Annual Financial Report
LONDON STOCK EXCHANGE ANNOUNCEMENT
Pacific Assets Trust plc
Audited Results for the Year Ended 31 January 2015
The Company's annual report will be posted to shareholders on 2 April 2015.
Members of the public may obtain copies from Frostrow Capital LLP, 25
Southampton Buildings, London WC2A 1AL or from the Company's website at:
www.pacific-assets.co.uk
The Company's annual report for the year ended 31 January 2015 has been
submitted to the UK Listing Authority, and will shortly be available for
inspection on the National Storage Mechanism (NSM):
www.hemscott.com/nsm.do
(Documents will usually be available for inspection within two business days of
this notice being given)
Mark Pope, Frostrow Capital LLP, Company Secretary - 0203 008 4913
27 March 2015
Strategic Report/Company Performance
Financial Highlights
31 Jan 31 Jan
2015 2014
Share price total return* +37.0% +0.3%
Net asset value per share total return* +32.6% +0.9%
MSCI All Country Asia ex Japan Index (total return, sterling +24.1% -6.8%
adjusted)* - benchmark index
Dividend per share 2.6p 2.6p
Discount of share price to net asset value per share 5.3% 8.7%
* Source: Morningstar
Performance Summary
As at As at
31 31
January January
2015 2014 %
Change
Shareholders' funds £242.1m £186.3m +30.0
Market capitalisation £229.3m £170.1m +34.8
Discount of share price to net asset value per share 5.3% 8.7% -
One year One year
to to
31 31
January January
Total Return 2015 2014
Share price (total return) +37.0% +0.3% n/a
Net asset value per share (total return) +32.6% +0.9% n/a
MSCI All Country Asia ex Japan Index (total return, +24.1% -6.8% n/a
sterling adjusted)
Revenue and Dividend
Revenue return per share 2.1p 2.5p -16.0
Dividend per share 2.6p 2.6p -
Ongoing Charges Ratio
Ongoing charges ratio (excluding performance fee)*†1.3% 1.3% n/a
Performance fee 0.8% 0.7% n/a
Ongoing charges ratio (including performance fee) 2.1% 2.0% n/a
Peer group average ongoing charges ratio (excluding 1.1% 1.1% n/a
performance fee)*
* Source: Morningstar
†See glossary
Year's Highs/Lows High Low
Net asset value per share 206.96p 155.52p
Share price 197.75p 145.63p
Premium/(discount) of share price to net asset value 1.03% (7.49)%
per share‡
‡ Discount high - narrowest discount/highest premium in year; discount low -
widest discount in year
Source: Morningstar
Net Asset Value Total Return Peer Group Performance for the Year to 31 January
2015
Performance Assessment
The Company exists in a competitive environment and aims to be a leader in its
peer group, defined by being consistently within the top third of that group
measured by net asset value total return. The Company is committed to building
a long-term investment record and will assess itself by reference to its peers
on a rolling three-year basis.
Ten Year Record
Discount
of
share
price
Shareholders' Net asset to net Dividend
asset
funds value per Share value per per Ongoing
31 January £'000 share price share share charges
2005 87,402 71.4p 64.0p 10.3% 1.02p 1.6%
2006 113,049 92.3p 86.0p 6.8% 1.05p 1.5%
2007 123,616 104.0p 93.5p 10.1% 1.12p 1.4%
2008 152,105 128.5p 115.5p 10.1% 1.12p 1.5%
2009 87,760 74.2p 68.3p 8.0% 1.29p 1.6%
2010 135,254 114.3p 104.3p 8.8% 1.29p 1.6%
2011 160,086 137.0p 131.5p 4.0% 1.29p 1.6%*
2012 153,870 131.7p 115.3p 12.5% 2.60p 1.4%
2013 187,602 160.6p 147.5p 8.2% 2.60p 1.3%â€
2014 186,287 159.4p 145.6p 8.7% 2.60p 1.3%â€
2015 242,063 207.2p 196.3p 5.3% 2.60p 1.3%â€
* Excludes the costs attributable to the change in management arrangements
amounting to £380,000.
†Excludes performance fee payable of £1,798,000 (2014: £1,358,000) (2013: £
627,000).
Strategic Report/Chairman's Statement
"The Company's share price total return of +37.0% and the net asset value total
return of +32.6% both significantly outperformed the benchmark index. This
places the Company first in its peer group over one, three and five years."
Performance
Asian markets performed strongly during the year ended 31 January 2015 as
demonstrated by the Company's benchmark index which posted a return of +24.1%.
The Company's share price total return of +37.0% and the net asset value total
return of +32.6% both significantly outperformed the benchmark index over this
period. It is also particularly pleasing that this places the Company first in
its peer group over one, three and five years to 31 January 2015 in terms of
its net asset value total return performance.
This continued outperformance has fulfilled the criteria for the payment of a
performance fee, which is measured over a rolling three year period, of £
1,798,000 and amounts to 0.7% of net assets. This has been charged to the
Company's capital account.
The share price discount to net asset value per share as at 31 January 2015 was
5.3% which compares to 8.7% as at 31 January 2014.
Revenue and Dividend
The Company generated earnings per share of 2.1p during the year which compares
to 2.5p for the previous year. The Board is recommending an unchanged dividend
payment of 2.6p per share, utilising £511,000 of the brought forward
accumulated revenue reserves. This dividend will be paid on 29 June 2015 to
shareholders on the register at 29 May 2015. The associated ex-dividend date
will be 28 May 2015.
At the end of January 2015 the Company held cash amounting to 11% of net
assets. If the cash were to remain uninvested and the yield from the investment
portfolio remains similar for much of the year to 31 January 2016, the income
would again be insufficient to cover the dividend. In this event the Directors
would give serious consideration to reducing the 2016 dividend.
The Board reminds shareholders that it remains the Company's policy to pursue
capital growth for shareholders with income being a secondary consideration.
The Board
As announced this time last year, Richard Horlick retired from the Board at the
2014 Annual General Meeting. The Board subsequently appointed Charlotta Ginman
as a Director with effect from 9 October 2014. The Board is delighted to have
attracted an individual of Charlotta's calibre and experience, and she will
take over from Nigel Rich as Chairman of the Company's Audit Committee with
effect from the conclusion of the Company's Annual General Meeting to be held
on Wednesday, 24 June 2015. Nigel will continue to act as the Company's Senior
Independent Director.
I will be retiring from the Board at the conclusion of this year's Annual
General Meeting. I have been on the Board since 1985 and Chairman since 2004. I
have thoroughly enjoyed my time on the Board and am grateful to my fellow
Directors and our advisers for their support over the years. I am delighted
that James Williams is to succeed me as Chairman. His extensive experience in
the investment community both here and in Asia will undoubtedly serve
shareholders well in the future.
A search for a new Director is underway and an announcement will be made in due
course.
Alternative Investment Fund Managers Directive (`AIFMD')
With effect from 30 April 2014 the Company has been registered as a small UK
Alternative Investment Fund Manager (`AIFM') in accordance with the
requirements of the European Union's Alternative Investment Fund Managers
Directive which came into effect in July 2014.
As previously announced, a consequence of such a registration is that your
Company will not be able to utilise gearing at any time. The Board continues to
believe that this will not have a material impact on your Company's investment
strategy in view of the fact that gearing is not a part of First State's
approach. However, should First State wish to reinstate gearing the Board would
then reconsider the Company's position with respect to AIFMD.
In adopting this approach, the Board has retained responsibility for risk
management and First State continues to be responsible for managing your
Company's investment portfolio.
Management Arrangements
The Board reviewed its management arrangements during the year. Under a new
Investment Management Agreement with First State, effective from 1 February
2015, the management fee payable was changed from 0.75% per annum of the
Company's net assets to 0.90% per annum of net assets. At the same time the
arrangements under which First State could earn a performance fee were removed.
In addition, under a new Management, Administrative and Secretarial Services
Agreement with Frostrow, also effective from 1 February 2015, the fee payable
was reduced to 0.15% per annum (plus VAT) of the Company's net assets lower
than or equal to £275 million, and 0.10% per annum of the amount of the
Company's net assets in excess of £275 million. The fee payable was previously
0.20% per annum (plus VAT) of market capitalisation.
As part of the new fee arrangements with First State and Frostrow,
responsibility for the Company's marketing activities has been transferred from
Frostrow to First State. The Board has been fully satisfied with the marketing
services provided by Frostrow in the past and supports First State's wish to
assume responsibility for this area in the future.
It is nearly five years since First State and Frostrow were first appointed
during which time the fortunes of the Company have been transformed. Tribute
should be paid to both organisations for their contributions over this period.
First State's sustainable investment approach has set your Company apart from
its peer group in terms of investment philosophy. Whilst the Board is convinced
these investment disciplines will continue to provide good long-term returns,
we are also aware that returns relative to our benchmark index are likely to be
volatile. Since July 2010, when First State was first appointed, returns
relative to the benchmark index have been favourable. However, we realise that
a portfolio constructed without reference to the benchmark index will face
periods when such comparisons will be negative.
Frostrow has steered the Board through ever increasing regulation and
legislation from within the United Kingdom and the EU. Their wise counsel and
guidance has made our job considerably easier and enabled us to assume the role
as AIFM with confidence.
Against this background, it is a credit to First State that they proposed a
cancellation of the performance fee and to Frostrow that they were willing to
reduce their fee whilst facilitating these changes with their usual efficiency.
The Board believes that this simplification of the fee arrangements, and the
removal of the volatility created by the performance fee payable to First
State, is in the interests of shareholders.
Annual General Meeting
The Annual General Meeting will be held at Skinners' Hall, 8 Dowgate Hill,
London EC4R 2SP on Wednesday, 24 June 2015 at 10.00 a.m. The Board is keen to
encourage an informal and useful dialogue between shareholders, the Directors
and the Investment Manager at this meeting and looks forward to seeing as many
shareholders as possible.
Shareholders who are unable to attend are encouraged to return their forms of
proxy to ensure their votes are represented.
Outlook
After a year of particularly strong performance, it is worth reflecting that a
number of political uncertainties and economic imbalances still exist which
could affect global growth. There are also concerns about the high valuations
attached to quality companies in the Asia Pacific region. Longer term, however,
your Board believes the sustainable approach adopted by your Investment Manager
will continue to provide good returns for the patient investor.
David Nichol
Chairman
27 March 2015
Strategic Report/Overview of Strategy
Investment Objective
Aim
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) but whose economic activities are predominantly within the Asia
Pacific Region.
Investment Approach
The Company`s assets are managed by First State.
First State invests in companies which it believes will deliver long-term
growth to shareholders.
In delivering this strategy, First State uses a sustainable approach in its
management of the Company's investment portfolio. First State seeks to generate
attractive long-term, risk-adjusted returns by investing in the shares of those
companies which are particularly well-positioned to benefit from, and
contribute to, the sustainable development of the countries in which they
operate.
This investment approach can be summarised as follows:
• First State's investment approach focusses on companies that they believe are
particularly well-positioned to deliver long-term returns in the face of the
huge development challenges facing all countries today.
• First State believes that in order to tackle these development challenges,
both developed and developing countries will need to shift away from the
current debt dependent, resource and consumption intensive models, towards a
more genuinely sustainable path of economic development.
• First State invests their clients' capital in good quality companies with
strong management teams and sound long-term growth prospects, and which are
well-positioned to benefit from, and contribute to, the sustainable development
of the countries in which they operate.
Investment Strategy and Business Model
Key Performance Indicators
The Company's Board of Directors meets at least four times a year and at each
meeting reviews performance against a number of key measures, as follows:
• Net asset value total return against the MSCI All Country Asia ex Japan Index
(total return, sterling adjusted).
• Net asset value total return against the peer group.
• Discount of share price to net asset value per share.
• Ongoing charges ratio.
Net asset value total return - benchmark
The Directors regard the Company's net asset value total return as being the
overall measure of value delivered to shareholders over the long-term. Total
return reflects both net asset value growth of the Company and also the
dividend paid to shareholders. First State's investment style is such that
performance is likely to deviate materially from that of the benchmark index.
The Board considers the most important comparator to be the MSCI All Country
Asia ex Japan Index.
During the year under review the net asset value per share showed a total
return of +32.6% outperforming the benchmark by 8.5%.
A full description of performance during the year under review and the
investment portfolio is contained in the Investment Manager's Review commencing
on page 16 of this annual report.
Net asset value total return - peer group
The Company exists in a competitive environment and aims to be a leader in its
peer group, defined by being consistently within the top third of that group
measured by net asset value total return. The Company is committed to building
a long-term investment record and will assess itself by reference to its peers
on a rolling three-year basis.
For the three years ended 31 January 2015 the Company ranked first out of its
peer group of the Company and seven other investment trusts with a similar
investment objective as that of the Company.
Discount of share price to net asset value per share
The Board believes that an important driver of an investment trust's discount
or premium over the long-term is investment performance together with 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.
During the year under review no shares were issued or bought back by the
Company and the Company's share price discount to net asset value per share was
consistently narrower than the peer group average. As at 31 January 2015 the
discount of the Company's share price to the net asset value per share was
5.3%.
Discount
31 January 2015 31 January 2014
5.3% 8.7%
(Peer group average 9.1%) (Peer group average 9.5%)
Ongoing charges ratio
The Board continues to be conscious of expenses and works hard to maintain a
sensible balance between strong service and costs.
The Board has agreed amended terms with First State, the Company's Investment
Manager, and Frostrow, the Company's Manager, Company Secretary and
Administrator which became effective on 1 February 2015. Further details can be
found in the Report of the Directors. The principal change to the Investment
Manager's terms is the removal of the performance fee.
As at 31 January 2015, the ongoing charges ratio including the performance fee
payable of £1,798,000 was 2.1% (2014: £1,358,000, 2.0%). The ongoing charges
ratio (excluding the performance fee) was 1.3% which was unchanged from the
percentage for the previous year. This ongoing charges ratio compares to the
average of the Company's peer group for the year of 1.1%.
Ongoing charges ratio
31 January 2015 31 January 2014
2.1% (inc. perf. fee) 2.0% (inc. perf. fee)
1.3% (ex. perf. fee) 1.3% (ex. perf. fee)
Peer group average excluding performance fees: 1.1% (2014: 1.1%)
Risk Management
The Board is responsible for the management of the risks faced by the Company
and the Board regularly reviews these risks and how risk is mitigated. The
Board has categorised the risks faced by the Company under five headings as
follows:
• Investment activity and strategy
• Financial
• Shareholder relations and corporate governance
• Operational
• Accounting, legal and regulatory.
A summary of these risks and their mitigation is described below:
Principal Risks and Mitigation
Uncertainties
Investment Activity and The Board regularly reviews the Company's
Strategy investment mandate and its long-term investment
strategy in relation to market and economic
An unsuccessful investment conditions, and the operation of the Company's
strategy, including asset peers, thereby monitoring whether the Company
allocation may lead to should continue in its present form. First State
underperformance against provides an explanation of stock selection
the Company's benchmark decisions and an overall rationale for the
index and peer group make-up of the investment portfolio. First State
companies, and may result discusses current and potential investment
in a widening of the holdings with the Board on a regular basis in
Company's share price addition to new initiatives, which may enhance
discount to net asset value shareholder returns. The Board sets appropriate
per share. investment restrictions and guidelines which are
monitored and reported on by Frostrow. Each
month the Board receives a monthly compliance
review report which monitors the Company's
investment performance (both on an absolute
basis and against the benchmark and peer group)
and its compliance with the investment
guidelines. Additional reports and presentations
are made regularly to investors by First State
and also by Canaccord Genuity Limited, the
Company's Corporate Stockbroker.
In consultation with its advisers, including the
Company's Corporate Stockbroker, the Board also
undertakes a regular review of the level of
discount/premium and consideration is given to
ways in which share price performance may be
enhanced, including the effectiveness of
marketing, share issuance and share buy-backs,
where appropriate.
Financial First State is responsible for undertaking
reviews of the creditworthiness of the
The financial risks counterparties that it uses. The Board regularly
associated with the Company reviews First State's approved list of
comprise market risk counterparties. The Board also reviews the
(including counter party relevant systems and controls at JPMorgan Chase
risk), interest rate risk, Bank, the Company's Custodian.
liquidity risk, foreign
exchange risk and credit The Company does not hold any fixed interest
risk. investments. Cash balances are held in overnight
call accounts where relevant interest rates are
linked to bank base rates. The Board keeps the
level of cash held under regular review.
The Company's assets mainly comprise readily
realisable liquid securities, which can be sold
to meet funding requirements if necessary.
The Company's assets are invested in securities
denominated in foreign currencies. As the
Company's shares are denominated and traded in
sterling, the return to shareholders will be
affected by changes in the value of sterling
relative to those foreign currencies.
The Company does not at present hedge against
currency exposure The Board keeps this position
under review.
Further information on financial instruments and
risk, as required by FRS 29, can be found in
note 16 to the financial statements beginning on
page 43.
Shareholder Relations and The Board receives regular reports on
Corporate Governance shareholder activity and is kept informed of
shareholder sentiment. Regular contact is
Shareholder concern could maintained with major shareholders. Details of
arise if there is poor the Company's compliance with corporate
adherence to best practice governance best practice, including information
in corporate governance on relations with shareholders, are set out in
resulting in reputational the Corporate Governance Statement beginning on
damage to the Company. page 25.
Operational The Board reviews both the internal control and
the disaster recovery procedures put in place by
Disruption to, or failure its principal service providers on a regular
of, accounting, dealing or basis.
payments systems in place
at the Company's service
providers, including
custodian and appointed
sub- custodians could
prevent accurate reporting
and monitoring of the
Company's financial
position.
Accounting, Legal and The Board relies on the services of Frostrow and
Regulatory also its external advisers to assist it in the
compliance with applicable law and regulations
Failure to comply with including the Companies Act, the Corporation Tax
appropriate law and Act, the UKLA Listing Rules and the Alternative
regulations could expose Investment Fund Managers Directive. Frostrow
the Company to serious provides a monthly compliance report to the
financial loss and Board.
reputational damage.
Director, Social, Economic and Environmental Matters and Looking to the Future
Directors
The Directors of the Company, who served during the year, are shown below.
Further information on the Directors can be found on pages 23 and 24.
David Nichol (Chairman)
Charlotta Ginman (appointed 9 October 2014)
Richard Horlick (retired on 24 June 2014)
Terence Mahony
Nigel Rich
James Williams
Board Diversity
The Board is supportive of the recommendations of Lord Davies' report that the
performance of corporate boards can be improved by encouraging the appointment
of the best people from a range of differing perspectives and backgrounds. The
Company recognises the benefits of diversity on the Board, including gender,
and takes this into account in its Board appointments. The Company is committed
to ensuring that any Director search process actively seeks persons with the
right qualifications so that appointments can be made, on the basis of merit,
against objective criteria from a diverse selection of candidates.
Social, Economic and Environmental Matters
The Directors, through the Company's Investment Manager, encourage companies in
which investments are made to adhere to best practice with regard to Corporate
Governance. The Company recognises that social and environmental issues can
have an effect on some of its investee companies and this is reflected by the
sustainable approach taken by First State.
The Company is an investment trust and so its own direct environmental impact
is minimal.
Looking to the Future
The Board concentrates its attention on the Company's investment performance
and First State's investment approach and on factors that may have an affect on
this approach.
The Board monitors the performance of the Company's portfolio compared to its
benchmark and also its peer group. In addition, it invests time in meeting
investee companies to ascertain if they meet the sustainable criteria set by
First State.
The Board is regularly updated by Frostrow on wider investment trust industry
issues and discussions are held at each Board meeting concerning the Company's
future development and strategy.
The Company's overall strategy remains unchanged.
Strategic Report/Investment Portfolio
as at 31 January 2015
% of
Market total Country
assets
valuation less of
current
Company MSCI sector £'000 liabilities incorporation
Tech Mahindra Information Technology 14,842 6.1 India
Marico Consumer Staples 11,146 4.6 India
Taiwan Semiconductor Information Technology 9,965 4.1 Taiwan
Manufacturing
Delta Electronics Information Technology 9,180 3.8 Thailand
(Thailand)
Vitasoy International Consumer Staples 9,054 3.8 Hong Kong
Holdings
Manila Water Utilities 8,399 3.5 Philippines
Kotak Mahindra Bank Financials 7,824 3.2 India
E.Sun Financial Financials 7,529 3.1 Taiwan
Holdings
Idea Cellular Telecommunication 7,438 3.1 India
Services
Standard Foods Consumer Staples 7,343 3.0 Taiwan
Ten largest 92,720 38.3
investments
Dr. Reddy's Health Care 6,730 2.8 India
Laboratories
Ayala Corporation Financials 6,474 2.6 Philippines
SembCorp Industries Industrials 5,809 2.4 Singapore
XL Axiata Telecommunication 5,596 2.3 Indonesia
Services
Chroma ATE Information Technology 5,441 2.3 Taiwan
Towngas China Utilities 5,441 2.3 Cayman
Islands1
Housing Development Financials 5,063 2.1 India
Finance
Infosys Information Technology 4,919 2.0 India
Bank of the Philippine Financials 4,861 2.0 Philippines
Islands
Singapore Post Industrials 4,207 1.7 Singapore
Twenty largest 147,261 60.8
investments
Linde India Materials 4,189 1.7 India
Dabur India Consumer Staples 4,117 1.7 India
Public Bank Financials 3,831 1.6 Malaysia
Axiata Group Telecommunication 3,791 1.6 Malaysia
Services
China Mengniu Dairy Consumer Staples 3,778 1.6 Cayman
Islands1
Shinhan Financial Financials 3,661 1.5 South Korea
Weifu High-Technology Consumer Discretionary 3,579 1.5 China
Group
Globe Telecom Telecommunication 3,446 1.4 Philippines
Services
Kasikornbank Financials 3,434 1.4 Thailand
Singapore Telecommunication 3,076 1.3 Singapore
Telecommunications Services
Thirty largest 184,163 76.1
investments
MTR Industrials 2,953 1.2 Hong Kong
DGB Financial Group Financials 2,916 1.2 South Korea
Uni-President Consumer Staples 2,695 1.1 Taiwan
Enterprises
Sheng Siong Consumer Staples 2,550 1.1 Singapore
Pidilite Industries Materials 2,521 1.0 India
Giant Manufacturing Consumer Discretionary 2,191 0.9 Taiwan
Tube Investments of Consumer Discretionary 2,064 0.9 India
India
AirTac International Industrials 2,053 0.8 Cayman
Islands2
Marico Bangladesh Consumer Staples 1,959 0.8 Bangladesh
Asustek Computers Information Technology 1,831 0.8 Taiwan
Forty largest 207,896 85.9
investments
1. Economic activity takes place principally in China
2. Economic activity takes place principally in Taiwan
% of
Market total Country
assets
valuation less of
current
Company MSCI sector £'000 liabilities incorporation
Info Edge Information Technology 1,385 0.6 India
Hemas Holdings Industrials 1,254 0.5 Sri Lanka
Cholamandalam Financials 1,228 0.5 India
Investment & Finance
Expeditors Industrials 1,214 0.5 United States
International of 3
Washington
Delta Electronics Information Technology 1,185 0.5 Taiwan
(Taiwan)
Commercial Bank of Financials 1,147 0.5 Sri Lanka
Ceylon
Dialog Axiata Telecommunication 1,069 0.5 Sri Lanka
Services
Container Corp of Industrials 1,006 0.4 India
India
Mahindra Lifespace Financials 825 0.3 India
Developers
Selamat Sempurna Consumer Discretionary 808 0.3 Indonesia
Fifty largest 219,017 90.5
investments
Swire Properties Financials 584 0.2 Hong Kong
PChome Online Information Technology 553 0.2 Taiwan
Bank OCBC NISP Financials 452 0.2 Indonesia
Bata Shoe Consumer Discretionary 355 0.1 Bangladesh
Elgi Equipments Industrials 133 0.1 India
Total portfolio 221,094 91.3
Cash 26,494 11.0
Net current (5,525) (2.3)
liabilities
Total assets less 242,063 100.0
current liabilities
3. Economic activity takes place principally in the Asia Pacific Region
Strategic Report/Investment Philosophy
Overview of First State's Investment philosophy
First State, which has been the Company's Investment Manager since 1 July 2010,
adopts a sustainable investment strategy in selecting the investments that make
up the Company's investment portfolio.
Definition of Sustainable Investment
By sustainable investment, First State is not referring to `green', `clean
tech' or `ethical' investing. Their emphasis is on sustainable development.
They are simply setting out to invest in those companies they believe are
particularly well-positioned to deliver long-term returns in the face of the
huge development challenges facing all countries today.
The root causes of these development challenges are numerous and complex. They
include population pressure, land and water scarcity and degradation, resource
constraints, income inequality, ethnic and gender inequalities and extreme
levels of poverty. It is becoming increasingly clear that in order to tackle
these development challenges, both developed and developing countries will be
required to reinvent their development trajectories and shift away from the
current resource intensive, consumption intensive, overly debt-dependent
development models towards a more genuinely sustainable path of economic
development.
Sustainable investment has always been an integral part of the First State
team's investment philosophy and stock-picking process. At the heart of this
philosophy is the principle of stewardship.
They believe their job is to invest their clients' capital in good quality
companies with strong management teams and sound long-term growth prospects.
Each investment is a decision to purchase, not a piece of paper or an
electronic Bloomberg ticker, but part of a real business with all the rights
and responsibilities that go with this `share' of the ownership of the company.
They take these rights and responsibilities seriously. They also believe the
way they behave as investment professionals and the role they play in the
broader industry are important for their own sustainability.
All the First State investment strategies strive to integrate environmental,
social and governance (ESG) considerations into every investment decision.
Their sustainability strategies take this one step further by focusing on
long-term sustainability themes as a key driver of the investment process.
Sustainable Investment Aim
To generate attractive long-term, risk-adjusted returns by investing in the
shares of those companies which are particularly well-positioned to benefit
from, and contribute to, the sustainable development of the countries in which
they operate.
Investment Philosophy
First State seeks to invest only in good quality companies. Quality is measured
through the lenses of management's financial and franchise quality. By
analysing the sustainability performance and positioning of companies they can
better measure less-tangible elements of quality and identify hidden risks.
First State are long-term investors. They strive to make investment decisions
with a five-year time horizon.
They have an absolute return mindset. That is, they define risk as losing money
for their clients, rather than in terms of deviation from any benchmark index.
They focus as much on the potential downside of their investment decisions as
on the anticipated upside. The identification of long-term sustainability risks
thus becomes an extremely important way of managing risk. In addition, their
willingness to differ substantially from index weightings, both country and
company, means they are not obliged to be invested anywhere where they have
particular sustainability concerns.
They also recognise there is no such thing as a perfect company. They are
active owners and stewards of the companies they own. A summary of First
State's investment approach can be found on page 7.
Strategic Report/Investment Manager's Review
"We seek management teams and businesses which are able to contribute
positively towards social outcomes, whilst making profits for shareholders."
Sustainable Investment in Asia
We sit in the office of the Chief Executive of one of South East Asia's leading
business families, high above the bustling streets below. The group's interests
range from property development to a leading airline. But the jewel in the
crown is an emerging, pan-regional snacks business. We are invited to try some
samples and spend the next five minutes examining the various cake bars, potato
chips and cookies on offer. None look especially appetising or healthy. As we
turn over the packets in our hands, doing our best to discern ingredients we
recognise and find some nutritional information, we can't help but notice that
several `chocolate' products do not appear to contain any cocoa. Slightly
bemused, we raise this point with our host. He explains to us that the company
finds it cheaper and easier to use vegetable fats as a substitute, and add more
sugar to preserve a taste of sweetness.
As the disposable incomes of tens of millions of Asians rises, so does the
demand for more variety and convenience in food. The sales of domestic
companies serving local tastes as well as those of multinationals producing
western fares have grown very quickly over the last twenty years. One
consequence has been the creation of a large universe of listed Asian consumer
staples companies available for the Company to invest in.
However, it is clear that rising per capita income does not necessarily imply
better nutrition. Much of Asia seems mid-way through a period of rapid growth
in consumption of highly processed ingredients with dangerous levels of salt,
sugar and fat. Globalisation has ensured that the speed with which
nutritionally poor quality food has become both available and affordable to
large swathes of the urban population in emerging Asia has completely
outstripped any education around sensible consumption.
The result is that large portions of the population in Asia are beginning to
experience the types of non-communicable lifestyle diseases that are more often
associated with older, richer and more developed western societies. The
prevalence of diabetes is now higher in Vietnam than in Japan and higher in
Indonesia than Italy. Malaysia's incidence of the disease ranks amongst the
highest globally. Startlingly, rates in China and India are twice as high as in
Australia, the UK or France. In countries with such large, in some cases
ageing, populations and so sorely inadequate public health systems, it is no
exaggeration to say that poor nutrition and the associated illnesses represents
a potential health time bomb for the continent in the
21st century.
It is a tragic dichotomy that in the same Asia-Pacific region, far away from
the bright lights of Hong Kong and Singapore, live two-thirds of the world's
population of 800 million people who do not have enough food to live healthily.
Malnutrition and stunting remains - despite the rapid economic progress of Asia
over the last two decades - the norm for hundreds of millions of people in the
region, primarily in rural areas in northern India, southwest China and the
more remote parts of the Indonesian archipelago.
It is within this extremely challenging and bewildering context that First
State attempts to identify potential investee companies for the Company's
shareholders. We set out to invest in those Asian companies which are best
positioned to contribute to and benefit from sustainable human development in
the Asia Pacific Region over the next ten years.
In the area of food and beverages, that means trying to find companies that we
think can continue to increase sales in a profitable way over the next ten
years, governed by sensible management teams who will deliver reliable and
steadily growing cash flows to shareholders. Often, this means seeking out
those companies focused on increasing rural, bottom of the pyramid consumption
and those products which are truly needed by the end-user.
We are trying to find companies whose products, by their nature, are
well-positioned for future health and wellness trends. In countries around the
world, the manufacturers of excessively unhealthy products are facing headwinds
to earnings growth. This is coming on one hand from changing consumer
preferences, reflecting a growing underlying awareness of health issues around
sugar and salt consumption. At the same time, governments are throwing up
barriers in the form of heavier regulation and special taxes in the knowledge
that such products can create significant costs for society which will be borne
through the public purse via future health spending.
These headwinds are extremely relevant long-term investment issues in Asia, not
twenty or thirty years from now, but today. Just as Asia has experienced an
increase in these problems earlier and faster than the West did, it may also be
the case that the region's populations begin to address them at a pace that few
currently expect.
The concept of `social license to operate' is pertinent: whether they realise
it or not, all companies depend upon an implicit acquiescence of society that
they may undertake their operations. Those companies which pollute the
environment, mistreat labour, avoid tax, bribe politicians or produce products
which slowly poison their consumers risk endangering their license to operate.
We seek management teams which understand these points and businesses which are
able to continuously replenish their implicit licences by contributing
positively towards social outcomes, whilst making profits for shareholders.
For these reasons, we consider a rupee or baht of earnings from selling milk or
oatmeal to be far lower risk than earnings from selling snacks made from
vegetable fats and sugar. Currently, around 15% of the Company's portfolio is
invested in companies which are to varying degrees involved in the provision of
healthier food and beverages in Asia. China Mengniu Dairy is a Beijing based
milk and dairy company. Following the melamine milk scandal in 2008, the
company came under the control of a reputable Chinese state-owned group and the
European dairy companies Danone and Arla - firms with decades of experience in
dairy health and safety. The company is today the largest dairy company in
China and is playing a major role in providing a daily staple in a safe,
reliable and increasingly profitable way. Meanwhile, Sheng Siong in Singapore
is a family-owned and operated retail operation with a very conservative
management team and balance sheet to match. The company has a particular focus
on affordable, fresh food and primarily serves the lower income areas of the
city, offering lower prices than either wet markets or their retail peers. In
Taiwan, Standard Foods is a family-run health foods business with dominant
market shares in several niche categories, including breakfast porridge and
ginseng drinks, which result in high levels of profitability in its domestic
market. The company is slowly growing into the mainland Chinese market from its
base in Shanghai. A similar tale applies to Hong Kong-based Vitasoy
International Holdings. This company supplies healthier alternatives in
numerous categories, producing soya milk, tea and tofu. Having successfully
gone overseas into more developed parts of the region, over time sales into
China have grown such that today the contribution from the mainland is
approaching 50%. In India, Bangladesh, Vietnam and Malaysia, Marico provides,
amongst other products, Saffola wholegrain oats and Parachute coconut cooking
oil - healthier substitutes to the fried breakfast foods and fattier cooking
oils commonly found across South and South East Asia. The Company owns shares
in both the Indian parent and in the listed subsidiary Marico Bangladesh.
We are well aware, however, that there are no perfect companies. For each of
the top holdings, we have compiled a number of priority engagement topics -
risk areas for which we want to understand company strategy better, or topics
on which we feel the company could be working better. In the case of food and
beverage companies, common concerns focus on sourcing of palm oil and other
high-risk sectors of the supply chain, sustainable packaging design, and
product formulation. We are well aware that there are products sold in Sheng
Siong supermarkets which are poorly positioned for sustainability headwinds,
and there are some China Mengniu brands which contain far too much sugar. As
ever, finding the best positioned companies entails dealing in shades of grey
rather than black and white!
Investing is a process rather than an event; hopefully one which takes place
over many years. We continue to engage regularly with underlying portfolio
holdings in a respectful and non-confrontational way, through face to face
meetings and more formally in a written format. The goal is to understand
better and, if we can, to improve the sustainability positioning of the
companies involved. This is part of the investment process because in our view
this can help reduce the risks to the investment case and ensure the
preservation of the company's social licence to operate. We believe that in the
long-term, making positive changes to company behaviour will not only be good
for society but will help contribute to the success of these businesses in Asia
in the coming decades.
Performance Review
The table overleaf shows the primary contributors to, and detractors from, the
Company's performance in the twelve months under review. As always the
detractors are of more interest as it is here we are able to learn from our
mistakes! The worst investment of the year was our investment in DGB Financial,
a South Korean bank headquartered in Daegu. We have a strong preference for
investing in small, regional, `old-fashioned banking' banks rather than the
huge, casino banks that increasingly straddle the Asia Pacific Region. DGB fits
very much into the former category, and has worked hard to earn the trust of
savers in the greater Daegu region over the past half century. While the
long-term outlook remains solid, the last twelve months have been difficult for
the Bank as a combination of senior management transition, local market
saturation and deteriorating asset quality have led to short-term uncertainty.
In hindsight, we should have anticipated the deteriorating lending environment
and trimmed our position earlier. Elsewhere, SembCorp Industries has struggled
following a downturn in the marine and offshore division while both Towngas
China and Standard Foods have seen their earnings slow as aresult of the
significant economic slowdown underway in mainland China.
In terms of the drivers of performance, five of the top ten contributors are
Indian companies. At first glance this may appear to have been a successful
call on the Indian stock market for 2014. In reality it was anything but. Each
of the sixteen Indian companies within the portfolio are held for
company-specific reasons, many of which have little if anything to do with the
Indian economy. For example, Tech Mahindra's sales are almost exclusively
outside India and its strong share price is simply a result of the successful
reincarnation of the company under new owners. While the landslide victory of
Prime Minister Modi has led to a re-rating of many Indian companies during
2014, Tech Mahindra included, it is just as likely that a de-rating will follow
at some point, once the political honeymoon period comes to an end. As a
result, there is every chance that the Company's Indian holdings will pepper
the top ten detractors list next year! Should this be the case, we will
hopefully take the opportunity to increase the Company's holdings in some of
our favourite Indian companies which we have been forced, as a result of
extended valuations, to trim during 2014.
We consider currency risks at a company level and avoid currency mis-matches
between revenues and costs, and look favourably upon natural currency hedges in
a business. At an investment portfolio level we have no expertise in managing
for expectations of currency changes and deliberately do not hedge for currency
changes. During the past year sterling depreciated versus all Asian currencies
held in the investment portfolio by between 3% and 11%.
What helped - contribution returns (top ten)
Contribution
returns
Company %
Tech Mahindra 4.50
Marico 4.49
Delta Electronics (Thailand) 2.12
Kotak Mahindra Bank 2.04
Amorepacific Group* 1.92
Taiwan Semiconductor Manufacturing 1.86
Dabur India 1.84
Manila Water 1.60
Kasikornbank 1.30
Tube Investment of India 1.21
What hurt - contribution returns (bottom ten)
Contribution
returns
Company %
DGB Financial -0.57
SembCorp Industries -0.41
Towngas China -0.40
Standard Foods -0.36
Uni President China* -0.09
Commercial Bank of Ceylon -0.03
Sabana REIT* -0.03
Nations Trust Bank* -0.02
Dialog Axiata -0.02
Selamat Sempurna -0.01
* Stock not held at the year-end.
Source: First State
Outlook
Taking a top-down view, Asia-Pacific markets currently can be argued to look
cheap, at least on a relative basis. In early 2015, Asia ex Japan is trading at
a forward looking P/E (price-to-earnings ratio) of below 12x. This is a little
lower than the region's historic average. For comparison, the US trades
currently on over 16x, Japan on 14x and even Europe, in the economic doldrums
and struggling with looming deflation, on almost 13x. Investors in the Company
might be forgiven, therefore, for thinking that the Company's Investment
Manager is currently having a comfortable time in picking out high quality
companies at very attractive valuations.
The reality could scarcely be further from the truth. Whenever we travel in the
region or conduct fair market valuation exercises on our favourite companies,
we find that many of them trade on very stretched valuations.
At least part of the answer to this paradox lies in the relative popularity of
different parts of Asia and the weightings of those markets in the composite
figure. That China and Korea, Asia's two largest markets by representation in
the index, are both unpopular at present contributes a lot to the overall
figure. Primarily for reasons around corporate governance, we have struggled to
find many high quality companies in these markets in which to invest our
clients' funds.
% of
Market YE15 P/E* YE15 P/B* % of Portfolio
* Index
Philippines 18.9 2.8 1.2 9.6
India 16.5 2.6 9.3 30.5
Indonesia 14.5 2.8 3.5 3.0
Malaysia 14.7 1.8 4.7 3.2
Taiwan 13.0 1.7 15.1 16.7
Hong Kong 14.5 1.2 12.8 7.5
Singapore 13.3 1.3 5.8 6.3
Thailand 12.9 1.9 3.5 5.0
Korea 9.6 0.9 17.4 2.7
China 9.5 1.3 26.7 3.1
* Price-to-earnings ratio
** Price-to-book ratio
% of Index calculated by pro rata from MSCI World Index. % of the portfolio
does not round to 100% due to exposure to markets not listed here and cash.
Source: MSCI and First State
We have built up a large cash position within the portfolio. This is less a
call on overall markets - we have no crystal ball - and more a reflection of
our stock-by-stock approach. Many of our favourite Asian companies have reached
valuations we struggle to live with. As a result, we have been forced to trim
and in some cases dispose altogether of the Company's investments in these
companies. Meanwhile, we continue to be very cautious about reinvesting the
proceeds from these sales. While we have placed a number of new purchase
orders, they have all been accompanied by tight limits above which we are not
prepared to go. Better to sit and be patient than to chase share prices up,
particularly given the state of markets currently.
In attempting to value companies, we believe that methodologically, quite often
less is more. We do not build complex financial models which attempt to
estimate future earnings growth over the short-term of one or two years. It
seems to us that most of the time such attempts would unnecessarily
overcomplicate matters and serve only to hide what are usually only a few key
investment points.
We have no black box for valuing companies and attempt to keep the methods used
as simple as possible and to deliberately rotate evaluating the fair market
values of companies around the team to ensure a fresh evaluation is made. The
specific methods used will vary; anything from valuing a company at the
replacement value of its tangible assets to making an international comparison
of the market capitalisation per capita of similar businesses are all
legitimate tools.
Two obvious potential mistakes, however, deserve mention as points we take care
to avoid. One is relative valuation arguments: "a 20x PE ratio isn't so
expensive, this similar company in this market trades at 25x". We are strongly
considering instituting a team-wide relative valuation argument swear jar. The
second is ensuring that short-term valuation metrics like one year forward
price-to-earnings (PE) ratios do not become the sole consideration.
History is instructive. In 2002, Dabur India, one of the Company's holdings,
was a small ayurvedic company focused on shampoo, toothpaste, skincare and
chyawanprash, an ancient Indian fruit pulp with herbs and plant extracts. If
you had wanted to buy shares in the company at that stage, you would have been
asked to pay a rather full looking 22x earnings. One could easily have
considered this too expensive. The subsequent 13 years has illustrated aptly
the folly of focusing excessively on the near-term in valuing companies. Since
then, Dabur has returned approximately 36% per year to shareholders in the form
of share price appreciation and a growing dividend.
In order to combat the tendency to focus on next year's PE ratio, we ask
ourselves whether we believe the quality of management, franchise and
financials of a given company is high enough that we would feel comfortable
buying and holding for ten years, and making claims stretching this far into
the future. Hopefully, for all of our investee companies, this is the case. We
then try to evaluate likely growth in earnings over that period. Lastly, we ask
whether the business will be mature or still growing ten years from now, and
what an appropriate multiple on earnings ten years from now might be.
As our favourite companies get expensive, the temptation is to chase more
reasonable valuations and compromise on quality. We are resolute that this
would not be the best choice for our clients. As valuations become stretched,
it becomes only more important in order to preserve clients' capital to focus
on quality companies - those with blemish-free corporate governance, reputable
management teams with track record, conservative financials and franchises
which stand to benefit from sustainability tailwinds - and ensure our valuation
mindsets take into account the next decade rather than the next four quarters.
First State Investment Management (UK) Limited
27 March 2015
Portfolio Focus - These are examples of companies that we are focusingon.
MARICO
Shareholders since: July 2010
Sustainability classification: Sustainable goods andservices
Company description: Marico is a leading Indianconsumer products company. The
Company's flagship product is Parachute, an edible grade coconut oil, designed
for hair care but also used in cooking! Using cashflows from Parachute, Marico
have successfully built up a strong suite of trusted brands in personal care
and healthy foods.
Investment rationale: Marico has a successful long-term track record, quality
management, a risk aware culture, an independent board, and a portfolio of
strong brands in under penetrated categories. Marico is now steadily building a
business in other emerging markets such as Bangladesh, South East Asia, Africa
and the Middle East where consumer behaviour is similar to India. We believe
Marico can continue to deliver sustainable growth over the next decade as it is
well positioned in fast growing markets and categories with strong
sustainability tailwinds.
GIANT MANUFACTURING
Shareholders since: February 2012
Sustainability classification: Required infrastructure
Company description: Established in 1972, Giant is oneof the world's largest
bike manufacturers in terms of revenue. They have the number one position in
China and are one of the top three brands in Europe and the US. Giant operates
manufacturing bases in Taiwan, China and the Netherlands. They manufacture
under the Giant brand but also for Trek and Specialized.
Investment rationale: Excellent track record ofexecution both in OEM business
and development of its own brand, there is a good history of paying dividends
and they have the long-term backing of the Liu family. We also see long-term
opportunities for bikes as people opt for healthier life styles and commuting
(Giant is also leading in the development of electric bikes).
PIDILITE
Shareholders since: December 2013
Sustainability classification: Sustainable goods andservices
Company description: Founded in 1959, Pidilite is oneof India's leading
adhesives and construction chemicals companies, majority owned and managed by
the Parekh family.
Investment rationale: Pidilite has a sound long-termtrack record, majority
owned by a quality family, has a strong balance sheet and should benefit from
rising spending on housing and infrastructure in India.
The company has been going through a well planned transformation since 2009 to
increasingly professionalise senior management. This transformation was not
borne out of a crisis but simply an understanding of the needs of a business
their size and the growth opportunities over the next decade.
CHINA MENGNIU DAIRY
Shareholders since: 2012
Sustainability classification: Sustainable goods andservices
Company description: China Mengniu is the country'slargest dairy company,
producing branded liquid milk, yogurt, ice cream and milk formula products.
Investment rationale: Following the melamine scandalin 2008, a respected
state-owned consumer group, COFCO, stepped in. Since then, the management team
has been changed, there has been a concerted effort to improve health and
safety standards and milk inspection procedures to global best practice.
Europeans with decades of expertise in food safety and branding in the dairy
industry, including Danone and Arla, have been integrated closely as equity
investors. The company has been consolidating and integrating its supply chain
in order to guarantee the quality of its liquid milk supplies. A cash
generative franchise with significant room for margin expansion, Mengniu is
focusing on strengthening its branding, cost control, and on promoting value
added dairy products like yogurt. We as minorities are aligned with the state
and other equity holders in improving safety standards in the Chinese dairy
industry, and hope to benefit from long-term increases in Chinese dairy
consumption.
Governance/Board of Directors
David Nichol, FCA
Chairman
David was appointed as a Director in January 1985 and Chairman in May 2004. He
is Chairman of the Nomination and Engagement & Remuneration Committees. He is a
former partner of Rossie House Investment Management, a firm which he founded
in 1993. Prior to that he was with Ivory & Sime for 20 years and was Managing
Director of Ivory & Sime Asia Ltd. in Hong Kong from 1989 to 1991.
Charlotta Ginman, ACA
Charlotta was appointed as a Director on 9 October 2014. She is a non-executive
Director of Kromek Group plc, where she chairs the company's Audit Committee,
and also of Polar Capital Technology Trust plc and Consort Medical plc.
Charlotta was formerly a non-executive Director of Wolfson Microelectronics
plc. Prior to going plural, Charlotta held senior positions in the investment
banking and telecom sectors.
A Chartered Accountant, Charlotta also holds an MSc in Economics from the
Swedish School of Economics and Business Administration in Helsinki.
Terence Mahony
Terence was appointed as a Director in February 2004. He is Managing Director
of TFM Management Limited, a firm of investment consultants based in Hong Kong.
He has over 35 years' investment experience, the last 25 of which have been
gained in Asia. He is also non-executive Vice Chairman of Vina Capital Group
and a non-executive Director of Tau Capital plc and Advance Developing Markets
Fund Limited.
The table below sets out the number of scheduled Board and Committee meetings
held during the year ended 31 January 2015 and the number of meetings attended
by each Director.
Engagement &
Board of Audit Remuneration Nomination
Directors Committee Committee Committee
Number of meetings 5 2 1 3
D B Nichol 5 2 1 3
M C Ginman* 2 - - 2
R M A Horlick** 2 1 1 1
T F Mahony 5 2 1 3
N M S Rich 5 2 1 3
J P Williams 5 2 1 3
* Appointed on 9 October 2014
** Retired on 24 June 2014
Other ad hoc meetings of the Board and Committees are held in connection with
specific events as and when necessary. All the serving Directors attended the
Annual General Meeting held on 24 June 2014.
Nigel Rich, CBE, FCA
A Chartered Accountant, Nigel is the Senior Independent Director and Chairman
of the Audit Committee and was appointed as a Director in January 1997. He is
Chairman of SEGRO plc and a non-executive Director of British Empire Securities
and General Trust plc and Matheson & Co Limited. He is also Co-Chairman of the
Philippine British Business Council. From 1974-1994 he was with Jardine
Matheson Group and was the Group Managing Director from 1989-1994 based in Hong
Kong.
James Williams
James was appointed as a Director in October 2013. He is currently also a
non-executive Director of Investors Capital Trust plc. He was formerly the
Chief Investment Officer of Baring Asset Management, and prior to that a
founder of Henderson Baring in Asia. He has worked in investment management for
over 40 years.
Directors' (and other Senior Individuals') Interests
The interests in the Company of the Directors who held office at the end of the
year and also of senior individuals at First State with responsibility for
managing the Company's portfolio were as set out below:
Number of Number of
shares shares
held as held as
at at
31 31
January January
2015 2014
David Nichol* Beneficial 75,000 75,000
Trustee - 100,000
Charlotta Ginman** Beneficial Nil Nil
Terence Mahony Beneficial Nil Nil
Nigel Rich†Beneficial 45,000 45,000
Trustee 10,550 9,650
James Williams Beneficial 20,000 20,000
150,550 249,650
Senior Individuals at First State 953,040 1,017,290
Total 1,103,590 1,266,940
* Includes 35,000 ordinary shares held by Mrs Judith Nichol
** Appointed 9 October 2014
†Includes 20,000 ordinary shares held by Mrs Cynthia Rich
There have been no changes in the interests of the Directors in the shares of
the Company between 31 January and 27 March 2015.
During 2013, the Board introduced a policy to encourage Directors to own shares
in the Company to the value of at least 1.5 times their annual fee, this to be
achieved over the following three years for existing Directors and within three
years of appointment for new Directors.
Governance/Corporate Governance
Committees of the Board
Throughout the year a number of Committees have been in operation, namely the
Audit Committee, the Engagement & Remuneration Committee and the Nomination
Committee. Each of these Committees operates within clearly defined written
terms of reference which are available upon request from the Company Secretary.
The Audit Committee is chaired by Nigel Rich. The Directors believe that Nigel
Rich, a Chartered Accountant, has relevant financial knowledge and experience
to enable him to chair this Committee effectively. Charlotta Ginman, aChartered
Accountant, will take over as Chairman of the Audit Committee with effect from
the conclusion of the Company's Annual General Meeting. Both the Engagement &
Remuneration and Nomination Committees are chaired by David Nichol. All
Directors of the Company, including the Chairman, are members of all three
committees to enable them to be kept fully informed of any issues that may
arise.
The Audit Committee
The Company's Audit Committee met on two occasions during the year. The duties
of the Audit Committee in discharging its responsibilities include: reviewing
the annual and half-year accounts; the system of internal controls employed by
First State and Frostrow and the terms of appointment of the external Auditor
together with its remuneration. It is also the forum through which the external
Auditor reports to the Board of Directors. The objectivity of the external
Auditor is reviewed by the Audit Committee which also reviews the terms under
which it is appointed to perform non-audit services. The
Audit Committee reviews the scope and results of the audit, its cost
effectiveness and the independence and objectivity of the external Auditor,
with particular regard to non-audit fees.
The Engagement and Remuneration Committee
The Company's Engagement & Remuneration Committee met on one occasion during
the year and its purpose is to review the appropriateness of the continuing
appointment of the Investment Manager and the Manager together with the terms
and conditions thereof on a regular basis.
The level of Directors' fees is also reviewed on a regular basis relative to
other comparable investment companies and in the light of Directors'
responsibilities.
The Directors Remuneration Report details the fees paid to the Company's
Directors for the years to 31 January 2014 and 31 January 2015.
The Nomination Committee
The Nomination Committee met on three occasions during the year and is convened
for the purposes of reviewing the election and re-election of Directors and
considering the appointment of additional Directors as and when considered
appropriate. In considering appointments to the Board, the Nomination Committee
takes into account the ongoing requirements of the Company and the need to have
a balance of skills and experience within the Board.
Individual Directors may, at the expense of the Company, seek independent
professional advice on any matter that concerns them in the furtherance of
their duties. The Company maintains appropriate Directors' and Officers'
liability insurance.
Risk Management
The Company is a small registered UK Alternative Investment Fund Manager under
the Alternative Investment Fund Managers Directive. As part of the Board's
role, it has added a specific risk management item to the agenda for each
quarterly Board meeting. In addition, an extra risk focused Board meeting has
been added to its calendar of meetings. Additional Board meetings will also be
convened as required to consider any issues that may arise.
Proxy Voting and Stewardship
The Board has instructed First State to take into account the published
corporate governance policy and the environmental practices and policies of the
companies in which they invest on behalf of the Company. The Company has
delegated responsibility for voting to First State.
The Board has considered First State's Stewardship Code and Proxy Voting Policy
and it reports to the Board, on the application of the Stewardship Code and
Voting Policy. First State's Stewardship Code and Voting Policy can be found on
its website in the Policies section.
Nominee Share Code
Where shares are held in a nominee company name, where the beneficial owner of
the shares is unable to vote in person, the Company nevertheless undertakes:
- to provide the nominee company with multiple copies of shareholder
communications, so long as an indication of quantities has been provided in
advance; and
- to allow investors holding shares through a nominee company to attend general
meetings, provided the correct authority from the nominee company is available.
Corporate Governance
The Listing Rules and the Disclosure and Transparency Rules (`Disclosure Rules
`) of the UK Listing Authority require listed companies to disclose how they
have applied the principles and complied with the provisions of the corporate
governance code to which the issuer is subject. The provisions of the UK
Corporate Governance Code (`UK Code`) issued by the Financial Reporting Council
(`FRC`) in September 2012 are applicable for the year under review. The related
Code of Corporate Governance (`AIC Code`) issued by the Association of
Investment Companies (`AIC`) in February 2013 provides specific corporate
governance guidelines to investment trusts. The Board has considered the
principles and recommendations of the AIC Code by reference to the AIC
Corporate Governance Guide for Investment Companies (`AIC Guide`). The FRC has
confirmed that AIC member companies who report against the AIC Code and who
follow the AIC Guide will meet the obligations in relation to the UK Code and
associated disclosure requirements of the Disclosure Rules.
The AIC Code can be viewed at http://www.theaic.co.uk/sites/ default/files/
AICCodeofCorporateGovernanceFeb2013.pdf
The UK Code can be viewed at http://www.frc.org.uk/our-work/Publications/
Corporate-Governance/UK-Corporate-Governance-Code-September-2012.pdf.
The Board considers that reporting against the principles and recommendations
of the AIC Code and the AIC Guide (which incorporates the UK Code) provides
shareholders with full details of the Company's Corporate Governance
compliance.
The UK Code includes provisions relating to the role of the chief executive
Directors' remuneration. However, as all of the Directors are non-executive,
these provisions are not applicable. The UK Code also sets out the case for
establishing an internal audit function. For the reasons set out in the AIC
Guide, the Board considers that an internal audit function is not relevant to
the Company, being an externally managed investment company.
Throughout the year ended 31 January 2015 the Company complied with the
provisions of the AIC Code and AIC Guide.
Nominee companies are encouraged to provide the necessary authority to
underlying shareholders to attend the Company's general meetings.
The Principles of the AIC Code
The AIC Code is made up of twenty-one principles split into three sections
covering:
- The Board
- Board Meetings and relations with First State and Frostrow
- Shareholder Communications
The Board
AIC Code Principle Compliance Statement
1. The Chairman should The Chairman, David Nichol, continues to be independent
be independent. of First State. There is a clear division of
responsibility between the Chairman, the Directors,
First State, Frostrow and the Company's other third
party service providers. The Chairman is responsible
for the leadership of the Board and for ensuring its
effectiveness in all aspects of its role.
2. A majority of the The Board consists of five non-executive Directors,
Board should be each of whom is independent of First State. No member
independent of the of the Board is a Director of another investment
manager. company managed by First State, nor has any Board
member been an employee of the Company, First State or
any of its service providers.
3. Directors should be All Directors will submit themselves for annual
submitted for re-election by shareholders.
re-election at regular
intervals. Nomination The individual performance of each Director standing
for re-election should for re-election is evaluated annually by the remaining
not be assumed but be members of the Board and, if considered appropriate, a
based on disclosed recommendation is made that shareholders vote in favour
procedures and of their re-election at the Annual General Meeting.
continued satisfactory
performance.
4. The Board should The Board, meeting as the Nomination Committee,
have a policy on considers the structure of the Board and recognises the
tenure, which is need for progressive refreshing of the Board.
disclosed in the
annual report. The Board subscribes to the view expressed within the
AIC Code that long-serving Directors should not be
prevented from forming part of an independent majority.
It does not consider that a Director's tenure
necessarily reduces his or her ability to act
independently and, following formal performance
evaluations, believes that each of the Directors is
independent in character and judgment and that there
are no relationships or circumstances which are likely
to affect their judgment. The Board's policy on tenure
is that continuity and experience are considered to add
significantly to the strength of the Board and, as
such, no limit on the overall length of service of any
of the Company's Directors, including the Chairman, has
been imposed. In view of its non-executive nature, the
Board considers that it is not appropriate for the
Directors to be appointed for a specified term,
although new Directors are appointed with the
expectation that they will serve for a minimum period
of three years subject to shareholder approval.
The terms and conditions of the Directors' appointments
are set out in letters of engagement which are
available for inspection on request at the office of
Frostrow and at the Annual General Meeting.
5. There should be The Directors' biographical details, set out on pages
full disclosure of 23 and 24 of this Report, demonstrate the wide range of
information about the skills and experience that they bring to the Board.
Board.
Details of the Board's Committees and their composition
are set out on page 25 of this Report.
The Audit Committee membership comprises all of the
Directors, all of whom are considered independent. The
Chairman of the Company is a member of the Audit
Committee, but does not chair it. His membership of the
Audit Committee is considered appropriate given the
Chairman's extensive knowledge of the financial
services industry.
The Engagement & Remuneration Committee is comprised of
the whole Board, all Directors are considered
independent. The Chairman of the Company acts as
Chairman of this Committee in light of the remit of the
Committee.
6. The Board should The Nomination Committee considers annually the skills
aim to have a balance possessed by the Board and identifies any skill
of skills, experience, shortages to be filled by new Directors.
length of service and
knowledge of the When considering new appointments, the Board reviews
company. the skills of the Directors and seeks to add persons
with complementary skills or who possess the skills and
experience which fill any gaps in the Board's knowledge
or experience and who can devote sufficient time to the
Company to carry out their duties effectively.
The experience of the current Directors is detailed in
their biographies set out on pages 23 and 24 of this
Report.
The Company is committed to ensuring that any vacancies
arising are filled by the most qualified candidates and
recognises the value of diversity in the composition of
the Board. When Board positions become available as a
result of retirement or resignation, the Company will
ensure that a diverse group of candidates is
considered.
7. The Board should During the year an external independent review of the
undertake a formal and Board, its committees and individual Directors
rigorous annual (including each Director's independence) was carried
evaluation of its own out by Stephenson & Co.
performance and that
of its committees and The review concluded that the Board worked in a
individual Directors. collegiate efficient and effective manner. The board is
currently considering the recommendations made in the
review. The Board has agreed that a further independent
review will be commissioned in 2017.
The Board is satisfied that the structure, mix of
skills and operation of the Board continue to be
effective and relevant for the Company.
8. Director The Engagement & Remuneration Committee periodically
remuneration should reviews the fees paid to the Directors and compares
reflect their duties, these with the fees paid by the Company's peer group
responsibilities and and the investment trust industry generally, taking
the value of their into account the level of commitment and responsibility
time spent. of each Board member. Details on the remuneration
arrangements for the Directors of the Company can be
found in the Directors' Remuneration Policy Report and
Directors' Remuneration Report on pages 54 to 55 and in
note 4 to the Accounts.
As all of the Directors are non-executive, the Board
considers that it is acceptable for the Chairman of the
Company to chair meetings when discussing Directors'
fees. The Chairman takes no part in discussions
regarding his own remuneration. The Board periodically
takes advice from external independent advisers on
Directors' remuneration.
9. The Independent The Nomination Committee is comprised of the whole
Directors should take Board, all Directors being independent. Subject to
the lead in the there being no conflicts of interest, all members of
appointment of new the Committee are entitled to vote on candidates for
Directors and the the appointment of new Directors and on recommending
process should be for shareholders' approval the Directors seeking
disclosed in the election and re-election at the Annual General Meeting.
annual report.
10. Directors should New appointees to the Board are provided with a full
be offered relevant induction programme. The programme covers the Company's
training and investment strategy, policies and practices. The
induction. Directors are also given key information on the
Company's regulatory and statutory requirements as they
arise including information on the role of the Board,
matters reserved for its decision, the terms of
reference for the Board Committees, the Company's
corporate governance practices and procedures and the
latest financial information. It is the Chairman's
responsibility to ensure that the Directors have
sufficient knowledge to fulfil their role and Directors
are encouraged to participate in training courses where
appropriate.
The Directors have access to the advice and services of
a Company Secretary through its appointed
representative which is responsible to the Board for
ensuring that Board procedures are followed and that
applicable rules and regulations are complied with. The
Company Secretary is also responsible for ensuring good
information flows between all parties.
11. The Chairman (and Principle 11 applies to the launch of new investment
the Board) should be companies and is therefore not applicable to the
brought into the Company.
process of structuring
a new launch at an
early stage.
Board Meetings and relations with First State and Frostrow
12. Boards and The Board meets regularly throughout the year and a
managers should representative of First State and Frostrow is in
operate in a attendance at each meeting and Committee meetings. The
supportive, Chairman encourages open debate to foster a supportive
co-operative and open and co-operative approach for all participants.
environment.
13. The primary focus The Board has agreed a schedule of matters specifically
at regular Board reserved for decision by the Board. This includes
meetings should be a establishing the investment objectives, strategy and
review of investment benchmarks, the permitted types or categories of
performance and investments, the markets in which transactions may be
associated matters, undertaken, the amount or proportion of the assets that
such as gearing, asset may be invested in any category of investment or in any
allocation, marketing/ one investment, and the Company's share issuance and
investor relations, share buy-back policies.
peer group information
and industry issues. The Board, at its regular meetings, undertakes reviews
of key investment and financial data, revenue
projections and expenses, analyses of asset allocation,
transactions and performance comparisons, share price
and net asset value performance, marketing and
shareholder communication strategies, the risks
associated with pursuing the investment strategy, peer
group information and industry issues.
The Audit and Engagement & Remuneration Committees
respectively, review the Company's risk matrix and the
performance and cost of the Company's third party
service providers.
14. Boards should give The Board is responsible for strategy and has
sufficient attention established an annual programme of agenda items under
to overall strategy. which it reviews the objectives and strategy for the
Company at each meeting.
15. The Board should The Engagement & Remuneration Committee meets at least
regularly review both once a year. It reviews annually the performance of
the performance of, First State and Frostrow. The Committee considers the
and contractual quality, cost and remuneration method (including the
arrangements with, the performance fee) of the service provided by First State
investment manager and and Frostrow against their contractual obligations and
the manager (or the Board receives regular reports on compliance with
executives of a self- the investment restrictions which it has set. It also
managed company). considers the performance analysis provided by First
State and Frostrow. During the year, a review of the
Company's management arrangements was undertaken.
Details of the new fee arrangements agreed with First
State and Frostrow can be found in the Report of the
Directors on page 48.
The Audit Committee reviews the compliance and control
systems of both First State and Frostrow in operation
insofar as they relate to the affairs of the Company
and the Board undertakes periodic reviews of the
arrangements with and the services provided by the
Custodian, to ensure that the safeguarding of the
Company's assets and security of the shareholders'
investment is being maintained.
16. The Board should The Investment Management Agreement between the Company
agree policies with and First State sets out the limits of First State's
the investment manager authority, beyond which Board approval is required. The
and the manager Board has also agreed detailed investment guidelines
covering key with First State, which are considered at each Board
operational issues. meeting.
A representative of First State and Frostrow attends
each meeting of the Board to address questions on
specific matters and to seek approval for specific
transactions which First State is required to refer to
the Board.
The Board has delegated discretion to First State to
exercise voting powers on its behalf, other than for
contentious or sensitive matters which are to be
referred to the Board for consideration.
The Board has reviewed First State's Stewardship
Policy, which includes its Corporate Governance and
Voting Guidelines, and which is published on First
State's website: www.firststate.co.uk
Reports on commissions paid by First State are
submitted to the Board regularly.
17. Boards should The Board considers any imbalances in the supply of and
monitor the level of the demand for the Company's shares in the market and
the share price takes appropriate action when considered necessary.
discount or premium
(if any) and, if The Board considers the discount or premium to net
desirable, take action asset value of the Company's share price at each Board
to reduce it. meeting and reviews the changes in the level of
discount or premium and in the share price since the
previous Board meeting and over the previous twelve
months.
At each meeting the Board reviews reports from First
State on marketing and shareholder communication
strategies. It also considers its effectiveness as well
as measures of investor sentiment and any
recommendations on share buy-backs and issuance.
18. The Board should The Engagement & Remuneration Committee reviews, at
monitor and evaluate least annually, the performance of all the Company's
other service third party service providers, including the level and
providers. structure of fees payable and the length of the notice
period, to ensure that they remain competitive and in
the best interests of shareholders.
The Audit Committee reviews reports from the principal
service providers on compliance and the internal and
financial control systems in operation and relevant
independent audit reports thereon, as well as reviewing
service providers' anti-bribery and corruption policies
to address the provisions of the Bribery Act 2010.
Shareholder Communications
19. The Board should A detailed analysis of the substantial shareholders of
regularly monitor the the Company is provided to the Directors at each Board
shareholder profile of meeting. Representatives of First State regularly meet
the company and put in with institutional shareholders and private client
place a system for asset managers to discuss strategy and to understand
canvassing shareholder their issues and concerns and, if applicable, to
views and for discuss corporate governance issues. The results of
communicating the such meetings are reported at the following Board
Board's views to meeting.
shareholders.
Regular reports from the Company's corporate
stockbroker are submitted to the Board on investor
sentiment and industry issues.
Shareholders wishing to communicate with the Chairman,
or any other member of the Board, may do so by writing
to the Company, for the attention of the Company
Secretary at the offices of Frostrow. All shareholders
are encouraged to attend the Annual General Meeting,
where they are given the opportunity to question the
Chairman, the Board and representatives of First State.
First State will make a presentation to shareholders
covering the investment performance and strategy of the
Company at the forthcoming Annual General Meeting. The
Directors welcome the views of all shareholders and
place considerable importance on communications with
them.
20. The Board should All substantive communications regarding any major
normally take corporate issues are discussed by the Board taking into
responsibility for, account representations from First State, Frostrow, the
and have a direct Auditor, legal advisers and corporate stockbroker.
involvement in, the
content of
communications
regarding major
corporate issues even
if the manager is
asked to act as
spokesman.
21. The Board should The Company places great importance on communication
ensure that with shareholders and aims to provide them with a full
shareholders are understanding of the Company's investment objective,
provided with policy and activities, its performance and the
sufficient information principal investment risks by means of informative
for them to understand Annual and Half Year Reports. This is supplemented by
the risk/reward the daily publication, through the London Stock
balance to which they Exchange, of the net asset value of the Company's
are exposed by holding shares.
the shares.
The Annual Report provides information on First State's
investment performance, portfolio risk and operational
and compliance issues. Further details on the risk/
reward balance are set out in the Strategic Report
under Investment Risk on pages 9 and 10 and in note 16
to the Accounts.
The Company's website, www.pacific-assets.co.uk, is
regularly updated with monthly factsheets and provides
useful information about the Company including the
Company's financial reports and announcements.
By order of the Board
Frostrow Capital LLP
Company Secretary
27 March 2015
Financial Statements/Income Statement
for the year ended 31 January 2015
2015 2014
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments 8 - 58,855 58,855 - 1,792 1,792
held at fair value
through profit or loss
Exchange differences - 785 785 - (204) (204)
Income 2 3,631 - 3,631 4,195 - 4,195
Investment management, 3 (504) (3,310) (3,814) (455) (2,711) (3,166)
management and
performance fees
Other expenses 4 (568) (43) (611) (567) (29) (596)
Return on ordinary 2,559 56,287 58,846 3,173 (1,152) 2,021
activities before
taxation
Taxation on ordinary 5 (32) - (32) (298) - (298)
activities
Return/(loss) after 2,527 56,287 58,814 2,875 (1,152) 1,723
taxation attributable
to equity shareholders
Return/(loss) per 7 2.1 48.2 50.3 2.5 (1.0) 1.5
share (p)
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 declared in the
Income Statement.
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 January 2015
2015 2014
Notes £'000 £'000
Opening shareholders' funds 186,287 187,602
Return for the year 58,814 1,723
Dividend paid 6 (3,038) (3,038)
Closing shareholders' funds 242,063 186,287
The accompanying notes are an integral part of these statements.
Financial Statements/Balance Sheet
as at 31 January 2015
2015 2014
Notes £'000 £'000 £'000 £'000
Fixed assets
Investments held at fair value 8 221,094 175,532
through profit or loss
Current assets
Debtors 9 977 561
Cash at bank 26,494 13,052
27,471 13,613
Creditors (amounts falling due within 10 (6,502) (2,858)
one year)
Net current assets 20,969 10,755
Net assets 242,063 186,287
Capital and reserves
Share capital 11 14,606 14,606
Share premium account 12 4 4
Capital redemption reserve 12 1,648 1,648
Special reserve 12 14,572 14,572
Capital reserve 12 205,623 149,336
Revenue reserve 12 5,610 6,121
Equity shareholders' funds 13 242,063 186,287
Net asset value per share (p) 13 207.2 159.4
The financial statements on pages 32 to 46 were approved and authorised for
issue by the Board of Directors on 27 March 2015 and signed on its behalf by:
David Nichol
Chairman
The accompanying notes are an integral part of this statement.
Pacific Assets Trust plc - Company Registration Number: SC091052 (Registered in
Scotland)
Financial Statements/Cash Flow Statement
for the year ended 31 January 2015
2015 2014
Notes £'000 £'000 £'000 £'000
Operating activities
Investment income received 3,684 3,921
Investment management and management (3,260) (2,422)
fees paid
Other cash payments (311) (910)
Net cash inflow from operating 14 113 589
activities
Capital expenditure and financial
investment
Purchase of investments (47,984) (47,009)
Disposal of investments 63,566 47,590
Net cash inflow from investing 15,582 581
activities
Equity dividends paid (3,038) (3,038)
Net cash Inflow/(outflow) before 12,657 (1,868)
financing
Increase/(decrease) in cash 15 12,657 (1,868)
Reconciliation of net cash flow to
movement in net funds
Increase/(decrease) in cash in the 12,657 (1,868)
year
Change in net funds resulting from 12,657 (1,868)
cash flows
Currency gains/(losses) 785 (204)
Movement in net funds 13,442 (2,072)
Net funds at 1 February 13,052 15,124
Net funds at 31 January 15 26,494 13,052
The accompanying notes are an integral part of this statement.
Financial Statements/Notes to the Financial Statements
1. Accounting Policies
A summary of the principal accounting policies adopted is set out below.
(a) Basis of accounting
These financial statements have been prepared under UK Generally Accepted
Accounting Practice (`UK GAAP') and in accordance with guidelines set out in
the Statement of Recommended Practice (`SORP'), dated January 2009, for
investment trust companies and Venture Capital Trusts issued by the Association
of Investment Companies (`AIC').
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 Sections 1158 and 1159 of the Corporation Tax
Act 2010.
(b) Valuation of investments
Investments are classified as fair value through profit or loss and are
recognised and de-recognised at trade date where a purchase or sale is under a
contract whose terms require delivery within the time frame established by the
market concerned. Financial assets designated as fair value through profit or
loss on initial recognition are measured initially and at subsequent reporting
dates at fair value. For listed securities this 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 are included in the Income
Statement as a capital item.
(c) Income
Dividends receivable on equity shares 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
grossed up at the appropriate rate of withholding tax.
Deposit interest is recognised on an accruals basis.
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 as income.
(d) Expenses and interest
All expenses and interest are accounted for on an accruals basis. Expenses and
interest are charged to the Income Statement as a revenue item 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:
- Investment Management and Management fees payable have been allocated 25% to
revenue and 75% to capital.
- Performance fees are charged 100% to capital.
- Transaction costs incurred on the purchase and sale of investments are taken
to the Income Statement as a capital item.
(e) Taxation
The tax effect of different items of income/gain and expenditure/loss is
allocated between capital and revenue as set out in note 5 to the financial
statements. 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.
(f) Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the Balance Sheet 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 Balance Sheet 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 Sections 1158 and 1159 of the
Corporation Tax Act 2010 the Company has not provided for deferred tax on any
capital gains and losses arising on the revaluation or disposal of investments.
(g) Foreign currencies
Transactions denominated in foreign currencies are recorded in the local
currency at actual exchange rates at the date of the transaction. Overseas
assets and liabilities are translated at the rate ruling at the Balance Sheet
date. Profits or losses on the retranslation of investments at the year end are
included within unrealised appreciation/depreciation of investments and are
taken to the capital reserve. Exchange gains and losses of a revenue nature are
taken to the revenue account. The functional currency of the Company, being its
statutory reporting currency, is sterling.
Rates of exchange at 31 January 2015 2014
Bangladesh taka 116.29 127.66
Hong Kong dollar 11.64 12.76
Indian rupee 93.02 102.97
Indonesian rupiah 19,025 20,067
Japanese yen 176.42 167.61
Korean won 1,642 1,759
Malaysian ringgit 5.45 5.50
New Taiwanese dollar 47.33 49.79
Philippine peso 66.22 74.48
Singaporean dollar 2.03 2.10
Sri Lankan rupee 198.64 214.88
Thai baht 49.16 54.25
U.S. dollar 1.50 1.64
(h) Nature and purpose of 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. The reserve is distributable and
has historically been used to fund any share buy-backs by the Company.
Capital reserve
The following are accounted for in this reserve:
- gains and losses on the disposal of investments;
- increases and decreases in the fair value of investments which have been
recognised in the capital column of the income statement;
- realised and unrealised exchange differences of a capital nature;
- expenses and finance costs, together with the related taxation effect,
charged to this reserve in accordance with note (d);
- realised gains and losses on transactions undertaken to hedge an exposure of
a capital nature;
- other receipts and payments of a capital nature; and
- following amendments to the Company's Articles of Association in 2013 this
reserve can be used to distribute realised capital profits by way of dividend.
Revenue reserve
This reserve reflects all income and expenditure which are recognised in the
revenue column of the income statement.
2. Income
2015 2014
£'000 £'000
Dividend income from investmentsâ€
Listed overseas 3,631 4,195
Other income‡
Deposit interest - -
Total income 3,631 4,195
†All investments have been designated as fair value through profit or loss on
initial recognition, therefore all investment income arises on investments at
fair value through profit or loss.
‡ Other income on financial assets not designated as fair value through profit
or loss.
3. Investment Management, Management and Performance Fees
2015 2014
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee - 400 1,201 1,601 364 1,090 1,454
First State
Investment management - 1,798 1,798 - 1,346 1,346
performance fee - First State
Management fee - Frostrow 104 311 415 91 275 366
504 3,310 3,814 455 2,711 3,166
During the year, First State were entitled to an investment management fee of
0.75% per annum of net assets. In addition there was a performance fee payable
of 12.5% of returns in excess of the MSCI All Country Asia ex Japan Index plus
a hurdle of 1.75% per annum, measured over a rolling three year period. The
Board capped the total of the investment management fee and the performance fee
at 1.75% of the average asset value per annum.
Frostrow Capital LLP were entitled to a management fee of 0.2% per annum (plus
VAT) of market capitalisation.
The Board has agreed amended terms with First State Investment Management (UK)
Limited, the Company's Investment Manager, and Frostrow Capital LLP, the
Company's Manager, Company Secretary and Administrator which became effective
on 1 February 2015. Further details can be found in the Report of the
Directors.
4. Other Expenses
2015 2014
£'000 £'000
Directors' fees 109 109
Auditor's remuneration for:
- annual audit 20 20
- tax compliance services 6 6
- other services relating to taxation* 35 20
Savings scheme costs 3 6
Marketing costs 17 20
Custody fees 124 117
Legal and professional fees 41 29
Printing and postage 32 29
Broker retainer 30 30
Registrar fees 30 32
Listing fees 16 14
Other expenses 105 135
Revenue expenses 568 567
Capital expenses 43 29
Total expenses 611 596
* Includes costs in relation to the recovery of Taiwanese withholding tax for
the period 2005 to 2009 £24,000 (2014: £5,000), also for the period 2010 - 2011
nil (2014: £3,000), the provision of Taiwanese tax guarantor and pre-approval
services £11,000 (2014: £12,000). See the Report of the Directors on page 50
for further details.
5(a). Taxation on Ordinary Activities
2015 2014
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Overseas taxation 261 - 261 344 - 344
Overseas tax recoverable (229) - (229) (46) - (46)
32 - 32 298 - 298
Overseas tax arose as a result of irrecoverable withholding tax on foreign
dividends.
(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 21.32% (2014: 23.17%).
The differences are explained below:
2015 2014
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Total return/(loss) on 2,559 56,287 58,846 3,173 (1,152) 2,021
ordinary activities before
tax
Corporation tax charged at 545 12,000 12,545 735 (267) 468
21.32%*
(2014: 23.17%)
Capital returns on - (12,548) (12,548) - (415) (415)
investments held at fair
value through profit or lossâ€
Exchange differences - (167) (167) - 47 47
Unutilised management 212 706 918 197 628 825
expenses
Disallowed expenses 1 9 10 1 7 8
Income not subject to (758) - (758) (933) - (933)
corporation tax
Overseas taxation 261 - 261 344 - 344
Overseas tax recoverable (229) - (229) (46) - (46)
(Taiwan)~
Tax charge for the year 32 - 32 298 - 298
* An average rate of 21.32% was applicable for the year ended 31 January 2015
due to the corporation tax rate being reduced to 21% from 23% on 1 April 2014.
†Gains on investments are not subject to corporation tax within an investment
trust company.
~ During the year ended 31 January 2015, £229,000 was recovered, as being the
final settlement in relation to the claim submitted in 2010 to recover
Taiwanese withholding tax that had been suffered in excess of the agreed treaty
rate between 2005 and 2009.
Investment trusts which have approval as such under section 1158 of the
Corporation Tax Act 2010 are not liable for taxation on capital gains within
the Company.
As at 31 January 2015 the Company had unutilised management expenses and other
reliefs for taxation purposes of £25,294,000 (2014: £20,987,000). It is not
anticipated that these will have value in the foreseeable future.
6. Dividends
Under UK GAAP, final dividends are not recognised and paid until they are
approved by shareholders. Amounts recognised as distributable to shareholders
for the year ended 31 January 2015, were as follows:
2015 2014
£'000 £'000
- final dividend paid for the year ended 31 January 2014 of 3,038 -
2.60p per share
- final dividend paid for the year ended 31 January 2013 of - 3,038
2.60p per share
In respect of the year ended 31 January 2015, a dividend of 2.6p has been
proposed, to be approved at the forthcoming Company's Annual General Meeting
(AGM) which will take place on Wednesday, 24 June 2015.
In accordance with FRS 21 this dividend will be reflected in the half-year
accounts for the period ending 31 July 2015.
The dividends payable in respect of both the current and the previous financial
year, which meet the requirements of Section 1158-1159 CTA 2010, are set out
below:
2015 2014
£'000 £'000
Revenue available for distribution by way of dividend for the 2,527 2,875
year
Proposed dividend of 2.6p per share (2014: 2.6p) (to be (3,038) (3,038)
approved at the AGM)
Shortfall covered by revenue reserves (511) (163)
7. Return/(loss) per share
The Return/(loss) per share is as follows:
2015 2014
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic and diluted 2.1 48.2 50.3 2.5 (1.0) 1.5
The total return per share is based on the total return attributable to
shareholders of £58,814,000 (2014: £1,723,000).
The revenue return per share is based on the net revenue return attributable to
shareholders of £2,527,000 (2014: £2,875,000).
The capital return per share is based on the net capital return attributable to
shareholders of £56,287,000 (2014: loss of £1,152,000).
The total return, revenue return and the capital return/(loss) per share are
based on the weighted average number of shares in issue during the year of
116,848,386 (2014: 116,848,386).
8. Investments
All investments are designated as fair value through profit or loss on initial
recognition, therefore all gains and losses arise on investments designated as
fair value through profit or loss.
As at 31 January 2015, all investments have been classified as level 1 (2014:
level 1). See note 16 for further details.
2015 2014
£'000 £'000
Investments held at fair value through profit of loss
Investments listed on recognised investment exchanges 221,094 175,532
Valuation at start of year 175,532 173,990
Less: valuation gains at start of year (31,657) (39,420)
Cost at start of year 143,875 134,570
Purchases at cost 51,088 47,083
Disposals proceeds (64,381) (47,333)
Realised gains on disposals 20,747 9,555
Cost at end of year 151,329 143,875
Add valuation gains at end of year 69,765 31,657
Valuation at end of year 221,094 175,532
2015 2014
£'000 £'000
Realised gains on sales 20,747 9,555
of which previously recognised as fair value adjustment (8,858) (8,946)
Realised gains for the year 11,889 609
Movement in fair value 46,966 1,183
Gains on investments 58,855 1,792
During the year the Company incurred transaction costs on purchases of £148,996
(2014: £126,898) and transaction costs on sales of £224,368 (2014: £183,780).
9. Debtors
2015 2014
£'000 £'000
Amounts due from brokers 815 -
Accrued income - 88
Overseas tax recoverable (Taiwan) 113 110
Other debtors 49 363
977 561
10. Creditors: amounts falling due within one year
2015 2014
£'000 £'000
Amounts due to brokers 4,068 964
Investment management fee - First State 442 357
Investment management performance fee - First State 1,798 1,358
Management fee - Frostrow 115 85
Other creditors 79 94
6,502 2,858
11. Share capital
2015 2014
£'000 £'000
Allotted and fully paid:
116,848,386 shares of 12.5p each (2014: 116,848,386) 14,606 14,606
The capital of the Company is managed in accordance with its investment policy,
in pursuit of its investment objective, both of which are detailed in the
Report of the Directors.
The Company does not have any externally imposed capital requirements.
12. Reserves
Share Capital
premium redemption Special Capital Revenue
account reserve reserve reserve reserve
£'000 £'000 £'000 £'000 £'000
At 31 January 2014 4 1,648 14,572 149,336 6,121
Net gain on realisation of - - - 38,108 -
investments
Increase in fair value adjustment on - - - 20,747 -
investments
Exchange differences - - - 785 -
Investment management, management - - - (3,310) -
and performance fees charged to
capital
Retained net revenue return for the - - - - 2,527
year
Other expenses - - - (43) -
Dividend paid - - - - (3,038)
At 31 January 2015 4 1,648 14,572 205,623 5,610
As at 31 January 2015 capital reserves relating to the revaluation of
investments held at the reporting date amounted to an unrealised gain of £
69,675,000 (2014: unrealised gain of £31,657,000).
13. Net asset value per share
The net asset value per share and the net asset value attributable to the
shares at the year end are calculated as follows:
Net asset value Net asset
values
per share attributable
attributable
2015 2014 2015 2014
pence pence £'000 £'000
207.2 159.4 242,063 186,287
The net asset value per share is calculated on net assets of £242,063,000
(2014: £186,287,000), divided by 116,848,386 (2014: 116,848,386) shares, being
the number of shares in issue at the year end.
14. Reconciliation of net return before finance costs and taxation to net cash
inflow from operating activities
2015 2014
£'000 £'000
Net return before finance costs and taxation 58,846 2,021
Gains on investments (58,855) (1,792)
Exchange differences (785) 204
Decrease/(increase) in accrued income 107 (38)
Decrease/(increase) in prepayments and other debtors 314 (324)
Increase in other creditors 540 754
Irrecoverable withholding tax on investment income (54) (236)
Net cash inflow from operating activities 113 589
15. Analysis of changes in net funds
Cash at Cash at
bank bank
2015 2014
£'000 £'000
At 1 February 13,052 15,124
Cash flow 12,657 (1,868)
Currency movements 785 (204)
At 31 January 26,494 13,052
16. 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 a portfolio of financial assets in
pursuit of its investment objective.
Listed fixed asset investments held (see note 8) are valued at fair value. For
listed securities this is either bid price or the last traded price depending
on the convention of the exchange on which the investment is listed. Unlisted
investments are valued by the Directors on the basis of all the information
available to them at the time of valuation. The fair value of all other
financial assets and liabilities is represented by their carrying value in the
Balance Sheet.
The main risks that the Company faces arising from its financial instruments
are:
(i) market price risk, being the risk that the value of investment holdings
will fluctuate as a result of changes in market prices caused by factors other
than interest rate or currency rate movements;
(ii) interest rate risk, being the risk that the future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates;
(iii) foreign currency risk, being the risk that the value of investment
holdings, investment purchases, investment sales and income will fluctuate
because of movements in currency rates;
(iv) 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
(v) 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. It is believed that the investment portfolio
of £221.1 million is realisable in full within a week.
Investments are financial assets designated at fair value through profit or
loss on initial recognition. In accordance with Financial Reporting Standard 29
`Financial Instruments : Disclosures', investments are classified based on the
fair value hierarchy described below and which reflects the reliability and
significance of the information used to measure their fair value.
As at 31 January 2015, all of the financial instruments held by the Company are
classified as level 1 and there are no level 2 or level 3 instruments (2014:
all financial instruments classified as level 1).
The levels are determined by the lowest (that is the least reliable or least
independently observable) level of impact that is significant to the fair value
measurement for the individual investment in its entirety as follows:
Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments whose fair value is evidenced by
comparison with other observable current market transactions in the same
instrument or based on a valuation technique whose variables includes only data
from observable markets.
Level 3 reflects financial instruments whose fair value is determined in whole
or in part using a valuation technique based on assumptions that are not
supported by prices from observable market transactions in the same instrument
and not based on available observable market data.
17. Market price risk
The management of market price risk is part of the investment management
process and is typical of equity investment. The 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 the portfolio is set out on pages 12 and
13. Derivatives may be used from time to time, with prior Board approval, to
hedge specific market risk or gain exposure to a specific market although it is
the Company's current policy not to use derivatives.
During the year ended 31 January 2015, there were no derivative contracts
entered into.
If the investment portfolio valuation fell by 10% at 31 January 2015 (31
January 2014: 10%), the impact on the profit or loss and the net asset value
would have been negative £22.1 million (2014: negative £17.6 million). If the
investment portfolio valuation rose by 10% at 31 January 2015 (31 January 2014:
10%), the impact on the profit or loss and the net asset value would have been
positive £22.1 million (2014: positive £17.6 million). The calculations are
based on the investment portfolio valuation as at the respective Balance Sheet
dates and are not representative of the year as a whole.
18. 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.
Fixed rate
The Company does not hold any fixed interest investments and accordingly no
sensitivity analysis has been presented.
19. Foreign currency risk
The Company invests in overseas securities and holds foreign currency cash
balances which give rise to currency risks. It is 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:
2015 2014
Short-term Short-term Short-term Short-term
Investments Cash Debtors Creditors Investments Cash Debtors Creditors
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Bangladesh 2,314 - - - 1,081 - - -
taka
Hong Kong 25,389 - - - 18,159 - - -
dollar
Indian rupee 75,430 22 - - 49,895 20 320 322
Indonesian 6,856 - - 4 3,337 - - 642
rupiah
Korean won 6,577 - - 925 15,680 - 52 -
Malaysian 7,622 - - - 9,606 - - -
ringgit
New Taiwanese 40,786 279 927 661 33,468 73 110 -
dollar
Philippine 23,180 - - - 13,108 - - -
peso
Singaporean 15,642 - - - 18,107 - 36 -
dollar
Sri Lankan 3,470 - - 1,243 1,574 - - -
rupee
Thai baht 12,614 - - - 11,517 - - -
U.S. dollar 1,214 12,174 - 1,235 - 1 - -
Total 221,094 12,475 927 4,068 175,532 94 518 964
At 31 January 2015 the Company had £14,019,000 of sterling cash balances (2014:
£12,958,000).
During the year sterling weakened by an average of 8% against all of the
currencies in the investment portfolio (weighted for portfolio exposure), if
the value of sterling had weakened against each of the currencies in the
portfolio by 10%, the impact on the profit or loss and the net asset value
would have been positive £23.0 million (2014: positive £17.5 million). If the
value of sterling had strengthened against each of the currencies in the
investment portfolio by 10%, the impact on the profit or loss and the net asset
value would have been negative £23.0 million (2014: negative £17.5 million).
The calculations are based on the portfolio valuation and cash balances as at
the respective Balance Sheet dates and are not representative of the year as a
whole.
20. 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 Investment 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 balance sheet date.
At the reporting date, the Company's financial assets exposed to credit risk
amounted to the following:
2015 2014
£'000 £'000
Cash and cash equivalents 26,494 13,052
Amounts due from brokers 815 -
Interest, dividends and other receivables 162 561
27,471 13,613
Credit risk arising on transactions with brokers relates to transactions
awaiting settlement. Risk relating to unsettled transactions is considered to
be small due to the short settlement period involved and the high credit
quality of the brokers used. The Investment Manager monitors the quality of
service provided by the brokers used to further mitigate this risk.
All the assets of the Company which are traded on a recognised exchange are
held by JPMorgan Chase Bank the Company's 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 by reviewing the custodian's internal control reports as described in the
Strategic Report on page 10.
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. 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.
No individual investment exceeded 6.1% of the total assets less current
liabilities attributable to the Company's shareholders at 31 January 2015
(2014: 6.3%).
21. Liquidity risk
The Company's listed securities are considered to be readily realisable within
one week.
The Company's liquidity risk is managed on an ongoing basis by the Investment
Manager. The Company's overall liquidity risks are monitored on a quarterly
basis by the Board.
The Company maintains sufficient investments in cash and readily realisable
securities to pay accounts payable and accrued expenses.
22. Related party transactions
The following are considered to be related parties:
• First State Investments (UK) Limited (First State)
• The Directors of the Company
The Company employs First State as its Investment Manager. During the year
ended 31 January 2015, First State earned £1,601,000 in respect of Investment
Management fees, of which £442,000 was outstanding at the year end. A
performance fee of £1,798,000 became payable at 31 January 2015 and was
outstanding at the year end. All material related party transactions have been
disclosed on pages 24, 54 and 55 and in notes 3 and 4.
Corporate Report/Report of the Directors
The Directors present this Annual Report on the affairs of the Company together
with the audited financial statements and the Independent Auditor's Report for
the year ended 31 January 2015.
Business and Status of the Company
The Company is registered as a public limited company in Scotland (Registered
Number SC091052) and is an investment company within the terms of Section 833
of the Companies Act 2006 (the `Act'). Its shares are listed on the Official
List of the UK Listing Authority and quoted on the main market of the London
Stock Exchange, which is a regulated market as defined in Section 1173 of the
Act.
The Company has applied for and been accepted as an approved investment trust
under sections 1158 and 1159 of the Corporation Taxes Act 2010 and Part 2
Chapter 1 of Statutory Instrument 2011/2999. This approval relates to
accounting periods commencing on or after 1 February 2012. The Directors are of
the opinion that the Company has conducted its affairs so as to be able to
retain such approval.
It is the Directors' intention that the Company should continue to manage its
affairs so as to be a qualifying investment for inclusion in the stocks and
shares components of an Individual Savings Account (`ISA') and Junior ISA.
The Company is required to comply with company law, the rules of the UK Listing
Authority, UK Financial Reporting Standards, and its Articles of Association.
The Company is a member of the Association of Investment Companies (`AIC').
Investment Objective
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) and New Zealand, but whose economic activities are predominantly
within the Asia Pacific Region.
Investment Policy
The Company invests in companies which First State believes will be able to
generate long-term growth for shareholders.
The Company invests principally in listed equities although its policy enables
it to invest in other securities, including preference shares, debt
instruments, convertible securities and warrants. In addition, the Company may
invest in open and closed-ended investment funds and companies.
The Company is only able to invest in unlisted securities with the Board's
prior approval. It is the current intention that such investments are limited
to those which are expected to be listed on a stock exchange or which cease to
be listed and the Company decides to continue to hold or is required to do so.
Risk is diversified by investing in different countries, sectors and stocks
within the Asia Pacific Region. There are no defined limits on countries or
sectors but no single investment may exceed 7.5% of the Company's total 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%.
The Board in conjunction with First State, continue to keep the possibility of
gearing under review, however, First State do not envisage the use of gearing
except in exceptional circumstances.
The use of derivatives is permitted with prior Board approval and within agreed
limits. However, First State are unlikely to use derivatives.
Results and Dividend
The results attributable to shareholders for the year are shown on page 32.
Details of the Company's dividend record can be found on page 4.
Fixed Asset Investments
The fair value of the Company's investments at 31 January 2015 was £221,094,000
(2014: £175,532,000) showing a gain since acquisition of £69,765,000 (2014:
gain £31,657,000). Taking these investments at this valuation, the net assets
attributable to each share at 31 January 2015 amounted to 207.2p (2014:
159.4p).
Capital Structure
As at 31 January 2015 there were 116,848,386 shares of 12.5p each in issue
(2014: 116,848,386). 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 49.
The giving of powers to issue or buy-back the Company's shares requires the
relevant resolution to be passed by shareholders. Proposals for the renewal of
the Board's current powers to issue and buy-back shares are detailed on pages
66 and 67.
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.
Company Management
Investment Manager
The Company's investment portfolio is managed by First State which had
approximately £42.2 billion in assets under management as at 31 December 2014.
For the year ended 31 January 2015 First State were engaged under the terms of
an Investment Management Agreement (the "IMA") effective from 1 July 2010. The
IMA was terminable by six months' notice. The Investment Manager has complied
with the terms of the IMA throughout the year to 31 January 2015. A management
fee of 0.75% per annum of net assets was payable. In addition there was a
performance fee of 12.5% of returns in excess of the MSCI All Country Asia ex
Japan Index plus a hurdle of 1.75% per annum, measured over a rolling three
year period. The Board capped the total of the management fees and the
performance fee at 1.75% of the average asset value per annum. As at 31 January
2015 a final performance fee of £1,798,000 became payable under the terms of
the performance fee arrangements as described on below (31 January 2014: £
1,358,000).
Under a new IMA effective from 1 February 2015 the management fee payable to
First State was changed to 0.9% per annum of net assets and the arrangements
under which First State could earn a performance fee were deleted. All other
existing terms contained in the original IMA were unchanged.
Manager
Frostrow acts as the Company's Manager, Company Secretary and Administrator.
Frostrow is an independent provider of services to the investment companies
sector and currently has 6 other investment trust clients whose assets totalled
approximately £5 billion as at 31 January 2015.
For the year ended 31 January 2015 Frostrow provided company management,
company secretarial and administrative services to the Company under the terms
of a Management, Administrative and Secretarial Services Agreement, effective
from 1 July 2010. A fee of 0.2% per annum (plus VAT) of market capitalisation
was payable for these services. Frostrow's appointment could be terminated by
either party by giving six months' notice.
Under a new Management, Administrative and Secretarial Services Agreement which
became effective from 1 February 2015, the fee payable to Frostrow was changed
to 0.15% per annum (plus VAT) of net assets, which are lower than or equal to £
275 million and 0.10% per annum of net assets in excess of £275 million.
As part of the new fee arrangements, responsibility for the Company's marketing
activities was transferred from Frostrow to First State. All other existing
terms contained in the original Management, Administrative and Secretarial
Services Agreements were unchanged.
Further details of the fees payable to First State and Frostrow are set out in
note 3 to the accounts.
Investment Manager and Manager Evaluation and Re-Appointment
The review of the performance of First State as Investment Manager and Frostrow
as Manager is a continuous process carried out by the Board with a formal
evaluation being undertaken each year. As part of this process the Board
monitors the services provided by the Investment Manager and the Manager 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 Board believes the continuing appointment of First State and Frostrow,
under the revised terms described on page 48, is in the interests of
shareholders as a whole. In coming to this decision the Board also took into
consideration the following additional reasons:
- the quality and depth of experience of First State and the level of
performance of the portfolio in absolute terms and also by reference to the
MSCI All Country Asia ex Japan Index (total return, sterling adjusted) and the
Company's peer group; and
- the quality and depth of experience of the management, administrative,
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 2015. It is intended that this policy will
continue for the year ending 31 January 2016 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 incurred as a result of carrying out his 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 the offices of
Frostrow during normal business hours and will be available for inspection at
the Annual General Meeting.
Substantial Interests in Share Capital
As at 27 March 2015, being the latest practicable date before publication of
the Annual Report, the Company was aware of the following substantial interests
in the voting rights of the Company:
Number of
shares Percentage
held held
Lazard Asset Management 16,859,039 14.4
Investec Wealth & Investment 9,464,989 8.1
Brewin Dolphin 8,700,113 7.4
Speirs & Jeffrey Stockbrokers 7,358,501 6.3
Charles Stanley Stockbrokers 5,109,798 4.4
Alliance Trust Savings 4,770,319 4.1
Smith & Williamson 4,179,296 3.6
Rathbones 3,871,234 3.3
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.
Electronic Proxy Voting
Legislation is in force which permits shareholders to submit proxy forms
electronically.
To submit a proxy form via the internet, an internet-enabled PC with Internet
Explorer 4 or Netscape 4 or above will be required. Shareholders will also need
their shareholder reference number (SRN) and Personal Identification Number
(PIN), which can be found on the personalised proxy form which accompanies this
report, to access this service. Before a proxy can be appointed, shareholders
will be asked to agree to the terms and conditions for electronic proxy
appointment. The use of the electronic proxy appointment service offered
through Equiniti Limited, the Company's registrars, is entirely voluntary.
Shareholders can continue to submit their proxy form by post if they wish.
Individual Savings Accounts
The Company's shares are eligible to be held in the stocks and shares component
of an ISA or Junior ISA, subject to applicable annual subscription limits (£
15,000 for an ISA and £4,000 for a Junior ISA for the 2014/2015 tax year) (£
15,240 and £4,080 respectively for the 2015/2016 tax year). Investments held in
ISAs or Junior ISAs will be free of UK tax on both capital gains and income.
The opportunity to invest in shares through an ISA is restricted to certain UK
resident individuals aged 18 or over. Junior ISAs are available for UK resident
children aged under 18 and born before 1 September 2002 or after 2 January
2011. Sums received by a shareholder on a disposal of shares held within an ISA
or Junior ISA will not count towards the shareholder's annual limit.
Individuals wishing to invest in shares through an ISA should contact their
professional advisers regarding their eligibility as should individuals wishing
to invest through a Junior ISA for children under 18 years old.
Auditor
The Company's Auditor, KPMG LLP, has indicated its willingness to continue in
office. Resolutions for the re-appointment of KPMG LLP and to authorise the
Board to determine its remuneration will be proposed at the Annual General
Meeting.
During the year the Company continued to obtain non-audit advice from tax
specialists within KPMG Taiwan in connection with the reclamation of tax
withheld on income arising from investments in Taiwan. The fees due in respect
of this work have exceeded the statutory audit fee. The Audit Committee has
considered whether this has had an effect on the independence and objectivity
of the external Auditor including having obtained an assurance from the audit
partner on this matter, and have concluded that it has not.
Non-audit fees due to KPMG LLP for the year ended 31 January 2015 amounted to £
41,000 (2014: £26,000) of which £24,000 was paid as final settlement under the
engagement entered into in 2010 to recover Taiwanese withholding tax that had
been suffered in excess of the agreed treaty rate between the years 2005 and
2009. (See note 4 on page 38) and note 5 on page 39 for further details.
Financial Instruments
The Company's financial instruments comprise its investment portfolio, cash
balances, debtors and creditors that arise directly from its operations, such
as sales and purchases awaiting settlement and accrued income. The financial
risk management and policies arising from its financial instruments are
disclosed in notes 16 to 21 to the accounts, beginning on page 43.
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 regularly by the
Audit Committee.
Political Donations
The Company has not in the past and does not intend in the future to make any
political donations.
Creditor Payment Policy
The Company follows the Manager's payment policy which is to settle investment
transactions in accordance with market practice and to ensure settlement of
supplier invoices in accordance with stated terms. The Company did not have any
trade creditors at the year end.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emissions producing sources under
Large and Medium sized Companies and Groups (Accounts and Reports) Regulations
2008 (as amended), (including those within our underlying investment
portfolio).
By order of the Board
Frostrow Capital LLP
Company Secretary
27 March 2015
Corporate Report/Statement of Directors' Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with UK Accounting Standards.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the company and of the profit or loss of the Company for that
period. In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements;
and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration Report
and Corporate Governance Statement that complies with that law and those
regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Going Concern
The Directors, having made relevant enquiries, are satisfied that it is
appropriate to prepare the financial statements on the going concern basis as
the net assets of the Company consist of liquid securities.
Disclosure of Information by the Auditor
So far as the Directors are aware, there is no relevant information to which
the Auditor is unaware. The Directors have taken all steps they ought to have
taken to make themselves aware of any relevant audit information and to
establish that the Auditor is aware of such information.
Responsibility statement of the Directors in respect of the Annual Financial
Report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company taken as a whole; and
• the Strategic Report includes a fair review of the development and
performance of the business and the position of the issuer, together with a
description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, 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
David Nichol
Chairman
27 March 2015
Corporate Report/Audit Committee Report
for the year ended 31 January 2015
Meetings and business
The Committee, which comprises the whole Board, met twice during the year.
Attendance by each Director is shown in the table on page 23.
Responsibilities
The Committee's main responsibilities during the year were:
1.To review the Company's half-year and annual financial statements together
with announcementsand other filings relating to the financial performance of
the Company and issues of the Company's shares. In particular, the Committee
considered whether the annual financial statements are fair, balanced and
understandable, allowing shareholders to more easily assess the Company's
strategy, investment policy, business model and financial performance.
2.To review the risk management and internal control processes of the Company
and its key serviceproviders. As part of this review the Committee again
reviewed the appropriateness of the Company's anti-bribery and corruption
policy.
3. To recommend the appointment of an external Auditor, and agreeing the scope
of its work and itsremuneration, reviewing its independence and the
effectiveness of the audit process.
4. To consider any non-audit work to be carried out by the Auditor. During the
year the Companycontinued to obtain non-audit advice from the external
independent Auditor in connection with the reclamation of tax withheld on
income arising from investments in Taiwan. The fees due in respect of this work
have exceeded the statutory audit fee. The Audit Committee have considered
whether this has had an effect on the independence and objectivity of the
external independent Auditor and have concluded that it has not.
5. To consider the need for an internal audit function. Since the Company
delegates its day-to-day operations to third parties and has no employees, the
Committee has determined there is no requirement for such a function.
The Committee's terms of reference are available for review on the Company's
website at www.pacific-assets.co.uk.
Financial Statements
The financial statements, and the annual report as a whole, are the
responsibility of the Board. The Directors' Responsibility Statement is
contained on page 51. The Board looks to the Audit Committee to advise them in
relation to the financial statements both as regards their form and content,
issues which might arise and on any specific areas requiring judgment.
Significant Reporting Matters
During the year the Committee considered key accounting issues, matters and
judgments in relation to the Company's financial statements and disclosures
relating to:
Investments
The Committee approached and dealt with this area of risk by:
- reconfirming its understanding of the processes in place to record investment
transactions and to value the investment portfolio;
- gaining an overall understanding of the performance of the investment
portfolio both in capital and revenue terms through comparison to a suitable
benchmark; and
- Ensuring that all investment holdings and cash/deposit balances have been
agreed to an independent confirmation from the custodian or relevant bank.
Taxation
The Committee approached and dealt with the area of risk, surrounding
compliance with section 1158 of the Corporation Tax Act 2010, by:
- seeking confirmation that the Company meets the eligibility conditions as
outlined in section 1158;
- by obtaining written confirmation from HMRC, evidencing the approval of the
Company as an investment trust under the regime; and
- understanding the consequences if the Company breaches this approval in
future years.
External Auditor
Meetings:
This year the nature and scope of the audit together with KPMG LLP's audit plan
were considered by the Committee on 12 September 2014 without the Auditor being
present.
The Committee met KPMG LLP on 18 March 2015 to review the outcome of the audit
and to discuss the limited issues that arose.
We have also discussed the presentation of the annual report with the Auditor
and sought their perspective.
Independence and Effectiveness:
In order to fulfil the Committee's responsibility regarding the independence of
the Auditor, we reviewed:
- the senior audit personnel in the audit plan for the year,
- the Auditor's arrangements concerning any conflicts of interest,
- the extent of any non-audit services, and
- the statement by the Auditor that they remain independent within the meaning
of the regulations and their professional standards.
- Auditor independence
In order to consider the effectiveness of the audit process, we reviewed:
- the Auditor's fulfilment of the agreed audit plan,
- the report arising from the audit itself, and
- feedback from the Manager.
The Committee is satisfied with the Auditor's independence and the
effectiveness of the audit process, together with the degree of diligence and
professional scepticism brought to bear.
Audit Tendering
As a Public Company listed on the London Stock Exchange, the Company is subject
to the mandatory Auditor rotation requirements of the European Union. Subject
to the detailed implementation of the European requirements in the UK, this is
likely to mean that the Company will put the external audit out to tender at
least every ten years, and change auditor at least every twenty years. The
Committee will, however, continue to consider annually the need to go to tender
for audit quality or independence reasons. KPMG have been in post since
September 2007, which was the last occasion an audit tender was held.
Mr Richard Hinton, the Audit Partner for this year's audit, previously acted in
this capacity for the Company's 2012 audit. Mr Hinton has now therefore
completed two of his five year rotation on the affairs of the Company.
Auditor Reappointment
KPMG LLP have indicated their willingness to continue to act as Auditor to the
Company for the forthcoming year and a resolution for their re-appointment will
be proposed at the Annual General Meeting.
The Committee reviews the scope and effectiveness of the audit process,
including agreeing the Auditor's assessment of materiality and monitors the
Auditor's independence and objectivity. It conducted a review of the
performance of the Auditor during the year and concluded that performance was
satisfactory and there were no grounds for change.
Nigel Rich, FCA
Chairman of the Audit Committee
27 March 2015
Corporate Report / Directors' Remuneration Report
for the year ended 31 January 2015
Statement from the Chairman
I am pleased to present the Directors' Remuneration Report to shareholders.
This report has been prepared in accordance with the requirements of Section
421 of the Companies Act 2006 and the Enterprise and Regulatory Reform Act
2013. An Ordinary Resolution for the approval of this report will be put to
shareholders at the Company's forthcoming Annual General Meeting.
The law requires the Company's Auditor to audit certain of the disclosures
provided in this report. Where disclosures have been audited, they are
indicated as such and the Auditor's audit opinion is included in its report to
shareholders on pages 57 and 58. The Remuneration Policy Report on page 56
forms part of this report.
The Engagement & Remuneration Committee considers the framework for the
remuneration of the Directors on an annual basis. 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
comparison with other companies of a similar structure and size. This is
in-line with the AIC Code.
In the year to 31 January 2015, the Directors fees were as follows: Myself, as
Chairman of the Company and Nigel Rich as Chairman of the Audit Committee and
Senior Independent Director received £28,000 and £24,000 respectively. Terence
Mahony and James Williams each received £21,000, Richard Horlick received £
8,373 and Charlotte Ginman received £6,623. The last increase in Directors'
fees took effect on 1 April 2012.
Directors' Fees
The Directors, as at the date of this report, and who (save for Richard Horlick
and Charlotta Ginman) all served throughout the year, received the fees listed
in the table. These exclude any employers' 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.
Directors' Emoluments for the Year (audited information)
The Directors who served in the year received the following emoluments in the
form of fees:
Fixed Fixed
Fees Fees
Date of 2015 2014
Appointment
to the Board £ £
David Nichol
(Chairman) 4 January 1985 28,000 28,000
Charlotta Ginman 9 October 2014 6,623 -
Richard Horlick* 1 December 2005 8,373 21,000
Stuart Leckie** 13 March 2001 - 8,448
Terence Mahony 1 February 2004 21,000 21,000
Nigel Rich+ 1 January 1997 24,000 24,000
James Williams 1 October 2013 21,000 7,000
108,996 109,448
* Retired on 24 June 2014
** Retired 25 June 2013
+ Chairman of the Audit Committee and Senior Independent Director
A resolution to approve the Remuneration Report was put to shareholders at the
Annual General Meeting of the Company held on 24 June 2014, and was passed by
99.3% of shareholders voting on the resolution. A resolution to approve the
Remuneration Policy was also put to shareholders at the Annual General Meeting,
and was passed by 99.0% of shareholders voting on the resolution. The
Remuneration Policy provisions as set out on page 56 will apply until they are
next put to shareholders for renewal of that approval, which must be at
intervals of not more than three years, or the Remuneration Policy is varied in
which case shareholder approval for the new Remuneration Policy will be sought.
Other Benefits
Article 117 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.
Article 118 permits the Company to provide pension or similar benefits for
Directors and employees of the
Company. However, no pension schemes or other similar arrangements have been
established and no Director is entitled to any pension or similar benefits.
Loss of Office
Directors do not have service contracts with the Company but are engaged under
Letters of Engagement. These specifically exclude any entitlement to
compensation upon leaving office for whatever reason.
Relative Cost of Directors' Remuneration
As noted in the Strategic Report, all of the Directors are non-executive and
therefore there is no Chief Executive Officer. The Company does not have any
employees. There is therefore no CEO or employee information to disclose.
Directors' Interest in Shares
The Directors interests in the share capital of the Company are shown in the
table below:
Number of shares
held
31 31
January January
2015 2014
David Nichol* Beneficial 75,000 75,000
Trustee Nil 100,000
Charlotta Ginman** Beneficial Nil N/A
Richard Horlick^ Beneficial N/A Nil
Terence Mahony Beneficial Nil Nil
Nigel Rich+ Beneficial 45,000 45,000
Trustee 10,550 9,650
James Williams Beneficial 20,000 20,000
Total 150,550 249,650
* Includes 35,000 ordinary shares held by Mrs Judith Nichol
** Appointed 9 October 2014
^ Retired 24 June 2014
+ Includes 20,000 ordinary shares held by Mrs Cynthia Rich
Share Price Total Return
The Company's benchmark is the MSCI All Country Asia ex Japan Index on a total
return, sterling adjusted basis. The Board has adopted this index as a measure
for both the Company's performance and that of First State, the Company's
Investment Manager. In accordance with statutory reporting purposes this report
is required to compare the Company's share price total return to that of the
benchmark index. The chart below provides this comparison.
Annual Statement
On behalf of the Board and in accordance with Part 2 of Schedule 8 of the Large
and Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013. I confirm that the Remuneration Policy, set out on page 56,
and Remuneration Report summarises, as applicable, for the year to 31 January
2015:
(a) the major decisions on Directors' remuneration;
(b) any substantial changes relating to Directors' remuneration made during the
year; and
(c) the context in which the changes occurred and decisions have been taken.
David Nichol
Chairman
Corporate Report/Directors' Remuneration Policy Report
The Company's 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 and should be sufficient to enable
candidates of high calibre to be recruited. Directors are remunerated in the
form of fees payable monthly in arrears, paid to the Director personally or to
a specified third party. 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.
Directors' remuneration comprises solely Directors' fees. The Company does not
have any employees.
Any new Director being appointed to the Board that has not been appointed as
either Chairman, Chairman of the Audit Committee or Senior Independent Director
will, under the current level of fees, receive £21,000 pa.
None of the Directors has a service contract. The terms of their appointment
provide that Directors shall retire and be subject to election at the first
annual general meeting after their appointment and to re-election annually
thereafter. The terms also provide that a Director may be removed without
notice and that compensation will not be due on leaving office.
No communications have been received from shareholders regarding 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 £
200,000 in aggregate per annum.
It is the Board's intention that the Remuneration Policy will be considered by
shareholders at the Company's Annual General Meeting (AGM) at least once every
three years. Therefore it is due to be brought before shareholders again at the
AGM to be held in 2017. If, however, the Remuneration Policy is varied,
shareholder approval for the new Remuneration Policy will be sought at the next
AGM following such variation.
The Board has agreed that there would be a formal review before any change to
the Remuneration Policy; and at least once a year the Remuneration Policy will
be reviewed to ensure that it remains appropriate. This year, the Board's
review concluded that there should be no change to the Remuneration Policy.
Corporate Report/Independent Auditor's Report to the Members of Pacific Assets
Trust plc
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of Pacific Assets Trust plc for the
year ended 31 January 2015 set out on pages 32 to 46. In our opinion the
financial statements:
• give a true and fair view of the state of the company's affairs as at 31
January 2015 and of its profit for the year then ended;
• have been properly prepared in accordance with UK accounting standards; and
• have been prepared in accordance with the requirements of the Companies Act
2006.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements, the risk of
material misstatement that had the greatest effect on our audit was as follows:
Carrying amount of Quoted Investments:
Refer to pages 52 and 53 (Audit Committee report), pages 35 and 36 (accounting
policy) and pages 40 and 41 (financial disclosures).
• The risk - The Company's portfolio investments make up 91.3% of the Total
Assets and are considered to be the key driver of operations and performance
results. We do not consider investments to be at high risk of significant
misstatement, or requiring a significant level of judgment, because they are
comprised of liquid, quoted investments. However, due to their materiality in
the context of the financial statements as a whole, they are considered to be
the area which had the greatest effect on our overall audit strategy and
allocation of resources in planning and completing our audit.
• Our response - Our procedures over the existence, completeness and valuation
of the Company's investment portfolio included, but were not limited to:
- documenting and assessing the processes in place to record investment
transactions and to value the portfolio;
- agreeing the valuation of portfolio investments to externally quoted prices;
and
- agreeing portfolio investment holdings to independently received third party
confirmations.
3 Our application of materiality and an overview of the scope of our audit
The materiality for the financial statements as a whole was set at £2.5m. This
has been determined with reference to a benchmark of Total Assets, of which it
represents 1%. Total Assets, which is primarily composed of the Company's
investment portfolio, is considered the key driver of the company's capital and
revenue performance and, as such, we believe that it is the principal
consideration for members of the Company in assessing financial performance.
We agreed with the Audit Committee to report to it all corrected and
uncorrected misstatements we identified through our audit with a value in
excess of £0.1m, in addition to other audit misstatements below that threshold
that we believe warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified
above and was performed at the Administrator, Frostrow Capital LLP in London.
4 Our opinion on other matters prescribed by the Companies Act 2006 is
unmodified
In our opinion:
• the part of the Directors' Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006;
• the information given in the Strategic Report and the Directors' Report for
the financial year for which the financial statements are prepared is
consistent with the financial statements; and
• the information given in the Corporate Governance Statement set out on pages
25 to 31 with respect to internal control and risk management systems in
relation to financial reporting processes and about share capital structures is
consistent with the financial statements.
5 We have nothing to report in respect of the matters on which we are required
to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based on the
knowledge we acquired during our audit, we have identified other information in
the annual report that contains a material inconsistency with either that
knowledge or the financial statements, a material misstatement of fact, or that
is otherwise misleading.
In particular, we are required to report to you if:
• we have identified material inconsistencies between the knowledge we acquired
during our audit and the directors' statement that they consider that the
annual report and financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the company's performance, business model and strategy; or
• the Audit Committee Report does not appropriately address matters
communicated by us to by the Audit Committee.
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
• adequate accounting records have not been kept by the company, or returns
adequate for our audit have not been received from branches not visited by us;
or
• the financial statements and the part of the Directors' Remuneration Report
to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of Directors' remuneration specified by law are not made;
or
• we have not received all the information and explanations we require for our
audit; or
• a Corporate Governance Statement has not been prepared by the company.
Under the Listing Rules we are required to review:
• the Directors' statement, set out on page 51, in relation to going concern;
and
• the part of the Corporate Governance Statement on pages 25 to 31 relating to
the Company's compliance with the nine provisions of the UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
As explained more fully in the Directors' Responsibilities Statement, the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. A description of the
scope of an audit of accounts is provided on the Financial Reporting Council's
website at www.frc.org.uk/auditscopeukprivate. This report is made solely to
the Company's members as a body and subject to important explanations and
disclaimers regarding our responsibilities, published on our website at
www.kpmg.com/uk/auditscopeukco2013a, which are incorporated into this report as
if set out in full and should be read to provide an understanding of the
purpose of this report, the work we have undertaken and the basis of our
opinions.
Richard Hinton (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
27 March 2015
Further Information/Glossary of Terms
AIFMD
The Alternative Investment Fund Managers Directive (the `Directive') is a
European Union Directive that entered into force on 22 July 2013. The Directive
regulates EU fund managers that manage alternative investment funds (this
includes investment trusts). There was a one-year transition period within
which alternative funds had to comply with the provisions of the Directive.
Ayurveda
Ayurveda or Ayurvedic medicine is a system of Hindu traditional medicine native
to the Indian subcontinent. Practices derived from Ayurvedic traditions are a
type of alternative medicine.
Discount or Premium
A description of the difference between the share price and the net asset value
per share. The size of the discount or premium is calculated by subtracting the
share price from the net asset value per share and is usually expressed as a
percentage (%) of the net asset value per share. If the share price is higher
than the net asset value per share the result is a premium. If the share price
is lower than the net asset value per share, the shares are trading at a
discount.
Gearing
The term used to describe the process of borrowing money for investment
purposes. The expectation is that the returns on the investments purchased will
exceed the finance costs associated with those borrowings.
There are several methods of calculating gearing and the following has been
selected:
Total assets, less current liabilities (before deducting any prior charges)
minus cash/cash equivalents divided by shareholders' funds, expressed as a
percentage.
Net Asset Value (NAV)
The value of the Company's assets, principally investments made in other
companies and cash being held, minus any liabilities. The NAV is also described
as `shareholders' funds' per share. The NAV is often expressed in pence per
share after being divided by the number of shares which have been issued. The
NAV per share is unlikely to be the same as the share price which is the price
at which the Company's shares can be bought or sold by an investor. The share
price is determined by the relationship between the demand and supply of the
shares.
Net Asset Value Total Return
The theoretical total return on an investment over a specified period assuming
dividends paid to shareholders were reinvested at net asset value per share at
the time the shares were quoted ex-dividend. This is a way of measuring
investment management performance of investment trusts which is not affected by
movements in discounts or premiums.
Ongoing Charges Ratio
Ratio of the Company's expenses, excluding performance fees and exceptional
items, expressed as a percentage of the average daily shareholders' funds of
the Company over the year.
The publishing of ongoing charges information rather than a total expense ratio
(TER) is advocated by the Association of Investment Companies who believe that
using a single methodology to calculate ongoing charges will help reduce
inconsistencies and allow investors and advisers to compare investment
companies more easily with open-ended funds.
Price-to-Earnings Ratio
The price-to-earnings ratio or P/E ratio, is an equity valuation multiple. It
is defined as the market price per share dividend by the annual earnings per
share.
Price-to-Book Ratio
The price-to-book ratio or P/B ratio, is a financial ratio used to compare a
Company's current market value to its book value (or balance sheet value).
Share Price Total Return
The change in capital value of a company's shares over a given period, plus
dividends received, expressed as a percentage of the opening value.
Further Information/Notice of the Annual General Meeting
Notice is hereby given that the thirtieth Annual General Meeting of Pacific
Assets Trust Public Limited Company will be held at Skinners' Hall, 8 Dowgate
Hill, London EC4R 2SP on Wednesday, 24 June 2015 at 10.00 a.m. for the
following purposes:
Ordinary Business
To consider and, if thought fit, pass the following as Ordinary Resolutions:
1. That the Report of the Directors and Accounts for the financial year ended
31 January 2015 together with the Report of the Auditors thereon be received.
2. To receive and approve the Directors' Remuneration Report for the financial
year ended 31 January 2015.
3. That a final dividend for the financial year ended 31 January 2015 of 2.6p
per share be declared.
4. That Ms M C Ginman be elected as a Director.
5. That Mr T F Mahony, be re-elected as a Director.
6. That Mr N M S Rich, be re-elected as a Director.
7. That Mr J P Williams be re-elected as a Director.
8. That KPMG 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.
9. That the Directors be authorised to determine KPMG LLP's remuneration.
Special Business
To consider and, if thought fit, pass the following resolutions, of which
resolutions 11, 12 and 13 will be proposed as Special Resolutions.
10. 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 £1,460,605 provided that this authority shall expire at the
conclusion of the Annual General Meeting of the Company to be held in 2016 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 hereby had not expired.
11. That, subject to the passing of resolution 10 proposed at the Annual
General Meeting of the Company convened for 24 June 2015 (`Resolution 10'), 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 subscribe for, or to convert any
securities into, ordinary shares of 12.5 pence each in the capital of the
Company (`Ordinary Shares')) for cash either pursuant to the authority
conferred on them by such Resolution 10 as if section 561(1) of the Act did not
apply to any such allotment, provided that this power shall be limited to:
the allotment of equity securities up to an aggregate nominal amount of £
1,460,605, and shall expire (unless previously renewed, varied or revoked by
the Company in general meeting) at the conclusion of the Annual General Meeting
of the Company to be held in 2016 or 15 months from the date of passing this
resolution, whichever is the earlier, unless previously revoked, varied or
renewed by the Company in general meeting and provided that the Company may
before such expiry make an offer or enter into an agreement which would or
might require equity securities to be allotted after such expiry and the Board
may allot equity securities in pursuance of such an offer or agreement as if
the authority conferred hereby had not expired.
12. That, the Company be and is hereby generally and unconditionally authorised
for the purposes of section 701 of the Companies Act 2006 (the `Act') to make
one or more market purchases (as defined in section 693(4) of the Act) of
ordinary shares of 12.5 pence each in the capital of the Company (`Ordinary
Shares') for cancellation on such terms and in such manner as the board of
directors may determine provided that:
(i) the maximum aggregate number of Ordinary Shares which may be purchased is
14.99% of the number of Ordinary Shares in issue immediately prior to the
passing of this resolution;
(ii) the minimum price which may be paid for an Ordinary Share is 12.5 pence
(exclusive of associated expenses);
(iii) the maximum price which may be paid for an Ordinary Share (exclusive of
associated expenses) shall not be more than the higher of: (a) an amount equal
to 105% of the average of the middle market quotations for an Ordinary Share as
derived from the London Stock Exchange Daily Official List for the five dealing
days immediately preceding the day on which the Ordinary Share is purchased;
and (b) the higher of the last independent trade and the highest current
independent bid on the London Stock Exchange for an Ordinary Share; and
(iv) unless previously renewed, varied or revoked, this authority shall expire
at the conclusion of the Annual General Meeting of the Company to be held in
2016 or 15 months from the date of passing this resolution, whichever is the
earlier, unless previously revoked, varied or renewed by the Company in general
meeting and provided that the Company may before such expiry enter into a
contract to purchase Ordinary Shares which will or may be completed wholly or
partly after such expiry and a purchase of Ordinary Shares may be made pursuant
to any such contract.
13. That as permitted by the EU Shareholders' Rights Directive (2007/36/EC) any
General Meeting of the Company (other than the Annual General Meeting of the
Company) shall be called by notice of at least 14 clear days in accordance with
the provisions of the Articles of Association of the Company provided that the
authority shall expire on the conclusion of the next Annual General Meeting of
the Company, or, if earlier, on the expiry 15 months from the date of the
passing of this resolution.
By order of the Board Registered office
16 Charlotte Square
Frostrow Capital LLP Edinburgh
Company Secretary EH2 4DF
27 March 2015
Notes
1. If you wish to attend the Annual General Meeting in person, you should
arrive at the venue for the Annual General Meeting in good time to allow your
attendance to be registered. It is advisable to have some form of
identification with you as you may be asked to provide evidence of your
identity to the Company's registrar, Equiniti Limited (the `Registrar'), prior
to being admitted to the Annual General Meeting.
2. Members are entitled to appoint one or more proxies to exercise all or any
of their rights to attend, speak and vote at the Annual General Meeting. A
proxy need not be a member of the Company but must attend the Annual General
Meeting to represent a member. To be validly appointed a proxy must be
appointed using the procedures set out in these notes and in the notes to the
accompanying proxy form.
If members wish their proxy to speak on their behalf at the meeting, members
will need to appoint their own choice of proxy (not the chairman of the Annual
General Meeting) and give their instructions directly to them.
Members can only appoint more than one proxy where each proxy is appointed to
exercise rights attached to different shares. Members cannot appoint more than
one proxy to exercise the rights attached to the same share(s). If a member
wishes to appoint more than one proxy, they should contact the Registrar on
0871 384 2466. Calls to this number cost 8p per minute plus network extras.
Lines are open between 8.30 am and 5.30 pm, Monday to Friday, the Registrars'
overseas helpline number is +44 121 415 7047.
A member may instruct their proxy to abstain from voting on any resolution to
be considered at the meeting by marking the abstain option when appointing
their proxy. It should be noted that an abstention is not a vote in law and
will not be counted in the calculation of the proportion of votes "for" or
"against" the resolution.
The appointment of a proxy will not prevent a member from attending the Annual
General Meeting and voting in person if he or she wishes.
A person who is not a member of the Company but who has been nominated by a
member to enjoy information rights does not have a right to appoint any proxies
under the procedures set out in these notes and should read note 8 below.
3. A proxy form for use in connection with the Annual General Meeting is
enclosed. To be valid any proxy form or other instrument appointing a proxy,
together with any power of attorney or other authority under which it is signed
or a certified copy thereof, must be received by post or (during normal
business hours only) by hand by the Registrar at Equiniti Limited, Aspect
House, Spencer Road, Lancing, West Sussex BN99 6DA no later than 48 hours
(excluding non-working days) before the time of the Annual General Meeting or
any adjournment of that meeting.
If you do not have a proxy form and believe that you should have one, or you
require additional proxy forms, please contact the Registrar on 0871 384 2466.
Calls to this number cost 8p per minute from a BT landline. Other service
providers' costs may vary. Lines are open between 8.30 am and 5.30 pm, Monday
to Friday, The Registrars' overseas helpline number is +44 121 415 7047.
4. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so by using the procedures
described in the CREST Manual and by logging on to the following website:
www.euroclear.com/CREST. CREST personal members or other CREST sponsored
members, and those CREST members who have appointed (a) voting service provider
(s), should refer to their CREST sponsor or voting service provider(s) who will
be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to
be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be
properly authenticated in accordance with Euroclear UK & Ireland Limited's
specifications, and must contain the information required for such instruction,
as described in the CREST Manual. The message, regardless of whether it
constitutes the appointment of a proxy or is an amendment to the instruction
given to a previously appointed proxy, must in order to be valid, be
transmitted so as to be received by the Registrar (ID RA19) no later 48 hours
(excluding non-working days) before the time of the Annual General Meeting or
any adjournment of that meeting. For this purpose, the time of receipt will be
taken to be the time (as determined by the timestamp applied to the message by
the CREST Application Host) from which the Registrar is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST. After this time
any change of instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service
provider(s) should note that Euroclear UK & Ireland Limited does not make
available special procedures in CREST for any particular message. Normal system
timings and limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal member, or
sponsored member, or has appointed (a) voting service provider(s), to procure
that his CREST sponsor or voting service provider(s) take(s)) such action as
shall be necessary to ensure that a message is transmitted by means of the
CREST system by any particular time. In this connection, CREST members and,
where applicable, their CREST sponsors or voting system providers are referred,
in particular, to those sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances
set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations
2001.
5. In the case of joint holders, where more than one of the joint holders
purports to appoint one or more proxies, only the purported appointment
submitted by the most senior holder will be accepted. Seniority is determined
by the order in which the names of the joint holders appear in the Company's
register of members in respect of the joint holding (the first named being the
most senior).
6. Any corporation which is a member can appoint one or more corporate
representatives. Members can only appoint more than one corporate
representative where each corporate representative is appointed to exercise
rights attached to different shares. Members cannot appoint more than one
corporate representative to exercise the rights attached to the same share(s).
7. To be entitled to attend and vote at the Annual General Meeting (and for the
purpose of determining the votes they may cast), members must be registered in
the Company's register of members at 6.00 p.m. on 22 June 2015 (or, if the
Annual General Meeting is adjourned, at 6.00 p.m. on the day two working days
prior to the adjourned meeting). Changes to the register of members after the
relevant deadline will be disregarded in determining the rights of any person
to attend and vote at the Annual General Meeting.
8. Any person to whom this notice is sent who is a person nominated under
section 146 of the Companies Act 2006 (the "2006 Act") to enjoy information
rights (a "Nominated Person") may, under an agreement between him/her and the
member by whom he/she was nominated, have a right to be appointed (or to have
someone else appointed) as a proxy for the Annual General Meeting. If a
Nominated Person has no such proxy appointment right or does not wish to
exercise it, he/she may, under any such agreement, have a right to give
instructions to the member as to the exercise of voting rights.
9. Information regarding the Annual General Meeting, including information
required by section 311A of the 2006 Act, and a copy of this notice of Annual
General Meeting is available from www.pacific-assets.co.uk.
10. Members should note that it is possible that, pursuant to requests made by
members of the Company under section 527 of the 2006 Act, the Company may be
required to publish on a website a statement setting out any matter relating
to: (a) the audit of the Company's accounts (including the auditor's report and
the conduct of the audit) that are to be laid before the Annual General
Meeting; or (b) any circumstance connected with an auditor of the Company
ceasing to hold office since the previous meeting at which annual accounts and
reports were laid in accordance with section 437 of the 2006 Act. The Company
may not require the members requesting any such website publication to pay its
expenses in complying with sections 527 or 528 of the 2006 Act. Where the
Company is required to place a statement on a website under section 527 of the
2006 Act, it must forward the statement to the Company's auditor not later than
the time when it makes the statement available on the website. The business
which may be dealt with at the Annual General Meeting includes any statement
that the Company has been required under section 527 of the 2006 Act to publish
on a website.
11. As at 27 March 2015 (being the latest practicable date prior to the
publication of this notice) the Company's issued share capital consisted of
116,848,386 ordinary shares carrying one vote each. Accordingly, the total
voting rights in the Company at 27 March 2015 were 116,848,386 votes.
12. 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 his
proxy will need to ensure that both he, and his proxy, comply with their
respective disclosure obligations under the UK Disclosure and Transparency
Rules.
13. Under section 319A of the 2006 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
the Company Secretary at 25 Southampton Buildings, London WC2A 1AL.
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.
14. The following documents will be available for inspection at the offices of
Frostrow Capital LLP, the Company's Company Secretary, 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 until the conclusion of the Annual General Meeting:
14.1 copies of the Directors' letters of appointment; and
14.2 copies of the Directors' deeds of indemnity.
15. Under section 338 and section 338A of the Companies Act 2006, 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 authorised by the person or persons making
it, must be received by the Company not later than 13 May 2015, 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.
Further Information/Explanatory Notes to the Resolutions
Resolution 1 - To receive the Annual Report and Accounts
The Annual Report and Accounts for the year ended 31 January 2015 will be
presented to the AGM. These accounts accompanied this Notice of Meeting and
shareholders will be given an opportunity at the meeting to ask questions.
Resolution 2 - Remuneration Report
The Company's Remuneration Policy was approved by shareholders at last year's
Annual General Meeting. The Report on Directors' Remuneration and the
Remuneration Policy Report are set out in full in the Annual Report on pages 54
to 56.
Resolution 3 - The Declaration of a Final Dividend for the year ended 31
January 2015
Resolution 3 seeks shareholder approval for the paying of a final dividend of
2.6p per share for the year ended 31 January 2015.
Resolutions 4 to 7 - Election and Re-election of Directors
Resolutions 4 to 7 deal with the election and re-election of each Director.
Biographies of each of the Directors can be found on pages 23 and 24 of the
Annual Report.
The Board has confirmed, following a performance review, that the Directors
standing for election and re-election continue to perform effectively.
Resolutions 8 and 9 - Re-appointment of Auditor and the determination of its
remuneration
Resolutions 8 and 9 relate to the re-appointment of KPMG LLP as the Company's
independent Auditor to hold office until the next AGM of the Company and also
authorises the Directors to set its remuneration.
Resolutions 10 and 11
Ordinary Resolution No. 10 in the Notice of Annual General Meeting will renew
the authority to allot the unissued share capital up to an aggregate nominal
amount of £1,460,605 (equivalent to 11,684,838 shares, or 10% of the Company's
existing issued share capital on 27 March 2015, being the nearest practicable
date prior
to the signing of this Report). Such authority will expire on the date of the
next Annual General Meeting 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 Annual General Meeting.
When shares are to be allotted for cash, Section 551 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. Special Resolution No. 11 will, if passed,
give the Directors power to allot for cash equity securities up to 10% of the
Company's existing share capital on 27 March 2015, 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 No. 10.
This authority will also expire on the date of the next Annual General Meeting
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 Nos. 10 and 11
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.
Resolution 12
The Directors wish to renew the authority given by shareholders at the previous
Annual General Meeting. 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 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 Annual General Meeting.
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 No. 12 in the Notice of Annual General Meeting will renew
the authority to purchase in the market a maximum of 14.99% of shares in issue
on 27 March 2015, being the nearest practicable date prior to the signing of
this Report, (amounting to 17,515,573 shares). Such authority will expire on
the date of the next Annual General Meeting or after a period of 15 months from
the date of passing of the resolution, whichever is earlier. This means in
effect that the authority will have to be renewed at the next Annual General
Meeting or earlier if the authority has been exhausted.
Resolution 13
Special Resolution No. 13 seeks shareholder approval for the Company to hold
General Meetings (other than the Annual General Meeting) at 14 clear days'
notice.
The Board considers that the resolutions relating to the above items of special
business, are in the best interests of shareholders as a whole.
Accordingly, the Board unanimously recommends to the shareholders that they
vote in favour of the above resolutions to be proposed at the forthcoming
Annual General Meeting as the Directors intend to do in respect of their own
beneficial holdings totalling 150,550 shares.
Contact: Mark Pope at Frostrow Capital LLP, 0203 008 4913
Frostrow Capital LLP,
Company Secretary
27 March 2015
ANNOUNCEMENT ENDS
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