PACIFIC ASSETS TRUST PLC - Half-yearly Report.
LONDON STOCK EXCHANGE ANNOUNCEMENT Pacific Assets Trust plc Unaudited Half Year Results For The Six Months Ended 31 July 2013 Company Summary Key Statistics As at As at 31 July 31 January 2013 2013 % change Share price 163.0p 147.5p +10.5 Net asset value per share 168.2p 160.6p +4.7 Discount of share price to net asset value 3.1% 8.2% - per share Shareholders' funds 196.5m 187.6m +4.7 Market capitalisation 190.5m 172.4m +10.5 Six months One year to to 31 July 31 January 2013 2013 Share price (total return)* +12.3% +30.9% Net asset value per share (total return)* +6.9% +24.8% MSCI All Country Asia ex Japan Index (total -1.1% +12.1% return, sterling adjusted)* *Source: Morningstar Year ended Year ended 31 January 31 January Dividends 2013 2012 Final dividend per share 2.60p 2.60p - Half Year's Highs/Lows High Low Net asset value per share 178.2p 152.5p Share price 167.1p 143.0p Discount of share price to net asset value 1.4% 12.2% per share** **Discount high - Narrowest discount in period Discount low - Widest discount in period Chairman's Statement "Following excellent performance last year I am pleased to report that the current financial year has started strongly." Performance Following excellent performance last year I am pleased to report that the current financial year has started strongly. During the six month period ended 31 July 2013, the Company's share price total return was +12.3% and the net asset value total return was +6.9%. This compares to a total return from the sterling adjusted MSCI All Country Asia ex Japan Index of -1.1%. The Company was the best performing member of its peer group during the period under review. Significantly, it has also been the best performer since the appointment of First State as the Company's Investment Manager in July 2010. The Company's strong share price performance reflected a decrease in the share price discount to net asset value per share from 8.2% as at 31 January 2013 to 3.1% as at 31 July 2013. Further information on the Company's investment strategy can be found in our Investment Manager's review beginning on page 4. Share Capital and Discount Policy The Company's strong share price performance relative to net asset value has continued since the half year end and as at 27 September 2013 it was trading at a (2.3% discount). The Board continues to monitor this closely. At the last Annual General Meeting, the Company renewed the authorities to issue and to purchase its own shares. The Board will use the authority to purchase shares to ensure that the discount between the Company's share price and the net asset value per share is not out-of-line with the share price discount of similar peer group investment companies. During the past six months and to the date of this report there have been no repurchases of shares. Similarly, it will make shares available to the market if a sustained premium to net asset value were to develop. Revenue Account and Dividend As mentioned in the Annual Report, the net revenue generated during the year to 31 January 2013 fell when compared to the previous year due to a reduction in the overall yield from portfolio investments. However, the Board has continued its drive to control costs, and this has, in part, helped to achieve an unchanged level of net income for the period of [pounds sterling]2.1m. 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 I am delighted to welcome James Williams onto the Board with effect from 1 October 2013. James brings with him a wealth of experience having held a number of senior roles at Baring Asset Management, including Chief Investment Officer and Head of International Business (Asia, Europe, Middle East and U.S.). He is currently a non-executive Director of Investors Capital Trust PLC and JPMorgan American Investment Trust PLC and was formerly a non-executive Director of Close Brothers Group PLC and Royal London Growth & Income Trust PLC. A resolution proposing his election to the Board will be considered by shareholders at the Annual General Meeting of the Company to be held on 24 June 2014. Regulatory The Board has noted that the Alternative Investment Fund Managers Directive (the 'Directive') was written into UK legislation with effect from 22 July 2013. There is a one-year transition period within which the Company must comply with the provisions of the Directive, which includes the appointment of an Alternative Investment Fund Manager ('AIFM'). The Board, together with its advisers, is currently reviewing the options open to the Company and will ensure that all documentation and processes to enable the Company to comply with the Directive are in place within the transition period. Outlook The deterioration in the short-term outlook for a number of countries in Asia remains a concern and comes within the context of excessive monetary growth in the USA and Europe being wound down. Your Board continues to believe that your investment manager's efforts to identify well managed companies which embrace a sustainable approach to business will provide superior returns over the longer term. David Nichol Chairman 27 September 2013 Investment Manager's Review "The choice is this: impose capital controls or let the Fed run your economy." Robin Harding, FT, Wed 28 August, 2013. Most Asian countries chose the latter and are now feeling the consequences. Much of the rise in Asian asset prices over the past few years has been attributable to the fall-out from the extreme monetary policies being pursued in the U.S. and Europe. As abundant liquidity from the West found its way into most, if not all, Asian asset classes, from property to Government debt to equity prices, many asset prices have re-rated beyond levels warranted by improvements in the underlying fundamentals of these assets. In recent months this process has started to reverse as markets finally realised that the monetary printing presses will not be left on indefinitely. As a result, the "hot" money has started to exit most Asian asset classes. Despite the immediate fall in the share prices of many of the Company's holdings, the reduced presence of "hot" money in Asian financial markets is good news for the Company's long-term investors. Most obviously, share prices of some of our favourite companies have finally started to return to more acceptable levels, allowing us to slowly increase the Company's stakes in some of Asia's best companies that were hitherto out-of-reach on valuation grounds. As importantly, the removal of temporary liquidity in the region has shone a bright light on the structural weaknesses still inherent in some Asian countries, most notably India and Indonesia, which both suffer from infrastructure bottlenecks, weak governance and glaring fiscal and current account deficits. In both countries, a rapidly depreciating currency has turned what was a long-festering "mini-crisis" into a full-blown economic crisis that has finally got the attention of policymakers and Government officials as a sense of panic and urgency has taken hold. It is too early to tell whether the Indian and Indonesian Governments will be able to overcome short-term political pressures and deliver meaningful long-term structural reforms but the faster the currencies continue to depreciate, the greater the chances of success. Most, if not all, Asian countries will be affected should the reversal of these "hot" flows of capital away from the region continue. The degree to which they are affected will depend in large part on the relative health of their underlying economies. For example, in contrast to India and Indonesia, the Philippines remains in particularly good shape, thanks to a large, steady stream of remittances of foreign earnings from its large overseas workforce and an economy just at the beginning of a cyclical upturn. Elsewhere, we, like many others, remain concerned that the investment-intensive, state-orchestrated Chinese economic model may be storing up serious structural problems within its huge banking system. Should Chinese savers start to lose confidence, it is not clear whether China's traditional capital controls would be able to hold back the subsequent exodus of domestic capital. Performance Given our long-term focus, it is difficult for us to comment on short-term performance trends, other than to note performance contribution at an individual stock level. Four of the worst contributors in the portfolio over the period are Indian companies. In part this reflects the dramatic shift in market sentiment towards India and the subsequent currency weakness. In the case of EID Parry (India) and Tube Investments of India, both part of the highly regarded Murugappa Group from Chennai, it also reflects the fact that both companies are experiencing a period of cyclical weakness in demand for their products. In the case of the latter, the slowdown in the Indian economy has affected short-term demand for their bicycles. Their manufacturing facilities have also been affected by an unusually high level of power cuts in Tamil Nadu, a sobering reminder of the challenges still facing Indian manufacturing companies today. Despite these short-term challenges, our long-term investment conviction remains intact. In terms of the best performing holdings, it is a very stock specific story. Improving corporate governance (Tech Mahindra) (India), the on-going drive to switch from heavy diesel oil and coal to cleaner, greener gas in China (Towngas China), strong leisure demand for bicycles (Giant Manufacturing) (Taiwan), solar panels (Delta Electronics (Thailand)) and healthy soya-based milk drinks (Vitasoy International Holdings) (Hong Kong) were at the top of the list. Given the random walk taken by markets over anything other than the long-run, it is entirely possible that these companies may appear at the bottom of the list next time! However, we remain convinced that these sustainability tailwinds will help provide good quality companies with the opportunity to significantly grow their earnings, and share prices, over the long-run. Portfolio Positioning During the period, we held one-on-one meetings with the senior management of over five hundred Asian companies, each of which are potential candidates for investment. However, our long-term investment horizon and conviction in the Company's current investments meant that the portfolio itself remains substantially unchanged over the six months under review. A new position was initiated in Weifu High-Technology Group, the leading manufacturer of fuel injection Investment Manager's Review Continued systems for the automotive sector in China. The Company is well placed to contribute to, and benefit from, a shift towards tighter vehicle emissions standards in China. The company has also benefitted from a long-term partnership with the highly regarded Bosch Group, dating back over twenty years. Weifu High-Technology Group aside, we continue to struggle to generate many new investment ideas in China. There are three main reasons for this. Firstly, corporate governance and management quality remain a challenge. Second, even where we are comfortable with management, we often struggle to get comfortable with long-term political alignment. So few Chinese companies are in charge of their own destiny. For example, we are looking closely at a well-managed port operator in mainland China. While we are comfortable with the quality of the underlying business, we have no idea what returns the Chinese Government will allow the company to achieve over the next five to ten years. The third challenge in China is valuation, with many of our favourite companies still trading on extremely extended valuations. As a result, we primarily invest in China indirectly, through companies such as Chroma ATE and Delta Electronics (both Taiwan) and Vitasoy International Group (Hong Kong). Elsewhere, extremely stretched valuations led us to reduce investment in some of the largest positions, including Taiwan Semiconductor Manufacturing (Taiwan), Manila Water (Philippines), Towngas China (China) and Kasikornbank (Thailand). The proceeds were reinvested primarily to increase the holdings in two Indian exporters, Tech Mahindra and Dr. Reddy's Laboratories. Tech Mahindra is the final reincarnation of Satyam Computer Services, the Indian software services company that was bankrupted under its previous owner. The company is now under new management and new stewardship in the shape of the Mahindra and Mahindra Group, in which we have much conviction. Dr. Reddy's is one of India's leading providers of affordable medicines, and has been successful in building a strong export business. Overseas earnings now account for over three quarters of earnings. In terms of complete disposals, we said goodbye to Wipro (India), another Indian software services company which has struggled to make the generational change in management required following the standing down from day-to-day duties of its visionary founder. We also completely disposed of the holding in Ayala Land (Philippines) on valuation grounds, although the Company remains an indirect investor via its shares in parent company, Ayala Corporation. Engagement and Voting During the period we undertook our annual review of engagement issues for the portfolio's major holdings. We firmly believe the mantra "there is no such thing as a perfect company" so look to identify the one or two things we would have investee companies change if we could. We then decide the approach we will take to engagement (e.g. writing a letter or through regular dialogue) and try to set a timeframe for the engagement (perhaps the most challenging part). Examples of some of the issues we engaged on during the period include: - Inappropriate, chauvinistic advertising with a consumer company - Palm oil sourcing and plastic bottled water with another consumer company - Improved focus on responsible banking and environmental risks in lending with a bank - Customer service levels relative to peers with a telecoms company In each case, we engaged for investment reasons. The more these companies are able to address such issues, the more attractive the potential risk-adjusted returns become. We were also active on the proxy voting front. Examples of where we voted against shareholder resolutions on behalf of the Company included voting against general approval to transact any and all other business brought before the annual meeting of shareholders (most of our Philippine and Taiwanese holdings!) and voting against poorly designed remuneration schemes. For example, we voted against schemes which had insufficiently long vesting periods and an overgenerous discount for share issues to management leading to poor alignment with minority shareholders such as the Company. Outlook In short, we remain concerned that the worst is not yet behind us. The global economy remains artificially supported. Such support cannot last indefinitely, and as and when it is pulled way, the implications for Asia may be profound. As a result, we will be delighted if we are able to preserve, in real terms, the capital of the Company at current levels in the short-term. As always, we believe the greatest challenge when investing in Asia is not to generate returns when times are good, but to try and hold on to as much of these returns as possible when times are not so good. Fortunately, we don't pride ourselves on the strength of our economic or market predictions. Instead, our job is simply to get on with striving to identify good quality companies which are well positioned to contribute to, and benefit from, Asia's shift towards a more genuinely sustainable development path. We believe this approach will stand the Company in good stead in its search to achieve attractive risk-adjusted returns in Asia over the long-term. David Gait Senior Investment Manager First State Investment Management (UK) Limited 27 September 2013 Portfolio as at 31 July 2013 % of total Market assets less valuation current Country of Investment Sector* [pounds sterling]'000 liabilities incorporation Towngas China Utilities 10,396 5.3 Cayman Islands AmorePacific Consumer Staples 9,276 4.7 South Korea Tech Mahindra Information 9,164 4.7 India Technology DBS Group Financials 8,890 4.5 Singapore Marico Consumer Staples 8,709 4.4 India Taiwan Semiconductor Information 7,505 3.8 Taiwan Manufacturing Company Technology Manila Water Utilities 6,850 3.5 Philippines Kasikornbank Financials 6,800 3.5 Thailand Public Bank Financials 6,248 3.2 Malaysia Samsung Fire & Marine Financials 6,054 3.1 South Korea Insurance Ten largest investments 79,892 40.7 Delta Electronics Information 5,745 2.9 Thailand (Thailand) Technology Axiata Telecom Services 5,620 2.8 Malaysia Dabur India Consumer Staples 5,590 2.8 India DGB Financial Financials 5,281 2.7 South Korea Globe Telecom Telecom Services 5,157 2.6 Philippines Singapore Telecom Services 4,857 2.5 Singapore Telecommunications Chroma ATE Information 4,513 2.3 Taiwan Technology E.Sun Financial Holdings Financials 4,350 2.2 Taiwan Dr. Reddy's Laboratories Health Care 4,266 2.2 India Uni- President Enterprise Consumer Staples 4,161 2.1 Taiwan Twenty largest investments 129,432 65.8 Idea Cellular Telecom Services 3,640 1.9 India SembCorp Industries Industrials 3,481 1.8 Singapore Singapore Post Industrials 3,127 1.6 Singapore Hongkong & China Gas Utilities 3,116 1.6 Hong Kong Delta Electronics (Taiwan) Information 2,938 1.5 Taiwan Technology Infosys Information 2,870 1.5 India Technology Bank of the Philippine Financials 2,786 1.4 Philippines Islands Sheng Siong Consumer Staples 2,609 1.3 Singapore MTR Industrials 2,401 1.2 Hong Kong Sabana Shari' ah Compliant Financials 2,285 1.1 Singapore REIT Thirty largest investments 158,685 80.7 Mindray Medical Health Care 2,205 1.1 Cayman Islands China Mengniu Dairy Consumer Staples 2,083 1.0 Cayman Islands Giant Manufacturing Consumer 1,878 1.0 Taiwan Discretionary Linde India Industrials 1,858 1.0 India Vitasoy International Consumer Staples 1,842 0.9 Hong Kong Holdings Uni- President China Consumer Staples 1,496 0.8 Cayman Islands Tube Invetments of India Industrials 1,402 0.7 India Standard Foods Consumer Staples 1,055 0.6 Taiwan Ayala Corporation Financials 1,012 0.6 Philippines ENN Energy Utilities 1,000 0.5 Cayman Islands Forty largest investments 174,516 88.9 *MSCI sector classifications Portfolio as at 31 July 2013 Continued % of total Market assets less valuation current Country of Investment Sector* [pounds sterling]'000 liabilities incorporation National Trust Bank Financials 974 0.5 Sri Lanka Kotak Mahindra Bank Financials 949 0.5 India XL Axiata Telecom Services 817 0.4 Indonesia Bharti Airtel Telecom Services 809 0.4 India Simplo Technology Information 803 0.4 Taiwan Technology Cholamandalam Financials 683 0.3 India Investment & Finance Mahindra Lifespace Industrials 669 0.3 India Developers Marico Bangladesh Consumer Staples 644 0.3 Bangladesh Swire Properties Financials 530 0.3 Hong Kong EID Parry (India) Materials 505 0.3 India Fifty largest 181,899 92.6 investments Hemas Holdings Industrials 497 0.2 Sri Lanka Godrej Consumer Consumer Staples 471 0.2 India Products Weifu High-Technology Information 179 0.1 China Group Technology Total portfolio 183,046 93.1 Net current assets 13,485 6.9 Total assets less 196,531 100.0 current liabilities *MSCI sector classifications Income Statement for the six months ended 31 July 2013 (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31 July 2013 31 July 2012 31 January 2013 Revenue Capital Total Revenue Capital Total Revenue Capital Total [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 Gains on investments held at fair value through - 11,820 11,820 - 13,489 13,489 - 35,724 35,724 profit or loss Exchange differences on currency balances - 61 61 - (8) (8) - (97) (97) Income (note 2) 2,829 - 2,829 2,703 - 2,703 4,168 - 4,168 Investment management, management and performance fees (note 3) (232) (2,021) (2,253) (187) (1,121) (1,308) (395) (1,811) (2,206) Other expenses (259) (2) (261) (246) (3) (249) (538) (19) (557) Return on ordinary 2,338 9,858 12,196 2,270 12,357 14,627 3,235 33,797 37,032 activities before taxation Taxation on (229) - (229) (155) - (155) (262) - (262) ordinary activities Return 2,109 9,858 11,967 2,115 12,357 14,472 2,973 33,797 36,770 attributable to equity shareholders Return per ordinary share (p) (note 4) 1.8 8.4 10.2 1.8 10.6 12.4 2.6 28.9 31.5 The Total column of this statement represents the Company's Income Statement. The Revenue and Capital columns are supplementary to this and are both 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 six months ended 31 July 2013 (Unaudited) (Unaudited) (Audited) Six months Six months Year ended ended ended 31 January 31 July 31 July 2013 2013 2012 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 Opening shareholders' funds 187,602 153,870 153,870 Return for the period 11,967 14,472 36,770 Dividends paid (3,038) (3,038) (3,038) Closing shareholders' funds 196,531 165,304 187,602 Balance Sheet as at 31 July 2013 (Unaudited) (Unaudited) (Audited) As at As at As at 31 July 31 July 31 January 2013 2012 2013 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 Fixed assets Investments held at fair value through 183,046 157,763 173,990 profit or loss Current assets Debtors 485 894 518 Cash at bank 14,878 7,658 15,124 15,363 8,552 15,642 Creditors (amounts falling due within one (1,878) (1,011) (2,030) year) Net current assets 13,485 7,541 13,612 Net assets 196,531 165,304 187,602 Capital and reserves Share capital 14,606 14,606 14,606 Share premium account 4 4 4 Capital redemption reserve 1,648 1,648 1,648 Special reserve 14,572 14,572 14,572 Capital reserve 160,346 129,048 150,488 Revenue reserve 5,355 5,426 6,284 Equity shareholders' funds 196,531 165,304 187,602 Net asset value per ordinary share (p) (note 168.2 141.5 160.6 5) Cash Flow Statement for the six months ended 31 July 2013 (Unaudited) (Unaudited) (Audited) Six months Six months Year ended ended ended 31 July 31 July 31 January 2013 2012 2013 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 Net cash inflow from operating activities 566 1,290 1,904 Servicing of finance - - - Financial investment Purchases of investments (21,251) (25,791) (40,030) Sales of investments 23,416 28,097 49,277 Net cash inflow from financial investment 2,165 2,306 9,247 Equity dividends paid (3,038) (3,038) (3,038) (Decrease)/increase in cash (307) 558 8,113 Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash resulting from (307) 558 8,113 cash flows Exchange differences on currency balances 61 (8) (97) Movement in net funds (246) 550 8,016 Net funds at beginning of period 15,124 7,108 7,108 Net funds at period end 14,878 7,658 15,124 Reconciliation of net return before finance costs and taxation to net cash flow from operating activities Net return before finance costs and taxation 12,196 14,627 37,032 Gains on investments (11,820) (13,489) (35,724) Exchange differences on currency balances (61) 8 97 Irrecoverable withholding tax on investment (213) (174) (294) income Changes in working capital and other non-cash items 464 318 793 Net cash inflow from operating activities 566 1,290 1,904 Notes to the Accounts 1. Basis of preparation The condensed financial statements have been prepared under the historical cost convention, except for the measurement of investments which are valued at fair value, and in accordance with applicable accounting standards, the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' dated January 2009 and the UK Accounting Standards Board's Statement 'Half Yearly Financial Reports'. The same accounting policies that were used for the year ended 31 January 2013 have been applied in these financial statements. 2. Income (Unaudited) (Unaudited) (Audited) Six months Six months Year ended ended ended 31 July 31 July 31 January 2013 2012 2013 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 Investment income 2,829 2,703 4,168 Total income 2,829 2,703 4,168 3. Investment Management fee, Management and Performance fees (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31 July 2013 31 July 2012 31 January 2013 Revenue Capital Total Revenue Capital Total Revenue Capital Total [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 [pounds sterling]'000 Investment 185 556 741 151 452 603 318 952 1,270 management fee - First State Management fee - 47 140 187 36 109 145 77 232 309 Frostrow Performance fee - 1,325 1,325 - 560 560 - 627 627 accrual* 232 2,021 2,253 187 1,121 1,308 395 1,811 2,206 *Details of the performance fee basis can be found in the Report of the Directors on page 14 of the Annual Report for the year ended 31 January 2013. 4. Return per ordinary share The total return per ordinary share price is based on the total return attributable to Shareholders of [pounds sterling]11,967,000 (six months ended 31 July 2012: [pounds sterling] 14,472,000; year ended 31 January 2013: return [pounds sterling]36,770,000) and on 116,848,386 shares (six months ended 31 July 2012: 116,848,386; year ended 31 January 2013: 116,848,386), being the weighted average number of shares in issue. The revenue return per ordinary share price is calculated by dividing the net revenue return attributable to Shareholders of [pounds sterling]2,109,000 (six months ended 31 July 2012: [pounds sterling]2,115,000; year ended 31 January 2013: [pounds sterling]2,973,000) by the weighted average number of shares in issue as above. The capital return per ordinary share price is calculated by dividing the net capital return attributable to Shareholders of [pounds sterling]9,858,000 (six months ended 31 July 2012: [pounds sterling]12,357,000; year ended 31 January 2013: return [pounds sterling]33,797,000) by the weighted average number of shares in issue as above. 5. Net asset value per ordinary share The net asset value per ordinary share is based on the net assets attributable to Shareholders of [pounds sterling]196,531,000 (31 July 2012: [pounds sterling]165,304,000; 31 January 2013: [pounds sterling] 187,602,000) and on 116,848,386 shares in issue (31 July 2012: 116,848,386; 31 January 2013: 116,848,386). Notes to the Accounts Continued 6. 2013 accounts These are not statutory accounts in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory accounts for the year to 31 January 2013, which received an unqualified audit report, have been lodged with the Registrar of Companies. No statutory accounts in respect of any period after 31 January 2013 have been reported on by the Company's auditors or delivered to the Registrar of Companies. Interim Management Report Principal Risks and Uncertainties The Company's assets consist of listed securities and its main risks are therefore market related. The Company is also exposed to currency risk in respect of the markets in which it invests. Other risks faced by the Company include external, investment and strategic, regulatory, operational, and financial risks. These risks, and the way in which they are managed, are described in more detail under the heading Principal Risks and Risk Management within the Business Review in the Company's Annual Report for the year ended 31 January 2013. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remaining six months of the Company's financial year. Related Party Transactions During the first six months of the current financial year no material transactions with related parties have taken place which have affected the financial position or the performance of the Company during the period. Going Concern The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, and the nature of the portfolio and its expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts. Directors' Responsibilities The Board of Directors confirms that, to the best of its knowledge: i. the condensed set of financial statements contained within the Half Year Report has been prepared in accordance with applicable accounting standards; and ii. the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority and Transparency Rules. The Half Year Report has not been reviewed or audited by the Company's auditors. The Half Year Report was approved by the Board on 27 September 2013 and the above responsibility statement was signed on its behalf by: David Nichol Chairman Frostrow Capital LLP Company Secretary 27 September 2013 0203 008 4913 www.frostrow.com A copy of the Half Year Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/ nsm.do The Half Year Report will also shortly be available on the Company's website at www.pacific-assets.co.uk where up to date information on the Company, including daily NAV, share prices and fact sheets, can also be found.