Annual Financial Report

RNS Number : 3242R

Witan Pacific Investment Trust PLC

29 April 2009

 



WITAN PACIFIC INVESTMENT TRUST PLC

Our Investment Objective is to provide shareholders with a balanced portfolio of investments in the Asia Pacific region with the aim of outperforming the MSCI AC Asia Pacific Free Index (£)

Chairman's statement 

Market Background 

The last year has seen almost unprecedented turmoil in global financial markets and contrary to many commentators' expectations the Far East was affected almost as soon as Western economies began to falter. Despite continued growth in the large economies of India and China, and fewer credit related problems across the region, markets in the Pacific region have generally fallen substantially in line with markets in other areas of the world. 

Indeed, in local currency terms Asia Pacific markets fell as much as those in Western economies. In local terms the MSCI AC Asia Pacific Free Index fell by 40.5%. When adjusted for Sterling, however, which was weak relative to most Asian currencies and especially the Yen, the returns are improved significantly to a more modest fall of 17.9%. 

Performance 

When in 2005 we appointed our two investment managers, Aberdeen and Nomura, the objective was that their different investment styles would complement each other. This has generally been proved to be the case leading to consistent performance. Over the last three years the Company's Net Asset Value (NAV) total return has outperformed the benchmark by 1.4%. 

However this year, for the first time since the new multi-manager arrangements were put in place, the Company has underperformed its benchmark in terms of NAV total return by 1.8% with a -19.7% return, compared with the index fall of -17.9% in the Sterling-denominated index (we use a Sterling index to reflect the currency of the majority of our investors). This fall, whilst disappointing, is substantially less than the fall in the FTSE All-Share Index of 27.8%, largely as a result of the currency effect and the strength of the Yen in particular. 

Total shareholder return for the year at -23.4% showed a larger fall than the net asset value as a result of the widening of the discount since January 2008. The discount of many investment trusts has widened significantly in the year and those investing in Asia have been no exception. 

Your Board keeps the performance of the investment managers under constant review and discusses their investment philosophy and strategy on a regular basis. Since appointment, both investment managers have adhered to their stated objectives, philosophy and investment approaches. During the last year the markets have favoured Aberdeen's approach rather than that followed by Nomura. 

Nomura produced a disappointing performance. Whilst their country selection was positive it was outweighed by poor stock selection. Nomura focuses on stocks that they consider to be undervalued relative to the market and buys them in the expectation that their merits will be recognised by the market in the medium term. 

Over the period in question markets behaved in a very volatile manner and the Nomura valuation model did not work to the advantage of our portfolio. Nomura has adjusted the portfolio in the year to recognise the change in economic circumstances, shifting to stocks they believe will maintain their value and will be well positioned for any upturn. However the result over the year was an underperformance of -1.6% against the Index. 

By contrast, Aberdeen outperformed by 2.4% which was due to both country and stock selection. This was despite being underweight Japan, which was the best performing market in the region when measured in Sterling terms. They held 30% of their portfolio in Japan, compared with Nomura's holding of 54%. This compares with Japan's position in the index at around 54%. Aberdeen continued to focus on companies with strong balance sheets and market positions that they believe will weather the current financial storms. This approach has stood them in good stead over the year in the very difficult market conditions. 

The Board has regular discussions with the Managers during the year. In addition the Board this year will be visiting the Managers' offices in Singapore and Tokyo to gain an on-site understanding of their investment and control processes. 

Dividend 

We continue our policy of distributing as much income as may be prudent. This year we received a substantial sum repaid by HM Revenue & Customs in respect of VAT previously borne and related interest. This followed the European Court of Justice ruling that investment trust management fees had been incorrectly subjected to VAT. Your Board has decided that this receipt should be addressed through the payment of a special dividend of 1.00p per share. A final dividend of 1.85p is also declared and represents an increase of 12.1% on last year's dividend. A further key factor leading to increased income this year was the weakness of Sterling - other factors being dividend rate increases and changes to the composition of the portfolio.

Both the final and the special dividends will be paid on 26 June 2009 to shareholders on the register at the close of business on 29 May 2009. 

Looking ahead, the future level of income from the portfolio is uncertain in the current environment. However, we have substantial revenue reserves which could be used to underpin our distribution policy if the Board considered it justified. 

Share Buy Backs 

Your Board believes that it is in shareholders' interests to buy back the Company's shares when they are standing at a substantial discount to their NAV. During the year the Company bought back 1,186,983 shares which had the effect of enhancing the NAV by approximately 0.24%. It is intended to seek renewal of the buy back authority at the forthcoming Annual General Meeting ('AGM'). In addition, the Board proposes to seek the renewal of authority to take shares into treasury for re-sale in the market at a later date. 

This power will be used to issue shares only at NAV or a premium to NAV. Inevitably in such volatile markets the discount has moved erratically. We keep our policy under review and will judiciously exercise our discretion regarding buy backs. 

Asia Pacific 

The merit of holding a diversified portfolio including exposure to the Asia Pacific region has been demonstrated over the past year. We continue to believe that the Company's investment mandate which includes Japan is particularly appropriate for an individual investor who does not want to make the asset allocation decision between Japan and the rest of Asia. 

Witan Wealthbuilder provides a cost effective facility for regular savers to invest either through a regular share savings scheme or through an ISA. It now has 3,166 Witan Pacific investors on its platform representing 16.8% of the shares of the Trust and received net inflows of £117,071 in 2008. Details of investing through Witan Wealthbuilder are available at www.witanwealthbuilder.com. 

Outlook 

The economic background in the Asia Pacific region is generally better placed for recovery relative to Western economies. There is less personal and banking debt and there are fewer credit related problems, as well as a greater propensity for individuals to save, making for an overall less fragile financial environment. 

However, it is quite clear that the theory that Asia Pacific economies in particular, and emerging markets in general, had decoupled from the Western economies and would not be affected by what was happening in those economies has been proved wrong. Currently stock markets in the Asia Pacific region are likely to continue to suffer as those economies which have typically grown faster than others, such as India and China, grow at a more sedate pace. A return to stability in Western economies is needed before there will be the potential for a return to higher growth rates in the region, and a market pick-up. 

Gillian Nott 

Chairman 

28 April 2009 

Business review
This Business Review provides shareholders and other readers with information about the Company's business and results for the year ended 31 January 2009 and comments on the main trends and factors likely to affect the future development of the business. It is divided into two sections: Corporate Review and Investment Review. 

Corporate Review

Objectives and Strategy 

The Company's investment objective is to provide shareholders with a balanced portfolio of investments in the Asia Pacific region designed to outperform the MSCI AC Asia Pacific Free Index ('MSCI Index') in Sterling terms. From an investment perspective this means that your Company will seek to provide steady above average performance compared with the relevant MSCI Index in Sterling terms predominantly aiming to achieve this through growth in capital. 

Your Company aims to outperform by using an active multi-manager approach. Currently the Board has appointed two investment managers but their performance is subject to regular review and the Board has the ability, should it wish, to change the managers and to increase/decrease the number of managers used. The Company has a policy of deploying gearing in a tactical sense, giving its Investment Managers discretion to hold up to 10% of their portfolio in cash or borrow up to 10%. Your Company will distribute as much income as may be prudent on an annual basis to shareholders. 

The Board employs share buy backs to manage the discount appropriately expecting that the level will be comparable to most of its peers. Share buy backs provide liquidity and enhance the NAV per share of the Company. In addition, your Company sponsors an ongoing marketing programme provided by Witan Investment Services Limited. This programme reaches out to both the private and professional investor using a blend of targeted marketing programmes. 

Your Board aims to provide the best possible return to shareholders. The unbundling of the investment management services and other necessary services has provided greater transparency of the Company's cost base. Your Board applies strict controls on costs and expenses. For the last financial year the total expense ratio (TER) including performance fees has risen to 1.1% largely as a result of a fall in asset values. Excluding performance fees the TER is 0.8%. 

Management Arrangements 

The management of the Company's assets is entirely outsourced to third parties. Witan Investment Services Limited acts as Executive Manager to manage and control the outsourced structure and relationships and to assist the Board on investment strategy and marketing. 

In summary, the Board sets the Company's strategy and the Executive Manager monitors and implements this same strategy. 

The following table shows the investment management arrangements: 

Equity Mandate	Investment Manager	Mandate Benchmark (£)	% of Initial Portfolio as at 31 May 2005	Actual % as at  31 January 2009
Asia Pacific	Aberdeen	MSCI AC Asia Pacific Free Index	50%	50.63%
Asia Pacific	Nomura	MSCI AC Asia Pacific Free Index	50%	49.37%

Your Company has also appointed third parties for the various supporting services it requires. The principal ones are JPMorgan Chase for global custody, BNP Paribas Securities Services for investment accounting and administration and Phoenix Administration Services Limited for company secretarial services. From time to time, as required, the Company also buys in services for legal, investment consulting, financial and tax advice. 

As a result of the outsourced structure the Company has no employees. Accordingly it has no direct impact on social matters and invests in a region which has varying degrees of political and corporate governance standards. As such it is impractical for investment trusts in general to adopt a policy on environmental, social and community issues and it is considered that the best performing investments are likely to be in those entities which have regard for the impact of these issues on their businesses. 

Dividend Policy 

As the Chairman has addressed in her statement, the Company will continue the policy of distributing as much income as may be prudent. The future level of income from the portfolio is somewhat uncertain in the current environment. However the Company has substantial revenue reserves which can be used to underpin the distribution policy particularly in these difficult market circumstances. 

Buy-back Policy 

Your Board believes that it is in shareholders' interests to buy back the Company's shares when they are standing at a substantial discount to NAV. The purchase of shares priced at a discount to the Company's net asset value (NAV) per share will, all other things being equal, increase the Company's NAV per share and support the Company's share price. Furthermore, the Board has an active marketing programme designed to promote and create demand for Witan Pacific shares. 

In the year ended 31 January 2009 the Company bought back and cancelled a total of 1,186,983 Ordinary shares of 25p at a cost of £1,851,193 including stamp duty. The result of this in terms of performance enhancement was to add 0.24% to the NAV per share as at 31 January 2009. 

At the end of the financial year there were 3,166 private investor shareholders holding 11,133,468 shares (2008: 3,331 holding 11,104,897 shares). 

Borrowings & Gearing 

The Company has the power under its Articles of Association to borrow up to 100% of the adjusted total of capital and reserves. Essentially this allows the Board to seek to improve performance through gearing by borrowing amounts equivalent in value to shareholders' funds. In practice the Board would not, other than in exceptional circumstances, borrow more than 20%. Over the past five years gearing has varied between 0% and 5%. On occasions, the Company has held net cash positions. 

Key Performance Indicators 

Your Board assesses its performance in meeting the Company's objective against the following key performance indicators:

• Net asset value return

• Total shareholder return 

• Performance against the benchmark 

• Discount to net asset value 

• Dividend payout 

• The level of buy-back activity 

• Total expense ratio 

• Growth in number of private investors 

The Board also reviews both absolute and relative volatility and risk statistics for the portfolio. 

Principal Risks 

Because the Company is essentially a vehicle for overseas equity investment, your Board is unlikely, in normal conditions to be anything other than fully invested subject to the tactical positions of the Investment Managers. The prime risks, therefore, of investing in the Company, are a fall in equity prices and adverse movements in foreign currency exchange rates. There are also other risks relating to the selection of Investment Managers and more generic risks associated with any international or regional equity portfolio relating to strategy, country, industrial sector and stock selection. Your Board seeks to manage these risks through the regular monitoring and review of portfolio information including adherence to the investment mandates, the monitoring of the investment policies and stock selection activities of the Investment Managers and the appropriate application of gearing and liquidity criteria. While foreign currency exposures are reviewed on a regular basis, at present there are no currency hedging contracts in place. 

The adverse effects of a failure, however defined, by an individual Investment Manager are reduced by the multi-manager structure, the different styles of each of the two Investment Managers and by the Board's regular reviews of the Investment Managers' performance against the relevant Key Performance Indicators. In addition, your Company also faces the risk that its objective and strategy become inappropriate in a rapidly changing financial services and savings market. This is a matter which is reviewed regularly at meetings of your Board. These reviews focus on investment policy, the role of marketing and the Witan Wealthbuilder savings schemes and discount control policies, as well as wider industry trends. 

Finally, there are operational and regulatory risks, and the risk of errors and omissions. These are regularly reviewed by the Company's Audit Committee. Your Board also takes professional legal, accounting and tax advice in advance, concerning any proposed activity of your Company. 

Operationally, the multi-manager structure is robust as each of the Investment Managers, the custodian and the fund accountants keep their own records which are reconciled on a monthly basis. In addition, our Executive Manager, Witan Investment Services Limited monitors the activities of all third parties and reports any issues to the Board. Comprehensive contractual obligations and indemnification provisions have been put in place with each of the third party service providers. 

In order to qualify as an investment trust the Company must comply with section 842 of the Income and Corporation Taxes Act 1988 ('section 842'). A breach of section 842 could result in the Company losing investment trust status and, as a consequence, capital gains realised within the Company's portfolio would be subject to Corporation Tax. Compliance with the requirements of section 842 is continually monitored by the Fund Administrators. 

The Company must comply with the provisions of the Companies Act 1985, and those of the Companies Act 2006 as they are brought into effect ('the Companies Acts'), and, as the Company's shares are listed for trading on the London Stock Exchange, the Company must comply with the UK Listing Authority's Listing Rules and Disclosure and Transparency Rules ('UKLA Rules'). A breach of the Companies Acts could result in the Company and/or the directors being fined or becoming the subject of criminal proceedings. A breach of the UKLA Rules could result in the suspension of the Company's shares which would in turn lead to a breach of section 842. The Board relies on the Executive Manager, the Company Secretary and the Company's professional advisers to ensure compliance with the Companies Acts and UKLA Rules. 

The Audit Committee regularly reviews these risks by considering a Risk Map which assesses the likelihood of such risks occurring and the severity of the potential impact of such risks. This enables the Board to take action and develop strategies in order to mitigate the effect of such risks to the extent possible. 

VAT 

During the year the Company received sums totalling £557,000 in respect of VAT previously paid on management fees and other expenses and subsequently agreed to be repaid by HM Revenue & Customs (HMRC) following the European Court of Justice ruling that investment trust management fees had been incorrectly subjected to VAT. In addition HMRC paid interest of £379,000 on the VAT repaid. Tax on the VAT reclaimed and interest thereon amounted to £273,000 resulting in a net recovery of VAT and interest of £663,000. 

Priorities for 2009 

At its annual 'Strategy Away Day', the Board agreed that over the coming year it would: 

• conduct an in depth review of both investment managers by visiting their offices in Singapore and Tokyo; 

• update the Company's website to make it easier to use; 

• improve communication with all categories of shareholders. 

INVESTMENT REVIEW 

Investment Policy 

The Company's investment objective is to provide shareholders with a balanced portfolio of investments in the Asia Pacific region designed to outperform the MSCI AC Asia Pacific Free Index ('MSCI Index') in Sterling terms. The range of investment opportunities of the investment managers is not limited to the constituents of the benchmark. This means that Witan Pacific will aim to outperform Asian stock markets, consistently adding value in the long term for its investors. Witan Pacific invests primarily in equities: in normal circumstances the Board expects the minimum equity level will be 90% of net assets although in recent times it has in practice been over 95%. The Board actively investigates alternative assets and new investment techniques and will use them if, in the Board's view, they provide the potential to enhance shareholder returns. 

The Company has the power under its Articles of Association to borrow up to 100% of the adjusted total of capital and reserves but it is the Board's policy not to borrow more than 20% other than in exceptional circumstances. 

Investment risk is managed through: 

• the selection of two investment managers with each managing broadly half the portfolio of assets. 

• the managers are required to spread their investments over a number of countries and industrial sectors within the region. 

• monitoring of investment manager performance and portfolios. 

• monitoring of asset allocation, currency exposures and gearing levels. 

During the year the Company invested its assets with a view to spreading investment risk and, in accordance with investment objective set out above, maintained a diversified portfolio. The portfolio is actively managed by two Investment Managers, and this is monitored by the Executive Manager. The Directors receive regular reports on investment activity and portfolio construction, both at and outwith regular meetings of the Board. 

Executive Manager and Investment Managers 

Under an Agreement dated 22 March 2005, Witan Investment Services Limited ('the Executive Manager'), a wholly owned subsidiary of Witan Investment Trust plc, has been appointed as Executive Manager to the Company. The Executive Manager is responsible for implementing and monitoring the Board's strategy through the commercial management of the Company, including advising on, liaising with, and monitoring the Company's Investment Managers and other third party service providers, marketing the Company, and the administration and servicing of savings plans. The Agreement may be terminated by either party by giving the other party six months' written notice. 

The Company's assets are managed by Aberdeen Asset Managers Limited ('Aberdeen') a subsidiary of Aberdeen Asset Management PLC and Nomura Asset Management U.K. Limited ('Nomura'). 

The Aberdeen Group is an international investment management group, managing assets for both institutional and retail clients from offices around the world. The management of the portfolio is delegated to Aberdeen Asia Limited through its offices in London and Singapore. Total group funds under management and advice as at 31 January 2009 were approximately £100.4 billion, with £21.6 billion in Asia. 

The Nomura Asset Management Group is headquartered in Tokyo, with investment offices in London, Singapore, Hong Kong, Malaysia and New York. Total group funds under management as at 31 December 2008 were approximately £151 billion of which some £38 billion was invested in Asian equity. 

Each of the Investment Managers is entitled to a base management fee calculated according to the value of the assets under their management, and a performance fee. The performance fee is calculated according to investment performance over a three year rolling period and is subject to a cap. The base investment management fees range from 0.20% to 0.25% per annum and the performance fees range from 10% to 15% per annum of the relevant portfolio outperformance. Each Investment Management Agreement can be terminated at one month's notice in writing. Upon termination, the Company will pay the accrued fees to the date of termination and will reimburse each Investment Manager all of the outstanding expenses payable or incurred. 

Portfolio Review 

Over the past year the scale of the global financial crisis and economic downturn has resulted in substantial negative returns for all stock markets. A string of bank bailouts across the world following the September collapse in the US of Lehman Brothers has been caused by unprecedented write downs and concerns about bad debts. The consequent lack of credit and bank lending within the global economy has pushed many economies of the world into recession and investor confidence has been badly shaken. 

Asia Pacific markets are not immune to these events and against this background the MSCI AC Asia Pacific Free Index including Japan fell 40.5% in local currency terms whilst the MSCI AC Asia Pacific Free Index excluding Japan fell 38.8% in local currency terms. 

Across the region there were poor returns from stock markets in Indonesia, India, Hong Kong, Taiwan, Thailand, China, the Philippines and Japan with relatively better stock market returns from Korea, Australia, Singapore and Malaysia. 

Significant volatility in stock markets was accompanied by similar volatility in currencies. Overall Sterling based investors benefited from these movements as most currencies strengthened against Sterling to give Sterling returns of -17.9% and -29.8% for the MSCI AC Asia Pacific Free Index including Japan and MSCI AC Asia Pacific Free Index excluding Japan indices respectively. 

The investment portfolio is managed by two managers, Aberdeen and Nomura, on an approximate 50/50 basis. The managers have been selected for their distinct but complementary investment philosophies. Aberdeen is a pure stockpicker, investing in a relatively small number of stocks. This bottom up stock picking approach means that any country weightings are more a by-product of the stock selection process rather than based on a top down macro economic forecast. Nomura on the other hand takes country and sector allocation decisions before applying fundamental company research to select stocks. Nomura holds a larger number of stocks and controls the size of position relative to the index. 

During the year under review the combined investment portfolio returned -17.5% as measured by WM Performance Services. This compares with the benchmark's Asia Pacific index return of -17.9%, both figures are Sterling adjusted. 

Aberdeen's portfolio returned -15.5% in Sterling terms compared with the benchmark MSCI AC Asia Pacific Free Index's decline of -17.9%. As would be expected from their stock picking style, stock selection was positive and outweighed the negative impact of their resultant overweight positions in India, Singapore and Hong Kong which detracted from an asset allocation perspective. In stock selection, Aberdeen's holdings in Singapore, India and Taiwan contributed the most to relative performance, whereas those in Australia, Hong Kong and Korea detracted from performance. Significant portfolio activity during the year included the sales of Hong Kong-listed utility CLP and Australian contractor Leighton Holdings after a period of relatively strong performance, as well as Taiwan's Fubon Financial because of a deteriorating operating environment. Aberdeen also divested Chinese toll road operator Zhejiang Expressway, disappointed by management's lack of focus on its core business, and Korea's Kookmin Bank, accepting the lender's repurchase offer. Aberdeen also disposed of Malaysia's Maybank on concerns over a perceived lack of focus and pricing of a spate of overseas acquisitions. 

Aberdeen's outlook for the region: 

'We expect Asian equity markets to remain vulnerable to more negative newsflow in the coming months. Although inflationary pressures have eased, unemployment levels across the region remain a key concern. Notably, Japan faces its biggest economic crisis since World War II, with GDP contracting to a 35-year nadir. In order to revive consumer spending, confidence has to be restored first. While governments have responded decisively by pump-priming billions via stimulus measures, the benefits of these policies will take time to implement and longer to have a meaningful effect. 

Meanwhile, the US economy's increasingly dire outlook will continue to have a negative bearing on export-led countries in the region. In the longer term, however, Asia's potential domestic-led demand holds out much to be optimistic for, while sound economic fundamentals (low debt levels, low diffusion indicators) should also underpin future growth prospects. We also believe that, despite the current environment, our holdings will remain resilient. We expect the better-managed companies to prosper as weaker rivals struggle. Though valuations have reached attractive levels, we will continue to be cautious in assessing investment opportunities.' 

Nomura's portfolio returned -19.5% compared with the benchmark's Asia Pacific index return of -17.9% - both figures Sterling adjusted. Nomura's top down country allocation decisions contributed positively while the negative stock selection was the main cause of the underperformance. Nomura's macro economic view led them to overweight Asian Pacific markets at the expense of Japan. On balance this proved positive when currency effects were taken into account. Within Asian Pacific markets the overweighting of Australia was the biggest positive contributor. 

However this good work was undermined by stock selection results which were negative across the portfolio including in Japan, China, Hong Kong, Australia, India, Korea and Indonesia although positive stock selection effects were to be found in Taiwan and Singapore. Nomura suffered some disappointing stock specific declines including Citic Pacific, a China stock that experienced a sharp decline when the company disclosed significant losses due to unauthorised foreign exchange dealings and the Australian company Rio Tinto due to the unexpected withdrawal of BHP Billiton's offer for the company. 

Nomura's outlook for the region: 

'Our economics team is forecasting that Asian GDP will rise by 4.5% annually in the next two years. Better than the OECD economies, but still the slowest growth rate since 2001. As such, we will maintain a cautious approach with an emphasis on high quality, large cap stocks. We believe these companies are in a better position to weather the adverse environment. At our most recent strategy meeting, we made some minor changes to our asset allocation by increasing the overweight exposure to China in all portfolios. 

We believe the Chinese economy can still grow at between 6.5%-7.0% over the next two years, beating virtually every other economy.' 

As mentioned in the Chairman's Statement, the Company underperformed its benchmark in terms of NAV total return by 1.8% with a -19.7% return compared with the index fall of -17.9%. Total shareholder return for the year was -23.4% as a result of the widening of the discount since January 2008. Further comment on the Company's performance during the year under review and the position of the Company's business at the end of that year, together with the proposed dividend payment, is set out in the Chairman's Statement.

Investment Manager Review 

During the year ended 31 January 2009, as in previous years, the Board reviewed the Company's benchmark and the investment management structure to ensure that they were still appropriate for your Company's objective. 

The Board has appointed Witan Investment Services to monitor and review the performance of the investment managers, Aberdeen and Nomura. In addition, the Board met formally with the investment managers three times during the year under review and on a number of other occasions. At these meetings the investment managers were asked, among other things, to: 

explain their asset allocation within the region;

explain their choice of investments, which

enabled the Board to check that these were within the Company's mandate guidelines and in accordance with the Investment Manager's own investment philosophies;

provide a detailed analysis of their performance to date and the reasons behind it;

report on any significant changes to the organisation; and

re-affirm their investment strategy and philosophy.

The Board were satisfied with the responses given by the managers. Had they not been satisfied, a formal review would have been undertaken by the Board. As mentioned in the Chairman's Statement, the Board is planning to visit each Investment Manager in June this year in their offices in Singapore and Tokyo.

Outlook 

Whilst the region is clearly affected by the global economic slowdown and corporate results due in early 2009 will show declining earnings there is comfort to be taken from the fact that Asia Pacific economies can be said to contrast favourably with those of the West i.e. in terms of well capitalised banks, current account surpluses and consumers with a propensity to save. Given this background, confidence in the longer term outlook for economic and stockmarket growth, remains realistic. 

Income Statement

for the year ended 31 January 2009  

	Year ended 31 January 2009				Year ended 31 January 2008
	Revenue return £'000	Capital return £'000		Total £'000	Revenue return £'000	Capital return £'000	Total £'000
(Losses)/gains on investments held at fair value through profit or loss
	-	(26,220)	(26,220)		-	4,262	4,262
Exchange gains/(losses)	-	592		592	-	(71)	(71)
Investment income (note 2)	3,812	-		3,812	3,183	-	3,183
Management fees	(283)	-		(283)	(335)	-	(335)
Refund of prior years' VAT	557	-		557	-	-	-
Performance fees	-	(318)		(318)	-	(165)	(165)
Other expenses	(576)	(45)		(621)	(603)	(37)	(640)
Net return/(loss) before finance charges and taxation	3,510	(25,991)		(22,481)	2,245	3,989	6,234
Finance charges	(203)	-		(203)	(189)	-	(189)
Net return/(loss) on ordinary activities before taxation	3,307	(25,991)		(22,684)	2,056	3,989	6,045
Taxation on ordinary activities	(963)	90		(873)	(649)	49	(600)
Net return/(loss) on ordinary activities after taxation	2,344	(25,901)		(23,557)	1,407	4,038	5,445
Return/(loss) per ordinary share - pence (note 3)	3.50	(38.66)		(35.16)	2.00	5.74	7.74

All revenue and capital items in the above statement derive from continuing operations. 

The total columns of this statement represent the Income Statement of the Company. 

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. 

The Company had no recognised gains or losses other than those disclosed in the Income Statement and Reconciliation of Movements in Shareholders' Funds. 

Reconciliation of Movements

in Shareholders' Funds

for the year ended 31 January 2009

	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total £'000
Year ended 31 January 2009
At 31 January 2008	16,887	5	40,684	61,091	8,916	127,583
Net (loss)/return on ordinary activities after taxation	-	-	-	(25,901)	2,344	(23,557)
Dividends paid in respect of year ended  31 January 2008	-	-	-	-	(1,109)	(1,109)
Purchase of own shares	(297)	-	297	(1,851)	-	(1,851)
At 31 January 2009	16,590	5	40,981	33,339	10,151	101,066
Year ended 31 January 2008
At 31 January 2007	18,223	5	39,348	66,387	8,586	132,549
Net return on ordinary activities after taxation	-	-	-	4,038	1,407	5,445
Dividends paid in respect of year ended 31 January 2007	-	-	-	-	(1,077)	(1,077)
Purchase of own shares	(1,336)	-	1,336	(9,334)	-	(9,334)
At 31 January 2008	16,887	5	40,684	61,091	8,916	127,583

Balance Sheet
at 31 January 2009 

	2009 £'000	2008  £'000
Fixed assets
Investments held at fair value through profit or loss	99,470	128,721
Current assets
Debtors	708	1,434
Cash at bank and short term deposits	5,686	2,311
	6,394	3,745
Creditors: amounts falling due within one year
Bank loan	(3,000)	(3,000)
Other	(1,768)	(1,840)
	(4,768)	(4,840)
Net current assets/(liabilities)	1,626	(1,095)
Total assets less current liabilities	101,096	127,626
Provisions for liabilities and charges	(30)	(43)
Net assets	101,066	127,583
Capital and reserves
Called up share capital	16,590	16,887
Share premium account	5	5
Capital redemption reserve	40,981	40,684
Capital reserves	33,339	61,091
Revenue reserve	10,151	8,916
Equity shareholders' funds	101,066	127,583
Net asset value per ordinary share - pence (note 5)	152.30	188.88

Cash Flow Statement

for the year ended 31 January 2009 

	2009  £'000	2009 £'000	2008 £'000	2008 £'000
Net cash inflow from operating activities		3,495		1,913
Servicing of finance
Bank and loan interest paid	(207)		(159)
Net cash outflow from servicing of finance		(207)		(159)
Taxation
UK Corporation tax paid	(476)		(428)
Withholding tax deducted from dividends	(146)		(179)
Net tax paid		(622)		(607)
Capital expenditure and financial investment
Purchases of investments	(36,382)		(40,041)
Sales of investments	39,667		48,883
Capital expenses and performance fee payments	(208)		(94)
Net cash inflow from financial investment		3,077		8,748
Equity dividends paid		(1,109)		(1,077)
Net cash inflow before financing		4,634		8,818
Financing
Repurchase of own shares	(1,851)		(9,339)
Net cash outflow from financing		(1,851)		(9,339)
Increase/(decrease) in cash		2,783		(521)
Reconciliation of net cash flow to movements
in net funds/(debt)
Increase/(decrease) in cash as above		2,783		(521)
Exchange movements		592		(71)
Movement in net debt in the year		3,375		(592)
Net debt at 1 February		(689)		(97)
Net funds/(debt) at 31 January		2,686		(689)

Notes to the Accounts

for the year ended 31 January 2009 

1. Basis of accounting

The accounts have been prepared on a going concern basis and under the historical cost convention, modified to include revaluation of fixed asset investments at fair value and in accordance with the Companies Act 1985, accounting standards applicable in the United Kingdom and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' revised December 2005 (the revised SORP). 

2. Investment income

	2009 £'000	2008 £'000
Income from investments held at fair value through profit or loss:
Overseas dividends	3,244	2,975
UK dividends	60	40
Overseas scrip dividends	23	14
	3,327	3,029
Other income:
Bank interest	75	121
Interest relating to refund of prior years' VAT	379	-
Stock lending fees	29	33
Underwriting commissions	2	-
	485	154
Total income	3,812	3,183
Total income comprises:
Dividends	3,327	3,029
Other income	485	154
	3,812	3,183
Income from investments comprises:
Listed overseas	3,267	2,989
UK listed	60	40
	3,327	3,029

3. Return/(loss) per ordinary share 

The total return per ordinary share is based on the net loss attributable to the ordinary shares of £23,557,000 (2008: £5,445,000) and on 67,001,745 ordinary shares (2008: 70,319,982) being the weighted average number of shares in issue during the year. 

The total return can be further analysed as follows: 

	2009 £'000	2008 £'000
Revenue return	2,344	1,407
Capital (loss)/return	(25,901)	4,038
Total (loss)/return	(23,557)	5,445
Weighted average number of ordinary shares	67,001,745	70,319,982
Revenue return per ordinary share - pence	3.50	2.00
Capital (loss)/return per ordinary share - pence	(38.66)	5.74
Total (loss)/return per ordinary share - pence	(35.16)	7.74

The Company does not have any dilutive securities. 

4. Dividends

2009				2008
Dividends on ordinary shares	Record date	Payment date	£'000	£'000
Final dividend (1.50p) for the year ended 31 January 2007	11 May 2007	27 June 2007	-	1,077
Final dividend (1.65p) for the year ended 31 January 2008	30 May 2008	27 June 2008	1,109	-
			1,109	1,077

The proposed final dividend is subject to approval by shareholders at the AGM and has not been included as a liability in these financial statements. 

The total dividend payable in respect of the financial year which form the basis of Section 842 of the ICTA 1988 are set out below. 

	2009 £'000
Revenue available for distribution by way of dividend for the year	2,344
Proposed final of 2.85p (includes 1.00p special) for the year ended 31 January 2009 (based on 66,308,868 ordinary shares in issue at 28 April 2009)	(1,890)
Undistributed revenue for Section 842 ICTA purposes*	454

*Undistributed revenue comprises 13.6% of income from investments of £3,327,000 (see note 2).

5. Net asset value per ordinary share 

Net asset values are based on net assets of £101,066,000 (2008: £127,583,000) and on 66,358,868 (2008: 67,545,851) ordinary shares in issue at the year end. 

6. Statement of Directors' Responsibilities
in respect of the Annual Report, the Directors' Remuneration Report and the Financial Statements 

The Directors are responsible for preparing the Annual Report and the Accounts in accordance with applicable law and United Kingdom generally accepted Accounting Practice. 

Company law requires the Directors to prepare accounts for each financial year which 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 accounts, the Directors are required to: 

• select suitable accounting policies and then apply them consistently; 

• make judgements and estimates that are reasonable and prudent; 

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts; and 

• prepare the accounts on a going concern basis unless it is inappropriate to presume that the Company will continue in business. 

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the accounts comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 

The Directors confirm that the accounts comply with the aforementioned requirements. 

The Directors each confirm to the best of their knowledge that:

• the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and 

• the management report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces. 

The accounts are published on www.witanpacific.com, which is a website maintained by the Company's Executive Manager, Witan Investment Services Limited ('Witan'). The Directors are responsible for the maintenance and integrity of the Company's corporate and financial information included on the above website. The work carried out by the Auditors does not involve consideration of the maintenance and integrity of the website and accordingly, the Auditors accept no responsibility for any changes that have occurred to the Report and Accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of the accounts may differ from legislation in other jurisdictions. 

7. Financial Statements - Availability and Comparative information

The financial information contained in this announcement does not constitute statutory accounts for the year ended 31 January 2009 or 31 January 2008 as defined in the Companies Act 1985 but is derived from those accounts. The auditor's report on those accounts was unqualified and did not contain any statements under section 237 (2) or (3) of the Companies Act 1985. 

The statutory accounts for the year ended 31 January 2008 have been delivered to the Registrar of Companies and those for the year ended 31 January 2009 will be delivered following the Company's Annual General Meeting. Copies can be obtained from the Registered Office of the Company and will be posted to Shareholders shortly.

Phoenix Administration Services Limited

28 April 2009

 

END

 

 

FR SEWFMASUSELL