Final Results

RNS Number : 1566L

Witan Pacific Investment Trust PLC

23 April 2015

 



WITAN PACIFIC INVESTMENT TRUST PLC

(the "Company")

Annual Report and Accounts for the year ended 31 January 2015

Witan Pacific Investment Trust PLC announces that its 2015 Annual Report and Accounts has been published. The full report can be accessed via the Company's website at www.witanpacific.com and will be circulated to shareholders shortly.

In order to meet the disclosure requirements of DTR 6.3.5(2), this announcement includes certain extracts from the 2015 Annual Report and Accounts. Any references to page numbers or sections in the following text are references to pages and sections in that report.

STRATEGIC REPORT

Financial summary

Key data

	2015	2014	% change
Net Asset Value per share	279.45p	241.86p	+15.5%
Share Price	244.00p	213.50p	+14.3%
Discount	12.7%	11.7%
Gearing#	Nil**	3.2%

Total returns

	2015	2014
Net Asset Value per share†	17.6%	-6.5%
Share price†	16.6%	-5.2%
Benchmark*	17.1%	0.2%

Income

	2015	2014	% change
Revenue per share	3.98p	4.41p	-9.8%
Dividend per share	4.55p	4.45p	+2.2%

Ongoing charges

	2015	2014
Excluding performance fees	1.06%	1.00%
Including performance feesx	1.12%	0.85%

^#   Calculated as the difference between the market value of investments and net assets as a percentage of net assets.    (Equivalent to AIC definition of net gearing).

^†   Source: AIC Services Ltd. Total returns include dividends reinvested.

*   Source: Datastream. Dividends reinvested.

**  Since repayment of the loan on 28 March 2014, the Company has had no borrowings.

^x       Details of a write-back of performance fees during the year ended 31 January 2014, (which reduce the ongoing charges when including the performance fee) are included at note 3 to the financial statements.

Long-term performance analysis

Total returns since inception of multi-manager structure

	Cumulative return since inception of the multi-manager structure 31/05/2005	Annualised return since the inception of the multi-manager structure 31/05/2005
Net Asset Value per share†	138.1%	9.4%
Share price**	137.6%	9.4%
Benchmark*	122.4%	8.6%

Total returns over the past 5 years

	Cumulative 5 year return	31/01/14- 31/01/15	31/01/13- 31/01/14	31/01/12- 31/01/13	31/01/11- 31/01/12	31/01/10- 31/01/11
Net Asset Value per share†	52.1%	17.6%	-6.5%	14.7%	-4.1%	25.8%
Share price†	62.4%	16.6%	-5.2%	22.1%	-7.4%	30.0%
Benchmark*	47.1%	17.1%	0.2%	11.1%	-6.0%	20.0%

^†   Source: AIC Services Ltd. Total returns include dividends reinvested.

*   Source: Datastream. Dividends reinvested.

**  Source: Datastream.

Chairman's statement

HIGHLIGHTS

·      NAV total return of +17.6%

·      0.5% outperformance vs. the benchmark

·      Share price total return of 16.6%

·      Final dividend of 2.45p, making 4.55p for the year (+2.2%)

·      10 year NAV total return of 144.2%, compared with the benchmark's 126.7%

·      Net Assets £184 million (2014: £160 million)

Introduction

I am pleased to be writing to you as your new Chairman, having taken over from Gill Nott at her retirement in June last year. I would like to reiterate the Board's gratitude to Gill for her considerable contribution to Witan Pacific. I have been involved as a Non-Executive Director of the trust in its development over the last 11 years, and I am confident that it remains a robust investment vehicle providing access to a wide range of opportunities across the Asia Pacific region.

I am always pleased to hear from shareholders. I have met many at Annual General Meetings over the years, and last year when I became Chairman I wrote to our largest shareholders to introduce myself to them. If shareholders have questions or comments for me, please get in touch via our Company Secretary, whose contact details are at the end of this statement.

Market background

The Asian region performed better than the UK or European markets over the year ended 31 January 2015, surpassed only by the US amongst major developed markets. This was in contrast to our previous financial year, when Western markets performed better and the Asian markets were flat overall. In 2014-15 both Japan and the rest of Asia contributed, Japan with a total return of 12.1% in sterling terms and Asia excluding Japan 20.6%. This was a reversal of 2014, when Japan delivered significantly better returns than the rest of the region. Australia (where the Company's portfolio was underweight) was a laggard during 2014-15, given weakness in its currency and the further downturn in commodity prices. Regional markets have been willing to look beyond the immediate weakness in economic growth caused by the April 2014 rise in Japan's indirect taxes and a monetary squeeze in China. This more upbeat assessment was encouraged by monetary easing measures towards the year end in both countries. The region is also a beneficiary of falling oil and other commodity prices, with the three biggest economies (China, Japan and India) being major importers.

Performance

Our regional benchmark, the MSCI All Country Asia Pacific Free Index, delivered a strong total return in sterling terms of 17.1%. The Company's 17.6% net asset value (NAV) total return was 0.5% ahead of the benchmark. The share price total return was 16.6%, a slightly lower return than the NAV reflecting a 1% widening of the discount over the year. Changes in currencies had only a small impact on sterling returns over the period.

All three of our Managers, whilst having different investment strategies, have in common fundamentally driven approaches and avoid an index-led approach to portfolio construction. Country weightings primarily result from the bottom up stock selection, rather than broader economic views, enabling the Managers to benefit from the long-term growth of their selected companies. This bottom-up approach during 2014 led to the portfolio being underweight the Australian and Japanese markets, both of which underperformed.

The Board closely monitors performance at all times in order to understand the Managers' investment strategies and how they are working. It should be emphasised that the Company's three Managers seek to construct portfolios that will outperform in the longer-term and inherent in this is the possibility that performance will diverge, sometimes significantly, from that of the index.

I am pleased to report that the Company has outperformed over the past 5 years, with a NAV total return of 52.1%, 5.0% ahead of the 47.1% return from the benchmark. Over the past 10 years, the Company's NAV total return of 144.2% is 17.5% ahead of the benchmark's 126.7%.

Further details of the Managers' performance and that of the overall portfolio are set out within the Strategic Report.

The Alternative Investment Fund Managers Directive ("AIFMD")

The Company took steps during the year to become authorised as a "Small Registered UK AIFM", which offers a straightforward and proportionate regime for internally managed funds with no more than approximately £350m of assets and which do not use gearing. Accordingly, the Company repaid its loan facility and will not use gearing for as long as it remains subject to this regulatory structure. The Board believes that the potential benefits forgone by repaying the relatively modest degree of gearing previously employed by the Company are outweighed by the costs to shareholders of full authorisation under the AIFMD. However, this decision will be kept under review in case the balance of costs and benefits changes. As the Company is not fully authorised there is no requirement to appoint a Depositary and no need to report a leverage ratio.

Ongoing charges

The ongoing charges figure (which is the recurring operating and investment management costs of the Company, expressed as a percentage of average net assets) was 1.06% (2014: 1.00%). The ongoing charges figure including performance fees was 1.12% (2014: 0.85%). A detailed explanation of the charges is given in the Strategic Report on pages 19 and 20 of the Annual Report and Accounts.

Although costs were only slightly higher than the previous year, the daily average net assets figure used in the calculation was lower than the previous year, increasing the charges as a percentage of assets. Investment management charges were 1% higher during the year, while expenses excluding investment management fees were lower and the Board will continue to exercise vigilance on costs.

Dividend

The Company indicated in 2012 that it expected over the long term to be able to increase the dividend in real terms, as a consequence of the strength of the companies in which it invests in the Asia Pacific region and of the growing willingness of companies to distribute profits to shareholders. Since then sterling has strengthened (reducing the value of incoming portfolio dividends when translated into sterling) and regional dividend growth slowed, particularly in 2013. The strength of sterling abated in the later months of 2014, which meant that the pressure on revenue earnings began to reduce but, taking the year as a whole, the Company's revenue earnings per share fell by 9.8% to 3.98 pence. However, our Managers are expecting portfolio dividend growth to be robust in 2015 and 2016, and we are accordingly continuing to increase our dividend. Following the interim dividend of 2.10p per share paid in October 2014, the Board is proposing a final dividend of 2.45p per share for this half year period, making a total dividend of 4.55p per share, a rise of 2.2% on last year, which meets the Company's aim to grow the dividend ahead of the Retail Price Index.

Subject to shareholder approval, the final dividend will be paid on 19 June 2015 to shareholders on the register at the close of business on 22 May 2015 (ex-dividend 21 May 2015).

Succession

In accordance with our Board evaluation and succession planning processes, and using an external firm of consultants, we conducted a thorough search in spring of 2014, and I am pleased to welcome Susan Platts-Martin and Andrew Robson to the Board. Susan brings many years of investment management and investment company experience, and is a Chartered Accountant. Andrew is also a Chartered Accountant, with substantial corporate finance and investment company experience. He will succeed Alan Barber as Chairman of the Audit and Management Engagement Committee following the AGM in 2015, when Mr Barber will retire. Dermot McMeekin has succeeded me as Chairman of the Nomination and Remuneration Committee and as Senior Independent Director. I have succeeded Gill Nott as Chairman, with effect from June 2014 when she retired.

I welcome Susan and Andrew to the Board on your behalf, while also thanking Alan Barber, who steps down as a Director in 2015, for his valued and insightful service as a Director and as Chairman of the Audit Committee since 2007. These changes have served to refresh the Board as the world around us develops.

Outlook

The fall in oil and commodity prices provides a tail-wind for the region and could, in common with most developed economies, create a positive growth surprise in 2015, although more fundamental reforms are needed in order to take full advantage of this one-off windfall. Our new financial year begins with an improved confidence in economic prospects for the region, owing to the direct benefits from lower energy costs but also the greater freedom to cut interest rates arising from the associated decline in inflation.

Investors still face a number of uncertainties in 2015, ranging from a General Election in the UK (which, although only having a remote effect on Asian markets, is relevant for many of our shareholders, particularly if it impacts the level of sterling). There is also the prospect of the US Federal Reserve starting to raise interest rates in response to a stronger US economy. In Asia, the reform-minded Chinese government is seeking to restore discipline to the banking system without unduly slowing the economy. Japan is continuing with its "Abenomics" policy of seeking to stimulate its economy by devaluing the yen and implementing structural change and there are high hopes that India's new government will deregulate its economy. There are also hopes that the cyclical influences in the region are turning more positive which may help to offset the likely moderate tightening emanating from the US.

Last year, we commented that investor sentiment may have become unduly negative towards the region, coloured by disappointment in 2013. Now, a degree of confidence appears to have been restored, making selectivity at the stock, sector and country level more important although valuations relative to other major equity markets remain lower than historical averages. Trade statistics indicate that the region has become increasingly economically interdependent in recent decades rather than simply relying upon exports to Europe and North America. For example China is Japan's largest trade partner with some 20% of both Japan's exports and imports arising from trade with China. Japan is China's top source of imports and its third largest export destination. Japan and the rest of the Asian region have delivered similar equity market total returns over the past 5 years, which may be an indication that these economic changes are asserting themselves, now that the valuation and development gap between Japan and the rest of South East Asia has narrowed. To date, this improved showing by Japan has yet to attract as much investor focus as the preceding 20 years of Japanese underperformance.

Looking to the longer term, we believe that the Company offers an attractive investment vehicle for investment in Asia, which remains a region of immense opportunity as living standards rise and consumers obtain increased spending power. Witan Pacific has three Managers with established track records who should be able to benefit from this longer term potential.

The AGM of the Company will be held on Wednesday, 10 June 2015 at 12 noon in the Piper Room, London Grocers' Hall, Princes Street, London EC2N 1DS, and I look forward to meeting as many of you as are able to attend the meeting.

Sarah Bates

Chairman

23 April 2015

Investment review

This investment review provides information about the Company's investments and performance for the year ended 31 January 2015.

Investments and performance

Performance summary and attribution

The year ended 31 January 2015 saw strong returns in sterling terms for investors in Asian equities. Witan Pacific achieved an NAV total return of +17.6%, which compares with +17.1% from the equity benchmark. The share price total return was 16.6%. Over the past 5 years the NAV total return of 52.1% and the share price total return of 62.4% were ahead of the benchmark's total return of 47.1%.

As recorded in the table on Managers' performance below, two of the appointed Managers, Aberdeen and GaveKal, outperformed during the year, with returns of 20.8% and 22.4% respectively. Matthews, which had outperformed the previous year was 1.0% behind the index this year, with a total return of 16.1%. Further details of the Managers' performance during the year and over the longer term are set out in the table below. Aberdeen and Matthews' returns are before fees, whereas GaveKal's are quoted net of fees, since the investment is held via an open ended fund which charges fees within the fund itself.

Aberdeen's strong performance was almost entirely accounted for by its stock picking and investment positioning in Japan and India. Its Japanese holdings appreciated by 10% more than the local index. Aberdeen was overweight the strongly performing Indian market and picked stocks there which performed even better. A detractor was Australia where holdings in mining stocks such as BHP and Rio Tinto performed weakly. Elsewhere in Asia, smaller positives and negatives balanced out. Aberdeen has outperformed by 3.0% per annum since appointment, with a compound total return of 11.6% per annum.

Matthews' orientation towards dividend growth and mid-sized stocks was less in favour, leading to modest underperformance over the year. Performance was held back by weakness in its largest holding, Japan Tobacco on concerns about its exposure to Russia. This offset other good stock selections in Japan with stocks such as Pigeon Corporation and Hoya Corporation. Matthews has outperformed by 1.6% per annum since appointment, with a compound total return of 11.8% per annum.

GaveKal's portfolio performed very well in the second half of the financial year, more than reversing earlier weakness. Its selection of countries across the region and investment selection in the Japanese and Australian markets performed very well. Notable stock-specific successes included its holdings in Indian financial stocks and companies such as Megaworld Corp in the Philippines and Guangdong Investment Ltd in Hong Kong.

Combined portfolio composition

The weightings of the three Managers are shown in the table below. After the previous year's rebalancing of the Manager allocations and repayment of the Company's borrowings in March 2014, the proportions were about 45% each for Aberdeen and Matthews and 10% for GaveKal. These percentages have altered slightly as a result of performance but have not otherwise seen any material change.

During the year the Company invested its assets with a view to spreading investment risk and in accordance with the investment policy set out in the Business Model on page 17 of the Annual Report and Accounts. It has maintained a diversified portfolio in terms of stocks, sectors and geography. The portfolio has been actively managed by the Investment Managers, in accordance with their individual mandates, with overall asset allocation and risk being monitored by the Board and Witan Investment Services Limited.

Manager performance for the year ended 31 January 2015 and from inception to 31 January 2015

Details of the Manager structure in place at the end of January 2015 are set out in the following table, showing the proportion of Witan Pacific's assets each managed and the performance they achieved:

	Inception date	Share of Witan Pacific's assets £m at 31 January 2015	Share of Witan Pacific's assets* at 31 January 2015 %	Performance year to 31 January 2015 %	Benchmark performance year to 31 January 2015 %	Annualised performance since inception to 31 January 2015 %	Annualised benchmark performance since inception to 31 January 2015 %
Aberdeen	31 May 2005	82.2	44.9	+20.8	+17.1	+11.6	+8.6
Matthews	30 April 2012	81.3	44.4	+16.1	+17.1	+11.8	+10.2
GaveKal†	24 April 2012	19.6	10.7	+22.4	+17.1	+9.4	+10.6

Notes:

*    Excluding cash balances held centrally by Witan Pacific.

^†        Returns are net of the 1.5% management fee charged per annum within the UCITS OEIC, of which 0.75% is rebated to the Company directly, outside the fund.

^†        Source: WM Company.

Whilst diversification is a benefit in reducing portfolio volatility, it is important that it does not unduly dilute returns, since the purpose of using active Managers is to outperform, which requires the portfolio to differ from the benchmark. One measure of the degree of active management is known as "active share". This indicates the degree to which a portfolio differs from its benchmark, with a portfolio identical to the benchmark having an active share of 0%, while one with no holdings in common with the benchmark would have an active share of 100%. Although looking at active share at a particular point is an incomplete measure of the degree to which a portfolio is managed actively (let alone successfully), as a guide, the Company's active share was 75% at the end of January 2015, which is similar to the level at the half-year.

The sector breakdown and regional exposure for the aggregated portfolio is shown on page 12 of the Annual Report and Accounts. The top 20 holdings across the whole of Witan Pacific's portfolios are set out on page 13 of the Annual Report and Accounts. They represented 45.9% of Witan Pacific's portfolio at 31 January 2015 (2014: 46.0%). These analyses highlight the diversification provided by the Managers and the regional geographical exposure.

The combination of the Manager's portfolios currently has relatively little exposure to the very largest companies in the region, with around 12% of the portfolio in the top 20 stocks by market capitalisation. These top 20 make up some 23% of the regional benchmark. Indeed, in 12 of these stocks none of the Managers has any holding. Therefore the combination of the Managers has a greater emphasis than the benchmark on stocks outside the largest market capitalisations. Some 18% of the portfolio is also invested in stocks with lower than £2.5bn market capitalisation, more than twice the weighting in the region's markets. Smaller stocks can often have better growth potential than larger companies.

The Company monitors the style characteristics of the combined portfolio: it has a slightly higher dividend yield than the market as a whole, but otherwise tends not to display "value style" characteristics. It has a strong quality tilt overall, with an emphasis on return on equity, with an estimated aggregate return on equity of over 17% compared with about 15% for the market. The companies in the portfolio also tend to have stronger balance sheets than the market average.

Continued appointment of the Investment Managers

The Directors regularly review the performance of the Investment Managers who formally report to the Board at Board meetings. In addition, periodically the Board visits the Managers' offices in the region to conduct due diligence, the most recent such visit having been in March 2015, subsequent to the year end. This provided an opportunity to review their portfolio performance, investment and operational resources and risk controls. The Board was satisfied with the Managers' performance in each of these areas, while engaging in discussion over how they would respond to the market and regulatory developments in the future.

Taking the performance of each of the Investment Managers' into consideration and having regard to the Managers strategies for securing longer-term outperformance the Directors are of the opinion that the continuing appointment of the Investment Managers, on the terms agreed, is in the interests of shareholders as a whole.

Details of the terms of appointment of the Investment Managers may be found in note 3 to the financial statements on pages 56 and 57 of the Annual Report and Accounts.

Geographical allocation

Country	Portfolio at 31 January 2015*	Benchmark at 31 January 2015**
Australia	6%	13%
China	14%	13%
Hong Kong	15%	6%
India	6%	4%
Indonesia	4%	2%
Japan	26%	40%
Malaysia	1%	2%
The Philippines	3%	1%
Singapore	11%	3%
South Korea	5%	8%
Taiwan	5%	7%
Thailand	3%	1%
Vietnam	1%	-
	100%	100%

*   Source: BNP Paribas.

**  Source: MSCI.

Aberdeen Asset Managers Limited

("Aberdeen")

Aberdeen, which has delegated management of the Company's assets to Aberdeen Asset Management Asia Limited, a wholly owned subsidiary of Aberdeen Asset Management PLC was established in Asia in 1992 and at 31 December 2014 was managing £70.3bn of assets in Asia. The 41 fund managers in the equity team, led by Hugh Young, follow a fundamental investment style emphasising the identification of good quality companies on low valuations relative to their growth potential.

Strategy

Aberdeen follows a stock-picking approach of investing in good quality, well-managed and soundly financed companies trading at attractive valuations, with the expectation of holding them for extended periods in order to benefit from the compounding of those companies' growth. Corporate governance and the alignment of management with shareholders' interests are additional important factors.

Performance

Aberdeen is one of the original investment managers appointed when the Company's multi-manager approach was adopted in 2005 and manages approximately 45% of the Company's assets. During the year under review, it achieved a total portfolio return (before fees) of 20.8%, compared with 17.1% for the benchmark. Since appointment in 2005, it has achieved a total portfolio return of 11.6% p.a. compared with 8.6% p.a. for the benchmark, representing outperformance of 3% p.a. before fees.

Matthews International Capital Management LLC ("Matthews")

Based in San Francisco, Matthews is an independent, privately owned firm, and the largest dedicated Asia investment specialist in the United States. As of 31 January 2015, Matthews had US$27.8bn in assets under management.

Strategy

The Company is invested in a segregated portfolio that is managed according to Matthews' Asia Dividend Strategy; the Lead Portfolio Managers are Yu Zhang, and Robert Horrocks. The Asia Dividend Strategy employs a fundamental, bottom up investment process to select dividend paying companies with sustainable long-term growth prospects, strong business models, quality management teams, and reasonable valuations. The Asia Dividend Strategy is a total-return strategy focused on dividend income and potential dividend growth from the companies in which it invests, as well as capital growth. The strategy invests in companies of all sizes and has significant exposure to small and mid-cap stocks.

Performance

Matthews was appointed as one of the Company's investment managers in April 2012 and manages approximately 44% of the Company's assets. During the year under review, it achieved a total portfolio return (before fees) of 16.1%, compared with 17.1% for the benchmark. Since appointment in 2012, it has achieved a total portfolio return of 11.8% p.a. compared with 10.2% p.a. for the benchmark, representing outperformance of 1.6% p.a. before fees.

GaveKal Capital Limited

GaveKal Capital Limited ("GaveKal") acts as advisor to several investment clients with combined assets of over US$1.6bn. The GaveKal Asian Opportunities UCITS Fund is the largest and oldest single fund under management.

Strategy

The Asian Opportunities Fund in which the Company has invested, employs no leverage, except on a short-term basis, and does not "short" stocks. The portfolio is managed by Louis-Vincent Gave, a co-founder of GaveKal and Alfred Ho, ex CIO of Invesco Asia. They are supported by five analysts. They vary the asset allocation between equities, bonds and cash according to their top-down view of economic prospects. The equity portfolio is invested in growth oriented companies, focusing on earnings growth and valuation. Within the equity portfolio, weightings are driven by company-specific attractions not index weightings.

Performance

GaveKal was appointed as one of the Company's investment managers in April 2012 and manages approximately 11% of the Company's assets. During the year under review, the GaveKal Asian Opportunities UCITS fund in which the Company holds its investment achieved a total portfolio return (after deduction of the 1.5% fee charged within the fund) of 22.4%, compared with 17.1% for the benchmark. Since appointment in 2012, it has achieved a total portfolio return (after fees) of 9.4% p.a. compared with 10.6% p.a. for the benchmark. On a pre fees basis, the portfolio has outperformed since April 2012 but the fund does not present separate figures excluding fees, hence the use of the after-fees numbers.

Aberdeen Asset Managers Limited

Geographical allocation (at 31 January 2015)*
Country	% Weighting	Under/Overweight
Australia	9%	-4%
China	5%	-8%
Hong Kong	20%	+14%
India	9%	+5%
Indonesia	2%	=
Japan	25%	-15%
Malaysia	2%	=
New Zealand	-	=
The Philippines	2%	+1%
Singapore	15%	+12%
South Korea	3%	-5%
Taiwan	5%	-2%
Thailand	3%	+2%
Vietnam	-	=

Sector allocation (at 31 January 2015)*
Sector	% Weighting	Under/Overweight
Consumer Discretionary	8%	-5%
Consumer Staples	10%	+4%
Energy	3%	=
Financials	31%	+1%
Healthcare	3%	-1%
Industrials	11%	-2%
Information Technology	9%	-6%
Materials	10%	+3%
Telecom Services	6%	=
Utilities	-	-3%
Other	9%	+9%

Matthews International Capital Management LLC

Geographical allocation (at 31 January 2015)*
Country	% Weighting	Under/Overweight
Australia	4%	-9%
China	20%	+7%
Hong Kong	10%	+4%
India	3%	-1%
Indonesia	7%	+5%
Japan	28%	-12%
Malaysia	1%	-1%
New Zealand	-	=
The Philippines	1%	=
Singapore	9%	+6%
South Korea	6%	-2%
Taiwan	6%	-1%
Thailand	4%	+3%
Vietnam	1%	+1%

Sector allocation (at 31 January 2015)*
Sector	% Weighting	Under/Overweight
Consumer Discretionary	25%	+12%
Consumer Staples	22%	+16%
Energy	-	-3%
Financials	13%	-17%
Healthcare	4%	=
Industrials	11%	-2%
Information Technology	6%	-9%
Materials	4%	-3%
Telecom Services	11%	+5%
Utilities	4%	+1%
Other	-	=

GaveKal Capital Limited

Geographical allocation (at 31 January 2015)*
Country	% Weighting	Under/Overweight
Australia	3%	-10%
China	26%	+13%
Hong Kong	14%	+8%
India	7%	+3%
Indonesia	1%	-1%
Japan	23%	-17%
Malaysia	-	-2%
New Zealand	4%	+4%
The Philippines	14%	+13%
Singapore	1%	-2%
South Korea	2%	-6%
Taiwan	4%	-3%
Thailand	1%	=
Vietnam	-	=

Sector allocation (at 31 January 2015)*
Sector	% Weighting	Under/Overweight
Consumer Discretionary	4%	-9%
Consumer Staples	1%	-5%
Energy	-	-3%
Financials	30%	=
Healthcare	3%	-1%
Industrials	8%	-5%
Information Technology	18%	+3%
Materials	1%	-6%
Telecom Services	2%	-4%
Utilities	11%	+8%
Other	22%	+22%

* Source: BNP Paribas and MSCI.

Top twenty investments as at 31 January 2015

This	Last			% of total	Value
period	period*	Company	Country	investments	£'000
1	(1)	GaveKal Asian Opportunities Fund (UCITS)	Far East & Pacific	11.0	19,625
2	(2)	Aberdeen Global Indian Equity Fund (UCITS)	India	4.3	7,646
3	(4)	Japan Tobacco	Japan	2.7	4,864
4	(6)	Taiwan Semiconductor Manufacturing	Taiwan	2.3	4,171
5	(-)	Toyota Motor	Japan	2.2	3,869
6	(5)	China Mobile	China	2.0	3,580
7	(8)	United Overseas Bank	Singapore	2.0	3,546
8	(9)	Oversea-Chinese Banking Corporation	Singapore	1.8	3,184
9	(18)	AIA	Hong Kong	1.7	3,004
10	(13)	Singapore Technologies Engineering	Singapore	1.6	2,867
11	(15)	Shin-Etsu Chemical	Japan	1.6	2,833
12	(10)	Samsung Electronics	South Korea	1.5	2,732
13	(-)	Swire Pacific	Hong Kong	1.5	2,685
14	(-)	Yum! Brands	China	1.5	2,628
15	(-)	Hoya	Japan	1.5	2,618
16	(-)	Unicharm	Japan	1.4	2,500
17	(-)	Pigeon	Japan	1.4	2,446
18	(-)	Suntory Beverage & Food	Japan	1.3	2,368
19	(3)	HSBC Holdings	Hong Kong/UK	1.3	2,365
20	(-)	Tata Motors	India	1.3	2,350
Totals				45.9	81,881

The value of the twenty largest holdings represents 45.9% (31 January 2014: 46.0%) of the Company's total investments. The full portfolio listing is published monthly (with a 3 month lag) on the Company's website.

*   The figures in brackets denote their position within the top 20 at the previous year end. The country shown is the country of incorporation.

Description of top twenty investments

1	GaveKal Asian Opportunities Fund (UCITS)	A UCITS fund investing in a growth oriented Asian equity portfolio, Asian bonds and cash. The Manager will vary the asset allocation amongst the three asset classes in response to market conditions.
2	Aberdeen Global Indian Equity Fund (UCITS)	A UCITS fund, whose objective is to invest in the equity of companies which are incorporated in India or which derive significant revenue or profit from India. This is a cost effective way of investing in India and does not affect Aberdeen's overall remuneration.
3	Japan Tobacco	A global tobacco company with operations in 120 countries producing a wide range of tobacco products. It was originally formed from the non-US operations of R.J. Reynolds in 1999 and has since grown through acquisition.
4	Taiwan Semiconductor Manufacturing	The world's largest dedicated semiconductor foundry, TSMC provides wafer manufacturing, wafer probing, assembly and testing, mask production and design services.
5	Toyota Motor	The world's largest automobile manufacturer with global manufacturing operations. It also has significant car financing activities.
6	China Mobile	China's largest mobile telephone operator. It operates the world's largest mobile network and, with 806 million customers, it has the largest mobile customer base. The company is developing a fast growing 4G telecoms network and has added over 100 million 4G customers in the past year.
7	United Overseas Bank	This Singaporean bank has earned a higher return on its business than its competitors. It has a strong capital base and an impressive cost-to-income ratio.
8	Oversea-Chinese Banking Corporation	A Singaporean bank which continues to generate shareholder value through the restructuring of its non-core assets.
9	AIA	The leading life insurance provider in the Asia Pacific region. It provides insurance and wealth management services to individuals and businesses.
10	Singapore Technologies Engineering	Global integrated engineering group spanning aerospace, electronics, marine and land systems sectors. It is the world's largest commercial aircraft maintenance operator.
11	Shin-Etsu Chemical	A leading manufacturer of polyvinyl chloride, silicon, and silicon wafers for semiconductors.
12	Samsung Electronics	The leading semiconductor company and a major player in mobile phones and TFT-LCDs for computer monitors and televisions.
13	Swire Pacific	A Hong Kong based conglomerate with transportation, agriculture, energy operations and a large Asian property portfolio.
14	Yum! Brands	The largest restaurant franchise operator in the world with 41,000 restaurants including 16,000 in emerging markets and a strong presence in China. Its principal restaurants are KFC, Pizza Hut and Taco Bell.
15	Hoya	Japanese manufacturer of electro-optics products for electronic and medical applications ranging from sunglasses to PC tablet glass.
16	Unicharm	A manufacturer of sanitary napkins, nappies and other hygiene products. Market leader in Japan and seeking to expand globally.
17	Pigeon	Baby care goods such as baby bottles, pacifiers and breast pumps, maternity and elder care products. The main driver of growth is in sales outside Japan, particularly to China.
18	Suntory Beverage & Food	Global manufacturer of beverage and food products. It is the third largest spirits maker globally and owns a broad range of soft drinks brands.
19	HSBC Holdings	One of the world's largest banks offering the full range of banking and financial services on a global basis and with a strong presence in Asia.
20	Tata Motors	Indian based manufacturer of cars, buses and trucks with manufacturing operations in six countries including the UK, Spain and Korea. In the UK, it owns Jaguar Land Rover.

Corporate review

Witan Pacific is an Investment Trust, which was founded in 1907 and has been listed on the London Stock Exchange since its foundation. It operates an outsourced business model, under the direction and supervision of the Board of Directors.

Strategic report

The Strategic Report on pages 2 to 22 of the Annual Report and Accounts. has been prepared in accordance with the requirements of Section 414 of the Companies Act 2006 and best practice. Its purpose is to provide information to the shareholders of the Company and help them to assess how the Directors have performed their duty to promote the success of the Company, in accordance with Section 172 of the Companies Act 2006.

Strategy and Investment Policy

The Company's investment objective is to provide shareholders with capital and income growth from a diversified portfolio of investments in the Asia Pacific region designed to outperform the MSCI AC Asia Pacific Free Index ("MSCI Index") in Sterling terms.

Since 2005 the Company has followed a multi-manager approach, using a blend of active managers with the aim of outperforming the benchmark. Our investment policy includes investments in a wide range of regional markets, including the main South East Asian and North Asian markets as well as Japan, India and Australia. The range of investment opportunities for the investment managers is not limited to the constituents of the benchmark or benchmark weightings. This means that Witan Pacific's portfolio may differ from the benchmark. Witan Pacific invests primarily in equities: in normal circumstances the Board expects the minimum equity level will be 90% of net assets. However the overall equity performance of regional markets is likely to have the most significant impact on the performance of the Company's net asset value.

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 net assets for investment purposes although in practice gearing has been low in recent years and the company would not, other than temporarily and in exceptional circumstances, borrow more than 20% of assets. The range of gearing prior to 2014 varied between a small net cash position and 5% gearing. Having become authorised in April 2014 as a "Small Registered UK AIFM" under the Alternative Investment Fund Managers Directive (AIFMD) the Company's current approach, as required by the regulation, is not to employ leverage. This approach is kept under review and should a change in regulatory status be appropriate, the Company would retain its current policy.

Investment risk is managed through:

·      the selection of at least two investment managers. Details of the proportion of assets managed by them and the portfolios managed by them are set out on pages 7 to 12;

·      the managers are required to spread their investments over a number of countries, sectors and companies within the region;

·      monitoring of investment manager performance and portfolios. Investment manager performance against their benchmarks is set out on page 7;

·      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 the investment objective set out above, maintained a diversified portfolio the analysis of which is shown on pages 7 to 12. The investment management of the portfolio by the managers is monitored by the Executive Manager.

The Directors receive regular reports on investment activity and portfolio construction at meetings of the Board, as well as periodically outside of these meetings.

The Company sponsors an ongoing marketing programme provided by Witan Investment Services Limited. This programme communicates with private investors and their financial advisers, as well as professional investors, to help them make informed decisions about whether investing in the Company's shares can help meet their investment objectives.

The unbundling of investment management from the Company's other necessary services has provided transparency of the Company's cost base as well as flexibility in case it becomes desirable to change the service provider in a particular area. The Board takes care to ensure strict monitoring and control of costs and expenses.

The Board holds an annual strategy meeting. This year, time was spent considering the effectiveness of the investment mandate and approach, taking advice from Witan Investment Services Limited ("WIS"), the Company's brokers and shareholder feedback received through the year. The Company also considered the changes in the competitive world in which we operate and developments affecting shareholders. The Company also noted the recently changed investment objective of the two other trusts formerly in the sector in which it operates. The Directors determined that the mandate to invest across the region, including Japan and Australia as well as the Asian markets, remained robust. This takes proper account of developments in the region's economy, particularly in inter-regional trade, market correlations and in risk-adjusted return terms compared with the pattern of returns seen in Japan and Asia only mandates. The Directors considered that the multi-manager approach gave a very wide set of opportunities allowing the Board to appoint managers who can implement their convictions, in a combination which should reduce the risk of surprises. The Directors also considered the Company's discount in depth and noted that discounts elsewhere in the region have widened slightly, as has the Company's. The Company will be increasing its marketing and communication work in the next 12 months and will continue to implement buy-backs when the discount seems anomalous compared with other investment funds specialising in the region.

Business model

The management of the Company's assets is outsourced to third parties. However, the Board sets and reviews all the key elements of the Company's strategy, including:

·      the choice of investment benchmark;

·      the selection of suitable Investment Managers;

·      investment guidelines and limits;

·      the appointment of providers for other services required by the Company;

·      the level of any gearing which the Company may have (this is not currently applicable given the Company's policy to not employ gearing, as set out on page 5 of the Annual Report and Accounts); and

·      the maintenance of an effective system of oversight, risk management and corporate governance.

The Board ensures that, taking specialist advice as appropriate, its Directors have the appropriate mix of skills and time available to address the management of its outsourced, multi-manager investment approach.

Witan Investment Services Limited, which has experience of the issues arising in operating a multi-manager structure, acts as Executive Manager to manage and monitor the outsourced structure and relationships, to provide commentary on investment issues and to provide marketing services. The Executive Manager reports to the Board on key aspects at all Board meetings as well as drawing attention as required to matters requiring non-routine review by the Board. The Board has considered, discussed and reviewed the Company's policies of engagement with each of the investment managers in detail and is satisfied that they remain appropriate.

The Company has also appointed third parties for the various supporting services it requires. The principal providers are JP Morgan Chase Bank N.A. for global custody, BNP Paribas Securities Services for investment accounting and administration and Capita Company Secretarial Services Limited (part of Capita Asset Services) for company secretarial services. From time to time, as required, the Company also makes use of specialist services for legal, investment consulting, financial and tax advice.

Environmental, human rights, employee, social and community issue

The Company has no employees and its core activities are undertaken by Aberdeen, GaveKal and Matthews, which consider policies relating to environmental and social matters as part of their investment process. The Company has therefore not reported on these, or social, community or human rights issues. However, it reviews its Managers' reports on their policies relating to social issues and corporate governance standards. The Managers are also prepared to use their votes in these areas as part of the proper management of the investments made on the Company's behalf and the Board periodically reviews their approaches with them.

The Board's role in investment management 

Although the Board retains overall risk and portfolio management responsibility, it appointed the Investment Managers after a disciplined selection process focused on their scope to add value and their fit with the overall balance of the portfolio. As already described, the selection of individual investments is delegated to these external Managers, subject to investment limits and guidelines which reflect the particular mandate and the specific investment approach which the Company has selected (e.g. quality, growth in dividend).

Approximately 90% of the portfolio is managed in two segregated accounts, held at the Company's custodian. The balance of the portfolio is held in a Dublin UCITS open ended investment company, for which holdings information is regularly available. This enables the Company to view the portfolio as a whole and to analyse its risks and opportunities as well as those at the level of each Manager's portfolio.

Information regarding the proportion of Witan Pacific's assets managed by each and of their performance during the year is set out on page 7 of the Annual Report and Accounts.

Our selected benchmark

The Company's benchmark is a reference point for a comparison of results from an investment in Witan Pacific, in terms of the underlying investment structure and in performance. The Benchmark is the MSCI All Country Asia Pacific Free Index in sterling terms.

The benchmark is a widely diversified regional index which includes the principal countries in the region including China, India, Japan and Australia. This is illustrated in the map on page 10 of the Annual Report and Accounts.

The Managers select stocks which they consider attractive, wherever they are located in the region. As a result, the geographical location of the holdings differs from the benchmark. The geographical distribution of the portfolio and of the benchmark are set out in the map and table on page 10 of the Annual Report and Accounts.

Key performance indicators

The Board monitors success in implementing the Company's strategy against a range of Key Performance Indicators (KPIs) which are viewed as significant measures of success over the longer term. Although performance relative to the KPIs is also monitored over shorter periods, it is success over the long-term that is viewed as more important, given the inherent volatility of short-term investment returns. The principal KPIs are set out below, with a record (in italics) of the Company's performance against them during the year.

Priorities for the year ahead

For the year ending 31 January 2016, the key priorities for Witan Pacific include:

·      Investment. Set an appropriate investment policy and employ skilled Managers with the objective of delivering good returns to shareholders;

·      Marketing and Communications. Communicate Witan Pacific's distinct and active investment approach and achievements more effectively to existing and potential shareholders;

·      Investor service. Ensure good shareholder service; and

·      Governance. Ensure effective oversight of all service providers and compliance with all applicable rules and guidelines.

Dividend Policy

As indicated in the Chairman's statement, the Company aims to grow its dividend in real terms over time, subject to the underlying trend in the Company's net income. The Company has substantial levels of revenue reserves available to smooth the effect of temporary fluctuations in dividends from investments, where this is viewed as prudent and beneficial for shareholders. Shareholders agreed at the 2013 AGM to amend the Articles of Association to permit the distribution of Capital Reserves as dividends. The Company has stated that this is to confer flexibility in pursuing its investment objectives and that it would be the norm for dividend payments to be funded from revenue over the cycle.

The Board paid a final dividend for the previous year of 2.40p in June 2014 and an interim dividend of 2.10p in October 2014 for the year under review. The latter payment compared to a 2.05p dividend the year before. The Company has proposed a final dividend for 2014-15 of 2.45p, making a total payment for the year of 4.55p per share. This is an increase of 2.2% on the previous year, which compares with a 1.1% rise in Retail Price Index during the year. Revenue earnings per share during the year amounted to 3.98p per share. The income of the trust was impacted by the strength of sterling, particularly against the yen and Australian dollar, with dividends from these countries accounting for approximately 26% of the portfolio's income.

KEY PERFORMANCE INDICATORS

Net Asset Value total return and total shareholder return. Long-term outperformance of the combined portfolios, compared with our benchmark is a key objective.	The Net Asset Value total returns was +17.6%, outperforming the benchmark total return of 17.1%, while the shareholder total return was +16.6%. Over the past 5 years the Net Asset Value total return was +52.1% and the shareholder total return was +62.4%, outperforming the benchmark return of +47.1%.
Investment performance by the individual Managers. Outperformance relative to the benchmark is sought.	Two of the Company's Managers outperformed the regional benchmark, while one (Matthews) underperformed slightly. Details are shown in the table on page 7 of the Annual Report and Accounts.
Annual growth in the dividend. The Company's aim is to deliver increases in real terms, ahead of UK inflation (subject to market circumstances).	The dividend for the year ended 31 January 2015 rose (subject to shareholder approval) by 2.2%, compared with an inflation rate of 1.1% during the year.
Discount to Net Asset Value. The objective is to avoid excessive fluctuations in the discount and avoid a discount which is anomalously wide compared with other trusts investing in the region by the use of share buy-backs, subject to market conditions.	The discount ended the financial year at 12.7% compared with 11.7% a year earlier. The average discount of the Company was 13.0% (2014: 12%).
The level of ongoing charges. Costs are managed with the objective of delivering an ongoing charges figure of below 1% (excluding performance fees). Where higher charges arise, these are carefully evaluated to ensure there is a net benefit for shareholders.	The ongoing charges figure was 1.06%, (2014: 1.00%). Inclusive of performance fees, the ongoing charges figure was 1.12%, (2014: 0.85%). Although costs have not changed significantly during a year when the Net Asset Value grew strongly, the lower average net assets during the year meant that this KPI was missed.

Policy on gearing and the use of derivatives

Borrowings and gearing

The Company has the power under its Articles of Association to borrow up to 100% of the adjusted total of capital and reserves. In the past this has permitted the Board to seek to improve performance through gearing by borrowing amounts equivalent in value to shareholders' funds. In practice, the level of gearing employed (prior to 2014) has been very low. Over the past five years gearing, as defined on page 69 of the Annual Report and Accounts, mostly varied between 0% and 5% with, on occasion, a small net cash position. At the end of January 2014, the Company was 3.2% geared.

In accordance with the Alternative Investment Fund Managers Directive ('AIFMD'), the Company was registered by the FCA as a Small Registered UK Alternative Investment Fund Manager ('AIFM') with effect from 1 April 2014. In preparation for registration, the Company repaid all its borrowings on 28 March 2014. To retain its Small Registered UK AIFM status, the Company is unable to employ gearing. It is therefore the Company's policy, not to employ gearing subject to periodic review of the costs and benefits of full AIFM authorisation.

Further details of the Company's decision to register as a Small Registered UK AIFM can be found on page 22 of the Annual Report and Accounts.

The Company's segregated portfolio Managers are not permitted to borrow within their portfolios but may hold cash if deemed appropriate.

Use of derivatives - policy

Aberdeen and Matthews are not permitted to use derivatives or to gear their portfolios nor does the Company use derivatives itself.

The Company has an 11% investment in a Dublin-domiciled open ended investment company (GaveKal Asian Opportunities Fund) whose Articles of Association allow the use of currency and equity derivatives. The Fund is regulated under UCITS rules and does not employ leverage, other than on a transitory basis within the terms of its prospectus.

Market liquidity and discount policy

The Board believes that it is in shareholders' interests to buy-back the Company's shares when they are standing at a substantial and anomalous discount to the Company's NAV. The objective is to avoid excessive fluctuations in the discount and avoid a discount which is anomalously wide compared with other trusts investing in the region by the use of buy-backs, subject to market conditions. The purchase of shares priced at a discount to NAV per share will, all other things being equal, increase the Company's NAV per share and benefit the Company's share price. During the year, the Company bought back 104,000 shares for cancellation, at times when supply and demand in the market were out of balance and the discount was particularly wide. Since the year end, the Company has repurchased a further 12,335 Ordinary shares, which have been put into Treasury. Treasury shares may only be reissued at a premium to the prevailing Net Asset Value.

The discount widened during the first half of the year, as sentiment towards Japan and other Asian markets deteriorated, but improved toward the year end.

Witan Pacific is a self-managed investment trust, so the purpose of "marketing" is to provide effective communication of developments at the Company to existing and potential shareholders to help sustain a liquid market in our shares. Clear communication of the Company's investment objective and its success in executing its strategy make it easier for investors to decide how Witan Pacific fits in with their own investment objectives. Other things being equal, this should help the shares to trade at a narrower discount, from which all shareholders would clearly benefit.

In view of these potential benefits, the Company has felt for many years that it is beneficial to incur the limited costs of operating a marketing programme (through Witan Investment Services Limited) in order to disseminate information about our investment strategy and performance more widely. This programme communicates with private and professional investors, financial advisers and intermediaries using a range of media (including direct meetings, press interviews and advertising through traditional media and the internet). The Company also provides an informative and easy to use website (www.witanpacific.com) to enable investors to make informed decisions about including Witan Pacific shares in their investment portfolios.

Costs

Investment management fees

Each of the external Managers is entitled to a base management fee, levied on the assets under management. In addition, one Manager (Aberdeen) is entitled to a performance fee, calculated according to investment performance relative to the benchmark. The agreements can be terminated on one month's notice.

The Company's external Investment Managers may use certain services which are paid for, or provided by, various brokers. In return, they may place business, including transactions relating to the Company, with those brokers.

The ongoing charges figure ("OCF") (which is the recurring operating and investment management costs of the Company, expressed as a percentage of average net assets) was 1.06% for the year ended 31 January 2015, slightly higher than that for the year ended 31 January 2014 (1.00%). The rise was principally due to lower average net assets during the year, since overall costs were little changed. There was a small rise in investment management fees due to the rebalancing of the Manager mix during 2014 (towards Matthews, who have a higher base fee than Aberdeen but without a performance fee structure), while other expenses declined by 11.6% during the year, although recurring costs rose by 1.0%.

One Manager (Aberdeen) has a performance fee structure. The ongoing charges figure (including performance fees) was 1.12%, higher than the comparable figure in 2014 (0.85%). This is because the previous year's figure was lowered by a reduction in the provision for performance fees (as a result of the underperformance during 2013) whereas Aberdeen outperformed during 2014.

The Company exercises strict scrutiny and control over costs. As a self-managed investment trust, any negotiated savings in investment management or other fees directly reduce the costs for shareholders. The information on costs is collated in a single table below. This indicates the main cost headings in money terms and as a percentage of net assets.

Category of costs*	Year ended 31 January 2015		Year ended 31 January 2014
	£m	% of average net assets	£m	% of average net assets
Management fees**	1.09	0.64	1.08	0.61
Other expenses	0.72	0.42	0.82	0.46
Non recurring expenses	-0.01	-	-0.12	-0.07
Total	1.80	1.06	1.78	1.00
Investment Manager performance fee†	0.10	0.06	-0.28	-0.15
Total	1.90	1.12	1.50	0.85
Portfolio transaction costs	0.13	0.07	0.14	0.08

*  For a full breakdown of costs, see notes 3 and 4 on pages 56 and 57 of the Annual Report and Accounts.

**  Figures inclusive of fees paid to Witan Investment Services Limited and fees paid to GaveKal of which £0.26m (2014: £0.27m) is charged to capital and therefore not included in the amounts charged to revenue in note 3 on page 56 of the Annual Report and Accounts.

^†      The figure for the year ended 31 January 2014 reflects a reduction in the previous level of provision for performance fees, see note 13 on page 61 of the Annual Report and Accounts.

Corporate and operational structure

Operational management arrangements

In addition to the appointment of external Investment Managers, Witan Pacific contracts with third parties for the supporting services it requires, including:

·      Witan Investment Services Limited ("WIS") for Executive Management services;

·      BNP Paribas Securities Services ("BPSS") for investment accounting and administration;

·      JP Morgan Chase Bank, N.A. for investment custody services;

·      Capita Company Secretarial Services Limited for company secretarial services; and

·      The Company also takes specialist advice on regulatory compliance issues and, as required, procures legal, investment consulting, financial and tax advice.

As with investment management, the contracts governing the provision of these services are formulated with legal advice and stipulate clear objectives and guidelines for the level of service required.

Premises and staffing

Witan Pacific has no premises nor employees.

Environmental, human rights, employee, social and community issues

The Board recognises the requirement under Section 414 of the Companies Act 2006 to detail information about environmental matters (including the impact of the Company's business on the environment), employees, human rights, social and community issues; including information about any policies it has in relation to these matters and effectiveness of these policies. As the Company has no employees or policies in these matters this requirement does not apply.

The Board of Directors consists of three female and three male Non-Executive Directors. It is the Directors' policy to appoint individuals on merit whilst taking into account the balance of skills and experience required by the Board.

Principal risks

Investment 

The Company is a vehicle for overseas equity investment and is likely in normal conditions to be fully invested. The main risks of investing in the Company are a fall in equity markets and security prices together with adverse movements in foreign currency exchange rate. Market risk and currency risk are an integral part of global equity investment and the Company does not specifically hedge against these risks but selects Managers it believes have the skills to construct portfolios able to overcome them and deliver superior performance.

The portfolio's value can be affected by a range of factors, including Company performance, government policies, geopolitical events and the skills of the Investment Managers selected to manage the portfolio. The Board seeks to manage these risks through understanding the investment approach of the Managers, regular monitoring and review of portfolio information, and analysis of the characteristics of the Company's overall combined portfolio.

The Company also bears the risk of settlement default by clearing houses and exchanges and the risk of delayed repossession or disputed title of the Company's assets in the event of failure of the Custodian.

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

Operational 

Comprehensive contractual obligations have been put in place with each of the third party service providers. Operationally, the multi-manager structure is robust, as the Investment Managers, the Custodian and the Fund Accountants keep separate records which are reconciled regularly. In addition, the Executive Manager, Witan Investment Services Limited, monitors the activities of all third parties and reports any issues to the Board.

Tax and regulation

In order to qualify as an investment trust the Company must comply with sections 1158-9 of the Corporation Tax Act 2010 (CTA) to which reference is made on page 25 of the Annual Report and Accounts under the heading "Status of the Company". A breach of these sections 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. The criteria are reported on by BNP Securities Services Limited and monitored by Witan Investment Services Limited on behalf of the Board.

In addition, there are regulatory risks. The Company is affected by a complex set of regulations and laws and changes in any of these may affect returns to shareholders. The Board expects regulation to increase, as demonstrated by new proposals, stemming from the US and Europe, which are due to take effect in coming years.

All of these risks are regularly reviewed by the Company's Audit and Management Engagement Committee and the Board takes professional legal, accounting and tax advice concerning any material proposed activity or emerging development affecting the Company's operations.

The Company must comply with the provisions of the Companies Act 2006 ("the Companies Act") and, as the Company's shares are Premium 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 Act could result in the Company and/or the Directors being fined or becoming the subject of criminal proceedings. Breach of the UKLA Rules could result in the suspension of the Company's shares which would in turn lead to a breach of the provisions of the CTA.

As a Small Registered UK AIFM, the Company is subject to some ongoing FCA regulatory obligations.

These legal and regulatory requirements offer significant protection for shareholders. The Board relies on the Company Secretary, the Executive Manager and the Company's professional advisers to ensure compliance with the Companies Act and UKLA Rules.

The Audit and Management Engagement Committee regularly reviews the foregoing risks by maintaining a detailed record of the identified risks in the form of a Risk Matrix 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. An analysis of financial risks can be found in note 20 to the financial statements on pages 62 to 67 of the Annual Report and Accounts.

Corporate governance

Details of the Company's compliance with corporate governance best practice are set out in the Corporate Governance Statement on pages 28 to 39 of the Annual Report and Accounts.

Operational and regulatory risks are regularly and extensively reviewed by the Audit and Management Engagement Committee. WIS is subject to its own operating rules and regulations and is regulated by the Financial Conduct Authority ("FCA").

Information about securities carrying voting rights can be found in the Directors' Report on page 26 of the Annual Report and Accounts.

Regulatory change

Retail Distribution Review (RDR)

The implementation of the Retail Distribution Review ("RDR") since 2013 has increased the categories of new potential investors in Witan Pacific shares, given the increased level of qualification amongst Financial Advisers and the ending of the practice of product providers (principally open ended funds) paying commission to buyers of their units.

Another impact of the RDR has been an increase in the number of self-directed investors making their own investment decisions. Many among this group are already familiar with Witan Pacific, from the Witan Wisdom savings scheme or from buying the Company's shares via online stockbrokers and execution-only platforms. We expect interest from self-directed investors to remain strong in the future. Discretionary Managers and private client brokers, who invest on behalf of their clients, are also set to benefit from the RDR as increasing numbers of financial advisers outsource investment management to them.

The "AIFMD"

The AIFMD became UK law in July 2013. Although many of the issues covered were already addressed by current regulation, it introduced changes to the rules governing entities, such as the Company, which are responsible for managing investment funds (including organisations where aspects of the management are delegated).

The Company reviewed the detail of the new regulations and decided, following a careful analysis of the cost and benefit to shareholders of appointing a full AIFM, to apply for registration as a Small Registered UK AIFM under the UK regulation to the Directive. The registration as a Small Registered UK AIFM was subsequently approved by the FCA with effect from 1 April 2014. This policy will be kept under review in the future, in the light of all the relevant factors.

Details of how registration affects the Company's policy on gearing is set out on page 5 of the Annual Report and Accounts.

It remains the Company's policy to meet best practice in complying with all applicable regulations, as an important part of delivering returns to shareholders and safeguarding the Company's assets. The shape of future regulation continues to change (e.g. MiFID 2) and the Company, through its advisers and its membership of the AIC, aims to ensure that it responds appropriately.

The Strategic Report has been signed for and on behalf of the Board by

Sarah Bates

Chairman

23 April 2015

DIRECTORS' REPORT

Statutory information at 31 January 2015

The Directors have pleasure in presenting their Annual Report and Accounts and the audited Financial Statements of the Company for the year ended 31 January 2015.

Status of the Company 

The Company is an investment company as defined by Section 833 of the Companies Act 2006.The Company operates as an investment trust in accordance with Sections 1158-1159 of the Corporation Tax Act 2010 and the Investment Trust (Approved Company) (Tax) Regulations 2011. HM Revenue & Customs' ("HMRC") approval of the Company's status as an investment trust has been received in respect of the year ended 31 January 2015. This approval is subject to there being no subsequent enquiry under corporation tax self-assessment. In the opinion of the Directors, the Company has subsequently conducted its affairs so that it would continue to qualify.

The Company's shares are eligible for inclusion in an Individual Savings Account ("ISA").

Strategic Report

The Strategic Report on pages 2 to 22 of the Annual Report and Accounts has been prepared in accordance with the requirements of section 414 of the Companies Act 2006 ("section 417"). It is designed to provide shareholders with information about the Company's business and its results for the year ended 31 January 2015 and contains financial and where applicable, non-financial key performance indicators ("KPIs") and principal risks facing the Company. The Directors consider that, in line with the activities and objectives of the Company, the KPIs set out on page 18 of the Annual Report and Accounts are those which communicate the performance of the Company.

Internal controls and risk management systems

The Board has established an ongoing process for identifying, evaluating and managing significant risks faced by the Company. This is described in more detail on pages 38 and 39 of the Annual Report and Accounts.

Share capital

At 31 January 2015, there were 65,944,000 Ordinary shares of 25p each in issue (2014: 66,048,000 Ordinary shares). At the 2014 AGM the Directors were granted authority to buy-back up to a maximum of 9,890,477 Ordinary shares; such authority will expire at the conclusion of the 2015 AGM when the Directors will seek a renewal of the authority.

During the year to 31 January 2015 the Company repurchased a total of 104,000 Ordinary shares for cancellation with a nominal value of £26,000 and being 0.15% of the issued Ordinary share capital at 31 January 2015. The total consideration for these repurchases was £225,000.

Following the year end, the Company has repurchased a further 12,335 Ordinary shares to hold in treasury (as at 23 April 2015), with a nominal value of £3,084 and being 0.02% of the issued Ordinary share capital at 31 January 2015. The total consideration for these repurchases was £30,000. At 23 April 2015, there were 65,931,665 Ordinary shares of 25p each in issue. 12,335 Ordinary shares were held in treasury. Each Ordinary share carries one vote, therefore, the total votes in issue was 65,931,665.

The share purchases described above were performed in accordance with the Company's stated policy of buying back shares when the Company's shares are standing at a substantial and anomalous discount to their Net Asset Value.

Results and dividend

Revenue return after taxation	£'000
Net revenue after taxation	2,628
Dividends paid/payable:
Interim dividend of 2.10p per share	(1,385)
Final dividend of 2.45p per share	(1,615)
Residual revenue return after dividends	(372)
At 31 January 2015
Revenue reserve*	11,068

*Revenue reserve excludes the final proposed dividend for the year ended 31 January 2015 of £1,615,000, payable on 19 June 2015.

Administration and company secretarial services 

Fund accounting administration services are provided to the Company by BPSS pursuant to an Agreement dated 22 March 2005 as amended between the Company and BNP Paribas Fund Services UK Limited and novated to BPSS on 1 December 2008. The fee for these services is £40,000 per annum plus an ad valorem charge of £41,000. The Agreement with BPSS continues until terminated by either party on giving not less than six months' written notice.

Capita Asset Services ("CAS") provides company secretarial services pursuant to an Agreement dated 1 January 2013, for a fee of £45,000 per annum. The Agreement with CAS continues until terminated by either party on giving not less than six months' written notice. Other services provided by Capita included registering the Company under the Foreign Account Tax Compliance Act as well as iXBRL tagging of the Company's accounts. The Company paid £3,000 and £1,000 respectively for these services.

Directors

The Directors of the Company at the date of this Report, and their biographical details, are shown on pages 23 and 24 of the Annual Report and Accounts. Mrs Gillian Nott served as a Director during the year, retiring following the Company's Annual General Meeting held on 9 June 2014.

The Company maintained a directors' and officers' liability insurance policy throughout the financial year.

Information about securities carrying voting rights

No changes to these holdings have been notified as at the date of this report.

The following information is disclosed in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and DTR 7.2.6 of the FCA Disclosure and Transparency Rules.

·      In respect of the Company's shares, there are no:

(i)        restrictions on the transfer of or in respect of the voting rights of the Company's shares;

(ii)       agreements, known to the Company, between holders of securities regarding the transfer of such shares;

(iii)      special rights with regard to control of the Company attaching to any such shares; and

(iv)       restrictions on voting rights and agreements which may result in such restrictions.

·      Details of the significant direct or indirect holdings of the Company's shares are shown in the table below;

·      The rules on the appointment and replacement of the Directors are set out in the Company's Articles of Association (the Articles);

·      The Company may by ordinary resolution suspend or relax to any extent, in respect of any particular matter, any provision of the Articles prohibiting a Director from voting at a meeting of the Directors or of a Committee of the Directors;

·      Subject to the provisions of the Companies Act, the Articles, and to any directions given by special resolution, the business of the Company shall be managed by the Directors who may exercise all the powers of the Company. The powers shall not be limited by any special power given to the Directors by the Articles and a meeting of the Directors at which a quorum is present may exercise all powers exercisable by the Directors; and

·      There are no agreements:

(i)         to which the Company is a party that might affect its control following a takeover bid; and

(ii)         between the Company and its Directors concerning compensation for loss of office. 

Substantial share interests

	At 31 January 2015		At 31 March 2015
Significant Direct or Indirect Interests	Ordinary shares	% of Voting Rights	Ordinary shares	% of Voting Rights
Witan Wisdom Savings Scheme	10,003,707	15.17	9,917,780	15.04
Wells Capital Management	5,097,291	7.73	5,347,950	8.11
1607 Capital Partners LLC	3,946,026	5.98	3,949,882	5.99
Charles Stanley	3,373,044	5.12	3,334,286	5.06
Wesleyan Assurance	2,780,000	4.22	2,780,000	4.22
Rathbones	2,507,602	3.80	2,479,941	3.76
Alliance Trust Savings	1,992,414	3.02	2,042,788	3.10

Source: RDIR share register analysis 

Going concern

The activities of the Company, together with the factors likely to affect its future development, performance, financial position, its cash flows and liquidity position are described in the Strategic Report. In addition, the Company's policies and processes for managing its key risks are described in note 20 on pages 62 and 67 of the Annual Report and Accounts. 

The assets of the Company consist mainly of securities which are readily realisable, and, as at 31 January 2015 the Company's total assets less current liabilities were in excess of £184 million. As a consequence, the Directors believe that the Company continues to be well placed to manage its business risks successfully. After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing this Annual Report and Accounts.

Resolutions of the Annual General Meeting

A full explanation of the resolutions being proposed at the AGM may be found on pages 77 and 78 of the Annual Report and Accounts.

The Board considers that all of the resolutions are likely to promote the success of the Company and are in the best interests of the Company and its shareholders as a whole. The Directors unanimously recommend that you vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings.

Independent Auditors

PricewaterhouseCoopers LLP, the Independent Auditors of the Company, have indicated their willingness to continue in office. The Audit and Management Engagement Committee has responsibility for making a recommendation to the Board on the reappointment of the Independent Auditors. After careful consideration of the services provided to the Company during the year and a review of the effectiveness of the Independent Auditors; the Audit and Management Engagement Committee has recommended that PricewaterhouseCoopers LLP be reappointed as the Company's Independent Auditors. Accordingly, resolutions are to be proposed at the forthcoming AGM for their reappointment and to authorise the Directors to agree their remuneration for the ensuing year. When considering the continuing appointment of PricewaterhouseCoopers LLP the Company considered those matters set out on page 37 of the Annual Report and Accounts.

Disclosure of information to Auditors

The Directors who held office at the date of the approval of the Directors' Report confirm that, so far as they are aware, there is no relevant audit information of which the Company's Independent Auditors are unaware. Each Director has taken all steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's Independent Auditors are aware of this information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Greenhouse gas emissions

The Company has no employees nor property, and it does not combust any fuel or operate any facility. The Company does not purchase electricity, heat, steam or cooling for its own use. The Company outsources all services on a fee basis, and, as such it is not practical to attempt to measure or quantify emissions in respect of any outsourced energy use. The Directors consider that the activities of the Company do generate a small amount of Greenhouse gases in the form of incidental transport, use of personal computers and other activities which it is not required to report on. Accordingly, the measurable amount of carbon dioxide equivalent produced by the Company during the year was zero tonnes. However, since the year end, the Board travelled to Asia and America to meet with the Investment Managers and the Company will report on the impact of that travel in the Annual Report and Accounts for the year ending 31 January 2016.

Annual General Meeting

The AGM of the Company will be held on 10 June 2015 at 12 noon in the Piper Room, Grocers' Hall, Princes Street, London EC2R 8AD.

Post year end events

Save as otherwise disclosed, there have been no important events to disclose since the end of the year under review. 

Listing Rule 9.8.4

The disclosures required to be made under Listing Rule 9.8.4 are not applicable to the Company.

By order of the Board

Capita Company Secretarial Services Limited

Company Secretary

23 April 2015

Statement of Directors' responsibilities in respect of the Annual Report and Accounts, the Directors' remuneration report and the Financial Statements

The Directors are responsible for preparing the Annual Report and Accounts, the Directors' Remuneration Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the net return or loss of the Company for that year. In preparing these financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable UK Accounting Standards have been followed subject to any material departures disclosed and explained in the financial statements; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006. 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 financial statements are published on www.witanpacific. com, which is a website maintained by the Company's Executive Manager, Witan Investment Services Limited ("WIS"). The Directors are responsible for the maintenance and integrity of the Company's website. The work carried out by the Independent Auditors does not involve consideration of the maintenance and integrity of the website and accordingly, the Independent Auditors accept no responsibility for any changes that have occurred to the Annual Report and Accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.  The Directors consider that the Annual Report and Accounts as a whole, are fair, balanced and understandable and provide the necessary information for shareholders to assess the Company's performance, business model and strategy.

Statement under DTR 4.1.12 

Each of the Directors, whose names and functions are listed on pages 23 and 24 of the Annual Report and Accounts, confirm that, to the best of their knowledge:

·      the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net return of the Company;

·      the Strategic 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 it faces.

On behalf of the Board

Sarah Bates

Chairman

23 April 2015

Income statement for the year ended 31 January 2015

			Year ended 31 January 2015			Year ended 31 January 2014
	Revenue notes	Capital notes	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Gains/(losses) on investments held at fair value through profit or loss		9	-	25,314	25,314	-	(14,001)	(14,001)
Exchange losses		16	-	(68)	(68)	-	(162)	(162)
Investment income	2		4,464	-	4,464	4,978	-	4,978
Management fees	3		(830)	-	(830)	(811)	-	(811)
Performance fees		3	-	(103)	(103)	-	276	276
Other expenses	4	16	(722)	(43)	(765)	(817)	(38)	(855)
Net return/(loss) before finance charges and taxation			2,912	25,100	28,012	3,350	(13,925)	(10,575)
Finance charges	5		(17)	-	(17)	(161)	-	(161)
Net return/(loss) on ordinary activities before taxation			2,895	25,100	27,995	3,189	(13,925)	(10,736)
Taxation on ordinary activities	6	6	(267)	-	(267)	(279)	-	(279)
Net return/(loss) on ordinary activities after taxation			2,628	25,100	27,728	2,910	(13,925)	(11,015)
Basic and diluted return/(loss) per Ordinary share - pence	7	7	3.98	38.05	42.03	4.41	(21.09)	(16.68)

All revenue and capital items in the above statement derive from continuing operations. The total columns of this statement represent the profit and loss account 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.

There is no material difference between the net return/(loss) on ordinary activities before taxation and the net return/(loss) for the financial year stated above and their historical costs equivalents.

Reconciliation of movements in shareholders' funds for the year ended 31 January 2015

	Notes	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 2015
At 1 February 2014		16,512	5	41,059	90,761	11,409	159,746
Net return on ordinary activities after taxation		-	-	-	25,100	2,628	27,728
Purchase of own shares		(26)	-	26	(225)	_	(225)
Dividends paid	8	-	-	-	-	(2,969)	(2,969)
At 31 January 2015		16,486	5	41,085	115,636	11,068	184,280
Year ended 31 January 2014
At 1 February 2013		16,512	5	41,059	104,686	11,372	173,634
Net (loss)/return on ordinary activities after taxation		-	-	-	(13,925)	2,910	(11,015)
Dividends paid	8	-	-	-	-	(2,873)	(2,873)
At 31 January 2014		16,512	5	41,059	90,761	11,409	159,746

Balance sheet at 31 January 2015 

	Notes	2015 £'000	2014 £'000
Fixed assets
Investments held at fair value through profit or loss	9	178,620	164,807
Current assets
Debtors	10	986	516
Cash at bank and in hand		5,893	4,041
		6,879	4,557
Creditors: amounts falling due within one year
Bank loan	11	-	(8,500)
Other	12	(1,219)	(1,118)
		(1,219)	(9,618)
Net current assets/(liabilities)		5,660	(5,061)
Total assets less current liabilities		184,280	159,746
Provisions for liabilities and charges	13	-	-
Net assets		184,280	159,746
Capital and reserves
Called up share capital	14	16,486	16,512
Share premium account		5	5
Capital redemption reserve	15	41,085	41,059
Capital reserves	16	115,636	90,761
Revenue reserve	16	11,068	11,409
Total shareholders' funds		184,280	159,746
Net Asset Value per Ordinary share - pence (basic and diluted)	17	279.45	241.86

Cash flow statement for the year ended 31 January 2015 

	Notes	2015 £'000	2015 £'000	2014 £'000	2014 £'000
Net cash inflow from operating activities	18		1,272		2,953
Servicing of finance
Bank and loan interest paid		(20)		(160)
Net cash outflow from servicing of finance			(20)		(160)
Capital expenditure and financial investment
Purchases of investments		(24,086)		(31,767)
Sales of investments		36,496		33,747
Capital expenses paid		(44)		(36)
Net cash inflow from financial investment			12,366		1,944
Equity dividends paid			(2,969)		(2,873)
Net cash inflow before financing			10,649		1,864
Financing
Repayment of loan		(8,500)		-
Repurchase of own shares		(225)		-
Net cash outflow from financing			(8,725)		-
Increase in cash			1,924		1,864
Reconciliation of net cash flow to movements in net debt
Increase in cash as above			1,924		1,864
Net cash outflow from repayment of loan			8,500		-
Exchange movements			(72)		(162)
Movement in net cash in the year			10,352		1,702
Net debt at start of year			(4,459)		(6,161)
Net cash/(debt) at end of year	19		5,893		(4,459)

Notes to the financial statements for the year ended 31 January 2015

1  Significant accounting policies

(a) Basis of accounting

The financial statements have been prepared on a going concern basis and under the historical cost convention, modified to include revaluation of fixed asset investments and derivative financial instruments at fair value through profit or loss and in accordance with the Companies Act 2006, accounting standards applicable in the United Kingdom and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' revised January 2009 (the revised SORP). The accounting policies have been applied consistently throughout the year. 

Presentation of Income Statement

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement.

(b) Valuation of investments

Listed investments have been designated by the Board as held at fair value through profit or loss and accordingly are valued at fair value, deemed to be bid market prices for quoted investments. Investments in Level 2 consist of unlisted reportable funds within the portfolio, GaveKal Asian Opportunities UCITS and Aberdeen Global Indian Equity UCITS. These are priced daily using their Net Asset Value, which is the fair value.

Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as "Gains or losses on investments held at fair value through profit or loss". Also included within this caption are transaction costs in relation to the purchase or sale of investments, including the difference between the purchase price of an investment and its bid price at the date of purchase. All purchases and sales are accounted for on a trade date basis.

(c) Foreign currency

The results and financial position of the Company are expressed in pounds sterling, which is the functional and presentation currency of the Company. The Directors, having regard to the currency of the Company's share capital and the predominant currency in which the Company operates, have determined the functional currency to be pounds sterling. The results and financial position of the Company are therefore expressed in pounds sterling.

Transactions recorded in foreign currencies during the year are translated into sterling at the appropriate daily exchange rates. Monetary assets and liabilities denominated in overseas currencies (including equity investments) at the balance sheet date are translated into sterling at the exchange rates ruling at that date.

Any gains or losses on the translation of foreign currency balances, whether realised or unrealised, are taken to the capital or the revenue return of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature.

(d) Income

Income from equity shares is brought into the revenue return of the Income Statement (except where, in the opinion of the Directors, its nature indicates it should be recognised as capital return) on the ex-dividend date or, where no ex-dividend date is quoted, when the Company's right to receive payment is established.

Dividends receivable are accounted for on the basis of gross income actually receivable, without adjustment for the tax credit attaching to the dividends.

Where the Company has elected to receive its dividends in the form of additional shares rather than in cash, the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone is recognised in the capital reserve.

Bank interest, underwriting commission and stock lending fees are accounted for on an accruals basis.

(e) Expenses including finance costs

Finance costs are accounted for on an accruals basis. Finance costs are fully allocated to revenue.

Management fee rebates of the fee on the GaveKal Asian Opportunities (UCITS Fund) are credited against Management fees paid.

All expenses are charged to the revenue return of the Income Statement, with the exception of the following which are charged to the capital return of the Income Statement:

·      performance fees/repayments insofar as they relate to capital performance;

·      expenses incurred buying back the Company's own shares; and

·      expenses incidental to the acquisition or disposal of investments.

All expenses are accounted for on an accruals basis.

(f)  Taxation

The tax effect of different items of expenditure is allocated between capital and revenue on the marginal basis using the Company's effective rate of corporation taxation for the accounting period.

Deferred taxation is provided on all timing differences that have originated but not been reversed by the balance sheet date other than those differences regarded as permanent. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the reversal of timing differences can be deducted. Any liability to deferred tax is provided at the average rate of tax expected to apply. Deferred tax assets and liabilities are not discounted to reflect the time value of money.

(g) Bank borrowings

Interest bearing bank loans are recorded as the proceeds are received, net of direct issue costs. Finance charges, including interest payable, premiums on settlement or redemption and direct issue costs are accounted for on an accruals basis in the Income Statement using the effective interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

(h) Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business being investment business.

(i)  Repurchase of Ordinary shares

The cost of repurchasing Ordinary shares including related stamp duty and transaction costs is taken directly to equity and dealt with in the Reconciliation of Movements in Shareholders' Funds. Share repurchase transactions are accounted for on a trade date basis.

The nominal value of Ordinary share capital repurchased for cancellation is transferred out of share capital and into the capital redemption reserve.

(j)  Capital reserves

Capital reserve arising on investments sold

The following transactions are accounted for in this reserve:

·      gains and losses on the realisation of fixed asset investments;

·      realised exchange differences of a capital nature;

·      costs of professional advice, including irrecoverable VAT, relating to the capital structure of the Company;

·      other capital charges and credits charged or credited to this account in accordance with the above policies; and

·      cost of purchasing Ordinary share capital.

Capital reserve arising on investments held

The following transactions are accounted for in this reserve:

·      increase and decrease in the valuation of investments held at year end; and

·      unrealised exchange differences of a capital nature.

(k) Dividends payable

In accordance with FRS 21 final dividends are not accrued in the financial statements unless they have been approved by shareholders before the balance sheet date. Interim dividends are recorded in the financial statements when they are paid. Dividends payable to equity shareholders are recognised in the Reconciliation of Movements in Shareholders' Funds when they have been approved by shareholders in the case of a final dividend, or paid in the case of an interim dividend and become a liability of the Company. 

(l)  Critical accounting estimates

The preparation of financial statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.

The critical estimates and assumptions relate, in particular, to the calculation of performance fees, as summarised in note 3 below. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

2 Investment income

	2015 £'000	2014 £'000
Income from investments held at fair value through profit or loss:
Overseas dividends	3,727	4,293
UK dividends	361	545
Scrip dividends	374	139
Total dividend income	4,462	4,977
Other income:
Bank interest	1	1
Underwriting commission	1	-
Total other income	2	1
Total income	4,464	4,978

    3  Management and performance fees

	2015 £'000	2014 £'000
Charged to the revenue return:
Management fee*	959	949
Management fee rebates†	(129)	(138)
Total management fees	830	811
Charged/(credited) to the capital return:
Performance fees	103	(276)

* The management fee stated above includes fees paid to Witan Investment Services Limited of £218,000 (2014: £220,000).

^† This figure relates to a rebate of management fees associated with the GaveKal Asia Opportunities UCITS Fund.

On 27 May 2005, the Company appointed Witan Investment Services Limited as Executive Manager and Aberdeen Asset Managers Limited and Nomura Asset Management U.K. Limited as Investment Managers. In April 2012, the Company appointed Matthews International Capital Management LLC and GaveKal Capital Limited to replace Nomura. Each Management Agreement can be terminated at one month's notice in writing. Each Investment Manager is entitled to a base management fee, at rates between 0.20% and 0.75% per annum, calculated according to the value of the assets under their management; Aberdeen is also entitled to a performance fee based on relative outperformance against the MSCI AC Asia Pacific Index (sterling adjusted total return). The performance fee is calculated according to investment performance over a three year rolling period and is payable at a rate of 15% of the calculated outperformance relative to the benchmark (subject to a cap).

For the year ended 31 January 2015, the investment management fee increased as the proportion of assets managed by Matthews International Capital Management LLC ("Matthews") was increased. Matthews' base management fee is higher than that of Aberdeen (who previously managed the transferred portion) but they do not have a performance fee.

The provisions included in the Income Statement at 31 January 2015, are calculated on the actual performance of Aberdeen relative to the benchmark index. The provision assumes that both the benchmark index remains unchanged and that Aberdeen's assets under management perform in line with the benchmark index to 31 May 2015, being the date the next performance period ends. In addition, provisions have been made for the performance periods ending 31 May 2016 and 31 May 2017, on the assumption that Aberdeen performs in line with the benchmark to each period end. The total of these provisions amounts to £nil.

4 Other expenses

	2015 £'000	2014 £'000
Auditors' remuneration:
for audit services	29	28
for non-audit services - tax**	4	23
Custody fees	61	65
Directors' emoluments: fees for services to the Company	141	127
Marketing*	173	189
Printing and postage	34	27
Loan commitment fees	8	39
Secretarial and Administration fees***	130	128
Directors' and Officers' liability insurance	8	8
Registrars' fees	22	22
Legal fees	10	53
Sundry expenses	102	108
	722	817

*  The marketing expense stated above includes fees paid to Witan Investment Services Limited of £75,000 (2014: £75,000).

** Charges for other services provided by the Independent Auditors in the year ended 31 January 2015 were in relation to tax compliance work.

*** Secretarial fees includes registration for FATCA and iXBRL filing by Capita.

5 Finance charges 

	2015 £'000	2014 £'000
On bank loans and overdrafts repayable within one year - see also note 11	17	161

6 Taxation on ordinary activities

a) Analysis of tax charge for the year

	2015 Revenue return £'000	2015 Capital return £'000	2015 Total £'000	2014 Revenue return £'000	2014 Capital return £'000	2014 Total £'000
Overseas taxation	267	-	267	279	-	279
Taxation on ordinary activities	267	-	267	279	-	279

(b) Factors affecting the charge for the year

The standard rate of corporation tax in the UK changed from 23% to 21% with effect from 1 April 2014. Accordingly, the Company's profits for this accounting period are taxed at an effective rate of 21.33% (2014: 23.17%).

The taxation assessed for the year is lower than the effective rate of corporation tax in the UK for a large company. The differences are explained below.

	2015 Revenue return £'000	2015 Capital return £'000	2015 Total £'000	2014 Revenue return £'000	2014 Capital return £'000	2014 Total £'000
Return/(loss) on ordinary activities before tax	2,895	25,100	27,995	3,189	(13,925)	(10,736)
Corporation tax at 21.33% (2014: 23.17%)	618	5,354	5,972	739	(3,227)	(2,488)
Effects of:
Non-taxable overseas dividends	(845)	-	(845)	(989)	-	(989)
Non-taxable UK dividends	(77)	-	(77)	(126)	-	(126)
Overseas taxation	267	-	267	279	-	279
Disallowed expenses	18	9	27	22	-	22
Income taxable in different years	3	-	3	2	-	2
Excess management expenses
and finance costs	283	22	305	352	(55)	297
Net capital returns not subject to tax*	-	(5,385)	(5,385)	-	3,282	3,282
Current tax charge	267	-	267	279	-	279

*    These items are not subject to corporation tax within an investment trust company provided the Company obtains approval from HM Revenue & Customs that the requirements of Section 1158-1159 of the Corporation Tax Act 2010 have been met.

(c) Deferred tax

The Company has not recognised a deferred tax asset of £2,078,000 (2014: £1,788,000) arising as a result of excess management expenses and interest paid. These expenses will only be utilised if the Company has profits chargeable to corporation tax in the future. It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and deficits and therefore no deferred tax asset has been recognised.

(d) Protective claim

Witan Pacific has filed protective claims with HMRC and the UK High Court in order to seek recovery of potentially overpaid taxes from HMRC in relation to the UK's pre - 2009 dividend tax rules. The claims cover historic periods in which Witan Pacific paid UK tax under Schedule D Case V. In such periods, Witan Pacific is seeking recovery of the tax paid together with interest on a compound basis. No tax or related interest recovery has been accrued or recognised as a contingent asset, as the outcome of lead cases in this area is expected to remain uncertain for several years.

7  Return/(loss) per Ordinary share

The total return per Ordinary share is based on the net return attributable to the Ordinary shares of £27,728,000 (2014 net loss: £11,015,000) and on 65,967,247 Ordinary shares (2014: 66,048,000) being the weighted average number of shares in issue during the year.

The total return can be further analysed as follows:

	2015 £'000	2014 £'000
Revenue return	2,628	2,910
Capital return/(loss)	25,100	(13,925)
Total return/(loss)	27,728	(11,015)
Weighted average number of Ordinary shares	65,967,247	66,048,000
Revenue return per Ordinary share - pence	3.98	4.41
Capital return/(loss) per Ordinary share - pence	38.05	(21.09)
Total return/(loss) per Ordinary share - pence	42.03	(16.68)

The Company does not have any dilutive securities.

8 Dividends

Dividends on Ordinary shares	Record date	Payment date	2015 £'000	2014 £'000
Final dividend (2.30p) for the year ended 31 January 2013	25 May 2013	21 June 2013	-	1,519
Interim dividend (2.05p) for the year ended 31 January 2014	4 October 2013	18 October 2013	-	1,354
Final dividend (2.40p) for the year ended 31 January 2014	23 May 2014	20 June 2014	1,584	-
Interim dividend (2.10p) for the year ended 31 January 2015	10 October 2014	20 October 2014	1,385	-
			2,969	2,873

The proposed final dividend for the year ended 31 January 2015 is subject to approval by shareholders at the AGM and has not been included as a liability in the financial statements.

The total dividend payable in respect of the financial year which meets the requirements of Section 1158 of the Corporation Tax Act 2010 is set out below.

	2015 £'000
Revenue available for distribution by way of dividend for the year	2,628
Interim dividend 2.10p for the year ended 31 January 2015	(1,385)
Proposed final dividend of 2.45p for the year ended 31 January 2015
(based on 65,931,665 Ordinary shares in issue at 29 April 2015)	(1,615)
Shortfall for year	(372)

All current year income has been distributed, the shortfall of £372,000 has been transferred from revenue reserves.

9 Investments held at fair value through profit or loss

	Total £'000
Cost at 31 January 2014	139,958
Investment holding gains at 31 January 2014	24,849
Valuation at 31 January 2014	164,807
Movements in the year:
Purchases at cost	25,281
Sales - proceeds	(36,782)
- gains on sales	4,180
Increase in investment holding gains	21,134
Valuation at 31 January 2015	178,620
Cost at 31 January 2015	132,637
Investment holding gains at 31 January 2015	45,983
	178,620

Purchase transaction costs for the year ended 31 January 2015 were £36,000 (2014: £43,000 including transition costs). Sale transaction costs for the year ended 31 January 2015 were £54,000 (2014: £56,000 including transition costs). These comprise mainly charges and commission.

Gains on investments

		2015 £'000	2014 £'000
Gains on investments sold based on historical cost		4,180	6,915
Less: amounts recognised as unrealised in previous years	(3,655)		(6,233)
Gains based on carrying value at previous balance sheet date	525		682
Net movement in investment holding gains in the year	24,789		(14,683)
Gains/(losses) on investments held at fair value through profit or loss	25,314		(14,001)

Substantial interests

At 31 January 2015 the Company held more than 3% of one class of the share capital of one of the undertakings held as investments (2014: one).

This consisted of GaveKal Asian Opportunities UCITS Fund and was 6.20% at 31 January 2015 (31 January 2014: 4.84%).

10 Debtors

	2015 £'000	2014 £'000
Sales for future settlement	505	219
Other debtors	23	5
Prepayments and accrued income	454	292
Foreign exchange contract	4	-
	986	516

11 Creditors: amounts falling due within one year

	2015 £'000	2014 £'000
Bank loan	-	8,500

The effective interest rate on the loan at 31 January 2014 was 1.9%.

The bank loan was a multi-currency revolving advance facility with this commitment period ending on 20 August 2014. The Company repaid all outstanding sums connected with this facility on the 28 March 2014.

12 Creditors: amounts falling due within one year

Other	2015 £'000	2014 £'000
Purchases for future settlement	821	-
Accruals	398	550
Performance fee accrual	-	568
	1,219	1,118

13 Provisions for liabilities and charges

	2015 £'000	2014 £'000
At 1 February	-	212
Change in provision for performance fees	-	(212)
At 31 January	-	-

 Provisions in respect of future years' performance fee

The figures above represent the estimated performance fees payable for the 3 year performance fee periods ending 31 May 2015, 31 May 2016 and 31 May 2017. Any accrual is based on actual performance to 31 January 2015 and the assumption that Aberdeen performs in line with the benchmark from 31 January 2015 to the end of each fee period. Changes in the level of accrual for future performance periods could arise for one of three principal reasons: a change in the degree of relative performance, the time elapsed (since this would increase the proportion of the rolling three-year performance period to which the performance calculation would be applied) or the termination of Aberdeen's contract.

14 Called up share capital

	Authorised		Issued and fully paid
Equity share capital	Number	£'000	Number	£'000
Ordinary shares of 25p each:
Balance brought forward	280,000,000	70,000	66,048,000	16,512
Shares purchased by the Company*	-	-	(104,000)	(26)
Balance carried forward	280,000,000	70,000	65,944,000	16,486

*   104,000 Ordinary shares were purchased and cancelled during the year (2014: nil) at a total cost of £225,000 (2014: nil).

15 Capital redemption reserve

			2015 £'000	2014 £'000
Balance brought forward			41,059	41,059
Transferred from share capital on purchase of Ordinary shares			26	-
Balance carried forward			41,085	41,059

16 Reserves

	Capital reserve arising on investments sold £'000	Capital reserve arising on investments held £'000	Capital reserve total £'000	Revenue reserve £'000
Balance brought forward	65,912	24,849	90,761	11,409
Movement during the year:
Gains on investments sold	525	-	525	-
Transfer on disposal of investments	3,655	(3,655)	-	-
Increase in investment holding gains	-	24,789	24,789	-
Exchange losses	(72)	4	(68)	-
Change in Performance fee charge	(103)	-	(103)	-
Other capital charges	(43)	-	(43)	-
Purchase of own shares	(225)	-	(225)	-
Revenue return for the year	-	-	-	2,628
Dividends paid	-	-	-	(2,969)
Balance carried forward	69,649	45,987	115,636	11,068

Under the terms of the Company's Articles of Association, sums standing to the credit of Capital Reserves are available for distribution only by way of redemption or purchase of any of the Company's own shares and by way of dividend. The Company may only distribute accumulated "realised" profits.

17 Net Asset Value per Ordinary share

Net Asset Values are based on net assets of £184,280,000 (2014: £159,746,000) and on 65,944,000 (2014: 66,048,000) Ordinary shares in issue at the year end.

18 Reconciliation of net return/(loss) before finance charges and taxation to net cash inflow from operating activities

			2015 £'000	2014 £'000
Net return/(loss) before finance charges and taxation			28,012	(10,575)
(Less)/add: net capital (return)/loss before finance charges and taxation			(25,100)	13,925
Net revenue return before finance charges and taxation			2,912	3,350
Scrip dividends			(374)	(139)
(Increase)/decrease in accrued income and other debtors			(180)	23
Decrease in creditors			(716)	(278)
Expenses charged to capital			(103)	276
Overseas withholding tax suffered			(267)	(279)
Net cash inflow from operating activities			1,272	2,953

19 Analysis of changes in net funds/(debt)

	1 February 2014 £'000	Cash flow £'000	Exchange movement £'000	31 January 2015 £'000
Net cash
Cash at bank	4,041	1,924	(72)	5,893
Debt
Debt falling due within one year	(8,500)	8,500	-	-
Net funds/(debt)	(4,459)	10,424	(72)	5,893

20 Related party transactions disclosures 

Directors' transactions

Dividends totalling £6,738 (2014: £7,143) were paid in the year ended 31 January 2015 in respect of Ordinary shares held by the Company Directors and details of Directors' remuneration may be found in the Directors' remuneration report on pages 40 to 43 of the Annual Report and Accounts.

There have been no other related party transactions.

21 Subsequent events 

Since the year end the Company has bought back 12,335 Ordinary shares at a cost of £30,000.

Ten year record (unaudited)

Assets at 31 January (£'000)

	2005*	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015
Total assets less current liabilities (excluding loans and Yen convertible bonds)
	214,058	158,591	135,595	130,626	104,096	137,866	170,182	163,411	182,346	168,246	184,280
Deferred taxation/provision
for liabilities and charges	(34)	(38)	(46)	(43)	(30)	-	-	(359)	(212)	-	-
Loans	(14,845)	(3,000)	(3,000)	(3,000)	(3,000)	(5,900)	(5,900)	(7,000)	(8,500)	(8,500)	-
Available for Ordinary shares	199,179	155,553	132,549	127,583	101,066	131,966	164,282	156,052	173,634	159,746	184,280

Net Asset Value at 31 January

	2005*	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015
NAV per share	129.6p	179.2p	181.9p	188.9p	152.3p	199.0p	248.0p	235.6p	262.9p	241.9p	279.5p

Share Price at 31 January

	2005*	2006*	2007	2008	2009	2010	2011	2012	2013	2014	2015
Mid-market price per share	115.0p	168.0p	161.5p	161.8p	122.8p	165.0p	212.0p	193.6p	229.3p	213.5p	244.0p
Discount to NAV (%)	11.3	6.3	11.2	14.4	19.4	17.1	14.5	17.8	12.8	11.7	12.7
Share price High	121.7p	169.3p	177.5p	188.0p	176.0p	177.0p	221.6p	221.5p	231.0p	265.0p	248.0p
Share price Low	98.5p	113.4p	138.5p	156.0p	110.0p	106.2p	163.0p	174.9p	183.3p	213.0p	208.0p

Total Returns (per AIC)

	1 year to 31 January 2015 %	5 years to 31 January 2015 %	10 years to 31 January 2015 %
Total shareholder return	16.6	62.4	144.5
Net asset value	17.6	52.1	144.2

Revenue for the year ended 31 January

	2005*	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015
Available for Ordinary
shares (£'000)	1,200	1,445	1,430	1,407	2,344	1,654	2,421	3,015	3,162	2,910	2,628
Earnings per share	0.74p	1.33p	1.75p	2.00p	3.50p**	2.49p	3.65p	4.55p	4.78p	4.41p	3.98p
Dividends per share	1.05p	1.33p	1.50p	1.65p	2.85p†	2.10p	2.80p	4.00p	4.30p	4.45p	4.55p

*   Restated for changes in accounting policies in respect of valuation of investments and dividends payable.

**  Includes management fee rebate.

^†       A special dividend of 1.00p per share was paid in the year ended 31 January 2009.

Performance (rebased at 31 January 2005)

	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015
NAV per share*	100.0	139.1	142.0	148.6	119.6	160.3	201.6	192.6	222.5	207.7	245.1
Benchmark*	100.0	140.6	141.1	144.8	118.9	154.1	184.9	173.8	193.1	193.6	226.7
Mid-market price per share	100.0	147.4	142.8	144.3	110.5	151.6	197.1	182.5	223.0	211.3	246.5
Earnings per share	100.0	179.7	236.5	270.3	473.0	336.5	493.2	614.9	645.9	595.9	537.8
Dividends per share	100.0	126.7	142.9	157.1	271.4**	200.0	266.7	381.0	409.5	423.8	433.3
RPI	100.0	102.4	106.7	111.1	111.2	115.4	120.9	126.0	130.1	133.7	135.2

* Source: Datastream NAV per share, Benchmark and Shareprice are Total Returns including reinvested dividends.

** A special dividend was also paid in the year ended 31 January 2009.

Cost of running the Company (Ongoing Charge) for the year ended 31 January (formally known as the Total Expense Ratio)

	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015
Ongoing Charge/TER** as a percentage of average net assets:
- excluding performance fees	0.9	0.9	0.8	0.7	0.8	0.8	0.7	0.8	1.0	1.0	1.1
- including performance fees	0.6†	1.0	0.9	0.8	1.1	1.3	1.2	1.5	1.3	0.9	1.1

^†    Includes management fee rebate.

**   TER (total expense ratio) figures shown for 2005 to 2011.

Gearing at 31 January

	2005*	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015
Gearing	5.9	(1.2)	0.6	0.9	(1.6)	1.0	2.7	3.4	4.2	3.2	Nil**

* Restated for changes in accounting policies in respect of valuation of investments and dividends payable.

** Since repayment of the loan on 28 March 2014, the Company has had no borrowings.

Definitions 

Prior charges	All convertible bonds, loans, overdrafts, etc., used for investment purposes.
Operating costs	All costs charged to revenue and capital, except performance related management fees, all taxation and taxation relief, finance charges, the costs of purchase of share capital and the costs of buying and selling investments.
Gearing	Calculated as the difference between the market value of investments and net assets as a percentage of net assets. (Equivalent to AIC definition of net gearing).
Total assets	Total assets less current liabilities before deducting prior charges.
NAV	Net Asset Value (assuming prior charges at balance sheet value).
RPI	All-items Retail Price Index.
Average net assets	Average of net assets at end of each quarter.
Average total assets	Average of total assets at end of each quarter.
NAV total return	Return on net assets per share assuming that all dividends paid to shareholders were reinvested.
Share price total return	Return to the investor on mid-market prices assuming that all dividends received were reinvested.
AIC	Association of Investment Companies.
TER/Ongoing charges	Total expense ratio/The total of the recurring operating and investment management costs expressed as a percentage of net assets.

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 January 2015. The statutory accounts for the year ended 31 January 2015 have been finalised and audited but have not yet been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 January 2015 have been finalised on the basis of the information presented by the directors in this Annual Financial Report announcement and will be delivered to the Registrar of Companies shortly.

The audited annual financial report will be available to shareholders shortly. Copies may be obtained during normal business hours from the Company's Registered Office via the Company Secretary, Capita Company Secretarial Services Limited, 40 Dukes Place, London EC3A 7NH and are available on the Company's website at www.witanpacific.com.

 

END

 

 

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