Final Results
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
13 March 2013
This announcement contains regulated information
Directors' Report: Chairman's Statement
Highlights
· The NAV total return of 15.6% outperformed the benchmark's return of 13%
· NAV total return over last five years was 18.7%, 3.7% ahead of the benchmark
· Dividend increased by 10%, 7% ahead of the rate of inflation
· Quarterly dividends introduced from 2013
· The 38th consecutive year of increased dividends
Performance and Shareholder Returns
In 2012 Witan delivered a net asset value total return of 15.6%, 2.6% better than our benchmark, which gave a total return of 13%. The rise in 2012 more than made up for the fall in 2011, despite volatile expectations for economic growth and weaker trends in corporate profits. We were able to increase our dividend by 10%, while adding to our revenue reserves, marking the 38th consecutive year of rising dividends at Witan.
Despite the difficulties that have been placed before the global economy over the last 5 years, Witan has achieved an NAV total return of + 18.7%, which is + 3.7% ahead of our benchmark over this period.
Fluctuating economic hopes in 2012 resulted in markets displaying some of the rollercoaster characteristics of the previous two years. A strong first quarter was largely reversed in the early summer months, before a more positive trend became established in the second half of the year. The two principal drivers of the strong returns were more pro-active official policies to sustain economic growth, acting on the dry tinder of the low equity valuations which prevailed at the end of 2011. Although arguments will continue over the policy of quantitative easing (central banks printing money to buy government bonds) it has undeniably helped offset the negative effects of contraction in the banking sector and kept interest rates low, which benefits borrowers (including, of course, governments).
2012 was a reminder that buying assets at low valuations gives a degree of fundamental support, even during periods of disappointing economic news. The positive returns for equity investors were assisted by a number of feared events which did not happen: Middle Eastern conflict did not lead to a spike in oil prices, the Euro did not implode and China did not slip into recession. Also on the positive side, inflation fell worldwide, the US housing market pulled out of a 6 year recession and Northern European governments showed a greater willingness to incur the costs of buying time for Southern European countries to reform their economies.
Portfolio Attribution
In 2012, our net asset value total return was 2.6% ahead of our equity benchmark, with a positive total return of 15.6% more than erasing the fall in 2011. The principal contributors were a 2.0% outperformance by our managers and a 1.5% benefit from the use of gearing during a year of rising markets. There was also a +0.5% contribution from a decline in the effect from marking our debt to market values and a +0.1% benefit from share buy-backs. These factors were offset by the cost of borrowings (-0.6%) and by operating and investment management costs (-0.9%).
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Chairman's Statement continued
A breakdown of the performance attribution is shown in the table below.
Performance Attribution
For the year ended 31 December 2012 (based on the Company's financial statements)
|
Net asset value total return |
15.6% |
Portfolio investment total return (gross) |
|
+15.0% |
|
|
|
|
|
|
|
Benchmark total return |
13.0% |
Benchmark total return |
|
+13.0% |
|
|
|
Relative investment performance |
|
+2.0% |
|
|
|
|
|
|
|
|
|
Gearing impact |
+1.5% |
|
|
|
|
Effect of changed market value of debt |
+0.5% |
|
|
|
|
Share buy-backs |
+0.1% |
|
|
|
|
|
|
|
|
|
|
|
|
+2.1% |
|
|
|
|
|
+4.1% |
|
|
|
Borrowing costs |
-0.6% |
|
|
|
|
Operating costs and tax |
-0.9% |
|
|
|
|
|
|
-1.5% |
|
Relative performance |
+2.6% |
|
|
+2.6% |
Ongoing Charges Figure (formerly Total Expense Ratio)
The ongoing charges figure ('OCF') (which is the recurring operating and investment management costs of the Company, expressed as a percentage of average net assets) was 0.69% in 2012, marginally below that for 2011 (0.71%). When performance fees paid to our managers are included, the OCF was 0.97% in 2012 (2011: 0.87%).
Dividend
Your Board has declared a second interim dividend of 7.2 pence per share (2011: 6.55 pence), to be paid to shareholders on 28 March 2013, making a total distribution for the year of 13.2 pence (2011: 12.0 pence). This represents an increase of 10%, some 7% ahead of the 2.7% rate of consumer price inflation (CPI) in the year to December 2012. This is the 38th consecutive year that we have increased the dividend. During this period (since 1974) the UK retail price index has risen approximately 900% (a 10-fold move in prices), while Witan's dividends per share have increased by over 3500% (a 36-fold rise).
Our portfolio generated revenue earnings per share of 14.50 pence, an increase of 9.3%, allowing us to increase our dividend in real terms, as well as adding £2.6 million to our revenue reserves which at the year-end stood at £43.4 million, after providing for this year's second interim dividend payment.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Chairman's Statement continued
In recent years, the practice of paying dividends quarterly rather than twice a year has become more common, as the level of personal investor ownership in many investment trusts has grown and electronic payment systems have reduced the additional administrative costs. The Retail Distribution Review ('RDR'), which takes effect in 2013, also broadens the potential investor base for investment trusts, among groups for whom predictable and regular dividend payments are a more important part of the total return than for institutional investors. The Company has accordingly decided to commence paying dividends quarterly, starting in 2013. The first three payments (in June, September and December) will, in the absence of unforeseen circumstances, be paid at a rate of 3.3 pence per share, being one quarter of the full year payment for 2012 (13.2 pence). The fourth payment (in March 2014) will be a balancing amount, reflecting the difference between the three quarterly dividends already paid and the payment decided for the full year.
Share Buy-backs and Discount
The Company purchased a total of 1.2% of the starting shares in issue during the year. These share buy-backs generated an increase in net asset value per share of 0.1% as well as helping to maintain the discount close to our desired target of a sustainable level of 10% or below. The share price discount (compared with the net asset value excluding income, with debt at market value) ended the year at 10.2 % compared with 9.4% at the end of 2011. The average discount for the year on this basis was 10.7% (2011: 10.6%).
Witan's Multi-manager Approach
Witan is unique amongst investment trusts in operating a fully-fledged multi-manager structure for the management of its assets. This aims to benefit from the specific skills of particular managers, as well as reducing the performance volatility that can come from having a single manager.
The day to day investment management of the Company's assets is outsourced to third parties. However, the Board sets and reviews all the key elements of the Company's strategy, including the choice of investment benchmark, the selection of suitable investment managers, investment guidelines and limits and the appointment of providers for other services required by the Company. The Board ensures that, taking specialist advice as appropriate, its Directors have the appropriate mix of skills and time available to address the management of its outsourced, multi-manager investment approach.
This structure is overseen by the Company's executive team, which is responsible for managing risk appetite by actively varying gearing as well as taking advantage of specialised opportunities which fall outside the investment managers' remits. Details of the process and the changes implemented during 2012 are set out in the Business Review on pages 6 to 22. Your Board is convinced that the multi-manager approach is beneficial particularly when it comes to global investing. However, we are mindful that the spread of managers and individual manager focus are key to unlocking the benefits.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Chairman's Statement continued
Retail Distribution Review (RDR)
The implementation of the Retail Distribution Review ('RDR') from 2013 will usher in changes in the qualification requirements for Financial Advisers as well as ending product provider "trail" commissions on future sales. It has the potential to increase interest in Witan from individual investors and their financial advisers, which creates an opportunity for us and a requirement to address issues of relevance both for clients with investment advisers and those for whom investment advice may be harder to obtain under the new regime. These issues include diversification of risk, timely investment updates, the policy on dividend growth, the management of the discount to net asset value and corporate governance safeguards. Witan has well-established policies in all these areas, which are set out in more detail in the Business Review on pages 6 to 22. Further details of initiatives to increase the availability of information for investors and their advisers are set out in the Marketing Review in the Annual Report.
AGM
Our Annual General Meeting will be held at Merchant Taylors' Hall on Tuesday 30 April 2013 at 2.30 pm. Formal notice of the meeting will be sent to shareholders when the Annual Report is published. With my fellow Directors, I look forward to the opportunity to meet you then for the Company's 105th AGM.
Andrew Bruce, who has been a member of the board since 2002, will be retiring from the Board at this year's AGM. He has served during a period of exceptional financial turbulence, both as a Director of Witan and a member of the audit committee and I would like to thank him warmly on behalf of shareholders and the Board for his valuable service.
Outlook
Equity markets made widespread gains during 2012 despite headwinds from downgraded growth expectations in many regions. This positive market trend has continued in the early part of 2013, amid signs that economic performance was improving from last year's weakness, with fewer downside risks than appeared likely during the middle of 2012. Although the world appears some way from a return to robust economic growth, sentiment is less fearful, as evidenced by the inflows into equity funds in recent months.
2013 seems likely to be a further year of convalescence for the world economy. A necessary correction in the private sector debt overhang in developed economies has been offset by a burgeoning in public sector budget deficits, to levels which are likely to be unsustainable in the longer term. This has cushioned the recent recession but led to disagreement over how to tackle the resulting problem of public sector debt. One group (led by the US but with increasingly vocal support in Europe) believes that higher economic growth should be the priority, arguing that growth will engender lower deficits than if budgets are cut in response to the currently wider deficits experienced as a result of weak growth. The other group (led by Germany) believes in addressing deficits first, forcing economies to adopt more competitive policies, in the belief that faster economic growth will eventually follow.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Chairman's Statement continued
The question of whether austerity will impede or facilitate recovery is sharpened by the sheer number of countries where economic growth is weak, which are tempted to boost their growth via a weaker currency. Since the whole world evidently cannot devalue at the same time, the global imbalances between output and demand will need to be tackled, requiring the "grasshoppers" to invest more while the "ants" will need to consume more. The past few years have shown that achieving political consensus on a coordinated policy approach is difficult.
The other notable feature of investment markets during 2012 was the plunge in government borrowing rates to multi-century lows. Although the continuation of low interest rates (to assist with debt reduction and encourage economic growth) may prolong the period of depressed bond yields, there is an increased risk of bond investors losing money in real terms, given that current yields are below current and targeted rates of inflation. Bonds being expensive is not itself a reason to buy other assets, such as equities, but it may prompt a broader definition of what is meant by investment risk. If the focus shifts towards investing to preserve real value rather than purely to avoid short-term volatility the outperformance of equities versus bonds in 2012 could have much further to go.
Harry Henderson
Chairman
12 March 2013
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review
This Business Review provides shareholders and other readers with information about the Company's business and results in 2012 and looks forward to the year ahead. It is divided into two sections: Corporate and Investment.
CORPORATE SECTION
Objectives and Strategy
Witan's objective is to be the preferred choice for wealth creation, delivering long-term capital growth and a rising real income to shareholders through investment in global equity markets. Witan seeks to make money for shareholders, to do so more effectively than its sector peers with similar objectives and to achieve consistent outperformance of the global stock markets represented by its benchmark. Recognising the importance of dividends in the returns from equity investment, Witan has a policy of seeking to increase its dividend in real terms, ahead of CPI inflation. In addition, Witan seeks to attract new investors to buy the Trust's shares in order to help maintain liquidity for shareholders.
Witan's portfolio has a multi-manager investment structure. This approach allows us to select a range of high quality fund managers with differing areas of expertise from around the world - often where the fund manager is not otherwise available on the same terms (or at all) to the UK investor. This approach also aims to reduce the performance volatility which can occur when employing a single manager.
Your Board believes that active management of risk is essential in investment. This is particularly relevant when economic conditions are unsettled, as in recent years, but an adaptable approach is also appropriate in more positive times. Where appropriate, we are also willing to employ innovative investment techniques and invest in diverse asset classes. Investment trusts have the advantage of being able to borrow in order to improve performance in rising markets. Witan has £110 million of long-term debt (including preference shares) which can be deployed, hedged or neutralised with cash balances according to our view of the outlook for markets. It has a £50m short-term multi-currency borrowing facility to give additional flexibility. We have a policy of actively managing gearing according to investment conditions (see Investment Policy section on page 14).
Management Arrangements
The management of Witan's portfolio is predominantly outsourced to third party investment managers around the world. A small proportion is invested in externally managed collective funds selected by Witan's in-house executive management team (the 'Executive') in areas to complement the delegated remit of Witan's external managers. The Executive manages and controls these relationships, recommends new managers when a change is appropriate and advises the Board on all relevant investment and business matters. The Executive is also responsible for adjusting the overall risk appetite of the portfolio (within guidelines set by the Board) and for managing the subsidiary company, Witan Investment Services Limited.
Changes to the investment manager line-up during the year, along with other investment issues, are referred to in greater detail in the Investment Section on pages 14 to 22. Our current managers are listed on page 18.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
Witan uses third parties for the supporting services it requires, including:
BNP Paribas Securities Services SA ('BNPSS') for global custody, investment accounting and administration.
Frostrow Capital LLP for company secretarial services.
International Financial Data Services ('IFDS') Limited as the savings plan administrators of Witan Wisdom and Jump Savings.
Cauldron Consulting for media relations.
Tangible Financial for advertising.
Towers Watson to monitor the market for managers.
The Company also takes specialist compliance advice on regulatory issues and from time to time, as required, also procures professional advice in the areas of legal, investment consulting, financial and tax advice.
Unlike other multi-manager services, we do not levy an additional fee (on top of the underlying external managers' fees) and any negotiated savings in investment management fees directly reduce the costs for shareholders. Your Board applies strict discipline over central corporate costs, as well as ensuring external investment management services are secured on competitive terms.
Our ongoing charges figure ('OCF', previously known as the Total Expense Ratio) reflects the recurring costs of running the Company, expressed as a percentage of average net assets. This was 0.69% in 2012, marginally lower than that for 2011 (0.71%). When performance fees paid to our managers are included, the OCF was 0.97% in 2012 (2011: 0.87%). Positive portfolio performance was reflected in a higher payment for performance fees. These figures should be evaluated against the weighted average OCF for the AIC Global Growth sector of 0.79% (February 2013, excluding performance fees, or 0.82% including performance fees) (source: AIC) and of 1.53% for the open-ended Global Growth sector (source: IMA, Financial Express as at December 2012).
Since November 2005 the Company has had a lease on office premises at 14 Queen Anne's Gate, London SW1H 9AA, which is also the Company's registered office.
The Company's policy towards its employees is to attract and retain staff with the particular skills and expertise required to manage the affairs of an investment trust company. Given its outsourced model and small number of direct employees, the Group has no specific policies in respect of environmental or social and community affairs.
Witan's Benchmark
Your Company's benchmark is a reference point for what shareholders can expect in the long term from an investment in Witan, in terms of the underlying investment structure of the portfolio and in performance. Although it is an equity benchmark, your Board reserves the right to invest in other assets, if appropriate, for better performance or capital preservation. Since 1 October 2007 the benchmark has been:
40% UK
20% North America
20% Europe ex-UK
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
20% Asia Pacific.
This reflects a balance between the domestic exposure and international status of the UK market and a broadly spread exposure to growth in other regions of the world. To assist shareholders who may apply different benchmarks in evaluating comparative performance, we include performance information for other commonly used indices in the Key Performance Indicators summary section on page 23. During 2012, the comparator indices were the FTSE All-Share Index (UK), the FTSE All-World North America Index (£), the FTSE All-World Europe (ex UK) Index (£) and the FTSE All-World Asia Pacific Index (£). The Company seeks to source the performance data for indices on competitive terms.
The benchmark provides a basis for assessing the long-term performance of the Company although the portfolio is actively managed and not designed to track any index. Over shorter periods performance can be expected to vary, sometimes considerably, from that of the benchmark, while aiming for consistent outperformance in the longer term.
Dividend Policy
The Company's policy, subject to circumstances, is to increase its dividend per share in real terms, ahead of the CPI. The Board believes that this should normally be funded from current year revenue earnings, if necessary making use of revenue reserves to smooth variations in incoming income from the portfolio. Although the regulations governing investment companies now permit dividends to be funded from capital reserves, the Company is not currently seeking to amend its Articles of Association, which preclude the distribution of capital reserves as dividends. The Company believes it is important that its dividend payments are viewed as sustainable (rather than eroding capital) and the accumulated revenue reserve of £43.4m, representing 1.7 times the annual dividend already gives substantial flexibility to smooth the impact of occasional declines in market dividend payments.
In accordance with this policy, for 2012, the Board has declared a second interim dividend of 7.2 pence per share, to be paid to shareholders on 28 March 2013, making a total distribution for 2012 of 13.2 pence (2011: 12.0 pence). This represents an increase of 10%, some 7% ahead of the rate of CPI to December 2012 (2.7%). This is the 38th consecutive year that the annual dividend has been increased.
The Company has decided to commence quarterly payment of dividends from 2013. The first three payments in respect of any year will be made in June, September and December at a rate which, in the absence of unforeseen circumstances, will be one quarter of the total payment made in respect of the previous financial year. The fourth payment, the following March, will be a balancing amount, reflecting the difference between the three payments already made and the payment decided for the full year.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
Market liquidity, Share Buy-backs and Discount Policy
Your Board places great importance on the encouragement of a liquid market in Witan's shares on the stock exchange. A healthy two-way market enables shareholders to sell Witan shares at a price that reflects prevailing market value while potential new shareholders should be able to invest with adequate market liquidity for their needs. The Company also operates an active share buyback policy, purchasing shares for cancellation when they stand at a significant discount to the net asset value (excluding income, with debt at market value), with the objective of achieving a sustainable discount of 10% or less (subject to market conditions). This policy has the direct effect of improving net asset value per share with the additional strategic aims of mitigating volatility in the discount and bringing the share price closer to the net asset value.
The level of share buy-backs during 2012 is referred to in detail in the Chairman's Statement. This activity not only generated an increase in net asset value per share of 0.1% but also helped to reverse periods of widening discounts occasioned by market conditions.
Marketing
Witan operates a marketing programme designed to stimulate interest in the Company's shares by explaining our investment strategy and performance to existing and potential new shareholders. 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). In particular, the Company aims to provide an informative and easy to use web-site (www.witan.com) to enable investors and their financial advisers to make informed decisions about including Witan shares in their investment portfolios. This includes a section focused on the requirements of Financial Advisers, given the increased attention being paid to Investment Trusts following the introduction of the Retail Distribution Review in January 2013. Further details of the Company's marketing and investment information initiatives are set out in the Marketing Review in the Annual Report.
Debt and Gearing Policy
Witan has £110m of long-term debt consisting of debentures, secured bonds and preference share capital. The Company also has a £50 million one year facility, providing additional flexibility over the level of gearing, as well as enabling the Company to borrow in other currencies than sterling, if deemed appropriate. Witan may either invest its borrowings fully, or neutralise the gearing effect with cash balances (or the sale of equity index futures) according to its view of the markets. The Company's investment managers are not permitted to borrow within their portfolios but may hold cash if deemed appropriate.
Key Performance Indicators
Your Board assesses its performance in meeting the Company's objective against the following key performance indicators:
• Net asset value total return and total shareholder returns, for which outperformance compared with Witan's composite benchmark is a key objective.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
• Investment performance by the individual managers, where outperformance relative to the relevant benchmark is expected.
• Annual growth in the dividend, where the Company's policy is to achieve increases in real terms, ahead of inflation (subject to market circumstances).
• The discount to net asset value, where the objective is to achieve a sustainable discount of 10% or less (compared with the net asset value excluding income, with debt at market value) and an annual average of no more than 11% on the same basis.
• The level of ongoing charges; costs are managed with the objective of delivering a competitive ongoing charges figure. In recent years this has been c.0.7-0.8%, excluding performance fees paid to investment managers. Where higher charges arise, these are carefully evaluated to assess the net benefit for shareholders.
Witan's performance in 2012 against these indicators is shown on page 23, and discussed in the Chairman's Statement on pages 1 to 5 and the Investment Section of the Business Review on pages 14 to 22. The Board also regularly reviews absolute and relative volatility and risk statistics for the portfolio and evaluates employee performance against assigned personal targets.
Principal Risks and Uncertainties
The Board has identified the key risks to the Group which need to be managed and has collated them in a risk matrix document. The risks relating to Witan's subsidiary company, Witan Investment Services Limited ('WIS'), are separately recorded. The respective documents are reviewed and updated regularly by the relevant Board of directors.
The Board is conscious that it must regularly review the nature of its corporate objectives and strategy to ensure that both remain relevant and appropriate in a changing financial services and savings market. This includes scrutiny of investment policies, the role of marketing, the service offered by the Witan Wisdom and Jump Savings schemes and wider industry trends. These issues are reviewed at least annually by the Board.
The Group's key risks fall broadly under the following categories:
1. Market and portfolio risks
Witan has traditionally been a vehicle for UK and overseas equity investment. Whilst this does not preclude a more diversified or defensive strategy during periods of falling or turbulent markets, nonetheless a key risk of investing in Witan is a general fall in equity prices. The other generic risks, as with any international equity portfolio, are the overall investment strategy and the resulting exposure to country, currency, industrial sector, and stock specific risks. There are also risks associated with the choice of managers.
Your Board seeks to manage these risks through:
• appropriate asset allocation decisions, with a broadly diversified equity benchmark. The investment remit covers the UK, North America, Europe and the Asia Pacific region. Investments are principally in listed (thus tradable) securities. Regional weightings are reviewed in the context of the Company's diversified benchmark at each board meeting, while country weightings, which mainly arise from decisions on stock selection, are assessed periodically as part of the manager review process.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
• regular reviews of the competence and stock selection skills of our fund managers
• monitoring the economic outlook, geo-political environment and stock market conditions around the world
• the application of relevant policies on gearing and liquidity
• manager diversification, as the multi-manager approach renders Witan less exposed to individual manager performance than with a conventionally structured portfolio
• delegating authority to the executive management team to manage risk actively, whether to preserve capital or capitalise on opportunities.
2. Investment activity and strategy risks
It is important that investment activities are managed in a disciplined and prudent way, to reduce the risk of falls in Witan's portfolio value or underperformance against the Company's benchmark index or its peer group. Adverse performance could also result in the Company's shares trading on a wider discount. The Board seeks to manage these risks by implementing an appropriate asset allocation, with a portfolio that is spread across a diverse range of investment managers and investments. These aspects are regularly reviewed, in addition to the extent of borrowings.
During the year Witan's Chief Executive Officer (CEO), Andrew Bell, managed the overall business and investment portfolio in accordance with limits and restrictions determined by the Board. These include limits on the extent to which borrowings may be used. The Board regularly reviews the matters delegated to executive management and the CEO reports on compliance at each Board meeting. Directors are provided with comprehensive management information including investment performance data, financial reports and shareholder analyses. The Board reviews investment strategy at each Board meeting, while also monitoring the implementation and results of the investment process with the CEO. The CEO regularly reviews reports and data which monitor the portfolio's principal risk factors.
Corporate governance and shareholder relations
Details of the Company's compliance with corporate governance best practice, including information on relations with shareholders, are set out in the Corporate Governance Statement in the Annual Report. The Board conducts an annual internal review of the effectiveness of its governance processes in managing the Company and enabling it to evolve in response to future challenges. In line with best practice, there is also a 3-yearly external review, the most recent of which was conducted in late 2010.
Operational and regulatory risks are regularly and extensively reviewed by Witan's Audit Committee. Witan Investment Services Limited ('WIS') is subject to its own operating rules and regulations and is regulated by the Financial Services Authority ('FSA').
Your Board takes its own regulatory responsibilities very seriously and reviews the main points of compliance against requirements quarterly. Your Board also takes corporate, legal, compliance, accounting and tax advice as appropriate.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
Operationally the multi-manager structure is robust, as the investment managers, the custodian and the fund accountants keep their own records which are reconciled monthly. Management monitors the activities of all third parties and reports any significant issues to the Board. Comprehensive contractual obligations and indemnification provisions have been put in place with each of the third party service providers.
4. Accounting, legal and regulatory
In order to qualify as an investment trust the Company must comply with sections 1158-59 of the Corporation Tax Act 2010 ('CTA'). A breach of these sections could result in the Company losing investment trust status and, as a consequence, capital gains realised within the Company's portfolio would be subject to Corporation Tax. The criteria are monitored by the CEO and reviewed at each board meeting. The accounting rules affecting investment trusts were revised in 2012, affording greater flexibility over portfolio structure, the use of derivatives for hedging and investment purposes and the ability to pay dividends from capital reserves. The Company carefully monitors compliance with these updated rules.
The Company must comply with the provisions of the Companies Act 2006 ('Companies Act'), and, as the Company's shares are listed for trading on the London Stock Exchange, the Company must also comply with the UK Listing Authority's Listing Rules and Disclosure Rules ('UKLA Rules'). A breach of the Companies Act could result in the Company and/or the directors being fined or becoming the subject of criminal proceedings. Breach of the UKLA Rules could result in the suspension of the Company's shares which would in turn lead to a breach of the provisions of the CTA.
These legal and regulatory requirements offer significant protection for shareholders. The Board relies on the CEO, the Company Secretary and the Group's professional advisers to ensure compliance with the CTA, the Companies Act and the UKLA Rules. WIS is regulated by the FSA for the marketing and administration of savings plans and the provision of investment advice to professional clients. The savings plans are administered on behalf of WIS by International Financial Data Services ('IFDS').
The implementation of the Retail Distribution Review ('RDR') from 2013 is expected to increase interest in Investment Company shares, given the increased level of qualification amongst Financial Advisers and the ending of the practice of product providers (principally open ended funds) paying commission to buyers of their units. The Company has taken steps to increase the range of information on its web-site (including a section for Financial Advisers to help inform the choices they make on behalf of their investors), further details of which are set out in the Annual Report.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
The Alternative Investment Fund Manager Directive ('AIFMD') has finally been passed by the European Parliament and is due to become UK law by July 2013. Although many of the issues covered are already addressed by current regulation, it will introduce changes in the rules governing entities, such as Witan, which are responsible for managing investment funds (including organisations where aspects of the management are delegated) and ensuring the safe custody of investors' assets. The Company is reviewing the detail of the new regulations as they are finalised, with a view to becoming authorised under the Directive ahead of the compliance deadline. It remains the Company's policy to meet best practice in complying with all applicable regulations, as an important part of delivering returns to shareholders and safeguarding the Company's assets.
5. Operational
Many of the Group's operations are outsourced to third parties, principally BNPSS. Disruption to the accounting, payment systems or custody records operated by BNPSS could prevent the accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by BNPSS and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal control section of the Corporate Governance Statement.
Witan Investment Services ('WIS')
Witan Investment Services Limited is a wholly-owned subsidiary of Witan Investment Trust plc. It was established in March 2005 to provide investment products and services and to give investment advice to professional investors. It is authorised and regulated by the FSA.
The principal activity of WIS is to provide executive management services to the Boards of Witan Investment Trust plc ('Witan') and Witan Pacific Investment Trust plc ('Witan Pacific') and stimulate interest in their shares.
Its objectives are:
· to operate a reliable and efficient investment savings platform for Witan and Witan Pacific investors
· to provide suitable advice to the Boards of its corporate clients
· to minimise the net operating costs for Witan
· to seek appropriate business opportunities which can add value for shareholders
WIS has two principal sources of income. These are savings plan revenues from transaction fees and annual management charges and the executive management and marketing fees paid by its corporate clients, Witan and Witan Pacific.
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WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
The savings plans provided for WIS clients are marketed under the Witan Wisdom and Jump Savings brands. They currently have over 25,000 customers with assets of some £220 million invested. The main costs incurred by WIS (which form part of the charges paid by savings plan account holders) are fees to the savings schemes administrator, IFDS. During 2012, the account fees for Jump were raised, to address the deficit between the costs of operating the savings plan and the revenue paid by account holders. Previously, the deficit had been funded by shareholders as a whole. Appropriate safeguards and transitional arrangements were put in place for smaller accounts and others who wished to transfer elsewhere.
Priorities for 2013
2012 was a positive year for equity markets, despite generally disappointing news on economic growth. Central banks have espoused policies conducive to maintaining economic growth, in the face of headwinds presented by the debt overhang from the last credit boom. This has encouraged investors to look beyond short-term negative news. In 2013, the key priorities include:
· Investment. Set an appropriate strategic asset allocation to reflect changing opportunities in the world economy. Select and monitor suitable managers to deliver our strategic objectives through a multi-manager structure. Continue to deliver dividend growth ahead of inflation.
· Regulatory change. Achieve cost-effective preparation to become authorised under the AIFMD. Communicate Witan's active investment process to existing and potential shareholders in particular increasing the focus on improving information for personal investors and financial advisers in the light of the RDR.
· Client service. Provide good service to the corporate and individual clients of Witan Investment Services.
· Business opportunities. Seek business development opportunities where Witan's multi-manager and Executive Management expertise can be applied beneficially.
INVESTMENT SECTION
Investment Policy
Witan invests primarily in global equities, so equity exposure is unlikely, in normal conditions, to drop below 80% although this does not preclude a more defensive positioning in exceptional market conditions. The Board is prepared to consider alternative investments when appropriate.
The Company has the power under its Articles of Association to borrow up to 100% of the adjusted total of shareholders' funds, with the objective of enhancing returns. In practice the Board's policy is not to allow gearing (as defined on page 23) to rise to more than 20%, other than temporarily in exceptional circumstances. Over the past five years it has varied between 0% and 15% and on occasion the Company has held a small net cash position. At the end of 2012, the Company had in place £110 million of long-term debt and £21 million of short-term borrowings (equivalent in total to 11.9% of shareholders' funds), although actual gearing was less than this (6.1%), owing to cash holdings and a short position in the UK 10 year Gilt March 2013 futures contract.
Page 15 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
Investment risk is managed through:
· diversification across global markets
· selection of a range of investment managers with different mandates
· monitoring and reviewing investment managers' performance and portfolios
· active management of risk, taking account of asset allocation, currency exposures and gearing levels
· carefully controlled use of liquid, exchange-traded index futures.
During the year the Company invested its assets with a view to spreading investment risk and in accordance with the investment policy as set out above. In particular it has maintained a diversified portfolio in terms of stocks, sectors and geography. The portfolio has been actively managed by the investment managers, in accordance with their individual mandates, with overall asset allocation and risk being managed by Witan's executive team. The directors have received regular reports on investment activity and portfolio construction, both at and between the regular meetings of the Board.
Portfolio Review
The year in summary
2012 began on a positive note, with widespread equity market gains after the market setbacks seen in 2011. Growth indicators in the US had shown a healthier trend towards the end of 2011, while the European Central Bank ('ECB') introduced generous funding terms for the banking sector, which reduced fears that the management of the Euro crisis would spin out of control and create a sequel to the financial crisis which followed Lehman Brothers' bankruptcy in 2008. There were also signs that the Bank of Japan was contemplating more aggressive monetary easing measures, with the adoption of an inflation target in February.
This rally lost momentum in March, when signs emerged that economic growth was again slowing. Southern European countries which had implemented fiscal austerity measures slipped into recession, fuelling renewed concerns about the banking sector, particularly in Spain, in a further twist in the region's recurring crisis of economic management. Fears of conflict with Iran led to a rise in oil prices, the inflationary effects of which were exacerbated by concerns over food prices as a result of record drought conditions in the US farming belt. Elsewhere, the UK economy slipped into a period of recession, albeit mild, which disappointed hopes that 2012 would mark a recovery from weak growth in 2011. In Japan, official enthusiasm for more radical policy measures did not last beyond the end of the financial year in March, while China was slower in reversing the previous period of monetary tightening than investors wished.
Equity markets proved fragile in the face of these widespread disappointments and had retraced the earlier rally by early June. The selling was less severe than in August 2011, since markets appeared to have become battle-hardened in the face of the repetition of themes to which they had already reacted in 2011. Furthermore, it became increasingly apparent that central banks were committed to fostering economic growth and less concerned about inflation than the previous year. This helped to limit investor fears, at the same time pushing certain government bond yields to their lowest levels in history. The US, UK and Germany saw 10 year bond yields fall below 2%, offering investors a yield lower than current and forecast inflation levels. The apparent absurdity of this in investment terms was overwhelmed by the clamour to own assets perceived as "safe", where the eventual
Page 16 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
repayment at face value (even if devalued by inflation) was viewed as worth buying seemingly at any price relative to more volatile assets which were more lowly valued.
A gradual market recovery began in the early summer, helped by reduced expectations of air strikes on Iran's nuclear facilities, and a consequent fall in oil prices, which alleviated the squeeze on consumers. There were also increasing signs that European leaders recognised that it was imperative to arrest speculation over fragmentation of the Euro currency bloc and take steps to underpin the financial position of the banks and the debtor countries in Southern Europe. This culminated in a watershed speech by the ECB Governor Mario Draghi in which he declared he would do "whatever it takes" to preserve the Euro. Although the details of the ECB's policy tools took further months to become clear and had not been used at the end of the year, the crucial issue of confidence had been addressed and, for the time being, markets have acted on the assumption that a "Lehman 2" crisis rooted in a disintegrating Euro will be avoided. Towards the end of the year, the signs of recovery in the US housing market became more consistent, China's economy appeared to have bottomed out and an eye-catching election in Japan saw the election of a leader who had called for the Bank of Japan to adopt a 2% inflation target and undertake unlimited monetary easing until it was achieved.
Although these developments represent events rather than solutions to problems which are likely to take years to work through, they provided a positive impetus which saw all major equity markets deliver strong returns, in aggregate more than erasing the falls of the previous year. This was largely a valuation shift, since corporate earnings estimates were under pressure for most of the year. Evidence of economic progress is likely to be necessary to build on these gains, despite the encouraging start to 2013, although the ratings on equity markets are low by historic standards (if current levels of corporate profits can be sustained) and offer premium returns relative to those on cash and most government bonds.
Manager changes
There was only one change to the list of managers during the year. Lansdowne Partners was appointed to manage a new global portfolio for Witan. This was invested in their newly-established Developed Markets Strategy, which seeks significant outperformance and absolute returns from a highly concentrated portfolio invested in larger companies in global developed markets, without regard to market weightings. An allocation of 3% of assets was made to them in December.
Since the year end, Matthews International Capital Management has been appointed to manage a portfolio of c.9% of Witan's assets, investing in their Asia Dividend Strategy covering the Asia Pacific region, including Japan. They replaced our previous Asia Pacific manager (whose remit excluded Japan), reflecting our belief that the region's economies have become increasingly interdependent and that although Witan has benefited from being substantially underweight in Japan in recent years this will not always be the case. Rather than, as in 2012, using equity index futures to raise exposure to Japan, alongside an Asia ex-Japan manager, we believe that having a manager with the ability to allocate capital on the basis of stock-specific attractions is preferable to predetermining allocations to Japan and Asia separately.
Page 17 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
Use of Derivatives
Exchange-traded benchmark futures were employed on a number of occasions during 2012. The principal objectives for which they were used were to increase exposure to the Japanese equity market (where our managers had few stock holdings) in a way that mitigated the drag from the weak yen, and to reduce exposure to the risk of higher gilt yields.
Exposure to the Japanese Nikkei index future was varied during the year according to market circumstances. The position was closed at a profit during December, after a strong rally in the market. In March, the Company sold gilt futures to establish a short position in the 10 year gilt market, on the view that the fall in yields to levels below the inflation rate was likely to prove unsustainable and that this was a way to benefit from a reversal of the move and to mitigate the impact on the portfolio from a future rise in bond yields. During the second quarter of the year, yields fell further and remained lower for the balance of the year, so this position was loss-making during the year.
The underlying futures exposure varied between -3% and +3% of assets, finishing the year at -2.7% (the 10-year gilt futures position). The Company takes full account of the effect of the underlying value of the futures contracts on its gearing. The value of the investments (which are traded on official exchanges) is fully marked to market every day.
The use of futures has a number of benefits. It enables Witan to increase or reduce its gearing at a known and immediate price level, conferring tactical flexibility. It also provides a means of adjusting asset allocation (for example, by allocating investment to particular markets). In both cases, the use of futures enables the adjustments to be made without interfering with the assigned objectives for our investment managers, which are to pick stocks that will grow in value over the medium to long term and outperform their respective benchmarks.
The operation of this investment area is the responsibility of the CEO, within guidelines set by the Board. Transactions are reported to the Board as they occur, with the CEO being accountable for the financial results. The Company's external managers are not permitted to make use of derivatives or to gear their portfolios.
Gearing management
Gearing was managed actively during the year. Starting the year at 10.5%, it was reduced following the rally in the early months of the year and reduced again with the sale of the Japanese equity future position in December, to end the year at 6.1%. Gearing was a significant benefit to performance during 2012, increasing the Company's exposure to the positive market trend. The Company's policy is that gearing should be used judiciously as a potentially effective tool to boost returns.
Directly held investments
In 2010, the Company initiated a policy of making direct investments of up to 10% of assets in selected collective funds, with the management of this portfolio being the responsibility of the CEO. This portfolio, which was 9.8% of assets at the end of 2011, outperformed Witan's benchmark during 2012 (after lagging in 2011) and represented 10.3% of assets at the year end.
Page 18 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
The portfolio was a net seller of assets during the year, although the list of investments was the same as at the end of 2011. The main investments were in listed private equity and related companies (3i Group, Electra Private Equity, Princess Private Equity and NB Distressed Debt Investment Fund), UK domestic recovery (Schroder Real Estate Investment Trust and Aberforth Geared Income Trust), two specialist sector funds (Polar Capital Insurance fund and Ludgate Environmental Fund Limited) and the convertible bonds of Edinburgh Dragon Investment Trust.
Portfolio diversification
In order to capture the changing dynamics in the global economy and provide stability against problems within individual countries, Witan's portfolio is well diversified across global stock markets and, importantly, across a range of managers. As expected in a multi-manager portfolio, individual manager returns vary, but in aggregate the outperformance at the portfolio level, together with the effect of gearing during a year of generally rising markets meant that Witan's net asset value total return of 15.6% outperformed the benchmark (+13.0%).
|
Equity mandate |
Investment Manager |
Benchmark |
Investment style |
|
UK |
Artemis Investment Management |
FTSE All-Share |
Recovery/special situations |
|
UK |
Lindsell Train |
FTSE All-Share |
Long-term growth from undervalued brands |
|
UK |
NewSmith Asset Management |
FTSE All-Share |
Flexible, thematic |
|
UK Smaller Companies |
Henderson Global Investors |
Hoare Govett Smaller Cos. (ex investment companies) |
Growth at an attractive price |
|
Global |
Southeastern Asset Management |
FTSE All-World |
Value |
|
Global |
MFS Investment Management |
FTSE All-World |
Growth at an attractive price |
|
Global |
Thomas White International |
FTSE All-World |
Diversified growth at a reasonable price |
|
Global |
Veritas Asset Management |
MSCI All-World |
Fundamental value, real return objective |
|
Global |
Lansdowne Partners Limited |
DJ Global Titans |
Concentrated, benchmark-independent investment in global developed markets |
|
Pan-European |
Marathon Asset Management |
FTSE All-World Developed Europe |
Capital cycles |
|
Asia Pacific (including Japan) |
Matthews International Capital Management*** |
MSCI AC Asia Pacific Free |
Investment in companies with attractive and growing dividend yields |
|
Emerging Markets |
Trilogy Global Advisers |
MSCI Emerging Markets |
Fundamental, growth orientated |
|
Directly-held investments |
Witan Executive team |
Witan's composite equity benchmark |
Collective funds invested in mispriced assets, recovery situations or specialist assets |
*** Replaced Comgest from February 2013
Page 19 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
Investment Managers
As set out in the table on page 18, the portfolio consists of 12 separate external mandates managed by different fund management firms, in addition to the directly-held positions managed by the CEO. Each of the external managers is entitled to a base management fee, calculated according to the value of the assets under management, and/or a performance fee, calculated according to investment performance, relative to the benchmark applicable to the investment mandate. The fees for each of the segregated investment management agreements are subject to a cap in respect of each accounting year. The agreements can be terminated on one month's notice (except one, for which a three month notice period applies). One of the investment mandates is operated via a fund, to simplify custody arrangements in emerging economies.
The base management fee rates in 2012 ranged from nil to 0.9 % per annum and the performance fees ranged from nil to 20 per cent per annum of the relevant outperformance. The performance fees are payable on a pro rata basis, after a minimum initial period of one year. The average aggregate base management fee, weighted according to the value of the funds under management, was 0.35% as at 31 December 2012 (end 2011: 0.34%). On a similar basis, the average performance fee is 11% of outperformance of the relevant benchmark, subject to capping of payments for any particular year. As an illustration, if our managers uniformly outperformed their benchmarks by 3% after base management fees, this would generate a performance fee of 0.34% of net assets, giving total investment management fees of 0.69%. The actual fees payable will of course vary according both to the level of performance and the variation in performance between managers with higher or lower fees.
Witan takes care to ensure the competitiveness of the fee rates it pays and that where higher fees are incurred they are supported by good performance, from which shareholders benefit.
The Company's external investment 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.
Manager Review
The table on page 22 shows the performance of the individual equity managers for 2012 as well as since inception, compared with their respective benchmarks.
The two best performers in absolute terms during the year were Henderson (managing a portfolio of UK smaller and mid-cap companies), with a total return of 36.5%, 6.6% ahead of its benchmark and Lindsell Train (one of our UK managers) which generated a total return of 22.6%, 10.3% ahead of the UK market benchmark. Artemis achieved a total return of 19.5%, 7.2% ahead of the UK benchmark, while MFS stood out amongst our global managers, with a return of 19.1%, 7.1% ahead of its global index benchmark.
Page 20 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
The returns earned by all of our managers during the year were positive and well ahead of inflation. Six of our external managers and the internally-managed portfolio of investment funds outperformed their benchmarks, while five of the external managers underperformed. These included Comgest, our Asia Pacific manager, who earned a total return of 6.7% during the year but underperformed by 11.1%. Subsequent to the year end, we have changed the structure of our investment management in the Asia region, to include Japan in the portfolio and appointed Matthews International Capital Management for this mandate in February 2013.
A strong recovery in the price of the listed private equity holdings in particular helped the directly held portfolio to outperform during the year. Although there was net selling, as some holdings were reduced into strength, the portfolio ended 2012 at 10.3% of assets. The two largest exposures were to 3i Group and to the ordinary shares and convertible bonds of Electra Private Equity.
Portfolio breakdown
The sector breakdown and regional exposure for the aggregated portfolio is set out in the Annual Report. A point to note is that the financials weighting is boosted by the investment companies held as specialist direct investments. The top 50 holdings across the whole of Witan's portfolios are set out in the Annual Report. They represent 44.4% of Witan's portfolio (2011: 46.0%). This highlights the substantial diversification provided by our range of managers. The objective of using active managers is to outperform, which requires the portfolio to differ from the benchmark. Witan's aggregated portfolio retains an individual character distinct from the main holdings in the relevant indices.
Outlook
The problems facing the world economy remain similar to a year ago but the process of economic convalescence in some developed economies is further advanced (US housing being an example), while the framework for crisis management in Europe appears better thought through. Even though the internal stresses of the Euro currency zone remain unresolved, the rich North appears to have decided that buying time to help the poorer South to make adjustments is a better approach than coded threats of expulsion.
Sentiment has become more positive towards equity markets, reflecting the avoidance of some of the worst case scenarios envisaged at the end of 2011. Markets rose in 2012 in the face of downgraded expectations for economic growth and corporate earnings, anticipating an improvement in 2013. This more optimistic mood has been sustained in the early part of 2013.
In absolute terms, after recent gains the near-term upside from equities appears lower than a year ago although if the economic risks are under better control investors may not insist on such high risk premia for buying equities, particularly given the sub-inflation returns on offer from bank deposits and government bonds. In this environment, a more selective approach is likely to be required, since less return is on offer from a general levitation in the level of market indices and more depends upon the growth prospects, business resilience and quality of management of individual companies. This is reflected in Witan's increased focus on managers with greater thematic or stock-specific concentration in their portfolios.
Page 21 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
Witan's Multi-Manager Approach
As referred to elsewhere in this report, Witan manages its portfolio using a multi-manager approach. This was adopted in 2004, in the belief that no single investment manager was likely to excel in all asset classes over economic cycles or longer time periods. Seeking to employ managers to invest in their areas of greatest competence has the potential both to improve returns and to reduce risk relative to using a single manager across the investment waterfront. Our investment processes are focused on continuing to adapt to structural changes and themes in the global economy while being resilient against the shorter-term influences of economic cycles and shifts in investor sentiment.
The Board and the executive team are responsible for managing the portfolio's asset allocation, choosing a suitable range of managers to use their stock selection skills to implement the strategy, designing appropriate incentives and monitoring performance against targets.
Witan selects its managers from amongst those whose processes, principles and performance commend them as long-term custodians of investors' wealth. We are seeking managers who can capture the longer-term growth rewards from equity investment by focusing on fundamental value rather than chasing short-term momentum. This fits with a fundamental dictum of equity investment, that whilst in the short term markets are a voting machine (affected by sentiment) in the long term they are a weighing machine (reflecting substance). Central to this approach is the idea of balance. Just as exposure to a single market or a small number of investments can lead to volatile performance, so can investing with a single manager or a group of managers with the same philosophy. Witan's approach aims to balance different factors (such as value and growth approaches, geographical exposure and secular growth versus cyclical trends) with the intention of profiting from the managers' combined ability to outperform over time.
The tables on pages 18 and 22 give a summary of the range of styles amongst our current investment managers, the proportion of Witan's portfolio they manage and their performance over the past year and since appointment. Further information is given in the Annual Report regarding the managers' history, the total amount of investments they manage and their investment approach.
Page 22 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
Performance for the year ended 31 December 2012 and from inception to 31 December 2012
|
Investment Manager
|
Inception Date |
Value of Witan's assets managed £m at 31.12.12 |
% of Witan's assets under management at 31.12.12 (Note 1) |
Performance in 2012(%) |
Benchmark Performance in 2012 (%) |
Performance since inception to 31.12.12 (%) (Note 2) |
Benchmark Performance since inception to 31.12.12 (%) (Note 2) |
|
Artemis Investment Management (UK) |
06.05.08 |
104.6 |
8.6 |
+19.5 |
+12.3 |
+8.5 |
+3.2 |
|
Lindsell Train (UK) |
01.09.10 |
147.4 |
12.0 |
+22.6 |
+12.3 |
+17.1 |
+9.7 |
|
NewSmith Asset Management (UK) |
01.09.10 |
106.3 |
8.7 |
+13.4 |
+12.3 |
+7.7 |
+9.7 |
|
Henderson Global Investors (UK smaller) |
31.08.04 |
22.7 |
1.9 |
+36.5 |
+29.9 |
+13.3 |
+11.3 |
|
Southeastern Asset Management (Global) |
30.09.04 |
104.6 |
8.6 |
+9.5 |
+12.0 |
+5.7 |
+7.9 |
|
MFS Investment Management (Global) |
30.09.04 |
104.9 |
8.6 |
+19.1 |
+12.0 |
+10.8 |
+7.9 |
|
Thomas White International (Global) |
28.09.07 |
99.7 |
8.1 |
+10.0 |
+12.0 |
+4.8 |
+3.6 |
|
Veritas Asset Management (Global) |
11.11.10 |
146.7 |
12.0 |
+8.1 |
+11.7 |
+8.0 |
+5.0 |
|
Lansdowne Partners (Global) |
14.12.12 |
31.1 |
2.5 |
n/a |
n/a |
+0.2 |
-0.4 |
|
Marathon Asset Management (Pan-Europe) |
23.07.10 |
96.8 |
7.9 |
+19.0 |
+15.3 |
+7.0 |
+5.9 |
|
Comgest (Asia Pacific (ex Japan)) |
31.07.07 |
77.9 |
6.4 |
+6.7 |
+17.8 |
+5.8 |
+7.4 |
|
Trilogy Global Advisors (Emerging Markets) |
09.12.10 |
53.9 |
4.4 |
+10.3 |
+13.4 |
-5.5 |
-1.5 |
|
Witan Direct Holdings |
19.03.10 |
126.5 |
10.3 |
+21.5 |
+13.0 |
+3.1 |
+4.2 |
Notes:
1. Excluding cash balances held centrally by Witan and the unquoted investments.
2. The percentages are annualised where the inception date was before 2012.
Source: The WM Company.
Page 23 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Business Review continued
Corporate Key Performance Indicators
|
|
31 December 2012 |
31 December 2011 |
% change |
|
Share price |
503.0p |
450.0p |
+11.8 |
|
Net asset value per ordinary share (debt at par value) |
581.8p |
516.9p |
+12.6 |
|
Net asset value per ordinary share (debt at market value) |
568.9p |
503.7p |
+12.9 |
|
Dividends per ordinary share |
13.2p |
12.0p |
+10.0 |
|
Discount (debt at par value) |
13.5% |
12.9% |
|
|
Discount (debt at market value) (A) |
11.6% |
10.7% |
|
|
Share buy-backs (B) |
1.2% |
1.5% |
|
|
Ongoing charges including performance fees (C) |
0.97% |
0.87% |
|
|
Ongoing charges excluding performance fees (C) |
0.69% |
0.71% |
|
|
Number of private investors (D) |
31,329 |
33,421 |
|
(A) This is the discount to the NAV including income. The average discount to the NAV, excluding income, with debt at market value in 2012 was 10.7% (2011: 10.6%). (Source: Datastream)
(B) The percentage of the ordinary share capital in issue at the previous year end that was bought back during the year.
(C) The total of the recurring operating and investment management costs (excluding the expenses of the subsidiary company) expressed as a percentage of daily average of net assets including debt at market value (December 2011 figures restated following calculation change from period end average to daily average of net assets including debt at market value). See further comment on page 2.
(D) The sum of the number of accounts on the Company's register of members and the number of accounts in Witan Wisdom and Jump Savings.
Performance
|
Total returns to 31 December 2012 |
1 year |
3 years |
5 years |
|
|
% return |
% return |
% return |
|
Total shareholder return (E) |
+14.7 |
+21.9 |
+19.6 |
|
Net asset value total return (F) |
+15.6 |
+22.4 |
+18.7 |
|
Benchmark (G) |
+13.0 |
+21.3 |
+15.0 |
|
FTSE All-Share Index (H) |
+12.3 |
+24.2 |
+13.2 |
|
FTSE World (ex UK) Index (H) |
+11.9 |
+22.6 |
+20.8 |
(E) Source: Datastream. The movement in the ordinary share price adjusted to include the notional reinvestment of dividends.
(F) Source: Datastream/Witan. The movement in the net asset value per share adjusted to include the notional reinvestment of dividends.
(G) Source: Witan. Since 1 October 2007 the benchmark has been a composite of four indices: the FTSE All-Share Index 40%, the FTSE All-World North America Index 20%, the FTSE All-World Europe (ex UK) Index 20% and the FTSE All-World Asia Pacific Index 20%.
(H) Source: Datastream. See also FTSE International for conditions of use (ww.ftse.com).
Other Financial Information
|
|
31 December 2012 |
31 December 2011 |
% change |
|
Net assets |
£1,105,847,000 |
£994,349,000 |
+11.2 |
|
Number of ordinary shares in issue |
190,079,500 |
192,367,000 |
-1.2 |
|
Revenue return per ordinary share |
14.50p |
13.27p |
+9.3 |
|
Gearing* |
6.1% |
10.5% |
|
* The difference between shareholders' funds and the total market value of the investments (including the face value of futures positions) expressed as a percentage of shareholders' funds.
Page 24 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Directors' Report: Statement of Directors' Responsibilities
Responsibility statement under DTR 4.1.12
The directors as at the date of the Annual Financial Report confirm to the best of their knowledge that:
(a) the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
(b) the management report, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
For and on behalf of the Board
H M Henderson
Chairman
12 March 2013
A L C Bell
Chief Executive Officer
12 March 2013
Page 25 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2012
|
|
Year ended 31 December 2012 |
Year ended 31 December 2011 |
||||
|
|
Revenue return £'000 |
Capital return £'000 |
Total £'000 |
Revenue Return £'000 |
Capital Return £'000 |
Total £'000 |
|
Investment income (note 2) |
35,583 |
- |
35,583 |
34,247 |
- |
34,247 |
|
Other income (note 3) |
1,467 |
- |
1,467 |
1,269 |
- |
1,269 |
|
Gains/(losses) on investments held at fair value through profit or loss |
- |
130,213 |
130,213 |
- |
(124,144) |
(124,144) |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
Total income |
37,050 |
130,213 |
167,263 |
35,516 |
(124,144) |
(88,628) |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Management fees (note 4) |
(845) |
(5,465) |
(6,310) |
(809) |
(4,151) |
(4,960) |
|
Other expenses |
(4,764) |
(101) |
(4,865) |
(5,190) |
(440) |
(5,630) |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
Profit /(loss) before finance costs and Taxation |
31,441 |
124,647 |
156,088 |
29,517 |
(128,735) |
(99,218) |
|
|
|
|
|
|
|
|
|
Finance costs |
(2,115) |
(6,092) |
(8,207) |
(2,163) |
(6,239) |
(8,402) |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
Profit/ (loss) before taxation |
29,326 |
118,555 |
147,881 |
27,354 |
(134,974) |
(107,620) |
|
|
|
|
|
|
|
|
|
Taxation |
(1,603) |
- |
(1,603) |
(1,675) |
- |
(1,675) |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
Profit/(loss) attributable to equity holders of the parent company |
27,723 |
118,555 |
146,278 |
25,679 |
(134,974) |
(109,295) |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
|
|
|
|
|
|
|
|
Earnings/ (loss) per ordinary share (note 5) |
14.50p |
62.02p |
76.52p |
13.27p |
(69.75)p |
(56.48)p |
|
|
====== |
====== |
====== |
====== |
====== |
====== |
The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRSs as adopted by the European Union.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
The Group does not have any Other Comprehensive Income and hence the total profit/(loss), as disclosed above, is the same as the Group's Total Comprehensive Income.
All items in the above statement derive from continuing operations.
The net profit for the year of the Company was £146,278,000 (2011: loss £109,295,000).
All income is attributable to the equity holders of Witan Investment Trust plc, the parent company. There are no minority interests.
Page 26 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Consolidated and Individual Company Statements of Changes in Equity
for the year ended 31 December 2012
|
Group: Year Ended 31 December 2012 |
||||||||
|
|
|
Ordinary |
Share |
Capital |
Other |
|
|
|
|
|
|
share |
premium |
redemption |
capital |
Revenue |
|
|
|
|
|
capital |
account |
Reserve |
reserves |
reserve |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Total equity at 31 December 2011 |
48,092 |
16,237 |
45,734 |
830,930 |
53,356 |
994,349 |
||
|
Total comprehensive income: |
|
|
|
|
|
|
||
|
Profit for the year |
- |
- |
- |
118,555 |
27,723 |
146,278 |
||
|
Transactions with owners, |
|
|
|
|
|
|
||
|
recorded directly to equity: |
|
|
|
|
|
|
||
|
Ordinary dividends paid |
- |
- |
- |
- |
(24,003) |
(24,003) |
||
|
Buy-backs of ordinary shares |
(572) |
- |
572 |
(10,777) |
- |
(10,777) |
||
|
|
|
|
|
|
|
|
|
|
|
Total equity at 31 December 2012 |
47,520 |
16,237 |
46,306 |
938,708 |
57,076 |
1,105,847 |
||
|
|
|
|
|
|
|
|
|
|
|
Company: Year Ended 31 December 2012 |
||||||||
|
|
|
Ordinary |
Share |
Capital |
Other |
|
|
|
|
|
|
share |
premium |
redemption |
capital |
Revenue |
|
|
|
|
|
capital |
account |
Reserve |
reserves |
reserve |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Total equity at 31 December 2011 |
48,092 |
16,237 |
45,734 |
830,893 |
53,393 |
994,349 |
||
|
Total comprehensive income: |
|
|
|
|
|
|
||
|
Profit for the year |
- |
- |
- |
118,618 |
27,660 |
146,278 |
||
|
Transactions with owners, |
|
|
|
|
|
|
||
|
recorded directly to equity: |
|
|
|
|
|
|
||
|
Ordinary dividends paid |
- |
- |
- |
- |
(24,003) |
(24,003) |
||
|
Buy-backs of ordinary shares |
(572) |
- |
572 |
(10,777) |
- |
(10,777) |
||
|
|
|
|
|
|
|
|
|
|
|
Total equity at 31 December 2012 |
47,520 |
16,237 |
46,306 |
938,734 |
57,050 |
1,105,847 |
||
|
|
|
|
|
|
|
|
|
|
|
Group: Year Ended 31 December 2011 |
||||||||
|
|
|
Ordinary |
Share |
Capital |
Other |
|
|
|
|
|
|
share |
premium |
redemption |
capital |
Revenue |
|
|
|
|
|
capital |
account |
Reserve |
reserves |
reserve |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Total equity at 31 December 2010 |
48,844 |
16,237 |
44,982 |
980,884 |
50,818 |
1,141,765 |
||
|
Total comprehensive income: |
|
|
|
|
|
|
||
|
(Loss)/profit for the year |
- |
- |
- |
(134,974) |
25,679 |
(109,295) |
||
|
Transactions with owners, |
|
|
|
|
|
|
||
|
recorded directly to equity: |
|
|
|
|
|
|
||
|
Ordinary dividends paid |
- |
- |
- |
- |
(23,141) |
(23,141) |
||
|
Buy-backs of ordinary shares |
(752) |
- |
752 |
(14,980) |
- |
(14,980) |
||
|
|
|
|
|
|
|
|
|
|
|
Total equity at 31 December 2011 |
48,092 |
16,237 |
45,734 |
830,930 |
53,356 |
994,349 |
||
|
|
|
|
|
|
|
|
|
|
|
Company: Year Ended 31 December 2011 |
||||||||
|
|
|
Ordinary |
Share |
Capital |
Other |
|
|
|
|
|
|
share |
premium |
redemption |
capital |
Revenue |
|
|
|
|
|
capital |
account |
reserve |
reserves |
reserve |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Total equity at 31 December 2010 |
48,844 |
16,237 |
44,982 |
981,047 |
50,655 |
1,141,765 |
||
|
Total comprehensive income: |
|
|
|
|
|
|
||
|
(Loss)/profit for the year |
- |
- |
- |
(135,174) |
25,879 |
(109,295) |
||
|
Transactions with owners, |
|
|
|
|
|
|
||
|
recorded directly to equity: |
|
|
|
|
|
|
||
|
Ordinary dividends paid |
- |
- |
- |
- |
(23,141) |
(23,141) |
||
|
Buy-backs of ordinary shares |
(752) |
- |
752 |
(14,980) |
- |
(14,980) |
||
|
|
|
|
|
|
|
|
||
|
Total equity at 31 December 2011 |
48,092 |
16,237 |
45,734 |
830,893 |
53,393 |
994,349 |
||
Page 27 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Consolidated and Individual Company Balance Sheets
for the year ended 31 December 2012
|
|
Group |
Company |
Group |
Company |
|
|
31 December |
31 December |
31 December |
31 December |
|
|
2012 |
2012 |
2011 |
2011 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Non current assets |
|
|
|
|
|
Investments held at fair value through profit or loss |
1,202,076 |
1,203,002 |
1,083,393 |
1,084,256 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Other receivables |
4,549 |
4,461 |
4,346 |
4,259 |
|
Cash and cash equivalents |
36,420 |
35,309 |
37,150 |
36,254 |
|
|
|
|
|
|
|
|
40,969 |
39,770 |
41,496 |
40,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
1,243,045 |
1,242,772 |
1,124,889 |
1,124,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Other payables |
(5,882) |
(5,609) |
(5,277) |
(5,157) |
|
Bank loan |
(21,000) |
(21,000) |
(15,000) |
(15,000) |
|
|
---------- |
---------- |
---------- |
---------- |
|
|
(26,882) |
(26,609) |
(20,277) |
(20,157) |
|
|
|
|
|
|
|
Total assets less current liabilities |
1,216,163 |
1,216,163 |
1,104,612 |
1,104,612 |
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
At amortised cost: |
|
|
|
|
|
81⁄2 per cent. Debenture Stock 2016 |
(44,587) |
(44,587) |
(44,585) |
(44,585) |
|
6.125 per cent. Secured Bonds due 2025 |
(63,174) |
(63,174) |
(63,123) |
(63,123) |
|
3.4 per cent. cumulative preference shares of £1 |
(2,055) |
(2,055) |
(2,055) |
(2,055) |
|
2.7 per cent. cumulative preference shares of £1 |
(500) |
(500) |
(500) |
(500) |
|
|
(110,316) |
(110,316) |
(110,263) |
(110,263) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
1,105,847 |
1,105,847 |
994,349 |
994,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to equity holders |
|
|
|
|
|
Ordinary share capital |
47,520 |
47,520 |
48,092 |
48,092 |
|
Share premium account |
16,237 |
16,237 |
16,237 |
16,237 |
|
Capital redemption reserve |
46,306 |
46,306 |
45,734 |
45,734 |
|
Retained earnings: |
|
|
|
|
|
Other capital reserves |
938,708 |
938,734 |
830,930 |
830,893 |
|
Revenue reserve |
57,076 |
57,050 |
53,356 |
53,393 |
|
|
|
|
|
|
|
Total equity |
1,105,847 |
1,105,847 |
994,349 |
994,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per ordinary share |
581.8p |
581.8p |
516.9p |
516.9p |
|
|
|
|
|
|
Page 28 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Consolidated and Individual Company Cash Flow Statements
for the year ended 31 December 2012
|
|
Group |
Company |
Group |
Company |
|
|
2012 |
2012 |
2011 |
2011 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Operating activities |
|
|
|
|
|
Profit/(loss) before taxation |
147,881 |
147,881 |
(107,620) |
(107,620) |
|
Interest paid |
7,995 |
7,995 |
8,278 |
8,278 |
|
(Gains)/losses on investments held at fair value |
|
|
|
|
|
through profit or loss |
(130,213) |
(130,276) |
124,144 |
124,344 |
|
Net sales/(purchases)/ of investments held at fair value through profit or loss |
10,913 |
10,913 |
(2,654) |
(2,654) |
|
Net gain from futures contracts |
2,458 |
2,458 |
201 |
201 |
|
Scrip dividends included in investment income |
(1,136) |
(1,136) |
(810) |
(810) |
|
Decrease/(increase) in other receivables |
467 |
468 |
(977) |
42 |
|
Increase/(decrease) in other payables |
598 |
445 |
(1,525) |
(1,487) |
|
|
|
|
|
|
|
Net cash inflow from operating activities before interest and taxation |
38,963 |
38,748 |
19,037 |
20,294 |
|
|
|
|
|
|
|
Interest paid |
(7,995) |
(7,995) |
(8,278) |
(8,278) |
|
Amortisation of debt issue costs |
53 |
53 |
17 |
17 |
|
Tax on overseas income |
(1,651) |
(1,651) |
(1,943) |
(1,943) |
|
|
|
|
|
|
|
Net cash inflow from operating activities |
29,370 |
29,155 |
8,833 |
10,090 |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Equity dividends paid |
(24,003) |
(24,003) |
(23,141) |
(23,141) |
|
Buy-backs of ordinary shares |
(10,899) |
(10,899) |
(15,364) |
(15,364) |
|
Drawdown of loans |
6,000 |
6,000 |
15,000 |
15,000 |
|
|
|
|
|
|
|
Net cash outflow from financing activities |
(28,902) |
(28,902) |
(23,505) |
(23,505) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(decrease) in cash and cash equivalents |
468 |
253 |
(14,672) |
(13,415) |
|
Cash and cash equivalents at the start of the year |
37,150 |
36,254 |
52,510 |
50,357 |
|
Effect of foreign exchange rate changes |
(1,198) |
(1,198) |
(688) |
(688) |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year |
36,420 |
35,309 |
37,150 |
36,254 |
|
|
|
|
|
|
|
|
|
|
|
|
Page 29 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Notes to the Financial Statements
for the year ended 31 December 2012
1. Accounting policies
The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation. These comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ('IASC') that remain in effect, to the extent that they have been adopted by the European Union.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.
(a) Basis of preparation
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts ('the SORP') issued by the Association of Investment Companies ('the AIC') in January 2009 is consistent with the requirements of IFRSs as adopted by the European Union, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
(b) Going concern
The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Business Review section of the Directors' Report on pages 6 to 22. The financial position of the Group as at 31 December 2012 is shown in the balance sheet on page 27. The cash flows of the Group for the year ended 31 December 2012, which are not untypical, are set out on page 28. The Company had fixed debt and preference share capital totalling £110,316,000; none of the borrowings is repayable before 2016. In 2012, the Group renewed a one year secured multi-currency borrowing facility for £50 million, of which £21 million was drawn down at 31 December 2012 (2011: £15 million). The notes in the Annual Report set out the Group's risk management policies and procedures, including those covering currency risk, interest rate risk and liquidity risk. As at 31 December 2012 the Group's total assets less current liabilities exceeded its total non current liabilities by a multiple of over ten. The assets of the Group consist mainly of securities that are held in accordance with the Company's investment policy, as set out on page 14. Most of these securities are readily realisable even in volatile markets. The directors, who have reviewed carefully the Group's budget and forecast for the coming year, consider that the Group has adequate financial resources to enable it to continue in operational existence for the foreseeable future. Accordingly, the directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Group's accounts.
(c) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and the entity controlled by the Company (its subsidiary) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. Where necessary, adjustments are made to the financial statements of the subsidiary to bring the accounting policies used by it into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
(d) Presentation of the Statement of Comprehensive Income
In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company's Articles of Association, net capital returns may not be distributed by way of dividend. Additionally, the net revenue is the measure the directors believe appropriate in assessing the Group's compliance with certain requirements set out in section 1158 of the Corporation Tax Act 2010 (formerly section 842 of the Income and Corporation Taxes Act 1988).
Page 30 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Notes to the Financial Statements continued
2. Investment income
|
|
|
|
|
|
2012 |
2011 |
|
|
£'000 |
£'000 |
|
Franked: |
|
|
|
UK dividends from listed investments |
15,868 |
13,499 |
|
UK special dividends from listed investments |
209 |
608 |
|
UK dividends from unquoted investments |
56 |
56 |
|
|
|
|
|
|
16,133 |
14,163 |
|
|
|
|
|
Unfranked: |
|
|
|
Overseas dividends from listed investments |
16,322 |
17,941 |
|
Overseas special dividends from listed investments |
843 |
337 |
|
Property income dividends |
5 |
7 |
|
Scrip dividends from listed investments |
1,136 |
810 |
|
Overseas fixed interest and convertible bonds |
1,144 |
989 |
|
|
|
|
|
|
19,450 |
20,084 |
|
|
|
|
|
Total investment income |
35,583 |
34,247 |
|
|
|
|
|
|
2012 |
2011 |
|
|
£'000 |
£'000 |
|
Analysis of investment income by geographical segment: |
|
|
|
United Kingdom |
17,428 |
15,320 |
|
North America |
3,429 |
3,347 |
|
Continental Europe |
9,268 |
10,071 |
|
Japan |
369 |
803 |
|
Asia Pacific (ex Japan) |
3,302 |
3,214 |
|
South America |
444 |
575 |
|
Other |
1,343 |
917 |
|
|
|
|
|
Total investment income |
35,583 |
34,247 |
3. Other income
|
|
|
|
|
|
2012 |
2011 |
|
|
£'000 |
£'000 |
|
Deposit interest |
29 |
58 |
|
Stock lending income |
269 |
320 |
|
Underwriting commission |
15 |
- |
|
Income from the subsidiary company's third party business |
1,154 |
875 |
|
Other income |
- |
16 |
|
|
1,467 |
1,269 |
Page 31 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Notes to the Financial Statements continued
4. Management fees
|
|
|
|
|
|
|
|
||||
|
|
Year ended 31 December 2012 |
Year ended 31 December 2011 |
||||||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
||||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||
|
|
|
|
|
|
|
|
||||
|
Management fees |
845 |
2,534 |
3,379 |
809 |
2,426 |
3,235 |
||||
|
Performance fees |
- |
2,931 |
2,931 |
- |
1,725 |
1,725 |
||||
|
|
|
|
|
|
|
|
||||
|
|
845 |
5,465 |
6,310 |
809 |
4,151 |
4,960 |
||||
5. Earnings/(loss) per ordinary share
The earnings/(loss) per ordinary share figure is based on the net profit for the year of £146,278,000 (2011: loss of £109,295,000) and on 191,174,313 ordinary shares (2011: 193,509,347), being the weighted average number of ordinary shares in issue during the year.
The earnings/(loss) per ordinary share figure detailed above can be further analysed between revenue and capital, as below. The Company has no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted earnings per ordinary share are the same.
|
|
2012 |
2011 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Net revenue profit |
27,723 |
25,679 |
|
Net capital profit/(loss) |
118,555 |
(134,974) |
|
|
|
|
|
Net total profit/(loss) |
146,278 |
(109,295) |
|
|
|
|
|
Weighted average number of ordinary shares in issue during the year |
191,174,313 |
193,509,347 |
|
|
2012 |
2011 |
|
|
Pence |
Pence |
|
Revenue earnings per ordinary share |
14.50 |
13.27 |
|
Capital earnings/(loss) per ordinary share |
62.02 |
(69.75) |
|
|
|
|
|
Total earnings/(loss) per ordinary share |
76.52 |
(56.48) |
|
|
|
|
6. Issued Share Capital
|
The number of ordinary shares of 25p each in issue at 31 December 2012 190,079,500 was (2011: 192,367,000). |
Page 32 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Notes to the Financial Statements continued
7. Dividends
|
|
2012 £'000 |
2011 £'000 |
|
Amounts recognised as distributions to equity holders in the year: |
|
|
|
Second interim dividend for the year ended 31 December 2011 of 6.55p (2010: 6.50p) per ordinary share |
12,589 |
12,654 |
|
First interim dividend for the year ended 31 December 2012 of 6.0p (2011: 5.45p) per ordinary share |
11,414 |
10,487 |
|
|
---------- |
---------- |
|
|
24,003 |
23,141 |
|
|
====== |
====== |
|
Second interim dividend for the year ended 31 December 2012 of 7.2p (2011: 6.55p) per ordinary share |
13,665 |
12,589 |
|
|
====== |
====== |
|
|
|
|
|
The second interim dividend has not been included as a liability in these financial statements, as it was declared after the year end. |
||
|
|
||
|
Total in respect of the year: |
|
|
|
Set out below is the total dividend to be paid in respect of the year. This is the basis on which the requirements of section 1158 of the Corporation Tax Act 2011 are considered. |
||
|
|
||
|
|
2012 £'000
|
2011 £'000 |
|
Revenue profits available for distribution |
27,723 |
25,679 |
|
First interim dividend for the year ended 31 December 2012 of 6.0p (2011: 5.45p) per ordinary share |
(11,414) |
(10,487) |
|
Second interim dividend for the year ended 31 December 2012 of 7.2p (2011: 6.55p) per ordinary share |
(13,665) |
(12,589) |
|
|
---------- |
---------- |
|
Revenue retained for the year |
2,644 |
2,603 |
|
|
====== |
====== |
|
|
|
|
8. 2012 Accounts
The figures and financial information for 2012 are extracted from the Annual Report and Financial Statements for the year ended 31 December 2012 and do not constitute the statutory accounts for the year. The Annual Report and Financial Statements includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Financial Statements has not yet been delivered to the Registrar of Companies.
9. 2011 Accounts
The figures and financial information for 2011 are extracted from the published Annual Report and Financial Statements for the year ended 31 December 2011 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
Page 33 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
Notes to the Financial Statements continued
|
10. Annual Report and Financial Statements
|
|
Copies of the Annual Report and Financial Statements will be posted to shareholders by the end of March 2013 and will be available on the Company's website (www.witan.com) or in hard copy format from the Registered Office, 14 Queen Anne's Gate, London, SW1H 9AA.
The Annual General Meeting will be held at 2.30 pm on Tuesday, 30 April 2013 at Merchant Taylors' Hall, 30 Threadneedle Street, London EC2R 8JB.
|
Page 34 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2012
For further information please contact:
Andrew Bell
Chief Executive Officer
Witan Investment Trust plc
Telephone: 020 7227 9770
James Frost
Marketing Director
Witan Investment Trust plc
Telephone: 020 7227 9770
Jain Castiau, Director
Cauldron Consulting
Tel: 020 3718 7236/07909 963969
- ENDS -
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
This information is provided by RNS
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