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RNS

Annual Financial Report

Released 07:00 26-Apr-2018

RNS Number : 1506M
Witan Pacific Investment Trust PLC
26 April 2018
 

WITAN PACIFIC INVESTMENT TRUST PLC

(the "Company")

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JANUARY 2018

 

Witan Pacific Investment Trust plc announces that its 2018 Annual Report and Accounts has been published. The full report can be accessed via the Company's website at www.witanpacific.com and will be circulated to shareholders shortly.

 

The Annual General Meeting of the Company will be held on 13 June 2018 at 2.30pm at the offices of J.P. Morgan Cazenove, 60 Victoria Embankment, London EC4Y 0JP.

 

The Directors have proposed the payment of a final dividend of 3.25p per Ordinary share which, if approved by shareholders at the forthcoming Annual General Meeting, will be payable on 18 June 2018 to shareholders whose names appear on the register at the close of business on 18 May 2018 (ex-dividend 17 May 2018).

 

This announcement includes certain extracts from the 2018 Annual Report and Accounts. Any references to page numbers or sections in the following text are references to pages and sections in that report.

 

 

STRATEGIC REPORT

 

FINANCIAL SUMMARY

for the year ended 31 January 2018

 

Key data

 

 

2018 

2017 

% change  

NAV per share

386.58p

333.87p

15.8%

Share price1

344.00p

286.00p

20.3%

Discount1

11.0%

14.3%

 

 

Total return

 

 

2018 

2017 

NAV per share1,2

17.3%

30.7%

Share price1,2

22.1%

26.1%

Benchmark3

17.9%

35.3%

 

Income

 

 

2018 

2017 

% change

Revenue per share4

6.52p

4.41p

47.8%

Dividend per share1

5.50p

4.75p

15.8%

 

Ongoing charges1

 

 

2018  

2017  

Excluding performance fees

0.99%

1.03%

Including performance fees

0.99%

1.03%

 

1 Alternative Performance Measure not defined under Generally Accepted Accounting Practice in the UK ("UK GAAP") (for definitions see page 74 in the full Annual Report).

2 Source: Morningstar.

3 Source: Morningstar. The benchmark for Witan Pacific Investment Trust plc is the MSCI AC Asia Pacific Index.

4 The allocation of management fees between capital and revenue was amended with effect from 1 February 2017. See below for further details.

 

 

LONG-TERM PERFORMANCE ANALYSIS

for the year ended 31 January 2018

 

Total returns since inception of multi-manager structure (31 May 2005)

 

 

Cumulative return

       Annualised return

NAV per share1

245.5%

10.3%

Share price2

252.9%

10.5%

Benchmark2

233.7%

10.0%


Total returns over each of the past five financial years (twelve months to 31 January)

 

 

Cumulative

 

 

 

 

 

 

5 year return

2018  

2017  

2016  

2015  

2014  

NAV per share1

58.8%

17.3%

30.7%

-5.6%

17.6%

-6.5%

Share price2

64.2%

22.1%

26.1%

-3.5%

16.6%

-5.2%

Benchmark2

76.1%

17.9%

35.3%

-5.9%

17.1%

0.2%

 

1          Source: Morningstar/Witan Investment Services. Alternative Performance Measure.

2          Source: Morningstar. Alternative Performance Measure.

 

 

CHAIR'S STATEMENT

 

SUMMARY

 

·      NAV total return of 17.3% for the year, compared with benchmark 17.9%

·      Share price total return of 22.1%

·      Final dividend of 3.25p, making 5.50p for the year (+15.8%)

·      NAV total return of 245.5% since 2005, compared with benchmark 233.7%

·      Net assets £244 million (2017: £217 million)

 

Introduction

I am pleased to be writing as your new Chair, having been a member of the Board and a shareholder since 2014. I took over from Sarah Bates, who retired from the Board last June, and I would like to take this opportunity to reiterate the Board's thanks to Sarah for her valuable contribution to Witan Pacific over the many years she was involved.

 

Witan Pacific has provided attractive returns over the long term from its mandate to invest across the whole of the Asia Pacific region and is the only investment trust to do so. Its multi-manager approach provides access to specialist investment managers that many investors would not otherwise be able to access directly or not at such a competitive cost.

 

Market background

This has been a year of strong performance from the region, with all country components of our benchmark index providing positive and mostly double-digit returns. The global backdrop has been generally supportive of equities with a healthy world economy, subdued inflation, growing corporate earnings and loose global monetary policy. This environment helped our benchmark appreciate by 17.9%. By way of comparison, the UK was up 11.3%, the US 11.8% and Europe 17.4%.

 

Political developments in the Asia Pacific region were positive for markets - Prime Minister Modi's position in India was reinforced by the results in State elections and Prime Minister Abe was re-elected in a snap Japanese election. Whilst North Korea continues as a risk, it is not seen as a present danger and is therefore not negatively impacting markets at the current time. The standout performer was the MSCI China Index, which returned over 40% over the year. Positive investor sentiment was further helped by the inclusion of China 'A' shares in the influential MSCI indices and by the relentless rise in the larger Chinese internet stocks. South Korea was the second strongest market in the region, returning 26%, helped by the strong performance of Samsung, which represents over 20% of the market.

 

Japan, which represents a little less than 40% of our benchmark, returned 11% as Yen weakness detracted from a c.22% gain the Japanese market achieved in local currency terms. Indeed, although the Yen was particularly weak, virtually all Asian currencies weakened versus Sterling, dampening returns for investors based in the UK. This is in contrast to 2016, when Asian currencies strengthened against Sterling as a result of the Brexit vote.

 

In sector terms, Technology was the outstanding performer with a gain of 41%. Consumer Services rose 25% and Oil & Gas stocks were up 19% in an environment where the prospects for sustained economic growth look more certain than in recent years.

 

Performance

The Company's NAV total return was 17.3% and the share price total return was 22.1%, compared with our regional benchmark, the MSCI AC Asia Pacific Index, which delivered a return of 17.9%. A significant proportion of our benchmark's performance came from just five technology stocks: Baidu, Alibaba, Tencent (collectively known as the BATs), Samsung and Taiwan Semiconductor ("TSMC"). Whilst our managers, in aggregate, own significant positions in Samsung and TSMC, they have been underweight the BATs stocks, believing that valuations have become stretched or that corporate governance standards (including a lack of transparency or dividend payments) remain below par. The underweight position in these three companies was a drag on performance. Positive contributions came from longheld positions in China and a wide variety of stocks based throughout the rest of the region, demonstrating that good performance can be found more broadly and outside the more fashionable internet sector.

 

Further details on the Company's performance can be found in the Investment Review.

 

Manager changes

Whilst the Company's absolute performance has been good since the multi-manager strategy was implemented, generating an annualised return of 10.3%, the performance relative to the benchmark over the last few years has not been as strong as we would like. Therefore, following our visit to the region in early 2017, the Board decided to alter the manager line-up with a view to strengthening performance. An extensive search was conducted with the help of an external consultant, resulting in the selection of two new portfolio managers: Robeco Institutional Asset Management BV and Dalton Investments LLC. Robeco takes a long-term selective value approach to investing, with its focus on future cash flows aiming to avoid overvalued speculative stocks. Dalton follows a fundamental highly-selective value approach where an alignment of interest between management and shareholders is evident, with a bias towards smaller companies. The holding in the Gavekal Asian Opportunities UCITS was sold. At the year end, the portfolio allocation to the four managers was: Matthews 40.2%, Aberdeen 25.1%, Robeco 25.1% and Dalton 9.6%.

 

These changes are designed to improve the potential for outperformance by accentuating the emphasis on active portfolio management and stock selection, to provide shareholders with exposure to a broad set of opportunities across the region. Although the managers each have mandates covering the entire Asia Pacific region, the revised mix is expected to increase portfolio exposure to smaller capitalisation or lesser-known companies whose growth prospects have more chance of being underestimated by the market. The Board believes these changes will enhance the benefits of the multi-manager strategy, which aims to deliver outperformance for investors while reducing the peaks and troughs arising from single manager performance.

 

Share repurchases

In line with our policy, we have continued to buy back shares when the discount to NAV is at a substantial and anomalous level. During the year, we repurchased 1,769,293 shares at discounts ranging from 11% to 17%, which added approximately £0.97m (1.53p per share) of value.

 

Dividend

The Board aims to increase the ordinary dividend in real terms over the long term and has been able to do so in each of the past 13 years. Following the interim dividend of 2.25p per share paid in October 2017, the Board is proposing a final dividend of 3.25p per share. Subject to shareholder approval, this will be paid in June, with the shares trading ex-dividend on 17 May 2018. This will make a total dividend of 5.50p per share, a rise of 15.8% on last year. This higher than usual increase is partly a result of higher dividend payments received from portfolio companies, with revenue earnings further enhanced by a change in the policy for allocating investment management fees between revenue and capital. Whereas previously all such expenses (except performance fees) were charged to revenue, now, in line with many other investment trusts, the majority (75%) of management fees are charged to the capital account to reflect the expected split between income and capital returns and to reflect the Company's aim of providing both capital and income growth. A consequence of this is that additional revenue is available to pay out to shareholders each year, although total returns of course remain the same.

 

Succession

We conducted a thorough search for a new Board member using an external firm of consultants in the spring of 2017. I am pleased to welcome Chris Ralph to the Board. Chris is an experienced investment professional and brings many years of investment manager monitoring and selection, which is particularly useful given the Company's multi-manager structure.

 

Outlook

Corporate earnings growth remains a strong support for markets and the regional earnings outlook appears healthy. Inflation fears have started to rise, marking a possible turning point in global interest rates. Following the strong performance of recent years we can expect returns to be more muted and markets to be more volatile. Although periodic setbacks are a normal feature of financial markets, as seen during early February they can surprise markets when sentiment has become too complacent.

 

We continue to believe that the Company offers an attractive vehicle for investment in Asia, a region of great opportunity with growing prosperity and rising living standards. Witan Pacific offers four specialist managers with established track records who are well placed to access the region's opportunities on behalf of shareholders.

 

Annual General Meeting

The Annual General Meeting ("AGM") of the Company will be held at 2.30pm on Wednesday, 13 June 2018 at 60 Victoria Embankment, London EC4Y 0JP. Please do arrive in time to register. The portfolio managers will have prepared video presentations and my Board colleagues and I look forward to meeting you then.

 

Susan Platts-Martin

Chair

25 April 2018

 

Company Secretary contact details:

Link Company Matters Limited

Beaufort House, 51 New North Road, Exeter, EX4 4EP

email: WitanPacificInvestmentTrustplc@linkgroup.co.uk

 

 

 

INVESTMENT REVIEW

for the year ended 31 January 2018

 

Performance summary

 

Markets

Equity markets performed well during the period as investors focused on economic and corporate fundamentals rather than the political events which had dominated the headlines in 2016. Stock market returns are being driven by a number of conflating factors. Interest rates remain ultra-low, while global economic growth has broadened away from the US and has taken hold in virtually all corners of the globe. This has helped propel corporate earnings growth, thereby underpinning equity valuations which could otherwise have appeared overextended. This effect is most notable in Asia, which is recovering from a number of years of sub-normal earnings growth. Corporate governance in the region continues to improve which, coupled with improved corporate profits, has resulted in significant dividend growth across the region and the Company's portfolio.

 

Our managers enjoyed a more prosperous year as this benign environment has allowed the individual attributes of the stocks they have selected to shine through. The only significant headwind they faced was, as noted earlier, that the portfolio was under-exposed to the rampant performance of some leading internet stocks (particularly in China). Notable positive contributions came from Chinese companies including Minth Group (auto-parts), Aberdeen's China A Share Fund, Shenzhou International (textiles), Midea (household appliances) and Ping An Insurance. Elsewhere, LG Chemical (Korea), United Tractors (Indonesia) and Japanese companies including Keyence (factory sensors), Misumi (machinery parts), Anritsu Corp (electronics) and Chugai Pharmaceutical also performed well. The net effect was that the portfolio marginally outperformed the benchmark before costs, while marginally underperforming it after costs.

 

Manager performance

Overall, the Company's NAV total return was 17.3%, marginally behind the benchmark return of 17.9%. Matthews outperformed the benchmark by 2.3%, with a total return (before costs) of 20.2%. Aberdeen was marginally behind the benchmark, with a total return of 16.8%. Robeco and Dalton were appointed on 28 September 2017 and recorded returns of 9.2% and 3.0% respectively. The benchmark total return over this relatively short period was 8.75%. Aberdeen was appointed in 2005 and manages 25.1% of the Company's assets. Since appointment, it has achieved a total portfolio return of 11.8% p.a. compared with 10.0% p.a. for the benchmark, representing outperformance of 1.8% p.a. before fees. Matthews Asia was appointed as one of the Company's portfolio managers in April 2012 and manages 40.2% of the Company's assets. Since appointment, it has achieved a total portfolio return of 14.5% p.a. compared with 12.4% p.a. for the benchmark, representing outperformance of 2.1% p.a. before fees.

 

Portfolio manager performance for the year ended 31 January 2018 and from appointment to 31 January 2018

Details of the portfolio manager structure in place at the end of January 2018 are set out in the following table, showing the proportion of Witan Pacific's assets each managed and the performance they achieved:

 

 

 

Managed assets1

Performance

Annualised performance2

 

Appointment date

£m

%

Manager

%

Benchmark

%

Manager

%

Benchmark

%

Aberdeen

31 May 2005

61.2

25.1

16.8

17.9

11.8

10.0

Dalton

28 Sept 2017

23.4

9.6

-

-

-

-

Matthews

30 April 2012

97.8

40.2

20.2

17.9

14.5

12.4

Robeco

28 Sept 2017

61.1

25.1

-

-

-

-

 

Source: BNP Paribas. All performance figures are disclosed on a pre-fee basis.

 

Notes:

1 Excluding cash balances held centrally by the Company.

2 Since appointment.

 

Manager changes

Shareholders will note that 2017 was a year of significant change for Witan Pacific. Our strategy is to employ an 'active multi-manager approach', by which we mean that manager portfolios are expected to be 'active' rather than passive (i.e. quite different from the benchmark). In addition, where necessary, the Board is active in adjusting the manager line-up when it considers this to be in shareholders' best interests. During 2017, as part of its ongoing manager and portfolio review process, the Board identified an opportunity to improve the prospects for the future performance of the Company. Early in the year, the Board initiated a search (via an external investment consultant) to identify managers who could make the most of the very broad set of opportunities the region has to offer. The Board reviewed an extensive list of high-quality managers and met with a number of short-listed candidates before confirming the appointment of Dalton Investments (based in Santa Monica, California) and Robeco International (based in Hong Kong). Two incumbent managers, Aberdeen and Matthews, were retained with differing allocations, while the sale of the Gavekal Asian Opportunities UCITS was undertaken as part of the transition process. It is expected that the new line-up will improve the chances of outperformance while avoiding undue reliance on the prospects for a single manager.

 

Dalton Investments is an independent investment boutique headed by James B. Rosenwald III, a veteran investor in Asian equities. Dalton follows a fundamental value approach, based upon four tenets - investing in good businesses, with a significant margin of safety, where management is aligned with shareholders' interests and has a strong record of internal capital allocation. Their portfolios tend to be tilted towards smaller companies, where valuations are often lower, access to management better and market research coverage is poor, offering mispricing opportunities.

 

Robeco's Asian equity team, led by Arnout van Rijn, has been in place since 1990. Robeco adopts a long-term selective value approach with a focus on companies' future cash flows and identifying where stocks are enjoying positive share price momentum. Its geographic weightings will not diverge significantly from the benchmark but its portfolio will look different. The aim is for performance to be driven primarily by stock selection.

 

Both new managers run high conviction, low turnover portfolios with an emphasis on selecting stocks for the long term. Robeco will typically have 70 - 80 stocks in their portfolio while Dalton will own approximately 20.

 

Further details on all four managers can be found below.

 

Portfolio composition

The Company's overall portfolio is the result of the stock selection decisions of our managers. The managers are chosen for their skills in this area and no attempt is made to replicate the benchmark, which serves as an opportunity set from which stocks are selected as well as an objective measure by which investors can assess performance. The managers are free to invest in Asian companies which are not benchmark constituents and, with Board approval, in companies domiciled outside the region if a suitable rationale exists. When selecting the managers, the Board takes account of how the managers are expected to perform (both individually and in combination). No attempt is made to select managers so that the resulting portfolio covers all stocks, countries or sectors. Indeed, for the portfolio to outperform the benchmark, it has to be different from it. One measure of this is Active Share (where a tracker fund would aim for 0% active share and a portfolio which held no stocks in common with the benchmark would have an active share of 100%). With an active share of 72%, Witan Pacific's portfolio is markedly different from the benchmark and therefore has the potential to outperform the benchmark (although naturally this cannot be guaranteed). The Board considers that the changes made in 2017 improve the capability of the multi-manager strategy which has been in place since 2005.

 

The tables below show how manager stock selection has resulted in the portfolio having particular geographic and sectoral weightings. These result from the stock selection process and (with the exception of Robeco) are not targeted as part of the investment process. The benchmark's geographic and sectoral distribution is also shown.

 

Although Japan retains the number one spot in terms of benchmark weighting, China is becoming an increasingly important regional market. This is reflected in our portfolio, which had 30% exposure to China/Hong Kong at the end of January 2018. Our managers have been successfully investing in Chinese businesses for a number of years, but 2017 will probably be seen as a watershed year. China 'A' shares (where the market has taken a number of years to stabilise and mature) are now included in MSCI Emerging Market indices. Although China 'A' shares are not yet included in our benchmark, our managers are increasingly finding attractive opportunities in this market as corporate governance improves. These investments were particularly fruitful in the last financial year, though appropriate caution is exercised at times when conditions become speculative, especially at times when valuations, relative to other opportunities, are high.

 

Despite the attractions of China (a fast growing economy which is home to nearly 20% of the world's population) our managers are finding exciting investment opportunities across the region, including in relatively mature economies such as Japan, which still represents approximately 30% of the portfolio. Japan may not be as economically or demographically vibrant as its neighbours, but it is home to many great and innovative businesses which are able to thrive in their home market or feed off the power of Asian growth. Many of these stocks, including Fanuc (robotics), Keyence (sensors), Anritsu (electronics) and Shin-Etsu Chemical, have served the Company well over the years and generate at least as much revenue overseas as they do in Japan.

 

Other markets of note are South Korea and India. Korea enjoyed a renaissance in 2017 as relations with China thawed following recent spats over how to deal with their errant neighbour, North Korea. The election of Moon Jae-in has led to a more conciliatory stance which should allow for a de-escalation in tension in the region, though the reactions of the leaders in the US and North Korea are difficult to predict. Moon is also an advocate of fiscal stimulus and of corporate reform, which should benefit market sentiment in the long term. Samsung Electronics is an obvious example of this fundamental change, having taken steps to improve its corporate governance. It is the largest position in our portfolio.

 

India can be something of an investment enigma. Home to over a quarter of the region's 4 billion people and over half of its listed companies, one would be forgiven for assuming that there were investment opportunities galore. There are indeed some great businesses in India and the stock market has enjoyed excellent returns from time to time, including in 2017. As an economy, it has not yet produced many businesses which compete on a global scale and those that can tend to be very highly rated. That said, the domestic economy is developing and Prime Minister Modi looks likely to remain in power and to continue his reform agenda. Our managers (notably Aberdeen and Dalton) continue to find interesting opportunities, especially in domestically focused and sometimes smaller companies where prospects are encouraging.

 

The various manager changes noted above and the managers' own stock selection (together with relative investment performance) has led to several changes in how the portfolio as a whole is positioned compared with 12 months ago.

 

South Korea is the largest beneficiary, with a 3% increase in allocation (from 9% to 12%), while Japan gained by 2%. These increases were at the expense of Singapore (-2%), India (-2%) and Indonesia (-3%). In sector terms, the largest increases were in Technology (+6%) and Energy (+3%), while decreases included Telecommunications (-3%) and Industrials (-2%). The portfolio continues to be tilted away from the region's very largest companies, with the benchmark's top 20 companies by market capitalisation representing 13.7% of the portfolio and 23.9% of the benchmark. Smaller companies (with a market capitalisation of less than c.£4.5bn which, by way of comparison, equates to the smallest company in the FTSE 100 in the UK) represent 23.8% of the portfolio and 10% of the benchmark. The largest overweight positions are in Minth Group (+1.8%), HSBC (+1.6%), Shenzhou Intl (+1.4%), China Construction Bank (+1.4%) and Hyundai Mobis (+1.2%). The most significant underweight positions are Tencent (-2.6%), Toyota (-1.8%), Alibaba (-1.7%), Commonwealth Bank (-1.1%) and Westpac Banking (0.9%).

 

Analysis of the Company's equity portfolio by sector at 31 January 2018

 

Sector

Portfolio %1

Benchmark %2

Consumer Discretionary

16%

13%

Consumer Staples

11%

6%

Energy

4%

3%

Financials

19%

21%

Healthcare

3%

5%

Industrials

10%

13%

Information Technology

16%

21%

Materials

7%

7%

Real Estate

5%

5%

Telecom Services

4%

4%

Utilities

1%

2%

Other

4%

-

 

1 Source: BNP Paribas.

2 Source: MSCI.

 

Geographical allocation

 

Country

Portfolio

at 31 January

20181

Benchmark

at 31 January

20182

Australia

5%

11%

China/Hong Kong

30%

24%

India

5%

5%

Indonesia

2%

1%

Japan

30%

38%

Malaysia

1%

1%

Philippines

1%

1%

Singapore

6%

2%

South Korea

12%

9%

Taiwan

5%

7%

Thailand

2%

1%

Vietnam

1%

-

 

100%

100%

 

1 Source: BNP Paribas - portfolio represents investments excluding cash.

2 Source: MSCI.

 

Outlook

Asian markets have enjoyed a fruitful period which has gone some way to closing the valuation gap between them and the rest of the world. Despite this, most regional markets continue to demonstrate attractive fundamentals. The improvement in economic growth experienced throughout the globe should allow for continued growth in corporate profits, which should help support current equity valuations. Equity market volatility in early February 2018 (following the Company's year end) reminded investors that a long period of low inflation does not mean it is banished forever. Bond investors' sensitivity to inflation, together with the opposite concern that policy makers may stall the widespread economic recovery by acting too aggressively, will leave investors prone to bouts of nervousness. It is into this less certain environment that Donald Trump recently launched his protectionist agenda by imposing tariffs on steel, aluminium and on a number of Chinese products, thereby risking a damaging trade war which, if allowed to escalate beyond these initial skirmishes, would be counter-productive for the global economy. Despite the rhetoric, trade wars are rarely easy to win and there would be significant collateral damage in the region and, more pertinently, in the US. It is unlikely, therefore, that rational politicians would embark on such an agenda without considering the wider consequences and resort, in the end, to more measured negotiations.

 

Whatever the outcome, it appears that the years of extremely low volatility are behind us and that the stock picking skills of our managers may become more highly prized. Nonetheless, equity ratings will continue to have attractions unless bond yields rise precipitously and should therefore offer competitive returns relative to other asset classes.

 

It is difficult to close without reference to the ongoing Brexit negotiations which, although they will have little impact on the Company's portfolio, will be likely to affect the value of Sterling for as long as the political wrangling continues. This will continue to impact (positively or negatively) the returns that we, as UK-based investors into Asian equities, will experience. It is still too early to reach any conclusion on the likely outcome of any deal with the EU so, as ever, the Board will focus on ensuring it has the right team in place to deliver the best possible returns from this diverse and exciting region.

 

Continued appointment of portfolio managers

As at the date of this Report, the Directors are of the opinion that the continuing appointment of the four portfolio managers, on the terms agreed, is in the interests of shareholders as a whole. The Board, in conjunction with Witan Investment Services Limited ("WIS") and consultants, as appropriate, considers the performance of, the allocations to and the appointments of each of the portfolio managers on a regular basis and may alter either allocations or appointments if considered to be in the Company's interests. The Board meets with the portfolio managers on a regular basis and, in any case, at least once a year. In addition, periodically, the Board travels to the region to visit the managers in their offices to carry out due diligence. The Board also takes the opportunity to meet with other managers while it is in Asia. The next due diligence visit to the managers is scheduled for February 2019 when the Board and representatives from WIS will meet with the investment teams as well as personnel from, but not limited to, business management and operations, risk management, compliance, internal controls (including IT security) and trading.

 

 

PORTFOLIO MANAGER INFORMATION

 

Aberdeen Asset Managers Limited ("Aberdeen") is a subsidiary of Aberdeen Asset Management PLC and part of the Standard Life Aberdeen PLC group of companies. Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments. Aberdeen has delegated management of the Company's assets to Aberdeen Asset Management Asia Limited (also part of the Standard Life Aberdeen PLC group of companies) which was established in Asia in 1992 and, as at 31 December 2017, was managing £47.1bn of assets in Asia. The Asian equity team, made up of over 40 fund managers in the region, is headed up by Flavia Cheong. The team follow a fundamental investment style emphasising the identification of good quality companies on reasonable valuations relative to their growth potential.

 

Strategy

Aberdeen follows a stock-picking approach of investing in good quality, well-managed and soundly-financed companies trading at attractive valuations, with the expectation of holding them for extended periods in order to benefit from the compounding of those companies' growth. Corporate governance and the alignment of management with shareholders' interests are additional important factors. Aberdeen will, from time to time, use their own UCIT funds to gain cost effective exposure to certain regional markets. This is achieved by investing in 'zero fee' class units so that it does not affect Aberdeen's overall remuneration.

 

 

Dalton Investments LLP ("Dalton") is an independent investment boutique established in Santa Monica, California in 1999. Dalton manages US$3.9bn (as at 31 January 2018) in strategies focused on Asian, global and emerging market equities, and high-yield fixed income. The firm is independently owned by its founders, each of whom has over 30 years of investment experience.

 

Strategy

Dalton's Asia strategies are managed by James B. Rosenwald III, co-founder of Dalton Investments and noted authority on Asia equity investment. He is supported by multi-cultural, multi-lingual analyst teams located in Los Angeles and Tokyo and a dedicated Asia trader based in Los Angeles. Dalton follows a disciplined value investment process to identify good businesses trading at a significant discount to intrinsic value and whose management share an alignment of interest with shareholders.

 

 

Matthews International Capital Management LLC ("Matthews Asia") is an independent, privately owned firm, and the largest dedicated Asia investment specialist in the United States. Matthews believes in the long-term growth of Asia and employs a bottom-up, fundamental investment philosophy with a focus on long-term investment performance. As at 31 December 2017, Matthews Asia had US$33.9bn in assets under management.

 

Strategy

The Company is invested in a segregated portfolio that is managed according to the Matthews Asia Dividend Strategy; the Lead Portfolio Managers are Yu Zhang, CFA, and Robert Horrocks, PhD. The Asia Dividend Strategy employs a fundamental, bottom-up investment process to select dividend paying companies with sustainable long-term growth prospects, strong business models, quality management teams and reasonable valuations. The Asia Dividend Strategy is a total-return strategy focused on a balance between stable dividend yielding companies and companies with attractive dividend growth prospects, in order to provide both capital growth and a sustainable dividend yield. The strategy invests in companies of all sizes and has significant exposure to small and mid-cap stocks.

 

 

Robeco Institutional Asset Management B.V. ("Robeco") is an international asset management company founded in 1929. It currently has 16 offices worldwide and is headquartered in Rotterdam, the Netherlands. Robeco is owned by ORIX Corporation, a Tokyo-listed financial services group. The Asian equity team (headed by Arnout van Rijn) has been in place since 1990 and now manages US$8.5bn out of its office in Hong Kong.

 

Strategy

Robeco's investment approach combines a value approach with awareness of business and price momentum with the aim of constructing portfolios of attractively-valued shares while avoiding value traps. Whilst their portfolio may have similar geographic weightings to the benchmark, it will tend to look very different from the benchmark as it has a high active share which is the result of active bottom-up stock selection. The aim is for performance to be driven by stock selection rather than country, macro-economic or political factors.

 

 

TOP FIFTY INVESTMENTS
as at 31 January 2018

 

Rank

Description

Country

% of total investments

Value

£'000

1

Samsung Electronics

Global market leader in semiconductors, mobile
phones, televisions and OLED panels

Korea

2.7

6,574

2

China Construction Bank

CCB provides banking services to public, corporate
and private sectors throughout China

China

2.3

5,504

3

Taiwan Semiconductor

The world's largest dedicated semiconductor foundry

Taiwan

2.2

5,300

4

Aberdeen Global Indian Equity Fund

UCITS fund providing cost-effective access to a concentrated portfolio of Indian equities

India

2.0

4,791

5

Minth Group

Auto-parts manufacturer with 136 clients representing
over 80% of the world's car production

China

1.8

4,369

6

Aberdeen Global China A Share Fund

UCITS fund providing cost-effective access to a concentrated portfolio of Chinese equities

China

1.8

4,265

7

HSBC

UK bank with Asian heritage and significant regional revenues

Hong Kong

1.7

4,030

8

Seven & I Holdings

Japanese convenience store operator with over 50,000 stores worldwide

Japan

1.5

3,507

9

Shenzhou International

Chinese textile manufacturer supplying the global
branded sports goods and casualwear market

China

1.5

3,507

10

Ping An Insurance

Personal and corporate insurance and other financial services across Greater China

China

1.4

3,474

11

Japan Tobacco

Global tobacco, pharmaceutical and processed food company with operations in 120 countries

Japan

1.4

3,305

12

Hyundai Mobis

Korean-based manufacturer of automotive and environmental products with global operations

Korea

1.4

3,300

13

China Petroleum

The world's largest oil & gas company by revenue

China

1.3

3,207

14

Rohm

IC and semiconductor manufacturer for industrial, automotive, home appliance, mobile and PC uses

Japan

1.3

3,162

15

Sumitomo Mitsui Financial

One of the market leaders in the Japanese banking and financial services industry

Japan

1.3

3,114

16

LG Chemical

Speciality chemicals used in life sciences, mobile
phone, OLED and innovative battery markets

Korea

1.3

3,092

17

Midea Group

One of the world's largest household electrical
appliance manufacturers

China

1.1

2,692

18

United Overseas Bank

Singaporean multinational banking organisation with
over 500 offices in 19 countries

Singapore

1.1

2,597

19

Nitori Holdings

Design and sale of home and business furniture and decorative products across Japan and China

Japan

1.0

2,329

20

Capitaland

Real estate and investment holding company with residential and commercial properties in 110 cities

Singapore

1.0

2,290

21

BGF Retail

A food and beverage retail chain operating over 8,000 convenience stores throughout South Korea

Korea

0.9

2,162

22

Sands China

Integrated casino resort developer and operator based
in Macau, the largest gaming market in the world

China

0.9

2,127

23

Hoya Corporation

Japanese manufacturer of glass products for optical, electronic and medical applications

Japan

0.8

2,015

24

United Tractors

The leading distributor and lessor of heavy equipment
and construction machinery in Indonesia

Indonesia

0.8

1,969

25

Woori Bank

Commercial bank offering personal and business
services in Korea with branches throughout the region

Korea

0.8

1,912

26

CK Hutchison

Holding company including ports, telecoms, retail, infrastructure, energy and leasing operations

Hong Kong

0.8

1,878

27

Tencent Holdings

Chinese internet and mobile value-added service provider

China

0.8

1,876

28

GDS Holdings

A leading high performance data centre solution provider in China

China

0.8

1,812

29

Mitsubishi UFJ Financial

Japan's largest financial services company

Japan

0.7

1,796

30

China Gas

Natural gas and LPG distribution and sales to domestic, commercial and industrial users across China

China

0.7

1,772

31

China Mobile

China's largest mobile operator with the world's largest mobile network and customer base

China

0.7

1,765

32

Shin-Etsu Chemical

A leading manufacturer of polyvinyl chloride, silicon
and silicon wafers for semiconductors

Japan

0.7

1,765

33

Thai Beverage

Market-leading Thai beverage company with overseas operations in Scotland, Singapore and China

Thailand

0.7

1,753

34

Misumi Group

Worldwide distribution of precision machine parts, automation components and industrial supplies

Japan

0.7

1,752

35

Fanuc Corporation

Market leading manufacturer of factory automation systems, equipment and robots

Japan

0.7

1,744

36

Keyence Corporation

Manufactures and sells sensors and measuring instruments used in factory automation equipment

Japan

0.7

1,712

37

DBS Group

Full service investment bank involved in consumer banking, brokerage and asset management

Singapore

0.7

1,647

38

Anritsu Corporation

Electronic systems, instruments and devices chiefly in
the information and communication fields

Japan

0.7

1,592

39

Pigeon Corporation

Manufactures baby, maternity and elderly care products distributed in Japan, China and across Asia

Japan

0.7

1,573

40

Inpex Corporation

Oil & gas operator headquartered in Japan with projects
in more than 20 countries

Japan

0.6

1,554

41

Alibaba Group

Chinese internet giant providing consumer and business sales services and data-centric cloud computing

China

0.6

1,542

42

Bank Central Asia

One of South-East Asia's largest banks offering financial services to both individual and business customers

Indonesia

0.6

1,513

43

AIA Group

A leading insurance and wealth management service provider in the Asia Pacific region

Hong Kong

0.6

1,496

44

Anhui Conch Cement

China's largest cement manufacturer

China

0.6

1,474

45

Sun Art Retail

Leading Chinese hypermarket operator with 450 sites
in over 200 cities as well as a strong online presence

China

0.6

1,470

46

Astra International

Indonesian automotive, heavy machinery, agriculture, financial, infrastructure, logistics and IT business

Indonesia

0.6

1,438

47

Vietnam Dairy

Vietnam's dominant dairy, baby foods and soft drinks business

Vietnam

0.6

1,393

48

Breville Group

Manufacturer of small domestic appliances marketed under various brands around the world

Australia

0.6

1,359

49

Kao Corporation

Manufacturer of speciality chemicals, edible oils/acids
and beauty, healthcare and homecare products

Japan

0.5

1,322

50

Chinasoft International

Cloud computing service provider including storage,
data migration, operation, maintenance and consulting

China

0.5

1,317

 

The value of the fifty largest holdings represents 51.8% (31 January 2017: 74.3%) of the Company's total investments. The full portfolio listing is published monthly (with a three-month lag) on the Company's website. The country shown is the country of incorporation or, in the case of funds, the country of risk.

 

 

CORPORATE REVIEW

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

 

Strategic Report

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

 

Strategy and investment policy

 

Investment policy

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

 

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

 

The Board periodically reviews alternative assets and new investment techniques and will use them if, in the Board's view, they provide the potential to enhance shareholder returns.

 

Investment risk is managed through:

 

the selection of at least two portfolio managers. Details of the proportion of assets managed by them are set out above;

 

the portfolio managers are required to spread their investments over a number of securities within the region;

 

monitoring of portfolio manager performance and portfolios. Portfolio manager performance against the benchmark is set out above; and

 

monitoring of sector and country allocations of the manager portfolios and of the resulting combined portfolio.

 

Implementation of the investment policy in the year

During the year, the Company invested its assets with a view to spreading investment risk and, in accordance with the investment objective set out above, maintained a diversified portfolio, the analysis of which is shown above.

 

The Board reviews its portfolio manager allocations at least annually, and during 2017 adjusted the allocations and introduced two new portfolio managers, as discussed in the Chair's statement above.

 

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

 

The Board holds an annual strategy meeting. The Directors use the strategy day to consider, amongst other things, the relevance of the investment mandate, the multi-manager approach, the marketing of the Company and the discount. The Board continues to believe that the Company's offering of a broad Asia Pacific mandate, implemented through a carefully selected group of managers, is an attractive and distinct proposition for shareholders. It further believes that, if superior returns are achieved over the long term, the discount should narrow. In the meantime, the Company will maintain its marketing programme and buy-back policy.

 

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

 

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

 

Please also see the Chair's Statement and the Investment Review for further commentaries on the year.

 

Business model

The Company is an investment trust and aims to provide shareholders with capital and income growth from a diversified portfolio of investments in the Asia Pacific region. The Board achieves this through:

 

the selection of suitable portfolio managers;

the choice of investment benchmark;

investment guidelines and limits;

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

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

 

The Board's role in investment management

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

 

The portfolio is managed in four segregated accounts, held at the Company's custodian. This enables the Company to view the portfolio as a whole and to analyse its risks and opportunities as well as those at the level of each portfolio manager's portfolio.

 

Information regarding the proportion of Witan Pacific's assets managed by each and of their performance during the year is set out above.

 

Our selected benchmark

The Company's benchmark is a reference point for a comparison of results from an investment in Witan Pacific. The benchmark is the MSCI AC Asia Pacific Index in sterling terms, with gross dividends reinvested ("MSCI Index" or "benchmark").

 

The benchmark is a widely diversified regional index which includes the principal countries in the Asia Pacific region.

 

The portfolio managers select stocks which they consider attractive, wherever they are located in the region. As a result, the geographical location of the holdings differs from the benchmark. The geographical distribution of the portfolio and of the benchmark are set out above.

 

Priorities for the year ahead

For the year ending 31 January 2019, the key priorities for Witan Pacific include:

 

Investment. Monitor and manage the portfolio managers with the objective of delivering good returns to shareholders whilst assessing the risk approach of each portfolio manager.

 

Governance. Ensure effective oversight of all service providers and compliance with all applicable rules and guidelines, and monitor supplier risk including cyber risk.

 

Costs. Monitor and manage costs carefully, with a view to achieving an ongoing charges ratio in line with the Company's target of less than 1% per annum.

 

Marketing and Communications. Communicate Witan Pacific's active multi-manager approach, highlight the distinct pan-Asian investment remit to existing and potential shareholders and raise the profile for retail investors. The marketing programme, in combination with the buy-back policy, aims to reduce the Company's discount over time.

 

Dividend policy

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

 

The Company paid a final dividend for the previous year of 2.55p in June 2017 and an interim dividend of 2.25p in October 2017 for the year under review. The latter payment compared to a 2.20p interim dividend the year before. The Company has proposed a final dividend for 2017/18 of 3.25p, making a total payment for the year of 5.50p per share. This is an increase of 15.8% on the previous year, which compares with a 3.0% rise in the Consumer Price Index ("CPI") during the year.

 

Revenue earnings per share during the year amounted to 6.52p per share. This is an increase of 47.8% on the previous year. This increase was partly due to a change in policy with regard to the allocation of certain costs between the capital account and the revenue account. This is further explained in the notes to the financial statements.

 

Key performance indicators

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

 

NAV total return and total shareholder return.

Long-term outperformance of the combined portfolios compared with the benchmark is a key objective.

 

The NAV total return was 17.3%, underperforming the benchmark total return of 17.9%, while the share price total return was 22.1%. Since the adoption of the multi-manager strategy in 2005, the NAV total return was 245.5%, outperforming the benchmark return of 233.7%. The share price total return was 252.9%.

 

Investment performance by the individual portfolio managers.

Long-term outperformance relative to the benchmark is sought.

 

Over the year, Aberdeen underperformed the benchmark, while Matthews outperformed. Aberdeen and Matthews have both outperformed the benchmark since appointment. Gavekal was redeemed during the year, while Dalton and Robeco were appointed. Details are shown in the table above.

 

Annual growth in the dividend.

The Company's aim is to deliver increases in real terms, ahead of UK inflation.

 

The dividend for the year ended 31 January 2018 rose (subject to shareholder approval) by 15.8%, compared with an inflation rate of 3.0% during the year. Since the adoption of the multi-manager strategy, dividends have grown at an annualised rate of 13.6% compared with an annualised inflation rate (CPI) of 2.4%.

 

Discount to NAV.

The objective is to avoid excessive fluctuations in the discount and avoid a discount which is anomalously wide compared with other trusts investing in the region by the use of share buy-backs, subject to market conditions.

 

The discount ended the financial year at 11.0% compared with 14.3% a year earlier. The average discount of the Company over the year was 13.3% (2017: 14.4%).

 

The level of ongoing charges.

Costs are managed with the objective of delivering an ongoing charges figure of less than 1% (excluding performance fees). Where higher charges arise, these are carefully evaluated to ensure there is a net benefit for shareholders. The increasingly stringent regulatory environment has resulted in additional pressure on costs. The Board considers its level of costs remains competitive compared to similar investment opportunities.

 

The ongoing charges figure was 0.99% (2017: 1.03%).

 

Gearing and the use of derivatives

 

Borrowings and gearing

The Company has the power under its Articles to borrow up to 100% of the adjusted total of capital and reserves. However, in accordance with the Alternative Investment Fund Managers' Directive ("AIFMD"), the Company was registered by the FCA as a Small Registered UK Alternative Investment Fund Manager ("AIFM") with effect from 1 April 2014. To retain its Small Registered UK AIFM status, the Company is unable to employ gearing. It is therefore the Company's approach not to employ gearing, subject to periodic review of the costs and benefits of full AIFM authorisation. This was a matter of discussion at the Board strategy day in January 2018.

 

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

 

Use of derivatives

The Company's delegated managers are not permitted to use derivatives or to gear their portfolios, nor does the Company use derivatives itself.

 

Market liquidity and discount

The Board believes that it is in shareholders' interests to buy back the Company's shares when they are standing at a substantial and anomalous discount to the Company's NAV. The objective is to avoid excessive fluctuations in the discount and avoid a discount which is anomalously wide compared with other trusts investing in the region by the use of buy-backs, subject to market conditions. The purchase of shares priced at a discount to NAV per share will, all other things being equal, increase the Company's NAV per share and benefit the Company's share price. During the year, the Company bought back 1,769,293 shares into treasury, at times when supply and demand in the market were out of balance and the discount was particularly wide. This added 1.53p to NAV per Ordinary share.

 

Since the year end, the Company has repurchased a further 30,516 Ordinary shares, which have been placed into treasury. Treasury shares may only be reissued at a premium to the prevailing NAV.

 

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

 

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

 

Corporate and operational structure

 

Investment management arrangements

Each of the portfolio managers, Aberdeen, Dalton, Matthews and Robeco, is entitled to a base management fee, levied on the assets under management. The base management fee rates for managers in place at 31 January 2018 ranged from 0.2% to 0.85%. The weighted average base management fee was 0.56%. In addition, one portfolio manager (which is also entitled to the lowest base fee) is entitled to a performance fee, calculated according to investment performance relative to the benchmark. These agreements can be terminated on one month's notice. Further details on fee arrangements are set out in the full Annual Report.

 

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

 

Operational management arrangements

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

 

WIS for Executive Management services; WIS has experience of the issues arising in operating a multi-manager structure, and manages and monitors the outsourced structure and relationships, provides commentary on investment issues and provides marketing services including the management and administration of a share savings plan. 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;

 

■ BNP Paribas Securities Services for investment accounting and administration;

 

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

 

■ Link Market Services Limited for company secretarial services (through Link Company Matters Limited); and

 

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

 

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

 

Premises and staffing

Witan Pacific has no premises nor employees.

 

Environmental, human rights, employee, social and community issues

The Company's core activities are undertaken by WIS, Aberdeen, Dalton, Matthews and Robeco, which consider policies relating to environmental and social matters as part of their investment process. The Company has therefore not reported on these, or community or human rights issues. However, it reviews its portfolio managers' reports on their policies relating to environmental, social and corporate governance issues and discusses the managers' approaches with them. The portfolio managers are also prepared to use their votes in these areas as part of the proper management of the investments made on the Company's behalf and the Board periodically reviews their approaches with them.

 

The Board of Directors consists of two female and three male non-executive Directors. It is the Directors' policy to appoint individuals on merit whilst taking into account the balance of skills and experience required by the Board. The Board's diversity policy is set out in the full Annual Report.

 

Key Information Document

The European Union's Packaged Retail Investment and Insurance based Products ("PRIIP"s) Regulations cover Investment Trusts and require boards to prepare a key information document ("KID") in respect of their companies. Witan Pacific's KID is available on the Company's website. Investors should note that the processes for calculating the risks, costs and potential returns in the KID are prescribed by EU law and the Company has no discretion over the format or content of the document.

 

The illustrated performance returns in the KID cannot be guaranteed and, together with the prescribed cost calculation and risk categorisation, may not reflect figures for the Company derived using other methods. Accordingly, the Board recommends that investors also take account of information from other sources, including the Annual Report.

 

Cost analysis

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

 

 

Category of costs1

Year ended 31 January 2018

Year ended 31 January 2017

£m 

% of average 

net assets 

£m 

% of average 

net assets 

Management fees2

1.48 

0.63 

1.30 

0.65 

Other expenses

0.88 

0.38 

0.76 

0.39 

Non-recurring expenses

(0.05)

(0.02)

(0.01)

(0.01)

Ongoing charges excluding performance fees

2.31 

0.99 

2.05 

1.03 

Ongoing charges including performance fees

2.31 

0.99 

2.05 

1.03 

Portfolio transaction costs

0.43 

0.18 

0.20 

0.10 

 

1 For a full breakdown of costs, see notes 3 and 4 below.

2 Figures inclusive of fees paid to WIS.

 

Principal risks and uncertainties

The Audit Committee regularly (at least annually) reviews the risks facing the Company 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 16 to the financial statements.

 

A robust assessment of the principal risks has been carried out, including a review of those risks which would threaten the Company's business model, future performance, solvency or liquidity.

 

Information about the Company's internal control and risk management procedures can be found in the Audit Committee Report in the full Annual Report.

 

The Board has identified the following as being the principal risks and uncertainties facing the Company:

 

Risk

Mitigation

Inappropriate business strategy and/or changes in the financial services market leads to lack of demand for the Company's shares and to an increase in the discount of the share price to the NAV.

The Board reviews its strategy at an annual strategy meeting. It considers investor feedback, consults with its broker and reviews its marketing strategy. It regularly reviews its discount control policy. The strategy is considered in the context of developments in the wider financial services industry.

 

Adverse market conditions, particularly in equities and currencies, lead to a fall in NAV.

 

 

The Company's exposure to equity market risk and foreign currency risk is an integral part of its investment strategy. Adverse markets may be caused by a range of factors including economic conditions and political change. Volatility in markets from such factors can be higher in less developed markets. Market risk is mitigated to a degree by careful selection of portfolio managers and appropriate portfolio diversification.

 

Poor investment performance, including through inappropriate asset allocation, leads to value loss for shareholders in comparison to the benchmark or the peer group.

 

 

The performance of the portfolio managers is reviewed at each Board meeting, and compared against the benchmark and similar investment opportunities. Exposures against companies and countries are reviewed against benchmark exposure to identify the highest risk exposures. In a multi-manager structure, different portfolio construction styles can mitigate underperformance. The Board reviews the investment strategies of the managers at least annually.

 

A reduction in income received from the companies in which it invests, from adverse currency movements, or from portfolio re-allocation could lead either to lower dividends being paid by the Company or to dividends being paid out of reserves.

 

The Board reviews forecast income at each Board meeting, and also receives longer-term views on income from the portfolio managers. The Company has substantial revenue reserves which can be utilised without requiring the use of other reserves.

Operational failure leads to reputational damage and potential shareholder loss. Operational issues could include: errors, control failures, cyber attack or business discontinuity at service providers.

 

The Audit Committee reviews the controls at the service providers and requires appropriate reports. Separate records of investments are maintained by the portfolio managers, custodian and fund accountants, and are reconciled. The Executive Manager also monitors the performance and controls of third party providers.

 

Tax and regulatory change or breach leads to the loss of investment trust status and, as a consequence, the loss of the exemption from taxation of capital gains. Change in tax, regulation or laws could make the activities of the Company more complicated, more costly or even not possible. Other regulatory breaches (including breaching the listing rules, market abuse regulations and AIFMD) could result in reputational damage and costs. Regulatory change can also increase the costs of operating the Company.

 

Compliance with investment trust status regulations is reviewed at each Board meeting. The Board reviews compliance with other regulatory, tax and legal requirements and is kept informed of forthcoming regulatory changes.

 

Leaving the EU. The Board has also considered the potential implications for the Company (to the extent identifiable) of the UK no longer being a member of the EU. Given the Company is invested in the Asia Pacific region, the greatest impact has been, and may continue to be, the movement of sterling against international currencies. Because the value of the Company's investments, and income received, is denominated substantially in overseas currencies, any fall in sterling will increase the value of those investments, and income received, in sterling terms. Conversely, any rise in sterling will decrease the value of those investments, and income received, in sterling terms.

 

Viability

In accordance with the provisions of the UK Corporate Governance Code, the Board has assessed the viability of the Company, and selected a period of five years for the assessment.

 

The Board considers five years to be a reasonable period for its assessment. The Board views the Company as a long-term investment vehicle, with strong financials and good liquidity in its portfolio. In selecting a five year period, the Board has balanced that view against the inherent uncertainties in equity markets.

 

In conducting the assessment, the Board has taken account of the following:

 

The Company is an investment trust founded in 1907, whose investment portfolio is invested in readily realisable listed securities. The portfolio is well diversified in terms of both sector and geography within its Asia Pacific remit.

 

■ The Company currently has no borrowings.

 

■ The expenses of the Company are reasonably predictable, modest in comparison to the assets and adequately covered by investment income.

 

The Board has also taken account of its strategy and investment policy and the principal risks and uncertainties set out above. The Company operates a robust risk control framework to manage those risks and uncertainties.

 

The Board's assessment assumes that there is continuing demand amongst shareholders for the investment trust structure and the mandates which the Board gives its managers.

 

Based on the above, the Board confirms that it has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of this assessment.

 

Approval

This Strategic Report has been approved by the Board and signed on its behalf by

 

Susan Platts-Martin

Chair

25 April 2018

 

 

BOARD OF DIRECTORS

 

Susan Platts-Martin - Chair

Dermot McMeekin - Senior Independent Director, Nomination and Remuneration Committee Chairman

Chris Ralph

Andrew Robson - Audit Committee Chairman

Diane Seymour-Williams

 

All of the Directors are members of the Audit Committee and of the Nomination and Remuneration Committee.

 

 

EXTRACTS FROM THE DIRECTORS' REPORT

 

Share capital 

At 31 January 2018, there were 65,944,000 Ordinary shares of 25p each in issue (2017: 65,944,000 Ordinary shares), of which 2,708,250 were held in treasury. At the 2017 AGM, the Directors were granted authority to buy back up to a maximum of 9,503,912 Ordinary shares. At 31 January 2018, the unused authority to buy back Ordinary shares was 9,337,976 Ordinary shares. This authority will expire at the conclusion of the 2018 AGM when the Directors will seek a renewal of the authority.

 

During the year to 31 January 2018, the Company repurchased a total of 1,769,293 Ordinary shares to hold in treasury. The nominal value of Ordinary shares repurchased during the period was £442,323. The total consideration for these repurchases was £5,395,000.

 

Following the year end, the Company has repurchased a further 30,516 Ordinary shares to hold in treasury (as at 25 April 2018), with a nominal value of £7,629. The total consideration for these repurchases was £100,322.

 

At 25 April 2018, there were 65,944,000 Ordinary shares of 25p each in issue. 2,738,766 Ordinary shares were held in treasury, representing 4.2% of the issued Ordinary share capital as at 31 January 2018. Each Ordinary share carries one vote, therefore, the total votes in issue were 63,205,234.

 

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

 

The impact to the NAV as a result of the buy-back activity for the year ended 31 January 2018 was an enhancement of £0.97m or 1.53p per Ordinary share.

 

Results and dividend

 

Revenue return after taxation

£'000 

Net revenue return after taxation

4,141 

Dividends paid/payable:

 

Interim dividend of 2.25p per share

(1,425)

Final dividend of 3.25p per share

(2,054)

Residual revenue return after dividends

662 

At 31 January 2018

 

Revenue reserve1

11,795 

 

1 Revenue reserve excludes the final proposed dividend for the year ended 31 January 2018 of £2,054,000, payable on 18 June 2018 to shareholders on the register on 18 May 2018.

 

 

Going concern

The activities of the Company, together with the factors likely to affect its future development, performance, financial position, its cash flows and liquidity position are described in the Strategic Report.

 

In addition, the Company's policies and processes for managing its key financial risks are described in note 16 below.

 

The assets of the Company consist mainly of securities which are readily realisable, and, as at 31 January 2018, the Company's total assets less current liabilities were in excess of £244 million. As a consequence, the Directors believe that the Company continues to be well placed to manage its business risks successfully. After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the next year. Accordingly, they continue to adopt the going concern basis in preparing this Annual Report and Accounts.

 

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

in respect of the Annual Report and financial statements

 

The Directors are responsible for preparing the Annual 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), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland". Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the net return or loss of the Company for that year.

 

In preparing these financial statements, the Directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

 

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

 

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

 

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

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements 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.

 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations, and for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority.

 

The financial statements are published on www.witanpacific.com, which is a website maintained by the Company's Executive Manager, Witan Investment Services Limited. The Directors are responsible for the maintenance and integrity of the Company's website. The work carried out by the Independent Auditors does not involve consideration of the maintenance and integrity of the website and accordingly, the Independent Auditors accept no responsibility for any changes that have occurred to the Annual Report and Accounts since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.  

 

The Directors consider that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the necessary information for shareholders to assess the Company's position and performance, business model and strategy.

 

Declaration

Each of the Directors, whose names and functions are listed above, confirm that, to the best of their knowledge:

 

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

 

·      the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

 

On behalf of the Board

 

Susan Platts-Martin

Chair

25 April 2018

 

 

INCOME STATEMENT

for the year ended 31 January 2018

 

 

 

 

Year ended 31 January 2018

Year ended 31 January 2017

 

 

 

Revenue 

Capital 

           

Revenue 

Capital 

 

 

Revenue 

Capital

return 

return 

Total 

return 

return 

Total 

 

note 

note

£'000 

£'000 

£'000 

£'000 

£'000 

£'000 

Gains on investments held at fair value through profit or loss

 

8

33,241 

33,241 

48,841 

48,841 

Exchange losses

 

14

(344)

(344)

(142)

(142)

Investment income

2

 

5,740 

-  

5,740 

5,004 

-  

5,004 

Management fees

3

3

(370)

(1,110)

(1,480)

(994)

-  

(994)

Other expenses

4

14

(879)

(64)

(943)

(754)

(43)

(797)

Net return before taxation

 

 

4,491 

31,723

36,214 

3,256 

48,656 

51,912 

Taxation

5

5

(350)

(6)

(356)

(376)

(376)

Net return after taxation

 

 

4,141 

31,717 

35,858 

2,880 

48,656 

51,536 

Basic and diluted return per Ordinary share - pence

6

6

6.52 

49.90 

56.42 

4.41 

74.50 

78.91 

 

 

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 other comprehensive income, recognised gains or losses other than those disclosed in this statement.

 

 

The notes below form an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 January 2018

 

 

Note

Called up share capital

£'000

Share premium

account £'000

Capital redemption reserve

£'000

Capital 

reserves 

£'000 

Revenue 

reserve 

£'000 

Shareholders' 

funds 

£'000 

Year ended 31 January 2018

At 1 February 2017

 

16,486

5

41,085

148,762 

10,697 

217,035 

Net return after taxation and total comprehensive income

 

-

-

-

31,717 

4,141 

35,858 

Purchase of own shares

12

-

-

-

(5,395)

(5,395)

Dividends paid

7

-

-

-

(3,043)

(3,043)

At 31 January 2018

 

16,486

5

41,085

175,084 

11,795 

244,455 

 

 

Year ended 31 January 2017

At 1 February 2016

 

16,486

5

41,085

101,926 

10,886 

170,388 

Net return after taxation and total comprehensive income

 

-

-

-

48,656 

2,880 

51,536 

Purchase of own shares

12

-

-

-

(1,820)

(1,820)

Dividends paid

7

-

-

-

(3,069)

(3,069)

At 31 January 2017

 

16,486

5

41,085

148,762 

10,697 

217,035 

 

 

The notes below form an integral part of these financial statements.

BALANCE SHEET

as at 31 January 2018 

 

 

Note

2018 

£'000 

2017 

£'000 

 
 

Fixed assets

 

 

 

 

Investments held at fair value through profit or loss

8

240,565 

210,745 

 

Current assets

 

 

 

 

Debtors

9

1,899 

1,813 

 

Cash at bank and in hand

 

4,392 

5,983 

 

 

 

6,291 

7,796 

 

Creditors

 

 

 

 

Amounts falling due within one year

10

(2,401)

(1,506)

 

 

 

(2,401)

(1,506)

 

Net current assets

 

3,890 

6,290 

 

Net assets

 

244,455 

217,035 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

Called up share capital

12

16,486 

16,486 

 

Share premium account

 

 

Capital redemption reserve

13

41,085 

41,085 

 

Capital reserves

14

175,084 

148,762 

 

Revenue reserve

14

11,795 

10,697 

 

Total shareholders' funds

 

244,455 

217,035 

 

Net asset value per Ordinary share - pence (basic and diluted)

15

386.58 

333.87 

 

 

The financial statements were authorised and approved by the Board of Directors of Witan Pacific Investment Trust plc on 25 April 2018 and signed on its behalf by:

 

Susan Platts-Martin, Chair

 

 

The notes below form an integral part of these financial statements.

 

Company Registration Number 91798

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 January 2018

 

1 Significant accounting policies

 

(a) Basis of accounting

 

The financial statements have been prepared in accordance with Generally Accepted Accounting Practice in the UK ("UK GAAP"), including the Companies Act 2006, Financial Reporting Standard 102 ("FRS 102") and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted. The accounting policies have been applied consistently throughout the year.

 

The financial statements have been prepared under the historical cost basis except for the measurement of fair value of investments. In applying FRS 102, financial instruments have been accounted for in accordance with Sections 11 and 12 of the standard. All of the Company's operations are of a continuing nature.

 

As an investment fund, the Company has the option, which it has taken, not to present a cash flow statement. A cash flow statement is not required when an investment fund meets all the following conditions: substantially all of the entity's investments are highly liquid and are carried at market value; and where a Statement of Changes in Equity is provided.

 

(b) Valuation of investments

 

All investments have been designated upon initial recognition as fair value through profit or loss. This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the grouping is provided internally on that basis.

 

Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are valued at fair value through profit or loss.

 

Listed investments have been designated by the Board as held at fair value through profit or loss and accordingly are valued at fair value, deemed to be bid market prices for quoted investments. Investments included in Level 2 under the Fair Value Hierarchy disclosures in note 16(g) consist of unlisted reportable funds within the portfolio, these being Aberdeen Global Indian Equity UCITS and Aberdeen Global China A Equity UCITS. These are priced daily using their net asset value, which is the fair value.

 

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

 

(c) Foreign currency

 

The results and financial position of the Company are expressed in pounds sterling, which is the functional and presentation currency of the Company and rounded to the nearest £'000.

 

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

 

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

 

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

 

(d) Income

 

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

 

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

 

Any bank interest or underwriting commission is accounted for on an accruals basis.

 

(e) Expenses including finance costs

 

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

 

With effect from 1 February 2017, management fees are charged 25% to the revenue return and 75% to the capital return of the Income Statement. In the prior year, management fees were charged 100% to the revenue return of the Income Statement.

 

Management fee rebates of the fee on Gavekal Asian Opportunities UCITS are credited against management fees paid.

 

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

 

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

·    expenses incidental to the acquisition or disposal of investments.

 

All expenses are accounted for on an accruals basis.

 

(f) Taxation

 

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

 

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

 

 (g) Segmental reporting

 

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

 

(h)  Repurchase of Ordinary shares

 

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

 

(i)  Capital reserves

 

Capital reserve arising on investments sold

 

The following transactions are accounted for in this reserve:

 

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

·    realised exchange differences of a capital nature;

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

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

·    cost of purchasing Ordinary share capital.

 

Capital reserve arising on investments held

 

The following transactions are accounted for in this reserve:

 

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

·    unrealised exchange differences of a capital nature.

 

(j) Dividends payable

 

In accordance with FRS 102, final dividends are not accrued in the financial statements unless they have been approved by shareholders before the year end date. Interim dividends are recorded in the financial statements when they are paid. Dividends payable to equity shareholders are recognised in the Statement of Changes in Equity when they have been approved by shareholders in the case of a final dividend, or paid in the case of an interim dividend and become a liability of the Company.

 

(k)  Critical accounting estimates

 

In the application of the Company's accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not always readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may vary from these estimates. Excluding the provisions for performance fees payable, the Directors do not consider there are any such items in the financial statements.

 

Details of the performance fee and the basis for the calculation of performance fees payable at the Balance Sheet date is disclosed in note 11, including the assumptions made by the Directors in computing the provision.

 

2 Investment income

 

 

 

2018

£'000

2017

£'000

Income from investments held at fair value through profit and loss:

 

Overseas dividends

5,204

4,564

UK dividends

426

209

Scrip dividends

110

230

Total dividend income

5,740

5,003

Other income:

 

Bank interest

-

1

Total other income

-

1

Total income

5,740

5,004

 

3 Management and performance fees

 

 

2018 

2017 

 

 £'000 

£'000 

Charged to the revenue return:

 

Management fees1

397 

1,150 

Management fee rebates2

(27)

(156)

 

370 

994 

Charged to the capital return:

 

 

Management fees1

1,190 

Management fee rebates2

(80)

 

1,110 

Total management fees

1,480 

994 

Performance fees charged to capital return

-  

 

1 The management fees stated above include fees paid to Witan Investment Services Limited of £296,000 (2017: £250,000).

2 This figure relates to rebate of management fees associated with the Gavekal Asian Opportunities UCITS.

 

With effect from 1 February 2017, management fees are charged 75%/25% to capital return and revenue return respectively.

 

The allocation percentages approximate to the split of historic returns between capital and income and reflect the Board's expectation of the long-term split of returns in compliance with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. Performance fees continue to be charged wholly to capital return.

 

Management fees payable to Gavekal Capital Limited

Management fees payable to Gavekal Capital Limited ("Gavekal") in respect of the Company's investment in the Gavekal Asian Opportunities UCITS ("the fund") were paid directly by the fund to Gavekal on behalf of the Company. The fair value of the Company's interest in Gavekal Asian Opportunities UCITS reflects those management fees paid. The Company's investment in the Gavekal fund was sold in September 2017.

 

In the prior year, the movement in the fair value of the investment in Gavekal Asian Opportunities UCITS was recognised in the Income Statement under 'Gains/(losses) on investments held at fair value through profit or loss'. Management fees paid to Gavekal have therefore been allocated within 'Gains/(losses) on investments held at fair value through profit or loss' through the capital return of the Income Statement.

 

With effect from 1 February 2017, management fees payable to Gavekal have been included within 'Management fees' in the Income Statement rather than being allocated within 'Gains/(losses) on investments held at fair value through profit or loss' and have been allocated 75%/25% to the capital return and the revenue return respectively.

 

Cash receipts of management fee rebates received by the Company in respect of the investment in Gavekal Asian Opportunities UCITS have been allocated 75%/25% to the capital return and the revenue return respectively.

 

Further details of management fees can be found in note 17.

 

4 Other expenses

 

 

2018

2017

 

£'000

£'000

Auditors' remuneration:

 

 

- for audit services

32

32

- for non-audit services - tax1

-

14

Custody fees

96

81

Directors' emoluments: fees for services to the Company

138  

136

Directors' expenses and travel2

39

1

Marketing3

175

174

Printing and postage

37

38

Secretarial and Administration fees

154

138

Directors' and Officers' liability insurance

7

7

Registrars' fees

30

26

Professional fees4

54

8

Sundry expenses

117

99

879

754

 

1 Costs in 2017 relate to a review of the 2015 tax computation and withholding taxes suffered on overseas dividend income between 1 February 2010 and 31 January 2017.

2 Costs in 2018 relate primarily to a Board visit to the Asia Pacific region, which is conducted every two to three years to meet our portfolio managers and other industry participants.

3 The marketing expense stated above includes fees paid to Witan Investment Services Limited of £75,000 (2017: £75,000).

4 Costs in the current year include investment consultancy fees in relation to the change in portfolio managers during the year, professional fees in respect of reclaims of foreign taxes and registration fees paid to the Securities and Exchange Board of India.

 

Additional information concerning transactions with Directors and Directors' fees can be found in the Directors' Remuneration Report in the full Annual Report.

 

5 Taxation

 

a) Analysis of tax charge for the year

 

 

2018

2018

2018

2017

2017

2017

 

Revenue

Capital

 Total

Revenue

Capital

 Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Overseas taxation

350

6

356

376

-

376

Total taxation

350

6

356

376

-

376

 

 

(b) Factors affecting current tax charge for the year

 

The UK corporation tax rate is 19% (2017: effective rate of 20%).The tax charge for the year is lower than the corporation tax rate. The differences are explained below:

 

 

2018 

2018 

 

2017 

2017 

 

 

Revenue 

Capital 

2018 

Revenue 

Capital 

2017 

 

Return 

Return 

Total 

Return 

Return 

Total 

 

£'000 

£'000 

£'000 

£'000 

£'000 

£'000 

Net return before taxation

4,491 

31,723 

36,214 

3,256 

48,656 

51,912 

Corporation tax at 19.17% (2017: 20.00%)

861 

6,081 

6,942 

651 

9,731 

10,382 

Effects of:

 

 

 

 

 

 

Non-taxable overseas dividends

(1,038)

(1,038)

(895)

(895)

Non-taxable UK dividends

(91)

(91)

(56)

(56)

Overseas taxation

350 

356 

376 

376 

Disallowed expenses

12 

12 

14 

14 

Income taxable in different years

35 

35 

  (16)

(16)

Tax effect of expensed double taxation relief

(3) 

(3)

Excess management expenses and finance costs

268 

178 

446 

305 

305 

Net capital returns not subject to tax1

(6,306)

(6,306)

(9,731)

(9,731)

Current tax charge for the year

350 

356 

376 

376 

 

 

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

 

(c) Deferred taxation

 

The Company has not recognised a deferred tax asset of £2,637,000 (2017: £2,244,000) arising as a result of excess management expenses and interest paid. These expenses will only be utilised if the Company has profits chargeable to corporation tax in the future. It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and deficits and therefore no deferred tax asset has been recognised.

 

(d) Protective claim

 

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

 

6 Return per Ordinary share

 

The total return per Ordinary share is based on the net gain attributable to the Ordinary shares of £35,858,000 (2017: gain of £51,536,000) and on 63,560,181 Ordinary shares (2017: 65,308,210), being the weighted average number of shares in issue during the year.

 

The total return can be further analysed as follows:

 

 

2018

2017

 

£'000

£'000

Revenue return

4,141

2,880

Capital return

31,717

48,656

Total return

35,858

51,536

Weighted average number of Ordinary shares

63,560,181

65,308,210

Revenue return per Ordinary share - pence

6.52

4.41

Capital return per Ordinary share - pence

49.90

74.50

Total return per Ordinary share - pence

56.42

78.91

 

The Company does not have any dilutive securities.

 

7 Dividends

 

 

 

 

2018

2017 

Dividends on Ordinary shares

Record date

Payment date

£'000

£'000 

Final dividend (2.50p) for the year ended

31 January 2016

20 May 2016

17 June 2016

-

1,636 

Interim dividend (2.20p) for the year ended 31 January 2017

14 October 2016

24 October 2016

-

1,433 

Final dividend (2.55p) for the year ended

31 January 2017

19 May 2017

19 June 2017

1,618

Interim dividend (2.25p) for the year ended 31 January 2018

20 October 2017

30 October 2017

1,425

 

 

 

3,043

3,069 

 

The proposed final dividend for the year ended 31 January 2018 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.

 

 

2018 

2017 

 

£'000 

£'000 

Revenue available for distribution by way of dividend for the year

4,141 

2,880 

Interim dividend 2.25p (2017: 2.20p) for the year ended 31 January 2018

(1,425)

(1,433)

Proposed final dividend of 3.25p (2017: 2.55p) for the year ended 31 January 2018

 

 

(based on 63,205,234 Ordinary shares in issue at 25 April 2018)

(2,054)

(1,619)

Retained surplus/(shortfall) for the year

662 

(172)

 

 

8 Investments held at fair value through profit or loss

 

 

2018 

2017 

 

£'000 

£'000 

Cost at 31 January 2017

144,367 

137,263 

Investment holding gains at 31 January 2017

66,378 

28,988 

Valuation at 31 January 2017

210,745 

166,251 

Movements in the year:

 

 

Purchases at cost

146,312 

52,336 

Sales - proceeds

(149,733)

(56,683)

          - gains on sales

44,376 

11,451 

(Decrease)/increase in investment holding gains

(11,135)

37,390 

Valuation at 31 January 2018

240,565 

210,745 

Cost at 31 January 2018

185,322 

144,367 

Investment holding gains at 31 January 2018

55,243 

66,378 

 

240,565 

210,745 

 

Purchase transaction costs for the year ended 31 January 2018 were £180,000 (2017: £75,000). Sale transaction costs for the year ended 31 January 2018 were £183,000 (2017: £82,000). These comprise mainly stamp duties and commission. The portfolio manager changes that occurred during the year have contributed to the uplift in transaction costs over the prior year.

 

Gains on investments

 

 

2018 

2017 

 

£'000 

£'000 

Gains on investments sold based on historical cost

44,376 

11,451 

Less: amounts recognised as unrealised in previous years

(37,539)

(3,465)

Gains based on carrying value at previous balance sheet date

6,837 

7,986 

Net movement in investment holding gains in the year

26,404 

40,855 

Gains on investments held at fair value through profit or loss

33,241 

48,841 

 

Substantial interests

 

At 31 January 2018, the Company did not hold more than 3% of one class of the share capital of one of the undertakings held as investments (2017: one holding being Gavekal Asian Opportunities UCITS: 7.5% interest).

 

All investments are quoted on recognised stock exchanges or are UCITS Funds with published net asset values.

 

9 Debtors

 

 

2018

2017

 

£'000

£'000

Sales for future settlement

1,355

1,303

Other debtors

27

73

Prepayments and accrued income

517

437

 

1,899

1,813

 

10 Creditors: amounts falling due within one year

 

 

2018

2017

Other

£'000

£'000

Purchases for future settlement

1,572

1,006

Accruals

829

500

 

2,401

1,506

 

11 Provisions for liabilities and charges

 

Aberdeen Asset Managers Limited ("Aberdeen") is entitled to a performance fee based on relative outperformance against the MSCI AC Asia Pacific Index (sterling adjusted total return). The performance fee is calculated according to investment performance over a three-year rolling period and is payable at a rate of 15% of the calculated outperformance relative to the benchmark (subject to a cap).

 

Any provisions included in the Income Statement at 31 January 2018 are calculated on the actual performance of Aberdeen relative to the benchmark index. The provision is computed applying the following assumptions:

 

·      that the benchmark index remains unchanged;

·      Aberdeen's assets under management perform in line with the benchmark index to 31 May 2018, being the date the next performance period ends; and

·      the future value of assets for performance fees purposes is the same as that at the Balance Sheet date.

 

In addition, provisions are made where necessary for the performance periods ending 31 May 2019 and 31 May 2020, applying the same assumptions as above. The total of all these provisions as at 31 January 2018 amounts to £nil (31 January 2017: £nil).

 

Changes in the level of accrual for future performance periods could arise for one of three principal reasons: a change in the degree of relative performance, the time elapsed (since this would increase the proportion of the rolling three-year performance period to which the performance calculation would be applied) or the termination of Aberdeen's contract.

 

12 Called up share capital

 

 

2018

2018

2017

2017

Equity share capital

Number

£'000

Number

£'000

Ordinary shares of 25p each:

 

 

 

 

Issued and fully paid

63,235,750

15,809

65,005,043

16,251

Held in treasury

2,708,250

677

938,957

235

 

65,944,000

16,486

65,944,000

16,486

 

In the year ended 31 January 2018, 1,769,293 Ordinary shares were purchased to be held in treasury at a total cost of £5,395,000. In the year ended 31 January 2017, there were 713,979 shares purchased to be held in treasury at a total cost of £1,820,000.

 

13 Capital redemption reserve

 

 

2018

2017

 

£'000

£'000

Balance brought forward and carried forward

41,085

41,085

 

The capital redemption reserve is used to fund amounts equivalent to the nominal value of any of the Company's own shares purchased and cancelled.

 

14 Reserves

 

 

Capital reserve 

 arising on 

 investments 

sold*

£'000 

Capital

reserve

arising on

investments

held

£'000

Capital

reserve

total

£'000

Revenue 

reserve*

total 

£'000 

Balance brought forward

82,380 

66,382 

148,762 

10,697  

Movement during the year:

  

 

 

  

Gains on investments sold

6,837 

6,837 

-  

Transfer on disposal of investments

37,539 

  (37,539)

-  

Increase in investment holding gains

-  

26,404 

26,404 

-  

Exchange losses

(344)

(344)

-  

Management and performance fees

(1,110)

(1,110)

-  

Other capital charges

(64)

(64)

-  

Purchase of own shares

(5,395)

(5,395)

-  

Capital gains tax

(6)

(6)

-  

Revenue return for the year

4,141 

Dividends paid

(3,043)

Balance carried forward

119,837

55,247

175,084 

11,795 

           

 

* Distributable reserve.

 

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

 

15 Net asset value per Ordinary share

 

Net asset values are based on net assets of £244,455,000 (2017: £217,035,000) and on 63,235,750 (2017: 65,005,043) Ordinary shares in issue at the year end excluding shares held in treasury.

 

16 Risk management policies and procedures

 

As an investment trust, the Company invests in equities and other investments for the long term so as to achieve its objective as stated above. In pursuing its investment objective, the Company is exposed to a variety of financial risks that could result in either a reduction in the Company's net assets or a reduction in the revenue available for distribution by way of dividends.

 

These financial risks: market risk (comprising market price risk, currency risk and interest rate risk), liquidity risk and credit risk, and the Directors' approach to the management of these risks, are set out below. The Board of Directors and the Executive Manager coordinate the Company's risk management. The overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

 

The Board determines the objectives, policies and processes for managing the risks that are set out below, under the relevant risk category. The policies for the management of each risk have not changed from the previous accounting period.

 

(a) Market risk

 

The fair value of an instrument held by the Company may fluctuate due to changes in market prices. Market risk comprises - market price risk (see note 16(b)), currency risk (see note 16(c)) and interest rate risk (see note 16(d)). The portfolio managers assess the exposure to market risk when making each investment decision and monitor the overall level of market risk on the whole of the investment portfolio on an ongoing basis.

 

(b) Market price risk

 

Market price risks (changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments.

 

Management of the risk

 

The Board of Directors manages the risks inherent in the investment portfolios by ensuring full and timely access to relevant information from the portfolio managers and through diversification at the stock level and of management style. The Board meets regularly and at each meeting reviews investment performance. The Board monitors the portfolio managers' compliance with the Company's objectives, and is directly responsible for oversight of the investment strategy and asset allocation.

 

The market value of quoted investments at 31 January 2018 was £240,565,000 (2017: £210,745,000).

 

Concentration of exposure to market price risk

 

A geographical analysis of the Company's investment portfolio is shown above. This shows the significant amounts invested in China/Hong Kong, Japan, South Korea and Singapore. Accordingly, there is a concentration of exposure to those countries, though it is recognised that an investment's country of domicile or of listing does not necessarily equate to its exposure to the economic conditions in that country.

 

Market price risk sensitivity

 

The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase or decrease of 25% (2017: 25%) in the fair value of the Company's investments. This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the Company's investments at each year end date and the investment management fees for the year ended 31 January 2018, with all other variables held constant.

 

 

2018 

Increase 

in fair 

value 

£'000 

2018 

Decrease 

in fair 

value 

£'000 

2017

Increase

in fair

value

£'000

2017

Decrease

in fair

value

£'000

Income Statement - return after tax

 

 

 

 

Revenue return

(85)

85 

(255)

255 

Capital return

59,886 

(59,886)

52,686 

 (52,686)

Impact on total return after tax for the year and net assets

59,801 

(59,801)

52,431 

(52,431)

 

(c) Currency risk

 

Most of the Company's assets, liabilities and income are denominated in currencies other than sterling (the Company's functional currency, and in which it reports its results). As a result, movements in exchange rates may affect the sterling value of those items.

 

Management of the risk

 

The portfolio managers monitor the Company's exposure to foreign currencies and report to the Board on a regular basis. The Executive Manager monitors the risk to the Company of the foreign currency exposure by considering the effect on the Company's net asset value and income of a movement in the exchange rates to which the Company's assets, liabilities, income and expenses are exposed.

 

Foreign currency exposure

 

The table below shows, by currency, the split of the Company's non-sterling monetary assets and investments that are denominated in currencies other than sterling. The exposure is shown on a direct basis and not on a look-through basis.

 

 

HK$

KRW 

US$ 

Yen

Other

2018

£'000

£'000 

£'000 

£'000

£'000 

Debtors (due from brokers, dividends and other income receivable)

20 

610 

697 

28 

Cash at bank and in hand

886 

138 

50 

Creditors (due to brokers, accruals and other creditors)

(207)

(701)

(60)

(403)

(201)

Total foreign currency exposure on net monetary items

(182)

(91)

826 

432 

(123)

Investments at fair value through profit or loss

28,596 

22,804 

70,992 

59,466 

Total net foreign currency exposure

56,336 

28,505 

23,630 

71,424 

59,343 

 

 

 

 

 

 

 

HK$ 

KRW 

US$ 

Yen

Other

2017

£'000 

£'000 

£'000 

£'000

£'000

Debtors (due from brokers, dividends and other income receivable)

117 

244 

78 

311 

959 

Cash at bank and in hand

50 

Creditors (due to brokers, accruals and other creditors)

(704)

(22)

(135)

(98)

(47)

Total foreign currency exposure on net monetary items

(587)

222 

(55)

213 

962 

Investments at fair value through profit or loss

16,053 

17,667 

57,912 

47,624 

Total net foreign currency exposure

44,334 

16,275 

17,612 

58,125 

48,586 

 

Foreign currency sensitivity

 

The sensitivity of the total return after tax for the year and the net assets in regard to the movements in the Company's foreign currency financial assets and financial liabilities and the exchange rates for the top four risk currencies are set out in the table below:

 

It assumes the following changes in exchange rates:

 

£/US$ +/- 15% (2017: 15%)

£/HK$ +/- 15% (2017: 15%)

£/Yen +/- 15% (2017: 15%)

£/KRW +/- 15% (2017: 15%)

£/Other +/- 15% (2017: 15%)

 

These percentages have been determined based on the average market volatility in exchange rates in the previous five years and using the Company's foreign currency financial assets and financial liabilities held at each year end date.

 

If sterling had strengthened against the currencies shown, this would have had the following effect:

 

 

 

 

2018

 

 

 

US$ 

HK$ 

Yen 

KRW 

Other 

 

£'000 

£'000 

£'000 

£'000 

£'000 

Income Statement - return after tax

 

 

 

 

 

Revenue return

(89)

(122)

(138)

(43)

(203)

Capital return

(2,961)

(7,340)

(9,220)

(3,714)

(7,723)

Impact on total return after tax for the year and net assets

(3,050)

(7,462)

(9,358)

(3,757)

(7,926)

 

 

 

 

2017

 

 

 

US$ 

HK$ 

Yen 

KRW 

Other 

 

£'000 

£'000 

£'000 

£'000 

£'000 

Income Statement - return after tax

 

 

 

 

 

Revenue return

(58)

(116)

(100)

(14)

(180)

Capital return

(2,304)

(5,859)

(7,554)

(2,094)

(6,213)

Impact on total return after tax for the year and net assets

(2,362)

(5,975)

(7,654)

(2,108)

(6,393)

 

If sterling had weakened against the currencies shown, this would have had the following effect:

 

 

 

 

2018

 

 

 

US$

HK$

Yen

KRW

Other

 

£'000

£'000

£'000

£'000

£'000

Income Statement - return after tax

 

 

 

 

 

Revenue return

120 

166 

187 

58 

275 

Capital return

4,007 

9,931 

12,474 

5,025 

10,447 

Impact on total return after tax for the year and net assets

4,127 

10,097 

12,661 

5,083 

10,722 

 

 

 

 

2017

 

 

 

US$

HK$

Yen

KRW

Other

 

£'000

£'000

£'000

£'000

£'000

Income Statement - return after tax

 

 

 

 

 

Revenue return

79

156

135

19

245

Capital return

3,118

7,927

10,220

2,833

8,404

Impact on total return after tax for the year and net assets

3,197

8,083

10,355

2,852

8,649

 

 

In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently.

 

(d) Interest rate risk

 

Interest rate movements may affect the interest payable on the Company's variable rate borrowings where applicable.

 

Management of the risk

 

The majority of the Company's financial assets are non-interest bearing. As a result, the Company's financial assets are not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates.

 

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions.

 

Interest rate exposure

 

The exposure at 31 January 2018 of financial assets and financial liabilities to interest rate risk is shown by reference to floating interest rates - when the interest rate is due to be reset.

 

 

2018

 

2017

 

 

Within

2018

Within

2017

 

one year

Total

one year

Total

 

£'000

£'000

£'000

£'000

Exposure to floating interest rates:

 

 

 

 

Cash at bank and in hand

4,392

4,392

5,983

5,983

Total net exposure to interest rates

4,392

4,392

5,983

5,983

 

The Company does not have any fixed interest rate exposure at 31 January 2018 (2017: nil). Interest receivable and finance costs are at the following rates:

 

·    Interest received on cash balances, or paid on bank overdrafts, is at a margin under LIBOR or its foreign currency equivalent (2017: same).

 

Interest rate sensitivity

 

The Company is not materially, directly exposed to changes in interest rates as the majority of financial assets are equity shares which do not pay interest. Therefore, the Company's total return and net assets are not materially affected by changes in interest rates.

 

(e) Liquidity risk

 

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

 

Management of the risk

 

Liquidity risk is not significant as the majority of the Company's assets are investments in quoted equities that are readily realisable.

 

The Board gives guidance to the portfolio managers as to the maximum amount of the Company's resources that should be invested in one company.

 

Liquidity risk exposure

 

The remaining contractual maturities of the financial liabilities at 31 January 2018, based on the earliest date on which payment can be required are as follows:

 

 

3 months or less

 

 

 

 

 

 

 

 

More than 3 months, not more than one year

More than one year

2018 Total

3 months or less

More than 3 months, not more than one year

More than one year

2017 Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Creditors: amounts falling due within one year

 

 

 

 

 

 

 

 

Amounts due to brokers and accruals

2,401

-

-

2,401

1,506

-

-

1,506

 

2,401

-

-

2,401

1,506

-

-

1,506

 

(f)  Credit risk

 

The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss.

 

Management of the risk

 

The risk is not significant, and is managed as follows:

 

·    investment transactions are carried out with a large number of brokers, whose credit standing is reviewed periodically by the portfolio managers;

·    Cash at bank and in hand are held only with the Company's custodian, JP Morgan. None of the Company's financial assets have been pledged as collateral.

 

(g) Fair values of financial assets and financial liabilities

 

Investments are held at fair value through profit or loss. All liabilities are held in the Balance Sheet at a reasonable approximation of fair value.

 

Financial assets and financial liabilities are either carried in the Balance Sheet at their fair value (investments) or the Balance Sheet amount is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals and cash at bank).

 

Fair value hierarchy disclosures

 

FRS 104 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following classifications:

 

·      Level 1: The unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.

·      Level 2: Inputs other than quoted prices included within Level 1 that are observable (i.e., developed using market data) for the asset or liability, either directly or indirectly.

·      Level 3: Inputs are unobservable (i.e., for which market data is unavailable) for the asset or liability.

 

The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy at the reporting date as follows:

 

Financial assets and financial liabilities at fair value through profit or loss

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

At 31 January 2018

 

 

 

 

Equity investments

231,508

9,057

-

240,565

Total

231,508

9,057

-

240,565

 

 

 

 

 

Financial assets and financial liabilities at fair value through profit or loss

Level 1

£'000

Level 2

£'000

Level 3

£'000

Total

£'000

At 31 January 2017

 

 

 

 

Equity investments

178,438

32,307

-

210,745

Total

178,438

32,307

-

210,745

           

 

The valuation techniques used by the Company are explained in the accounting policies in note 1(b).

 

There were no transfers during the year between Level 1 and Level 2.

 

Investments classified as Level 2 are Aberdeen Global Indian Equity UCITS and Aberdeen Global China A Equity UCITS (2017: Gavekal Asian Opportunities UCITS, Aberdeen Global Indian Equity UCITS and Aberdeen Global China A Equity UCITS).

 

(h) Capital management policies and procedures

 

The Company's capital management objectives are:

 

·    to ensure that it will be able to continue as a going concern; and

·    to maximise the income and capital return to its equity shareholders.

 

The Company's capital at 31 January 2018 comprises its equity share capital and reserves that are shown in the Balance Sheet at a total of £244,455,000 (2017: £217,035,000).

 

The Board, with the assistance of the Executive Manager, monitors and reviews the broad structure of the Company's capital on an ongoing basis.

 

This review includes:

 

·    the need to buy back equity shares, either for cancellation or to hold in treasury, which takes account of the difference between the net asset value per share and the share price (i.e. the level of share price discount or premium);

·    the need for new issues of equity shares, including issues from treasury; and

·    the extent to which revenue in excess of that which is required to be distributed should be retained.

 

The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. The Company is subject to several externally-imposed capital requirements:

 

·    as a public company, the Company has a minimum share capital of £50,000; and

·    in order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by company law. These requirements are unchanged since last year, and the Company has complied with them.

 

17 Transactions with the managers

 

On 27 May 2005, the Company appointed Witan Investment Services Limited as Executive Manager. Aberdeen Asset Managers Limited was appointed as portfolio manager on 31 May 2005. In April 2012, the Company appointed Matthews International Capital Management LLC and Gavekal Capital Limited. In September 2017, the Company appointed Robeco Institutional Asset Management B.V. and Dalton Investments LLC and redeemed its investment in the Gavekal Asian Opportunities UCITS. Each Management Agreement can be terminated at one month's notice in writing. Each portfolio manager is entitled to a base management fee, at rates between 0.20% and 0.85% per annum, calculated according to the value of the assets under their management.

 

During the year ended 31 January 2018, management fees paid, net of management fee rebates of £107,000 (2017: £156,000), amounted to £1,480,000 (2017: £994,000). At the year end, £632,000 (2017: £253,000) was due to the managers, net of management fee rebates of £nil (2017: £14,000).

 

Aberdeen is also entitled to a performance fee, further details of which are provided in note 11 of these financial statements.

 

18 Subsequent events

 

Since the year end, the Company has bought back 30,516 Ordinary shares at a cost of £100,322.

 

 

NON-STATUTORY ACCOUNTS

 

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 January 2018 but is derived from those accounts. Statutory accounts for the year ended 31 January 2018 will be delivered to the Registrar of Companies in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts on the Company's website at www.witanpacific.com.

 

The audited annual financial report will be available to shareholders shortly. Copies may be obtained during normal business hours from the Company's registered office via the Company Secretary, Link Company Matters Limited, Beaufort House, 51 New North Road, Exeter, EX4 4EP and are available on the Company's website at www.witanpacific.com.

 

 

 

NATIONAL STORAGE MECHANISM

 

A copy of the Annual Report and Accounts 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 

 

 

The content of the Company's web pages and the content of any website or pages which may be accessed through hyperlinks on the Company's web pages or this announcement is neither incorporated into nor forms part of the above announcement.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Annual Financial Report - RNS