Half Yearly Report

RNS Number : 4461T

Witan Pacific Investment Trust PLC

29 September 2010

 



WITAN PACIFIC INVESTMENT TRUST PLC

Half Yearly Report of the unaudited results for the six months ended 31 July 2010

Financial Highlights

Summary of Results attributable to equity shareholders

	31 July 2010	31 January 2010	% change
Share price	179.50p	165.00p	8.8
Net asset value per share	217.50p	199.02p	9.3
Discount	-17.5%	-17.1%
Gearing#	1.1%	-0.1%

# Bank loan at Balance Sheet value, less cash and fixed interest stocks, as a percentage of net assets ("Effective" or "Actual" gearing)

Cumulative Performance (Total Returns) to 31 July 2010

	6 months	1 year	3 years	5 years
	%	%	%	%
Total shareholder return†	10.1	18.3	7.3	45.0
Net asset value total return†	10.8	20.5	14.1	57.5
MSCI AC Asia Pacific Free Index (£)* total return	5.8	15.4	7.0	48.1

^†Source: AIC Services Ltd. Returns include dividends reinvested

* Source: Datastream

Chairman's Statement

Market Background

Global equity markets have been erratic during 2010, generally rising until late April before profit  taking set in, amid concerns about financial stability in Europe and the strength of the US recovery. In contrast with western economies, in much of Asia concerns about faltering economic growth were absent, with the speed of the recovery creating higher inflation and prompting tighter monetary policies.

The MSCI AC Asia Pacific Free Index (£) delivered a total return of 5.8% over the six months to 31 July 2010, helped by strengthening of the region's currencies against sterling. The Japanese market fell by 6.2% in yen terms but delivered a marginally positive return of sterling 0.4%. The Asia Pacific index excluding Japan rose by 3.1%, or 6.0% in sterling terms.

Although market returns were less dramatic than in 2009, the starting point was less depressed and the returns nonetheless compared favourably with those in Western equity markets and the low returns available on cash. It is encouraging to see that your Company is earning increasing levels of income on its portfolio.

Performance

Your Company's Investment Managers delivered almost twice the gain of the benchmark index, with a net asset value total return of 10.8%, 5.0% ahead of the benchmark. The share price total return (which calculates the effect of reinvesting dividends in extra shares at the price on the date the dividend is paid) for the first half of our financial year was 10.1%. Both of your Investment Managers outperformed during the period. Aberdeen continued to perform strongly, with a total return of 13.8%, 8.0% ahead of the benchmark. This was helped by the manager's continued low weighting in Japan and by positive country allocation in the other Asia Pacific markets. In addition Aberdeen's stock selection has been a positive contributor across the portfolio. Nomura, with a generally more conservative and diversified policy, returned8.0%, sterling adjusted, 2.2% ahead of the benchmark. They benefited less from Japan's relative weakness as they were less underweight Japan and so country allocation made only a small positive contribution and their outperformance was almost entirely the result of positive stock selection.

Aberdeen remain underweight in the Japanese market, approximately a half weighting of 23% when compared with 41% that Japan represents in the benchmark index. In their analysis, while many Japanese companies have strong cash flow and balance sheets, corporate governance remains weak andand balance sheets, corporate governance remains weak and Aberdeen  consider that better investment opportunities lie elsewhere within the region. This approach has been rewarded with strong contributions over the period coming at the stock level from companies such as Astra International. This Indonesian conglomerate gained from a robust recovery in auto sales, financial services and contract mining; its first-half profits rose sharply, driven by the automotive segment. At the country level, exposure to the fast growing Indian market via the Aberdeen Global Indian Equity Fund provided the portfolio with strong returns from its holdings in well-managed local and multinational companies. Aberdeen believe markets in the region are likely to remain sentiment-driven whilst the prospects for developed markets and the global recovery remain fragile. They are confident that longer term prospects remain positive as sound fiscal positions and large foreign exchange reserves provide the authorities with options to stimulate their economies should it be required.

Nomura's small underweighting to the Japan market was a positive and whilst recognising structural problems in Japan they are encouraged by the fact that the underlying economy looks robust. For example during market weakness the domestic oriented sectors such as infrastructure were relatively unchanged and they point out that many stocks appear cheap with very attractive dividend yields. Outside Japan, Nomura believe that Asia Pacific countries have shown good recoveries from the recent global financial crisis with most delivering strong GDP growth rates in the first half of 2010. Examples are India, Korea, Taiwan and Singapore and these are all countries where Nomura have full weightings. More recently Nomura have increased their exposure to China which they consider to be well placed to lead the next leg of a recovery in markets. Nomura feel that a double dip recession will be avoided and that an increase in capital spending, led by the US private sector, will benefit emerging Asian economies and that Asia Pacific stockmarkets are now set to rise further after the recent period of consolidation.

During the six months to 31 July 2010, the Company bought back 35,000 shares representing 0.05% of the share capital which enhanced NAV by 0.01% (0.02p per share). Your Board believes that it is in shareholders' interests to buy back the Company's shares when they are standing at a substantial discount to their NAV and with the objective that the discount should be comparable to that of our peers, taking account of the prevailing market conditions.

Asia Pacific

Asia Pacific markets have experienced contrasting economic conditions, both within the region and relative to those in mature Western economies. Japan continues to share some of the problems of mature economies (e.g. relatively sluggish demographics and weak public finances), although it has benefited from its increased trade exposure to the more dynamic economies of Asia. It has yet to find an economic policy enabling it to shake off the stagnation and deflation that have dogged its economy for many years, although much of this is factored-in to the stock market's valuation, with returns holding up well during the period of market turbulence.

Many of the other Asian economies, by contrast, have experienced boom conditions, with healthy public finances and rising inflation, prompting policy makers to start applying the brakes, in the form of higher interest rates and lending restrictions. This economic buoyancy is contributing substantially to world growth and helping western economies pull out of recession. However, the efforts of the faster growing economies to avoid the risks of inflation and economic overheating will require careful management to ensure that any slowdown in growth does not become too abrupt.

The Board will be re-visiting the two investment managers' offices in the region early in 2011, to review their operations and gain a first-hand update of their investment strategies and operational resources. This follows the visit which the Board made in 2009, which was reported on in last year's Half Year Report.

Expenses

With the continued good relative performance, performance fees increased from £598,000 in the prior period to July 2009 to £796,000 in the period to July 2010. This represents a positive reason for an increase in costs, being linked to the strong performance showing through in the net asset value. We will continue to tightly control the other operational expenses of the Company which have remained broadly unchanged from the same period last year.

Electronic Communications

Changes in Company Law now enable companies to offer their shareholders the opportunity to access the Annual and Half Year Reports via the Company's website, instead of receiving the printed reports. This entails savings in postage and printing, as well as having benefits for the environment through reduced paper use. Accordingly, registered shareholders and those

holding the Company's shares in Witan Wealthbuilder, will receive with this report a postage-paid reply card to enable an election to be made to receive email notifications when documents are available on the Company's web site (Option 1) or, if preferred, to continue to receive printed copies by post (Option 2). If no election is made, a written notification will be sent by post whenever the Annual or Half Year reports are available on the Company's website. Whatever decision is made at this time, this can be subsequently changed by notifying the Registrar, Computershare, in writing.

Board Membership

Following a professional search for a new Director, Diane Seymour-Williams was appointed to the Board on 9 June 2010. Diane brings a wealth of experience of investing in the Asia Pacific region, having been at Morgan Grenfell Deutsche Asset Management for 23 years. She has held a number of positions, including Head of Asian Equities and CEO and CIO Asia, based in Singapore.

Outlook

There are signs from the recent equity rally that the improvement in corporate profitability is starting to make investors more positive, after a period when concerns about European economic stability and nervousness that the global economic recovery was wavering were influencing market sentiment. Although the Asia Pacific region is more resilient than most to the fluctuating fortunes of the economic upswing (credit bubbles were more of a feature in western developed economies) investors are likely to have to continue to exercise prudence in selecting investments in this high growth area of the world.

Although the variable nature of the recovery in the US and elsewhere is likely to lead to periodic outbreaks of volatility, valuations in the region we invest in are on the whole moderate, so earnings and dividend growth should enable the fundamental value of investee companies to grow and fuel the long term returns that investors hope for as the fruits of the Pacific Basin's strong growth story.

Gillian Nott

Chairman

28 September 2010

Income Statement

for the half year ended 31 July 2010

	(Unaudited) Half year ended 31 July 2010			(Unaudited) Half year ended 31 July 2009			(Audited) Year ended 31 January 2010
	Revenue return	Capital return	Total	Revenue return	Capital return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through profit or loss	-	13,038	13,038	-	21,402	21,402	-	32,078	32,078
Exchange gains/(losses)	-	64	64	-	(214)	(214)	-	(222)	(222)
Income	2,166	-	2,166	1,686	-	1,686	2,950	-	2,950
Management fees	(202)	-	(202)	(131)	-	(131)	(305)	-	(305)
Performance fees	-	(796)	(796)	-	(598)	(598)	-	(638)	(638)
Other expenses	(368)	(21)	(389)	(333)	(34)	(367)	(663)	(57)	(720)
Net return before finance charges and taxation	1,596	12,285	13,881	1,222	20,556	21,778	1,982	31,161	33,143
Finance charges	(80)	-	(80)	(95)	-	(95)	(129)	-	(129)
Net return on ordinary activities before taxation	1,516	12,285	13,801	1,127	20,556	21,683	1,853	31,161	33,014
Taxation on ordinary activities	(164)	-	(164)	(139)	51	(88)	(199)	34	(165)
Net return on ordinary activities after taxation	1,352	12,285	13,637	988	20,607	21,595	1,654	31,195	32,849
Return per ordinary share - pence Note 3	2.04	18.53	20.57	1.49	31.07	32.56	2.49	47.05	49.54

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

The total columns of this statement represent the Income Statement of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

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

Reconciliation of Movements in Shareholders' Funds

for the half year ended 31 July 2010

	Called up share capital	Share premium account	Capital redemption reserve	Capital reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Half year ended 31 July 2010 (unaudited)
At 31 January 2010	16,577	5	40,994	64,475	9,915	131,966
Net return on ordinary activities after taxation	-	-	-	12,285	1,352	13,637
Dividends paid in respect of year ended 31 January 2010	-	-	-	-	(1,392)	(1,392)
Purchase of own shares	(9)	-	9	(65)	-	(65)
At 31 July 2010	16,568	5	41,003	76,695	9,875	144,146
Half year ended 31 July 2009 (unaudited)
At 31 January 2009	16,590	5	40,981	33,339	10,151	101,066
Net return on ordinary activities after taxation	-	-	-	20,607	988	21,595
Dividends paid in respect of year ended 31 January 2009	-	-	-	-	(1,890)	(1,890)
Purchase of own shares	(13)	-	13	(59)	-	(59)
At 31 July 2009	16,577	5	40,994	53,887	9,249	120,712
Year ended 31 January 2010 (audited)
At 31 January 2009	16,590	5	40,981	33,339	10,151	101,066
Net return on ordinary activities after taxation	-	-	-	31,195	1,654	32,849
Dividends paid in respect of year ended 31 January 2009	-	-	-	-	(1,890)	(1,890)
Purchase of own shares	(13)	-	13	(59)	-	(59)
At 31 January 2010	16,577	5	40,994	64,475	9,915	131,966

Purchase transaction costs for the half year ended 31 July 2010 were £38,000 (half year ended 31 July 2009: £50,000; year ended 31 January 2010: £96,000). Sale transaction costs for the half year ended 31 July 2010 were £41,000 (half year ended 31 July 2009: £59,000; year ended 31 January 2010: £99,000).

Balance Sheet

at 31 July 2010 

	(Unaudited) 31 July 2010 £'000	(Unaudited) 31 July 2009 £'000	(Audited) 31 January 2010  £'000
Fixed assets
Investments held at fair value through profit or loss	147,670	119,551	133,318
Current assets
Debtors	1,636	1,058	1,485
Cash at bank and short term deposits	4,319	4,364	5,992
	5,955	5,422	7,477
Creditors: amounts falling due within one year
Loans	(5,900)	(2,000)	(5,900)
Other	(3,579)	(2,261)	(2,929)
	(9,479)	(4,261)	(8,829)
Net current (liabilities)/assets	(3,524)	1,161	(1,352)
Net assets	144,146	120,712	131,966
Capital and reserves
Called up share capital	16,568	16,577	16,577
Share premium account	5	5	5
Capital redemption reserve	41,003	40,994	40,994
Capital reserves	76,695	53,887	64,475
Revenue reserve	9,875	9,249	9,915
Equity shareholders' funds	144,146	120,712	131,966
Net asset value per ordinary share - pence Note 4	217.50	182.05	199.02

Cash Flow Statement

for the half year ended 31 July 2010

	(Unaudited) Half year ended 31 July 2010 £'000	(Unaudited) Half year ended 31 July 2009 £'000	(Audited) Year ended 31 January 2010  £'000
Net cash inflow from operating activities	1,015	1,011	1,717
Servicing of finance
Bank and loan interest paid	(60)	(178)	(177)
Net cash outflow from servicing of finance	(60)	(178)	(177)
Net tax paid	-	(497)	(497)
Capital expenditure and financial investment
Purchases of investments	(19,322)	(24,755)	(47,813)
Sales of investments	18,108	26,290	46,404
Capital expenses and performance fee payments	(21)	(30)	(57)
Net cash (outflow)/inflow from financial investment	(1,235)	1,505	(1,466)
Equity dividends paid	(1,392)	(1,890)	(1,890)
Net cash outflow before financing	(1,672)	(49)	(2,313)
Financing
Repurchase of own shares	(65)	(59)	(59)
(Repayment)/drawdown of bank loan	-	(1,000)	2,900
Net cash (outflow)/inflow from financing	(65)	(1,059)	2,841
(Decrease)/increase in cash	(1,737)	(1,108)	528
Reconciliation of net cash flow to movements in net funds/(debt)
(Decrease)/increase in cash as above	(1,737)	(1,108)	528
Exchange movements	64	(214)	(222)
Decrease/(increase) in bank loan	-	1,000	(2,900)
Movement in net funds in the period	(1,673)	(322)	(2,594)
Net funds at start of period	92	2,686	2,686
Net (debt)/funds at end of period	(1,581)	2,364	92

Notes to the Accounts

for the half year ended 31 July 2010

1. Accounting policies

The accounts have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with applicable Accounting Standards, pronouncements on interim reporting issued by the Accounting Standards Board and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ("SORP") revised December 2005 and January 2009. All of the Company's operations are of a continuing nature.

The same accounting policies used for the year ended 31 January 2010 have been applied.

2. Dividends per Ordinary Share

No interim dividend payment will be proposed for the half year ended 31 July 2010 (half year ended 31 July 2009: nil; year ended 31 January 2010: final of 2.10p per share).

3. Return per Ordinary Share

The return per ordinary share is based on the net return attributable to the ordinary shares of

£13,637,000 (half year ended 31 July 2009: net return £21,595,000; year ended 31 January 2010: net return £32,849,000) and on 66,281,646 ordinary shares (half year ended 31 July 2009: 66,327,376; year ended 31 January 2010: 66,312,703) being the weighted average number of ordinary shares in issue during the period.

	(Unaudited) Half year ended 31 July 2010 £'000	(Unaudited) Half year ended 31 July 2009 £'000	(Audited) Year ended 31 January 2010  £'000
Revenue return (£'000)	1,352	988	1,654
Capital return (£'000)	12,285	20,607	31,195
Total return (£'000)	13,637	21,595	32,849
Weighted average number of ordinary shares in issue during the period	66,281,646	66,327,376	66,312,703
Revenue return per ordinary share - pence	2.04	1.49	2.49
Capital return per ordinary share - pence	18.53	31.07	47.05
Total return per ordinary share - pence	20.57	32.56	49.54

4. Net Asset Value per Ordinary Share

Net asset value per ordinary share is based on 66,273,868 ordinary shares of 25p each in issue at 31 July 2010 (31 July 2009: 66,308,868 and 31 January 2010: 66,308,868).

5. Results

The results for the half year ended 31 July 2010 and 31 July 2009, which are unaudited and were not reviewed by the Auditors, constitute non-statutory accounts within the meaning of Section 435 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 31 January 2010, the report of the Auditor thereon was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. The comparative figures for the year ended 31 January 2010 have been extracted from those accounts.

Regulatory Disclosures

Related Party Transactions

No related party transactions took place in the period under review.

Principal Risk and Uncertainties

The principal risks faced by the Company for the remaining six months of the financial year include financial risks relating to markets, liquidity and credit. Market risk includes market price risk, currency risk and interest rate risk. Other risk categories include those relating to investment strategy, investment management resources, regulatory requirements, operational structure and the external economic and financial environment. These risks and the way in which they are managed, are described in more detail in the Annual Report for the year ended 31 January 2010 in the Business Review and in the Notes to the Accounts. The Report is available on the Company's website at www.witanpacific.com.

Responsibility Statement of Directors

in respect of the Half Year Report for the six months ended 31 July 2010

The Directors confirm to the best of their knowledge that:

(a) the condensed set of financial statements in this Half Year Report, which has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

(b) the Interim Management Report which comprises the Chairman's Statement and the Regulatory Disclosures above includes a fair review, as required by Disclosure and Transparency Rule 4.2.7 R, of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(c) no related parties transactions took place in the first six months of the current financial year and no related parties transactions were described in the last Annual Report of the Company and accordingly there are no disclosures required to be made pursuant to Disclosure and Transparency Rule 4.2.8 R.

This Half Year Report was approved by the Board on 28 September 2010 and the above responsibility statement was signed on its behalf by:

Gillian Nott

Chairman

 

END

 

 

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