Annual Financial Report

RNS Number : 1753D

Witan Pacific Investment Trust PLC

25 April 2013

 



WITAN PACIFIC INVESTMENT TRUST PLC

(the "Company")

Annual Report and Financial Statements for the year ended 31 January 2013

Witan Pacific Investment Trust plc announces that its 2013 Annual Report 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 2013 Annual Report. Any references to page numbers or sections in the following text are references to pages and sections in that report. The notes to the accounts in the following text are abbreviated notes to the accounts, the full notes to the accounts can be found in the 2013 Annual Report on pages 44 to 56.

Chairman's statement

Highlights

·     NAV total return of +14.7%

·     Share price total return of +22.1%

·     3.6% NAV outperformance vs. the benchmark

·     Final dividend of 2.3p, making 4.3p for the year (+7.5%)

·     Successful transition to more "active" investment policy

·     Discount narrowed from 17.8% to 12.8%

Performance

The Board of your Company took the innovative step in 2005 of moving to a multi-manager structure. I am pleased to say that this decision has paid off and since then the trust has outperformed its benchmark, by some 1.9% per annum. Asian markets have been strong since May 2005 and over that period the NAV total return per share has grown by 115.7%. Following the changes made in April 2012, the Company now has three managers, Aberdeen Asset Managers Limited ("Aberdeen"), one of the initial appointments and two new managers Matthews International Capital Management LLC ("Matthews") and Marshall Wace GaveKal Asia Limited ("GaveKal"). All three managers, while having quite different investment strategies, have in common a fundamentally-driven rather than index-led approach to portfolio construction. Further details of each Manager's approach and performance are given in the Investment Review section of the Business Review below.

The Company's performance during the year was good. The NAV total return rose by 14.7%, 3.6% ahead of the regional benchmark, which saw a total return of 11.1%. During the year, the discount narrowed from 17.8% to 12.8%, as a result of which the total shareholder return during the year was 22.1%. It is encouraging to see the strong underlying investment performance being recognised by increased demand for the Company's shares in this way, reversing the previous year's widening in the discount.

The performance of the two new managers, Matthews and GaveKal, has been strong both in absolute terms and relative to the Company's benchmark since appointment. Aberdeen also significantly outperformed during the year. There was a benefit from diversification as the three managers did well at different times during the period.

Market background

Markets spent much of the first half of 2012 continuing 2011's preoccupation with the Euro's woes, a slowdown in China and the threat of rising commodity prices. Market volatility was less intense, since these risks had already been partly factored into investor expectations.

During the second half of our financial year, aside from signs that crisis management had improved in Europe, there were indications that the slowdown in growth in China was moderating. Furthermore, a new government was elected in Japan, committed to introducing economic policies to stimulate growth and end the long period of deflation which had weighed on confidence. This raised hopes that its underperforming economy would start to pull its weight, allowing the Tokyo stock market to share in the positive returns seen elsewhere in the region.

Overall, markets in the region provided a total return of just over 11% in sterling terms during the year to 31 January 2013.

A focused investment approach with three different managers

We have put in place a multi-manager strategy so that shareholders can benefit from several investment styles, which could smooth out the volatility of the combined returns. The vital but difficult task is to identify high calibre investment managers capable of delivering material outperformance in combination.

Following the changes in April 2012, the Company now operates a three-manager structure. These managers bring a range of skills to the management of the portfolio, although each has the same objective, which is to outperform the Company's regional equity benchmark. They approach this in rather different ways.

Aberdeen has continued to manage its portion of the portfolio (currently c.54%) in accordance with its stock-picking approach, independent of index weightings, focused on well-managed, strongly capitalised companies with scope to grow their business.

Matthews has managed c.36% of the Company's portfolio since April 2012, in accordance with its Asia Dividend strategy, investing in a portfolio of 50-80 stocks. These are chosen across the market capitalisation spectrum using a bottom-up approach, with an emphasis on a buy and hold strategy blending yield with potential dividend growth.

GaveKal manages approximately 10% of the portfolio, taking a distinct approach, varying the asset allocation between equities, bonds and cash, as well as selecting companies on their merits. The combination of stock picking and top-down decisions on asset allocation seeks to capture the benefits of the region's growth, while reducing absolute volatility and downside risk.

RDR

The implementation of the Retail Distribution Review ("RDR") from the start of 2013 has introduced changes in the qualification requirements for Financial Advisers as well as ending sales commissions paid by product providers to advisers. It is expected that this will 'level the playing field' between open-ended funds, whose managers were previously able to pay commissions to intermediaries, and closed-ended investment companies, such as Witan Pacific. It is very possible therefore that RDR may bring increased interest in the Investment Trust Sector, which could lead to increased demand for the Company's shares.

Ongoing Charges (formerly Total Expense Ratio)

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 0.98% (2012: 0.76%). The principal reason for the rise was the higher base management fee payable to the new managers, who do not have a performance fee structure. Aberdeen continues to have a performance fee structure and since it outperformed its benchmark, a performance fee has been accrued for the year. Including provision for this, the ongoing charges figure was 1.29% (2012: 1.52%). The Company's total return of 14.7% is after deduction of all fees and expenses.

The Board will continue to manage costs closely in accordance with its objective of keeping the ongoing charges figure (excluding performance fees) below 1%.

Dividend

Overall, the Company's revenue earnings per share rose by 5.1%, to 4.78p per share. Although the combined income from the new managers exceeded that from the portfolio held by the previous manager, the base management fees were also higher because there is no performance element to their fees. The Company's revenues grew more slowly than in recent years, as dividend growth slowed with economic activity while a weaker Yen reduced the value of Japanese dividends when translated into sterling.

The Company recognises the importance to investors of regular and growing dividends, reflected in its policy of real dividend growth and the introduction of twice-yearly payments since 2012. In addition to the 2p per share interim dividend paid in October 2012, the Board is proposing a final dividend of 2.3p per share, making a total of 4.3p, a 7.5% increase on last year's payment of 4.0p. Subject to shareholder approval, the final dividend will be paid on 21 June 2013 to shareholders on the register at the close of business on 24 May 2013 (ex-dividend 22 May 2013). This increase is well ahead of the rise of 3.3% in the UK retail price index during the year.

The growth in dividends is subject to market conditions but the Board notes that the dividend proposed for 2013 will allow a further £0.3m to be added to revenue reserves. The Company's accumulated revenue reserves of £9.9m amount to more than three times the annual dividend payment, which provides considerable flexibility to sustain dividends during any future periods when the dividends received from the portfolio come under pressure.

In 2012, the investment trust tax rules were amended to allow companies to use capital reserves to fund dividend payments. The Company will be seeking investor approval at the 2013 Annual General Meeting ("AGM") to amend its Articles of Association to permit the use of capital reserves in this way. It remains the Company's policy that it is appropriate for dividends to be funded from revenue over the medium term. However, the change offers enhanced flexibility to sustain dividends at times when incoming dividend growth is slow or when better returns are available from lower yielding companies. The Company emphasises that it would be the norm for dividend payments to be funded from revenue over the cycle.

Share Buy-Backs

Your Board believes that it is in shareholders' interests to buy back the Company's shares when they are standing at a substantial and anomalous discount to their NAV, with the objective that the discount should be comparable to that of our peers and reflect the Company's investment performance, taking account of market conditions. The Company repurchased a total of 186,868 shares for cancellation during the year (2012: 10,000). The Board intends to seek renewal of the buy-back authority at the forthcoming Annual General Meeting. The Board regards it as sensible to seek to renew the authority to take shares into treasury for re-sale in the market at a later date. This power will be used to issue shares only at NAV or a premium to NAV.

Shareholder Information

The Company's website www.witanpacific.com is an easy to use source of up-to-date information on the Company. This contains an increased range of information compared with previous years and has a section specifically for the use of financial advisers. Further information, including the calendar of corporate announcements expected during the year as well as ways to invest in the Company's shares, is set out on pages 59 to 61 of the 2013 Annual Report.

Outlook

In the Asia Pacific region, two positive developments in late 2012 have contributed to a rally in the region's stock markets. The first was that the Chinese economy showed signs of responding to official measures designed to encourage economic growth, a change of emphasis after two years when monetary policy was tightened to bear down on inflation. The second was the election of a new government in Japan, after a campaign focused on the need to put pressure on the Bank of Japan to end the 20 year long period of deflation and to stimulate growth by seeking a more competitive level for the Yen. This policy shift is not without risk, but it has led some to reassess their assumptions that it was safe to ignore Japan, despite its importance in the region.

Although your Company's managers primarily seek opportunities on the basis of company-specific attractions a more positive growth backdrop from the region's two major economies would provide a helpful tailwind for investment returns.

The AGM of the Company will be held on Thursday, 13 June 2013 at 12 noon in the Piper Room, Grocers' Hall, Princes Street, London EC2R 8AD, and I look forward to meeting as many of you as are able to attend the meeting.

Gillian Nott

Chairman

24 April 2013

Business review

This Business review provides information about the Company's business and results for the year ended 31 January 2013 and comments on the main trends and factors likely to affect its future development. It is divided into two sections: The Investment Review and the Corporate Review.

Investment review

After the market disappointments of 2011, 2012 was a year of positive returns for the region, more than erasing the previous year's falls in most markets. As in 2011, there were a number of scares along the way but these appeared to have lost some of their capacity to unnerve investors.

Economic growth began 2012 with improving momentum but this faded under the dual impacts of financial austerity in Europe and higher oil prices, stemming from fears of supply interruptions in the Middle East. European concerns lingered on until late summer, as rumours swirled about Greece being forced to leave the Eurozone and fears grew that this would initiate a more widespread disintegration of the Euro, with potentially catastrophic effects on the financial sector. These concerns were put to rest in July by the European Central Bank governor saying that he would do "whatever it takes" to secure the future of the Euro, which led to a revival of investor confidence.

In the Asian region, a number of countries (notably China) moved from counter-inflationary policies towards seeking an upturn in economic growth, which began to be apparent in economic statistics towards the end of the year. After a further year of disappointment in Japan, in December the opposition LDP party was elected by a landslide on a platform of seeking a weaker Yen, pressing the Bank of Japan to introduce an official target of 2% inflation and increasing government spending on infrastructure. This led to a late revival in the Tokyo stock market, although much of the initial gain was offset by the weakening of the Yen.

During the year, the Company's NAV total return was +14.7%, 3.6% better than the 11.1% gain in the regional benchmark index. The Company's investments were managed during the year by Aberdeen (54%) and, from April, Matthews (36%) and GaveKal (10%). The Company's managers have differing approaches but their focus is on the best opportunities, independent of the weighting of countries in the index or of Companies within a particular national market.

Manager performance for the year ended 31 January 2013 and from appointment to 31 January 2013

	Manager appointment date	Value of Witan Pacific's assets managed £m at 31 January 2013	Witan Pacific's managed assets (Note 1) %	Performance  to  31 January  2013  %	Benchmark  performance  to  31 January  2013  %	Performance since appointment to 31 January 2013 (Note 2) %	Benchmark performance since appointment to 31 January 2013 (Note 2) %
Aberdeen	31 May 2005	98.6	54.1	14.2	11.1	13.4	8.7
Matthews	30 April 2012	65.4	35.9	16.0*	11.2*	16.0	11.2
GaveKal	24 April 2012	18.3	10.0	15.2*	12.5*	15.2	12.5

Notes:

1. Excluding cash balances held centrally by Witan Pacific.

2. Manager returns are gross of management fees and are annualised where appointment was before 31 January 2012.

* Since appointment.

Source: WM Company.

Sector allocation*

Portfolio at 31 January 2013
Financials	29%
Consumer Discretionary	11%
Consumer Staples	11%
Industrials	9%
Information Technology	8%
Materials	8%
Telecom Services	6%
Energy	5%
Healthcare	3%
Other	10%

Benchmark at 31 January 2013
Financials	31%
Information Technology	13%
Consumer Discretionary	12%
Industrials	12%
Materials	9%
Consumer Staples	6%
Energy	5%
Telecom Services	5%
Healthcare	4%
Other	3%

*Source: BNP Paribas.

Geographical allocation*

Country	Portfolio at   at 31 January    2013	Benchmark    at 31 January    2013
Australia	8%	16%
China	12%	9%
Hong Kong	18%	8%
India	6%	4%
Indonesia	4%	2%
Japan	21%	36%
Malaysia	3%	2%
The Philippines	2%	1%
Singapore	12%	3%
South Korea	4%	9%
Taiwan	5%	7%
Thailand	5%	2%
Other	-	1%

* Source BNP Paribas

Portfolio information

Aberdeen Asset Managers Limited

Aberdeen was established in Asia in 1992 and at 31 January 2013 was managing some £78.3bn of funds in the region. 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 follow 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.

Review

Aberdeen has managed half of the Company's assets since the inception of the multi-manager structure in 2005. Since then, it has delivered portfolio returns of 13.4% p.a., outperforming the regional benchmark by 4.7% p.a. During the year under review, it achieved a total portfolio return of 14.2%, outperforming by 3.1%.

Performance record1	Portfolio    return in    year to    31 January    2013	Annualised   portfolio   return since   inception   (31 May   2005)
Aberdeen2	14.2%	13.4%
MSCI AC Asia Pacific (£)	11.1%	8.7%

1    Source: WM Company & Datastream.

2    Manager returns are gross of management fees.

Matthews International Capital Management LLC

Matthews is an independent, privately owned firm, which is the largest dedicated Asia-only investment specialist based in San Francisco. At 31 January 2013, Matthews had US$22.1bn in assets under management.

Strategy

The Company is invested in a segregated portfolio based upon Matthews' Asia Dividend strategy which is managed by Jesper Madsen and co-managed by Yu Zhang. They use a fundamental bottom-up investment process to select companies with sustainable long-term growth prospects, strong business models, quality management teams and reasonable valuations.

The Asia Dividend strategy focuses on dividend income and potential growth in that income from the companies in which it invests, as well as capital growth. The strategy invests in all sizes of company and has significant exposure to small and mid-cap stocks.

Review

During the 8 months between appointment and the end of the Company's financial year, Matthews' portfolio delivered a total return of 16.0%, 4.8% ahead of the Company's benchmark.

Performance record1	Portfolio    return in    year to    31 January    2013	Portfolio   return since   inception   (30 April   2012)
Matthews2	16.0%	16.0%
MSCI AC Asia Pacific (£)	11.2%	11.2%

1 Source: WM Company & Datastream

2 Manager returns are gross of management fees

Marshall Wace GaveKal Asia Limited

The proportion of the trust's assets managed by GaveKal is invested through MW GaveKal Asian Opportunities UCITS Fund. During the year the Fund was managed by Marshall Wace GaveKal Asia Limited, a joint venture between Marshall Wace LLP and GaveKal Holdings. Since the year end, the joint venture has been restructured but the portfolio will continue to be managed by the same team at GaveKal Capital Limited. The Board has held discussions with GaveKal over the practical consequences of this change and is satisfied with their capabilities and commitment to increase resourcing in areas previously covered by the joint venture.

Strategy

The Asian Opportunities Fund in which the Company has invested, employs no leverage 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.

Review

During the period of just over 8 months between appointment and the end of the Company's financial year, GaveKal's portfolio delivered a total return of 15.2%, 2.7% ahead of the Company's benchmark.

Performance record1	Portfolio    return in    year to    31 January    2013	Portfolio   return since   inception   (24 April   2012)
GaveKal2	15.2%	15.2%
MSCI AC Asia Pacific (£)	12.5%	12.5%

1 Source: WM Company & Datastream.

2 Manager returns are gross of management fees

Corporate review

Objectives and Strategy

The Company's investment objective is to provide shareholders with capital and income growth from a diversified portfolio consisting principally of equity investments in the Asia Pacific region, designed to outperform the MSCI AC Asia Pacific Free Index ("MSCI Index") in Sterling terms. Although the Company's portfolio will be predominantly invested in equities, it may also hold bonds or cash from time to time, if the managers judge that this is desirable. Your Company seeks to outperform the MSCI Index in Sterling terms, expecting to achieve this through growth in capital as well as income by employing an active multi-manager approach.

Prior to 2013, the Company had two investment managers, Aberdeen and Nomura Asset Management UK Limited ("Nomura") who had been in place since 2005. In 2012, following a formal search process, Nomura was replaced by two new managers, Matthews and GaveKal. Managers' performance is subject to regular review, with the Board's objective being to use managers who offer the best prospects of outperforming the benchmark index referred to, with an acceptable level of diversification and risk.

Your Company sponsors an ongoing marketing programme provided by Witan Investment Services Limited. This programme reaches out to private investors and their financial advisers, as well as professional investors, to help them make informed decisions about whether investing in our 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. Your Board takes care to ensure strict monitoring and control of costs and expenses.

Board Responsibility and Management Arrangements

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 and the appointment of providers for other services required by the Company. 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 and to assist the Board on investment strategy and marketing. 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 table above provides a summary of the Investment Managers' performance for the year ended 31 January 2013.

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

As a result of its outsourced structure the Company has no employees. Accordingly it has no direct impact on social matters. However, it carefully reviews its Managers' reports on their policies relating to social issues and corporate governance standards and is generally satisfied with those policies. Our Managers are prepared to use their votes in these areas in the interests of the investments made on our behalf.

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. Shareholder permission is being sought 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.

Buy-Back Policy

Your Board believes that it is in shareholders' interests to buy-back the Company's shares when they are standing at a substantial and anomalous discount to the Company's net asset value (NAV). 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.

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. This permits the Board to seek to improve performance through gearing by borrowing amounts equivalent in value to shareholders' funds. In practice, the policy on gearing in recent years has been modest and well within this theoretical limit. Over the past five years fully invested gearing as defined on page 58 of the 2013 Annual Report has mostly varied between 0% and 5% with, on occasion, a small net cash position. At the end of January 2013, the Company was 4.2% geared.

Key Performance Indicators

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

● Net asset value total return and total shareholder return, for which outperformance of the combined portfolios, compared with our benchmark is a key objective.

● Investment performance by the individual managers, where outperformance relative to the benchmark is sought.

·  Annual growth in the dividend, where the Company's policy is to achieve increases in real terms, ahead of inflation (subject to market circumstances).

·  Discount to net asset value, where the objective is to be at least in line with the sector peer group, seeking a sustainable narrowing over time, subject to market conditions.

·  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.

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 prices and adverse movements in foreign currency exchange rates. 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. Your 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, your Company also 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 your Board, which focus on investment policy, the role of marketing and discount control policies, as well as wider industry trends.

Operational

Comprehensive contractual obligations and indemnification provisions 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 (JP Morgan) and the Fund Accountants (BNP Paribas) keep separate records which are reconciled monthly. In addition, our 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 1158-59 of the Corporation Tax Act 2010 (CTA) to which reference is made on page 20 of the 2013 Annual Report, 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 Paribas Securities Services and monitored by Witan Investment Services Limited on behalf of the Board.

In addition, there are regulatory risks. We are affected by a complex set of regulations and laws and changes in any of these may affect returns to shareholders. We expect regulation to increase, as demonstrated by new regulations, stemming from the US and Europe, which are due to take effect in 2013-14.

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

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 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 52 to 56 of the 2013 Annual Report.

Regulatory change in 2013

Retail Distribution Review (RDR)

The implementation of the Retail Distribution Review ("RDR") from 2013 will potentially increase interest 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.

Witan Pacific offers actively-managed equity exposure to an increasingly interdependent Asia Pacific region, covering the faster-growing Asian economies, the more mature Japanese economy as well as commodity-reliant economies such as Australia. The Company's portfolio is diversified by manager, business sector and at the individual company level. It has increased its dividend every year since 2005, an 8-year run. Share buybacks are used to enhance the net asset value per share. Witan Pacific has a simple capital structure and, with a market capitalisation of £151m as at January 2013 it is one of the larger Asian investment trusts and the largest within its peer group. The Company is also the only multi-managed investment trust offering specialised exposure to the Pacific region. As well as the inherent benefits of a multi-manager approach, Witan Pacific has a competitive ongoing charges figure (previously known as the Total Expense Ratio). Unlike open-ended funds it has the ability to build up dividend reserves, which can be used to sustain dividend payments during periods of falling portfolio dividends.

What sets the Company apart are the credentials listed above, its investment performance and a clearly defined investment approach. The Company has taken steps to increase the range of information on its website (including a section for Financial Advisers to help inform the choices they make on behalf of their investors).

Another likely impact of the RDR is that the number of self-directed investors making their own investment decisions is likely to increase. This is a group that is already familiar with Witan Pacific, both through the Witan Wisdom savings scheme and from buying the Company's shares via online stockbrokers and execution-only platforms. We expect interest from self-directed investors to remain strong in 2013. 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 are likely to outsource investment management to them.

The "AIFMD"

The Alternative Investment Fund Manager Directive ("AIFMD") is due to become UK law in July 2013. Although many of the issues covered are already addressed by current regulation, it will introduce changes in 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 is reviewing the detail of the new regulations as they are finalised.

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.

Income Statement

for the year ended 31 January 2013

		Year ended 31 January 2013			Year ended 31 January 2012
	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		-	20,048	20,048	-	(8,201)	(8,201)
Exchange losses		-	(759)	(759)	-	(25)	(25)
Income	2	5,108	-	5,108	4,766	-	4,766
Management fees		(660)	-	(660)	(499)	-	(499)
Performance fees		-	(491)	(491)	-	(1,167)	(1,167)
Other expenses		(820)	(43)	(863)	(786)	(50)	(836)
Net return/(loss) before finance charges and taxation		3,628	18,755	22,383	3,481	(9,443)	(5,962)
Finance charge		(180)	-	(180)	(191)	-	(191)
Net return/(loss) on ordinary activities before taxation		3,448	18,755	22,203	3,290	(9,443)	6,153)
Taxation on ordinary activities		(286)	-	(286)	(275)	-	(275)
Net return/(loss) on ordinary activities after taxation		3,162	18,755	21,917	3,015	(9,443)	(6,428)
Basic and diluted return/(loss) per Ordinary share - pence	3	4.78	28.38	33.16	4.55	(14.25)	(9.70)

All revenue and capital items in the above statement derive from continuing operations. The total columns of this statement represent the Income Statement of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

The Company had no recognised gains or losses other than those disclosed in the Income Statement.

There is no material difference between the profit on ordinary activities before taxation and the profit for the financial year stated above and their historical costs equivalents.

Reconciliation of movements in shareholders' funds

for the year ended 31 January 2013

	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 2013
At 31 January 2012		16,559	5	41,012	86,300	12,176	156,052
Net return on ordinary activities after taxation		-	-	-	18,755	3,162	21,917
Dividends paid	4	-	-	-	-	(3,966)	(3,966)
Purchase of own shares		(47)	-	47	(369)	-	(369)
At 31 January 2013		16,512	5	41,059	104,686	11,372	173,634
Year ended 31 January 2012
At 31 January 2011		16,561	5	41,010	95,762	10,944	164,282
Net(loss)/return on ordinary activities after taxation		-	-	-	(9,443)	3,015	(6,428)
Dividends paid	4	-	-	-	-	(1,855)	(1,855)
Write back of dividends over twelve years old	4	-	-	-	-	72	72
Purchase of own shares		(2)	-	2	(19)	-	(19)
At 31 January 2012		16,559	5	41,012	86,300	12,176	156,052

Balance sheet

at 31 January 2013

	Notes	2013  £'000	2012  £'000
Fixed assets
Investments held at fair value through profit and loss		180,945	161,334
Current assets
Debtors		736	1,796
Cash at bank and in hand		2,339	2,462
		3,075	4,258
Creditors: amounts falling due within one year
Bank loan		(8,500)	(7,000)
Other		(1,674)	(2,181)
		(10,174)	(9,181)
Net current liabilities		(7,099)	(4,923)
Total assets less current liabilities		173,846	156,411
Provisions for liabilities and charges		(212)	(359)
Net assets		173,634	156,052
Capital and reserves
Called up share capital		16,512	16,559
Share premium account		5	5
Capital redemption reserve		41,059	41,012
Capital reserves		104,686	86,300
Revenue reserve		11,372	12,176
Total shareholders' funds		173,634	156,052
Net asset value per Ordinary share - pence	5	262.89	235.60

The financial statements above and below were authorised and approved by the Board of Directors on 24 April 2013 and signed on its behalf by:

Gillian Nott, Chairman

Cash flow statement

for the year ended 31 January 2013

		2013  £'000	2013  £'000	2012  £'000	2012  £'000
Net cash inflow from operating activities			2,655		2,140
Servicing of finance
Bank and loan interest paid		(182)		(238)
Net cash outflow from servicing of finance			(182)		(238)
Capital expenditure and financial investment
Purchases of investments		(100,710)		(43,913)
Sales of investments		101,628		43,191
Gains on future contracts		129		-
Loss on forward exchange contracts		(368)		-
Capital expenses paid		(49)		(50)
Net cash inflow/(outflow) from financial investment			630		(772)
Equity dividends paid			(3,966)		(1,783)
Net cash outflow before financing			(863)		(653)
Financing
Drawdown of loan		1,500		1,100
Repurchase of own shares		(369)		(19)
Net cash inflow from financing			1,131		1,081
Increase in cash			268		428
Reconciliation of net cash flow to movements in net debt
Increase in cash as above			268		428
Net cash inflow from drawdown of loan			(1,500)		(1,100)
Exchange movements			(391)		(25)
Movement in net debt in the year			(1,623)		(697)
Net debt at the start of the year			(4,538)		(3,841)
Net debt at end of the year			(6,161)		(4,538)

Notes to the Accounts

for the year ended 31 January 2013

1.  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 at fair value 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.

2.  Investment income

	2013 £'000	2012 £'000
Income from investments held at fair value through profit or loss:
Overseas dividends	4,653	4,103
UK dividends	446	167
Scrip dividends	7	493
Total dividend income	5,106	4,763
Other income:
Bank interest	2	3
Total other income	2	3
Total income	5,108	4,766

3.  Return per Ordinary share

The total return per Ordinary share is based on the net return attributable to the Ordinary shares of £21,917,000 (2012 net loss: £6,428,000) and on 66,101,540 Ordinary shares (2012: 66,244,320) being the weighted average number of shares in issue during the year.

The total return can be further analysed as follows:

	2013 £'000	2012 £'000
Revenue return	3,162	3,015
Capital return/(loss)	18,755	(9,443)
Total return/(loss)	21,917	(6,428)
Weighted average number of Ordinary shares	66,101,540	66,244,320
Revenue return per Ordinary share - pence	4.78	4.55
Capital return/(loss) per Ordinary share - pence	28.38	(14.25)
Total return/(loss) per Ordinary share - pence	33.16	(9.70)

The Company does not have any dilutive securities.

4.  Dividends

Dividends on Ordinary shares	Record date	Payment date	2013 £'000	2012 £'000
Final dividend (2.80p) for the year ended 31 January 2011	27 May 2011	24 June 2011	-	1,855
Write back of dividends over twelve years old			-	(72)
Final dividend (4.00p) for the year ended 31 January 2012	25 May 2012	22 June 2012	2,645	-
Interim dividend (2.00p) for the year ended 31 January 2013	5 October 2012	19 October 2012	1,321	-
			3,966	1,783

The proposed final dividend for the year ended 31 January 2013 is subject to approval by shareholders at the AGM and has not been included as a liability in these financial statements.

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

	2013 £'000
Revenue available for distribution by way of dividend for the year	3,162
Interim dividend (2.00p) for the year ended 31 January 2013	(1,321)
Proposed final dividend of 2.30p for the year ended 31 January 2013 (based on 66,048,000 Ordinary shares in issue at 24 April 2013)	(1,519)
Undistributed revenue for Section 1158 CTA purposes*	322

*Undistributed revenue comprises 6.3% of income from investments of £5,108,000 (see note 2).

5. Net asset value per Ordinary share

Net asset values are based on net assets of £173,634,000 (2012: £156,052,000) and on 66,048,000 (2012: 66,234,868) Ordinary shares in issue at the year end.

6. Statement of Directors' Responsibilities 

The Directors are responsible for preparing the Annual Report, 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 respectively; 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 ("Witan"). The Directors are responsible for the maintenance and integrity of the Company's website. The work carried out by the Auditors does not involve consideration of the maintenance and integrity of the website and accordingly, the Auditors accept no responsibility for any changes that have occurred to the Annual Report and Financial Statements 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.

Each of the Directors, whose names and functions are listed on page 7 of the 2013 Annual Report, 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; and

·     the Annual 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.

7. Financial Statements - Availability and Comparative Information 

The financial information contained in this announcement does not constitute statutory accounts for the year ended 31 January 2013 or 31 January 2012 as defined by the Companies Act 2006 but is derived from those accounts. The statutory accounts for the year ended 31 January 2012 have been delivered to the Registrar of Companies and those for the year ended 31 January 2013 will be delivered following the Company's Annual General Meeting. The Independent Auditor's report on those accounts was unqualified and did not contain any statements under section 498 (2) or (3) of the Companies Act 2006.

Copies of the Annual Reports and Financial Statements for the year ended 31 January 2013 will be posted shortly to those shareholders who have elected to receive printed copies. Details of the ability to view or download the Annual Report and Financial Statements from the Company's website at www.witanpacific.com will be posted or e-mailed to the remaining shareholders in accordance with their respective elections. Copies of the Annual Reports and Financial Statements can also be requested from the Registered Office of the Company.  

8. Annual General Meeting (`AGM')

The AGM of the Company, will be held in the Piper Room, Grocer's Hall, Princes Street. London EC2R 8AD on Thursday 13 June 2013 at 12 noon. Notice of the AGM is given in the annual report and accounts.

9. National Storage Mechanism

A copy of the annual report and financial statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at www.morningstar.co.uk/uk/NSM

Neither the contents of the Company's website, nor the contents of any website accessible from hyperlinks in this announcement or on those websites (or any other website), is incorporated into, or forms part of, this announcement.

 

END

 

 

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