Half Yearly Report

RNS Number : 4910Z

Witan Pacific Investment Trust PLC

22 September 2009

 



WITAN PACIFIC INVESTMENT TRUST PLC

Half Yearly Report of the unaudited results for the six months ended 31 July 2009

Financial Highlights

Summary of Results attributable to equity shareholders

	31 July 2009	31 January 2009	% change
Share price	153.50p	122.75p	25.1
Net asset value per share	182.05p	152.30p	19.5
Discount	-15.7%	-19.4%
Gearing#	-2.0%	-2.7%

# Prior charges 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 2009

	6 months	1 year	3 years	5 years
	%	%	%	%
Total shareholder return†	27.6	2.3	5.0	54.2
Net asset value total return†	21.7	5.5	12.1	61.9
MSCI AC Asia Pacific Free Index (£)* total return	18.8	3.9	7.1	57.1

†Source: AIC Services Ltd. Returns include dividends reinvested

* Source: Datastream

Chairman's Statement

Market Background

Over the last six months to the end of July markets in the Asia Pacific region have responded favourably to the global backdrop of stabilising, if not improving, economic indicators.  Furthermore the strong stimulus packages applied in the western economies, and in China in particular, have boosted liquidity resulting in a strong upturn in Far Eastern markets.

The MSCI Asia Pacific Free Index rose 33.7% in local currency terms however Sterling strengthened over the period and overseas returns were therefore reduced for Sterling investors including your Company. This of course is the opposite of 2008 where Sterling weakness benefited your Company's investment returns. During the six months under review the Sterling return for the MSCI Asia Pacific Free Index was 18.8%.  

The remarkable strength of the rally in Far Eastern stock markets can be demonstrated by individual country returns which ranged in local currency terms from the highest in Indonesia of 83.9% to the lowest in Japan of 21.7%. In Sterling terms Japan was the clear laggard with a marginally negative return whilst all other countries where your Company was invested posted returns greater than 20%.

Performance†

Given these very strong stockmarket returns and after the disappointment of 2008 it is pleasing to record that your Company's share price returned 27.6% with dividends reinvested and the net asset value total return was 21.7%.  Both figures are comfortably ahead of the 18.8% rise in the benchmark as noted above.

Aberdeen have continued to perform strongly and their structural bias towards the better performing Asian markets and away from Japan has been a strong contributor to this outperformance whilst stock selection has generally been somewhat muted. Aberdeen's portfolio returned 27.0%, Sterling adjusted. 

Nomura who have a more index-like weighting approach to Japan returned 17.7%, over the period with positive country and sector selection across the board held back by negative stock selection in the Asian markets despite positive stock selection in Japan.  

During the six months to 31 July 2009, the Company bought back 50,000 shares which enhanced NAV modestly. It is the Board's policy to continue to manage the discount through share buy backs. We have applied this policy flexibly. We will continue to do so.

Asia Pacific

As indicated in my statement in the Annual Report issued in April, the Board visited the investment managers in their respective Far Eastern offices in June. Both of them manage the Asia Pacific portfolios excluding Japan from Singapore offices, whilst the Japanese portfolios are managed in Tokyo. Our visit proved to be very worthwhile and instructive. There is no substitute for seeing the full team in operation in their own offices to gain a really good understanding of their investment philosophy and processes. Our visit confirmed to us that the managers have very different styles that complement each other and are likely to perform well at different times in the market cycle.

Aberdeen choose companies that they like for their quality of management and earnings, and

balance sheet strength. They tend to hold these companies for a very long time and the turnover in the portfolio is very low. By contrast Nomura look at a very wide selection of stocks and having identified those that they consider undervalued they conduct in-depth research on them and select those they consider will rise in value. They hold a much larger number of stocks and the turnover in the portfolio is much greater than Aberdeen's.  

Our visit confirmed our view that both managers are highly competent with different strengths. We will continue to keep their performance under review but for the moment we do not propose any change to what is proving to be a good combination for the overall performance of the Company.

Expenses

As a result of the strong performance referred to above performance fees have more than doubled since the first half of last year to £598,000 compared with £278,000. This will most likely result in a significant increase in our Total Expense Ratios (TERs) when they are calculated for the full year. This is a good reason for an increase in costs and we will continue to control the underlying costs and expenses of the Company.

Taxation

The tax charge element in the Income Statement has reduced compared with last year, largely as a result of recent changes in tax legislation relating to overseas dividends.

Outlook

Looking ahead it is encouraging to see the normalisation of credit markets and as I have commented before Asian markets are generally better placed that the Western economies with lower levels of government and household debt. Whilst there may be a set-back in Far Eastern markets following the recent very strong rally, the longer term outlook for markets in the region is positive. This is likely to be driven by both recovering economic growth rates and the large volumes of cash, both in the region and world wide, seeking a better return than can be earned on fixed interest portfolios.

Gillian Nott

Chairman

22 September 2009

† all returns expressed in Sterling

Income Statement 

for the six months ended 31 July 2009

		(Unaudited)	(Unaudited)	(Audited)
		Six months ended 31 July 2009	Six months ended 31 July 2008	Year ended 31 January 2009

		Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on  investments held at fair value through  profit or loss		-	21,402	21,402	-	(9,461)	(9,461)	-	(26,220)	(26,220)
Exchange (losses)/gains		-	(214)	(214)	-	92	92	-	592	592
Investment income	2	1,686	-	1,686	1,900	-	1,900	3,812	-	3,812
Management fees	3	(131)	-	(131)	(156)	-	(156)	(283)	-	(283)
Refund of prior years' VAT		-	-	-	-	-	-	557	-	557
Performance fees	3	-	(598)	(598)	-	(278)	(278)	-	(318)	(318)
Other expenses		(333)	(34)	(367)	(317)	(18)	(335)	(576)	(45)	(621)
Net return/(loss)  before finance charges  and taxation		1,222	20,556	21,778	1,427	(9,665)	(8,238)	3,510	(25,991)	(22,481)
Finance charges		(95)	-	(95)	(103)	-	(103)	(203)	-	(203)
Net return/(loss) on  ordinary activities  before taxation		1,127	20,556	21,683	1,324	(9,665)	(8,341)	3,307	(25,991)	(22,684)
Taxation on  ordinary activities		(139)	51	(88)	(407)	79	(328)	(963)	90	(873)
Net return/(loss)  on ordinary activities  after taxation		988	20,607	21,595	917	(9,586)	(8,669)	2,344	(25,901)	(23,557)
Return/(loss) per  ordinary share - pence	5	1.49	31.07	32.56	1.36	(14.24)	(12.88)	3.50	(38.66)	(35.16)

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 six months ended 31 July 2009

	Called up share capital	Share premium account	Capital  redemption reserve	Capital reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended  31 July 2009  (unaudited)
At 31 January 2009	16,590	5	40,981	33,339	10,151	101,066
Net return from 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
Six months ended  31 July 2008  (unaudited)
At 31 January 2008	16,887	5	40,684	61,091	8,916	127,583
Net (loss)/return from ordinary activities after taxation	-	-	-	(9,586)	917	(8,669)
Dividends paid in respect of year ended 31 January 2008	-	-	-	-	(1,109)	(1,109)
Purchase of own shares	(180)	-	180	(1,231)	-	(1,231)
At 31 July 2008	16,707	5	40,864	50,274	8,724	116,574
Year ended    31 January 2009  (audited)
At 31 January 2008	16,887	5	40,684	61,091	8,916	127,583
Net(loss)/return from ordinary activities after taxation	-	-	-	(25,901)	2,344	(23,557)
Dividend paid in respect of year  ended 31 January 2008	-	-	-	-	(1,109)	(1,109)
Purchase of own shares	(297)	-	297	(1,851)	-	(1,851)
At 31 January 2009	16,590	5	40,981	33,339	10,151	101,066

Purchase transaction costs for the six months ended 31 July 2009 were £50,000 (six months ended 31 July 2008: £33,000; year ended 31 January 2009: £68,000). Sale transaction costs for the six months ended 31 July 2009 were £59,000 (six months ended 31 July 2008: £40,000; year ended 31 January 2009: £79,000).

Balance Sheet

at 31 July 2009

		(Unaudited) 31 July 2009	(Unaudited) 31 July 2008	(Audited) 31 January 2009
	Note	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		119,551	117,235	99,470
Current assets
Debtors		1,058	1,153	708
Cash at bank and short term deposits		4,364	2,669	5,686
		5,422	3,822	6,394
Creditors: amounts falling due within one year
Loans		(2,000)	(3,193)	(3,000)
Other		(2,261)	(1,220)	(1,768)
		(4,261)	(4,413)	(4,768)
Net current assets/ (liabilities)		1,161	(591)	1,626
Total assets less current liabilities		120,712	116,644	101,096
Provision for liabilities		-	(70)	(30)
Net assets		120,712	116,574	101,066
Capital and reserves
Called up share capital		16,577	16,707	16,590
Share premium account		5	5	5
Capital redemption reserve		40,994	40,864	40,981
Capital reserves		53,887	50,274	33,339
Revenue reserve		9,249	8,724	10,151
Equity shareholders' funds		120,712	116,574	101,066
Net asset value per ordinary share - pence	6	182.05	174.44	152.30

Cash Flow Statement

for the six months ended 31 July 2009

		(Unaudited)	(Unaudited)	(Audited)
		Six months ended  31 July 2009	Six months ended  31 July 2008	Year ended 31 January 2009
	Note	£'000	£'000	£'000
Net cash inflow from operating activities	7	1,128	1,253	3,495
Servicing of finance
Bank and loan interest paid		(178)	(193)	(207)
Net cash outflow from servicing of finance		(178)	(193)	(207)
Net tax paid		(614)	(324)	(622)
Capital expenditure and financial investment
Purchases of investments		(24,755)	(17,750)	(36,382)
Sales of investments		26,290	19,445	39,667
Capital expenses and performance fee payments		(30)	(18)	(208)
Net cash inflow from financial investment		1,505	1,677	3,077
Equity dividends paid		(1,890)	(1,109)	(1,109)
Net cash (outflow)/inflow before financing		(49)	1,304	4,634
Financing
Repurchase of own shares		(59)	(1,038)	(1,851)
Repayment of bank loan		(1,000)	-	-
Net cash outflow from financing		(1,059)	(1,038)	(1,851)
(Decrease)/increase in cash		(1,108)	266	2,783
Reconciliation of net cash flow to movements in net funds/(debt)
(Decrease)/increase in cash as above		(1,108)	266	2,783
Exchange movements		(214)	92	592
Decrease/(increase) in bank loan		1,000	(193)	-
Movement in net funds in the period		(322)	165	3,375
Net funds/(debt) at start of period		2,686	(689)	(689)
Net funds/(debt) at end of period		2,364	(524)	2,686

Notes to the Accounts

for the six months ended 31 July 2009

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 2009 have been applied.

2 Income

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended  31 July 2009	Six months ended  31 July 2008	Year ended  31 January 2009
	£'000	£'000	£'000
Overseas dividends	1,566	1,788	3,244
UK dividends	60	36	60
Overseas scrip dividends	53	11	23
Other income:
Bank interest	1	50	75
Interest relating to refund of prior years' VAT	-	-	379
Stock lending fees	-	15	29
Underwriting commissions	6	-	2
	1,686	1,900	3,812

3 Management Fee and Performance-Related Management Fee

On 27 May 2005, your Board appointed Witan as Executive Manager and Aberdeen and Nomura as the Investment Managers. Each of the Investment Managers is entitled to a base management fee, calculated according to the value of the assets under their management, and a performance fee. The performance fee is calculated according to investment performance over a three year rolling period and is subject to a cap. Each Management Agreement can be terminated at one month's notice. The base management fees range from 0.2% to 0.25% per annum and the performance fees range from 10% to 15% per annum of the relevant outperformance.

The provisions included in the Income Statement at 31 July 2009, are calculated based on the performance of each Investment Manager relative to the benchmark index. Each provision assumes that both the benchmark and each Investment Manager's assets under management remain unchanged to 31 May 2010, being the date the performance period ends.

4 Dividends per Ordinary Share

No interim dividend payment will be proposed for the six months ended 31 July 2009 (six months ended 31 July 2008: nil; year ended 31 January 2009: final of 2.85p per share (includes 1.00p special)).

5 Return per Ordinary Share

The return per ordinary share is based on the net return attributable to the ordinary shares of £21,595,000 (six months ended 31 July 2008: loss £8,669,000; year ended 31 January 2009: loss £23,557,000) and on 66,327,376 ordinary shares (six months ended 31 July 2008: 67,323,640; year ended 31 January 2009: 67,001,745) being the weighted average number of ordinary shares in issue during the period.

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended  31 July 2009	Six months ended  31 July 2008	Year ended  31 January 2009
Revenue return (£'000)	988	917	2,344
Capital return/(loss) (£'000)	20,607	(9,586)	(25,901)
Total return/(loss) (£'000)	21,595	(8,669)	(23,557)
Weighted average number of ordinary shares in issue during the period	66,327,376	67,323,640	67,001,745
Revenue return per ordinary share - pence	1.49	1.36	3.50
Capital return/(loss) per ordinary  share - pence	31.07	(14.24)	(38.66)
Total return/(loss) per ordinary  share - pence	32.56	(12.88)	(35.16)

6 Net Asset Value per Ordinary Share

Net asset value per ordinary share is based on 66,308,868 ordinary shares of 25p each in issue at 31 July 2009 (31 July 2008: 66,826,968 and 31 January 2009: 66,358,868).

7 Reconciliation of Revenue Return Before Finance Costs and Taxation to Net Cash 

  Inflow From Operating Activities

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended  31 July 2009	Six months ended  31 July 2008	Year ended 31 January 2009
	£'000	£'000	£'000
Total return/(loss) before finance charges and taxation	21,778	(8,238)	(22,481)
(Less)/add capital(return)/loss before  finance charges and taxation	(20,556)	9,665	25,991
Net revenue return before finance costs and taxation	1,222	1,427	3,510
(Increase)/decrease in accrued income	(22)	(10)	133
(Increase)/decrease in debtors of a revenue nature	(14)	3	21
Increase/(decrease) in creditors of a revenue nature	41	(108)	(43)
Management fee rebate	(46)	(48)	(103)
Scrip dividends	(53)	(11)	(23)
Net cash inflow from operating activities	1,128	1,253	3,495

8 Principal Risks and Uncertainties

The principal risks faced by the Company include those of 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 2009. The Report is available on the website www.witanpacific.com.

9 Results

The results for the six months ended 31 July 2009 and 31 July 2008, 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 and Section 240 of the Companies Act 1985 respectively. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 31 January 2009, the report of the Auditors thereon was unqualified and did not contain a statement under Section 237 of the Companies Act 1985. The comparative figures for the year ended 31 January 2008 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 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 2009 in the Business Review and in the Notes to the Accounts. The Report is available on the Company's website www.witanpacific.com. 

Responsibility Statement of Directors

in respect of the Half Year Report for the six months ended 31 July 2009

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 22 September 2009 and the above responsibility statement was signed on its behalf by:

Gillian Nott

Chairman

 

END

 

 

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