Last checked at 
28 Nov 2008 15:08
Pacific Assets Trust plc
Interim Management Statement
For the Three Month Period from 1 August 2008 to 31 October 2008
Investment Objective
Pacific Assets Trust plc aims to achieve long term capital growth through investment in selected companies in the Asia Pacific region and the Indian sub-continent, but excluding Japan and Australasia.
Performance Summary
| Capital Return | As at 31 October 2008 | As at 31 July 2008 | Movement |
| Net asset value (000s) | £79,452 | £130,597 | -39.2% |
| Net asset value per share | 67.13p | 110.35p | -39.2% |
| MSCI All Country Far East ex Japan Index | 162.57 | 226.14 | -28.1% |
| Share price (mid market) | 57.50p | 99.25p | -42.1% |
| Discount | 14.3% | 10.1% | |
| Gearing‡ | 3.7% | 7.4% | |
| Total Return# | For the three month period to 31 October 2008 | ||
| Net asset value | -39.2% | ||
| MSCI All Country Far East ex Japan Index | -27.5% | ||
| Share price | -42.1% | ||
Sources: F&C Investment Business Limited, Datastream.
‡ - Gearing: equity investments/shareholders' funds
# - All total returns are based on net dividends re-invested
Review for the Period
The Company's net asset value total return for the three month period ended 31 October 2008 was -39.2%, ranking it last within its peer group of eight companies. For comparison purposes, the total return from the MSCI All Country Far East ex Japan Index was -27.5%.
Performance was disappointing over the period as positive asset allocation was undone by stock selection. In particular, smaller companies China Water Affairs, China Shineway and China Medical Technology fell heavily during the quarter. Furthermore, being underweight index heavyweights Samsung Electronics and TSMC hurt relative performance over the period.
As the extent of the cyclical slowdown in the Chinese and South East Asian economies became apparent, a more defensive approach was taken within the portfolio, with a reduction in gearing and exposure to smaller companies. However, the benefits of this strategy have yet to be felt. The number of holdings within the Company was also reduced which, although raising the possibility of short term volatility, reflects the increased conviction in the core portfolio. It is hoped that following the adjustment to focus on defensive growth companies with strong balance sheets, recurring cash flow and defendable market share, recent relative underperformance versus the peer group will reverse.
Facing the prospect of an imminent G7 led global recession, dysfunctional credit markets, and increasing redemption pressures, international equity markets went from being weak in August and September to complete free fall in October. Bank recapitalisations, liquidity injections and coordinated monetary easing offered some hope of stabilisation, but proved insufficient to inspire a sustainable rebound as confidence and trust in the financial system suffered immeasurable damage.
The two best performing markets were the Philippines and Malaysia. Underperformance in the previous quarter, being less liquid and therefore off the radar screen, as well as relative under ownership, were the principal reasons for this. For similar reasons, if and when markets stabilise, they are expected to lag.
India underperformed over the quarter as a result of investor nervousness about its external balance as capital inflows reversed. With lower commodity prices, falling inflation and easier monetary policy, India should enjoy relative outperformance. However, this could be undermined by rising political instability.
The worst performing market over the period was Indonesia. The collapse of international commodity prices led to fears over the stability of the Rupiah. Limited short term offshore debt, relatively high foreign exchange reserves of $50bn, and the prospect of declining inflation did little to assuage the market. Interest rates were raised, bond yields widened to over 13% and the country risk premium exceeded that of Vietnam partly as a result of being a more liquid market.
Top Ten Holdings
| Company | Country | 31/10/08 Percentage of total assets |
| China Mobile | China | 4.7 |
| Hang Lung Properties | Hong Kong | 4.3 |
| KT&G | South Korea | 4.0 |
| Kasikornbank | Thailand | 3.6 |
| NHN Corporation | South Korea | 3.5 |
| Hon Hai Precision | Taiwan | 3.1 |
| China Medical Technology | China | 3.1 |
| Shin Zu Shing | Taiwan | 3.1 |
| Bharti Airtel | India | 3.0 |
| CNOOC | Hong Kong | 3.0 |
| Total | 35.4 |
Geographical Analysis
| Country | 31/10/08 Percentage of total assets | 31/7/08 Percentage of total assets | |
| South Korea | 18.4 | 16.3 | |
| Hong Kong | 17.8 | 19.4 | |
| China | 17.7 | 16.6 | |
| Taiwan | 15.4 | 14.9 | |
| India | 5.1 | 4.8 | |
| Thailand | 5.0 | 4.9 | |
| Indonesia | 4.5 | 6.5 | |
| Malaysia | 4.4 | 8.0 | |
| Singapore | 3.6 | 6.7 | |
| Philippines | 1.5 | 1.6 | |
| Liquidity | 6.6 | 0.3 | |
| Total | 100.0 | 100.0 |
The Board is not aware of any significant events or transactions which have occurred since 31 October 2008 and the date of publication of this statement which would have a material impact on the financial position of the Company.
Daily and Key Information
Further information regarding the Company, including daily net asset values published since the end of the period and monthly factsheets, can be found at the Company's website www.pacific-assets.co.uk, or at www.fandc.co.uk.
For further information please contact:
Peter Dalgliesh/Gordon Hay Smith
F&C Investment Business Limited
Tel: 0207 628 8000