Pacific Assets Trust plc - Conclusion of Strategic Review
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LEI: 2138008U8QPGAESFYA48
Conclusion of Strategic Review
Combination with Schroder Asian Total Return Investment Company plc
Introduction
On
Pursuant to the Strategic Review, the Board received and considered a range of possible options. These included continuing to engage FSSA Investment Managers (an autonomous investment group within FSG) ("
FSSA
") as its portfolio manager, appointing a new external, third-party manager, and entering into a combination with another investment company. The Board was pleased that the Company received interest from a large number of high-quality management groups, including FSSA. All proposals received pursuant to the Strategic Review were evaluated in detail by the Board with the assistance of its financial adviser,
The Board is pleased to announce that it has agreed heads of terms with the board of directors of Schroder Asian Total Return Investment Company plc ("
Schroder Asian Total Return
") in respect of a proposed combination of the two companies (the "
Combination
"). The Combination, if approved by the shareholders of both companies, will be implemented pursuant to a scheme of reconstruction and members' voluntary winding up of
Pursuant to the Scheme, the Company's shareholders will be entitled to receive new shares in Schroder Asian Total Return (the " Rollover Option ") and/or to participate in a cash exit, which option will be limited, on an aggregate basis, to 25% of the Company's issued share capital (excluding treasury shares) and will be offered at a 2% discount (the " Cash Option ").
The Scheme will create a combined entity with significant scale, which is expected to deliver costs efficiencies for both
The Board wishes to acknowledge both the professionalism of FSSA and its diligence in managing the Company's portfolio throughout the duration of the Strategic Review and during a period of considerable operational and market complexity.
Benefits of the Combination
The boards of
-- Asia Pacific strategy expertise : Exposure to Schroder Asian Total
Return's award-winning investment strategy managed by Robin Parbrook and
King Fuei Lee supported by Schroders' deep resources on the ground in
Asia , including 15 portfolio managers and 49 dedicated analysts
operating across six offices with total assets under management of
approximately £43 billion. Robin and King Fuei have managed Schroder
Asian Total Return since Schroders took over the mandate in 2013 and the
underlying Asian Total Return strategy (total AUM of approximately £6.1
billion as at 31 May 2026 ) since 2007.
-- Long-term performance track record : To 31 May 2026 , Schroder Asian
Total Return has delivered annualised net asset value (" Net Asset
Value " or " NAV ") total returns of 57.2%, 22.1%, 10.9% and 15.0%
over the last 1, 3, 5, and 10 years, respectively. This compares to the
annualised returns of the MSCI AC Asia Pacific ex Japan Index (Net, GBP)
of 51.0%, 21.0%, 8.7% and 11.8% over the same time periods.
-- Robust discount control : The Board of Schroder Asian Total Return
aims to achieve a discount of no wider than 5% in normal market
conditions. To 9 June 2026 , the 3-month average discount to NAV at which
Schroder Asian Total Return's shares have traded was 3.49%. This
compares to a 3-month average discount to NAV of 9.59% for Pacific
Assets' shares over the same period. Accordingly, for Pacific Assets
shareholders who are deemed to elect for the Rollover Option, the
Combination should deliver an immediate uplift in the market value of
their shareholding (whilst Schroder Asian Total Return shareholders will
continue to benefit from Schroder Asian Total Return's robust and
long-established discount control). In addition, Schroder Asian Total
Return offers a continuation vote at three yearly intervals, with the
next vote due to be proposed at its AGM in 2028.
-- Conditional Tender Offer : Conditional on the Combination
completing, Schroder Asian Total Return will put forward a 15%
performance-related tender offer to its shareholders if, over the 5-year
period from 31 December 2025 to 31 December 2030 , Schroder Asian Total
Return's NAV total return does not exceed the total return of the MSCI
AC Asia Pacific ex Japan Index (Schroder Asian Total Return's reference
index).
-- Increased scale, relevance and liquidity : The enlarged Schroder Asian
Total Return is expected to have a pro forma NAV of approximately £1.1
billion, based on the two companies' respective NAVs as at 9 June 2026 ,
and assuming the Cash Option is subscribed in full. With greater scale,
it is anticipated that Schroder Asian Total Return will be attractive to
a wider range of investors, who may have been constrained by ownership
restrictions, and that the secondary market for its shares will be more
liquid.
-- Revised management fee structure : Subject to and with effect from the
completion of the Combination, Schroders, the manager of Schroder Asian
Total Return, has agreed to amend its base management fee with respect
to the enlarged Schroder Asian Total Return such that: (i) a new annual
management fee tier of 0.50% (applicable in excess of £500 million) will
be introduced; and (ii) the basis on which the management fee is
calculated will be changed to the lower of market capitalisation and
NAV. In addition, the cap on total fees (including the performance fee)
payable by Schroder Asian Total Return to Schroders will be reduced from
its current level of 1.25% of Schroder Asian Total Return's closing NAV
per annum to 1.15% of closing NAV per annum. Schroders has also agreed
to make an adjustment to the performance fee payable to it in the
financial year in which the Combination completes so as to ensure that
Pacific Assets shareholders who are deemed to elect for the Rollover
Option do not pay the performance fee in respect of performance they
have not received the benefit of.
-- Lower ongoing charges: Following the Combination, based on the two
companies' respective NAVs as at 9 June 2026 , and assuming full take-up
of the Cash Option, it is estimated that the Ongoing Charges Ratio of
Schroder Asian Total Return would drop to 0.65% (excluding performance
fees; on an ongoing basis), compared to 0.80% in the financial year to
31 December 2025 and 1.10% for Pacific Assets in the financial year to
31 January 2026 .
-- Marketing and promotional resources : Schroders is a leading provider
of investment trusts in the UK and currently manages fifteen trusts with
total assets under management of approximately £11.5 billion as of 29
May 2026 . Schroders promotes Schroder Asian Total Return across the UK
to key investor channels including institutional, wealth and retail.
Their sales team, with 30 professionals, provides direct access for
professional investors to the Schroder Asian Total Return investment
team. Schroder Asian Total Return has access to extensive marketing
resource: two experienced investment trust marketers are supported by
50+ marketing professionals across a wide range of disciplines. PR is
managed by Schroders' in-house team of three dedicated PR specialists,
with additional support from the wider Schroders PR team and external
agencies.
-- Tax-efficient rollover or cash exit opportunity for Pacific Assets
shareholders : As part of the Scheme, shareholders in Pacific Assets
will be entitled to elect for cash at a 2% discount, subject to a total
limit on the number of Pacific Assets shares that may be elected for the
Cash Option of 25% of the Pacific Assets shares in issue (excluding
treasury shares) and are expected to be able to roll over their shares
on a tax efficient basis into Schroder Asian Total Return on a Formula
Asset Value (" FAV ")-for-FAV basis.
-- Schroders cost contribution : Schroders has agreed to make a material
contribution to the costs of the Combination (further details below).
This is expected to offset the direct transaction costs of the Scheme
for existing investors in Schroder Asian Total Return. Shareholders in
Pacific Assets who are deemed to elect for the Rollover Option will also
benefit from this contribution, which, in conjunction with the aggregate
Cash Option discount described below, is expected to offset the Pacific
Assets direct transaction costs of the Scheme and help to defray
portfolio realignment costs for Pacific Assets shareholders who are
deemed to elect for the Rollover Option.
The Investment Strategy
The Schroders Asian equities philosophy is an active fundamental approach with a focus on companies that grow shareholder value in the long term. Schroders believes that equity markets are not efficient in
In focusing on fundamentals, investments must first be of high quality, which is defined by both the quality of earnings as well the quality of management. Secondly, the investments must exhibit structurally superior return profiles, which are defined as those companies that can earn a higher return on investment capital than their weighted average cost of capital.
Furthermore, given Asian equities are a volatile asset class, Schroder Asian Total Return's strategy provides a top-down overlay in addition to its bottom-up fundamentals driven stock selection process, through the disciplined use of quantitative models to identify and hedge potential downside risk in markets. Derivatives are used to manage these potential downside risks and volatility inherent in equity market investing, whilst maintaining exposure to the portfolio's capital growth potential.
Schroder Asian Total Return Historic Returns vs Reference Index to
____________________________________________________________________________ | | NAV Total Return | |_____________________________________|______________________________________| | | 1Y | 3Y (p.a.)| 5Y (p.a.)| 10Y (p.a.)| |_____________________________________|____|__________|__________|___________| | Schroder Asian Total Return |57.2|22.1 |10.9 |15.0 | |_____________________________________|____|__________|__________|___________| | MSCI AC Asia Pac ex Japan (Net, GBP)|51.0|21.0 |8.7 |11.8 | |_____________________________________|____|__________|__________|___________|
The Investment Manager
As at
Schroder Asian Total Return's investment portfolio is co-managed by Robin Parbrook and King
Robin Parbrook
Robin is Co-head of Asia Equity Alternative Investments and has 35 years' experience, all of which have been spent at Schroders. Robin started his career at Schroders in 1990 as a graduate trainee before moving to
King
King Fuei is Co-head of Asia Equity Alternative Investments and has 26 years' experience, all of which have been spent at Schroders. King Fuei started his career at Schroders in 1999 and is currently responsible for managing Schroders' Asian Total Return strategies and Schroders' Asian Yield mandates. King Fuei is based in
In this announcement, "
Schroders
" means
Summary of the Scheme
The Combination will be effected by way of a scheme of reconstruction of
Pursuant to the Scheme,
(i)
the interests of
(ii)
the interests of
(iii)
a provision sufficient to meet any contingent or unknown liabilities of
Subject to, and conditional on, the Scheme becoming unconditional and the Combination completing successfully, qualifying
(i) New ATR Shares under the Rollover Option; and/or
(ii) the Cash Option.
Should total elections, including deemed elections, for the Cash Option exceed 25% of
New ATR Shares will be issued as the default option under the Scheme in the event that
In the event that the Combination is aborted, each party will bear its own costs.
In accordance with customary practice for such schemes of reconstruction pursuant to section 110 of the Insolvency Act 1986 involving investment companies, the City Code on Takeovers and Mergers is not expected to apply to the proposed Combination via the Scheme. The Scheme will be subject to,
inter alia
, the approval of both
The Cash Option will be offered at a discount of 2% to the Pacific Assets Residual FAV (the "
Cash
Option
Discount
") less the costs of realising the assets allocated to the cash pool. The "
Pacific Assets Residual FAV
" will be the (cum income) NAV of
The New ATR Shares will be issued on the basis of the ratio between the Schroder Asian Total Return FAV per share and the Pacific Assets Rollover FAV per share. The "
Pacific Assets Rollover FAV
" for these purposes will be the Pacific Assets Residual FAV divided by
The Pacific Assets Residual FAV and Schroder Asian Total Return FAV will be calculated for the purposes of the Scheme in accordance with the respective normal accounting policies of the relevant company, taking into account the adjustments outlined above.
More information will be provided in the Scheme document to be published by
New Management Fee Structure
As part of the Combination, and conditional upon the Scheme being implemented, Schroders and the board of Schroder Asian Total Return have agreed to introduce a new base management fee structure for Schroder Asian Total Return, pursuant to which Schroders will be paid an annual fee for its management services, calculated as follows:
- 0.65% per annum up to and including the first £500 million of the lower of Schroder Asian Total Return's market capitalisation and Net Asset Value; and
- 0.50% per annum of the lower of Schroder Asian Total Return's market capitalisation and Net Asset Value in excess of £500 million.
This compares to the existing annual management fee structure for Schroder Asian Total Return of 0.65% per annum on Schroder Asian Total Return's gross assets, less cash and cash equivalents.
Schroders is also entitled to a performance fee from Schroder Asian Total Return equal to 10% of any outperformance of the Schroder Asian Total Return NAV over an annual hurdle of 7%, provided that the NAV per Schroder Asian Total Return share (i) exceeds the "high water mark" NAV at the date the last performance fee was paid; and (ii) is equal to or greater than the total return of the MSCI AC Asia Pacific ex Japan Index.
As part of the Combination, and conditional upon the Scheme being implemented, Schroders has agreed to make an adjustment to the performance fee payable to it in the financial year in which the Combination completes so as to ensure that
The sum of the management fee and any performance fee payable by Schroder Asian Total Return to Schroders in any financial year is currently capped at 1.25% per annum of closing NAV. In connection with the Combination, and conditional upon the Scheme being implemented, Schroders has agreed that the cap on total fees (including the performance fee) payable to Schroders by the enlarged Schroder Asian Total Return will be reduced from 1.25% to 1.15% per annum of closing NAV.
Schroders Costs Contribution
Schroders has agreed to make a contribution to the costs of the Combination calculated based on the new base management fee at the incremental rate that would otherwise be payable to it based on the cash, assets and undertaking that are transferred to Schroder Asian Total Return under the Combination in respect of the period of 15 months following the effective date of the Scheme up to the greater of (i) £2,750,000; and (ii) the notional value of the fee waiver had the 25% Cash Option been fully subscribed (the "
Schroders Costs Contribution
"). Based on the NAV of
The benefit of the Schroders Costs Contribution will be first applied, up to an amount equal to 50% of the total amount of such contribution, to meet Schroder Asian Total Return's direct transaction costs incurred in connection with the Scheme, with the balance (being an amount equal to at least 50% of the total amount of such contribution), being applied in conjunction with the Cash Discount Benefit, to meet
The Schroders Costs Contribution is expected to ensure that the direct transaction costs for existing shareholders in Schroder Asian Total Return in relation to the Combination are offset in their entirety and, in conjunction with the Cash Option Discount, is expected to offset the
Enlarged Schroder Asian Total Return Board of Directors
Following completion of the Combination, two directors of
Expected timetable
Documentation in connection with the Scheme will be posted to the shareholders of both companies as soon as practicable, with a view to convening general meetings of
"After a thorough review of a large number of high quality proposals as part of the Strategic Review, we are delighted to be able to announce the combination with Schroder Asian Total Return.
Schroder Asian Total Return has an impressive record of attractive total returns from a differentiated investment strategy and a track record of strong discount management. We have every confidence that the enlarged company will be a leading Asian equities investment company for existing and future investors."
"'We are delighted to announce a combination with
Unless otherwise noted, all data and performance figures in this announcement are sourced from Morningstar.
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For further information, please contact:
Company Secretary
Tel: +44 20 3709 8734
Financial Adviser
Tel: +44 20 7597 4000
PR
Tel: +44 7934 578932
Important Information
This announcement contains information that is inside information for the purposes of Article 7 of the
The person responsible for arranging for the release of this announcement on behalf of
This announcement does not constitute an offer or solicitation to acquire or sell any securities in the Company. This announcement is not for distribution, directly or indirectly, in or into
The final terms of the Scheme will be detailed in documentation to be published in due course, and those final terms may be different to those described in this announcement. The Scheme will be subject to certain conditions, which if not satisfied or waived, will mean that the Scheme will not proceed.
The information in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. The material contained in this announcement is given as at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment. In particular, any proposals referred to herein are subject to revision and amendment.
The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. Figures refer to past performance and past performance should not be considered a reliable indicator of future results. Returns may increase or decrease as a result of currency fluctuations.
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