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This report has been produced using Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 vegetable based inks. ## 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 ## 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 ### Strategic Report ## 1 ## Financial ## Highlights | 5.7% | | | | 5.9% | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Net asset value per share total return*^ | | | | Share price total return*^ | | | | | 2023 | 1 | 5.7% | | 2023 | 1 | | 5.9% | | 2022 | 2 | | | 2022 | 2 | | | | | | | 9.1% | | | 2.9% | | ## 10.1% | 17.3% | | | | | Average discount of share price to net asset value | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 3 | | per share during the year*^ | | | | | UK Consumer Price Index (“CPI”) + 6% | | | † | | | | | | | | 1 | | | | 2023 | 1 | | 10.1% | | 2023 | | | | 17.3% | | | | | | | 2 | | | | 2022 | 2 | | | | 2022 | | 11.5% | | | | | 7.3% | | ## (2.2)% | MSCI All Country Asia ex Japan Index (total return | | | | | 1.1% | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | sterling adjusted)* | | | | | | | | | 3 | | | | | | | Ongoing charges | | | | ^ | | | | | 2023 | 1 | | | 1 | | | | | | (2.2)% | | | | 2023 | | 1.1% | | | 2022 | 2 | | | | | | 2 | | | | | | | (9.2%) | | | 2022 | | 1.1% | | 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 ƐƕƏ ƳѵѷŐѵƒĺƒѷő ƐѵƏ ƐƔƏ -1bC1vv;|v(ŐƔƑĺƖѷő ƐƓƏ -1bC1vv;|v"_-u;ub1;ŐƓƕĺƏѷő ƐƒƏ ;;uuor;u-];(ŐƒѶĺƑѷő ƐƑƏ ƐƐƏ "vb-;-r-mŐƐƑĺƔѷő ƐƏƏ ƖƏ ѶƏ -m -u - Ѵ ";r o -m -u - Ѵ ";r o -m -u - Ѵ ";r o -m -u - Ѵ ";r o -m -u - Ѵ ";r o -m ƐѶ ƐѶ ƐѶ ƐѶ ƐѶ ƐѶ ƐƖ ƐƖ ƐƖ ƐƖ ƐƖ ƐƖ ƑƏ ƑƏ ƑƏ ƑƏ ƑƏ ƑƏ ƑƐ ƑƐ ƑƐ ƑƐ ƑƐ ƑƐ ƑƑ ƑƑ ƑƑ ƑƑ ƑƑ ƑƑ Ƒƒ Source: Morningstar. Rebased to 100 as at 31 January 2018 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 2 Strategic Report ## Key Information ### 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 (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. ### Management Investment Philosophy Stewart Investors have been the Company’s Portfolio The foundations of Stewart Investors’ investment Manager since 1 July 2010. They adopt a sustainable philosophy and approach remain largely unchanged since investment strategy in selecting the investments that make 1988 and since their first dedicated sustainability up the Company’s portfolio. They operate through the strategy was launched in 2005. regulatory licences of First Sentier Investors (UK) IM The Stewart Investors investment philosophy is Limited, which is the legal entity appointed as the summarised below: Company’s Portfolio Manager. Their ultimate owner is the Mitsubishi UFJ Trust and Banking Corporation. > They are stewards. They believe their role is to allocate society’s capital to productive uses, Frostrow Capital LLP is the Company’s Alternative 1 inaccordance with their Hippocratic Oath . Investment Fund Manager (“AIFM”). > They are long-term investors. Their time horizon is ### Investment Aims measured in years, not weeks, and they value Stewart Investors aim to generate strong long-term, companies accordingly. risk-adjusted returns by investing in the shares of > They invest only in companies they believe are high-quality companies that are particularly well contributing to a more sustainable future. They positioned to contribute to and benefit from sustainable engage constructively as owners to help companies development in the Asia Pacific Region. Sustainability is on their sustainability journeys. fully integrated into the management of risk and return. The team seeks to improve sustainable outcomes by > They invest only in high-quality companies. avoiding businesses linked to harmful activities, investing Theyinvest in companies with exceptional cultures, in companies contributing to solutions, and engaging and strong franchises and resilient financials. voting for positive change. > 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 3 ## Company ## Performance ### 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 1 2 | Share price total return | 5.9% 2.9% | | | --- | --- | --- | | | | 1 2 | | Net asset value per share total return | | 5.7% 9.1% | 3 CPI +6% 17.3% 11.5% 1 MSCI All Country Asia ex Japan Index total return, sterling adjusted (2.2)% (9.2)% 1 2 Average discount of share price to net asset value per share 10.1% 7.3% 2 Ongoing charges 1.1% 1.1% 4 Revenue return per share 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) ƒѶƏ ƒƒƏ -1bC1vv;|v"_-u;ub1;ŐƑƕƓĺƔѷő ƑѶƏ -1bC1vv;|v(ŐƑƕƏĺƑѷő ;;uuor;u-];(ŐƑƐƏĺѶѷő ƑƒƏ ƳѵѷŐƐƖƖĺƕѷő ƐѶƏ "vb-;-r-mŐƐƒƓĺƕѷő ƐƒƏ ѶƏ -mŊƐƔmŊƐƏ -mŊƑƏ -mŊƐѵ-mŊƐƕ-mŊƐѶ-mŊƐƖ-mŊƐƑ-mŊƐƐ-mŊƐƓ-mŊƐƒ -mŊƑƐ-mŊƑƑ Source: Morningstar. Rebased to 100 as at 30 June 2010 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 4 Strategic Report Company Performance continued ## 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") plus 6%, 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 page 13 and details of the Key Performance Indicators begin on page 23. ## Peer Group NAV per Share Total Return | | 1 Year £ | Rank | 3 years £ | Rank | 5 years £ | 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) Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 5 ### Five Year Record - Net Asset Value Per Share, Share Price and Discount                          1$9SHUVKDUHDVDWWKH\HDUHQGOHIWD[LV 6KDUH3ULFHDVDWWKH\HDUHQGOHIWD[LV $YHUDJHGLVFRXQWIRUWKH\HDUULJKWD[LV Source: Morningstar. Data for Pacific Assets Trust plc as at 31 January. ### Five Year Record – Dividend and Costs               SHQFH  SHQFH         'LYLGHQGSHQFHSHUVKDUHOHIWD[LV 2QJRLQJ&KDUJHVULJKWD[LV Source: Frostrow. Data for Pacific Assets Trust plc as at 31 January. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 6 Strategic Report ## Chairman’s ## Statement We have seen confiscation of have become so dominant economically and politically in the central bank reserves, the Asia Pacific region, as have their stock markets. The Trust’s freezing of stock markets and portfolio is built from the bottom up which will of course the impounding of luxury yachts remain the case, but the limit prevents there being and assets belonging to nationals accidental overload in a country possibly exposing our of an unfavoured country. We shareholders to higher political risk. can argue that Russia is The Board is proposing to shareholders at the forthcoming exceptional and that our Annual General Meeting (“AGM”) that this limit be formalised well-managed Asian markets would never be forced to as part of the Company’s investment policy. Further succumb to such international pressure. Yet it wasn’t so information can be found on pages 98 to 105 of this report. long ago that mainstream investors were being encouraged to have some diversification into Russia, so ### Outcomes in the Year blessed with energy and other resources with its The detailed performance data is to be found on page 3 of technically literate, educated young millennials. this report. In absolute terms, Pacific Assets was the only It is not my intention from my vantage point of chairing member of its peer group of Asian investment trusts to this Trust to alarm our shareholders. However, one of the produce an increase in value for its shareholders, with a rise more significant developments in recent years has been of 5.7%. While this is satisfactory, the Trust failed to achieve the weaponisation of the dollar and other Western its performance objective of exceeding UK CPI plus 6% currencies, and that it has become seemingly legitimate (+17.3%). We have noted in the past that the Trust, under the to seize the assets of a country that has crossed a line of management of Stewart Investors, tends to be able to ride political respectability. It can be argued that it was ever out difficult markets, and this is again vindicated in absolute thus in emerging markets, but we have seen global terms by the outcome of the last 12 months. polarisation on a somewhat different scale exacerbated To look a little at the longer term, the annualised NAV by the Ukrainian war. In short, the nature of ‘country risk’ return of the Trust (and the corresponding CPI plus 6% has altered in the last 12 months. figure in parantheses) is 11.9% over 3 years (11.9%), 8.8% However, in the end we must do our job in optimising over 5years (10.3%), and 10.9% since Stewart Investors returns from investing in these vibrant Asian countries. began to manage the Trust in June 2010 (9.1%). You, as shareholders, must consider the exposure that you It is also worth looking at the MSCI AC Asia ex Japan should have in a part of the world that provides you with Index (the “Index”) over the longer periods. It is something different from what can be found at home. interesting to see how the Index has lagged active We are usually agnostic about politics, domestic and global, managers over both long and short periods. This is an but we have taken note by introducing a new line of control. unusual phenomenon in that most market indices, Pacific Assets belies its name by having high exposure to especially in developed markets, tend to be very difficult India, something which has been helpful to returns in this to overcome. Managers, if they care to do so, can make difficult last year. During the year, the Board agreed with the quite significant choices as to how they differ from the Portfolio Manager the introduction of an upper limit to Index within Asia, either by not including some of the weighting in any one country. In particular, no more than larger components (Chinese internet stocks, for 45% of the Company’s total assets may be invested in any instance) or by accentuating positions in one country or one country at the time of investment and the Portfolio another. As the last year has shown, correlations manager shall seek to rebalance the portfolio if any country between the two major markets (China and India) can fall accounts for 49% of total assets at any time. India and China to very low levels. Whatever means you use to analyse Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 7 this, it is rather heartening if you philosophically believe business. In India, on the other hand, there is a surprising in the powers of active management over passive, and in depth of able companies that display the kind of positive good stock picking, to find that Asia can still be rewarding impacts that increasingly investors are looking for. Two of in relative terms. our three largest holdings, Tube Investments and CG Power (together 12.5% of the portfolio) have been Less so, perhaps, in absolute terms. Both the United outstanding under the stewardship of the Murugappa States and Europe over the last five years have produced family, first recognised by Stewart Investors 12 years ago. better annualised returns than Asia as a whole. Attempts to explain this could dominate the rest of this Chairman’s ### Company Balance Sheets and statement but suffice to say that Asia Pacific markets ### Gearing have not delivered the premium return over developed To begin with, our Portfolio Manager believes that the markets that the asset allocation models suggest should cleaner the balance sheet, the more resilient the be normal. business in tough times. This does not mean to say that ### Impact only debt free businesses are owned in the Trust’s It has been rather bewildering to be associated with portfolio, but financial vulnerability must be kept to a Pacific Assets Trust these past ten years, to see the minimum. The longer standing businesses in Asia, investment industry become fixated on ‘sustainability’. It especially those controlled by multi-generation families, almost suggests that there is a choice once you have will have seen economic, political, and military excluded the polluters as to whether you invest in a clean turbulence far beyond our own experience in the West. manner or not. Those of you who have met our portfolio Take, for example, the Lee family who founded Oversea- managers will be only too aware that they simply do not Chinese Banking Corporation in Singapore in the early understand whether there should be a distinction or not. 1930s, who still manage a forward looking but Sustainable investing is embedded in their psyche and conservative leaning bank today. It remains one of the must be for any new member joining their team. Hence Trust’s largest holdings. the somewhat confused look when someone asks Investors may be preoccupied in trying to second guess whether they are ESG compliant, or how they can be the world’s central banks. However, an over-arching accredited as a sustainable investor by an algorithm that question is what happens further on in this cycle. The is fed by multiple choice answers. longer-term effect of more than a decade of zero or When the Board visits an Asian country with the negative interest rates is still not really understood. Portfolio Manager, we participate in an intense Within the Asian region, there are questions about the programme of company meetings. When meeting one of economic sustainability of an indebted China, with its the world’s largest semiconductor manufacturers, the shadow banking system seemingly supported by a questions were not about earnings growth, but about the network of state inspired safety nets. Is the assumption use of conflict minerals in the supply chain and their correct that we must return to negligible interest rates excessive consumption of fresh water. In India, we have everywhere, with all the effects of supporting zombie met senior board members where the questions are companies and entrenching the misallocation of capital? about their personal journey and about the fit of Financial engineering may have distorted true professional managers with the company’s founders. I profitability amongst more unscrupulous companies. Off should add that the spreadsheet with the numbers is balance sheet finance is another unknown. there as well, but the criteria applied are distinctly I have talked about sustainability, a hard to define long-term in their nature. concept. Similarly, ‘quality’ is another which cannot easily The large weighting in Indian companies and the or neatly be defined. Looking forward as the post relatively light weighting in China does not result from Covid-19 interest rate cycle unravels, and with it, some strategic decision. It comes down to the availability hopefully but not with any certainty, inflation, we may of companies that meet the criteria of good governance. not quickly return to a low-risk world that many A few years ago in Shanghai, we visited some interesting investors expect. Financial sustainability is an important companies with the Portfolio Manager which appeared to aspect of the portfolio of Asian companies that the Trust show considerable potential. Hardly any of these ended holds. It also goes some way to answering the question up in Pacific Assets’ portfolio, with too many having about how the downside is protected during difficult dubious association with government agencies, or markets such as the last year. alternatively they had unexpectedly diversified into an There is linkage here to the use of leverage within the area that bore no relationship to the company’s core Trust’s portfolio. Gearing can be a differentiating factor Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 8 Strategic Report Chairman's Statement continued 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 9 development in the Asia Pacific Region. Given this ### The Outlook long-standing sustainable investment strategy, the Our investment universe covers an area that contains Company will seek to comply with, and report against, a over 60% of the world’s population, and an ever growing high standard of sustainability disclosures under the UK proportion of global GDP. Generalising about such SDR once the categorisations and requirements of this varied countries is always hazardous, which makes regime have been confirmed. Although it is not currently predicting the short-term future hard. However, we note expected that the UK SDR will change Stewart Investors’ that the anxieties about interest rates, inflation, and strategy in managing the Company’s portfolio, the Board financial accidents seem to diminish the further you notes that the Company’s investment objective and move away from the developed world. There can be no policy may require further amendment, and approval by isolation from difficult global trends, but there is a feeling shareholders, in order to meet the regulatory of greater self-sufficiency in Asia than there was a few requirements governing sustainability disclosures going years ago. Our goal is to invest for the long term forward. The FCA has stated its intention to publish the alongside successful and experienced local business UK SDR policy statement in the third quarter of 2023. leaders. The rewards that will accrue come from The Board will provide a further update to shareholders satisfying the needs of a huge and growing middle class, in due course and, to the extent required, seek from exploitation of technological inventiveness, and shareholder approval for any necessary changes to the from skilful management. 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 James Williams Stewart Investors, Finsbury Circus House, 15 Finsbury Chairman Circus, London EC2M 7EB. As well as the formal proceedings, there will be an opportunity for 9 May 2023 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 10 Strategic Report ## Investment ## Portfolio ### as at 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% Top10Investments   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% Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Strategic Report 11 | Company | Country | MSCI Sector | Market valuation £'000 | % Net 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%** | Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 12 Strategic Report Investment Portfolio continued ### Portfolio Distribution ### Geographical Analysis India China Taiwan Indonesia Japan Singapore Hong Kong Thailand Malaysia South Korea Bangladesh Philippines Liquidity 0 5 10 15 20 25 30 35 40 45 50 55 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 13 ## Portfolio ## Manager’s ## Review ### “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 people who impact the long-term success or failure of a that values capital preservation alongside capital business. Importantly we do not rely on auditors, ESG growth. We do not believe that the respect given to scores or other outside entities to tell us who totrust. downside protection constrains the long-term potential A consequence of looking for people we trust to take a to grow the net asset value of the Trust in any way. long-term view and behave in the best interests of Rather, we see it as a vital component in the ability to stakeholders is that 90% of companies in the Trust have generate long-term growth. a long-term owner at the helm. These stewards have There are common characteristics that companies which their own capital invested alongside the Trust while also fail to protect and grow capital share with one another. sharing the Trust’s time horizon and philosophy of These include, but are not limited to, a history of long-term capital protection and growth. For those corruption, short-time horizons, government companies without a long-term steward, we are looking connections, bad capital allocation, poor sustainability for cultures that exhibit the same values. Because we are positioning, lack of pricing power, unproven business free from having to use a benchmark index as a starting models, mountains of debt and fragile cash flows. point when constructing our portfolio, there is no pressure for us to expose the Trust’s capital to a We aim to filter out these poor-quality features as we particular company, sector or country if we believe the believe their presence increases the vulnerability of the risk of capital loss is too high. business, its stream of cash flows, and ultimately its share price. The presence of such characteristics by no ### Macroeconomic Volatility means guarantees that a company will automatically fall Much has been written, and forecast, about the direction foul of some universal law of failure, only that it will tend of travel for interest rates and inflation. We aim to avoid to fail our quality threshold criteria and desire to own the falling into the trap of allowing top-down noise to company for the next ten years. distract and shorten time horizons. If we are true to our An emphasis on capital preservation allows us to quickly philosophy and build a diversified portfolio of high- eliminate many companies across the region, leaving a quality businesses at reasonable valuations, there should far smaller set of companies with which to study quality be little need for us to alter geographic or sector in greater detail. From here, we spend the vast majority exposure on account of a shift in economic rhetoric. We of our time trying to understand the people that make up invest in companies not countries. This was the case last a business, whether that be the ultimate owner, the year and over every period Stewart Investors has had management team or the culture that proliferates the the privilege of managing the Trust. As stewards, we whole organisation. We do so because we believe it is the would not be fulfilling our obligation to shareholders if quality of the people and the decisions they make on a we built a portfolio with a high likelihood of severe daily basis that creates, and protects the pricing power, capital loss should there be any slight variation in the exceptional returns on capital or enduring growth macroeconomic environment. outcomes enjoyed by quality businesses. Simply, it is Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 14 Strategic Report Portfolio Manager’s Review continued A bottom-up approach to filtering out poor quality The Trust now owns nine Chinese companies: each has a companies leads us to companies which should have a private entrepreneur, family or steward behind it who we greater ability than most to survive, and prosper, across trust to continue their track record of treating minority macroeconomic cycles. The Trust is home to companies investors fairly while building unique and enduring who enjoy attractive margins and long track records of franchises. A consequence of our lens of asking “what pricing power. The average age of the companies in the could go wrong?” as well as “what can go right?” has been Trust is 45; inflation is not new to these businesses. our need to appraise how businesses in China are aligned Institutional memory of years when inflation sat at levels with the objectives and aims of Xi and his CCP. This focus materially higher than today ensures these businesses are on capital protection allowed the Trust to avoid the purposefully robust. These businesses should also be redrawing of the rules in the Chinese education and relatively resilient to changes in interest rates. The vast fintech sectors. Again, thanks to our ability to be truly majority of the companies in the Trust have more cash than bottom up, we can be very picky in the companies we debt on their balance sheets and can fund investment in choose to own in China. If we were to see a deterioration future growth through their own cash flow generation. This in the industries in which our companies operate, greater offers freedom from the pressure to appease banks and political involvement or stretched valuations there capital markets - stakeholders who tend to be very should be no surprise if the Trust’s exposure to China short-term. were to fall again. ### Political Volatility Investment Returns Unanticipated political change is not new to Asian Over the year to 31 January, the net asset value of the markets but last year perhaps marked one of the most Trust returned 5.7%. Using the MSCI All Country Asia ex significant junctures in the region’s history. With Xi Japan Index (the “Index”) as a reference point, the chart Jingping being confirmed as President of the Chinese overleaf provides one way of visualising the Trust’s track Communist Party (“CCP”) for an unprecedented third record. Every one-year rolling period since Stewart term, his preferences, fears and ambitions will be those Investors started managing the Trust is represented by a that drive China for the foreseeable future. The Trust has dot (taken at quarterly intervals). Every dot below the had minimal exposure to Chinese listed companies over line represents a year of underperformance against the the course of the last ten years. This is not the result of a Index, every dot above the line, outperformance. top-down view of politics, or growth, or demographics Focusing only on years where the Index has delivered but due to an inability to find companies that meet our returns of less than 0% highlights the ability of quality and valuation thresholds. Most companies in companies owned within the Trust to survive and China are either state-controlled or state-owned so are prosper under most periods of stress. easily avoided by us on ‘quality of people’ grounds; misalignment with controlling shareholders, especially governments, is an easy way of losing capital. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 15 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. -uh;|v &r-uh;|v &r-uh;|v ѶƏ ѵƏ ƓƏ ƑƏ Őt-u|;uѴő Ə -1bC1vv;|v$uv|Ŋ!oѴѴbm]Ɛu(u;|umv ŊƑƏ 0o;Ѵbm;Ĺ $uv|ѷƻ-uh;|ѷ ;ѴoѴbm;Ĺ$uv|ѷƺ-uh;|ѷ ŊƓƏ ŊƓƏŊƒƔ ŊƒƏŊƑƔ ŊƑƏŊƐƔ ŊƐƏŊƔƏ ƔƐƏƐƔƑƏƑƔƒƏƒƔƓƏƓƔƔƏƔƔѵƏѵƔƕƏƕƔѶƏ Marketswith<0%return(rolling1yrbasis) % Pacific Assets Trust NAV Total Return – average % -1.1 MSCI AC Asia ex Japan Index – average % -9.6 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. | | Annual Performance | | 12mths to | | 12mths to | 12mths to | 12mths to | 12mths to | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | (%inGBP)to31January2023 | | | 31/01/23 | | 31/01/22 | 31/01/21 | 31/01/20 | 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 ;-u oul-Ѵ "|uom] MSCIACAsiaexJapanIndex(Net) -2.2 -9.2 30.7 5.0 -7.7 | | CumulativePerformance | | Sinceinception | | 7 years 5 years 3 years 1 year | | --- | --- | --- | --- | --- | --- | | (%inGBP)to31January2023 | | | (01/07/2010) | | | | | | 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% MSCIACAsiaexJapanIndex(Net) 134.7% 95.3% 12.5% 16.0% -2.2% Thesefiguresrefertothepast.Pastperformanceisnotindicativeoffutureperformance.Forinvestorsbasedincountrieswithcurrenciesother thanGBP,thereturnmayincreaseordecreaseasaresultofcurrencyfluctuations. 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 "vb-;-r-mŊ!oѴѴbm]Ɛuu;|umvŐt-u|;uѴbm|;u-Ѵvő ## 16 Strategic Report Portfolio Manager’s Review continued ### Contribution by investment for the year ended 31 January 2023 ### Top 10 contributors to and detractors from absolute performance (%) | | CG Power & Industrial Soluঞons | | | | | | | | 3.3 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Mahindra & Mahindra | | | | | | 2.6 | | | | Tube Investments of India Limited | | | | | | | 2.6 | | | | | | Shanthi Gear Ltd | | | | 0.9 | | | | | | Elgi Equipments Ltd | | | | 0.5 | | | | | Shenzhen Inovance Technology Co Ltd | | | | | | 0.4 | | | | | | Vitasoy Internaঞonal Holdings | | | | | 0.4 | | | | | | | | Bank Ocbc Nisp Pt | | | 0.3 | | | | | | | Selamat Sempurna Pt | | | | 0.3 | | | | | | Voltronic Power Te chnology Corp | | | | | 0.3 | | | | | | | | -0.7 | | Aavas Financiers Ltd. | | | | | | | | | -0.7 | | NAVER Corp. | | | | | | | | | | -0.4 | Dr Lal Pathlabs Ltd | | | | | | | | | | -0.4 | Taiwan Semiconductor Manufacturing Co. Ltd. | | | | | | | | | | -0.4 | Silergy Corp | | | | | | | | | | -0.4 | Te chtronic Industries Co., Ltd. | | | | | | | | | | -0.3 | Koh Yo ung Te chnology Inc | | | | | | | | | | -0.3 | Tokyo Electron Ltd. | | | | | | | | | | -0.3 | Hoya Corp. | | | | | | | | | | -0.3 | Te ch Mahindra Limited | | | | | -3 -2 -1 01234 To p 10 Stocks Boom 10 Stocks appointed a new CEO with the remit to address issues ### Contributors stemming from historically poor capital allocation. Since During the year under review, the Trust’s material then we have seen material improvement in the quality ownership of Indian companies, especially those with of the business, continued dominance of the tractor exposure to a return of capital spending and industrial market and the development of ambitious plans for their growth, was a key contributor to absolute performance. farm equipment and electric mobility businesses. CGPower&IndustrialSolutions TubeInvestmentsofIndia (India: Industrials) (India: Consumer Discretionary) Contribution: 3.3% We acquired CG Power in the first quarter of 2021, very Contribution: 2.6% quickly after Tube Investments took a controlling stake. The Trust has owned Tube for close to ten years but Previous owners had abused their power resulting in their materially increased its position in 2017 when a new creditors taking control of the company, putting it up for CEO took over this fourth generation family company. sale, and Tube Investments subsequently taking ownership. His intention was to evolve Tube away from its existing CG Power is the leading manufacturer of motors in India, a businesses - parts for the auto and rail industries, as well high-quality franchise with fantastic long-term avenues for as bicycles - to an industrial conglomerate with growth. It has performed well thanks to a greater leadership positions across higher value industries. This appreciation of the opportunities under Tube Investment’s was to be done in a manner similar to that achieved by ownership as well as very attractive levels of underlying the high performing conglomerates we have studied in growth. Had we not followed the actions of quality people the US or Europe: taking free cash flow from existing we trust we would not have found nor invested in CG Power. businesses and expanding, both organically and through It certainly would not have appeared in a very favourable mergers and acquisitions (“M&A”), into higher quality light had it been put through a quantitative screen. industries. Since 2017, Tube has grown its sales at more than 20% a year, its free cash flow at a higher rate, while Mahindra&MahindraLtd improving its return on capital employed (“ROCE”) from (India: Consumer Discretionary) 1 22% to 47% . We have also seen the company embark on Contribution: 2.6% high quality M&A while organically entering the fields of The Trust has owned this company for more than five electric mobility and manufacturing in the IT industry. 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 1 Source: Tube Investments, 2021-22 Annual Report and FactSet Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 17 We initiated positions in six new companies last year ### Detractors with the purchases of Public Bank (Malaysia: Financials), Aavas Financiers Kalbe Farma (Indonesia: Healthcare) and Oversea- (India: Financial Services) Chinese Banking Corporation (Singapore: Financials) Contribution: -0.7% being discussed in the Company’s last half year report. The Trust has owned Aavas since 2020 as we believe the The most significant new holding in the second half of company to be a very well run, conservative provider of the year was Advanced Energy Solutions (“AES”) mortgages to low income households in India. The share (Taiwan: Industrials), a company focused on the design price looks to have come under pressure as Aavas has and manufacture of battery packs used in electric bikes, chosen to constrain short-term profitability as they electric vehicles and servers. Despite the very obvious invest in scaling the business. We are very comfortable tailwinds created by growing demand and investment in with this approach as the long-term potential remains electric mobility, as well as lithium batteries, we have vast and this kind of behaviour is usually emblematic of a struggled to find companies that meet our quality patient mindset. We have added to the position in recent threshold. AES bucks that trend with robust margins and months. attractive returns thanks to long-standing relationships NAVER Corp. with customers who trust AES to build a valuable input (South Korea: Information Technology) that has a significant bearing on the quality and Contribution: -0.7% performance of the end product. NAVER has struggled to find new avenues for profitable As discussed earlier, the Trust’s exposure to India had a growth as it seeks to diversify away from its core search positive contribution to performance last year. With that business. We sold the position during the year as we outperformance came some extended valuations that failed to gain conviction in the long-term growth profile required reducing position sizes. Holdings in consumer of the company as well as their capital discipline. names such as Dabur India (India: Consumer Staples) and Marico (India: Consumer Staples) were trimmed as was Dr Lal Pathlabs the large holding in the air compressor manufacturer (India: Healthcare) Elgi Equipments (India: Industrials). The relative Contribution: -0.4% weakness in Chinese markets offered the opportunity Like so many other companies that enjoyed spectacular toadd to some of our favourite names: Shenzhen growth on the back of Covid-19-induced tailwinds, Dr Inovance (Industrials), Kingmed Diagnostics (Health Lal’s earnings growth has deteriorated dramatically over Care), Glodon (Information Technology) and Amoy the short term. Alongside the reversal of unsustainable Diagnostics (Health Care). growth in testing volumes, the Indian diagnostic industry ### has also experienced increased intensity of pricing: this Looking Forward combination of headwinds has led to heightened levels of As always, we remain excited about the potential for the uncertainty in the sector. We remain long-term owners long-term, active investor in the Asian region. Our of the company as we believe Dr Lal’s brand and scale continued focus on owning high-quality companies run advantages should allow them to survive the current by high-quality people should continue to provide capital period of stress and become a long-term winner as the preservation in times of stress while allowing the Trust to market consolidates around trusted players. participate in the exceptional long-term growth opportunities that Asia offers. ### Significant Transactions Over the course of the year, the turnover of the Trust was 16%. The majority of the turnover was driven by the Stewart Investors need to control the weight of the largest positions Portfolio Manager namely, Tube Investments and CG Power. Without 9 May 2023 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 similarindustries. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 18 Strategic Report ## Sustainability ## and ESG As best practice, regulation and disclosure are evolving ### Environmental, Social & rapidly in this area both for the Company and for the ### Governance Policy companies in which it invests, the Board regularly The Board believes that consideration of environmental, social discusses sustainability, including ESG policy and and governance (“ESG”) issues within the Company’s practice, with the Portfolio Manager, encouraging where operations is of importance to shareholders and other possible further enhancements in both the policy and in stakeholders, not least because long-term returns are much reporting to shareholders. more likely to be generated by companies that have embedded ### corporate governance strengths, and which respect the Stewart Investors’ Approach to environment and the society in which they operate. The Board ### Sustainable Investing and ESG believes that this investment approach is readily applicable in Sustainability is core to Stewart Investors’ investment the markets in Asia in which the Company invests. philosophy and integrated into their investment process. As the Company delegates the management of the They do not have a separate team that looks at portfolio to Stewart Investors, the Board has chosen to sustainability – every investment team member analyses adopt and endorse their approach to integrating the sustainability positioning of a business, and is also sustainability into portfolio construction and investee responsible for engaging and voting activities. company engagement. This approach is described in detail in this section. As part of this focus on sustainability, the Stewart Investors only invest in high-quality companies Board expects ESG concerns to be a key topic of that contribute to, and benefit from, sustainable engagement with investee companies. The Company development. They define development as sustainable if it expects to maintain, through its Portfolio Manager, a furthers human development and has an ecological continuous constructive dialogue with the owners and the footprint that respects planetary boundaries. All managers of the companies where it owns shares. Such a members of the investment team sign the Stewart relationship is enhanced by the long-term nature of the 1 Investors, Hippocratic Oath , pledging to uphold the investment inherent in the Portfolio Manager’s principles of stewardship. investment approach, reassuring companies of stability. They approach sustainability as a means to mitigate risks In the same way as the Board expects the Portfolio and as a driver of investment returns. Integrating Manager to test investee companies on their ESG sustainability into their analysis is a natural extension of adherence, the Board will also assess the Company’s having a long-term investment horizon; the sustainability principal service providers. The Board asks for headwinds and tailwinds that affect companies are assurances that a service provider has taken the different from the shorter-term risks that businesses face. necessary steps to mitigate any negative environmental impact their operations might have, to ensure that their Their consideration of sustainability is holistic; it includes internal governance is compliant with expected high ESG but is more than ESG. They consider financial standards, and that they strive to avoid negative social sustainability – conservatism around the balance sheet, impacts resulting from their activities. for example – and stewardship by management – the treatment of all stakeholders through a crisis, for example Similarly, the Board itself strives to uphold the highest – to be as essential to the sustainability positioning of a ESG standards. The Board’s operations mainly consist of governance-related matters, where it is important to the company as the product or service the company sells. Directors to be at the forefront of best practice. 1 https://www.stewartinvestors.com/uk/en/private-investor/how-we-invest/sustainable-investing/our-hippocratic-oath.html Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 19 When assessing a company’s sustainability they ask identify problems they engage. Their recent themselves the following questions: collaborative engagement on conflict minerals in the semi-conductor supply chain is a good example of this. > Products and services – Do the products and Their approach to diversity is explained in their services make a valuable contribution to sustainable 5 6 statement and article about what they have done so far. development? They will provide updates on these issues, amongst > Context – Can the company benefit from others, in their quarterly shareholder updates. sustainability tailwinds and negative headwinds? ### Transparency > Company ethos – Do the culture and values embody As part of their focus on improved transparency, Stewart sustainability and continuous improvement? 9 Investors have developed a Portfolio Explorer tool > Operational impact – Is the company trying to which provides four views of sustainable development reduce impacts from its operations? for the Trust: Map: This global view provides detailed company They avoid companies that do not contribute to information including investment rationales, risks and sustainable development and engage with companies to engagement priorities. improve sustainability outcomes. Sustainable Development Goals (“SDGs”): The 17 SDGs Stewart Investors has established a materiality threshold are globally agreed goals that countries have committed to for harmful or controversial activities at 5% of revenues achieving by 2030. The SDGs offer a vision for the future – 0% for tobacco production and controversial weapons. towards which sustainable investment efforts can They explicitly seek to invest in companies that are bedirected. making a positive contribution to society. Full details of the activities and practices Stewart Investors finds Climate solutions: Companies are mapped to Project inconsistent with their investment philosophy are Drawdown’s c.90 climate change solutions, which if scaled 2 available on their website . o up, can deliver the Paris Agreement’s 1.5 C temperature goal. Project Drawdown is a non-profit organisation Stewart Investors employ the services of an external providing analysis of the solutions which can help the ESG research provider to provide a quarterly check on world reach ‘drawdown’ – i.e. the future point in time when the Trust to ensure companies meet global norms for levels of greenhouse gases in the atmosphere stop best practices and raise no exceptions against their climbing and start to decline. The solutions are diverse and thresholds for harmful activities. They also receive cross-cutting, and show the systemic change needed to controversy reporting from RepRisk. avoid catastrophic warming. The full set of solutions along Issues such as climate change, biodiversity and water, with the research that backs them are publicly available on human rights and modern slavery, and diversity and www.drawdown.org. inclusion are integrated into Stewart Investors’ Human development pillars: Stewart Investors have investment selection and engagement and voting developed 10 human development pillars inspired by the processes. Their approach to climate change is explained | | | 3 | UN Human Development Index that they believe are | | --- | --- | --- | --- | | in detail in their climate statement | | and recently | | | | 4 | | essential for lifting people out of poverty and empowering | | published climate report | . Their approach to biodiversity | | | them to achieve their potential. and water is reflected in their selection of companies that mitigate their impact on the natural environment or ### Sustainable Finance Disclosure provide services/products that improve efficiencies. ### They have engaged on a number of related issues such as Regulation palm oil, deforestation, plastic waste and the use of The Portfolio Manager reports on how the Trust has met harmful chemicals. Human rights and modern slavery are its sustainable investment objective, in accordance with a risk throughout the supply chain of their investee the requirements of the Sustainable Finance Disclosure companies. Their approach is to focus on quality Regulation (“SFDR”), beginning on page 82 of this companies that treat their employees well and manage AnnualReport. the risks in their supply chain effectively. Where they 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 20 Strategic Report 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 21 ### 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- 7 mat: How a due diligence scheme appears to launder conflict minerals . A summary of the findings is available in a 8 short interview with Alex Kopp, an investigator at Global Witness . 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 22 Strategic Report ## Business ## Review The Strategic Report, set out on pages 1 to 33, contains a Company’s affairs, including setting the parameters for review of the Company’s business model and strategy, an monitoring the investment strategy and the review of analysis of its performance during the financial year and investment performance and policy. It also has its future developments as well as details of the principal responsibility for all strategic policy issues, including risks and challenges it faces. Its purpose is to inform share issuance and buybacks, share price and discount/ shareholders and help them to assess how the Directors premium monitoring, corporate governance matters, have performed their duty to promote the success of dividends and gearing. theCompany. Further information on the Board’s role and the topics it The Strategic Report contains certain forward-looking discusses with the Portfolio Manager is provided in the statements. These statements are made by the Directors Corporate Governance report beginning on page 36. in good faith based on the information available to them ### up to the time of their approval of this report. Such Investment Objective and Policy statements should be treated with caution due to the The Company aims to achieve long-term capital growth inherent uncertainties, including both economic and through investment in selected companies in the Asia business risk factors, underlying any such forward- Pacific region and the Indian sub-continent, but looking information. excluding Japan, Australia and New Zealand (the “Asia Pacific Region”). Up to a maximum of 20% of the ### Business Model Company’s total assets (at the time of investment) may The Company is an externally managed investment trust be invested in companies incorporated and/or listed and its shares are listed on the premium segment of the outside the Asia Pacific Region (as defined above); at Official List and traded on the main market of the least 25% of their economic activities (at the time of London Stock Exchange. investment) are within the Asia Pacific Region with this The purpose of the Company is to achieve long-term proportion being expected to grow significantly over the growth in our shareholders’ wealth by providing a vehicle long term. for investors to gain exposure to a portfolio of companies The Company invests in companies which Stewart in the Asia Pacific region and the Indian sub-continent Investors believe will be able to generate long-term (but excluding Japan, Australia and New Zealand), growth for shareholders. through a single investment. The Company invests principally in listed equities The Company’s strategy is to create value for although it is able to invest in other securities, including shareholders by addressing its investment objective. preference shares, debt instruments, convertible As an externally managed investment trust, all of the securities and warrants. In addition, the Company may Company’s day-to-day management and administrative invest in open and closed-ended investment funds and functions are outsourced to service providers. Asa companies. result, the Company has no executive directors, The Company is only able to invest in unlisted securities employees or internal operations. with the Board’s prior approval. It is the current intention The Company employs Frostrow Capital LLP that such investments are limited to those which are (“Frostrow”) as its Alternative Investment Fund Manager expected to be listed on a stock exchange or which cease (AIFM) and they provide corporate management, risk to be listed and the Company decides to continue to hold management, company secretarial and administrative or is required to do so. services. The Company employs Stewart Investors as its Risk is diversified by investing in different countries, Portfolio Manager (see pages 45 and 46 for further sectors and stocks within the Asia Pacific Region. There information). are no defined limits on countries or sectors but no single The Board remains responsible for all aspects of the investment may exceed 7.5% of the Company’s total Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 23 assets at the time of investment. This limit is reviewed frequently drawn to companies whose future growth from time to time by the Board and may be revised as profile is more important than the generation of dividend appropriate. income for shareholders. No more than 10% of the Company’s total assets may be The Company complies with the United Kingdom’s invested in other listed closed-ended investment investment trust rules which require investment trusts companies unless such investment companies themselves to retain no more than 15% of their distributable income have published investment policies to invest no more than each year. The Company’s dividend policy is that the 15% of their total assets in other closed-ended investment Company will pay a dividend as a minimum to maintain companies, in which case the limit is 15%. investment trust status. When deemed appropriate, the Company may borrow ### The Board for investment purposes up to the equivalent of 10% of At the date of this report, the Board of the Company the net asset value of the Company at the time of comprises James Williams (Chairman), Charlotta Ginman, drawdown of such borrowing. Sian Hansen, Robert Talbut, Edward Troughton and The use of derivatives is permitted with prior Board Andrew Impey. All of these Directors are non-executive, approval and within agreed limits. However, Stewart independent Directors. They all served throughout the Investors are unlikely to use derivatives as they do not year except for Andrew Impey who was appointed to the form part of their investment strategy. Board with effect from 1 August 2022. Proposed Change to Investment Policy Further information on the Directors can be found on pages 34 and 35 and information on the Board’s diversity As noted in the Chairman’s Statement on page 6, the can be found in the Corporate Governance Report on Board is proposing to formalise an internal limit that was page 42. agreed with the Portfolio Manager during the year, to limit exposure to a single country or jurisdiction to 45% ### Key Performance Indicators of total assets at the time of investment and 49% of total The Board of Directors reviews performance against the assets at any time. following measures (“KPIs”). The KPIs are unchanged Accordingly, an ordinary resolution to approve this from the prior year. amendment to the investment policy is included in the > NAV total return against the Consumer Price Index Notice of AGM, beginning on page 98, and the full text of +6% (the “Performance Objective”)*^ the proposed new investment policy can be found in the explanatory notes on pages 103 and 104. For the > NAV per share total return against the peer group*^ avoidance of doubt, the formalisation of the single > Average discount/premium of share price to NAV country investment limit is the only proposed change to per share over the year^ the Company’s investment policy. The proposed > Ongoing charges ratio^ amendment has been approved in principle by the Financial Conduct Authority in accordance with the * Calculated on an annual basis and measured over three to five years requirements of the Listing Rules. ^ Alternative Performance Measure (see Glossary beginning on page79) ### Performance Measurement NAV per share total return – Performance Objective The Board measures Stewart Investors’ performance The Directors regard the Company’s net asset value total against a performance objective, which is to provide return as being the overall measure of value generated shareholders with a net asset value total return in excess by the Portfolio Manager over the long term. Total of the UK Consumer Price Index (“CPI”) plus 6% return reflects both the net asset value growth of the (calculated on an annual basis) measured over three to Company and the dividends paid to shareholders. The five years (the “Performance Objective”). The Board also performance objective of the Company is inflation monitors the Company’s performance against its peer (represented by the Consumer Price Index) plus 6%, group (see page 4 for details). Please refer to the measured over three to five years. The 6% represents Chairman’s Statement beginning on page 6 and the what the Board considers to be a reasonable premium on Glossary on page 79 for further information. investors’ capital, which investing in the faster growing Asian economies ought to provide over time. The ### Dividend Policy Performance Objective is designed to reflect that the It is the Company’s policy to pursue capital growth for Portfolio Manager’s approach does not consider index shareholders with income being a secondary composition when building and monitoring the portfolio. consideration. This reflects that the Portfolio Manager is Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 24 Strategic Report Business Review continued 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 by 1.5% per annum. 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. The Company's performance is discussed in the Chairman's Statement beginning on page 6; 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 the year. 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 discount 8.9% | Peer group average discount 5.0% | * Source: Morningstar ^ Alternative Performance Measure (see Glossary beginning on page 79) Ongoing charges ratio Ongoing charges represent the costs that the Company can reasonably expect to pay from one year to the next, under normal circumstances. The Board continues to be conscious of expenses and seeks to maintain a sensible balance between high quality service and costs. The Board therefore considers the ongoing charges ratio to be a KPI and reviews the figure both in absolute terms and in relation to the Company's peers. Ongoing charges ratio^ | 31 January 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 page 79). 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. It should 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. A process has been established to identify and assess risks, their likelihood and the possible severity of their impact. These principal risks are set out on the following pages with a high-level summary of their management through mitigation and 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 25 A summary of these risks and their mitigation is set out below: Change in risk assessment Principal Risks and Uncertainties Mitigation over the last financial year ### Investment and Financial Risks Market and Foreign Exchange Risk The Company’s portfolio is exposed To manage these risks the Board has appointed Stewart Investors to to fluctuations in market prices manage the portfolio within the remit of the investment objective and (from both individual security prices policy. Compliance with the investment objective and investment policy and foreign exchange rates) in the limits is monitored daily by Frostrow and Stewart Investors and reported to regions and sectors in which it the Board monthly. The investment policy limits ensure that the portfolio is invests. Emerging markets in the diversified, reducing the risks associated with individual stocks and markets. Asia Pacific region, in which the Stewart Investors report at each Board meeting on the performance of the portfolio companies operate, are Company’s portfolio, including the rationale for investment decisions, the expected to be more volatile than make-up of the portfolio, and the investment strategy. developed markets. As part of its review of the viability of the Company, the Board also Stewart Investors’ approach is considers the sensitivity of the Company to changes in market prices and expected to lead to performance foreign exchange rates (see note 14 beginning on page 75), how the that will deviate from that of portfolio would perform during a market crisis, and the ability of the comparators, including both market Company to liquidate its portfolio if the need arose. Further details are indices and other investment included in the Going Concern and Viability Statements on page 32. companies investing in the Asia During the year, the Board took further steps to mitigate market risk by Pacific Region. 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 Counterparty risk is managed by the Board through: risk arising from the use of > review of the arrangements with, and services provided by, the counterparties. If a counterparty Custodian to ensure that the security of the Company’s custodial assets were to fail, the Company could be is maintained; adversely affected through either delay in settlement or loss of assets. > monitoring the Custodian, including review of internal control reports The most significant counterparty to and sub-custodial arrangements, asappropriate; and which the Company is exposed is > review of Stewart Investors’ approved list of counterparties, the process J.P.Morgan Chase Bank, the for monitoring and adding to the approved counterparty list, and the Custodian, which is responsible for Company’s use of those counterparties. the safekeeping of the Company’s assets. 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 note14 beginning on page75. No change Increased Decreased Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 26 Strategic Report Business Review continued Change in assessment Principal Risks and Uncertainties Mitigation of risk over the last financial year ### Strategic Risks Geopolitical Risk Geopolitical events may have an The Board regularly discusses global geopolitical issues and general adverse impact on the Company’s economic conditions and developments. performance by causing exchange Political changes in recent years, particularly in the US and Asia Pacific rate volatility, changes in tax or region and more recently in Ukraine and Eastern Europe, have increased regulatory environments, a reduced uncertainty and volatility in financial markets. The Board discusses such investment universe and a fall in developments and how they may impact decision making with market prices. StewartInvestors. 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 The Board regularly reviews global environmental, geopolitical and arising from climate change and the economic developments with the Portfolio Manager and the implications of impact climate change events could these risks and events on portfolio construction and the Company’s have on portfolio companies and operations. Given Stewart Investors’ focus on sustainability as set out on their operations, as well as on pages18 to 21, the Board considers the portfolio to be relatively well service providers to the Company. positioned in this regard. Black Swan Risk A significant unpredictable event The Board monitors emerging risks and the robustness of Stewart Investors’ (e.g. a pandemic/war/closure of a and other service providers’ business continuity plans. major shipping route) could lead to Stewart Investors’ investment approach includes a focus on sustainability and increased market volatility, and in a stewardship, which emphasises quality investments with strong balance sheets, worst-case scenario, major global a proven track record in previous crises, and the protection of shareholders’ trade and supply chain breakdown funds, leaving them relatively well positioned to deal with unforeseen events. resulting in significant volatility/ declines in market prices. The All of the Company’s service providers are required to have business continuity / Company’s service providers and disaster recovery policies and test them at least annually. Service providers their operational systems may also provide updates on contingency plans for coping with major disruption to their be affected. operations. No change Increased Decreased Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 27 Change in assessment Principal Risks and Uncertainties Mitigation of risk over the last financial year Portfolio Management Key Persons Risk There is a risk that the team The Board manages this risk by: responsible for managing the > receiving regular reports from the Portfolio Manager, including any Company’s portfolio may leave their significant changes in the make-up of the portfolio management team; employment or may be prevented from undertaking their duties. > meeting the wider team supporting the designated lead manager, atboth 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, In managing this risk the Board: particularly if the investment > reviews the Company’s investment objective and policy, and Stewart strategy and approach are Investors’ investment approach, in relation to investment performance, unsuccessful, that the Company market and economic conditions and the performance of the Company’s underperforms its peer group, fails peers; to achieve its Performance Objective and becomes unattractive > regularly discusses the Company’s future development and strategy; to shareholders, resulting in a > undertakes a regular review of the level of the share price discount/ widening of the share price discount premium to the NAV per share and considers ways in which share price to the NAV per share. performance may beenhanced, 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 28 Strategic Report Business Review continued Change in assessment Principal Risks and Uncertainties Mitigation of risk over the last financial year ### Operational Risk Operational Risk As an externally-managed To manage these risks the Board: investment trust, the Company is > periodically visits all key service providers to gain a better reliant on the systems of its service understanding of their control environment, and the processes in place providers for dealing, trade to mitigate any disruptive events; processing, administration, financial andother functions. If such systems > receives a monthly report from Frostrow, which includes, inter alia, were to fail or be disrupted confirmation of compliance with applicable laws and regulations; (including, for example, as a result of > reviews internal control reports and key policies of its service providers, cyber-crime or a pandemic) this including disaster recover procedures and business continuity plans; could lead to a failure to comply with applicable laws, regulations and > maintains a risk matrix with details of the risks to which the Company is governance requirements and/or to exposed, the approach to managing those risks, the key controls relied a financial loss. 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 inplace. 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 29 ### 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 30 Strategic Report Business Review continued ### 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 31 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 The Board and the Portfolio Manager provided updates on performance shareholders concerning the via RNS, the Company’s website and the usual financial reports and strategy of the Company, monthly fact sheets. performance and the portfolio. The Board continued to monitor share price movements closely, both in > The impact of market volatility absolute terms and in relation to the Company’s peer group. As the caused by certain geopolitical discount remained relatively stable throughout the year, and narrowed in events on the portfolio. the second half, the Board did not initiate any share buybacks. While recognising that buybacks can generate shareholder value in the short > Share price performance. term, the Board decided that buybacks were not in the long-term interests > The Portfolio Manager’s of shareholders, as they would reduce the size of the Company, increase approach to sustainable the ongoing charges ratio and reduce the liquidity of the Company’s development and investment. shares. Instead, the Board continued to take steps to improve the visibility of the Company and the Portfolio Manager’s sustainability credentials, inparticular to retail investors. Further information is provided in the Chairman’s Statement beginning on page 6. > Portfolio composition, The Board agreed that high standards of research and decision-making performance, outlook and have been maintained and the Portfolio Manager’s strategy has been business updates. implemented consistently, leading to good returns over the past year and over longer periods. The Board concluded that it was in the interests of > The integration of sustainability shareholders for Stewart Investors to continue in their role as Portfolio and ESG factors to the Portfolio Manager on the same terms and conditions. Further information is Manager’s investment process. provided on pages 46 and 47. > The promotion and marketing The Board continued its focus on improving the marketing strategy of the strategy of the Company. Company, to highlight in particular the Portfolio Manager’s sustainability > The Portfolio Manager’s system credentials. Further information is provided in the Chairman’s Statement of internal controls and beginning on page 6. investment risk management. 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 The Board concluded that it was in the interests of shareholders for and the terms and conditions Frostrow to continue in their role as AIFM on the same terms and under which service providers conditions. See pages 46 and 47 for further details. are engaged. The Board approved the Audit Committee’s recommendation to propose > The assessment of the to shareholders that BDO LLP be re-appointed as the Company’s auditor effectiveness of the audit and the for a further year. Please refer to the Audit Committee Report beginning Auditor’s reappointment. on page 51 and the Notice of AGM beginning on page 98 for further information. > The terms and conditions under which the Auditor is engaged. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 32 Strategic Report Business Review continued stability of the Company through the benefits of ### Going Concern having a diversified portfolio of listed and realisable The Company’s portfolio, investment activity, the assets. As illustrated in note 14 to the accounts, the Company’s cash balances and revenue forecasts, and the Board has considered price sensitivity risk (the trends and factors likely to affect the Company’s sensitivity of the profit after taxation for the year and performance are reviewed and discussed at each Board the value of the shareholders’ funds to changes in the meeting. The Board has considered a detailed fair value of the Company’s investments) and foreign assessment of the Company’s ability to meet its liabilities currency sensitivity (the sensitivity to changes in key as they fall due, including stress tests which modelled the exchange rates to which the portfolio is exposed). effects of substantial falls in portfolio valuations and liquidity constraints on the Company’s NAV, cash flows > With an ongoing charges ratio of 1.1%, the expenses and expenses. Based on the information available to the of the Company are predictable and modest in Directors at the date of this report, the conclusions comparison with the assets and there are no capital drawn in the Viability Statement (including the results of commitments currently foreseen which would alter the stress tests undertaken) below and the Company’s that position; cash balances, the Directors are satisfied that the > The Board has considered the Company’s average Company has adequate financial resources to continue in cash balance over the past three years and noted that operation for at least the next 12 months from the date the Company has consistently retained levels of cash of signing this report and that, accordingly, it is that are significantly higher than its annual operating appropriate to continue to adopt the going concern basis expenses. in preparing the financial statements. > The Company has no employees, only non-executive ### Viability Statement Directors. Consequently it does not have redundancy The Directors have carefully assessed the Company’s or other employment related liabilities or financial position and prospects as well as the principal responsibilities; and risks facing the Company and have formed a reasonable > The closed ended nature of the Company means that, expectation that the Company will be able to continue in unlike open ended funds, it does not need to realise operation and meet its liabilities as they fall due over the investments when shareholders wish to sell their next five financial years. The Board has chosen a five shares. year horizon in view of the long-term outlook adopted by the Portfolio Manager when making investment The Directors, as well as considering the potential impact decisions. of the principal risks and various severe but plausible downside scenarios, have also made the following To make this assessment and in reaching this conclusion, assumptions in considering the Company’s longer-term the Audit Committee has considered the Company’s viability: financial position and its ability to liquidate its portfolio and meet its liabilities as they fall due and notes the > There will continue to be demand for investment following: trusts; > The Board and the Portfolio Manager will continue to > The portfolio is comprised of investments traded on adopt a long-term view when making investments, and major international stock exchanges. Based on historic anticipated holding periods will be at least five years; analysis, it is estimated that approximately 55% of the current portfolio could be liquidated within seven > The Company invests in the securities of listed trading days. There is no expectation that the nature companies traded on international stock exchanges of the investments held within the portfolio will be to which investors will wish to continue to have materially different in future; exposure; > The Board has considered the viability of the Company > Regulation will not increase to a level that makes under various scenarios, including periods of acute running the Company uneconomical; and stock market and economic volatility, and concluded > The performance of the Company will continue to be that it would expect to be able to ensure the financial satisfactory. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Strategic Report ## 33 Stewart Investors is committed to reporting annually on its ### Social, Human Rights and progress against its climate change objectives which are ### Environmental Matters 10 set out in its climate change statement . This reporting is As an externally-managed investment trust, the Company modelled on TCFD recommendations to the degree it is does not have any employees or maintain any premises, relevant to their activities and to support shareholders nor does it undertake any manufacturing or other physical with their reporting requirements. operations itself. All its operational functions are Stewart Investors have signed up to the Net Zero Asset outsourced to third party service providers. Therefore the Managers Initiative. They published their first climate Company has no material, direct impact on the 11 report in 2022 which provides details about their plan; environment or any particular community and, as a result, this will be updated annually. They are engaging with their the Company itself has no environmental, human rights, investee companies to set ambitious targets and have social or community policies. credible action plans to achieve net zero by 2050. They are The Portfolio Manager engages with the Company’s targeting outcomes that are aligned with their underlying investee companies in relation to their commitment to the Net Zero Asset Managers Initiative corporate governance practices and the development of and prioritising engagement with companies that have their policies on social, community and environmental inadequate disclosures and targets, and/or rising matters. ThePortfolio Manager (under their parent, legal emissions. entity name, First Sentier Investors) is a Tier 1 signatory 12 Climate reporting, at both the Stewart Investors and to the UNPrinciples of Responsible Investment, an 13 Pacific Asset Trust level, is available via the Trust’s investor signatory of Climate Action 100+ and an website. investor member of the Institutional Investors Group on Climate Change. ### Performance and Future ### Integrity and Business Ethics Developments The Company is committed to carrying out business in an A review of the Company’s performance over the year honest and fair manner with a zero-tolerance approach and the outlook for the Company can be found in the to bribery, tax evasion and corruption. As such, policies Chairman’s Statement beginning on page 6 and in the and procedures are in place to prevent this and can be Portfolio Manager’s Review beginning on page 13. found on the Company’s website. In carrying out its The Company’s overall strategy remains unchanged. activities, the Company aims to conduct itself responsibly, ethically and fairly, including in relation to By order of the Board social and human rights issues. ### Taskforce for Climate-Related Frostrow Capital LLP Company Secretary ### Financial Disclosures (“TCFD”) 9 May 2023 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. 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 34 Governance ## Board of Directors | James Williams | Charlotta Ginman, FCA | Sian Hansen | | --- | --- | --- | | Independent Non-Executive Chairman | Independent Non-Executive Director | Independent Non-Executive Director | | Joined the Board in 2013 and became | Joined the Board in 2014 | Joined the Board in 2015 | Chairman in June 2015 | James is Chairman of the Nomination | Charlotta is Chair of the Audit Committee. | Sian is Chair of the Engagement & | | --- | --- | --- | | Committee. | | Remuneration Committee. | | Shareholding in the Company: 56,000 | Shareholding in the Company: 13,789 | Shareholding in the Company: 15,880 | | Skills and Experience | Skills and Experience | Skills and Experience | | --- | --- | --- | | James has worked in investment management | Charlotta has held senior positions in the | Previously Sian was Executive Director of the | | for 50 years. He was formerly the Chief | investment banking and the technology/ | Legatum Institute and before that, Managing | | Investment Officer of Baring Asset | telecom sectors. | Director of the UK think tank Policy Exchange. | | Management. He was a founder in Asia of the | | Earlier in her career, Sian was a senior equity | As a chartered accountant, Charlotta brings to the Henderson Baring group. James has also held analyst and Co-Director of Sales for Asian Board, and especially as Chair of the Audit several non-executive directorships and senior Emerging Markets at Société Générale. Committee, an incisive and detailed perspective advisory roles. of the Company’s financial position and its risk Sian enhances the Board’s knowledge of His leadership of the Board draws on his long control environment. Charlotta is not afraid to sustainability, enabling meaningful debates with and varied experience on investment and confront complex issues on a range of topics. the Portfolio Manager to take place. As a thought public company boards, and his knowledge of leader in political and other forums, she brings a the fund management industry. His focus is on valuable perspective on geo-political matters. long-term strategic issues, which are a key characteristic of Board discussion. Other Appointments Other Appointments Charlotta is a non-executive director and Sian is currently Chief Operating Officer of Chairof the Audit Committee of Polar Capital CITGroup and a non-executive director of Technology Trust plc, Keywords Studios plc JPMorgan Multi-Asset Growth and Income 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. Standing for re-election Standing for re-election Standing for re-election No Yes Yes Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 35 | Robert Talbut | Edward Troughton | Andrew Impey | | --- | --- | --- | | Independent Non-Executive Director | Independent Non-Executive Director | Independent Non-Executive Director | | Joined the Board in 2016 | Joined the Board in 2019 | Joined the Board in 2022 | | Robert is the Senior Independent Director. | Shareholding in the Company: 18,357 | Shareholding in the Company: 10,000 | Shareholding in the Company: 9,611 | Skills and Experience | Skills and Experience | Skills and Experience | | --- | --- | --- | | Robert was formerly a director and Chief | Edward has been in the investment industry for | Andrew has over 34 years’ experience in | | Investment Officer at Royal London Asset | over 35 years, starting his career with Barings | institutional investment management and | | Management Limited. | Asset Management as an Asian equity portfolio | wealth management. He has been lead manager | | | manager. He spent the rest of his career after | on a broad range of funds including a sovereign | His ongoing knowledge of the asset that in business development and marketing. He wealth mandate, unit trusts and several management industry and the strategic managed NatWest Investment Management’s investment trusts. He was previously a challenges it faces is useful in many board office in Hong Kong for 5 years. For 7 years, he consultant at Rathbones Investment debates. His understanding of today’s was with BlackRock where at one stage, as Management, a partner of Albion Capital Group, corporate governance best practice and the Managing Director, he ran their Asian regional joint managing director at OLIM Limited and matters that a Board must confront, helps to office out of Hong Kong. Latterly he was Chief Investment Officer at Singer & ensure that the Company is run in accordance Managing Director at Alliance Trust Investments Friedlander. with best practice. and Principal Representative Officer for Bank of Andrew’s wide investment experience allows Given his wide-ranging board and sector London and the Middle East based in Dubai. him to engage knowledgeably with the Portfolio experience Robert is well positioned to bring Edward’s experience in the investment sector Manager. He also brings current knowledge of alternative perspectives on issues that may and first-hand knowledge of living and working the industry and in corporate governance arise. in Asia enables the Board to engage andstrategy. authoritatively with the Portfolio Manager on He is a charity trustee and on a number of their investment strategy. His knowledge of investment committees including the HMS business development and marketing within the Victory Preservation Company. UK wealth sector is also extremely useful as the Board looks to widen the Company’s overall appeal and shareholder base. Other Appointments Other Appointments Other Appointments Robert is non-executive chairman of Shires Edward is a partner at Oldfield Partners LLP. Andrew is the non-executive chairman of Income PLC and Schroder UK Mid Cap Fund JPMorgan UK Smaller Companies Investment PLC. He is a non-executive director of Trust plc. JPMorgan American Investment Trust plc. Standing for re-election Standing for re-election Standing for election Yes Yes Yes Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 36 Governance ## 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. Thegovernance 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. The Board 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. Engagement & Remuneration Audit Committee Nomination Committee Committee Chair Chair Chairman Sian Hansen Charlotta Ginman, FCA James Williams All Independent Directors All Independent Directors All Independent Directors Key responsibilities: Key responsibilities: Key responsibilities: > to review the contracts, the > to review the Company’s > to review the Board’s structure performance and remuneration financial reports; and composition; and of the Company’s principal > to oversee the risk and control > to make recommendations for service providers; environment; and any changes or new > to set the Directors’ > to have primary responsibility appointments. remuneration policy; and for the relationship with the > to review the terms and Company’s external auditor, to conditions of the Directors’ review their independence and appointments. performance, and to determine their remuneration. 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 37 ### Internal Controls Structure The Board has a responsibility for Board of Directors establishing and assessing internal Entirely independent and non-executive controls to ensure the Company Sub-committees: operates effectively, efficiently and l Audit Committee within the risk appetites set by the BDO LLP l Engagement & Remuneration Committee Board. As the Company relies on (Statutory Auditor) third-party service providers for all l Nomination Committee of its operations, it obtains regular reports from these counterparties on the nature and effectiveness of Principal third-party Frostrow Capital LLP controls within these organisations. service providers (AIFM, Company Secretary, Fund Administrator) The Company’s principal service The Directors Reporting providers are the Portfolio Manager, l receive regular reporting l Balance sheet l Investment limits and restrictions Stewart Investors, the AIFM, at meetings; (monthly) l Liquidity and gearing Company Secretary and l Compliance with investment policy and l review the assurance l Income forecasts administrator, Frostrow Capital, the guidelines (monthly) report produced by each l Portfolio valuation custodian and depositary, JP Morgan l Compliance report (semi annually) organisation; and the registrar, Equiniti Group. The l Portfolio transactions l Effectiveness of control environment Board receives regular reporting on l receive additional compliance with the control reporting on the control Stewart Investors environment and assesses the environment from each (Portfolio Management) effectiveness of the internal controls of the principal third through review of the assurance Reporting party service providers; l Portfolio performance update at each meeting reports from each of these and organisations. l Compliance Report (semi-annually) l formally evaluate their l Effectiveness of control environment (annually) In addition, the Company retains a performance on an number of secondary providers who annual basis. l Presentations on subjects of interest report regularly to the Board. These e.g. Risk Management, Investment Compliance (as required) include the Company’s legal advisers and the corporate stockbroker. The Engagement and Remuneration JP Morgan (Depositary and Custodian) Committee formally evaluates the performance and service delivery of Reporting all third-party service providers at l Depositary’s Report (semi-annually) least annually and the Audit l Effectiveness of control environment (annually) Committee evaluates the l Presentations on subjects of interest e.g. cyber security (as required) performance of the Company’s external auditor annually, following the completion of the annual audit Equiniti Group process. (Registrar) Reporting l Effectiveness of control environment (annually) l Presentations on subjects of interest e.g. cyber security (as required) Secondary third- party service providers Dickson Minto W.S. Investec Bank PLC The Directors (Legal Adviser) (Corporate Broker) l receive regular reporting on their activities at meetings; and l formally evaluate their performance on an annual basis Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 38 Governance Corporate Governance continued Corporate Governance Statement Shareholder Relations The Board has considered the principles and Representatives of Stewart Investors and Investec Bank recommendations of the AIC Code of Corporate plc, the Company’s corporate stockbroker, meet Governance published in February 2019 (the “AIC regularly with institutional shareholders and private Code”). The AIC Code addresses all the principles set out client asset managers to discuss investment strategy, any in the UK Corporate Governance Code (the “UK Code”), issues or concerns and, if applicable, corporate as well as setting out additional provisions on issues that governance matters. Reports on investor sentiment and are of specific relevance to the Company. the feedback from investor meetings are discussed with the Directors at the following Board meeting. The Board considers that reporting against the principles and provisions of the AIC Code (which has been Shareholder Communications endorsed by the Financial Reporting Council) will provide The Directors welcome the views of all shareholders and better information to shareholders. By reporting against place considerable importance on communications with the AIC Code, the Company meets its obligations under them. Shareholders wishing to communicate with the the UK Code (and associated disclosure requirements Chairman, or any other member of the Board, may do so under paragraph 9.8.6 of the Listing Rules) and as such by writing to the Company Secretary at the offices of does not need to report further on issues contained in Frostrow Capital LLP (25 Southampton Buildings, the UK Code which are irrelevant to the Company as an London WC2A 1AL). Shareholders are encouraged to externally-managed investment company, including the attend the Annual General Meeting (“AGM”), where they provisions relating to the role of the chief executive, are given the opportunity to question the Chairman, the executive directors’ remuneration and the internal audit Board and representatives of Stewart Investors. function. Inaddition, Stewart Investors make a presentation to shareholders covering the investment performance and The AIC Code is available on the AIC’s website strategy of the Company at the AGM. Further details of www.theaic.co.uk and the UK Code can be viewed on the this year’s AGM are provided in the Chairman’s Financial Reporting Council website www.frc.org.uk. The Statement beginning on page 6 and in the Notice of AGM AIC Code includes an explanation of how the AIC Code beginning on page98. adapts the principles and provisions set out in the UK Code to make them relevant for investment companies. Significant Holdings and Voting Rights The Company has complied with the principles and Details of the shareholders with substantial interests in provisions of the AIC Code. the Company’s shares, the Directors’ authorities to issue and repurchase the Company’s shares, and the voting This Corporate Governance report on pages36 to 43 rights of the shares are set out in the Report of the forms part of the Report of the Directors on pages 44 Directors on pages 44 to 48. to48. Conflicts of Interest Board Leadership and Purpose Company directors have a statutory obligation to avoid a Purpose and Strategy situation in which they (and connected persons) have, The purpose and strategy of the Company are described orcan have, a direct or indirect interest that conflicts, or in the Strategic Report on page 22. may possibly conflict, with the interests of the Company. In line with the Companies Act 2006, the Board has the Strategy issues and all material operational matters are power to authorise any potential conflicts of interest that considered at Board meetings. may arise and impose such limits or conditions as it Board Culture thinks fit. A register of interests and potential conflicts is The Board aims to enlist fully differences of opinion, maintained and is reviewed at every Board meeting. No unique vantage points and areas of expertise. conflicts of interest arose during the year under review. TheChairman encourages open debate to foster a supportive and co-operative approach. Strategic decisions are discussed openly and constructively. TheBoard 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 39 Division of Responsibilities Director Independence Responsibilities of the Chairman and the SID The Board consists of six non-executive Directors, each of The Chairman’s primary role is to provide leadership to whom is independent of Stewart Investors and the the Board, assuming responsibility for its overall Company’s other service providers. Each of the Directors, effectiveness in directing the Company. The Chairman is including the Chairman, was independent on appointment responsible for: and all of the Directors seeking re-election at the forthcoming AGM continue to be independent when > taking the chair at general meetings and Board assessed against the circumstances set out in Provision13 meetings, conducting meetings effectively and of the AIC Code. The Board carefully considers these ensuring all Directors are involved in discussions and guidelines but places particular weight on the view that decision-making; independence is evidenced by an individual being > setting the agenda for Board meetings and ensuring independent of mind, character and judgement. The Board the Directors receive accurate, timely and clear considers that all of the Directors are independent and information for decision-making; there are no relationships or circumstances which are likely to impair or could appear to impair their judgement. > taking a leading role in determining the Board’s composition and structure; Directors’ Other Commitments Prior approval is obtained from the Chairman for any > overseeing the induction of new directors and the new appointment. Following the annual Board development of the Board as a whole; evaluation, the Board considers that all Directors have > leading the annual board evaluation process and sufficient time to discharge their duties. assessing the contribution of individual Directors; Board Meetings > supporting and also challenging the Portfolio The Board meets formally at least four times each year. Manager (and other suppliers) where necessary; The primary focus at regular Board meetings is the review of investment performance and associated > ensuring effective communications with shareholders matters, including asset allocation, marketing/investor and, where appropriate, stakeholders; and relations, peer group information and industry issues. > engaging with shareholders to ensure that the Board The Board reviews key investment and financial data, has a clear understanding of shareholder views. revenue and expense projections, analyses of asset allocation, transactions, customised performance The Senior Independent Director (“SID”) serves as a metrics and performance comparisons, share price and sounding board for the Chairman and acts as an net asset value performance. The Board’s approach to intermediary for the other Directors and the addressing the Portfolio Manager’s and the Company’s shareholders. The SID is responsible for: share price performance during the year is described in > working closely with the Chairman and providing the Chairman’s Statement beginning on page 6. support; The Board is responsible for setting the Company’s > leading the annual assessment of the performance of corporate strategy and reviews the continued the Chairman; appropriateness of the Company’s investment objective, investment strategy and investment restrictions at each > holding meetings with the other non-executive meeting. Directors without the Chairman being present, on such occasions as necessary; Matters Reserved for Decision by the Board The Board has adopted a schedule of matters reserved > carrying out succession planning for the Chairman’s for its decision. This includes, inter alia, the following: role; > Decisions relating to the strategic objectives and > working with the Chairman, other Directors and overall management of the Company, including the shareholders to resolve major issues; and appointment or removal of the Portfolio Manager > being available to shareholders and other Directors and other service providers, establishing the to address any concerns or issues they feel have not investment objectives, strategy and performance been adequately dealt with through the usual comparators, the permitted types or categories of channels of communication (i.e. through the investments, the proportion of assets that may be Chairman or the Portfolio Manager). invested in them, and the markets in which transactions may be undertaken. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 40 Governance Corporate Governance continued > Requirements under the Companies Act 2006, signatory to the UK Stewardship Code. First Sentier including approval of the half yearly and annual Investors produce an annual Responsible Investment and financial statements, recommendation of the final Stewardship Report which is published on their website dividend (if any), declaration of any interim dividends, www.firstsentierinvestors.com/UK/en/private/ the appointment or removal of the Company responsible-investment/responsible-investment- Secretary, and determining the policy on share resource-centre.html. issuance and buybacks. The Board has delegated authority to Stewart Investors > Matters relating to certain Stock Exchange (as Portfolio Manager) to engage with companies held in requirements and announcements, the Company’s the portfolio and to vote the shares owned by the internal controls, and the Company’s corporate Company. governance structure, policies and procedures. Stewart Investors have a strong commitment to effective > Matters relating to the Board and Board committees, stewardship and their approach, including their including the terms of reference and membership of consideration of environmental, social and governance the committees, and the appointment of directors issues, is set out in their Stewardship and Corporate (including the Chairman and the SID). Engagement policy which can be found on their website www.stewartinvestors.com. During the year, the Board Day-to-day portfolio management is delegated to reviewed quarterly reports from Stewart Investors on Stewart Investors and operational management is their voting and engagement and is satisfied with their delegated to Frostrow. approach. The Board takes responsibility for the content of Independent Professional Advice communications regarding major corporate issues, even The Board has formalised arrangements under which the if Stewart Investors or Frostrow acts as spokesman. The Directors, in the furtherance of their duties, may seek Board is kept informed of relevant promotional material independent professional advice at the Company’s that is issued by Stewart Investors. expense. No such advice was sought during the year. Relationship with the Portfolio Manager Company Secretary A representative from Stewart Investors is in attendance The Directors have access to the advice and services of a at each Board meeting to provide updates and address specialist investment trust company secretary, Frostrow questions on specific matters. Capital LLP, which is responsible for advising the Board The Engagement and Remuneration Committee on all governance matters. The Company Secretary evaluates Stewart Investors’ performance and suitability ensures governance procedures are followed and that as well as reviewing the terms of the Portfolio the Company complies with applicable statutory and Management Agreement at least annually. The outcome regulatory requirements. of this year’s review is described on pages 46 and 47. Composition, Succession and Evaluation Relationship with Other Service Providers Board Evaluation Representatives from Frostrow are in attendance at each During the year an internal review of the Board, its Board meeting to address questions on the Company’s committees and individual Directors (including each operations, administration and governance requirements. Director’s independence) was carried out by the Board, The Engagement and Remuneration Committee monitors in the form of electronic performance evaluation and evaluates all of the Company’s other service providers, questionnaires. including Frostrow, and also the Depositary, the Custodian, The review concluded that the Board worked in a the Registrar and the Broker. At the most recent review in collegiate, efficient and effective manner, and there were January 2023, the Committee concluded that all the service no material weaknesses or concerns identified. providers were performing well and should be retained on their existing terms and conditions. All Directors submit themselves for election and annual re-election thereafter by shareholders (unless they intend Stewardship and the Exercise of Voting Powers to retire from the Board). The particular contribution of The Board and the Portfolio Manager support the each individual Director is summarised on pages 34 and 35. UKStewardship Code, which sets out the principles of Following the evaluation process, the Board recommends effective stewardship by institutional asset owners and that shareholders vote in favour of the Directors’ election/ asset managers. Stewart Investors (under their legal re-election at the forthcoming AGM. parent entity name, First Sentier Investors) is a Tier1 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 41 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. Succession Planning Appointments to the Board The Board, meeting as the Nomination Committee, The Nomination Committee considers annually the skills regularly considers its structure and recognises the need possessed by the Directors and identifies any skill for progressive refreshment. During the year, the Board shortages to be filled by new directors. The rules appointed Andrew Impey as a non-executive Director governing the appointment and replacement of directors ahead of the planned retirement of the Chairman, James are set out in the Company’s Articles of Association and Williams. Please refer to the Chairman’s Statement the aforementioned succession planning policy. Where beginning on page 6 for further information. The Board the Board appoints a new director during the year, that recognises that there will need to be further changes in director will stand for election by shareholders at the next the coming years as certain Directors come to the end of AGM. The minimum number of directors is two and the their tenure. maximum is seven. When considering new appointments, the Board endeavours to ensure that it has the capabilities The Board has an approved succession planning policy to required to be effective and oversee the Company’s ensure that (i) there is a formal, rigorous and transparent strategic priorities. This will include an appropriate range, procedure for the appointment of new directors; and balance and diversity of skills, experience and knowledge. (ii)the Board is comprised of members who collectively The Company is committed to ensuring that any vacancies display the necessary balance of professional skills, arising are filled by the best qualified candidates. experience, length of service and industry knowledge. The policy is reviewed annually and at such other times During the year, Andrew Impey was appointed to the as circumstances may require. Board. The Board engaged the services of a specialist recruitment agency, Trust Associates, to assist with the Policy on the Tenure of the Chairman and other search process. Trust Associates sourced and prepared a Non-Executive Directors diverse long list of potential candidates for consideration by The tenure of each independent, non-executive director, the Nomination Committee. The Nomination Committee including the Chairman, is not ordinarily expected to then selected a short list of candidates to interview. exceed nine years. It should be noted that, in practice, Following the interviews, a recommendation was made to the date of departure from the Board may be the date of the Board that Mr Impey be appointed as a Director. Trust the Annual General Meeting following this anniversary. Associates has no other connection with the Company. However, the Board has agreed that the tenure of the Chairman may be extended provided such an extension Board Diversity is conducive to the Board’s overall orderly succession. The Board supports the principle of boardroom diversity, The Board believes that this more flexible approach to of which gender and ethnicity are two important aspects. the tenure of the Chairman is appropriate in the context The Company’s policy is that the Board and its committees of the regulatory rules that apply to investment should be comprised of directors with a diverse range of skills, companies, which ensure that the chair remains knowledge and experience and that appointments to the independent after appointment, while being consistent Board should be made on merit, against objective criteria, with the need for regular refreshment and diversity. including diversity in its broadest sense. The objective of the policy is to ensure there is a broad range of approaches, Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 42 Governance Corporate Governance continued backgrounds, skills, knowledge and experience represented The Board will give due regard to the new diversity on the Board. To this end, achieving a diversity of perspectives targets in the Listing Rules, but will not discriminate and backgrounds on the Board is a key consideration in any unfairly on the grounds of gender, ethnicity, age, sexual director search process. The Board encourages any orientation, disability or socio-economic background recruitment agencies it engages to find a diverse range of when considering the appointment of Directors. candidates that meet the criteria agreed for each Education, professional background, and cognitive and appointment and, from the shortlist, aims to ensure that a personal strengths are considered against the diverse range of candidates is brought forward for interview. specification prepared for each appointment. The Directors have noted that the last recruitment The Board has noted the FCA’s new Listing Rules which agency engaged by the Board, Trust Associates, has require companies to report against the following become a signatory of The Standard Voluntary Code of diversity targets: Conduct for Executive Search Firms. The code of a) At least 40% of individuals on the board are women; conduct lays out steps for search firms to follow across the search process, from accepting a brief through to b) At least one of the senior board positions is held by a induction. The key areas of focus include increasing the woman; and proportion of women and broadening ethnic diversity. c) At least one individual on the board is from a minority ethnic background. 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. . 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 43 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. Asshown 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 page56 sets out the levels of remuneration for each Director and explains how Directors’ remuneration is determined. Frostrow Capital LLP Company Secretary 9 May 2023 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 44 Governance ## Report of the ## Directors The Directors present this Annual Report on the affairs The measures used for the year under review have of the Company together with the audited financial remained consistent with the prior year. statements and the Independent Auditor’s Report for Definitions of the terms used and the basis of their the year ended 31 January 2023. calculation are set out in the Glossary beginning on page79. ### Business and Status of the | Company | Annual General Meeting | | --- | --- | | The Company is registered as a public limited company in | THE FOLLOWING INFORMATION TO BE DISCUSSED | | Scotland (Registered Number SC091052) and is an | AT THE FORTHCOMING ANNUAL GENERAL | | investment company within the terms of Section 833 of | MEETING IS IMPORTANT AND REQUIRES YOUR | | the Companies Act 2006 (the “Act”). Its shares are listed | IMMEDIATE ATTENTION. | on the premium segment of the Official List and traded If you are in any doubt about the action you should on the main market of the London Stock Exchange, which take, you should seek advice from your stockbroker, is a regulated market as defined in Section 1173 of the bank manager, solicitor, accountant or other financial Act. adviser authorised under the Financial Services and The Company has been accepted as an investment trust Markets Act 2000 (as amended). If you have sold or under Section 1158 of the Corporation Taxes Act 2010 transferred all of your ordinary shares in the Company, and Part 2 Chapter 1 of Statutory Instrument you should pass this document, together with any 2011/2999. This approval relates to accounting periods other accompanying documents, including the form of commencing on or after 1 February 2012. The Directors proxy, at once to the purchaser or transferee, or to the are of the opinion that the Company has conducted its stockbroker, bank or other agent through whom the affairs so as to be able to retain such approval. sale or transfer was effected, for onward transmission to the purchaser or transferee. It is the Directors’ intention that the Company should continue to manage its affairs so as to be a qualifying Resolutions relating to the following items of special investment for inclusion in the stocks and shares business will be proposed at the forthcoming Annual components of an Individual Savings Account (“ISA”) and General Meeting. Junior ISA. Resolution 12 Authority to amend the Investment Policy The Company is a member of the Association of Resolution 13 Authority to allot shares Investment Companies (“AIC”). Resolution 14 Authority to disapply pre-emption rights ### Alternative Performance Measures Resolution 15 Authority to buy back shares The financial statements (on pages 66 to 78) set out the required statutory reporting measures of the Company’s Resolution 16 Authority to hold General Meetings (other financial performance. In addition, the Board assesses the than the AGM) on at least 14 clear days’ notice Company’s performance against a range of criteria which are Resolution 17 Authority to increase the limit on the viewed as particularly relevant for investment trusts. These aggregate fees payable to the Directors measures are summarised on page 3 and explained in greater detail in the Strategic Report, under the heading ‘Key The full text of the resolutions can be found in the Notice Performance Indicators’ on pages 23 to 24. The Directors of Annual General Meeting on pages 98 to 102. believe that these measures enhance the comparability of Explanatory notes regarding the resolutions can be information between reporting periods and aid investors in found on pages 103 to 105. understanding the Company’s performance. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Governance 45 ## 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 9 June 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). No shares 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 £14.8 billion in assets under management as at 31 December 2023. Stewart Investors are engaged under the terms of a Portfolio Management Agreement (the "PMA") effective from 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 31 January 2023. 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 £20.1 billion 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 46 Governance Report of the Directors continued Company and Frostrow (the "AIFM Agreement"). The AIFM Agreement assigns to Frostrow overall responsibility to manage the Company, subject to the supervision, review and control of the Board, and ensures that the relationship between the Company and Frostrow is compliant with the requirements of the AIFMD. Frostrow, under the terms of the AIFM Agreement provides, *inter alia*, the following services: - risk management services; - administrative and secretarial services; - advice and guidance in respect of corporate governance requirements; - maintenance of the Company's accounting records; - preparation and dispatch of the annual and half yearly reports; and - ensuring compliance with applicable tax, legal and regulatory requirements. Under the AIFM Agreement, Frostrow receives a fixed fee of £75,000 per annum plus 0.11% per annum of net assets up to £250 million, plus 0.075% per annum of net assets in excess of £250 million. The AIFM Agreement is terminable on six months' notice given by either party. Further details of the fees payable to Stewart Investors and Frostrow Capital LLP during the year are set out in note 3 to the financial statements on page 70. # Depositary and Custodian The Board resolved to appoint J.P. Morgan Europe Limited (the "Depositary") as the Company's depositary in accordance with the AIFMD on the terms and subject to the conditions of the depositary agreement between the Company, Frostrow and the Depositary (the "Depositary Agreement"), with effect from 30 April 2021. The Depositary provides the following services, *inter alia*, under its agreement with the Company: - safekeeping and custody of the Company's custodial investments and cash; - processing of transactions; and - foreign exchange services. The Depositary must take reasonable care to ensure that the Company is managed in accordance with the Financial Conduct Authority's Investment Funds Sourcebook, the AIFMD and the Company's Articles of Association. Under the terms of the Depositary Agreement, the Depositary is entitled to receive an annual fee of the higher of £30,000 or 0.015% of the net assets of the Company up to £150 million, 0.0125% of the net assets in excess of £150 million and up to £300 million, 0.01% of the net assets in excess of £300 million and up to £500 million and 0.005% of the net assets in excess of £500 million. The Depositary has delegated the custody and safekeeping of the Company's assets to JPMorgan Chase Bank N.A., London branch (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 90 days if terminated by the Company and 120 days if terminated by the Depositary. # Portfolio Manager and AIFM Evaluation and Re-Appointment The review of the performance of Stewart Investors as Portfolio Manager and Frostrow Capital LLP as AIFM is a continuous process carried out by the Board and the Engagement and Remuneration Committee (the "ERC"), with a formal evaluation being undertaken each year. As part of this process the Board monitors the services provided by Stewart Investors and Frostrow and receives regular reports and views from them. The Board also receives comprehensive performance measurement reports to enable it to determine whether or not the Performance Objective set by the Board has been met. The ERC formally reviewed the appointment of Stewart Investors in January 2023 with a recommendation being made to the Board to continue their appointment on the existing terms. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Governance 47 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 31 January 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. Each Director is indemnified against the costs of defending any criminal or civil proceedings or any claim by the Company or a regulator as they are incurred provided that where the defence is unsuccessful the Director must repay those defence costs to the Company. The indemnities are qualifying third party indemnity provisions for the purposes of the Companies Act 2006. A copy of each deed of indemnity is available for inspection at Frostrow's offices during normal business hours and will be available for inspection at the AGM. ## Articles of Association Amendment of the Company's Articles of Association requires a special resolution to be passed by shareholders. The Directors have not proposed any changes to the Articles of Association this year. ## Substantial Interests in Share Capital As at 31 January 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 48 Governance Report of the Directors continued ## Modern Slavery Act 2015 The Company does not provide goods or services in the normal course of business, and as a financial investment vehicle, does not have customers. Therefore, the Directors do not consider that the Company is required to make a statement under the Modern Slavery Act 2015 in relation to slavery or human trafficking. The Company's suppliers are typically professional advisers and the Company's supply chains are considered to be low risk in this regard. ## Anti-Bribery and Corruption Policy The Board has adopted a zero tolerance approach to instances of bribery and corruption. Accordingly, it expressly prohibits any Director or associated persons when acting on behalf of the Company, from accepting, soliciting, paying, offering or promising to pay or authorise any payment, public or private, in the United Kingdom or abroad to secure any improper benefit for themselves or for the Company. The Board applies the same standards to its service providers in their activities for the Company. A copy of the Company's Anti Bribery and Corruption Policy can be found on its website at www.pacific-assets.co.uk. The policy is reviewed annually by the Audit Committee. ## Prevention of the Facilitation of Tax Evasion In response to the implementation of the Criminal Finances Act 2017, the Board adopted a zero-tolerance approach to the criminal facilitation of tax evasion. A copy of the Company's policy on preventing the facilitation of tax evasion can be found on the Company's website www.pacific-assets.co.uk. The policy is reviewed annually by the Audit Committee. ## Global Greenhouse Gas Emissions The Company is an investment trust, with no employees or premises, nor has it any financial or operational control of the assets it owns. It has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Reports and Directors' Reports) Regulations 2013 or the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, including those within the Company's underlying investment portfolio. The Company consumed less than 40,000 kWh of energy during the year and therefore is exempt from the disclosures required under the Streamlined Energy and Carbon Reporting criteria. ## Political Donations The Company has not made and does not intend to make any political donations. ## Corporate Governance The Corporate Governance report, which includes the Company's corporate governance policies and forms part of the Report of the Directors, is set out on pages 36 to 43. ## Common Reporting Standard ("CRS") CRS is a global standard for the automatic exchange of information commissioned by the Organisation for Economic Cooperation and Development and incorporated into UK law by the International Tax Compliance Regulations 2015. CRS requires the Company to provide certain additional details to HMRC in relation to certain shareholders. The reporting obligation began in 2016 and is an annual requirement. The Registrar, Equiniti, has been engaged to collate such information and file the reports with HMRC on behalf of the Company. ## UK Sanctions The Board has made due diligence enquiries of the service providers that process the Company's shareholder data, to ensure the Company's compliance with the UK sanctions regime. The relevant service providers have confirmed that they check the Company's shareholder data against the UK sanctions list on a daily basis. At the date of this report, no sanctioned individuals had been identified on the Company's shareholder register. The Board notes that stockbrokers and execution-only platforms also carry out their own due diligence. By order of the Board Frostrow Capital LLP Company Secretary 9 May 2023 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 49 ## Statement ## of Directors’ ## Responsibilities The Directors are responsible for preparing the Annual Act2006. They are also responsible for safeguarding the Report and the financial statements in accordance with assets of the Company and hence for taking reasonable applicable law and regulations. steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring Company law requires the Directors to prepare financial that the Annual Report and financial statements, taken statements for each financial year. Under that law they as a whole, are fair, balanced, and understandable and are required to prepare the financial statements in provide the information necessary for shareholders to accordance with United Kingdom Generally Accepted assess the Company’s performance, business model and Accounting Practice, including FRS 102 ‘The Financial strategy. Reporting Standard applicable in the UK and the Republic of Ireland’. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Under company law, the Directors must not approve the Directors’ Report, Directors’ Remuneration Report and financial statements unless they are satisfied that they Corporate Governance Statement which comply with give a true and fair view of the state of affairs of the that law and those regulations. Company and of the profit or loss of the Company for that period. In preparing these financial statements, the The Directors are responsible for ensuring the Annual Directors are required to: Report and the financial statements are made available on the Company’s website, which is maintained by the > select suitable accounting policies and then apply Portfolio Manager. Financial statements are published them consistently; on the Company’s website in accordance with legislation > make judgements and accounting estimates that are in the United Kingdom governing the preparation and reasonable and prudent; dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance > state whether applicable UK Accounting Standards and integrity of the Company’s website is the have been followed, subject to any material responsibility of the Directors. The Directors’ departures disclosed and explained in the financial responsibility also extends to the ongoing integrity of the statements; financial statements contained therein. > prepare the financial statements on a going concern ### basis unless it is inappropriate to presume that the Disclosure of Information to the Company will continue in business; and ### Auditor > prepare a directors’ report, a strategic report and a The Directors who held office at the date of approval of directors’ remuneration report which comply with this report confirm that, so far as they are each aware, the requirements of the Companies Act 2006. there is no relevant audit information of which the The Directors are responsible for keeping adequate Company’s auditor is unaware; and each Director has accounting records that are sufficient to show and taken all the steps that he/she might reasonably be explain the Company’s transactions and disclose with expected to have taken as a Director to make himself/ reasonable accuracy at any time the financial position of herself aware of any relevant audit information and to the Company and enable them to ensure that the establish that the Company’s auditor is aware of that financial statements comply with the Companies information. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 50 Governance Statement of Directors’ Responsibilities continued ### Responsibility Statement of the ### Directors in respect of the Annual ### Financial Report We confirm that to the best of our knowledge: > the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and the return of the Company for the year ended 31January2023; 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 51 ## Audit Committee ## Report ### Introduction from the Chair ### I am pleased to present my seventh Audit Committee report ### to shareholders, for the year ended 31January 2023. combination of financial, investment and other relevant ### Composition experience. The experience of the Committee members The Committee comprises all of the Company’s can be assessed from the Directors’ biographies set out independent non-executive Directors. As a result, on pages 34 and 35. theCommittee comprises the whole Board. The Committee met three times during the year with all At least one member of the Committee has recent and members attending each meeting. relevant financial experience and the Committee as a whole has competence relevant to the investment trust ### Role and Responsibilities sector. I am a Fellow of the Institute of Chartered A comprehensive description of the Committee’s role, its Accountants in England and Wales and I chair the audit duties and responsibilities, can be found in its terms of committees of three other companies, one of which is an reference, which are available on the Company’s website investment trust; the other Committee members have a www.pacific-assets.co.uk. ### 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), JPMorgan (the Custodian) and other service providers. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 52 Governance 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 and an analysis of portfolio liquidity, which estimated Audit Regulation liquidation of c.55% of the portfolio within seventrading The Committee has not had to consider any new audit days (based on current market volumes). Stress testing regulations in the past year. It has, however, taken note was also conducted as described below. Further of reporting guidance and thematic reviews published by information is provided on page 32. the FRC and determined how to apply any relevant best Viability Statement practice to the Company’s reporting. The Committee The Committee considered, again on behalf of the Board, also reviews the outcomes of the FRC’s annual Audit the longer-term viability of the Company in connection Quality Reviews and discusses the findings with our with the Board’s statement in the Report of the Directors Auditor. (see page 32). The Committee reviewed the Company’s The Committee has noted the government response to financial position (including its cash flows and liquidity the consultation on strengthening the UK’s audit, position), the principal risks and uncertainties and the corporate reporting and corporate governance systems. results of stress tests. We await confirmation of the schedule for implementing The stress tests modelled the impact of one or more of the reforms which will create a new Audit, Reporting and the principal risks occurring. The tests assumed Governance Authority, amongst other changes. substantial falls in the Company’s NAV and reductions in Recognition of Revenue from Investments the liquidity of the portfolio and then modelled the Frostrow confirmed to the Committee, as in previous effect this would have on the Company’s expenses and years, that all dividends had been accounted for the Company’s ability to meet its liabilities as they fell correctly. It was noted that there was an appropriate due. Based on the results of these tests the Committee segregation of duties between Frostrow and JPMorgan. concluded it was reasonable for the Board to expect that the Company will be able to continue in operation and Accounting Policies meet its liabilities as they fall due over the next five The Committee ensured that the accounting policies set financial years. out in the notes to the financial statements were applied consistently throughout the year. In light of there being Internal Controls and Risk Management no unusual transactions during the year or other possible The Board has overall responsibility for the Company’s reasons, there were no changes to these policies. risk management and internal control systems and for reviewing their effectiveness. Operational responsibility Going Concern is delegated to the Audit Committee. The Company’s The Audit Committee, at the request of the Board, internal control structure is summarised on page 37. The considered the ability of the Company to adopt the going Company applies the guidance published by the Financial concern basis for the preparation of the financial Reporting Council on internal controls. Internal control statements. Having reviewed the Company’s financial systems are designed to manage, rather than eliminate, position, the Committee is satisfied that it is appropriate the risk of failure to achieve the business objective and for the Board to prepare the financial statements for the can provide only reasonable and not absolute assurance year ended 31 January 2023 on a going concern basis. against material misstatement or loss. These controls aim to ensure that the assets of the Company are The Committee’s review of the Company’s financial safeguarded, that proper accounting records are position included consideration of the cash and cash maintained, and that the Company’s financial equivalents position; the diversification of the portfolio; information is reliable. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 53 A description of the principal risks facing the Company Investment Trust Status and an explanation of how they are managed is provided in The Committee sought and received confirmation from the Strategic Report on pages 24 to 29. The Directors have Frostrow that the Company continues to comply with a robust process for identifying, evaluating and managing Section 1158 of the Corporation Tax Act 2010, so that its the risks faced by the Company, including emerging risks, status as an investment trust is maintained. which are recorded in a risk matrix. The Committee Withholding Tax reviewed the risk matrix at each of its three meetings The Committee monitored the reclamation of during the year. One of the Committee meetings was a withholding tax, receiving regular updates from Frostrow dedicated meeting to evaluate the Company’s risks, on the process and the appointment of specialist local identify emerging risks, and discuss the Board’s approach agents. In the year under review, Grant Thornton LLP to monitoring and managing them. The Audit Committee, provided services to the Company as tax agents in on behalf of the Board, assesses the likelihood of Taiwan, Ernst & Young in India and S.F.Ahmed & Co. in occurrence and the possible impact of each risk. The Bangladesh. Committee then records the mitigating controls inplace. Taxation As an externally managed investment trust, the The Committee has been monitoring the provision for Company is reliant on the operational systems of its Indian capital gains tax, which has increased to service providers. Therefore, the Audit Committee also £9,750,000 as at 31January 2023 (2022: £8,395,000), examines internal control reports from the Company’s receiving regular updates on the position. A local tax principal service providers. The Committee also spoke specialist (Ernst & Young LLP) has been appointed to with members of the Portfolio Manager’s risk ensure that tax returns and any tax due are calculated management and investment compliance teams to accurately and in line with the relevant legislation. ensure their processes remain robust. The Audit Committee then reports its findings to the Board. Internal Audit The Committee reviewed the effectiveness of the The Committee considered whether there was a need Company’s risk management and internal controls for the Company to have an internal audit function. systems during the year. There were no changes to the Asthe Company delegates its day-to-day operations to Company’s risk management processes during the year third parties and has no employees, the Committee and no significant failings or weaknesses were identified. concluded that there was no such need. Following its annual review of internal controls reports ### Other Activities During the Year from Stewart Investors, Frostrow, JPMorgan and In addition to carrying out its principal duties, the Equiniti (the Registrar), the Committee concluded that Committee also reviewed: there were no significant control weaknesses or other issues that were required to be brought to the attention > the arrangements put in place by the Company’s of the Board. The Committee is satisfied that appropriate principal service providers to address cyber security; systems have been in place for the year under review and > the Committee’s terms of reference; up to the date of approval of this report. > compliance reports submitted by Frostrow and Half Year Report Stewart Investors; The Committee reviewed the Half Year Report including > Stewart Investors’ list of approved brokers, the unaudited financial statements, to ensure that the commission rates and the amount of commission paid accounting policies were consistent with those applied in by the Company throughout the year; the annual financial statements and that the report portrayed a fair, balanced and understandable account > the Company’s anti-bribery and corruption policy; of the period. > the Company’s commitment to the prevention of the Depositary criminal facilitation of tax evasion; and During the year, the Committee reviewed reports from > the Company’s audit tender guidelines. 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 54 Governance Audit Committee Report continued Independence and Effectiveness ### External Auditor The Committee evaluated the independence of the Appointment and Tenure Auditor and the effectiveness of the external audit. In BDO LLP (“BDO”) was the Auditor for the financial year order to fulfil this responsibility, the Committee and this was their third audit of the Company. reviewed: Peter Smith was the audit partner for the financial year > the senior audit personnel in the audit plan, in order under review and he has confirmed BDO’s willingness to to ensure that there were sufficient, suitably continue to act as Auditor for the forthcoming financial experienced staff with knowledge of the investment year. BDO’s re-appointment is subject to shareholder trust sector working on the audit; approval at the next Annual General Meeting (“AGM”) to be held in July, and details can be found in the Notice of > the steps the Auditor takes to ensure its AGM beginning on page 98. independence and objectivity; As a public company listed on the London Stock > the statement by the Auditor that they remain Exchange, the Company is subject to mandatory auditor independent within the meaning of the relevant rotation requirements. Based on these requirements, regulations and their professional standards; another tender process will be conducted no later than > the extent of any non-audit services provided by the 2030. The Committee will, however, continue to consider Auditor (there were none during the year under annually the need to go to tender for audit quality, review); remuneration or independence reasons. > the Company’s policy on former employees of the The Audit Auditor (and other service providers) joining the The Committee reviewed BDO’s audit plan on Board; 22September 2022. The review considered, inter alia, the scope of the audit, the level of materiality, the audit > the Auditor’s fulfilment of the agreed audit plan, risks identified by BDO, the Auditor’s approach to testing including their ability to communicate with the portfolio, and pertinent regulatory developments. management and to resolve any issues promptly and No modifications were required to the audit approach. satisfactorily; The Committee met with BDO on 22 March 2023 to > the presentation of the audit findings; and discuss the progress of the audit and the draft Annual Report. The Committee then met BDO on 28 April 2023 > feedback from BDO and Frostrow as the AIFM and to review formally the outcome of the audit. Company Secretary on their working relationship. The Auditor was provided with an opportunity to meet The Committee is satisfied with the Auditor’s with the Committee without the AIFM or the Portfolio independence and the effectiveness of the audit process. Manager being present. No concerns were raised by the Auditor or the Audit Committee in relation to the service Non-Audit Services provided by the AIFM, the Portfolio Manager, or any other BDO LLP did not carry out any non-audit work during third-party service provider. There were no material or the year. Pursuant to the Company’s non-audit services significant adverse matters brought to the Audit policy, the Committee is required to approve the Committee’s attention in respect of the 2023 audit, which engagement of the Auditor for any non-audit work. should be brought to shareholders’ attention. Acopy of the Company’s non-audit services policy can be found on the Company’s website at Remuneration www.pacific-assets.co.uk. The Committee approved a fee of £44,350 for the audit of the year ended 31 January 2023 (2022: £36,500). Thisrepresents 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 55 ### 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. Iam 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 56 Governance # Directors' Remuneration Report ![img-0.jpeg](img-0.jpeg) ## 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"). 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. It reviews 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, if applicable. 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. ## Annual Percentage Change in Directors' Remuneration | Director | 2024 | | 2023 | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Fee Level (per annum) (projected) | 2024 % Change | Fee Level (per annum) | 2023 % Change | Fee Level (per annum) | 2022 % Change | Fee Level (per annum) | 2021 % Change | | 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 | Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 57 ### 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 ### Loss of Office Directors’ Interests in Shares Directors do not have service contracts with the ### (audited) Company but are engaged under letters of The Directors’ interests in the share capital of the appointment. These specifically exclude any Company at the year end are shown in the table below: entitlement to compensation upon leaving office for whatever reason. Number of shares held 31 January 31 January ### Relative Cost of Directors’ 2023 2022 ### Remuneration The bar chart below shows the comparative cost of James Williams Beneficial 56,000 50,000 Directors’ fees compared with the level of dividend Charlotta Ginman Beneficial 13,789 13,789 distribution and Company expenses for the years Sian Hansen Beneficial 15,880 13,907 ended 31 January 2022 and 2023. Robert Talbut Beneficial 9,611 9,611 Edward Troughton Beneficial 18,357 18,357 ƔĺƏ Andrew Impey Beneficial 10,000 – ƓĺƏ Total 123,637 105,664 ƒĺƏ There have been no changes to the Directors’ holdings in the Company’s shares since the year end. ƑĺƏ None of the Directors is required to own shares in the ƐĺƏ Company. ƏĺƏ | | bu;1\|ouvĽ | r;mv;v | bb7;m7v | bu;1\|ouvĽ | r;mv;v | bb7;m7v | | --- | --- | --- | --- | --- | --- | --- | | ѵĺƏ | ;;v | ƑƏƑƒ | ƑƏƑƒ | ;;v | ƑƏƑƑ | ƑƏƑƑ | | | ƑƏƑƒ | | | ƑƏƑƑ | | | Ŭl Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 58 Governance Directors' Remuneration Report continued ## Total Shareholder Return for the Ten Years to 31 January 2023 ![img-1.jpeg](img-1.jpeg) 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 28 June 2022. Of the votes cast, 99.92% were in favour and 0.08% were against. ### 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. There are 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. The Company 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 59 ## Independent ## Auditor’s Report ### to the Members of Pacific Assets Trust plc Independence ### Opinion on the financial Following the recommendation of the Audit Committee, ### statements we were appointed by the Board of Directors on In our opinion the financial statements: 17November 2020 to audit the financial statements for the year ending 31 January 2021 and subsequent > give a true and fair view of the state of the Company’s financial periods. The period of total uninterrupted affairs as at 31 January 2023 and of its profit for the engagement including retenders and reappointments is year then ended; three years, covering the years ending 31 January 2021 > have been properly prepared in accordance with to 31 January 2023. We remain independent of the United Kingdom Generally Accepted Accounting Company in accordance with the ethical requirements Practice; and that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied > have been prepared ins accordance with the to listed public interest entities, and we have fulfilled our requirements of the Companies Act 2006. other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that We have audited the financial statements of Pacific standard were not provided to the Company. Assets Trust plc (the “Company”) for the year ended 31January 2023 which comprise the Income Statement, Conclusions relating to going concern the Statement of Changes in Equity, the Statement of In auditing the financial statements, we have concluded Financial Position and notes to the financial statements, that the Directors’ use of the going concern basis of including a summary of significant accounting policies. accounting in the preparation of the financial statements The financial reporting framework that has been applied is appropriate. Our evaluation of the Directors’ in their preparation is applicable law and United assessment of the Company’s ability to continue to adopt Kingdom Accounting Standard, including FRS 102, The the going concern basis of accounting included: Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted > Evaluating the appropriateness of the Directors’ Accounting Practice). method of assessing the going concern in light of market volatility and the present uncertainties in Basis for opinion economic recovery created by the ongoing geo- We conducted our audit in accordance with International political issues by reviewing the information used by Standards on Auditing (UK) (ISAs (UK)) and applicable the Directors in completing their assessment; law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the > Challenging management’s assumptions and audit of the financial statements section of our report. judgements made with regards to stress testing Webelieve that the audit evidence we have obtained is forecasts including whether cash flow assumptions sufficient and appropriate to provide a basis for our used were appropriate,; validating data assumptions opinion. Our audit opinion is consistent with the used, that could have a material impact, by agreeing additional report to the Audit Committee. 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 60 Governance Independent Auditor’s Report continued Based on the work we have performed, we have not An overview of the scope of our audit identified any material uncertainties relating to events or Our audit was scoped by obtaining an understanding of conditions that, individually or collectively, may cast the Company and its environment, including the significant doubt on the Company’s ability to continue as Company’s system of internal control, and assessing the a going concern for a period of at least twelve months risks of material misstatement in the financial from when the financial statements are authorised for statements. We also addressed the risk of management issue. override of internal controls, including assessing whether there was evidence of bias by the Directors that may In relation to the Company’s reporting on how it has have represented a risk of material misstatement. applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to Key audit matters the Directors’ statement in the financial statements Key audit matters are those matters that, in our about whether the Directors considered it appropriate professional judgement, were of most significance in our to adopt the going concern basis of accounting. audit of the financial statements of the current period and include the most significant assessed risks of Our responsibilities and the responsibilities of the material misstatement (whether or not due to fraud) that Directors with respect to going concern are described in we identified, including those which had the greatest the relevant sections of this report. effect on: the overall audit strategy, the allocation of Overview resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the 2023 2022 context of our audit of the financial statements as a Key audit Valuation and ownership   whole, and in forming our opinion thereon, and we do not matters of quoted investments provide a separate opinion on these matters. Revenue recognition   Materiality Company financial statements as a whole £4.73m (2022: £4.5m) based on 1% (2022: 1%) of net assets How the scope of our audit addressed Key audit matter the key audit matter Valuation and The investment portfolio at the We responded to this matter by testing the valuation and ownership of year end comprised of quoted ownership of the whole portfolio of quoted investments. quoted equity investments. Weperformed the following procedures: investments There is a risk that the prices used > Confirmed that the bid price has been used by agreeing to (Note 8 to the for the listed investments held by externally quoted prices using our data analytics software; financial the Company are not reflective of statements) > Checked that there are no contra indicators, such as fair value and the risk that errors made in the recording of liquidity considerations, to suggest the bid price is not the investment holdings result in the most appropriate indication of fair value by considering incorrect reflection of the realisation period for individual holdings; investments owned by the > Confirmed the foreign exchange rates used in the Company. valuations are appropriate by corroborating these to Therefore we considered the independent sources; valuation and ownership of quoted > Recalculated the valuation by multiplying the number of investments to be the most shares held by the valuation per share; and significant audit area as the quoted investments also > Obtained direct confirmation of the number of shares held represent the most significant per equity investment from the custodian, J.P Morgan balance in the financial statements Chase Bank regarding all investments held at the balance and underpin the principal activity sheet date. of the entity. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 61 How the scope of our audit addressed Key audit matter the key audit matter Furthermore, we consider the We also considered the completeness, accuracy and clarity valuation disclosures to be a of investment-related disclosures against the requirements significant area as they are of the relevant accounting standard. expected to be a key area of Key observations: interest for the users of the Based on our procedures performed we did not identify any financial statements. matters to suggest the valuation or ownership of the quoted For these reasons and the equity investments was not appropriate. materiality of the balance in relation to the financial statements as a whole, we considered this to be a key audit matter. Revenue Income arises from overseas We assessed the treatment of dividend income and recognition quoted investments in the form of challenged if these had been appropriately accounted for as overseas dividends and can be income or capital by reviewing the underlying reason for (Note 2 to the volatile but is often a key factor in issue of the dividend and whether it could be driven by a financial demonstrating the performance of capital event. statements) the portfolio. As such there may We analysed the whole population of dividend receipts to be an incentive to recognise identify items for further discussion that could indicate a income as revenue where it is capital distribution, for example where a dividend more appropriately of a capital represents a particularly high yield. None were identified. nature. However, this risk is decreased in light of the capital Key observations: return objective of the Company. Based on our procedures performed we found the judgements made by management in determining the Additionally, judgement is allocation of income to revenue or capital to be appropriate. 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. Our application of materiality In order to reduce to an appropriately low level the We apply the concept of materiality both in planning and probability that any misstatements exceed materiality, performing our audit, and in evaluating the effect of we use a lower materiality level, performance misstatements. We consider materiality to be the materiality, to determine the extent of testing needed. magnitude by which misstatements, including omissions, Importantly, misstatements below these levels will not could influence the economic decisions of reasonable necessarily be evaluated as immaterial as we also take users that are taken on the basis of the financial account of the nature of identified misstatements, and statements. the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 62 Governance # 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 having considered a number of factors including the expected total value 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 63 > The Directors’ explanation as to their assessment of > the financial statements and the part of the the Company’s prospects, the period this assessment Directors’ Remuneration Report to be audited are covers and why the period is appropriate. not in agreement with the accounting records and returns; or Other Code provisions > certain disclosures of Directors’ remuneration > Directors’ statement on fair, balanced and specified by law are not made; or understandable; > we have not received all the information and > Board’s confirmation that it has carried out a robust explanations we require for our audit. assessment of the emerging and principal risks; Responsibilities of Directors > The section of the annual report that describes the As explained more fully in the Statement of Directors’ review of effectiveness of risk management and Responsibilities, the Directors are responsible for the internal control systems; and preparation of the financial statements and for being > The section describing the work of the audit satisfied that they give a true and fair view, and for such committee. internal control as the Directors determine is necessary to enable the preparation of financial statements that are Other Companies Act 2006 reporting free from material misstatement, whether due to fraud Based on the responsibilities described below and our or error. work performed during the course of the audit, we are In preparing the financial statements, the Directors are required by the Companies Act 2006 and ISAs (UK) to responsible for assessing the Company’s ability to report on certain opinions and matters as described continue as a going concern, disclosing, as applicable, below. matters related to going concern and using the going concern basis of accounting unless the Directors either Strategic report and Directors’ report intend to liquidate the Company or to cease operations, In our opinion, based on the work undertaken in the or have no realistic alternative but to do so. course of the audit: Auditor’s responsibilities for the audit of the financial > the information given in the Strategic Report and the statements Directors’ report for the financial year for which the Our objectives are to obtain reasonable assurance about financial statements are prepared is consistent with whether the financial statements as a whole are free the financial statements; and from material misstatement, whether due to fraud or > the Strategic Report and the Directors’ report have error, and to issue an auditor’s report that includes our been prepared in accordance with applicable legal opinion. Reasonable assurance is a high level of requirements. assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a In the light of the knowledge and understanding of the material misstatement when it exists. Misstatements can Company and its environment obtained in the course of arise from fraud or error and are considered material if, the audit, we have not identified material misstatements individually or in the aggregate, they could reasonably be in the Strategic Report or the Directors’ report. expected to influence the economic decisions of users taken on the basis of these financial statements. Directors’ remuneration In our opinion, the part of the Directors’ Remuneration Extent to which the audit was capable of detecting Report to be audited has been properly prepared in irregularities, including fraud accordance with the Companies Act 2006. Irregularities, including fraud, are instances of non- Matters on which we are required to report by compliance with laws and regulations. We design procedures in line with our responsibilities, outlined exception above, to detect material misstatements in respect of We have nothing to report in respect of the following irregularities, including fraud. The extent to which our matters in relation to which the Companies Act 2006 procedures are capable of detecting irregularities, requires us to report to you if, in our opinion: including fraud, is detailed below: > adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 64 Governance Independent Auditor’s Report continued Non-compliance with laws and regulations > Review of minutes of meetings of Those Charged Based on: With Governance for any known or suspected instances of fraud; and > Our understanding of the Company and the industry in which it operates; > Discussion amongst the engagement team as to how and where fraud might occur in the financial > Discussion with management and Those Charged statements. With Governance; and Based on our risk assessment, we considered the areas > Obtaining and understanding of the Company’s most susceptible to be management override of controls. policies and procedures regarding compliance with laws and regulations. Our procedures in respect of the above included: We considered the significant laws and regulations to be > The procedures set out in the Key Audit Matters Companies Act 2006, the FCA listing and DTR rules, the section above; principles of the AIC Code of Corporate Governance, > Recalculating investment management fees in total; industry practice represented by the AIC SORP, the applicable accounting framework, and qualification as an > Obtaining independent confirmation of bank Investment Trust under UK tax legislation as any balances; and non-compliance of this would lead to the Company losing > Testing journals which met a defined risk criteria by various deductions and exemptions from corporation agreeing to supporting documentation and tax. evaluating whether there was evidence of bias by the Our procedures in respect of the above included: Investment Manager and Directors that represented a risk of material misstatement due to fraud. > Agreement of the financial statement disclosures to underlying supporting documentation; We also communicated relevant identified laws and regulations and potential fraud risks to all engagement > Enquiries of management and Those Charged With team members who were all deemed to have appropriate Governance relating to the existence of any non- competence and capabilities and remained alert to any compliance with laws and regulations; indications of fraud or non-compliance with laws and > Reviewing minutes of meetings of Those Charged regulations throughout the audit. With Governance throughout the period for Our audit procedures were designed to respond to risks instances of non-compliance with laws and of material misstatement in the financial statements, regulations; and recognising that the risk of not detecting a material > Reviewing the calculation in relation to Investment misstatement due to fraud is higher than the risk of not Trust compliance to check that the Company was detecting one resulting from error, as fraud may involve meeting its requirements to retain its Investment deliberate concealment by, for example, forgery, Trust status. misrepresentations or through collusion. There are inherent limitations in the audit procedures performed Fraud and the further removed non-compliance with laws and We assessed the susceptibility of the financial regulations is from the events and transactions reflected statements to material misstatement including fraud and in the financial statements, the less likely we are to considered the fraud risk areas to be revenue recognition become aware of it. and management override of controls. A further description of our responsibilities is available Our risk assessment procedures included: on the Financial Reporting Council’s website at: www.frc. > Enquiry with management and Those Charged With org.uk/auditorsresponsibilities. This description forms Governance regarding any known or suspected part of our auditor’s report. 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Governance ## 65 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). Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 66 Financial Statements # Income Statement for the year ended 31 January 2023 | | Notes | Year ended 31 January 2023 | | | Year ended 31 January 2022 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Financial Statements 67 # Statement of Changes in Equity for the year ended 31 January 2023 | | Note | Ordinary Share Capital £'000 | Share premium £'000 | Capital Redemption reserve £'000 | Special reserve £'000 | Capital reserve £'000 | Revenue reserve £'000 | Total £'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 | 7,009 | 473,662 | The accompanying notes are an integral part of these statements. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 68 Financial Statements # Statement of Financial Position as at 31 January 2023 | | Notes | 2023 | | 2022 | | | --- | --- | --- | --- | --- | --- | | | | £'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 | | 7,009 | | 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 9 May 2023 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) Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Financial Statements ## 69 ## Notes to the Financial ## Statements ### 1. Accounting Policies A summary of the principal accounting policies adopted is set out below or as appropriate within the relevant note to the financial statements. (a) Basis of Accounting These financial statements have been prepared under UK Company Law, FRS 102 ‘The Financial Reporting Standard applicable in the UK and Ireland’, and in accordance with guidelines set out in the Statement of Recommended Practice (‘SORP’), published in July 2022, for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies (‘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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 70 Financial Statements 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 £'000 | 2022 £'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 £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Financial Statements 71 ## 4. Other Expenses | | 2023 £'000 | 2022 £'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 £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'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 page 75. £2,158,000 (2022: £2,202,000) of the charge relates to capital gains tax paid on disposals during the year. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 72 Financial Statements # 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 £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Financial Statements 73 ## 6. Dividends Amounts recognised as distributable to shareholders for the year ended 31 January 2023, were as follows: | | 2023 £'000 | 2022 £'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 page 45. The Board's current policy is to pay dividends only out of revenue reserves. Therefore the amount available for distribution as at 31 January 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 £'000 | 2022 £'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 pence | Capital pence | Total pence | Revenue pence | Capital pence | Total 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 74 Financial Statements Notes to the Financial Statements continued ## 8. Investments | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | **Investments** | | | | Cost at start of year | 290,337 | 267,140 | | Investment holding gains at start of year | 146,646 | 137,574 | | **Valuation at start of year** | **436,983** | **404,714** | | Purchases at cost | 77,305 | 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 in the Income Statement as a capital item. In addition, for financial reporting purposes, fair value measurements are categorised into a fair value hierarchy based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: Level 1 – Quoted prices in active markets. Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data), either directly or indirectly. Level 3 – Inputs are unobservable (i.e. for which market data is unavailable). All investments have been classified as Level 1 (2022: All Level 1). ## 9. Debtors | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Accrued income | 323 | 204 | | Other debtors | 10 | 38 | | | **333** | **242** | Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Financial Statements 75 ## 10. Creditors: Amounts Falling Due Within One Year | | 2023 £'000 | 2022 £'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 £'000 | 2022 £'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 £'000 | 2022 £'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; Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 76 Financial Statements 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 £'000 | Cash £'000 | Debtors £'000 | Creditors £'000 | Investments £'000 | Cash £'000 | Debtors £'000 | Creditors £'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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Financial Statements 77 portfolio by 10%, the impact on the net asset value would have been positive £43.7 million (2022: positive £50.2 million). The calculations are based on the investment portfolio valuation and cash balances as at the year end and are not necessarily representative of the year as a whole. Credit risk Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Portfolio Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum credit risk exposure at the Statement of Financial Position date, and the main exposure to credit risk is via the Custodian which is responsible for the safeguarding of the Company's investments and cash balances. At the reporting date, the Company's financial assets exposed to credit risk amounted to the following: | | 2023 £'000 | 2022 £'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, the Custodian. Bankruptcy or insolvency of the Custodian may cause the Company's rights with respect to securities held by the Custodian to be delayed or limited. The Board monitors the Company's risk as described in the Strategic Report on pages 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 78 Financial Statements Notes to the Financial Statements continued ## 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 pages 45 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 page 45. 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 and 4 on pages 70 and 71. Details of the remuneration and the shareholdings of all Directors can be found on page 57. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 79 ## Glossary of Terms and ## Alternative Performance ## Measures (unaudited) ### AIFMD Gearing The Alternative Investment Fund Managers Directive The term used to describe the process of borrowing (the ‘Directive’) is a European Union Directive that money for investment purposes. The expectation is that entered into force on 22 July 2013. The Directive, which the returns on the investments purchased will exceed the was retained in UK law following the withdrawal of the finance costs associated with those borrowings. UK from the European Union, regulates fund managers There are several methods of calculating gearing and the that manage alternative investment funds (including following has been selected: investment trusts). Total assets less current liabilities (before deducting any Where an entity falls within the scope of the Directive, it prior charges) minus cash/cash equivalents divided by must appoint a single Alternative Investment Fund shareholders’ funds, expressed as a percentage. Manager (‘AIFM’). The core functions of an AIFM are portfolio and risk management. An AIFM can delegate ### MSCI Disclaimer one but not both of these functions. The entity must also The MSCI information (relating to the Index) may only be appoint an independent Depositary whose duties include used for your internal use, may not be reproduced or the following: the safeguarding and verification of redisseminated in any form and may not be used as a ownership of assets; the monitoring of cashflows; and to basis for or a component of any financial instruments or ensure that appropriate valuations are applied to the products or indices. None of the MSCI information is entity’s assets. intended to constitute investment advice or a recommendation to make (or refrain from making) any ### Average Discount kind of investment decision and may not be relied on as The average share price for the period divided by the such. Historical data and analysis should not be taken as average net asset value for the period minus 1. an indication or guarantee of any future performance 2023 2022 analysis, forecast or prediction. The MSCI information is pence pence provided on an “as is” basis and the user of this information assumes the entire risk of any use made of Average share price for the year 335.9 342.3 this information. MSCI, each of its affiliates and each Average net asset value for the year 373.8 369.3 other person involved in or related to compiling, computing or creating any MSCI information Average Discount 10.1% 7.3% (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties ### Bottom Up Approach of originality, accuracy, completeness, timeliness, An investment approach that focuses on the analysis of non‑infringement, merchantability and fitness for a individual stocks rather than the significance of particular purpose) with respect to this information. macroeconomic factors. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, ### Discount or Premium special, incidental, punitive, consequential (including, A description of the difference between the share price without limitation lost profits) or any other damages. and the net asset value per share. The size of the discount (www.msci.com). 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 80 Further Information 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 2023 p | 31 January 2022 p | | --- | --- | --- | | **NAV Total Return** | | | | 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 2023 £'000 | 31 January 2022 £'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 | Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Further Information 81 ## 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 2023 p | 31 January 2022 p | | --- | --- | --- | | Share Price Total Return | | | | 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 82 Further Information ## 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: Sustainable investment means an investment in Pacific Assets Trust plc 2138008U8QPGAESFYA48 an economic activity that contributes to an ## environmental or social Sustainable investment objective objective, provided that the investment does not significantly harm any Did this financial product have a sustainable investment objective? environmental or social objective and that the l l ✖ Yes l l No investee companies ✖ It made sustainable investments It promoted Environmental/Social follow good governance with an environmental objective: (E/S) characteristics and while it practices. 60% did not have as its objective a sustainable investment, it had a in economic activities that The EU Taxonomy is a proportion of ___% of sustainable qualify as environmentally classification system laid investments sustainable under the EU down in Regulation (EU) Taxonomy with an environmental 2020/852 establishing a objective in economic ✖ in economic activities that do list of environmentally activities that qualify as not qualify as environmentally sustainable economic environmentally sustainable sustainable under the EU activities. That Regulation under the EU Taxonomy Taxonomy does not lay down a list of with an environmental socially sustainable objective in economic economic activities. activities that do not qualify as Sustainable investments environmentally sustainable with an environmental under the EU Taxonomy objective might be aligned with the Taxonomy or not. with a social objective ✖ It made sustainable investments It promoted E/S characteristics, with a social objective: 100% 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. 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 83 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 174contributions 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 84 Further Information Template periodic disclosure for the financial products referred to in Article 9 continued 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? Sustainability indicators The Portfolio Manager's Portfolio Explorer tool provides the contribution that each measure how the company makes to climate solutions, human development and the Sustainable sustainable objectives of Development Goals, as well as the investment rationale, key risks and engagement this financial product are topics. Click on the link below to access the tool. attained. 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) Climate change solutions (number of companies contributing to each solution) 10 12 19 21 29 9 15 4 23 | 3 | | | | | 2 | | | 3 | | | | 3 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 19 | | 3 | | | | | 9 | | | 1 | | | | | 7 | | | 7 6 | 7 | | | | 6 | | | | | | | | 6 | | | | | | 5 | | | 10 | 3 | | | | 1 | | | | | | | 9 2 | | | | | | 2 | | | | 9 | | 8 | | | | | | | | | 4 | 6 | | | | | 5 | | 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. Water Circular Energy Human industry | | Buildings | | | | Energy | | | | Finance | | of living | Transport | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | economy/ | | restoration | Housing | | | | Standard | | | | | Nutrition | | | | sanitation | | | | | | | | Education | | | | | Healthcare | | Water and | | | | | | | | | | | | | | | | | | | Food system | | development | | | Information | | | | and hygiene | | | Conservation/ | | | | | | | | | | | | | Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 | | | | Employment | | | | | | | | | | | Direct Contribution | | | | Enabling/Supporting Contribution | | | | | | | | | | | Direct Contribution | | | | Enabling/Supporting Contribution | | | | | | | ### Further Information ## 85 > …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 173contributions to the pillars. Human development pillars (number of companies contributing to each pillar) 12 12 28 26 3 | | 18 | 3 | | | 4 | | | --- | --- | --- | --- | --- | --- | --- | | 3 | | | | 7 | | | | | | | 6 | | | 5 | 10 2 8 8 7 4 5 5 Energy Housing Finance of living Nutrition Standard Water and sanitation Education Healthcare and hygiene Information Employment Direct Contribution Enabling/Supporting Contribution 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) 10 5 1 25 15 12 4 1 2 6 7 2 3 3 4 5 Water Circular Energy Human industry Buildings Transport economy/ restoration Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Food system development Conservation/ Direct Contribution Enabling/Supporting Contribution Indirect Contribution ## 86 Further Information Template periodic disclosure for the financial products referred to in Article 9 continued 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 Principal adverse sustainable investment objective? impacts are the most The Company only invests in companies that are sustainable investments which significant negative contribute to a social and/or environmental objective. impacts of investment decisions on The hallmarks of the investment strategy are an exclusive focus on companies that sustainability factors contribute to, and benefit from, sustainable development; a research-driven, relating to fundamental, bottom-up approach to the selection and ongoing analysis of environmental, social investments; a focus on the quality and sustainability attributes of every company; a and employee matters, focus on company stewardship and sound governance; a long-term investment respect for human horizon; and a commitment to engagement in order to address sustainability rights, anti-corruption concerns and issues. and anti-bribery The bottom-up investment process results in portfolios composed of companies without matters follow good material exposure to harmful products, services or processes. All harmful business governance practices. 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 87 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 88 Further Information Template periodic disclosure for the financial products referred to in Article 9 continued 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. Trust Indicators Metrics analysis Exposure (EUR m) 534 Scope 1 (tCO eq) 3,302 2 Scope 2 (tCO eq) 14,848 2 Scope 3 (tCO eq) 437,418 2 1. GHG Emissions Total Emissions Scope 1+2 (tCO eq) 18,150 2 Total Emissions Scope 1+2+3 455,568 (tCO eq) 2 Total Emissions Scope 1+2 (tCO eq/ 34 2 EURm) 2. Carbon Footprint Total Emissions Scope 1+2+3 854 (tCO eq/EURm) 2 3. GHG Intensity of Scope 1+2 (tCO eq/EURm) 75 2 Investee Companies Scope 1+2+3 (tCO eq/EURm) 2,413 2 4. Exposure to companies (% involvement) 0% active in the fossil fuel sector Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 89 Trust | Indicators Metrics | | | analysis | | | --- | --- | --- | --- | --- | | 5. Share of Non– | | Non–Renewable Energy | | 84% | | | Renewable Energy | Consumption (%) | | | | | Consumption and | Non–Renewable Energy Production | | 35% | | | Production | (%) | | | | | | Agriculture, Forestry & Fishing | no data | | (GWh/EURm) Construction (GWh/EURm) no data Electricity, Gas, Steam & Air no data Conditioning Supply (GWh/EURm) Manufacturing (GWh/EURm) 0.12 6. Energy consumption Mining & Quarrying (GWh/EURm) no data intensity per high Real Estate Activities (GWh/EURm) no data impact sector Transportation & Storage no data (GWh/EURm) Water Supply, Sewerage, Waste no data Remediation (GWh/EURm) | | Trade & Repair of Automobiles | insufficient | | | --- | --- | --- | --- | | | (GWh/EURm) | | data | | 7. Activities Negatively | (% involvement) 0% | | | Affecting Biodiversity Areas 8. Emissions to Water (t/EURm) 0 9. Hazardous waste ratio (t/EURm) 37 10. Violations of UNGC and Watch (% involvement) 0% OECD Guidelines for Breach (% involvement) 2% Multinational Enterprises 11. Lack of Processes & (% involvement) 81% Compliance Mechanisms to Monitor Compliance with UNGC and OECD guidelines 12. Unadjusted Gender % of Male Gross Hourly Rate insufficient Pay Gap data 13. Board Gender Diversity % of Female Board Members 19% 14. Exposure to (% involvement) 0% Controversial Weapons 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 90 Further Information Template periodic disclosure for the financial products referred to in Article 9 continued 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. # 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. Asset allocation describes the share of investments in specific assets. ![img-2.jpeg](img-2.jpeg) #1 Sustainable covers sustainable investments with environmental or social objectives. #2 Not sustainable includes investments which do not qualify as 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 Further Information 91 > 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 ? > Did the financial product invest in fossil gas and/or nuclear energy related activities? ☐ Yes ☐ In fossil gas ☐ In nuclear energy ☒ No ¹Fossil 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 92 Further Information Template periodic disclosure for the financial products referred to in Article 9 continued The graphs below show in green the percentage of investments that were aligned Taxonomy-aligned with the EU Taxonomy. As there is no appropriate methodology to determine the activities are expressed taxonomy-alignment of sovereign bonds*, the first graph shows the Taxonomy as a share of: alignment in relation to all the investments of the financial product including > turnover reflecting the sovereign bonds, while the second graph shows the Taxonomy alignment only in share of revenue from relation to the investments of the financial product other than sovereign bonds. green activities of 1. Taxonomy-alignment of investments 2. Taxonomy-alignment of investments investee companies including sovereign bonds* excluding sovereign bonds* > capital expenditure (CapEx) showing the Turnover 100% Turnover 100% green investments made by investee CapEx 100% CapEx 100% companies, e.g. for a transition to a green OpEx 100% OpEx 100% economy. > operational 0% 50% 100% 0% 50% 100% expenditure (OpEx) Taxonomy-aligned investment Taxonomy-aligned investment reflecting green Other investments Other investments operational activities of investee companies. * 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%. are sustainable investments > How did the percentage of investments aligned with the EU Taxonomy with an compare with previous reference periods? environmental objective Not applicable. This is the first year of reporting EU Taxonomy aligned that do not take into investments. account the criteria for What was the share of sustainable investments with an environmental environmentally objective that were not aligned with the EU Taxonomy? sustainable economic 38 companies (60%) in the Company were aligned to environmental activities under the EU sustainable investments as defined by the Portfolio Manager's climate Taxonomy. 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 93 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 94 Further Information Template periodic disclosure for the financial products referred to in Article 9 continued Voting rationales: Company Proposal No. of Voting decision proposals Amoy Approve Transfer of 2 Against Diagnostics Product Rights and Equity management recommendation Amendments to Articles 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 Director Election 1 Against Flavouring 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 | | 3 Against | | | --- | --- | --- | --- | | | Employee Stock Purchase | | management | | | Plan ("ESPP") | | recommendation | Implement Assessment Management Plan for FY2022 ESPP Board Authorisation to FY2022 ESPP Rationale The Portfolio Manager believes the one-year vesting periods in the ESPP are too short-term and not in shareholders' interests. Hualan Appointment of Auditor 3 Against Biological management Director Election Engineering 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 95 Voting rationales: Company Proposal No. of Voting decision proposals Humanica Transaction of Other 3 Against Public Business 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 1 Against w/o Pre-emptive Rights 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 Reference benchmarks indicators to determine the alignment of the reference benchmark with the are indexes to measure sustainable investment objective? whether the financial Not applicable. product attains the sustainable objective. > 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ! ## 96 Further Information ## Shareholder ## Information | Financial Calendar | Share Prices | | --- | --- | | 31 January Financial Year End | The Company’s shares are listed on the London Stock | | May Final Results Announced | Exchange under ‘Investment Companies’. The price is | | July Annual General Meeting | given daily in the Financial Times and other newspapers. | July Dividend Payable ### 31 July Half Year End Change of Address September Half Year Results Announced Communications with shareholders are mailed to the address held on the share register. In the event of a ### Annual General Meeting change of address or other amendment this should be The Annual General Meeting of Pacific Assets Trust plc notified to the Registrar, Equiniti Limited, under the will be held at the offices of Stewart Investors, Finsbury signature of the registered holder. Circus House, 15 Finsbury Circus, London EC2M 7EB ### onMonday, 3 July 2023 at 12 noon. Please refer to the Daily Net Asset Value Chairman’s Statement beginning on page 6 for details of The daily net asset value of the Company’s shares can be this year’s arrangements. obtained on the Company’s website at www.pacific-assets.co.uk and is published daily via the ### Dividend London Stock Exchange. A final dividend is paid annually following approval at the ### Annual General Meeting. Shareholders who wish to have How to Vote dividends paid directly into a bank account, rather than by If you hold your shares directly you will have received a cheque posted to their registered address, can complete a paper proxy form. For this year’s Annual General mandate form for the purpose. Mandates may be obtained Meeting you should ensure that this is returned to the from the Registrar, Equiniti Limited, on request. Registrar, Equiniti, before 12 noon on 29 June2023. Alternatively, you can vote online. To submit a proxy ### Profile of the Company’s Ownership form online, an internet-enabled PC with Internet Explorer 4 or Netscape 4 or above is required. ### % of shares held at 31 January 2023 Shareholders will require their Voting ID, Task ID and other Institutional Investors Shareholder Reference Number, which can be found on 15.0% 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 Retail Shareholders offered through Equiniti Limited, the Company’s 20.9% registrar, is entirely voluntary. If you hold your shares via an investment platform or a nominee, you should contact them to inquire about Mutual Funds and Private Wealth Managers 64.1% arrangements to vote. Source: Richard Davies Investor Relations Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 97 ## How to Invest AJ Bell Youinvest www.youinvest.co.uk/ ### Retail Investors advised by IFAs Barclays Stockbrokers www.smartinvestor.barclays.co.uk/ The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Bestinvest www.bestinvest.co.uk/ Advisers (“IFAs”) in the UK to ordinary retail investors in Charles Stanley Direct www.charles-stanley-direct.co.uk/ accordance with the Financial Conduct Authority (“FCA”) Halifax Share Dealing www.halifaxsharedealing-online.co.uk rules in relation to non-mainstream investment products Hargreaves Lansdown www.hl.co.uk/ and intends to continue to do so. The shares are excluded HSBC www.hsbc.co.uk/investments/ from the FCA’s restrictions which apply to non- products-and-services/invest-direct/ mainstream investment products because they are iDealing www.idealing.com/ shares in an investment trust. Interactive Investor www.ii.co.uk/ ### Equiniti – Share Dealing Service IWEB www.iweb-sharedealing.co.uk/ An internet and telephone dealing service is available Saxo Capital Markets www.home.saxo through the Company’s registrar, Equiniti. This provides a Tillit www.tillitinvest.com/ simple way for UK shareholders of Pacific Assets Trust plc WealthClub www.wealthclub.co.uk to buy or sell the Company’s shares. For full details and terms and conditions simply log onto Risk warnings www.shareview.co.uk/dealing or call 03456 037037 Past performance is no guarantee of future performance. between 8.00am and 4.30pm Monday to Friday. This The value of your investment and any income from it may service is only available to shareholders of Pacific Assets go down as well as up and you may not get back the Trust plc who hold shares in their own name, with a UK amount invested. This is because the share price is registered address and who are aged 18 and over. determined by the changing conditions in the relevant stock markets in which the Company invests and by the Shareview Dealing is provided by Equiniti Financial supply and demand for the Company’s shares. As the Services Limited which has issued and approved the shares in an investment trust are traded on a stock preceding paragraph. Equiniti Financial Services Limited, market, the share price will fluctuate in accordance with Aspect House, Spencer Road, Lancing, West Sussex BN99 the supply and demand and may not reflect the 6DA is registered in England and Wales with number underlying net asset value of the shares; where the share 6208699. Equiniti Financial Services Limited is authorised price is less than the underlying value of the assets, the and regulated by the Financial Conduct Authority. difference is known as the ‘discount’. For these reasons investors may not get back the original amount invested. ### Investment Platforms Although the Company’s shares are denominated in The Company’s shares are traded openly on the London sterling, it may invest in stocks and shares which are Stock Exchange and can be purchased through a stock denominated in currencies other than sterling and to the broker or other financial intermediary. The shares are extent they do so, they may be affected by movements in available through savings plans (including Investment exchange rates. As a result the value of your investment Dealing Accounts, ISAs, Junior ISAs and SIPPs) which may rise or fall with movements in exchange rates. facilitate both regular monthly investments and lump Investors should note that tax rates and reliefs may sum investments in the Company’s shares. There are a change at any time in the future. The value of ISA tax number of investment platforms that offer these advantages will depend on personal circumstances. The facilities. The following is a list of some of them, which is favourable tax treatments of ISAs may not be not comprehensive and does not constitute any form of maintained. recommendation: Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 98 Further Information # 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 12 noon 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 31 January 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 31 January 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 31 January 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 Act 2006 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 ('Resolution 13'), 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 99 subscribe for, or to convert any securities into, Stock Exchange for an Ordinary Share at the ordinary shares of 12.5 pence each in the capital of time the purchase is carried out; and the Company (‘Ordinary Shares’)) for cash pursuant (iv) this authority shall expire at the conclusion of to the authority conferred on them by such the Annual General Meeting of the Company to Resolution 13as if section 561(1) of the Act did not be held in 2024 or 15 months from the date of apply to any such allotment, provided that this power passing this resolution, whichever is the earlier, shall be limitedto: the allotment of equity securities unless previously revoked, varied or renewed up to an aggregate nominal amount of £1,511,979, by the Company in general meeting and (orif changed, the number representing 10% of the provided that the Company may before such issued share capital of the Company immediately expiry enter into a contract to purchase prior to the passing of this resolution) and shall expire Ordinary Shares which will or may be at the conclusion of the Annual General Meeting of completed or executed wholly or partly after the Company to be held in 2024 or 15 months from such expiry and a purchase of Ordinary Shares the date of passing this resolution, whichever is the may be made pursuant to any such contract. earlier, unless previously revoked, varied or renewed by the Company in general meeting and provided that ### General Meetings the Company may before such expiry make an offer 16. That any General Meeting of the Company (other or enter into an agreement which would or might than the Annual General Meeting of the Company) require equity securities to be allotted after such may be called by not less than 14 clear days’ notice in expiry and the Board may allot equity securities in accordance with the provisions of the Articles of pursuance of such an offer or agreement as if the Association of the Company provided that the authority conferred hereby had not expired. authority shall expire on the conclusion of the next Annual General Meeting of the Company to be held ### Authority to Repurchase Shares in 2024, or, ifearlier, on the expiry 15 months from 15. That the Company be and is hereby generally and the date of the passing of this resolution. unconditionally authorised for the purposes of section 701 of the Companies Act 2006 (the ‘Act’) to ### Directors’ Remuneration make one or more market purchases (within the meaning of section 693(4) of the Act) of ordinary 17. That the limit in the Company’s Articles of shares of 12.5pence each in the capital of the Association on the aggregate annual remuneration Company (‘Ordinary Shares’) for cancellation on payable to the Directors be increased from such terms and in such manner as the board of £250,000 to £300,000 with immediate effect. directors may determine provided that: | (i) the maximum aggregate number of Ordinary | | By order of the Board Registered office | | --- | --- | --- | | | Shares which may be purchased is 18,131,662 | 16 Charlotte Square | | | or, if lower, the number representing 14.99% of | Edinburgh | | | the issued share capital of the Company | EH2 4DF | immediately prior to the passing of this resolution; Frostrow Capital LLP (ii) the minimum price which may be paid for an Company Secretary Ordinary Share is 12.5 pence (exclusive of 9 May 2023 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 100 Further Information Notice of the Annual General Meeting continued 3. A proxy form for use in connection with the Annual ### Notes General Meeting is enclosed. To be valid any proxy 1. If you wish to attend the Annual General Meeting in form or other instrument appointing a proxy, together person, you should arrive at the venue for the with any power of attorney or other authority under Annual General Meeting in good time to allow your which it is signed or a certified copy thereof, must be attendance to be registered. It is advisable to have received by post or (during normal business hours only) some form of identification with you as you may be by hand by the Registrar at Equiniti Limited, asked to provide evidence of your identity to the AspectHouse, Spencer Road, Lancing, West Sussex Company’s registrar, Equiniti Limited (the BN99 6DA no later than 48 hours (excluding ‘Registrar’), prior to being admitted to the Annual non-working days) before the time of the Annual GeneralMeeting. General Meeting or any adjournment of that meeting. 2. Members are entitled to appoint one or more If you do not have a proxy form and believe that you proxies to exercise all or any of their rights to attend, should have one, or you require additional proxy speak and vote at the Annual General Meeting. forms, please contact the Registrar on +44 (0)371 Aproxy need not be a member of the Company but 3842466. Other service providers’ costs may vary. must attend the Annual General Meeting to Lines are open between 8.30 am and 5.30 pm, represent a member. To be validly appointed a proxy Monday to Friday (excluding public holidays in must be appointed using the procedures set out in England and Wales). these notes and in the notes to the accompanying proxyform. 4. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy If members wish their proxy to speak on their behalf appointment service may do so by using the at the meeting, members will need to appoint their procedures described in the CREST Manual and by own choice of proxy (not the chairman of the Annual logging on to the following website: General Meeting) and give their instructions directly www.euroclear.com. CREST personal members or to them. other CREST sponsored members, and those Members can only appoint more than one proxy CREST members who have appointed (a) voting where each proxy is appointed to exercise rights service provider(s), should refer to their CREST attached to different shares. Members cannot sponsor or voting service provider(s) who will be appoint more than one proxy to exercise the rights able to take the appropriate action on their behalf. attached to the same share(s). If a member wishes In order for a proxy appointment or instruction made to appoint more than one proxy, they should using the CREST service to be valid, the appropriate contact the Registrar on +44 (0)371 384 2466. CREST message (a “CREST Proxy Instruction”) must be Lines are open between 8.30 am and 5.30 pm, properly authenticated in accordance with Euroclear Monday to Friday (excluding public holidays in UK & International Limited’s specifications, and must England and Wales). contain the information required for such instruction, as A member may instruct their proxy to abstain from described in the CREST Manual. The message, voting on any resolution to be considered at the regardless of whether it constitutes the appointment of meeting by marking the abstain option when a proxy or is an amendment to the instruction given to a appointing their proxy. It should be noted that an previously appointed proxy, must in order to be valid, be abstention is not a vote in law and will not be transmitted so as to be received by the Registrar counted in the calculation of the proportion of votes (IDRA19) no later 48 hours (excluding non-working “for” or “against” the resolution. days) before the time of the Annual General Meeting or any adjournment of that meeting. For this purpose, the The appointment of a proxy will not prevent a time of receipt will be taken to be the time (as member from attending the Annual General determined by the timestamp applied to the message by Meeting and voting in person if he or she wishes. the CREST Application Host) from which the Registrar is A person who is not a member of the Company but able to retrieve the message by enquiry to CREST in the who has been nominated by a member to enjoy manner prescribed by CREST. After this time any information rights does not have a right to appoint change of instructions to proxies appointed through any proxies under the procedures set out in these CREST should be communicated to the appointee notes and should read note 9 overleaf. through other means. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 101 CREST members and, where applicable, their CREST 8. To be entitled to attend and vote at the Annual sponsors or voting service provider(s) should note General Meeting (and for the purpose of that Euroclear UK & International Limited does not determining the votes they may cast), members must make available special procedures in CREST for any be registered in the Company’s register of members particular message. Normal system timings and at 6.30 p.m. on 29 June 2023 (or, if the Annual limitations will, therefore, apply in relation to the General Meeting is adjourned, at 6.30 p.m. on the input of CREST Proxy Instructions. It is the day two working days prior to the adjourned responsibility of the CREST member concerned to meeting). Changes to the register of members after take (or, if the CREST member is a CREST personal the relevant deadline will be disregarded in member, or sponsored member, orhas appointed determining the rights of any person to attend and (a)voting service provider(s), to procure that his vote at the Annual General Meeting. CREST sponsor or voting service provider(s) take(s)) 9. Any person to whom this notice is sent who is a such action as shall be necessary to ensure that a person nominated under section 146 of the message is transmitted by means of the CREST Companies Act 2006 (the “Act”) to enjoy information system by any particular time. In this connection, rights (a “Nominated Person”) may, under an CREST members and, where applicable, their CREST agreement between him/her and the member by sponsors or voting system providers are referred, whom he/she was nominated, have a right to be inparticular, to those sections of the CREST Manual appointed (or to have someone else appointed) as a concerning practical limitations of the CREST proxy for the Annual General Meeting. If a system and timings. Nominated Person has no such proxy appointment The Company may treat as invalid a CREST Proxy right or does not wish to exercise it, he/she may, Instruction in the circumstances set out in under any such agreement, have a right to give Regulation 35(5)(a) of the Uncertificated Securities instructions to the member as to the exercise of Regulations 2001. voting rights. 5. If you are an institutional investor you may be able to 10. Information regarding the Annual General Meeting, appoint a proxy electronically via the Proxymity including information required by section 311A of platform, a process which has been agreed by the the 2006 Act, and a copy of this notice of Annual Company and approved by the Registrar. For further General Meeting, is available from information regarding Proxymity, please go to www. www.pacific-assets.co.uk. proxymity.io. Your proxy must be lodged by 11. Members should note that it is possible that, pursuant 12.00noon on 29 June 2023 in order to be to requests made by members of the Company under, considered valid. Before you can appoint a proxy via and meeting the threshold requirements in, section527 this process you will need to have agreed to of the Act, the Company may be required to publish Proxymity’s associated terms and conditions. It is on a website a statement setting out any matter important that you read these carefully as you will relating to: (a) the audit of the Company’s accounts be bound by them and they will govern the (including the auditor’s report and the conduct of the electronic appointment of your proxy. audit) that are to be laid before the Annual General 6. In the case of joint holders, where more than one of Meeting; or (b) any circumstance connected with an the joint holders purports to appoint one or more auditor of the Company ceasing to hold office since proxies, only the purported appointment submitted the previous meeting at which annual accounts and by the most senior holder will be accepted. Seniority reports were laid in accordance with section 437 of is determined by the order in which the names of the the Act. The Company may not require the members joint holders appear in the Company’s register of requesting any such website publication to pay its members in respect of the joint holding (the first expenses in complying with sections 527 or 528 of the named being the most senior). Act. Where the Company is required to place a statement on a website under section 527 of the Act, 7. Any corporation which is a member can appoint one it must forward the statement to the Company’s or more corporate representatives. Members can auditor not later than the time when it makes the only appoint more than one corporate statement available on the website. The business representative where each corporate representative which may be dealt with at the Annual General is appointed to exercise rights attached to different Meeting includes any statement that the Company shares. Members cannot appoint more than one has been required under section 527 of the Act to corporate representative to exercise the rights publish on a website. attached to the same share(s). Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 102 Further Information Notice of the Annual General Meeting continued 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, 25 Southampton 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 (in the 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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 103 ## Explanatory Notes to ## the Resolutions Resolution 1 – To receive and adopt the Report of the country or jurisdiction to 45% of total assets at the time Directors and the Financial Statements of investment and obliges the Portfolio Manager to seek The Report of the Directors and the financial statements to rebalance the portfolio if exposure to any one for the year ended 31 January 2023 will be presented to jurisdiction reaches 49% of total assets at any time. The the AGM. These accounts accompany this Notice of proposed amendment has been approved in principle by Meeting and shareholders will be given an opportunity the Financial Conduct Authority in accordance with the to ask questions at the meeting. requirements of the Listing Rules. Please refer to the Chairman’s Statement beginning on page 6 for further Resolutions 2 and 3 – Remuneration Report and Policy information. Any future material changes to the It is mandatory for all listed companies to put their report Company’s investment policy will also require the prior on Directors’ remuneration to an advisory shareholder vote approval of both the FCA and shareholders. The full text every year and their remuneration policy to a binding of the proposed Investment Policy is set out below: shareholder vote every three years. As shareholders are being asked to approve the Remuneration Policy this year, it ### Proposed Investment Policy is anticipated that the Remuneration Policy will next be put to shareholders at the AGM in 2026. The Company aims to achieve long-term capital growth through investment in selected companies in the Asia The Directors’ Remuneration Report is set out in full on Pacific region and the Indian sub-continent, but pages 56 to 58 and the Remuneration Policy is set out on excluding Japan, Australia and New Zealand (the “Asia page58. Pacific Region”). Up to a maximum of 20% of the Resolution 4 – Declaration of a Final Dividend for the Company’s total assets (at the time of investment) may year ended 31 January 2023 be invested in companies incorporated and/or listed Resolution 4 seeks shareholder approval for the outside the Asia Pacific Region (as defined above); at declaration of a final dividend of 2.3p per share for the least 25% of their economic activities (at the time of year ended 31January 2023. investment) are within the Asia Pacific Region with this proportion being expected to grow significantly over the Resolutions 5 to 9 – Election and Re-election of long term. Directors Resolutions 5 to 9 deal with the election/re-election of The Company invests in companies which Stewart each Director. Biographies of each of the Directors and Investors believe will be able to generate long-term details of their specific contribution to the Board, can be growth for shareholders. found on pages 34 and 35. The Company invests principally in listed equities The Board has confirmed, following a performance although it is able to invest in other securities, including review, that the Directors standing for election and preference shares, debt instruments, convertible re-election continue to perform effectively. securities and warrants. In addition, the Company may invest in open and closed-ended investment funds and Resolutions 10 and 11 – Re-appointment of Auditor companies. and the determination of its remuneration Resolutions 10 and 11 relate to the re-appointment of The Company is only able to invest in unlisted securities BDO LLP as the Company’s independent Auditor to hold with the Board’s prior approval. It is the current intention office until the next AGM and also authorise the Audit that such investments are limited to those which are Committee to set their remuneration. expected to be listed on a stock exchange or which cease to be listed and the Company decides to continue to hold Resolution 12 – Investment Policy or is required to do so. The Board is proposing to formalise in the investment policy an internal limit that was agreed with the Portfolio Risk is diversified by investing in different countries, Manager during the year, to limit exposure to a single sectors and stocks within the Asia Pacific Region. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 104 Further Information # Explanatory Notes to the Resolutions continued No more 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 49 per 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 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. # **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 8 May 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 Resolution 13. 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. The purchase 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 five business 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 Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 105 Report, (amounting to 18,131,662 shares or, if less, the Recommendation number representing 14.99% of the issued share capital The Board considers that the resolutions detailed above of the Company immediately prior to the passing of this are in the best interests of shareholders as a whole. resolution). Such authority will expire on the date of the Accordingly, the Board unanimously recommends to the next Annual General Meeting or after a period of shareholders that they vote in favour of the above 15months from the date of passing of the resolution, resolutions to be proposed at the forthcoming AGM as whichever is earlier. This means that the authority will the Directors intend to do in respect of their own have to be renewed at the next AGM or earlier if the beneficial holdings totalling 123,637 shares. authority has been exhausted. How to Vote Resolution 16 – General Meetings Please submit your votes by proxy using one of the Special Resolution 16 seeks shareholder approval for the following methods: Company to hold General Meetings (other than the > Electronically using: www.sharevote.co.uk; AGM) on at least 14 clear days’ notice. The Company will only use this shorter notice period where it is merited by > Submitting a paper proxy form; the purpose of the meeting. > CREST members may use the CREST electronic Resolution 17 – Directors’ Remuneration Limit proxy appointment service; Special Resolution 17 seeks shareholder permission to > Institutional investors may also be able to appoint a increase the limit in the Company’s Articles of proxy electronically via the Proxymity Platform Association on the aggregate fees that may be paid to the www.proxymity.io; or directors’ from £250,000 to £300,000 per annum. If the > If you hold your shares through a nominee or resolution is passed, the aggregate annual remuneration investment platform, please contact them to enquire of the Directors will remain within the current limit of about voting arrangements. £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. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 106 Further Information ## Company ## Information ### Directors Alternative Investment 1 J P Williams (Chairman) ### Fund Manager 2 M C Ginman, FCA Frostrow Capital LLP 3 S E Hansen 25 Southampton Buildings A M Impey London WC2A 1AL 4 R E Talbut Telephone: 0203 008 4910 E T A Troughton Email: info@frostrow.com 1 Chair of the Nomination Committee Website: www.frostrow.com 2 Chair of the Audit Committee 3 Authorised and regulated by the Chair of the Engagement & Remuneration Committee 4 Financial Conduct Authority. Senior Independent Director ### Custodian ### Registered Office J.P. Morgan Chase Bank 16 Charlotte Square 25 Bank Street, Canary Wharf Edinburgh EH2 4DF London, E14 5JP Website: www.pacific-assets.co.uk United Kingdom Company Registration Number SC091052 (Registered in Scotland) ### Depositary The Company was incorporated in Scotland on JP Morgan Europe Limited 21 December 1984. The Company was incorporated 25 Bank Street asPacific Assets Trust Public Limited Company. London E14 5JP ### Portfolio Manager ### Independent Auditor Stewart Investors BDO LLP 23 St. Andrew Square 55 Baker Street Edinburgh EH2 1BB London W1U 7EU Telephone: 0131 473 2200 United Kingdom Website: www.stewartinvestors.com Authorised and regulated by the Financial Conduct Authority. Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ### Further Information ## 107 | Registrar | Solicitors | | --- | --- | | Equiniti Limited | Dickson Minto W.S. | | Aspect House | 16 Charlotte Square | | Spencer Road | Edinburgh EH2 4DF | Lancing West Sussex ### Identification Codes BN99 6DA Shares: SEDOL: 0667438 Shareholder Helpline: +44 (0)371 384 2466* ISIN: GB0006674385 Broker Helpline: 0906 559 6025* Bloomberg: PAC LN For deaf and speech impaired customers, we welcome EPIC: PAC calls via Relay UK. Please see www.relayuk.bt.com for more information. ### Global Intermediary Identification * Lines open 8.30 a.m. to 5.30 p.m., Monday to Friday ### Number (GIIN) (excluding public holidays in England and Wales). MAEPFZ.99999.SL.826 Notifications of changes of address and enquiries regarding share certificates or dividend cheques should ### Legal Entity Identifier (LEI) be made in writing to the Registrar quoting your 2138008U8QPGAESFYA48 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 Avoid investment fraud Report a Scam ## Be ScamSmart | | 1 Reject cold calls | If you suspect that you have been | | --- | --- | --- | | | If you’ve received unsolicited contact about | approached by fraudsters please tell the | | | an investment opportunity, chances are | FCA using the reporting form at | | Investment scams are | it’s a high risk investment or a scam. You | www.fca.org.uk/consumers/report- | | | should treat the call with extreme caution. | scam-unauthorised-firm. You can also call | designed to look like The safest thing to do is to hang up. the FCA Consumer Helpline on genuine investments 0800 111 6768 2 Check the FCA Warning List The FCA Warning List is a list of firms and Spot the warning signs If you have lost money to investment fraud, individuals we know are operating without you should report it to Action Fraud on Have you been: our authorisation. 0300 123 2040 or online at | • contacted out of the blue | 3 Get impartial advice | www.actionfraud.police.uk | | --- | --- | --- | | • promised tempting returns | Think about getting impartial financial | | | and told the investment is safe | advice before you hand over any money. | | Find out more at • called repeatedly, or Seek advice from someone unconnected to www.fca.org.uk/scamsmart • told the offer is only available the firm that has approached you. 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! Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 ## 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 This report is printed on Revive 100% White Silk a totally recycled paper produced using 100% recycled waste at a mill that has been awarded the ISO 14001 certificate for environmental management. The pulp is bleached using a totally chlorine free (TCF) process. This report has been produced using Pacific Assets Trust plc Annual Report for the year ended 31 January 2023 vegetable based inks. ## 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