:
> to review the Board’s structure
and composition; and
> to make recommendations for
any changes or new
appointments.
Nomination Committee
37
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Board of Directors
Entirely independent and non-executive
Sub-committees:
l Audit Committee
l Engagement & Remuneration Committee
l Nomination Committee
Frostrow Capital LLP
(AIFM, Company Secretary, Fund Administrator)
Reporting
l Balance sheet
l Liquidity and gearing
l Income forecasts
l Portfolio valuation
l Portfolio transactions
l Investment limits and restrictions
(monthly)
l Compliance with investment policy and
guidelines (monthly)
l Compliance report (semi annually)
l Effectiveness of control environment
JP Morgan
(Depositary and Custodian)
Reporting
l Depositary’s Report (semi-annually)
l Effectiveness of control environment (annually)
l Presentations on subjects of interest e.g. cyber security (as required)
Stewart Investors
(Portfolio Management)
Reporting
l Portfolio performance update at each meeting
l Compliance Report (semi-annually)
l Effectiveness of control environment (annually)
l Presentations on subjects of interest
e.g. Risk Management, Investment Compliance (as required)
Investec Bank PLC
(Corporate Broker)
Equiniti Group
(Registrar)
Reporting
l Effectiveness of control environment (annually)
l Presentations on subjects of interest e.g. cyber security (as required)
Dickson Minto W.S.
(Legal Adviser)
BDO LLP
(Statutory Auditor)
Principal third-party
service providers
The Directors
l receive regular reporting
at meetings;
l review the assurance
report produced by each
organisation;
l receive additional
reporting on the control
environment from each
of the principal third
party service providers;
and
l formally evaluate their
performance on an
annual basis.
Secondary third-
party service
providers
The Directors
l receive regular reporting
on their activities at
meetings; and
l formally evaluate their
performance on an
annual basis
The Board has a responsibility for
establishing and assessing internal
controls to ensure the Company
operates effectively, efficiently and
within the risk appetites set by the
Board. As the Company relies on
third-party service providers for all
of its operations, it obtains regular
reports from these counterparties on
the nature and effectiveness of
controls within these organisations.
The Company’s principal service
providers are the Portfolio Manager,
Stewart Investors, the AIFM,
Company Secretary and
administrator, Frostrow Capital, the
custodian and depositary, JP Morgan
and the registrar, Equiniti Group. The
Board receives regular reporting on
compliance with the control
environment and assesses the
effectiveness of the internal controls
through review of the assurance
reports from each of these
organisations.
In addition, the Company retains a
number of secondary providers who
report regularly to the Board. These
include the Company’s legal advisers
and the corporate stockbroker.
The Engagement and Remuneration
Committee formally evaluates the
performance and service delivery of
all third-party service providers at
least annually and the Audit
Committee evaluates the
performance of the Company’s
external auditor annually, following
the completion of the annual audit
process.
Internal Controls Structure
38
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Corporate Governance Statement
The Board has considered the principles and
recommendations of the AIC Code of Corporate
Governance published in February 2019 (the “AIC
Code”). The AIC Code addresses all the principles set out
in the UK Corporate Governance Code (the “UK Code”),
as well as setting out additional provisions on issues that
are of specific relevance to the Company.
The Board considers that reporting against the principles
and provisions of the AIC Code (which has been
endorsed by the Financial Reporting Council) will provide
better information to shareholders. By reporting against
the AIC Code, the Company meets its obligations under
the UK Code (and associated disclosure requirements
under paragraph 9.8.6 of the Listing Rules) and as such
does not need to report further on issues contained in
the UK Code which are irrelevant to the Company as an
externally-managed investment company, including the
provisions relating to the role of the chief executive,
executive directors’ remuneration and the internal audit
function.
The AIC Code is available on the AIC’s website
www.theaic.co.uk and the UK Code can be viewed on the
Financial Reporting Council website www.frc.org.uk. The
AIC Code includes an explanation of how the AIC Code
adapts the principles and provisions set out in the UK Code
to make them relevant for investment companies.
The Company has complied with the principles and
provisions of the AIC Code.
This Corporate Governance report on pages36 to 43
forms part of the Report of the Directors on pages 44
to48.
Board Leadership and Purpose
Purpose and Strategy
The purpose and strategy of the Company are described
in the Strategic Report on page 22.
Strategy issues and all material operational matters are
considered at Board meetings.
Board Culture
The Board aims to enlist fully differences of opinion,
unique vantage points and areas of expertise.
TheChairman encourages open debate to foster a
supportive and co-operative approach. Strategic
decisions are discussed openly and constructively.
TheBoard aims to be open and transparent with
shareholders and other stakeholders, and for the
Company to conduct itself responsibly, ethically and
fairly in its relationships with service providers.
Shareholder Relations
Representatives of Stewart Investors and Investec Bank
plc, the Company’s corporate stockbroker, meet
regularly with institutional shareholders and private
client asset managers to discuss investment strategy, any
issues or concerns and, if applicable, corporate
governance matters. Reports on investor sentiment and
the feedback from investor meetings are discussed with
the Directors at the following Board meeting.
Shareholder Communications
The Directors welcome the views of all shareholders and
place considerable importance on communications with
them. Shareholders wishing to communicate with the
Chairman, or any other member of the Board, may do so
by writing to the Company Secretary at the offices of
Frostrow Capital LLP (25 Southampton Buildings,
London WC2A 1AL). Shareholders are encouraged to
attend the Annual General Meeting (“AGM”), where they
are given the opportunity to question the Chairman, the
Board and representatives of Stewart Investors.
Inaddition, Stewart Investors make a presentation to
shareholders covering the investment performance and
strategy of the Company at the AGM. Further details of
this year’s AGM are provided in the Chairman’s
Statement beginning on page 6 and in the Notice of AGM
beginning on page98.
Significant Holdings and Voting Rights
Details of the shareholders with substantial interests in
the Company’s shares, the Directors’ authorities to issue
and repurchase the Company’s shares, and the voting
rights of the shares are set out in the Report of the
Directors on pages 44 to 48.
Conflicts of Interest
Company directors have a statutory obligation to avoid a
situation in which they (and connected persons) have,
orcan have, a direct or indirect interest that conflicts, or
may possibly conflict, with the interests of the Company.
In line with the Companies Act 2006, the Board has the
power to authorise any potential conflicts of interest that
may arise and impose such limits or conditions as it
thinks fit. A register of interests and potential conflicts is
maintained and is reviewed at every Board meeting. No
conflicts of interest arose during the year under review.
Corporate Governance continued
39
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Division of Responsibilities
Responsibilities of the Chairman and the SID
The Chairman’s primary role is to provide leadership to
the Board, assuming responsibility for its overall
effectiveness in directing the Company. The Chairman is
responsible for:
> taking the chair at general meetings and Board
meetings, conducting meetings effectively and
ensuring all Directors are involved in discussions and
decision-making;
> setting the agenda for Board meetings and ensuring
the Directors receive accurate, timely and clear
information for decision-making;
> taking a leading role in determining the Board’s
composition and structure;
> overseeing the induction of new directors and the
development of the Board as a whole;
> leading the annual board evaluation process and
assessing the contribution of individual Directors;
> supporting and also challenging the Portfolio
Manager (and other suppliers) where necessary;
> ensuring effective communications with shareholders
and, where appropriate, stakeholders; and
> engaging with shareholders to ensure that the Board
has a clear understanding of shareholder views.
The Senior Independent Director (“SID”) serves as a
sounding board for the Chairman and acts as an
intermediary for the other Directors and the
shareholders. The SID is responsible for:
> working closely with the Chairman and providing
support;
> leading the annual assessment of the performance of
the Chairman;
> holding meetings with the other non-executive
Directors without the Chairman being present, on
such occasions as necessary;
> carrying out succession planning for the Chairman’s
role;
> working with the Chairman, other Directors and
shareholders to resolve major issues; and
> being available to shareholders and other Directors
to address any concerns or issues they feel have not
been adequately dealt with through the usual
channels of communication (i.e. through the
Chairman or the Portfolio Manager).
Director Independence
The Board consists of six non-executive Directors, each of
whom is independent of Stewart Investors and the
Company’s other service providers. Each of the Directors,
including the Chairman, was independent on appointment
and all of the Directors seeking re-election at the
forthcoming AGM continue to be independent when
assessed against the circumstances set out in Provision13
of the AIC Code. The Board carefully considers these
guidelines but places particular weight on the view that
independence is evidenced by an individual being
independent of mind, character and judgement. The Board
considers that all of the Directors are independent and
there are no relationships or circumstances which are
likely to impair or could appear to impair their judgement.
Directors’ Other Commitments
Prior approval is obtained from the Chairman for any
new appointment. Following the annual Board
evaluation, the Board considers that all Directors have
sufficient time to discharge their duties.
Board Meetings
The Board meets formally at least four times each year.
The primary focus at regular Board meetings is the
review of investment performance and associated
matters, including asset allocation, marketing/investor
relations, peer group information and industry issues.
The Board reviews key investment and financial data,
revenue and expense projections, analyses of asset
allocation, transactions, customised performance
metrics and performance comparisons, share price and
net asset value performance. The Board’s approach to
addressing the Portfolio Manager’s and the Company’s
share price performance during the year is described in
the Chairman’s Statement beginning on page 6.
The Board is responsible for setting the Company’s
corporate strategy and reviews the continued
appropriateness of the Company’s investment objective,
investment strategy and investment restrictions at each
meeting.
Matters Reserved for Decision by the Board
The Board has adopted a schedule of matters reserved
for its decision. This includes, inter alia, the following:
> Decisions relating to the strategic objectives and
overall management of the Company, including the
appointment or removal of the Portfolio Manager
and other service providers, establishing the
investment objectives, strategy and performance
comparators, the permitted types or categories of
investments, the proportion of assets that may be
invested in them, and the markets in which
transactions may be undertaken.
40
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
> Requirements under the Companies Act 2006,
including approval of the half yearly and annual
financial statements, recommendation of the final
dividend (if any), declaration of any interim dividends,
the appointment or removal of the Company
Secretary, and determining the policy on share
issuance and buybacks.
> Matters relating to certain Stock Exchange
requirements and announcements, the Company’s
internal controls, and the Company’s corporate
governance structure, policies and procedures.
> Matters relating to the Board and Board committees,
including the terms of reference and membership of
the committees, and the appointment of directors
(including the Chairman and the SID).
Day-to-day portfolio management is delegated to
Stewart Investors and operational management is
delegated to Frostrow.
The Board takes responsibility for the content of
communications regarding major corporate issues, even
if Stewart Investors or Frostrow acts as spokesman. The
Board is kept informed of relevant promotional material
that is issued by Stewart Investors.
Relationship with the Portfolio Manager
A representative from Stewart Investors is in attendance
at each Board meeting to provide updates and address
questions on specific matters.
The Engagement and Remuneration Committee
evaluates Stewart Investors’ performance and suitability
as well as reviewing the terms of the Portfolio
Management Agreement at least annually. The outcome
of this year’s review is described on pages 46 and 47.
Relationship with Other Service Providers
Representatives from Frostrow are in attendance at each
Board meeting to address questions on the Company’s
operations, administration and governance requirements.
The Engagement and Remuneration Committee monitors
and evaluates all of the Company’s other service providers,
including Frostrow, and also the Depositary, the Custodian,
the Registrar and the Broker. At the most recent review in
January 2023, the Committee concluded that all the service
providers were performing well and should be retained on
their existing terms and conditions.
Stewardship and the Exercise of Voting Powers
The Board and the Portfolio Manager support the
UKStewardship Code, which sets out the principles of
effective stewardship by institutional asset owners and
asset managers. Stewart Investors (under their legal
parent entity name, First Sentier Investors) is a Tier1
signatory to the UK Stewardship Code. First Sentier
Investors produce an annual Responsible Investment and
Stewardship Report which is published on their website
www.firstsentierinvestors.com/UK/en/private/
responsible-investment/responsible-investment-
resource-centre.html.
The Board has delegated authority to Stewart Investors
(as Portfolio Manager) to engage with companies held in
the portfolio and to vote the shares owned by the
Company.
Stewart Investors have a strong commitment to effective
stewardship and their approach, including their
consideration of environmental, social and governance
issues, is set out in their Stewardship and Corporate
Engagement policy which can be found on their website
www.stewartinvestors.com. During the year, the Board
reviewed quarterly reports from Stewart Investors on
their voting and engagement and is satisfied with their
approach.
Independent Professional Advice
The Board has formalised arrangements under which the
Directors, in the furtherance of their duties, may seek
independent professional advice at the Company’s
expense. No such advice was sought during the year.
Company Secretary
The Directors have access to the advice and services of a
specialist investment trust company secretary, Frostrow
Capital LLP, which is responsible for advising the Board
on all governance matters. The Company Secretary
ensures governance procedures are followed and that
the Company complies with applicable statutory and
regulatory requirements.
Composition, Succession and Evaluation
Board Evaluation
During the year an internal review of the Board, its
committees and individual Directors (including each
Director’s independence) was carried out by the Board,
in the form of electronic performance evaluation
questionnaires.
The review concluded that the Board worked in a
collegiate, efficient and effective manner, and there were
no material weaknesses or concerns identified.
All Directors submit themselves for election and annual
re-election thereafter by shareholders (unless they intend
to retire from the Board). The particular contribution of
each individual Director is summarised on pages 34 and 35.
Following the evaluation process, the Board recommends
that shareholders vote in favour of the Directors’ election/
re-election at the forthcoming AGM.
Corporate Governance continued
41
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Succession Planning
The Board, meeting as the Nomination Committee,
regularly considers its structure and recognises the need
for progressive refreshment. During the year, the Board
appointed Andrew Impey as a non-executive Director
ahead of the planned retirement of the Chairman, James
Williams. Please refer to the Chairman’s Statement
beginning on page 6 for further information. The Board
recognises that there will need to be further changes in
the coming years as certain Directors come to the end of
their tenure.
The Board has an approved succession planning policy to
ensure that (i) there is a formal, rigorous and transparent
procedure for the appointment of new directors; and
(ii)the Board is comprised of members who collectively
display the necessary balance of professional skills,
experience, length of service and industry knowledge.
The policy is reviewed annually and at such other times
as circumstances may require.
Policy on the Tenure of the Chairman and other
Non-Executive Directors
The tenure of each independent, non-executive director,
including the Chairman, is not ordinarily expected to
exceed nine years. It should be noted that, in practice,
the date of departure from the Board may be the date of
the Annual General Meeting following this anniversary.
However, the Board has agreed that the tenure of the
Chairman may be extended provided such an extension
is conducive to the Board’s overall orderly succession.
The Board believes that this more flexible approach to
the tenure of the Chairman is appropriate in the context
of the regulatory rules that apply to investment
companies, which ensure that the chair remains
independent after appointment, while being consistent
with the need for regular refreshment and diversity.
Appointments to the Board
The Nomination Committee considers annually the skills
possessed by the Directors and identifies any skill
shortages to be filled by new directors. The rules
governing the appointment and replacement of directors
are set out in the Company’s Articles of Association and
the aforementioned succession planning policy. Where
the Board appoints a new director during the year, that
director will stand for election by shareholders at the next
AGM. The minimum number of directors is two and the
maximum is seven. When considering new appointments,
the Board endeavours to ensure that it has the capabilities
required to be effective and oversee the Company’s
strategic priorities. This will include an appropriate range,
balance and diversity of skills, experience and knowledge.
The Company is committed to ensuring that any vacancies
arising are filled by the best qualified candidates.
During the year, Andrew Impey was appointed to the
Board. The Board engaged the services of a specialist
recruitment agency, Trust Associates, to assist with the
search process. Trust Associates sourced and prepared a
diverse long list of potential candidates for consideration by
the Nomination Committee. The Nomination Committee
then selected a short list of candidates to interview.
Following the interviews, a recommendation was made to
the Board that Mr Impey be appointed as a Director. Trust
Associates has no other connection with the Company.
Board Diversity
The Board supports the principle of boardroom diversity,
of which gender and ethnicity are two important aspects.
The Company’s policy is that the Board and its committees
should be comprised of directors with a diverse range of skills,
knowledge and experience and that appointments to the
Board should be made on merit, against objective criteria,
including diversity in its broadest sense. The objective of the
policy is to ensure there is a broad range of approaches,
The number of scheduled Board and Committee meetings held during the year and the number of meetings attended
by each Director is set out below:
Engagement &
Remuneration Nomination
Board Audit Committee Committee Committee
Number of meetings (5) (3) (1) (1)
James Williams 5 3 1 1
Charlotta Ginman 5 3 1 1
Sian Hansen 5 3 1 1
Robert Talbut 5 3 1 1
Edward Troughton 5 3 1 1
Andew Impey* 2 2 1 1
* Appointed to the Board on 1 August 2022.
Other ad hoc meetings of the Board and committees are held in connection with specific events as and when necessary.
42
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
The information above was obtained by asking the Directors to indicate on an anonymous form, how they should be
categorised for the purposes of the Listing Rules disclosures.
In accordance with the Listing Rules, the Board has provided the following information in relation to its diversity as at
the year end.
Number of
Number of Senior
Board Percentage of Positions on
Members the Board the Board*
Men 4 67%
Women 2 33%
Not specified/prefer not to say^ – –
^ Directors were also given the opportunity to indicate if there was an ‘other category’ they wished to specify.
Number of
Number of Senior
Board Percentage of Positions on
Members the Board the Board*
White British or other White
(including minority-white groups) 6 100%
Mixed/Multiple Ethnic Groups – –
Asian/Asian British – –
Black/African/Caribbean/Black British – –
Other ethnic group, including Arab – –
Not specified/prefer not to say – –
* The format of the above tables is prescribed in the Listing Rules which define ‘Senior Positions on the Board’ as ‘CEO, CFO, SID and Chair’. However,
as an externally managed investment trust, the Company has no executive management functions, including the roles of CEO and CFO, and the
Company has therefore deliberately left this column blank and excluded columns relating to executive management. .
backgrounds, skills, knowledge and experience represented
on the Board. To this end, achieving a diversity of perspectives
and backgrounds on the Board is a key consideration in any
director search process. The Board encourages any
recruitment agencies it engages to find a diverse range of
candidates that meet the criteria agreed for each
appointment and, from the shortlist, aims to ensure that a
diverse range of candidates is brought forward for interview.
The Directors have noted that the last recruitment
agency engaged by the Board, Trust Associates, has
become a signatory of The Standard Voluntary Code of
Conduct for Executive Search Firms. The code of
conduct lays out steps for search firms to follow across
the search process, from accepting a brief through to
induction. The key areas of focus include increasing the
proportion of women and broadening ethnic diversity.
The Board will give due regard to the new diversity
targets in the Listing Rules, but will not discriminate
unfairly on the grounds of gender, ethnicity, age, sexual
orientation, disability or socio-economic background
when considering the appointment of Directors.
Education, professional background, and cognitive and
personal strengths are considered against the
specification prepared for each appointment.
The Board has noted the FCA’s new Listing Rules which
require companies to report against the following
diversity targets:
a) At least 40% of individuals on the board are women;
b) At least one of the senior board positions is held by a
woman; and
c) At least one individual on the board is from a minority
ethnic background.
Corporate Governance continued
43
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
As an externally managed investment company, the
Company does not have the positions of CEO or CFO and
therefore, as permitted by the Listing Rules, it has not
reported against the second target as it is not applicable.
Asshown in the above tables, the Company has not yet met
the first and third targets.
With regard to the first target, it should be noted that the
Board was comprised of five directors, 40% of whom were
women, for the first six months of the year. The reason for
the Company’s non-compliance with the first target is the
short period of handover between the incumbent
Chairman and his successor. It is anticipated that the
Company will meet the target for female representation
on the Board following Mr Williams’ retirement at the end
of May this year.
It is intended that there should be at least one individual
from a minority ethnic background on the Board. While
the Board will have regard to this target in future
director recruitment processes, due to the Board’s small
size, vacancies and recruitment opportunities arise
relatively infrequently and therefore the target may take
some time to achieve.
Audit, Risk and Internal Control
The Statement of Directors’ Responsibilities on pages 49
and 50 describes the Directors’ responsibility for
preparing this report.
The Audit Committee Report, beginning on page 51,
explains the work undertaken to allow the Directors to
make this statement and to apply the going concern basis
of accounting. It also sets out the main roles and
responsibilities and the work of the Audit Committee
throughout the year, and describes the Directors’ review
of the Company’s risk management and internal control
systems.
A description of the principal risks facing the Company
and an explanation of how they are being managed is
provided in the Strategic Report on pages 24 to 29.
The Board’s assessment of the Company’s longer-term
viability is set out in the Strategic Report on page 32.
Remuneration
The Directors’ Remuneration Report beginning on
page56 sets out the levels of remuneration for each
Director and explains how Directors’ remuneration is
determined.
Frostrow Capital LLP
Company Secretary
9 May 2023
44
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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 2023.
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 listed
on the premium segment of the Official List and traded
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 (“AIC”).
Alternative Performance Measures
The financial statements (on pages 66 to 78) 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 3 and explained in greater
detail in the Strategic Report, under the heading ‘Key
Performance Indicators’ on pages 23 to 24. 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
page79.
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 special
business will be proposed at the forthcoming Annual
General Meeting.
Resolution 12 Authority to amend the Investment Policy
Resolution 13 Authority to allot shares
Resolution 14 Authority to disapply pre-emption rights
Resolution 15 Authority to buy back shares
Resolution 16 Authority to hold General Meetings (other
than the AGM) on at least 14 clear days’ notice
Resolution 17 Authority to increase the limit on the
aggregate fees payable to the Directors
The full text of the resolutions can be found in the Notice
of Annual General Meeting on pages 98 to 102.
Explanatory notes regarding the resolutions can be
found on pages 103 to 105.
45
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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 2.3p per ordinary share has been
proposed and, subject to shareholder approval, will be paid
on 6 July 2023 to shareholders on the register on 9June
2023. The associated ex-dividend date is 8 June 2023.
Capital Structure
As at 31 January 2023, there were 120,958,386 ordinary
shares of 12.5p each (‘shares’) in issue (2022:
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, 28 June 2022, 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 (2022:nil).
Noshares were repurchased during the year (2022: 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 98.
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 is managed by
Stewart Investors which had approximately £14.8billion
in assets under management as at 31 December 2023.
Stewart Investors are engaged under the terms of a
Portfolio Management Agreement (the “PMA”)
effectivefrom 30 April 2021, which replaced the
previous investment management agreement that had
been in place since 1 February 2015.
Under the terms of the Portfolio Management
Agreement, 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; and
> advising the Company in relation to trends, market
movements and other matters which may affect the
investment objective and policy of the Company.
The PMA is terminable by six months’ notice. Stewart
Investors have complied with the terms of the PMA
throughout the year to 31January2023. Stewart
Investors are entitled to a fee, paid quarterly, of 0.85% of
the Company’s net assets.
Alternative Investment Fund Manager (“AIFM”)
Frostrow Capital LLP acts as the AIFM. It is an
independent provider of services to the investment
companies sector and currently has 15 investment
company clients whose assets totalled approximately
£20.1billion as at 28 February 2023.
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
46
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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 30April2021.
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
£150million and up to £300 million, 0.01% of the net assets
in excess of £300 million and up to £500million 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 (the “Custodian”) under a
Global Custody Agreement (“GCA”). 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
90days 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 2023 with a recommendation being
made to the Board to continue their appointment on the
existing terms.
Report of the Directors continued
47
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
The Board believes the continuing appointment of
Stewart Investors, under the terms described above, 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 2023 with a formal recommendation being
made to the Board. The Board believes the continuing
appointment of Frostrow Capital LLP, under the terms
described on page 46 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
31January 2023 and to the date of this report. It is
intended that this cover will continue throughout the
year ending 31 January 2024 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. EachDirector 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. Theindemnities 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 2023, the Company had been notified of
the following substantial interests in the Company’s voting
rights.
Number of
shares %
held held
Evelyn Partners
1
13,319,478 11.01%
Brewin Dolphin (Ireland) 11,332,765 9.37%
Rathbones 8,226,403 6.81%
Charles Stanley 6,038,409 4.99%
1
Formerly known as Tilney Smith & Williamson.
Following the year end, and to the date of this report, the
Company received one new notification from Evelyn
Partners disclosing their increased holding of 14,779,682
shares, amounting to 12.22% of the Company’s issued
share capital.
These disclosures reflect those shareholders who 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 owning their shares
through a variety of online platforms. A profile of the
Company’s ownership is shown on page 96.
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.
48
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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. TheCompany’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,
itexpressly 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.
Acopy 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
40,000kWh 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
to43.
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
9 May 2023
Report of the Directors continued
49
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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
Act2006. 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.
50
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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 31January2023; 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
James Williams
Chairman
9 May 2023
Statement of Directors’ Responsibilities continued
51
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Audit Committee
Report
Composition
The Committee comprises all of the Company’s
independent non-executive Directors. As a result,
theCommittee comprises the whole Board.
At least one member of the Committee has recent and
relevant financial experience and the Committee as a
whole has competence relevant to the investment trust
sector. I am a Fellow of the Institute of Chartered
Accountants in England and Wales and I chair the audit
committees of three other companies, one of which is an
investment trust; the other Committee members have a
combination of financial, investment and other relevant
experience. The experience of the Committee members
can be assessed from the Directors’ biographies set out
on pages 34 and 35.
The Committee met three times during the year with all
members attending each meeting.
Role and Responsibilities
A comprehensive description of the Committee’s role, its
duties and responsibilities, can be found in its terms of
reference, which are available on the Company’s website
www.pacific-assets.co.uk.
Introduction from the Chair
I am pleased to present my seventh Audit Committee report
to shareholders, for the year ended 31January 2023.
Significant Issues Considered by the Audit Committee During the Year
Significant Reporting Matter How the issue was addressed
Annual Report and Financial Statements The Board asked the Audit Committee once again to confirm that, in
its opinion, the Annual Report taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s financial position,
performance, business model and strategy. In doing so, the
Committee considered:
> the comprehensive control framework around the production of the
Annual Report, including the process in place to verify the factual
content;
> the detailed levels of review that were undertaken in the
production process, by Frostrow and by the Committee; and
> the internal control environment as operated by Stewart
Investors (the Portfolio Manager), Frostrow (the AIFM),
JPMorgan (the Custodian) and other service providers.
52
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Audit Committee Report continued
Significant Reporting Matter How the issue was addressed
Valuation of Investments The Audit Committee received assurance that the valuation of assets
had been carried out in accordance with the adopted accounting
policies set out in note 8 on page 74.
Existence and Ownership of Investments Once again the Committee received assurance that all investment
holdings and cash/deposit balances had been agreed by Frostrow to
an independent confirmation from the Custodian or relevant bank.
The Committee reviewed the internal controls reports of Frostrow,
Stewart Investors and JP Morgan.
Other Reporting Matters
Audit Regulation
The Committee has not had to consider any new audit
regulations in the past year. It has, however, taken note
of reporting guidance and thematic reviews published by
the FRC and determined how to apply any relevant best
practice to the Company’s reporting. The Committee
also reviews the outcomes of the FRC’s annual Audit
Quality Reviews and discusses the findings with our
Auditor.
The Committee has noted the government response to
the consultation on strengthening the UK’s audit,
corporate reporting and corporate governance systems.
We await confirmation of the schedule for implementing
the reforms which will create a new Audit, Reporting and
Governance Authority, amongst other changes.
Recognition of Revenue from Investments
Frostrow confirmed to the Committee, as in previous
years, that all dividends had been accounted for
correctly. It was noted that there was an appropriate
segregation of duties between Frostrow and JPMorgan.
Accounting Policies
The Committee ensured that the accounting policies set
out in the notes to the financial statements were applied
consistently throughout the year. In light of there being
no unusual transactions during the year or other possible
reasons, there were no changes to these policies.
Going Concern
The Audit Committee, at the request of the Board,
considered the ability of the Company to adopt the going
concern basis for the preparation of the financial
statements. Having reviewed the Company’s financial
position, the Committee is satisfied that it is appropriate
for the Board to prepare the financial statements for the
year ended 31 January 2023 on a going concern basis.
The Committee’s review of the Company’s financial
position included consideration of the cash and cash
equivalents position; the diversification of the portfolio;
and an analysis of portfolio liquidity, which estimated
liquidation of c.55% of the portfolio within seventrading
days (based on current market volumes). Stress testing
was also conducted as described below. Further
information is provided on page 32.
Viability Statement
The Committee considered, again on behalf of the Board,
the longer-term viability of the Company in connection
with the Board’s statement in the Report of the Directors
(see page 32). The Committee reviewed the Company’s
financial position (including its cash flows and liquidity
position), the principal risks and uncertainties and the
results of stress tests.
The stress tests modelled the impact of one or more of
the principal risks occurring. The tests assumed
substantial falls in the Company’s NAV and reductions in
the liquidity of the portfolio and then modelled the
effect this would have on the Company’s expenses and
the Company’s ability to meet its liabilities as they fell
due. Based on the results of these tests the Committee
concluded it was reasonable for the Board to expect that
the Company will be able to continue in operation and
meet its liabilities as they fall due over the next five
financial years.
Internal Controls and Risk Management
The Board has overall responsibility for the Company’s
risk management and internal control systems and for
reviewing their effectiveness. Operational responsibility
is delegated to the Audit Committee. The Company’s
internal control structure is summarised on page 37. The
Company applies the guidance published by the Financial
Reporting Council on internal controls. Internal control
systems are designed to manage, rather than eliminate,
the risk of failure to achieve the business objective and
can provide only reasonable and not absolute assurance
against material misstatement or loss. These controls
aim to ensure that the assets of the Company are
safeguarded, that proper accounting records are
maintained, and that the Company’s financial
information is reliable.
53
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
A description of the principal risks facing the Company
and an explanation of how they are managed is provided in
the Strategic Report on pages 24 to 29. The Directors have
a robust process for identifying, evaluating and managing
the risks faced by the Company, including emerging risks,
which are recorded in a risk matrix. The Committee
reviewed the risk matrix at each of its three meetings
during the year. One of the Committee meetings was a
dedicated meeting to evaluate the Company’s risks,
identify emerging risks, and discuss the Board’s approach
to monitoring and managing them. The Audit Committee,
on behalf of the Board, assesses the likelihood of
occurrence and the possible impact of each risk. The
Committee then records the mitigating controls inplace.
As an externally managed investment trust, the
Company is reliant on the operational systems of its
service providers. Therefore, the Audit Committee also
examines internal control reports from the Company’s
principal service providers. The Committee also spoke
with members of the Portfolio Manager’s risk
management and investment compliance teams to
ensure their processes remain robust. The Audit
Committee then reports its findings to the Board.
The Committee reviewed the effectiveness of the
Company’s risk management and internal controls
systems during the year. There were no changes to the
Company’s risk management processes during the year
and no significant failings or weaknesses were identified.
Following its annual review of internal controls reports
from Stewart Investors, Frostrow, JPMorgan and
Equiniti (the Registrar), the Committee concluded that
there were no significant control weaknesses or other
issues that were required to be brought to the attention
of the Board. The Committee is satisfied that appropriate
systems have been in place for the year under review and
up to the date of approval of this report.
Half Year Report
The Committee reviewed the Half Year Report including
the unaudited financial statements, to ensure that the
accounting policies were consistent with those applied in
the annual financial statements and that the report
portrayed a fair, balanced and understandable account
of the period.
Depositary
During the year, the Committee reviewed reports from
the Depositary on their regulatory oversight and due
diligence duties. Nothing material was brought to the
attention of the Committee; no breaches or pricing
errors were reported.
Investment Trust Status
The Committee sought and received confirmation from
Frostrow that the Company continues to comply with
Section 1158 of the Corporation Tax Act 2010, so that its
status as an investment trust is maintained.
Withholding Tax
The Committee monitored the reclamation of
withholding tax, receiving regular updates from Frostrow
on the process and the appointment of specialist local
agents. In the year under review, Grant Thornton LLP
provided services to the Company as tax agents in
Taiwan, Ernst & Young in India and S.F.Ahmed & Co. in
Bangladesh.
Taxation
The Committee has been monitoring the provision for
Indian capital gains tax, which has increased to
£9,750,000 as at 31January 2023 (2022: £8,395,000),
receiving regular updates on the position. A local tax
specialist (Ernst & Young LLP) has been appointed to
ensure that tax returns and any tax due are calculated
accurately and in line with the relevant legislation.
Internal Audit
The Committee considered whether there was a need
for the Company to have an internal audit function.
Asthe Company delegates its day-to-day operations to
third parties and has no employees, the Committee
concluded that there was no such need.
Other Activities During the Year
In addition to carrying out its principal duties, the
Committee also reviewed:
> the arrangements put in place by the Company’s
principal service providers to address cyber security;
> the Committee’s terms of reference;
> compliance reports submitted by Frostrow and
Stewart Investors;
> Stewart Investors’ list of approved brokers,
commission rates and the amount of commission paid
by the Company throughout the year;
> the Company’s anti-bribery and corruption policy;
> the Company’s commitment to the prevention of the
criminal facilitation of tax evasion; and
> the Company’s audit tender guidelines.
54
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Audit Committee Report continued
External Auditor
Appointment and Tenure
BDO LLP (“BDO”) was the Auditor for the financial year
and this was their third audit of the Company.
Peter Smith was the audit partner for the financial year
under review and he has confirmed BDO’s willingness to
continue to act as Auditor for the forthcoming financial
year. BDO’s re-appointment is subject to shareholder
approval at the next Annual General Meeting (“AGM”) to
be held in July, and details can be found in the Notice of
AGM beginning on page 98.
As a public company listed on the London Stock
Exchange, the Company is subject to mandatory auditor
rotation requirements. Based on these requirements,
another tender process will be conducted no later than
2030. The Committee will, however, continue to consider
annually the need to go to tender for audit quality,
remuneration or independence reasons.
The Audit
The Committee reviewed BDO’s audit plan on
22September 2022. The review considered, inter alia,
the scope of the audit, the level of materiality, the audit
risks identified by BDO, the Auditor’s approach to testing
the portfolio, and pertinent regulatory developments.
No modifications were required to the audit approach.
The Committee met with BDO on 22 March 2023 to
discuss the progress of the audit and the draft Annual
Report. The Committee then met BDO on 28 April 2023
to review formally the outcome of the audit.
The Auditor was provided with an opportunity to meet
with the Committee without the AIFM or the Portfolio
Manager being present. No concerns were raised by the
Auditor or the Audit Committee in relation to the service
provided by the AIFM, the Portfolio Manager, or any other
third-party service provider. There were no material or
significant adverse matters brought to the Audit
Committee’s attention in respect of the 2023 audit, which
should be brought to shareholders’ attention.
Remuneration
The Committee approved a fee of £44,350 for the audit
of the year ended 31 January 2023 (2022: £36,500).
Thisrepresents an increase of 21.5% compared with the
previous year’s fee. Part of the increase was inflationary
and part was attributed to the costs of additional work
relating to the changes to ISA 315, 50% of which BDO
assured the Committee will be a one-off. Although this is
a large increase, the Committee believes that the fee is in
line with audit fees payable for the investment trust
sector and is reflective of the level of work required to
carry out a robust audit of a listed company.
Independence and Effectiveness
The Committee evaluated the independence of the
Auditor and the effectiveness of the external audit. In
order to fulfil this responsibility, the Committee
reviewed:
> the senior audit personnel in the audit plan, in order
to ensure that there were sufficient, suitably
experienced staff with knowledge of the investment
trust sector working on the audit;
> the steps the Auditor takes to ensure its
independence and objectivity;
> the statement by the Auditor that they remain
independent within the meaning of the relevant
regulations and their professional standards;
> the extent of any non-audit services provided by the
Auditor (there were none during the year under
review);
> the Company’s policy on former employees of the
Auditor (and other service providers) joining the
Board;
> the Auditor’s fulfilment of the agreed audit plan,
including their ability to communicate with
management and to resolve any issues promptly and
satisfactorily;
> the presentation of the audit findings; and
> feedback from BDO and Frostrow as the AIFM and
Company Secretary on their working relationship.
The Committee is satisfied with the Auditor’s
independence and the effectiveness of the audit process.
Non-Audit Services
BDO LLP did not carry out any non-audit work during
the year. Pursuant to the Company’s non-audit services
policy, the Committee is required to approve the
engagement of the Auditor for any non-audit work.
Acopy of the Company’s non-audit services policy can
be found on the Company’s website at
www.pacific-assets.co.uk.
55
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Effectiveness of the Committee
The Committee’s performance over the past year was
reviewed as part of the annual Board evaluation. The
evaluation considered the composition of the Committee
and the efficacy of Committee meetings, as well as
assessing the Committee’s role in monitoring and
overseeing the Company’s financial reporting and
accounting, risk management and internal controls,
compliance with corporate governance regulations and
the assessment of the external audit.
Iam pleased to confirm that the evaluation result was
positive and no matters of concern or requirements for
change were highlighted.
Charlotta Ginman FCA
Chair of the Audit Committee
9 May 2023
56
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Directors’
Remuneration
Report
The law requires the Auditor to audit certain disclosures
in this report. Where disclosures have been audited, they
are indicated as such and the audit opinion is included in
the Auditor’s report to shareholders on pages 59 to 65.
The Engagement & Remuneration Committee considers
the framework for the remuneration of the Directors.
Itreviews the ongoing appropriateness of the Company’s
remuneration policy and the individual remuneration of
Directors by reference to the activities of the Company
and in comparison with other companies of a similar
structure and size. This is in line with the AIC Code.
The simple fee structure reflects the non-executive
nature of the Board, which itself reflects the Company’s
business model as an externally-managed investment
trust (please refer to the Business Review beginning on
page 22 for more information). Accordingly, statutory
requirements relating to executive directors’ and
employees’ pay do not apply.
The Engagement & Remuneration Committee met once
during the year and approved a small inflationary increase
in the level of fees paid to the Directors, to take effect
from 1 February 2023. The fees for the current year and
the annual percentage change in directors’ fee rates over
the past three years are shown in the table below.
Directors’ Fees
The Directors as at the date of this report received the
fees listed in the table on page 57. These exclude
employer’s national insurance contributions,
ifapplicable. No other forms of remuneration were
received by the Directors and so fees represent the total
remuneration of each Director.
No communications have been received from
shareholders regarding Directors’ remuneration and no
remuneration consultants were engaged during the year.
Article 100 of the Company’s Articles of Association
provides that Directors are entitled to be reimbursed for
reasonable expenses incurred by them in connection
with the performance of their duties and attendance at
Board and General Meetings.
Under HMRC guidance, travel expenses and other out of
pocket expenses may be considered as taxable benefits
for the Directors. Where expenses reimbursed to the
Directors are classed as taxable under HMRC guidance,
they are shown in the taxable expenses column of the
Directors’ remuneration table overleaf and include the
associated tax liability settled by the Company.
Statement from the Chair
As Chair of the Engagement and Remuneration Committee, I
am pleased to present the Directors’ Remuneration Report to
shareholders. The Directors’ Remuneration Report is subject
to an annual advisory vote and therefore an ordinary resolution
for the approval of this report will be put to shareholders at the
Company’s forthcoming Annual General Meeting (“AGM”).
2024 2023 2022 2021
Fee Level 2024 % Fee Level 2023 % Fee Level 2022 % Fee Level 2021 %
(per annum) Change (per annum) Change (per annum) Change (per annum) Change
Director (projected)
Chairman £44,000 4.8 £42,000 3.7 £40,500 6.6 £38,000 6.6
Audit Chair £37,000 5.7 £35,000 4.5 £33,500 8.0 £31,000 8.0
Director £31,500 5.0 £30,000 3.4 £29,000 7.4 £27,000 7.4
Annual Percentage Change in Directors’ Remuneration
57
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Loss of Office
Directors do not have service contracts with the
Company but are engaged under letters of
appointment. These specifically exclude any
entitlement to compensation upon leaving office for
whatever reason.
Relative Cost of Directors’
Remuneration
The bar chart below shows the comparative cost of
Directors’ fees compared with the level of dividend
distribution and Company expenses for the years
ended 31 January 2022 and 2023.
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Directors’ Interests in Shares
(audited)
The Directors’ interests in the share capital of the
Company at the year end are shown in the table below:
Number of shares held
31 January 31 January
2023 2022
James Williams Beneficial 56,000 50,000
Charlotta Ginman Beneficial 13,789 13,789
Sian Hansen Beneficial 15,880 13,907
Robert Talbut Beneficial 9,611 9,611
Edward Troughton Beneficial 18,357 18,357
Andrew Impey Beneficial 10,000 –
Total 123,637 105,664
There have been no changes to the Directors’ holdings
in the Company’s shares since the year end.
None of the Directors is required to own shares in the
Company.
Directors’ Remuneration for the Year (audited)
The Directors who served in the year received the following remuneration:
Total Total
Fixed Taxable Remun- Fixed Taxable Remun-
Date of Fees Expenses eration Fees Expenses eration
Appointment 2023 2023 2023 2022 2022 2022
to the Board £ £ £ £ £ £
James Williams 1 October 2013 42,000 518 42,518 40,500 416 40,916
Charlotta Ginman 9 October 2014 35,000 – 35,000 33,500 – 33,500
Sian Hansen 3 August 2015 30,000 – 30,000 29,000 – 29,000
Robert Talbut 23 September 2016 30,000 422 30,422 29,000 – 29,000
Edward Troughton 18 December 2019 30,000 – 30,000 29,000 – 29,000
Andrew Impey 1 August 2022 15,000 – 15,000 – – –
182,000 940 182,940 161,000 416 161,416
58
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Total Shareholder Return for the
Ten Years to 31 January 2023
MSCI All Country Asia ex Japan (total return, sterling adjusted) (+194.6%)
Share Price To tal Return (+271.6%)
%
80
100
120
140
16
0
180
200
220
240
26
0
280
300
Jan
13
Jan
14
Jan
15
Jan
17
Jan
20
Jan
16
Jan
19
Jan
18
Jan
21
Jan
22
Ja
n
23
Source: Morningstar
Rebased to 100 as at 31 January 2013
In accordance with statutory reporting requirements,
the Directors’ Remuneration Report is required to
compare the Company’s share price total return with
that of a market index. The Board has identified the
MSCI All Country Asia ex Japan Index measured on a
total return, sterling adjusted basis as a suitable
comparator for the Company’s performance.
Approval
A resolution to approve the Directors’ Remuneration
Report for the year ended 31 January 2022 was put to
shareholders at the AGM held on 28June 2022. Ofthe
votes cast, 99.92% were in favour and 0.08%
wereagainst.
Directors’ Remuneration Policy
The Remuneration Policy provides that fees payable to
the Directors should reflect the time spent by the Board
on the Company’s affairs and the responsibilities borne
by the Directors. Remuneration should be sufficient to
enable candidates of a high calibre to be recruited.
Directors are remunerated in the form of fees payable
monthly in arrears, paid to the Director personally.
Thereare no long-term incentive schemes, bonuses,
share option schemes or pension arrangements and the
fees are not specifically related to the Directors’
performance, either individually or collectively.
TheCompany does not have any employees.
None of the Directors has a service contract. The terms
of their appointment provide that Directors shall be
subject to election at the first AGM after their
appointment and to annual re-election thereafter. The
terms also provide that a Director may be removed
without notice and that compensation will not be due on
leaving office.
The Directors’ Remuneration Policy is subject to a
binding shareholder vote every three years. It was last
approved at the AGM held in 2020 and it has therefore
been recommended to shareholders for approval at the
forthcoming AGM (please refer to the Notice of AGM
beginning on page 98 for further information). There
have been no changes to the Remuneration Policy during
the year and no changes are proposed for the year
ending 31 January 2024. If, however, the Directors
propose to vary the Remuneration Policy, shareholder
approval for the new policy will be sought at a general
meeting. The Committee and the Board review the
Remuneration Policy annually to ensure that it remains
appropriate.
Limit on Directors’ Remuneration
The remuneration for the non-executive Directors is
determined within the limits set out in the Company’s
Articles of Association. The present limit is £250,000 in
aggregate per annum. At the Committee’s
recommendation, the Board is proposing to
shareholders that this limit be increased to £300,000
and a resolution for this purpose has been included in
the Notice of AGM, beginning on page 98. If the
resolution is passed, the aggregate annual
remuneration of the Directors will remain within the
current limit of £250,000, however the increased limit
will provide for moderate adjustments that may be
necessary in subsequent years, including the
recruitment of future directors, and to provide a
contingency for any additional fees associated with
non-routine business.
Sian Hansen
Chair of the Engagement & Remuneration Committee
9 May 2023
Directors’ Remuneration Report continued
59
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Independent
Auditor’s Report
to the Members of Pacific Assets Trust plc
Opinion on the financial
statements
In our opinion the financial statements:
> give a true and fair view of the state of the Company’s
affairs as at 31 January 2023 and of its profit for the
year then ended;
> have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and
> have been prepared ins accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of Pacific
Assets Trust plc (the “Company”) for the year ended
31January 2023 which comprise the Income Statement,
the Statement of Changes in Equity, the Statement of
Financial Position and notes to the financial statements,
including a summary of significant accounting policies.
The financial reporting framework that has been applied
in their preparation is applicable law and United
Kingdom Accounting Standard, including FRS 102, The
Financial Reporting Standard applicable in the UK and
Republic of Ireland (United Kingdom Generally Accepted
Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the
audit of the financial statements section of our report.
Webelieve that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our
opinion. Our audit opinion is consistent with the
additional report to the Audit Committee.
Independence
Following the recommendation of the Audit Committee,
we were appointed by the Board of Directors on
17November 2020 to audit the financial statements for
the year ending 31 January 2021 and subsequent
financial periods. The period of total uninterrupted
engagement including retenders and reappointments is
three years, covering the years ending 31 January 2021
to 31 January 2023. We remain independent of the
Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied
to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. The non-audit services prohibited by that
standard were not provided to the Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate. Our evaluation of the Directors’
assessment of the Company’s ability to continue to adopt
the going concern basis of accounting included:
> Evaluating the appropriateness of the Directors’
method of assessing the going concern in light of
market volatility and the present uncertainties in
economic recovery created by the ongoing geo-
political issues by reviewing the information used by
the Directors in completing their assessment;
> Challenging management’s assumptions and
judgements made with regards to stress testing
forecasts including whether cash flow assumptions
used were appropriate,; validating data assumptions
used, that could have a material impact, by agreeing
these to supporting documentation where possible.
> Recalculating financial ratios, namely net asset value
per share, ongoing charges, revenue return per share,
and share price total return to ascertain the financial
health of the Company.
> Considering any other factors which could impact on
going concern such as non-compliance with laws and
regulation, legal matters and the presence of
contingencies and commitments.
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Based on the work we have performed, we have not
identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast
significant doubt on the Company’s ability to continue as
a going concern for a period of at least twelve months
from when the financial statements are authorised for
issue.
In relation to the Company’s reporting on how it has
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the Directors’ statement in the financial statements
about whether the Directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the
Directors with respect to going concern are described in
the relevant sections of this report.
Overview
2023 2022
Key audit
matters
Valuation and ownership
of quoted investments
Revenue recognition
Materiality Company financial statements as a whole
£4.73m (2022: £4.5m) based on 1%
(2022: 1%) of net assets
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of
the Company and its environment, including the
Company’s system of internal control, and assessing the
risks of material misstatement in the financial
statements. We also addressed the risk of management
override of internal controls, including assessing whether
there was evidence of bias by the Directors that may
have represented a risk of material misstatement.
Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most significance in our
audit of the financial statements of the current period
and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that
we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of
resources in the audit, and directing the efforts of the
engagement team. These matters were addressed in the
context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matter
How the scope of our audit addressed
the key audit matter
Valuation and
ownership of
quoted
investments
(Note 8 to the
financial
statements)
The investment portfolio at the
year end comprised of quoted
equity investments.
There is a risk that the prices used
for the listed investments held by
the Company are not reflective of
fair value and the risk that errors
made in the recording of
investment holdings result in the
incorrect reflection of
investments owned by the
Company.
Therefore we considered the
valuation and ownership of quoted
investments to be the most
significant audit area as the
quoted investments also
represent the most significant
balance in the financial statements
and underpin the principal activity
of the entity.
We responded to this matter by testing the valuation and
ownership of the whole portfolio of quoted investments.
Weperformed the following procedures:
> Confirmed that the bid price has been used by agreeing to
externally quoted prices using our data analytics software;
> Checked that there are no contra indicators, such as
liquidity considerations, to suggest the bid price is not the
most appropriate indication of fair value by considering
the realisation period for individual holdings;
> Confirmed the foreign exchange rates used in the
valuations are appropriate by corroborating these to
independent sources;
> Recalculated the valuation by multiplying the number of
shares held by the valuation per share; and
> Obtained direct confirmation of the number of shares held
per equity investment from the custodian, J.P Morgan
Chase Bank regarding all investments held at the balance
sheet date.
Independent Auditor’s Report continued
61
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Key audit matter
How the scope of our audit addressed
the key audit matter
Furthermore, we consider the
valuation disclosures to be a
significant area as they are
expected to be a key area of
interest for the users of the
financial statements.
For these reasons and the
materiality of the balance in
relation to the financial
statements as a whole, we
considered this to be a key audit
matter.
We also considered the completeness, accuracy and clarity
of investment-related disclosures against the requirements
of the relevant accounting standard.
Key observations:
Based on our procedures performed we did not identify any
matters to suggest the valuation or ownership of the quoted
equity investments was not appropriate.
Revenue
recognition
(Note 2 to the
financial
statements)
Income arises from overseas
quoted investments in the form of
overseas dividends and can be
volatile but is often a key factor in
demonstrating the performance of
the portfolio. As such there may
be an incentive to recognise
income as revenue where it is
more appropriately of a capital
nature. However, this risk is
decreased in light of the capital
return objective of the Company.
Additionally, judgement is
required by management in
determining the allocation of
dividend income to revenue or
capital for certain corporate
actions or special dividends.
For this reason we considered
revenue recognition to be a key
audit matter.
We assessed the treatment of dividend income and
challenged if these had been appropriately accounted for as
income or capital by reviewing the underlying reason for
issue of the dividend and whether it could be driven by a
capital event.
We analysed the whole population of dividend receipts to
identify items for further discussion that could indicate a
capital distribution, for example where a dividend
represents a particularly high yield. None were identified.
Key observations:
Based on our procedures performed we found the
judgements made by management in determining the
allocation of income to revenue or capital to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the
magnitude by which misstatements, including omissions,
could influence the economic decisions of reasonable
users that are taken on the basis of the financial
statements.
In order to reduce to an appropriately low level the
probability that any misstatements exceed materiality,
we use a lower materiality level, performance
materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and
the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a
whole.
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Independent Auditor’s Report continued
Based on our professional judgement, we determined materiality for the financial statements as a whole and
performance materiality as follows:
Company financial statements
2023
£m
2022
£m
Materiality 4.73
4.5
Basis for determining
materiality
1% of net assets
Rationale for the benchmark
applied
As an investment trust, the net asset value is the key measure of
performance for users of the financial statements.
Performance materiality £3,540,000 £3,380,000
Basis for determining
performance materiality
75% of materiality
Rationale for the percentage
applied for performance
materiality
The level of performance materiality applied was set after
havingconsidered a number of factors including the expected
totalvalue of known and likely misstatements and the level of
transactions in the year.
Lower testing threshold
We also determined that for revenue return before tax, a
misstatement of less than materiality for the financial
statements as a whole could influence users of the
financial statements as it is a measure of the Company’s
performance of income generated from its investments
after expenses. As a result, we determine a lower testing
threshold for those items impacting revenue return of
£360,000 (2022: £290,000), based on 10% of revenue
return before tax (2022: 10% of revenue return before
tax).
Reporting threshold
We agreed with the Audit Committee that we would
report to them all individual audit differences in excess
of £230,000 (2022: £225,000). We also agreed to report
differences below this threshold that, in our view,
warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information.
The other information comprises the information
included in the annual report other than the financial
statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the
other information and, except to the extent otherwise
explicitly stated in our report, we do not express any
form of assurance conclusion thereon. Our responsibility
is to read the other information and, in doing so, consider
whether the other information is materially inconsistent
with the financial statements or our knowledge obtained
in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we
are required to determine whether this gives rise to a
material misstatement in the financial statements
themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this
other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’
statement in relation to going concern, longer-term
viability and that part of the Corporate Governance
Statement relating to the Company’s compliance with
the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of
the Corporate Governance Statement is materially
consistent with the financial statements or our
knowledge obtained during the audit.
Going concern and longer-term viability
> The Directors’ statement with regards to the
appropriateness of adopting the going concern basis
of accounting and any material uncertainties
identified; and
63
Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
> The Directors’ explanation as to their assessment of
the Company’s prospects, the period this assessment
covers and why the period is appropriate.
Other Code provisions
> Directors’ statement on fair, balanced and
understandable;
> Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks;
> The section of the annual report that describes the
review of effectiveness of risk management and
internal control systems; and
> The section describing the work of the audit
committee.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our
work performed during the course of the audit, we are
required by the Companies Act 2006 and ISAs (UK) to
report on certain opinions and matters as described
below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the
course of the audit:
> the information given in the Strategic Report and the
Directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
> the Strategic Report and the Directors’ report have
been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the
Company and its environment obtained in the course of
the audit, we have not identified material misstatements
in the Strategic Report or the Directors’ report.
Directors’ remuneration
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
> adequate accounting records have not been kept, or
returns adequate for our audit have not been
received from branches not visited by us; or
> the financial statements and the part of the
Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and
returns; or
> certain disclosures of Directors’ remuneration
specified by law are not made; or
> we have not received all the information and
explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for the
preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary
to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the Directors are
responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
concern basis of accounting unless the Directors either
intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free
from material misstatement, whether due to fraud or
error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of these financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities,
including fraud, is detailed below:
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Governance
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Independent Auditor’s Report continued
Non-compliance with laws and regulations
Based on:
> Our understanding of the Company and the industry
in which it operates;
> Discussion with management and Those Charged
With Governance; and
> Obtaining and understanding of the Company’s
policies and procedures regarding compliance with
laws and regulations.
We considered the significant laws and regulations to be
Companies Act 2006, the FCA listing and DTR rules, the
principles of the AIC Code of Corporate Governance,
industry practice represented by the AIC SORP, the
applicable accounting framework, and qualification as an
Investment Trust under UK tax legislation as any
non-compliance of this would lead to the Company losing
various deductions and exemptions from corporation
tax.
Our procedures in respect of the above included:
> Agreement of the financial statement disclosures to
underlying supporting documentation;
> Enquiries of management and Those Charged With
Governance relating to the existence of any non-
compliance with laws and regulations;
> Reviewing minutes of meetings of Those Charged
With Governance throughout the period for
instances of non-compliance with laws and
regulations; and
> Reviewing the calculation in relation to Investment
Trust compliance to check that the Company was
meeting its requirements to retain its Investment
Trust status.
Fraud
We assessed the susceptibility of the financial
statements to material misstatement including fraud and
considered the fraud risk areas to be revenue recognition
and management override of controls.
Our risk assessment procedures included:
> Enquiry with management and Those Charged With
Governance regarding any known or suspected
instances of fraud;
> Obtaining an understanding of the Company’s
policies and procedures relating to:
o Detecting and responding to the risks of fraud;
and
o Internal controls established to mitigate risks
related to fraud.
> Review of minutes of meetings of Those Charged
With Governance for any known or suspected
instances of fraud; and
> Discussion amongst the engagement team as to how
and where fraud might occur in the financial
statements.
Based on our risk assessment, we considered the areas
most susceptible to be management override of controls.
Our procedures in respect of the above included:
> The procedures set out in the Key Audit Matters
section above;
> Recalculating investment management fees in total;
> Obtaining independent confirmation of bank
balances; and
> Testing journals which met a defined risk criteria by
agreeing to supporting documentation and
evaluating whether there was evidence of bias by the
Investment Manager and Directors that represented
a risk of material misstatement due to fraud.
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement
team members who were all deemed to have appropriate
competence and capabilities and remained alert to any
indications of fraud or non-compliance with laws and
regulations throughout the audit.
Our audit procedures were designed to respond to risks
of material misstatement in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are
inherent limitations in the audit procedures performed
and the further removed non-compliance with laws and
regulations is from the events and transactions reflected
in the financial statements, the less likely we are to
become aware of it.
A further description of our responsibilities is available
on the Financial Reporting Council’s website at: www.frc.
org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
65
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Use of our report
This report is made solely to the Company’s members, as
a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Peter Smith (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
9 May 2023
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
66
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Income Statement
for the year ended 31 January 2023
Year ended 31 January 2023 Year ended 31 January 2022
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains on investments 8 - 27,434 27,434 - 43,614 43,614
Exchange differences - 1,787 1,787 - (114) (114)
Income 2 5,541 - 5,541 4,657 - 4,657
Portfolio management
and AIFM fees 3 (1,095) (3,283) (4,378) (1,070) (3,212) (4,282)
Other expenses 4 (813) - (813) (692) - (692)
Return before taxation 3,633 25,938 29,571 2,895 40,288 43,183
Taxation 5 (621) (3,656) (4,277) (487) (5,343) (5,830)
Return after taxation 3,012 22,282 25,294 2,408 34,945 37,353
Return per share (p) 7 2.5 18.4 20.9 2.0 28.9 30.9
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
(“AIC”).
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.
67
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Ordinary Capital
Share Share Redemption Special Capital Revenue
Capital premium reserve reserve reserve reserve Total
Note £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 January 2021 15,120 8,811 1,648 14,572 369,275 6,790 416,216
Return after taxation - - - - 34,945 2,408 37,353
Ordinary dividends paid 6 - - - - - (2,903) (2,903)
At 31 January 2022 15,120 8,811 1,648 14,572 404,220 6,295 450,666
Return after taxation - - - - 22,282 3,012 25,294
Ordinary dividends paid 6 - - - - - (2,298) (2,298)
At 31 January 2023 15,120 8,811 1,648 14,572 426,502 7, 0 09 473,662
The accompanying notes are an integral part of these statements.
Statement of
Changes in Equity
for the year ended 31 January 2023
68
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
2023 2022
Notes £’000 £’000 £’000 £’000
Fixed assets
Investments 8 474,399 436,983
Current assets
Debtors 9 333 242
Cash and cash equivalents 10,535 24,192
10,868 24,434
Creditors (amounts falling due within one year) 10 (1,855) (2,356)
Net current assets 9,013 22,078
Total assets less current liabilities 483,412 459,061
Non-current liabilities
Provision for liabilities 11 (9,750) (8,395)
Net assets 473,662 450,666
Capital and reserves
Called up share capital 12 15,120 15,120
Share premium account 8,811 8,811
Capital redemption reserve 15 1,648 1,648
Special reserve 15 14,572 14,572
Capital reserve 15 426,502 404,220
Revenue reserve 15 7,0 09 6,295
Equity shareholders’ funds 473,662 450,666
Net asset value per Ordinary Share (p) 13 391.6p 372.6p
The financial statements on pages 66 to 78 were approved and authorised for issue by the Board of Directors on
9May2023 and signed on its behalf by:
James Williams
Chairman
The accompanying notes are an integral part of these statements.
Pacific Assets Trust Public Limited Company – Company Registration Number: SC091052 (Registered in Scotland)
Statement of
Financial Position
as at 31 January 2023
69
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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 (‘AIC’), the historical cost convention, as modified by the valuation of
investments at fair value through profit or loss.
The Board has considered a detailed assessment of the Company’s ability to meets its liabilities as they fall due,
including stress and liquidity tests which modelled the effects of substantial falls in markets and significant
reductions in market liquidity (including further stressing the current economic conditions caused by the Covid-19
pandemic and certain geopolitical events) on the Company’s assets and liabilities. In light of the results of these tests,
the Company’s cash balances, the liquidity of the Company’s investments and the absence of any gearing, 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 approval of these financial statements and that, accordingly, it is appropriate to
adopt the going concern basis in preparing these financial statements.
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 net assets.
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.
Significant Judgement
There is one significant judgement involved in the presentation of the Company’s accounts, being the judgement on
the functional and presentational currency of the Company.
The Company’s investments are made in foreign currencies, however the Board considers the Company’s functional and
presentational 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. All values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.
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.
Notes to the Financial
Statements
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Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Notes to the Financial Statements continued
(c) Cash and Cash Equivalents
Cash and cash equivalents are defined as cash and demand deposits readily convertible to known amounts of cash
and subject to insignificant risk of changes in value.
2. Income
2023 2022
£’000 £’000
Income from investments
Overseas dividends 5,504 4,657
Bank interest 37 -
5,541 4,657
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. Foreign dividends are gross of withholding tax.
Special dividends of a revenue nature are recognised through the revenue column of the Income Statement. Special
dividends of a capital nature are recognised through the capital column of the Income Statement.
Where the Company has elected to receive its dividends in the form of additional shares rather than cash the amount
of the stock dividend is recognised in the revenue column.
3. Portfolio Management and AIFM Fees
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Portfolio management fee
– Stewart Investors 968 2,904 3,872 949 2,850 3,799
AIFM fee – Frostrow 127 379 506 121 362 483
1,095 3,283 4,378 1,070 3,212 4,282
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.
71
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
4. Other Expenses
2023 2022
£’000 £’000
Directors’ fees 183 161
Employers NIC on directors’ remuneration 14 13
Auditor’s remuneration for annual audit 44 37
Depository fees 56 41
Custody fees 190 217
Registrar fees 25 26
Broker retainer 32 30
Listing fees 36 26
Legal and professional fees 43 43
Other expenses 190 98
Total expenses 813 692
For accounting policy, see note 3 on the prior page.
5. Taxation
(a) Analysis of Charge in the Year
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Overseas taxation 764 - 764 591 - 591
Indian capital gains tax charge (143) 3,656 3,513 (104) 5,343 5,239
621 3,656 4,277 487 5,343 5,830
Overseas tax arose as a result of irrecoverable withholding tax on overseas dividends and Indian capital gains
tax(“CGT”).
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 15% on short-term capital gains (defined as those
where the security was held for less than a year) and 10% on long-term capital gains. £1,355,000 (2022: £3,073,000)
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 page75. £2,158,000 (2022: £2,202,000) of the
charge relates to capital gains tax paid on disposals during the year.
72
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Notes to the Financial Statements continued
(b) Reconciliation of Tax Charge
The revenue account tax charge for the year is lower than the standard rate of corporation tax in the UK of 19.0%
(2021:19.0%).
The differences are explained below:
2023 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Total return on ordinary activities
before tax 3,633 25,938 29,571 2,895 40,288 43,183
Corporation tax charged at 19.0%
(2022: 19.0%) 690 4,928 5,618 550 7,655 8,205
Effects of:
Gains on investment not subject to UK
corporation tax - (5,212) (5,212) - (8,287) (8,287)
Non-taxable exchange differences - (340) (340) - 22 22
Expenses not deductible for
tax purposes 356 624 980 335 610 945
Income not subject to corporation tax (1,046) - (1,046) (885) - (885)
Indian capital gains tax charge
(see note 5a) (143) 3,656 3, 513 (104) 5,343 5,239
Overseas taxation 764 - 764 591 - 591
Tax charge for the year 621 3,656 4,277 487 5,343 5,830
As at 31 January 2023 the Company had unutilised management expenses and other reliefs for taxation purposes of
£57,846,000 (2022: £52,693,000). It is not anticipated that these will be utilised in the foreseeable future and as such
no related deferred tax asset has been recognised.
In October 2022 it was confirmed that the main rate of corporation tax would increase from 19% to 25% from April
2023. This rate has been enacted as at the date of the Statement of Financial Position.
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.
73
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
6. Dividends
Amounts recognised as distributable to shareholders for the year ended 31 January 2023, were as follows:
2023 2022
£’000 £’000
Final dividend paid for the year ended 31 January 2022 of 1.9p per share 2,298 -
Final dividend paid for the year ended 31 January 2021 of 2.4p per share - 2,903
In respect of the year ended 31 January 2023, a final dividend of 2.3p per share has been proposed and will be
reflected in the Annual Report for the year ending 31 January 2024. Details of the ex-dividend and payment dates are
provided on page45.
The Board’s current policy is to pay dividends only out of revenue reserves. Therefore the amount available for
distribution as at 31 January 2023 is £7,009,000 (2022: £6,295,000).
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:
2023 2022
£’000 £’000
Revenue available for distribution by way of dividend for the year 3,012 2,408
Final dividend of 2.3p per share (2022: final dividend of 1.9p) (2,782) (2,298)
Transfer to revenue reserves 230 110
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:
2023 2022
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic 2.5p 18.4p 20.9p 2.0p 28.9p 30.9p
The total return per share is based on the total return attributable to shareholders of £25,294,000 (2022:
£37,353,000).
The revenue return per share is based on the net revenue return attributable to shareholders of £3,012,000
(2022:£2,408,000).
The capital return per share is based on the net capital return attributable to shareholders of £22,282,000
(2022:£34,945,000).
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 120,958,386 (2022: 120,958,386).
The calculations of the returns per Ordinary Share have been carried out in accordance with IAS 33 Earnings per
Share.
74
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Notes to the Financial Statements continued
8. Investments
2023 2022
£’000 £’000
Investments
Cost at start of year 290,337 267,14 0
Investment holding gains at start of year 146,646 137, 574
Valuation at start of year 436,983 404,714
Purchases at cost 77,3 05 82,266
Disposal proceeds (67, 323) (93,611)
Gains on investments 27,434 43,614
Valuation at end of year 474,399 436,983
Cost at 31 January 320,883 290,337
Investment holding gains at 31 January 153,516 146,646
Valuation at 31 January 474,399 436,983
The Company received £67,323,000 (2022: £93,611,000) from investments sold in the year. The book cost of these
investments when they were purchased was £46,759,000 (2022: £59,069,000). 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 £87,000 (2022: £121,000) and transaction
costs on sales of £142,000 (2022: £206,000).
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 inthe 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 have been classified as Level 1 (2022: All Level 1).
9. Debtors
2023 2022
£’000 £’000
Accrued income 323 204
Other debtors 10 38
333 242
75
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
10. Creditors: Amounts Falling Due Within One Year
2023 2022
£’000 £’000
Amounts due to brokers 481 1,016
Portfolio management fee – Stewart Investors 1,002 996
AIFM fee – Frostrow 129 125
Other creditors 243 219
1,855 2,356
11. Provisions for liabilities
2023 2022
£’000 £’000
Deferred taxation on unrealised capital gains on Indian securities 9,750 8,395
See note 5 for further details and accounting policy.
12. Share Capital
2023 2022
£’000 £’000
Allotted and fully paid:
120,958,386 Ordinary shares of 12.5p each (2022: 120,958,386) 15,120 15,120
During the year, no Ordinary shares were issued (2022: nil).
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 391.6p (2022: 372.6p) is calculated on net assets of £473,662,000 (2022:
£450,666,000), divided by 120,958,386 (2022: 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;
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Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Notes to the Financial Statements continued
(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 £46.7 million (2022: £41.1 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:
2023 2022
Investments Cash Debtors Creditors Investments Cash Debtors Creditors
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Chinese renminbi 39,812 481 - (481) 26,979 - - -
Indian rupee 206,897 15 110 (9,750) 216,401 254 22 (9,355)
New Taiwanese dollar 54,280 - 5 - 55,785 69 10 -
Hong Kong dollar 33,134 - - - 28,513 - - -
Philippine peso 4,835 - - - 5,489 - - -
Indonesian rupiah 36,718 - - - 21,405 - - -
Japanese yen 36,161 - 120 - 39,018 - 100 -
Bangladesh taka 6,106 - 1 - 10,606 35 - -
Thai baht 12,001 - - - 8,517 - - -
Malaysian ringgit 10,231 - - - 5,771 9 - -
Singapore dollar 23,085 2,898 - - - 6,940 - -
US dollar - 3,100 - - - 7,147 - -
Korean won 11,139 - 67 - 18,499 - 68 (56)
Total 474,399 6,494 303 (10,231) 436,983 14,454 200 (9,411)
At 31 January 2023 the Company had £4,041,000 of sterling cash balances (2022: £9,738,000).
During the year sterling weakened by an average of 1.6% (2022: strengthened by 0.4%) 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 £53.4 million
(2022: negative £41.0 million). If the value of sterling had weakened against each of the currencies in the investment
77
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
portfolio by 10%, the impact on the net asset value would have been positive £43.7 million (2022: positive
£50.2million). 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:
2023 2022
£’000 £’000
Cash and cash equivalents 10,535 24,192
Debtors 333 242
10,868 24,434
All the assets of the Company which are traded on a recognised exchange are held by J.P.Morgan Chase Bank,
theCustodian. 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 24 to 29.
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 one week, 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.
78
Financial Statements
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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 3 on page 70. 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
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
pages45 and 46. During the year ended 31 January 2023, Frostrow earned £506,000 (2022: £483,000) in respect of
company management fees, of which £129,000 (2021: £125,000) was outstanding at the year end.
The Company employs Stewart Investors as its Portfolio Manager. Details of this arrangement are disclosed on page45.
During the year ended 31 January 2023, Stewart Investors earned £3,872,000 (2022: £3,799,000) in respect of
portfolio management fees, of which £1,002,000 (2022: £996,000) was outstanding at the year end.
All material related party transactions have been disclosed in notes 3 and4 on pages 70 and 71. Details of the
remuneration and the shareholdings of all Directors can be found on page 57.
Notes to the Financial Statements continued
79
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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: the safeguarding and verification of
ownership of assets; the monitoring of cashflows; and to
ensure 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.
2023 2022
pence pence
Average share price for the year 335.9 342.3
Average net asset value for the year 373.8 369.3
Average Discount 10.1% 7.3%
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.
MSCI Disclaimer
The MSCI information (relating to the Index) may only be
used for your internal use, may not be reproduced or
redisseminated in any form and may not be used as a
basis for or a component of any financial instruments or
products or indices. None of the MSCI information is
intended to constitute investment advice or a
recommendation to make (or refrain from making) any
kind of investment decision and may not be relied on as
such. Historical data and analysis should not be taken as
an indication or guarantee of any future performance
analysis, forecast or prediction. The MSCI information is
provided on an “as is” basis and the user of this
information assumes the entire risk of any use made of
this information. MSCI, each of its affiliates and each
other person involved in or related to compiling,
computing or creating any MSCI information
(collectively, the “MSCI Parties”) expressly disclaims all
warranties (including, without limitation, any warranties
of originality, accuracy, completeness, timeliness,
non‑infringement, merchantability and fitness for a
particular purpose) with respect to this information.
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without limitation lost profits) or any other damages.
(www.msci.com).
Glossary of Terms and
Alternative Performance
Measures (unaudited)
80
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Glossary of Terms and Alternative Performance Measures (unaudited) continued
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.
31 January 31 January
2023 2022
NAV Total Return p p
Opening NAV 372.6 344.1
Increase in NAV 20.9 30.9
Dividend paid (1.9) (2.4)
Closing NAV 391.6 372.6
Increase in NAV 5.6% 9.0%
Impact of reinvested dividends 0.1% 0.1%
NAV Total Return 5.7% 9.1%
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.
31 January 31 January
2023 2022
£’000 £’000
Operating expenses 5,190 4,974
Average net assets
during the year 452,081 446,596
Ongoing charges 1.1% 1.1%
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.
Total Return (annualised)
Share
Price NAV CPI + 6%
(%) (%) (%)
One year to
31 January 2023 5.9 5.7 17.3
Three years to
31 January 2023 11.1 11.9 11.9
Five years to
31 January 2023 8.0 8.8 10.3
81
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
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.
31 January 31 January
2023 2022
Share Price Total Return p p
Opening share price 340.0 333.0
Increase in share price 19.9 9.4
Dividend paid (1.9) (2.4)
Closing share price 358.0 340.0
Increase in share price 5.8% 2.8%
Impact of reinvested dividends 0.1% 0.1%
Share Price Total Return 5.9% 2.9%
Volatility
A measure of the range of possible returns for a given
security or market index.
82
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Sustainable Finance
Disclosure Regulation
(“SFDR”) Report (unaudited)
Template periodic disclosure for the financial products referred to in
Article 9, paragraphs 1 to 4a, of Regulation (EU) 2019/2088 and Article 5,
first paragraph, of Regulation (EU) 2020/852
Product name: Legal entity identifier:
Pacific Assets Trust plc 2138008U8QPGAESFYA48
Sustainable investment objective
To what extent was the sustainable investment objective of this financial product met?
The Company seeks to achieve long-term capital appreciation by investing in
companies which both contribute to, and benefit from, sustainable development,
achieving positive social and environmental sustainable outcomes.
The EU Taxonomy is a
classification system laid
down in Regulation (EU)
2020/852 establishing a
list of environmentally
sustainable economic
activities. That Regulation
does not lay down a list of
socially sustainable
economic activities.
Sustainable investments
with an environmental
objective might be aligned
with the Taxonomy or not.
Sustainable investment
means an investment in
an economic activity
that contributes to an
environmental or social
objective, provided that
the investment does not
significantly harm any
environmental or social
objective and that the
investee companies
follow good governance
practices.
Did this financial product have a sustainable investment objective?
l l
✖
Yes l l
No
✖
It made sustainable investments
with an environmental objective:
60%
in economic activities that
qualify as environmentally
sustainable under the EU
Taxonomy
✖
in economic activities that do
not qualify as environmentally
sustainable under the EU
Taxonomy
It promoted Environmental/Social
(E/S) characteristics and while it
did not have as its objective a
sustainable investment, it had a
proportion of ___% of sustainable
investments
with an environmental
objective in economic
activities that qualify as
environmentally sustainable
under the EU Taxonomy
with an environmental
objective in economic
activities that do not qualify as
environmentally sustainable
under the EU Taxonomy
with a social objective
✖
It made sustainable investments
with a social objective: 100%
It promoted E/S characteristics,
but did not make any sustainable
investments
Note: The percentages are defined and measured on the basis that each sustainable investment must
contribute to a social objective and may also contribute to an environmental objective. The percentages will
therefore not add to 100.
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Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Positive social sustainability outcomes include the enablement of improved health
and wellbeing; access to income-generating and enterprise opportunities; fair
employment and workplace safety; access to education and learning opportunities;
communication and access to information; financial inclusion; sustainable transport
and mobility; better access to housing, water, sanitation and electricity; and social
inclusion and reduced inequality.
Positive environmental sustainability outcomes include more careful, efficient and
productive use of natural resources; reduced waste and improved waste
management; the wider adoption of circular economy practices and measures; the
adoption of renewable and cleaner energy technologies; reduced greenhouse gas
emissions; reduced water, air and other environmental pollution; a slowing in the
rate of land degradation, land use change and loss of forests and biodiversity; and
measures and technologies that enable climate change adaptation and resilience.
The Company only invests in companies that are sustainable investments which
contribute to a social and/or environmental objective. The contribution of the
Company’s investments to the social and environmental objectives are assessed by
reference to two framework indicators – the Portfolio Manager's human
development pillars and Project Drawdown climate change solutions.
Human development pillars
The Portfolio Manager has determined 10 broad pillars which they believe
encapsulate the essence of human development and which can be mapped to
companies. Each investee company must be contributing in a tangible way to at least
one of the following pillars:
> Nutrition
> Healthcare and hygiene
> Water and sanitation
> Energy
> Housing
> Employment
> Finance
> Standard of living
> Education
> Information
As at 31 December 2022, the Company held 63 companies. All companies (100%)
were contributing to at least one human development pillar and, in total, were
making 174contributions to the pillars.
Climate change solutions
Project Drawdown is a non-profit organisation, founded in 2014, which has mapped,
measured and modelled over 90 different solutions to global warming, with the
ultimate goal of reaching drawdown – i.e. the point in the future when emissions stop
increasing and start to steadily decrease. Each Company investment is mapped by
the Portfolio Manager against the c.90 solutions (which are captured in eight
broader solutions of Buildings, Circular economy / industry, Conservation /
restoration, Energy, Food system, Human development, Transport and Water). The
Portfolio Manager's focus is on whether the companies themselves are making a
meaningful contribution and will have meaningful involvement with the delivery of
any of those solutions. Where the companies in which the Company invests do
contribute to any of the solutions, they will be involved in making products and
delivering services directly or by enabling/supporting those solutions.
84
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Further information about how the Portfolio Manager uses the human development
pillars and Project Drawdown climate solutions is available on the Portfolio
Manager's website – stewartinvestors.com
As at 31 December 2022, the Company held 63 companies. 38 companies (60%) were
contributing to climate change solutions. These companies were contributing to 33
different solutions and, in total, were making 111 contributions to the solutions.
These frameworks, alongside the Portfolio Manager's own bottom-up analysis, lean
on measurable and reportable outcomes as evidence for determining a company's
meaningful contribution to sustainable development.
> How did the sustainability indicators perform?
The Portfolio Manager's Portfolio Explorer tool provides the contribution that each
company makes to climate solutions, human development and the Sustainable
Development Goals, as well as the investment rationale, key risks and engagement
topics. Click on the link below to access the tool.
www.stewartinvestors.com/uk/en/intermediary/our-strategies/pacific-assets-trust.
html?tabs-anchor=Pacific%20Assets%Trust&active-tab=Portfolio%20Explorer
The social and environmental outcomes for the Company as at 31 December 2022
are provided in the charts below.
Human development pillars
(number of companies contributing to each pillar)
10
3
19
12
2
3
4
6
23
10
6
7
9
3
8
29
5
6
9
3
Enabling/Supporting Contribution
Direct Contribution
Information
Education
Standard
of living
Finance
Employment
Housing
Energy
Water and
sanitation
Healthcare
and hygiene
Nutrition
Climate change solutions
(number of companies contributing to each solution)
3
15
7
9
2
1
4
6
19
7
9
5
21
1
2
Water
Transport
Human
development
Food system
Energy
Conservation/
restoration
Circular
economy/
industry
Buildings
Enabling/Supporting Contribution
Direct Contribution
Sustainability indicators
measure how the
sustainable objectives of
this financial product are
attained.
Notes: Direct Contribution – directly attributable to products, services or practices provided by that company. Enabling/
Supporting Contribution – supported or made possible by products or technologies provided by that company.
Template periodic disclosure for the financial products referred to in Article 9 continued
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
> …and compared to previous periods?
Changes in the sustainability outcomes for the Company year-on-year are related to
bottom-up changes in the portfolio and/or changes in the sustainability profile of
individual investee companies.
The social and environmental outcomes for the Company as at 31 December 2021
are provided in the charts below.
As at 31 December 2021, the Company held 63 companies. All companies (100%)
were contributing to at least one human development pillar and, in total, were
making 173contributions to the pillars.
Human development pillars
(number of companies contributing to each pillar)
Enabling/Supporting Contribution
Direct Contribution
Information
Education
Standard
of living
Finance
Employment
Housing
Energy
Water and
sanitation
Healthcare
and hygiene
Nutrition
7
3
18
12
2
3
4
6
26
12
5
7
8
4
8
28
5
5
10
3
As at 31 December 2021, the Company held 63 companies. 38 companies (60%)
were contributing to climate change solutions. These companies were contributing
to 32 different solutions and, in total, were making 105 contributions to the
solutions.
Climate change solutions
(number of companies contributing to each solution)
Indirect Contribution
Enabling/Supporting Contribution
Direct Contribution
Water
Transport
Human
development
Food system
Energy
Conservation/
restoration
Circular
economy/
industry
Buildings
3
1
1
12
3
2
5
4
4
15
6 7
10
5
25
2
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Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
During 2022 and following feedback from clients, the Portfolio Manager removed
the Indirect Contribution from their climate solutions measures.
Indirect Contribution – providing generic products or services to companies making
direct or enabling contributions or making operational decisions which have a
material contribution.
In 2022, Project Drawdown added 11 new climate solutions to their framework. The
Portfolio Manager considered these new solutions for their 2022 reporting measures.
More detail on these changes are available on the Portfolio Manager's website:
www.stewartinvestors.com/all/insights/climate-solutions-update
> How did the sustainable investments not cause significant harm to any
sustainable investment objective?
The Company only invests in companies that are sustainable investments which
contribute to a social and/or environmental objective.
The hallmarks of the investment strategy are an exclusive focus on companies that
contribute to, and benefit from, sustainable development; a research-driven,
fundamental, bottom-up approach to the selection and ongoing analysis of
investments; a focus on the quality and sustainability attributes of every company; a
focus on company stewardship and sound governance; a long-term investment
horizon; and a commitment to engagement in order to address sustainability
concerns and issues.
The bottom-up investment process results in portfolios composed of companies without
material exposure to harmful products, services or processes. All harmful business
activities are defined and publicly disclosed, and subject to a materiality assessment by
the Portfolio Manager. The Portfolio Manager's position on harmful and controversial
products and services and investment exclusions is available on their website.
www.stewartinvestors.com/all/insights/our-position-on-harmful-and-controversial-
products-and-services
Socially harmful activities include the production of alcohol products, tobacco
products and armaments; involvement in gambling operations; the production and
sale of pornography; poor animal welfare practices; animal testing that breaches
ethical principles and regulatory standards; failure to respect sexual and
reproductive health rights; genetic and embryonic and adult stem cell research
activities that fail to meet the highest ethical, safety and regulatory standards or are
aimed at the reproductive cloning of humans or animals; failure to comply with
globally accepted human rights, norms and standards in relation to modern slavery,
child labour, customary land tenure and indigenous rights; and unethical and
discriminatory employment practices.
Environmentally harmful activities include the exploration, production or generation
of fossil fuels and nuclear power. Companies that fail to discharge their
environmental stewardship responsibilities in line with the UN Global Compact and
other global standards are also excluded.
Unacceptable governance practices include carrying out operations with and within
oppressive regimes; systemic bribery and corruption; tax avoidance and
unacceptably low levels of tax payments; and poor ethical conduct when dealing
with customers, suppliers and competitors.
If an investment is held in a company that has material exposure to harmful products
and services, this will be disclosed on the Portfolio Manager's website, and the
reasons for the exception and for maintaining the holding explained. Exceptions may
occur if a company is winding down a legacy commercial activity (in which case the
company will be engaged and encouraged to cease the commercial activity
Principal adverse
impacts are the most
significant negative
impacts of investment
decisions on
sustainability factors
relating to
environmental, social
and employee matters,
respect for human
rights, anti-corruption
and anti-bribery
matters follow good
governance practices.
Template periodic disclosure for the financial products referred to in Article 9 continued
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Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
concerned), or if a company is only indirectly exposed to a harmful industry or
activity, for example, a company making safety products for a wide range of
industries may also have customers in the fossil fuel or defence industries.
The Company’s exposure to such activities is monitored on an ongoing basis through
pre and post trade compliance systems.
Where any material exposure to these harmful activities is found, the Portfolio
Manager will:
• review the company research and investment case, noting the response where
they believe it is adequate,
• engage with the company where they require further information or wish to
encourage improved practices and an appropriate resolution of the issues,
• exit the Company’s position in the company where engagement has been
unsuccessful, or where part of a pattern of behaviour raises concerns regarding
the quality and integrity of the company's management.
> How were the indicators for adverse impacts on sustainability factors taken
into account?
Adverse impact indicators, relevant to each Company investee company, are taken
into account through the Portfolio Manager's bottom-up research, company
engagement, adherence to their position statement on harmful and controversial
products and services, Group-wide exclusion policies and third-party research
providers.
The Portfolio Manager meets and liaises with companies on an on-going basis and is
continuously assessing their sustainability credentials and quality. Where the
Portfolio Manager has identified changes to a company's quality or sustainability
positioning through either meetings, ongoing monitoring and reviewing their annual
reports, the Portfolio Manager will re-evaluate the investment case.
The Company portfolio is assessed on an ongoing basis by external service providers
including controversy monitoring, product involvement, carbon footprints and other
impact measures, and breaches of social norms.
Any material Principle Adverse Sustainability Indicators are incorporated into the
Portfolio Manager's company analysis, team discussion and engagement
programme.
> Were sustainable investments aligned with the OECD Guidelines for
Multinational Enterprises and the UN Guiding Principles on Business and
Human Rights? Details:
The Company’s sustainable investments are aligned with these Guidelines and
Principles.
The Portfolio Manager continually monitors the companies owned to understand
any changes to the strategies. The Company’s portfolio is assessed by an external
service provider for compliance with the OECD Guidelines for Multinational
Enterprises and the UN Guiding Principles on Business and Human Rights, UN global
norms and exposure to high-risk sectors. The Portfolio Manager also receives
regular updates from a controversy monitoring service. Where issues are raised by
these services, the Portfolio Manager will review and consider as part of the
investment analysis and depending on the detail may engage with the company in
question, and if necessary will divest to ensure the portfolio continues to meet the
principles which sit at the heart of the investment philosophy.
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
During the reporting period the Company held the following company which flagged
against the Portfolio Manager's policy.
Tata Consultancy Services (TCS)
Activity exposure >5% revenue: UN Global Compact Principle 2: Businesses should
make sure that they are not complicit in human rights abuses.
Reason for exception/holding: TCS has no direct involvement in nuclear weapons or
energy, however the external research provider considers the company to be
involved because its parent company, Tata Sons, owns greater than 50% of TCS.
Tata Sons involvement is due to the company owning Tata Advanced Systems which
acquired Tata Power's Strategic Engineering Division. The Strategic Engineering
Division provides control systems for the Indian Navy's nuclear missile submarines.
As India has not signed the Treaty on the Non-Proliferation of Nuclear Weapons, the
external data provider considers Tata Sons and by extension TCS to be in support of
the nuclear weapons programme of India. The Portfolio Manager disagrees with this
assessment and does not see anything in the activities or conduct of the company to
question its sustainability positioning or the investment case.
How did this financial product consider principal adverse impacts on
sustainability factors?
In addition to the detail described above, the Portfolio Manager has set a materiality
threshold of 5% of revenue for direct involvement companies materially involved in
the exploration, production or generation of fossil fuel energy and a threshold of 0%
for controversial weapons. Portfolio companies are checked against the thresholds
each quarter by an external third-party research platform.
The below table sets out the principle adverse impact (“PAI”) mandatory indicators
for the Company.
Indicators Metrics
Trust
analysis
Exposure (EUR m) 534
1. GHG Emissions
Scope 1 (tCO
2
eq) 3,302
Scope 2 (tCO
2
eq) 14,848
Scope 3 (tCO
2
eq) 437,418
Total Emissions Scope 1+2 (tCO
2
eq) 18,150
Total Emissions Scope 1+2+3
(tCO
2
eq)
455,568
2. Carbon Footprint
Total Emissions Scope 1+2 (tCO
2
eq/
EURm)
34
Total Emissions Scope 1+2+3
(tCO
2
eq/EURm)
854
3. GHG Intensity of
Investee Companies
Scope 1+2 (tCO
2
eq/EURm) 75
Scope 1+2+3 (tCO
2
eq/EURm) 2,413
4. Exposure to companies
active in the fossil fuel
sector
(% involvement) 0%
Template periodic disclosure for the financial products referred to in Article 9 continued
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Indicators Metrics
Trust
analysis
5. Share of Non–
Renewable Energy
Consumption and
Production
Non–Renewable Energy
Consumption (%)
84%
Non–Renewable Energy Production
(%)
35%
6. Energy consumption
intensity per high
impact sector
Agriculture, Forestry & Fishing
(GWh/EURm)
no data
Construction (GWh/EURm) no data
Electricity, Gas, Steam & Air
Conditioning Supply (GWh/EURm)
no data
Manufacturing (GWh/EURm) 0.12
Mining & Quarrying (GWh/EURm) no data
Real Estate Activities (GWh/EURm) no data
Transportation & Storage
(GWh/EURm)
no data
Water Supply, Sewerage, Waste
Remediation (GWh/EURm)
no data
Trade & Repair of Automobiles
(GWh/EURm)
insufficient
data
7. Activities Negatively
Affecting Biodiversity
Areas
(% involvement) 0%
8. Emissions to Water (t/EURm) 0
9. Hazardous waste ratio (t/EURm) 37
10. Violations of UNGC and
OECD Guidelines for
Multinational
Enterprises
Watch (% involvement) 0%
Breach (% involvement) 2%
11. Lack of Processes &
Compliance
Mechanisms to Monitor
Compliance with UNGC
and OECD guidelines
(% involvement) 81%
12. Unadjusted Gender
Pay Gap
% of Male Gross Hourly Rate insufficient
data
13. Board Gender Diversity % of Female Board Members 19%
14. Exposure to
Controversial Weapons
(% involvement) 0%
Notes: Principal Adverse Impact data is sourced from third-party ESG data providers.
Limitations to the data provided from third parties will stem from their coverage and
methodologies and from limited disclosures by issuer companies. Where data is not available,
third-party providers may use estimation models or proxy indicators. Methodologies used by
data providers may include an element of subjectivity. Whilst data is collected on an ongoing
basis, in this rapidly evolving environment, data can become outdated within a short time
period. Data for certain metrics may be based on limited data across the portfolio companies.
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
What were the top investments of this financial product?
Largest Investments Sector %
Assets*
Country
CG Power Industrials 6.0 India
Tube Investments Consumer Discretionary 5.9 India
Mahindra & Mahindra Consumer Discretionary 5.7 India
Marico Consumer Staples 3.2 India
Unicharm Consumer Staples 2.8 Japan
Voltronic Power Industrials 2.6 Taiwan
Elgi Equipments Industrials 2.5 India
Hoya Health Care 2.5 Japan
Tata Consumer Products Consumer Staples 2.3 India
HDFC Financials 2.2 India
Koh Young Technology Information Technology 2.2 South Korea
Techtronic Industries Industrials 2.1 Hong Kong
Vitasoy Consumer Staples 2.0 Hong Kong
Taiwan Semiconductor (TSMC) Information Technology 1.9 Taiwan
Vinda International Consumer Staples 1.9 China
* Calculated based on average investment as at Jan, April, July and October quarter
ends.
What was the proportion of sustainability-related investments?
> What was the asset allocation?
The Company invested at least 90% of its Net Asset Value in companies that are
positioned to contribute to, and benefit from, sustainable development. Sustainable
development is based on the Portfolio Manager's own philosophy explained in the
Company’s Investor Disclosure Document.
Investments
#1 Sustainable
90%
#2 Not sustainable
10%
Environmental
60%
Social
100%
Taxonomy-aligned
0%
Other
60%
#1 Sustainable covers sustainable investments with environmental or social objectives.
#2 Not sustainable includes investments which do not qualify as sustainable investments.
The list includes the
investments
constituting the
greatest proportion of
investments of the
financial product during
the reference period
which is: 1 February 2022
to 31 January 2023.
Asset allocation
describes the share of
investments in specific
assets.
Note: The percentages are defined and measured on the basis that each sustainable investment must
contribute to a social objective and may also contribute to an environmental objective. The percentages will
therefore not add to 100.
Template periodic disclosure for the financial products referred to in Article 9 continued
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
> In which economic sectors were the investments made?
The average holdings (excluding cash) over the reporting period in GICs sectors:
Sector % Assets*
Consumer Staples 21.5
Industrials 18.9
Information Technology 17.2
Consumer Discretionary 12.6
Financials 12.0
Health Care 8.9
Communication Services 3.2
Materials 0.2
Energy –
Real Estate –
Utilities –
Cash and cash equivalents 5.5
Total 100.0
* Calculated based on average investment as at Jan, April, July and October quarter
ends.
The Company has no direct holdings in companies materially involved in the
exploration, production or generation of fossil fuel energy.
The Portfolio Manager checks investee companies (via a third-party research
platform and on a quarterly basis) for any revenues derived from exploration, mining,
extraction, production, processing, storage, refining or distribution, including
transportation, storage and trade, of fossil fuels. They disclose any companies above
their material threshold (5% of revenues) on their website.
Additional transparency is provided by the Portfolio Manager in their annual climate
report, where they disclose companies that are providing services to the fossil fuel
industry directly or via their underlying subsidiaries.
stewartinvestors.com/all/insights/climate-report
To what extent were sustainable investments with an environmental
objective aligned with the EU Taxonomy
1
?
> Did the financial product invest in fossil gas and/or nuclear energy related
activities?
Yes
In fossil gas In nuclear energy
5
No
1
Fossil gas and/or nuclear related activities will only comply with the EU Taxonomy
where they contribute to limiting climate change ("climate change mitigation") and
do not significantly harm any EU Taxonomy objective – see explanatory notes in the
left hand margin. The full criteria for fossil gas and nuclear energy economic
activities that comply with the EU Taxonomy are laid down in Commission
Delegated Regulation (EU) 2022/1214.
To comply, with the EU
Taxonomy, the criteria
for fossil gas include
limitations on emissions
and switching to fully
renewable power or
lower-carbon fuels by
the end of 2035. For
nuclear energy, the
criteria include
comprehensive safety
and waste management
rules.
Enabling activities
directly enable other
activities to make a
substantial contribution
to an environmental
objective
Transitional activities
are economic activities
for which low-carbon
alternatives are not yet
available and that have
greenhouse gas
emission levels
corresponding to the
best performance.
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
The graphs below show in green the percentage of investments that were aligned
with the EU Taxonomy. As there is no appropriate methodology to determine the
taxonomy-alignment of sovereign bonds*, the first graph shows the Taxonomy
alignment in relation to all the investments of the financial product including
sovereign bonds, while the second graph shows the Taxonomy alignment only in
relation to the investments of the financial product other than sovereign bonds.
0%
50%
100%
OpEx
100%
100%
100%
CapEx
Turnover
1. Taxonomy-alignment of investments
including sovereign bonds*
Taxonomy-aligned investment
Other investments
0%
50%
100%
OpEx
100%
100%
100%
CapEx
Turnover
2. Taxonomy-alignment of investments
excluding sovereign bonds*
Taxonomy-aligned investment
Other investments
* For the purpose of these graphs, 'sovereign bonds' consist of all sovereign
exposures
> What was the share of investments made in transitional and enabling
activities?
The share of investments made in transitional and enabling activities for the
Company is 0%.
> How did the percentage of investments aligned with the EU Taxonomy
compare with previous reference periods?
Not applicable. This is the first year of reporting EU Taxonomy aligned
investments.
What was the share of sustainable investments with an environmental
objective that were not aligned with the EU Taxonomy?
38 companies (60%) in the Company were aligned to environmental
sustainable investments as defined by the Portfolio Manager's climate
change solutions.
What was the share of socially sustainable investments?
All companies in the Company were aligned to socially sustainable investments
as defined by the Portfolio Manager's human development pillars.
What investments were included under "not sustainable", what was
their purpose and were there any minimum environmental or social
safeguards?
The "#2 Not sustainable" assets are cash and near-cash assets held pending
investment, to meet liquidity requirements, or assets held in order to allow
efficient operational exit of positions. Cash is held by the depositary.
What actions have been taken to attain the sustainable investment objective
during the reference period?
No company is perfect and engagement and voting are key responsibilities for the
Portfolio Manager as long-term shareholders. They believe that engagement is a
means to mitigate business risks, protect against potential headwinds and improve
sustainability outcomes. Engagement is fully integrated into the responsibilities of
Taxonomy-aligned
activities are expressed
as a share of:
> turnover reflecting the
share of revenue from
green activities of
investee companies
> capital expenditure
(CapEx) showing the
green investments
made by investee
companies, e.g. for a
transition to a green
economy.
> operational
expenditure (OpEx)
reflecting green
operational activities
of investee companies.
are sustainable
investments
with an
environmental objective
that do not take into
account the criteria for
environmentally
sustainable economic
activities under the EU
Taxonomy.
Template periodic disclosure for the financial products referred to in Article 9 continued
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
the Portfolio Manager as it contributes invaluable insights into their understanding
of each company.
More information on the approach and the policy is available on the Portfolio
Manager's website:
www.stewartinvestors.com/content/dam/stewartinvestors/pdf/global/si-corporate-
engagement-policy.pdf
During the period, the Portfolio Manager met with 51% of investee companies.
All engagement starts with bottom-up analysis, with responsibility shared across the
investment team. Over the period the Portfolio Manager engaged on issues such as:
> Pollution, natural resource degradation, biodiversity and climate change–
packaging, plastic pellets, deforestation, sustainability of supply chains (soy, palm
oil and coffee), fossil fuel versus renewables, water, waste and energy efficiency.
> Aligned remuneration and incentives – living wage, gender pay gap and
complexity of incentives.
> Human rights and modern slavery – conflict minerals in the supply chains of
semiconductors, trafficking, forced labour and child labour in the Asia Pacific
region.
> Diversity, equity and inclusion – diversity, particularly gender, in senior
management and on boards.
> Addictive products – indirect exposure to tobacco and sugar content in food.
> Governance – corporate strategy and legal structure.
During the period the Portfolio Manager engaged with 74% of investee companies.
> Environmental issues 39%
> Social issues 19%
> Governance issues 42%
Engagements may relate to one or multiple environmental, social or governance issues.
Proxy voting is an extension of the Portfolio Manager's engagement activities. It is
not outsourced to an external provider or separate proxy voting/engagement team.
The Portfolio Manager considers each proxy vote individually and on its own merits
in the context of their knowledge about that particular company. A breakdown of
voting activity for the Company is detailed below.
Voting activity:
Total proposals to vote on 711
Number of meetings to vote at 110
Number of companies that held voting meetings 67
Number of votes against management proposals 15
Number of votes abstained from voting 0
Number of shareholder proposals to vote on 0
Number of shareholder proposals voted against 0
Number of shareholder proposals abstained from voting 0
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Voting rationales:
Company Proposal No. of
proposals
Voting decision
Amoy
Diagnostics
Approve Transfer of
Product Rights and Equity
Amendments to Articles
2 Against
management
recommendation
Rationale
The Portfolio Manager voted against the company's request
to transfer product rights and equity to a subsidiary, and to
amend authorised share capital, as they did not have sufficient
information at the time of voting.
Dabur Director Election 1 Against
management
recommendation
Rationale
The Portfolio Manager voted against the election of a director
as they did not believe the director was truly independent.
Foshan Haitian
Flavouring
Director Election 1 Against
management
recommendation
Rationale
The Portfolio Manager voted against the election of a director
to the supervisory board as they did not believe the director
was truly independent.
Glodon Proposal for FY2022
Employee Stock Purchase
Plan ("ESPP")
Implement Assessment
Management Plan for
FY2022 ESPP
Board Authorisation to
FY2022 ESPP
3 Against
management
recommendation
Rationale
The Portfolio Manager believes the one-year vesting periods
in the ESPP are too short-term and not in shareholders'
interests.
Hualan
Biological
Engineering
Appointment of Auditor
Director Election
3 Against
management
recommendation
Rationale
At the time of voting, the company had not disclosed a
breakdown of the fees paid to its auditor and the Portfolio
Manager did not believe the two directors to be truly
independent.
Template periodic disclosure for the financial products referred to in Article 9 continued
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Voting rationales:
Company Proposal No. of
proposals
Voting decision
Humanica
Public
Transaction of Other
Business
3 Against
management
recommendation
Rationale
The Portfolio Manager voted against the company's request
for management to approve all other business matters before
the annual general meeting (AGM) of shareholders. As an
active shareholder, the Portfolio Manager prefers to vote on
such matters at the AGM.
Pentamaster Authority to Issue Shares
w/o Pre-emptive Rights
1 Against
management
recommendation
Rationale
The Portfolio Manager voted against the company's request
to issue shares without pre-emptive rights, as the share
discount rate had not been disclosed.
Vitasoy Director Election 1 Against
management
recommendation
Rationale
The Portfolio Manager voted against the election of the
chairman of the audit committee as the committee met less
than four times during the last fiscal year.
How did this financial product perform compared to the reference sustainable
benchmark?
A sustainable benchmark has not been designated to compare the performance for
the Company.
> How did the reference benchmark differ from a broad market index?
Not applicable.
> How did this financial product perform with regard to the sustainability
indicators to determine the alignment of the reference benchmark with the
sustainable investment objective?
Not applicable.
> How did this financial product perform compared with the reference benchmark?
Not applicable.
> How did this financial product perform compared with the broad market index?
Not applicable.
Reference benchmarks
are indexes to measure
whether the financial
product attains the
sustainable objective.
!
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Shareholder
Information
Financial Calendar
31 January Financial Year End
May Final Results Announced
July Annual General Meeting
July Dividend Payable
31 July Half Year End
September Half Year Results Announced
Annual General Meeting
The Annual General Meeting of Pacific Assets Trust plc
will be held at the offices of Stewart Investors, Finsbury
Circus House, 15 Finsbury Circus, London EC2M 7EB
onMonday, 3 July 2023 at 12 noon. Please refer to the
Chairman’s Statement beginning on page 6 for details of
this year’s arrangements.
Dividend
A final dividend is paid annually following approval at the
Annual General Meeting. Shareholders who wish to have
dividends paid directly into a bank account, rather than by
cheque posted to their registered address, can complete a
mandate form for the purpose. Mandates may be obtained
from the Registrar, Equiniti Limited, on request.
Profile of the Company’s Ownership
% of shares held at 31 January 2023
Private Wealth
Managers 64.1%
Mutual Funds and
other Institutional
Investors
15.0%
Retail
Shareholders
20.9%
Source: Richard Davies Investor Relations
Share Prices
The Company’s shares are listed on the London Stock
Exchange under ‘Investment Companies’. The price is
given daily in the Financial Times and other newspapers.
Change of Address
Communications with shareholders are mailed to the
address held on the share register. In the event of a
change of address or other amendment this should be
notified to the Registrar, Equiniti Limited, under the
signature of the registered holder.
Daily Net Asset Value
The daily net asset value of the Company’s shares can be
obtained on the Company’s website at
www.pacific-assets.co.uk and is published daily via the
London Stock Exchange.
How to Vote
If you hold your shares directly you will have received a
paper proxy form. For this year’s Annual General
Meeting you should ensure that this is returned to the
Registrar, Equiniti, before 12 noon on 29 June2023.
Alternatively, you can vote online. To submit a proxy
form online, an internet-enabled PC with Internet
Explorer 4 or Netscape 4 or above is required.
Shareholders will require their Voting ID, Task ID and
Shareholder Reference Number, which can be found on
the personalised proxy form which accompanies this
report, to access this service. Before a proxy can be
appointed, shareholders will be asked to agree to the
terms and conditions for electronic proxy appointment.
The use of the electronic proxy appointment service
offered through Equiniti Limited, the Company’s
registrar, is entirely voluntary.
If you hold your shares via an investment platform or a
nominee, you should contact them to inquire about
arrangements to vote.
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
How to Invest
Retail Investors advised by IFAs
The Company currently conducts its affairs so that its
shares can be recommended by Independent Financial
Advisers (“IFAs”) in the UK to ordinary retail investors in
accordance with the Financial Conduct Authority (“FCA”)
rules in relation to non-mainstream investment products
and intends to continue to do so. The shares are excluded
from the FCA’s restrictions which apply to non-
mainstream investment products because they are
shares in an investment trust.
Equiniti – Share Dealing Service
An internet and telephone dealing service is available
through the Company’s registrar, Equiniti. This provides a
simple way for UK shareholders of Pacific Assets Trust plc
to buy or sell the Company’s shares. For full details and
terms and conditions simply log onto
www.shareview.co.uk/dealing or call 03456 037037
between 8.00am and 4.30pm Monday to Friday. This
service is only available to shareholders of Pacific Assets
Trust plc who hold shares in their own name, with a UK
registered address and who are aged 18 and over.
Shareview Dealing is provided by Equiniti Financial
Services Limited which has issued and approved the
preceding paragraph. Equiniti Financial Services Limited,
Aspect House, Spencer Road, Lancing, West Sussex BN99
6DA is registered in England and Wales with number
6208699. Equiniti Financial Services Limited is authorised
and regulated by the Financial Conduct Authority.
Investment Platforms
The Company’s shares are traded openly on the London
Stock Exchange and can be purchased through a stock
broker or other financial intermediary. The shares are
available through savings plans (including Investment
Dealing Accounts, ISAs, Junior ISAs and SIPPs) which
facilitate both regular monthly investments and lump
sum investments in the Company’s shares. There are a
number of investment platforms that offer these
facilities. The following is a list of some of them, which is
not comprehensive and does not constitute any form of
recommendation:
AJ Bell Youinvest www.youinvest.co.uk/
Barclays Stockbrokers www.smartinvestor.barclays.co.uk/
Bestinvest www.bestinvest.co.uk/
Charles Stanley Direct www.charles-stanley-direct.co.uk/
Halifax Share Dealing www.halifaxsharedealing-online.co.uk
Hargreaves Lansdown www.hl.co.uk/
HSBC www.hsbc.co.uk/investments/
products-and-services/invest-direct/
iDealing www.idealing.com/
Interactive Investor www.ii.co.uk/
IWEB www.iweb-sharedealing.co.uk/
Saxo Capital Markets www.home.saxo
Tillit www.tillitinvest.com/
WealthClub www.wealthclub.co.uk
Risk warnings
Past performance is no guarantee of future performance.
The value of your investment and any income from it may
go down as well as up and you may not get back the
amount invested. This is because the share price is
determined by the changing conditions in the relevant
stock markets in which the Company invests and by the
supply and demand for the Company’s shares. As the
shares in an investment trust are traded on a stock
market, the share price will fluctuate in accordance with
the supply and demand and may not reflect the
underlying net asset value of the shares; where the share
price is less than the underlying value of the assets, the
difference is known as the ‘discount’. For these reasons
investors may not get back the original amount invested.
Although the Company’s shares are denominated in
sterling, it may invest in stocks and shares which are
denominated in currencies other than sterling and to the
extent they do so, they may be affected by movements in
exchange rates. As a result the value of your investment
may rise or fall with movements in exchange rates.
Investors should note that tax rates and reliefs may
change at any time in the future. The value of ISA tax
advantages will depend on personal circumstances. The
favourable tax treatments of ISAs may not be
maintained.
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Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Notice of the
Annual General Meeting
Notice is hereby given that the Annual General Meeting
of Pacific Assets Trust Public Limited Company (the
“Company”) will be held at the offices of Stewart
Investors, Finsbury Circus House, 15 Finsbury Circus,
London EC2M 7EB on Monday, 3 July 2023 at 12noon
for the following purposes:
Ordinary Resolutions
To consider and, if thought fit, pass the following as
Ordinary Resolutions:
1. That the Report of the Directors and the financial
statements for the year ended 31 January 2023
together with the Report of the Auditor thereon be
received and adopted.
2. That the Directors’ Remuneration Report for the
year ended 31January 2023 (other than the part
containing the Directors’ Remuneration Policy) be
approved.
3. That the Directors’ Remuneration Policy set out on
page 58 of the Annual Report for the year ended
31January 2023 be received, adopted and approved.
4. That a final dividend for the year ended 31 January
2023 of 2.3p per share be declared.
5. That Ms M C Ginman be re-elected as a Director.
6. That Mrs S E Hansen be re-elected as a Director.
7. That Mr A M Impey be elected as a Director.
8. That Mr R E Talbut be re-elected as a Director.
9. That Mr E T A Troughton be re-elected as a Director.
10. That BDO LLP be re-appointed as Auditor to hold
office from the conclusion of the meeting to the
conclusion of the next Annual General Meeting at
which accounts are laid.
11. That the Audit Committee be authorised to
determine BDO LLP’s remuneration.
Investment Policy
12. That the proposed investment policy set out on pages
103 and 104 of the Annual Report for the year ended
31January 2023, a copy of which has been produced
to the meeting and signed by the Chairman for the
purposes of identification, be and is hereby approved
and adopted as the investment policy of the Company
in substitution for, and to the exclusion of, all previous
investment policies of the Company.
Authority to Allot Shares
13. That the Board of Directors of the Company (the
‘Board’) be and it is hereby generally and
unconditionally authorised pursuant to and in
accordance with section 551 of the Companies
Act2006 to exercise all the powers of the Company
to allot shares in the Company and to grant rights to
subscribe for or to convert any security into shares
in the Company up to an aggregate nominal amount
of £1,511,979 (or if changed, the number
representing 10% of the issued share capital of the
Company immediately prior to the passing of this
resolution on such terms as the Board may
determine) provided that this authority shall expire
at the conclusion of the Annual General Meeting of
the Company to be held in 2024 or 15 months from
the date of passing this resolution, whichever is the
earlier, unless previously revoked, varied or renewed
by the Company in general meeting and provided
that the Company may before such expiry make an
offer or enter into an agreement which would or
might require shares to be allotted, or rights to
subscribe for or to convert securities into shares to
be granted, after such expiry and the Board may
allot shares or grant such rights in pursuance of such
an offer or agreement as if the authority conferred
by this resolution had not expired.
Special Resolutions
To consider and, if thought fit, pass the following as
Special Resolutions.
Disapplication of Pre-emption
Rights
14. That, subject to the passing of resolution 13 proposed
at the Annual General Meeting of the Company
convened for 3 July 2023 (‘Resolution13’), the Board
of Directors of the Company (the ‘Board’) be and it is
hereby generally empowered pursuant to sections
570 and 573 of the Companies Act 2006 (the ‘Act’) to
allot equity securities (within the meaning of section
560 of the Act) (including the grant of rights to
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
subscribe for, or to convert any securities into,
ordinary shares of 12.5 pence each in the capital of
the Company (‘Ordinary Shares’)) for cash pursuant
to the authority conferred on them by such
Resolution 13as if section 561(1) of the Act did not
apply to any such allotment, provided that this power
shall be limitedto: the allotment of equity securities
up to an aggregate nominal amount of £1,511,979,
(orif changed, the number representing 10% of the
issued share capital of the Company immediately
prior to the passing of this resolution) and shall expire
at the conclusion of the Annual General Meeting of
the Company to be held in 2024 or 15 months from
the date of passing this resolution, whichever is the
earlier, unless previously revoked, varied or renewed
by the Company in general meeting and provided that
the Company may before such expiry make an offer
or enter into an agreement which would or might
require equity securities to be allotted after such
expiry and the Board may allot equity securities in
pursuance of such an offer or agreement as if the
authority conferred hereby had not expired.
Authority to Repurchase Shares
15. That the Company be and is hereby generally and
unconditionally authorised for the purposes of
section 701 of the Companies Act 2006 (the ‘Act’) to
make one or more market purchases (within the
meaning of section 693(4) of the Act) of ordinary
shares of 12.5pence each in the capital of the
Company (‘Ordinary Shares’) for cancellation on
such terms and in such manner as the board of
directors may determine provided that:
(i) the maximum aggregate number of Ordinary
Shares which may be purchased is 18,131,662
or, if lower, the number representing 14.99% of
the issued share capital of the Company
immediately prior to the passing of this
resolution;
(ii) the minimum price which may be paid for an
Ordinary Share is 12.5 pence (exclusive of
associated expenses);
(iii) the maximum price which may be paid for an
Ordinary Share (exclusive of associated
expenses) shall not be more than the higher of:
(a) an amount equal to 105% of the average of
the middle market quotations for an Ordinary
Share as derived from the London Stock
Exchange Daily Official List for the five dealing
days immediately preceding the day on which
the Ordinary Share is purchased; and (b) the
higher of the last independent trade and the
highest current independent bid on the London
Stock Exchange for an Ordinary Share at the
time the purchase is carried out; and
(iv) this authority shall expire at the conclusion of
the Annual General Meeting of the Company to
be held in 2024 or 15 months from the date of
passing this resolution, whichever is the earlier,
unless previously revoked, varied or renewed
by the Company in general meeting and
provided that the Company may before such
expiry enter into a contract to purchase
Ordinary Shares which will or may be
completed or executed wholly or partly after
such expiry and a purchase of Ordinary Shares
may be made pursuant to any such contract.
General Meetings
16. That any General Meeting of the Company (other
than the Annual General Meeting of the Company)
may be called by not less than 14 clear days’ notice in
accordance with the provisions of the Articles of
Association of the Company provided that the
authority shall expire on the conclusion of the next
Annual General Meeting of the Company to be held
in 2024, or, ifearlier, on the expiry 15 months from
the date of the passing of this resolution.
Directors’ Remuneration
17. That the limit in the Company’s Articles of
Association on the aggregate annual remuneration
payable to the Directors be increased from
£250,000 to £300,000 with immediate effect.
By order of the Board Registered office
16 Charlotte Square
Edinburgh
EH2 4DF
Frostrow Capital LLP
Company Secretary
9 May 2023
100
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Notice of the Annual General Meeting continued
Notes
1. If you wish to attend the Annual General Meeting in
person, you should arrive at the venue for the
Annual General Meeting in good time to allow your
attendance to be registered. It is advisable to have
some form of identification with you as you may be
asked to provide evidence of your identity to the
Company’s registrar, Equiniti Limited (the
‘Registrar’), prior to being admitted to the Annual
GeneralMeeting.
2. Members are entitled to appoint one or more
proxies to exercise all or any of their rights to attend,
speak and vote at the Annual General Meeting.
Aproxy need not be a member of the Company but
must attend the Annual General Meeting to
represent a member. To be validly appointed a proxy
must be appointed using the procedures set out in
these notes and in the notes to the accompanying
proxyform.
If members wish their proxy to speak on their behalf
at the meeting, members will need to appoint their
own choice of proxy (not the chairman of the Annual
General Meeting) and give their instructions directly
to them.
Members can only appoint more than one proxy
where each proxy is appointed to exercise rights
attached to different shares. Members cannot
appoint more than one proxy to exercise the rights
attached to the same share(s). If a member wishes
to appoint more than one proxy, they should
contact the Registrar on +44 (0)371 384 2466.
Lines are open between 8.30 am and 5.30 pm,
Monday to Friday (excluding public holidays in
England and Wales).
A member may instruct their proxy to abstain from
voting on any resolution to be considered at the
meeting by marking the abstain option when
appointing their proxy. It should be noted that an
abstention is not a vote in law and will not be
counted in the calculation of the proportion of votes
“for” or “against” the resolution.
The appointment of a proxy will not prevent a
member from attending the Annual General
Meeting and voting in person if he or she wishes.
A person who is not a member of the Company but
who has been nominated by a member to enjoy
information rights does not have a right to appoint
any proxies under the procedures set out in these
notes and should read note 9 overleaf.
3. A proxy form for use in connection with the Annual
General Meeting is enclosed. To be valid any proxy
form or other instrument appointing a proxy, together
with any power of attorney or other authority under
which it is signed or a certified copy thereof, must be
received by post or (during normal business hours only)
by hand by the Registrar at Equiniti Limited,
AspectHouse, Spencer Road, Lancing, West Sussex
BN99 6DA no later than 48 hours (excluding
non-working days) before the time of the Annual
General Meeting or any adjournment of that meeting.
If you do not have a proxy form and believe that you
should have one, or you require additional proxy
forms, please contact the Registrar on +44 (0)371
3842466. Other service providers’ costs may vary.
Lines are open between 8.30 am and 5.30 pm,
Monday to Friday (excluding public holidays in
England and Wales).
4. CREST members who wish to appoint a proxy or
proxies through the CREST electronic proxy
appointment service may do so by using the
procedures described in the CREST Manual and by
logging on to the following website:
www.euroclear.com. CREST personal members or
other CREST sponsored members, and those
CREST members who have appointed (a) voting
service provider(s), should refer to their CREST
sponsor or voting service provider(s) who will be
able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made
using the CREST service to be valid, the appropriate
CREST message (a “CREST Proxy Instruction”) must be
properly authenticated in accordance with Euroclear
UK & International Limited’s specifications, and must
contain the information required for such instruction, as
described in the CREST Manual. The message,
regardless of whether it constitutes the appointment of
a proxy or is an amendment to the instruction given to a
previously appointed proxy, must in order to be valid, be
transmitted so as to be received by the Registrar
(IDRA19) no later 48 hours (excluding non-working
days) before the time of the Annual General Meeting or
any adjournment of that meeting. For this purpose, the
time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by
the CREST Application Host) from which the Registrar is
able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time any
change of instructions to proxies appointed through
CREST should be communicated to the appointee
through other means.
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Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
CREST members and, where applicable, their CREST
sponsors or voting service provider(s) should note
that Euroclear UK & International Limited does not
make available special procedures in CREST for any
particular message. Normal system timings and
limitations will, therefore, apply in relation to the
input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to
take (or, if the CREST member is a CREST personal
member, or sponsored member, orhas appointed
(a)voting service provider(s), to procure that his
CREST sponsor or voting service provider(s) take(s))
such action as shall be necessary to ensure that a
message is transmitted by means of the CREST
system by any particular time. In this connection,
CREST members and, where applicable, their CREST
sponsors or voting system providers are referred,
inparticular, to those sections of the CREST Manual
concerning practical limitations of the CREST
system and timings.
The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001.
5. If you are an institutional investor you may be able to
appoint a proxy electronically via the Proxymity
platform, a process which has been agreed by the
Company and approved by the Registrar. For further
information regarding Proxymity, please go to www.
proxymity.io. Your proxy must be lodged by
12.00noon on 29 June 2023 in order to be
considered valid. Before you can appoint a proxy via
this process you will need to have agreed to
Proxymity’s associated terms and conditions. It is
important that you read these carefully as you will
be bound by them and they will govern the
electronic appointment of your proxy.
6. In the case of joint holders, where more than one of
the joint holders purports to appoint one or more
proxies, only the purported appointment submitted
by the most senior holder will be accepted. Seniority
is determined by the order in which the names of the
joint holders appear in the Company’s register of
members in respect of the joint holding (the first
named being the most senior).
7. Any corporation which is a member can appoint one
or more corporate representatives. Members can
only appoint more than one corporate
representative where each corporate representative
is appointed to exercise rights attached to different
shares. Members cannot appoint more than one
corporate representative to exercise the rights
attached to the same share(s).
8. To be entitled to attend and vote at the Annual
General Meeting (and for the purpose of
determining the votes they may cast), members must
be registered in the Company’s register of members
at 6.30 p.m. on 29 June 2023 (or, if the Annual
General Meeting is adjourned, at 6.30 p.m. on the
day two working days prior to the adjourned
meeting). Changes to the register of members after
the relevant deadline will be disregarded in
determining the rights of any person to attend and
vote at the Annual General Meeting.
9. Any person to whom this notice is sent who is a
person nominated under section 146 of the
Companies Act 2006 (the “Act”) to enjoy information
rights (a “Nominated Person”) may, under an
agreement between him/her and the member by
whom he/she was nominated, have a right to be
appointed (or to have someone else appointed) as a
proxy for the Annual General Meeting. If a
Nominated Person has no such proxy appointment
right or does not wish to exercise it, he/she may,
under any such agreement, have a right to give
instructions to the member as to the exercise of
voting rights.
10. Information regarding the Annual General Meeting,
including information required by section 311A of
the 2006 Act, and a copy of this notice of Annual
General Meeting, is available from
www.pacific-assets.co.uk.
11. Members should note that it is possible that, pursuant
to requests made by members of the Company under,
and meeting the threshold requirements in, section527
of the Act, the Company may be required to publish
on a website a statement setting out any matter
relating to: (a) the audit of the Company’s accounts
(including the auditor’s report and the conduct of the
audit) that are to be laid before the Annual General
Meeting; or (b) any circumstance connected with an
auditor of the Company ceasing to hold office since
the previous meeting at which annual accounts and
reports were laid in accordance with section 437 of
the Act. The Company may not require the members
requesting any such website publication to pay its
expenses in complying with sections 527 or 528 of the
Act. Where the Company is required to place a
statement on a website under section 527 of the Act,
it must forward the statement to the Company’s
auditor not later than the time when it makes the
statement available on the website. The business
which may be dealt with at the Annual General
Meeting includes any statement that the Company
has been required under section 527 of the Act to
publish on a website.
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Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
12. As at 8 May 2023 (being the latest practicable date
prior to the publication of this notice) the Company’s
issued share capital consisted of 120,958,386
ordinary shares carrying one vote each (and no
shares were held in Treasury). Accordingly, the total
voting rights in the Company at 8 May 2023 were
120,958,386 votes.
13. Any person holding 3% or more of the total voting
rights of the Company who appoints a person other
than the chairman of the Annual General Meeting as
her/she proxy will need to ensure that both he/she,
and his/her proxy, comply with their respective
disclosure obligations under the UK Disclosure
Guidance and Transparency Rules.
14. Under section 319A of the Act, the Company must
cause to be answered any question relating to the
business being dealt with at the Annual General
Meeting put by a member attending the meeting
unless answering the question would interfere
unduly with the preparation for the meeting or
involve the disclosure of confidential information, or
the answer has already been given on a website in
the form of an answer to a question, or it is
undesirable in the interests of the Company or the
good order of the meeting that the question be
answered.
Members who have any queries about the Annual
General Meeting should contact Frostrow Capital
LLP, the Company Secretary, at 25 Southampton
Buildings, London WC2A 1AL or info@frostrow.com.
Members may not use any electronic address
provided in this notice or in any related documents
(including the accompanying proxy form) to
communicate with the Company for any purpose
other than those expressly stated.
15. The following documents will be available for
inspection at the offices of Frostrow Capital LLP,
25Southampton Buildings, London WC2A 1AL
during normal business hours on any weekday
(Saturdays, Sundays and English public holidays
excepted) from the date of this notice and at the
venue of the Annual General Meeting from 9.45 a.m.
on the day of the Annual General Meeting until the
conclusion of the Annual General Meeting:
15.1 copies of the Directors’ letters of appointment;
and
15.2 copies of the Directors’ deeds of indemnity.
16. Under section 338 and section 338A of the Act,
members meeting the threshold requirements in
those sections have the right to require the
Company (i) to give, to members of the Company
entitled to receive notice of the meeting, notice of a
resolution which may properly be moved and is
intended to be moved at the meeting; and/or (ii) to
include in the business to be dealt with at the
meeting any matter (other than a proposed
resolution) which may be properly included in the
business. A resolution may properly be moved or a
matter may properly be included in the business
unless (a) (in the case of a resolution only) it would, if
passed, be ineffective (whether by reason of
inconsistency with any enactment or the Company’s
constitution or otherwise), (b) it is defamatory of any
person, or (c) it is frivolous or vexatious. Such a
request may be in hard copy form or in electronic
form, must identify the resolution of which notice is
to be given or the matter to be included in the
business, must be authenticated by the person or
persons making it, must be received by the Company
not later than 22 May 2023, being the date six clear
weeks before the meeting, and (inthe case of a
matter to be included on the business only) must be
accompanied by a statement setting out the grounds
for the request.
17. In accordance with the Articles, the Company may
impose restrictions on shareholders wishing to
attend the AGM. Such restrictions may include
limiting the number of shareholders permitted to
attend the AGM in person. Other restrictions may
be imposed as the chairman of the meeting may
specify in order to ensure the safety of those
attending the AGM.
Notice of the Annual General Meeting continued
103
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Explanatory Notes to
the Resolutions
Resolution 1 – To receive and adopt the Report of the
Directors and the Financial Statements
The Report of the Directors and the financial statements
for the year ended 31 January 2023 will be presented to
the AGM. These accounts accompany this Notice of
Meeting and shareholders will be given an opportunity
to ask questions at the meeting.
Resolutions 2 and 3 – Remuneration Report and Policy
It is mandatory for all listed companies to put their report
on Directors’ remuneration to an advisory shareholder vote
every year and their remuneration policy to a binding
shareholder vote every three years. As shareholders are
being asked to approve the Remuneration Policy this year, it
is anticipated that the Remuneration Policy will next be put
to shareholders at the AGM in 2026.
The Directors’ Remuneration Report is set out in full on
pages 56 to 58 and the Remuneration Policy is set out on
page58.
Resolution 4 – Declaration of a Final Dividend for the
year ended 31 January 2023
Resolution 4 seeks shareholder approval for the
declaration of a final dividend of 2.3p per share for the
year ended 31January 2023.
Resolutions 5 to 9 – Election and Re-election of
Directors
Resolutions 5 to 9 deal with the election/re-election of
each Director. Biographies of each of the Directors and
details of their specific contribution to the Board, can be
found on pages 34 and 35.
The Board has confirmed, following a performance
review, that the Directors standing for election and
re-election continue to perform effectively.
Resolutions 10 and 11 – Re-appointment of Auditor
and the determination of its remuneration
Resolutions 10 and 11 relate to the re-appointment of
BDO LLP as the Company’s independent Auditor to hold
office until the next AGM and also authorise the Audit
Committee to set their remuneration.
Resolution 12 – Investment Policy
The Board is proposing to formalise in the investment
policy an internal limit that was agreed with the Portfolio
Manager during the year, to limit exposure to a single
country or jurisdiction to 45% of total assets at the time
of investment and obliges the Portfolio Manager to seek
to rebalance the portfolio if exposure to any one
jurisdiction reaches 49% of total assets at any time. The
proposed amendment has been approved in principle by
the Financial Conduct Authority in accordance with the
requirements of the Listing Rules. Please refer to the
Chairman’s Statement beginning on page 6 for further
information. Any future material changes to the
Company’s investment policy will also require the prior
approval of both the FCA and shareholders. The full text
of the proposed Investment Policy is set out below:
Proposed Investment 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.
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Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Explanatory Notes to the Resolutions continued
Nomore than 45 per cent. 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 49per
cent. at any time, the AIFM and the Portfolio Manager
should, 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 is15%.
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.
Resolutions 13 and 14 – Issue of Shares
Resolution 13 in the Notice of Annual General Meeting
will renew the authority to allot share capital up to an
aggregate nominal amount of £1,511,979 (equivalent to
12,095,838 shares or 10% of the Company’s existing
issued share capital on 8May 2023, being the nearest
practicable date prior to the signing of this Report or, if
changed, the number representing 10% of the issued
share capital of the Company immediately prior to the
passing of this resolution). Such authority will expire on
the date of the next AGM or after a period of 15 months
from the date of the passing of the resolution, whichever
is earlier. This means that the authority will have to be
renewed at the next AGM.
When shares are to be allotted for cash, Section 561 of
the Companies Act 2006 (the “Act”) provides that
existing shareholders have pre-emption rights and that
the new shares must be offered first to such
shareholders in proportion to their existing holding of
shares. However, shareholders can, by special resolution,
authorise the Directors to allot shares otherwise than by
a pro rata issue to existing shareholders. Resolution 14
will, if passed, give the Directors power to allot for cash
equity securities up to 10% of the Company’s existing
share capital on 8 May 2023, or, if changed, the number
representing 10% of the issued share capital of the
Company immediately prior to the passing of this
resolution as if Section 551 of the Act does not apply.
This is the same nominal amount of share capital which
the Directors are seeking the authority to allot pursuant
to Resolution13. This authority will also expire on the
date of the next AGM or after a period of 15 months,
whichever is earlier. This authority will not be used in
connection with a rights issue by the Company.
The Directors intend to use the authority given by
Resolutions 13 and 14 to allot shares and disapply
pre-emption rights only in circumstances where this will
be clearly beneficial to shareholders as a whole. The
issue proceeds would be available for investment in line
with the Company’s investment policy. No issue of shares
will be made which would effectively alter the control of
the Company without the prior approval of shareholders
in general meeting.
Shares will only be issued at a premium to the Company’s
cum income net asset value per share at the time of issue.
Resolution 15 – Repurchase of Shares
The Directors wish to renew the authority given by
shareholders at the previous AGM. The principal aim of a
share buy-back facility is to enhance shareholder value by
acquiring shares at a discount to net asset value, as and
when the Directors consider this to be appropriate.
Thepurchase of shares, when they are trading at a
discount to the net asset value per share, should result in
an increase in the net asset value per share for the
remaining shareholders. This authority, if conferred, will
only be exercised if to do so would result in an increase in
the net asset value per share for the remaining
shareholders and if it is in the best interests of
shareholders generally. Any purchase of shares will be
made within guidelines established from time to time by
the Board. It is proposed to seek shareholder authority to
renew this facility for another year at the AGM.
Under the current Listing Rules, the maximum price that
may be paid on the exercise of this authority must not
exceed the higher of (i) 105% of the average of the
middle market quotations for the shares over the
fivebusiness days immediately preceding the date of
purchase and (ii) the higher of the last independent trade
and the highest current independent bid on the trading
venue where the purchase is carried out. The minimum
price which may be paid is 12.5p per share. Shares which
are purchased under this authority will be cancelled.
Special Resolution 15 in the Notice of AGM will renew
the authority to purchase in the market a maximum of
14.99% of shares in issue on 8 May 2023, being the
nearest practicable date prior to the signing of this
105
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Report, (amounting to 18,131,662 shares or, if less, the
number representing 14.99% of the issued share capital
of the Company immediately prior to the passing of this
resolution). Such authority will expire on the date of the
next Annual General Meeting or after a period of
15months from the date of passing of the resolution,
whichever is earlier. This means that the authority will
have to be renewed at the next AGM or earlier if the
authority has been exhausted.
Resolution 16 – General Meetings
Special Resolution 16 seeks shareholder approval for the
Company to hold General Meetings (other than the
AGM) on at least 14 clear days’ notice. The Company will
only use this shorter notice period where it is merited by
the purpose of the meeting.
Resolution 17 – Directors’ Remuneration Limit
Special Resolution 17 seeks shareholder permission to
increase the limit in the Company’s Articles of
Association on the aggregate fees that may be paid to the
directors’ from £250,000 to £300,000 per annum. If the
resolution is passed, the aggregate annual remuneration
of the Directors will remain within the current limit of
£250,000 for the time being, however the increased limit
will provide for moderate adjustments that may be
necessary in subsequent years, including the recruitment
of future directors, and will provide a contingency for any
additional fees associated with non-routine business.
Recommendation
The Board considers that the resolutions detailed above
are in the best interests of shareholders as a whole.
Accordingly, the Board unanimously recommends to the
shareholders that they vote in favour of the above
resolutions to be proposed at the forthcoming AGM as
the Directors intend to do in respect of their own
beneficial holdings totalling 123,637 shares.
How to Vote
Please submit your votes by proxy using one of the
following methods:
> Electronically using: www.sharevote.co.uk;
> Submitting a paper proxy form;
> CREST members may use the CREST electronic
proxy appointment service;
> Institutional investors may also be able to appoint a
proxy electronically via the Proxymity Platform
www.proxymity.io; or
> If you hold your shares through a nominee or
investment platform, please contact them to enquire
about voting arrangements.
106
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Directors
J P Williams (Chairman)
1
M C Ginman, FCA
2
S E Hansen
3
A M Impey
R E Talbut
4
E T A Troughton
1
Chair of the Nomination Committee
2
Chair of the Audit Committee
3
Chair of the Engagement & Remuneration Committee
4
Senior Independent Director
Registered Office
16 Charlotte Square
Edinburgh EH2 4DF
Website: www.pacific-assets.co.uk
Company Registration Number
SC091052 (Registered in Scotland)
The Company was incorporated in Scotland on
21 December 1984. The Company was incorporated
asPacific Assets Trust Public Limited Company.
Portfolio Manager
Stewart Investors
23 St. Andrew Square
Edinburgh EH2 1BB
Telephone: 0131 473 2200
Website: www.stewartinvestors.com
Authorised and regulated by the Financial Conduct
Authority.
Alternative Investment
Fund Manager
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
Telephone: 0203 008 4910
Email: info@frostrow.com
Website: www.frostrow.com
Authorised and regulated by the
Financial Conduct Authority.
Custodian
J.P. Morgan Chase Bank
25 Bank Street, Canary Wharf
London, E14 5JP
United Kingdom
Depositary
JP Morgan Europe Limited
25 Bank Street
London E14 5JP
Independent Auditor
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
Company
Information
107
Further Information
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Shareholder Helpline: +44 (0)371 384 2466*
Broker Helpline: 0906 559 6025*
For deaf and speech impaired customers, we welcome
calls via Relay UK. Please see www.relayuk.bt.com for
more information.
* Lines open 8.30 a.m. to 5.30 p.m., Monday to Friday
(excluding public holidays in England and Wales).
Notifications of changes of address and enquiries
regarding share certificates or dividend cheques should
be made in writing to the Registrar quoting your
shareholder reference number. Registered shareholders
can obtain further details of their holdings on the
internet by visiting www.shareview.co.uk
Broker
Investec Bank plc
30 Gresham Street
London EC2V 7QP
Solicitors
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
Identification Codes
Shares: SEDOL: 0667438
ISIN: GB0006674385
Bloomberg: PAC LN
EPIC: PAC
Global Intermediary Identification
Number (GIIN)
MAEPFZ.99999.SL.826
Legal Entity Identifier (LEI)
2138008U8QPGAESFYA48
Avoid investment fraud
1 Reject cold calls
If you’ve received unsolicited contact about
an investment opportunity, chances are
it’s a high risk investment or a scam. You
should treat the call with extreme caution.
The safest thing to do is to hang up.
2 Check the FCA Warning List
The FCA Warning List is a list of firms and
individuals we know are operating without
our authorisation.
3 Get impartial advice
Think about getting impartial financial
advice before you hand over any money.
Seek advice from someone unconnected to
the firm that has approached you.
Report a Scam
If you suspect that you have been
approached by fraudsters please tell the
FCA using the reporting form at
www.fca.org.uk/consumers/report-
scam-unauthorised-firm. You can also call
the FCA Consumer Helpline on
0800 111 6768
If you have lost money to investment fraud,
you should report it to Action Fraud on
0300 123 2040 or online at
www.actionfraud.police.uk
Find out more at
www.fca.org.uk/scamsmart
Investment scams are
designed to look like
genuine investments
Spot the warning signs
Have you been:
• contacted out of the blue
• promised tempting returns
and told the investment is safe
• called repeatedly, or
• told the offer is only available
for a limited time?
If so, you might have been
contacted by fraudsters.
Remember: if it sounds too
good to be true, it probably is!
Be ScamSmart
Contents
Strategic Report
1 Financial Highlights
2 Key Information
3 Company Performance
6 Chairman’s Statement
10 Investment Portfolio
13 Portfolio Manager’s Review
18 Sustainability and ESG
22 Business Review
Governance
34 Board of Directors
36 Corporate Governance
44 Report of the Directors
49 Statement of Directors’ Responsibilities
51 Audit Committee Report
56 Directors’ Remuneration Report
59 Independent Auditor’s Report
Financial Statements
66 Income Statement
67 Statement of Changes in Equity
68 Statement of Financial Position
69 Notes to the Financial Statements
Further Information
79 Glossary of Terms and Alternative Performance
Measures (unaudited)
82 Sustainable Finance Disclosure
Regulation (“SFDR”) Report (unaudited)
96 Shareholder Information
97 How to Invest
98 Notice of the Annual General Meeting
103 Explanatory Notes to the Resolutions
106 Company Information
The photograph on the front cover depicts Chinese lanterns in Hoi An, Vietnam
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Pacific Assets Trust plc Annual Report for the year ended 31 January 2023
Contact details
Pacific Assets Trust plc
25 Southampton Buildings
London
WC2A 1AL
www.pacific-assets.co.uk
Pacific Assets Trust plc
Annual Report for the year ended 31 January 2023
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