Shareholder Update
WITAN PACIFIC INVESTMENT TRUST PLC
Shareholder update
From the Chairman:
In recent days, the world has been transfixed by the enormity of the earthquake in Japan and the subsequent inundation of a wide area of Japan's East coast by tsunamis. Many thousands have lost their lives, populations have been displaced for an indefinite period and coastal towns and cities have been swept away.
It is too soon to gauge the consequences, in the wake of the tragic loss of life and the damage to nuclear and other infrastructure. Apart from the human aspect of the catastrophe, it has not yet become clear how widespread or prolonged the dislocation to industry will be within Japan and, for companies with global supply chains run with slim inventory levels, further afield too. An additional, and currently dominant, factor is the uncertainty over the severity of pollution from the nuclear reactors at Fukushima, whose facilities were damaged by both the earthquake and the tsunamis. The operator has been struggling to shut down the facility fully which has resulted in a continuing fear in case a major escape of radiation generated more serious consequences than those already created by the physical destruction suffered by the region.
The uncertainty has been felt most severely by the Japanese stock market which fell by 11% in the week following the earthquake, having been at one stage over 20% down. This in turn has prompted lesser falls elsewhere, reflecting greater concern over the near-term prospects for economic growth in general and the differing effects of these events on individual economies and companies.
Witan Pacific employs two managers whose portfolios each invest in the Japanese market as well as the other markets in the Asia-Pacific region. Prior to this month's terrible events, 30% of our assets were invested in Japan. This compares with the regional benchmark's allocation to Japan of 41% (as at the end of February 2011), as both of our managers had to differing extents taken the view that there were more opportunities in other markets. Our Managers always keep a careful watch over all the pertinent factors in making their assessment of the right balance to strike between country weightings and individual companies in their respective parts of the portfolio. The aftermath of the recent earthquake is no exception, although the significance of the issues involved and currently un-quantified consequences of the past week's events lend extra weight to any resulting decisions.
Aside from our relative underexposure to the Tokyo market, which has helped to reduce the impact of its falls on our shareholders' net asset value, one other factor of reassurance is that neither of our managers held shares in Tokyo Electric Power, the operator of the nuclear power station at the centre of current concerns, whose shares have been especially weak. Our portfolio's exposure to property insurance was under 1% of the total portfolio, the largest holding within which (QBE Insurance Group in Australia) has informed the market that its expected losses are less than 1% of its market value. 1.5% of our total portfolio was invested in Shin-Etsu Chemical (a manufacturer of silicon wafers for the semiconductor industry) whose operations were extensively damaged by the tsunami and will therefore suffer dislocation beyond the immediate term. Although many other companies in Japan, including some in our portfolio, have had their operations damaged or disrupted, reconstruction efforts and the reopening of factories currently in emergency shutdown are likely to enable investors to take a more positive view of their prospects once the current crisis abates.
We emphasise that all our portfolio share holdings are quoted and trading on their respective stock markets so the impact of the foregoing specific comments is reflected in their prices and our daily released net asset values.
Apart from the foregoing update, I am sure that our shareholders will join with me and the rest of the Board in expressing our condolences to the people of Japan for the calamity which has struck their country and our support and good wishes for the Herculean task of reconstruction which faces them.
Gillian Nott
Chairman
18 March 2011
Phoenix Administration Services Limited - Corporate Secretary
This information is provided by RNS