Final Results

RNS Number : 4695R
Witan Investment Trust PLC
09 March 2016
 

Page 1 of 38

This announcement contains regulated information

Highlights

               ·    NAV total return of 6.4% outperformed the benchmark's return of 3.5%

               ·    NAV total return over the last five years of 51%, 12% ahead of the benchmark

               ·    Share price average premium to NAV of 0.1%

               ·    10.5m shares issued at a premium to NAV, raising over £83m

               ·    £75m long-term debt issued at under 3.5% p.a.

               ·    Dividend increased by 10.4% to 17.0p, more than 10% ahead of the rate of inflation

 

Summary

2015 was another year when market sentiment was changeable, with no consistent market direction as discussed in the Chief Executive's Report on page 3. Active investment selection was particularly important. During the year our managers outperformed their benchmarks significantly overall, with a modest additional contribution from the Company's use of gearing.  Eight of our external managers outperformed their benchmarks during the year, four of them by margins of over 5%.

 

As a result, Witan shareholders enjoyed a successful year, with a net asset value ('NAV') total return of 6.4%, 2.9% more than our benchmark's total return of 3.5%. The share price total return was 5.7%, as the shares moved from a small premium at the end of 2014 to a 0.2% discount at the end of 2015. The dividend for the year has been increased by 10.4% to 17.0 pence per share (2014: 15.4 pence), while adding £2.4m to our revenue reserves. A fourth interim dividend of 5.45 pence was declared in February 2016, payable on 1 April 2016. This marks the 41st consecutive year of rising dividends at Witan.

 

Taking a longer perspective, over the past 5 years Witan has achieved a NAV total return of +51%, compared with the +39% return from our benchmark over this period. Over the 10 years to the end of 2015, shareholders have enjoyed a NAV total return of 110%, compared with the benchmark's return of 82%.

 

Witan's shares in the market

The Company's shares enjoyed a further rerating during 2015, trading at a premium for much of the period. In order to meet demand from the market, the Company issued 10.5m shares at a premium to NAV, adding over £83m to our net assets. This is beneficial to shareholders in several ways. The issuance itself is modestly accretive to NAV (+ £0.4m in 2015), being made at a premium. The increased market liquidity is helpful to existing and prospective investors, particularly those dealing in size on a single day and the increased assets of the Company enable its fixed costs to be spread over a wider base.

 

Whilst delivery of sound investment performance remains the principal focus of the Board, it has also always paid attention to discount-related issues. At the time of our change to a multi-manager approach in 2004, our Annual report said that "one of the more important long-term objectives is to create sustainable liquidity in Witan's shares at or near to asset value". We are pleased to have achieved this in 2015. Now the challenge is to achieve this objective through the

 

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Chairman's Report continued

 

full range of investment conditions. These issues are discussed in more detail in the Strategic Report on page 6.

 

Borrowings

During the year, the Company issued £75m of 20 and 30 year debt, at borrowing yields below 3.5%.  The interest rates Witan secured are the lowest achieved in the sector for such long maturities for many decades. The Board believes that fixing borrowing costs at such low rates will benefit future shareholder returns and the timing fits neatly with the scheduled repayment of our 8.5% Debenture in 2016. Further details of the Company's policy on gearing and actions taken during 2015 may be found in the Strategic Report on page 6.

 

AGM

Our Annual General Meeting will be held at Merchant Taylors' Hall on Thursday 28 April 2016 at 2.30 pm. Formal notice of the meeting will be sent to shareholders when the Annual Report is published. We look forward to the opportunity to meet you then for the Company's 108th AGM.

 

James Bevan, who has been on the board since 2007, will retire at the AGM.  I should like to thank him on behalf of the Board for his wise counsel and advice.

 

I should like to thank the Chief Executive and the rest of our team for their hard work and excellent results this year.

 

 

Harry Henderson

Chairman

8 March 2016

 

 

 

  

 

 

 

 

Page 3 of 38

 

 

Chief Executive's Report

 

The investment markets in 2015

As the Chairman has alluded to, equity markets delivered positive returns in 2015 in sterling terms but there were episodes of notable volatility. A strong rally in the first quarter (helped by falling oil prices and lower bond yields) faded then reversed during the summer, as concerns about global growth and financial stress in emerging economies took hold. Following a strong rally in the final quarter, returns turned positive for developed markets but remained negative for emerging markets. Japan was the standout performer, with a 16% total return in sterling terms, while the UK was a relative laggard, only returning 1.0%. Asian and other emerging economies fell, weighed down by concerns about weaker growth in China and exposure to falling commodity prices.

 

Economic growth fell short of hopes but, in developed economies, 2015 was generally stronger than 2014, while expectations for 2016 are for similar or higher growth than in 2015. It is difficult to see in this an explanation for the volatility experienced in August and September (as well as early in 2016), when investor concerns became focused on the negative repercussions of the falls in oil and other commodity prices, with additional concerns about strains in the Chinese economy.

 

The fall in oil prices, from a consumer's point of view, represents a boost in spending power and had been predicted to boost growth in 2015. Consumers were expected to spend the windfall, whereas much of the revenue from high oil prices had piled up in the sovereign wealth funds of producing nations, which were simply expected to have smaller surpluses to save, resulting in a net overall boost to activity. This appears not to have happened, owing to the speed and extent of the fall in oil prices - they halved in a few months in late 2014 and fell further during 2015.

 

As a result, countries and companies dependent on oil aggressively cut their spending, resulting in a sharp setback for industrial sectors that had benefited from the oil exploration and production boom. Consumers saved much of the benefit, being unsure whether it would persist. Consequently, the negative impacts on growth were more apparent than the benefits, which were more thinly spread.

 

During the summer, in addition to predictable earnings disappointments from the oil sector, many other US companies reported shortfalls, owing to their indirect dependence on the previous oil boom or to the impact of the strong dollar on their overseas earnings. This weighed heavily on a market that was already highly rated, especially given the prospect of the US Federal Reserve starting to raise interest rates. On top of this, concerns grew that the Chinese economy was slowing down, reducing its demand for commodities and potentially exacerbating the pressures on emerging economies dependent upon commodity revenues. Nerves were further rattled by a meteoric rise and collapse in the Chinese equity market and a poorly-handled (albeit small) devaluation of the Chinese Renminbi relative to the dollar, both of which fed fears that the Chinese authorities were losing control of economic policy.

 

 

 

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Chief Executive's Report continued

 

These factors resulted in a widespread equity market correction in August, accompanied by high volatility. This continued through September, before a recovery started in October, as it became clear that global growth, though disappointing, was relatively resilient and the US Federal Reserve stated that its approach to raising interest rates would be cautious.

 

Witan's strategy was to remain fully invested, as the world economy appeared to be improving, though watchful, increasing investment during periods when markets overreacted to events. Our gearing peaked at 13% during September before being reduced, as markets recovered, to 10.7% at the year-end. The Strategic Report on pages 6 to 26 sets out details of our external managers' performance during the year as well as decisions made in the areas of gearing, the use of index futures and changes in the direct fund investments.

 

Outlook

2015 was a "glass half-empty" year in market sentiment terms, with a propensity to magnify disappointments and to dismiss positive news as already priced in, or about to turn bad.

 

On the positive side, economies in the US and the UK enjoyed a further year of 2-3% growth, with similar rates expected in 2016. Japan and Europe have seen improved (though low) growth, with higher growth rates forecast for the coming year. The oil price has remained near to 10 year lows, sustaining the boost to consumers (and companies outside oil-related sectors), while the rate of cut-backs in oil and mining sector investment may be abating, or more fully discounted. Corporate earnings forecasts for the year ahead are stronger than the weakness visible in the rear-view mirror. Monetary policy remains stimulative worldwide, with near-record low government bond yields.

 

The worries are familiar and have come into sharper focus in early 2016. Will China be able to manage its transition from an economy driven by over-investment in infrastructure and heavy industry to one dependent upon consumption and services, without an intervening recession? The stresses from low oil and commodity prices may generate political instability in (mainly emerging) economies dependent on raw material production or cause distress to the banks which have financed projects based on higher price assumptions. Both might have significant consequences that could make relatively localised problems more globally significant. In the UK, uncertainty over the EU membership referendum is a further unpredictable factor for investors.

 

The world cannot decide whether it should be worried about inflation (due to years of loose monetary policy) or deflation (due to surplus capacity and excessive debt accumulation). In 2015, with falling oil prices, deflation fears were in the ascendant, with the new phenomenon of negative interest rates, initially in Europe and more recently in Japan. Paying to have money on deposit or to lend to governments is a novel concept. In 2016, this inflation-denial will be tested, as headline inflation rates are set to rise later in the year due to the falls in oil prices dropping out of the annual comparison. With bond yields so low, investors may be more sensitive than expected to signs that the direction of inflation rates is turning upwards.

 

 

 

 

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Chief Executive's Report continued

 

Concerns continue to be expressed about the slow pace of recovery from the 2008-9 financial crisis. Much looser monetary policy than normal has been required, which has generated relatively pallid rates of economic growth. However, anaemia is not the same as rigor mortis. There are now more examples of economies where recovery is well-established, with the US and UK relatively robust but even previous problem areas such as Japan and Europe are seeing more encouraging growth. The Achilles' heel now is seen as emerging economies but, after 5 years of emerging market underperformance, this may already be significantly discounted.

 

It seems unlikely that the world will see rapid rates of economic growth in 2016 but nor does it appear probable that there will be renewed slippage into recession. Interest rates seem likely to remain exceptionally low for an extended period (even if they have begun to rise in the US). Finding companies which can grow their earnings in a world of moderate growth will continue to be the focus of our managers. On the macro-economic level, whilst there is an ever-present potential for policy mistakes, policy makers appear aware of the risks of weak growth and price deflation and the resulting pro-growth emphasis should prove supportive for equity markets.  However, as recent months have demonstrated, there will be inevitable periods of volatility when investor confidence is tested by shorter term market and economic events.

 

 

 

Andrew Bell

Chief Executive

8 March 2016

 

 

  

 

 

 

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Strategic Report

 

Companies are required to publish a Strategic Report, which should provide a description of the objectives which its strategy is designed to deliver for shareholders, the business model and the outlook for the year ahead. It should also include analysis of the Company's performance during the year, relative to the key elements of its business strategy. This Strategic Report has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for those strategies to succeed. The Strategic Report contains certain forward looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. This report falls into four main sections:

 

1.         Strategy

 

2.         Business model

 

3.         Performance and principal developments in 2015

 

4.         Corporate and operational structure

 

Witan is an Investment Trust, which was founded in 1909 and has been listed on the London Stock Exchange since 1924. It is managed by the Executive team of its Alternative Investment Fund Manager (AIFM), Witan Investment Services Limited (WIS), under the control and supervision of the Company's Board of Directors.

 

1. Strategy

The Company's strategy is to create value for shareholders, by addressing its investment objective, by adding value in pursuing that objective and by communicating effectively with existing and potential shareholders.

 

The Company invests its shareholders' funds primarily in a broad spread of global equity markets. The objective is to profit from opportunities created by global economic growth and to outperform a representative equity benchmark, thereby generating long-term capital growth for shareholders, together with an income that rises faster than the rate of inflation.

 

The Company employs an active multi-manager approach, allocating funds for investment by selected managers with differing styles and specialisations. The aim is to access the best available managers, including those not accessible on the same terms (or at all) to UK investors.

 

Witan's multi-manager approach was adopted in 2004, in the belief that no single manager was likely to excel in all markets and at all points in the economic cycle. Employing managers to invest in their areas of greatest competence has the potential to improve returns and to reduce risk relative to using a single manager across the investment waterfront.

 

 

 

 

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Strategic Report continued

 

Our approach is to balance different factors (such as quality, value or growth approaches and geographical exposure), aiming to profit from asset allocation and from managers' combined ability to outperform over time. We seek managers who can capture the longer term growth rewards from equity investment by focusing on fundamental share values rather than chasing short-term momentum.

 

2. Business model

The Company has appointed Witan Investment Services Limited (WIS) as its Alternative Investment Fund Manager under the Alternative Investment Fund Managers Directive ('AIFMD'). As AIFM, WIS has responsibility for operating the Company's portfolio and risk management processes. WIS delegates certain portfolio management responsibilities to external portfolio managers. In addition, the Company uses an outsourced model for other corporate functions, such as fund accounting, custody and specialist professional services. These activities are overseen by the WIS and Witan Executive team, covering Investment, Operations and Marketing, headed by the Chief Executive Officer, who is a Director of the Company.

 

Whilst the external managers appointed are responsible for stock selection in their individual portfolios, WIS and the Company's Board are responsible for the overall delivery of performance to shareholders, through the following means:

 

-      Setting the overall investment objective;

 

-      Selecting competent managers, who are expected to outperform a suitable benchmark relating to the investment remit set by the Company;

 

-      Operating appropriate portfolio, corporate governance and risk management arrangements for effective corporate management and to meet the requirements of the AIFMD;

 

-      Adjusting asset allocation according to opportunities that arise;

 

-      The judicious use of borrowings with the aim of adding to performance;

 

-      Direct investment in funds exposed to specialist asset categories;

 

-      Controlled and selective use of exchange-traded derivatives to adjust asset allocation; and

 

-      Clear communication of Witan's objective and its results to shareholders and potential investors.

 

 

 

 

 

 

 

 

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Strategic Report continued

 

The Board's and the Executive's role in investment management

As noted above, the Company has appointed its wholly-owned subsidiary WIS as its AIFM. As such, WIS has responsibility for ensuring that portfolio and risk management of the Company are properly carried out, with appropriate safeguards to ensure the functional and hierarchical independence of those with portfolio and risk management responsibilities. The Board remains responsible for setting the investment strategy, policy and guidelines of the Company and the AIFM operates within these.

 

The selection of individual investments is largely delegated to external managers, subject to investment limits and guidelines which reflect the particular mandate (e.g. UK or global equities) and the specific investment approach which the Company and its AIFM have selected (e.g. value, higher dividend yield, special situations). The managers are chosen by the Witan and WIS Boards after a disciplined selection process focused on the managers' scope to add value and their fit with the overall balance of the portfolio.

 

The overwhelming majority of the portfolio is managed in segregated accounts, held by the Company's depositary (via the custodian to whom it delegates safekeeping responsibilities). This enables the Company to analyse the risks and opportunities of the portfolio as a whole as well as of each manager's portfolio. The operations of the custodian and the safeguarding of the Company's assets are further supervised by the depositary, appointed by Witan and its AIFM, in accordance with the requirements set out in the AIFMD.

 

At the end of 2015, the Company and its AIFM had 11 external investment managers, covering a range of investment remits. Information regarding the proportion of Witan's assets managed by each and of their performance during the year is set out on page 12.

 

A proportion, up to 10%, of the portfolio (at the time of investment) may be invested in collective funds selected by WIS, with the objective of outperforming Witan's equity benchmark. This portfolio is managed subject to limits set by the Board, and in accordance with portfolio and risk management processes established by Witan and the Company's AIFM. These investments may represent asset categories that are temporarily undervalued or funds which are viewed as attractive longer-term generators of superior returns.

 

The WIS Executive, overseen by and working within clear parameters set by the Board, seeks to add to performance by adjusting the level of gearing employed, by the selective use of exchange-traded derivatives to alter the asset allocation and by the use of specialist funds to gain exposure to areas under-represented in the rest of the portfolio. In essence, the Company seeks to have sufficient levers to pull to take advantage of investment opportunities that may arise, in addition to the total returns arising from the investment managers' portfolios, which are expected to be the most significant driver of the Company's performance.

 

 

 

 

 

 

 

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Strategic Report continued

 

Our selected benchmark

The Company's benchmark, used as a reference point for comparing performance, is a combination of global equity markets, which reflect the investment universe from which most of the portfolio holdings are chosen. Since October 2007 the benchmark (based on the FTSE All-World indices) has been:

 

40% UK

20% North America

20% Europe ex-UK

20% Asia Pacific.

 

This reflects an investment policy that is designed to access a comprehensive range of investment opportunities in the global economy. The component weightings reflect the Board's belief that the opportunities are related to the importance of economic regions more than the market capitalisation of regional equity markets. The high weighting in the UK (which declined from 60% to 50% in 2004 and to 40% in 2007) reflects the global exposure of the UK market, which derives a significant majority of its earnings from overseas.

 

It should be emphasised that the portfolio is actively managed and not designed to track any index or combination of market indices. Performance can be expected to vary, sometimes considerably, from that of the benchmark, while aiming for outperformance in the longer term.

 

Performance information for other commonly used indices is also given in the key performance indicators summary section on page 10.

 

3. Performance and principal developments in 2015

Success in implementing the Company's strategy is monitored against a range of Key Performance Indicators (KPIs) which are viewed as significant measures of success over the longer term. Although performance relative to the KPIs is also monitored over shorter periods, success over the long-term is viewed as more important, given the inherent volatility of short-term investment returns. The principal financial KPIs are set out below, with a report (in italics) of Witan's performance against them during 2015. With respect to non-financial measures, details of the Company's policies and performance in relation to its obligations under the UK Corporate Governance Code are set out in the Corporate Governance Statement in the Annual Report.

 

 

 

 

 

 

 

 

 

 

 

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Strategic Report continued

 

Key Performance Indicators

 

A.      Investment performance

             ●          Outperformance compared with Witan's equity benchmark.  The Company seeks to achieve at least 2% p.a. outperformance in NAV total return and shareholder total return terms over the long-term.  In 2015, Witan achieved 2.9% NAV total return outperformance relative to its combined global equity benchmark (see page 9) and a shareholder total return 2.2% above that of the benchmark.

          ●       A positive long-term total return, after inflation, for shareholders.

                   In 2015, Witan shareholders enjoyed a NAV total return of 6.4% and, as the shares moved from a small premium to a small discount to NAV, a shareholder total return of 5.7%.  This was well ahead of inflation of 0.2% for the year to December 2015.  Returns over the longer term are set out on page 28 and indicate that this objective has also been met over the past 3 and 5 year periods.

          ●      Long-term investment outperformance by the individual managers relative to the relevant benchmark.

                   In 2015, eight of the eleven third party delegated managers outperformed their benchmarks.  The managers' returns since appointment are set out in the table on page 12.  Further details are set out on pages 12 and 13.

B.      Annual growth in the dividend per share ahead of the rate of inflation.  In 2015, the dividend increased by 10.4%, compared with an inflation rate of 0.2% in the year to December 2015.  Further details are set out on page 14.

C.      A positive contribution to investment returns from the use of borrowings.  The Company employed average gearing of 9.7% during the year, which directly contributed 0.7% to returns. This covered the (mostly fixed) costs of borrowing, for a small contribution, after interest, of 0.05%.  Further details are set out on pages 14 to 16.

D.      A share price trading at a sustainable low discount (or a premium) to NAV (including income, with debt at fair value), taking account of prevailing investment conditions.  This amends the previous KPI, which was "A discount to NAV of 10% or less (compared with the NAV excluding income, with debt at market value)".  The shares traded at an average premium of +0.1% in 2015, compared with an average 2.8% discount in 2014.  The discount at the year-end was 0.2% (2014: premium of +0.6%).

E.      A competitive level of ongoing charges, below the costs of other multi-manager funds, balancing the need to pay for high quality investment management with the aim of keeping the costs of managing the business as low as possible.  In 2015, the ongoing charges figure ('OCF') was 0.72% excluding performance fees (2014: 0.74%) and 0.99% including performance fees (2014: 0.96%).  This compares with the average OCF of 1.56% in the Investment Association Global equity funds sector and 0.73% (0.80% including performance fees) for the AIC Global sector.  Further details are set out on page 19.

 

 

 

 

 

 

 

 

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Strategic Report continued

 

Performance summary and attribution

2015 was in some respects similar to 2014, in that equity investment returns oscillated around the unchanged mark for much of the year. Japan was the strongest of the main equity markets (with a total return in sterling of 16%), while sterling total returns in developed markets ranged from just 1.0% for the UK (weighed down by high oil and mining sector weightings) to 7% for the US and 5% for Europe. Emerging markets and Asia fell by 9% and 4% respectively, affected by concerns including weak commodity prices, lower growth in China and the prospect of rising US interest rates.

 

Witan's NAV total return (after all costs) was 6.4%, 2.9% ahead of the 3.5% return from the composite equity benchmark.  Excluding the effect of the fall in the fair value of Witan's debt securities, the NAV total return was 5.8%, 2.3% ahead of the benchmark. The shareholder total return was 5.7%, as the shares closed the year on a 0.2% discount (2014: +0.6% premium).

 

In a year when market returns were modest and variable, active investment selection was needed to achieve more tangible returns and respond to the opportunities created by market volatility. Witan's gross portfolio return (before costs) was 6.7%. This performance was boosted by outperformance by the managers' portfolios (with 8 out of our 11 third party delegated managers ahead of their benchmarks). In the underperforming UK market, the three UK managers' targeted stock selection enabled them to outperform their UK benchmark by a significant margin, with returns between 4.7% and 7.7%, compared with the UK market's total return of just 1.0%. The contribution from gearing (0.7%) was slightly greater than the drag from the Company's mostly fixed borrowing costs.

 

Combined portfolio composition

During the year the Company invested its assets with a view to spreading investment risk and in accordance with the investment policy. 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 the Executive team, within delegated limits from the Board and the Company's AIFM.

 

The sector breakdown and regional exposure for the aggregated portfolio is shown in the Annual Report. The top 50 holdings across the combined Witan portfolio are set out in the Annual Report. They represented 42% of Witan's portfolio at 31 December 2015 (2014: 41%). These analyses highlight the substantial diversification provided by our range of managers and the portfolio's broad geographical exposure.

 

It is important that diversification does not unduly dilute returns, since the purpose of using active managers is to outperform, which requires the portfolio to differ from the benchmark. One measure of active management in a portfolio is known as "active share". This indicates the degree to which a portfolio differs from its benchmark, with a portfolio identical to the benchmark having an active share of 0% while one with no holdings in common with its benchmark would have an active share of 100%. Although looking at active share at a particular point is an incomplete measure of the degree to which a portfolio is managed actively (let alone successfully), the active share of our combined portfolio was circa 66% at the end of 2015 (2014: 65%). This level of active share indicates that even with the diversifying effects of the multi-manager structure Witan's portfolio

 

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Strategic Report continued

 

retains an active approach, while relative performance in recent years also demonstrates that Witan's aggregated portfolio retains an individual character distinct from the relevant indices.

 

A breakdown of the performance attribution in 2015 (based on the Company's financial statements) is shown in the table below.

 

Net asset value total return

+6.4%

Portfolio total return (gross)


+6.7%

Benchmark total return

+3.5%

Benchmark total return


+3.5%



Relative investment performance


+3.2%



Gearing impact

+0.7%




Effect of changed fair value of debt

+0.6%




Share buybacks/issuance

+0.0%






+1.3%





+4.5%



Borrowing costs

-0.6%




Operating costs and tax

-1.0%






-1.6%

Relative performance

+2.9%



+2.9%

 

Investment manager performance

 

Details of the manager structure in place at the end of 2015, showing the proportion of Witan's assets that each managed and the performance they achieved, are set out in the table below:

 

Investment manager

Value of Witan assets managed

at 31.12.15

£m

 

% of Witan's assets under management at 31.12.15 (Note 1)

 

 

 

 

Performance in 2015 (%)

 

 

 

Benchmark performance in 2015 (%)

 

Performance since appointment (%)

(Note 2)

 

Benchmark performance since appointment (%)

Artemis

173.4

9.9

5.4

1.0

10.5

4.8

Heronbridge

109.8

6.3

4.7

1.0

8.5

4.5

Lindsell Train

179.2

10.2

7.7

1.0

17.1

8.3

Lansdowne Partners

196.5

11.2

17.5

6.0

26.8

11.8

MFS

142.0

8.1

5.3

4.0

11.8

9.0

Pzena

162.2

9.3

2.3

4.0

5.6

7.8

Tweedy, Browne

51.1

2.9

0.5

4.0

4.5

7.8

Veritas

202.8

11.6

8.5

3.8

12.1

8.9

Marathon

138.5

7.9

10.7

3.4

10.5

7.3

Matthews

194.5

11.1

10.1

4.0

6.3

3.3

Trilogy

47.2

2.7

(10.7)

(9.7)

(4.8)

(2.6)

Witan Direct Holdings

152.4

8.7

0.3

3.5

7.3

7.0

Note 1 Percentage of Witan's investments managed and cash balances held centrally by Witan.

Note 2 The percentages are annualised where the date of appointment was more than one year ago.

 

 

 

 

 

 

 

 

 

 

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Manager structure and performance

The Company's delegated managers have a range of investment approaches and follow differing mandates set by the Company. Details of each manager's mandate, benchmark and investment style are shown below. Further details, including the date of appointment are shown in the manager summaries in the Annual Report.

 

Equity mandate

Investment manager

 

Benchmark

Investment style

UK

Artemis Investment Management LLP

FTSE All-Share

Recovery/special situations

UK

Heronbridge Investment Management LLP

FTSE All-Share

Intrinsic value growth

UK

Lindsell Train Limited

FTSE All-Share

Long-term growth from undervalued brands

Global

Lansdowne Partners (UK) LLP

DJ Global Titans

Concentrated, benchmark-independent investment in developed markets

Global

MFS International (UK) Limited

FTSE All-World

Growth at an attractive price

Global

Pzena Investment Management LLC

FTSE All-World

Systematic value

Global

Tweedy, Browne Company LLC

FTSE All-World

Fundamental value

Global

Veritas Asset Management LLP

FTSE All-World

Fundamental value, real return objective

Pan-European

Marathon Asset Management LLP

FTSE All-World Developed Europe

Capital cycles

Asia Pacific

(including Japan)

Matthews International Capital Management LLC

MSCI Asia Pacific Free

Quality companies with dividend growth

Emerging Markets

Trilogy Global Advisers, LP

MSCI Emerging Markets

Fundamental, growth orientated

Directly-held

investments

Witan's AIFM and Executive team

Witan's combined equity benchmark

Collective funds invested in mispriced or specialist assets, recovery situations

 

All of the delegated managers were in place throughout the year. During the year, eight of the third party delegated managers outperformed their benchmarks, while three underperformed, along with the Direct Holdings. Lansdowne delivered a particularly strong performance, with a total return of 17.5%. Marathon, Matthews, Lindsell Train and Veritas also delivered above average returns, in Matthews' case overcoming the headwind from low returns from the Pacific regional markets (Japan excepted). Value as a style had a hard time in 2015, so Pzena and Tweedy, Browne's returns were below benchmark. Our emerging market manager, Trilogy, also slightly underperformed its asset class, which was notably weaker than developed markets.

 

Directly held investments

 

This portfolio, which held 6.7% of assets at the end of 2014, underperformed Witan's benchmark by 3.2% during 2015, with a flat return from the portfolio of +0.3%. Its proportion of the investment portfolio at the year-end was 8.7%, owing to net investments made during the year. The investment in Electra Private Equity convertible shares was sold. An investment was made in Apax Global Alpha, a newly listed private equity fund. The holding in SVG Capital (where despite good NAV progress and reduced portfolio concentration the discount widened) was significantly increased at low prices and we also added to Princess Private Equity. Less favourably, we continued to add, gradually (though not gradually enough), to our holding in BlackRock World Mining Trust, at prices significantly lower than in 2014 but the shares (and the sector) have yet to stabilise, with sentiment currently almost universally negative. Despite the near-term risks to capital and dividends in the sector, it has increased potential as a medium-term recovery story. We also added to the Edinburgh Dragon convertible holding, which offers potential equity participation if the Asian

 

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Strategic Report continued

 

markets recover and downside protection (through redemption at par in 2018) if they do not. We trimmed our holding in Aberforth Geared Income Trust, owing to its excellent NAV progress, as it outperformed the smaller companies index, which itself outperformed the wider market in 2015.  The main investments are in listed private equity and related funds (Apax Global Alpha, Princess Private Equity, SVG Capital and NB Distressed Debt Investment Fund), UK domestic recovery (Aberforth Geared Income Trust), specialist sector funds (principally Blackrock World Mining Trust) and the convertible bonds of Edinburgh Dragon Investment Trust and JZ Capital Partners.

 

Dividend policy and performance in 2015

The Company's policy (subject to circumstances) is to increase its dividend per share in real terms, ahead of the increase in UK Consumer Price Index (CPI).

 

The Company's revenue earnings increased by 16% to 18.49 pence per share in 2015.  This was driven by an increase in portfolio dividends and by strength in the US dollar (in which US and a number of UK company dividends are denominated) relative to sterling.

 

For 2015, the Board has declared a fourth interim dividend of 5.45 pence per share, to be paid to shareholders on 1 April 2016, making a total distribution for the year of 17.0 pence (2014: 15.4 pence).  This represents an increase of 10.4%, more than 10% ahead of the 0.2% rate of CPI inflation in the year to December 2015.  This is the 41st consecutive year that Witan has increased its dividend.

 

A chart in the Annual Report shows the growth in dividends over the past 10 years, which has been ahead of the rise in the UK CPI in each year.

 

Since 2005, Witan's dividend per share has risen 93% compared with 27% for the UK consumer price index.

 

The Company pays dividends quarterly.  The first three payments for 2016 (in June, September and December) will, in the absence of unforeseen circumstances, be paid at a rate of 4.25 pence per share (2015: 3.85 pence), being one quarter of the full year payment for 2015.  The fourth payment (in March 2017) will be a balancing amount, reflecting the difference between the three quarterly dividends already paid and the payment decided for the full year.

 

Policy on gearing and the use of derivatives

Employment of gearing

Purpose

The purpose of using borrowings is to improve (or "gear/ leverage") returns for shareholders, by achieving investment returns higher than the interest cost of the borrowings. Accordingly, attention is paid to using a level of gearing appropriate for market conditions (put simply, having more borrowings when markets are attractively valued and borrowing less at times when returns are expected to be poorer). In addition, a blend of long-term and short-term borrowings is used, to balance the certainty of cost associated with locking in fixed rates for longer periods with the flexibility of using short-term facilities which can be readily repaid when they are not required.

 

 

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Strategic Report continued

 

Limits

Although the Company has the legal power under its Articles of Association to borrow up to 100% of the adjusted total of shareholders' funds (which is also the maximum level of leverage set by its AIFM), this is subject to practical constraints including a test of prudence.  The Board's longstanding policy is not to allow gearing (as defined on page 29) to rise to more than 20%, other than temporarily in exceptional circumstances. Over the past five years it has generally varied between 5% and 15% and where appropriate the Company may hold a small net cash position.

 

Structure

Following the issuance of new long-term debt in 2015 (detailed in the following section), the Company's fixed rate borrowings rose from £110m to £185m but will reduce to £140m when the Debenture is repaid in October 2016.  The average interest rate paid on the Company's fixed-rate borrowings has declined from 7% (prior to the issue) to 5.6% and will fall further to 4.6% following repayment of the Debenture, while the average borrowing term has doubled from 7 to 14 years.  The Company also has a £50m one-year facility, providing additional flexibility over the level of gearing, as well as enabling the Company to borrow in currencies other than sterling, if deemed appropriate.  Witan may either invest its borrowings fully, or neutralise their effect with cash balances (or the sale of equity index futures) according to its assessment of the markets.  The Company's delegated managers are not permitted to borrow within their portfolios but may hold cash if deemed appropriate.

 

Action taken in 2015

In mid-2015, the Company issued £21m of 20 year and £54m of 30 year fixed-interest debt at yields of 3.29% and 3.47% respectively. These borrowing yields are the lowest rates achieved in the sector for borrowing at such long maturities for many decades. The Board believes that fixing borrowing costs at such low rates will benefit future shareholder returns. In 2015, the funds raised were predominantly used to repay short-term borrowings but the issues also took account of the October 2016 repayment date of the Company's 8.5% Debenture stock.

 

The size of the Company's short-term facility was reduced from £70m to £25m for the second half of 2015, to limit commitment costs. The current facility is £50m, which will rise to £75m in October 2016. At the end of December, the drawn balance on this facility was £3m (2014: £45m).

 

Gearing was managed actively during the year. It was reduced in early 2015 as the markets rose, and increased in the summer and autumn, as market setbacks created opportunities.  Gearing was 10.1% at the end of 2014, 9.6% mid-year and 10.7% at the year-end. The calculation of gearing takes account of cash balances and the full nominal value of any derivatives held, since this represents the size of the asset or liability to which the derivative provides exposure.

 

Gearing benefited performance during the year. Although the estimated contribution of 0.7% of shareholders' funds was similar to the interest costs borne (0.6%), the majority of the finance cost is fixed and would have been incurred irrespective of whether the funds were invested, so the benefit (similar to 2014) was noticeable, in a year of moderate absolute returns.

 

 

 

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Strategic Report continued

 

At the end of 2014, gross gearing (adding together the value of all positions (less cash), irrespective of whether they were an asset or a liability) was 10.1%. This included a £34.7 million long position in Nikkei Index futures, equivalent to 2.4% of net assets.

 

At the end of 2015, gross gearing (on the same basis) was 10.7%. This included £37m in index futures (FTSE 100 (£24m) and MSCI Emerging Markets (£13m)) equivalent to 2.4% of net assets. Gearing excluding this was 8.3%. Further details of the accounting treatment for these positions are given in the Annual Report.

 

Use of Derivatives

Policy

Witan's policy on the use of derivatives emphasises simplicity, transparency, cost effectiveness and the minimisation of counterparty risk. Where financial instruments are available that help the Company to implement its investment policy (whether for the purpose of increasing exposure to a particular asset or for portfolio hedging) their use will be considered. In recent years, exchange-traded index futures have been the only instruments used. These give exposure to a particular market index, are relatively liquid to trade and depend upon the creditworthiness of the particular exchange, not an individual firm. The Company takes full account of the effect of the nominal value of the futures contracts when calculating its gearing. The value of the investments (which are traded on official exchanges) is fully marked to market every day.

 

The use of index futures enables Witan to adjust its gearing rapidly, helping investment flexibility. It also provides a means of adjusting asset allocation (by directing investment to particular markets). In both cases index futures enable 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 AIFM, acting under guidelines set by the Board. Transactions are reported to the Board as they occur, with the CEO and AIFM being accountable for the financial results. The Company's delegated managers are not permitted to use derivatives or to gear their portfolios.

 

Activity during 2015

In early March, we sold our position in Nikkei 225 Index futures contracts, after a strong run in the Japanese market. The position was equivalent to approximately 2.4% of net assets at the end of 2014, having been in place since purchase in early 2013, to increase our portfolio exposure to a market which we believed to be attractive and where our managers had relatively little stock exposure.

 

The Company had a short position in Gilt futures during March and early April. This was established to protect against the risk of a rise in yields during the period when the Company was seeking to lock in low rates on long-term borrowings. Given volatility in government bond markets, together with uncertainty ahead of the UK General Election, negating part (around one third) of the interest rate risk was viewed as prudent. In the event, gilt yields fell in March which meant that the protection proved unnecessary and this position made a loss. However, the benefit of that fall in yields on our new long-term debt costs was significantly greater.

 

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Strategic Report continued

 

In the aftermath of the decisive UK General Election result, we increased our exposure to UK equities by 1.5% using FTSE 100 index futures. The timing of this was inopportune, given the later summer volatility in markets. Our timing was better in August and September, when we invested 2% of net assets in FTSE 100 and MSCI Emerging Markets index futures on two of the most volatile days. When the markets rebounded, these positions were reduced.

 

At the end of 2015, our derivatives exposure was £37m, £24m in UK FTSE 100 index futures and £13m in MSCI Emerging Markets index futures. The realised gain on index futures during the year is shown in the cash flow statement on page 33.

 

Witan's shares in the market - liquidity and discounts

Witan is a member of the FTSE 250 index, with a market capitalisation of over £1.5 billion as at 31 December 2015. The Board places great importance on the encouragement of a liquid market in Witan's shares on the London Stock Exchange. Considerable effort is devoted to communicating Witan's objective and performance clearly to shareholders and potential investors. There is a wide range of firms and online investment platforms through which the Company's shares may be held and the Company's subsidiary Witan Investment Services Limited also operates a savings plan for investing in Witan shares, details of which are described in the Annual Report.

 

Whilst delivery of sound investment performance remains the principal focus of the Board, it has also always paid attention to discount-related issues. The Company has, over many years, made significant use of share buybacks, purchasing shares for cancellation when they have stood at an unduly wide discount (to the NAV taking debt at fair value). In addition to being accretive to NAV, this had the objective of reducing the discount. A total of over 49% of our shares were repurchased and cancelled between 1998 and 2013. In recent years, partly as a result of this persistence, Witan's shares have traded closer to NAV than historically and, for much of 2015, at a premium.

 

The discount trend since 2011 is illustrated in a chart in the Annual Report. The Company's shares continued to trade at a premium for much of 2015, as a result of demand in the market, which the Company met by issuing a total of 10.5m new shares at a premium to NAV. This increased our net assets by over £83m. This process has three principal benefits for shareholders. Share buybacks and issuance are accretive to NAV per share and help contribute to liquidity in the trading of the Company's shares, while (in the case of new issuance) benefiting the ongoing charges figure by spreading the Company's fixed costs over a wider base.

 

The long-term objective remains (while taking account of wider market conditions) to create sustainable liquidity in Witan's shares at or near to asset value, building on the progress achieved. Discounts are affected by many factors not under the Company's control, hence the need to pay respect to prevailing investment conditions. With this in mind, as stated in the interim report, although no new discount target is set, the Company remains prepared to buy back shares taking account of prevailing market conditions, the level of the discount and the impact on the NAV per share. In accordance with this policy, subsequent to the year end, the Company bought back shares on a number of occasions following a widening of the discount in February.  Similarly, where it is in shareholders' interests, the Company may issue shares at a premium to NAV. The criterion for the Company's transactions in its own shares will always be that it should be in shareholders' interests.

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Strategic Report continued

 

Marketing

The purpose of marketing for an investment trust is to communicate the Company's strategy and new developments effectively to existing and potential shareholders, to ensure they are properly informed of our performance as stewards of their savings and to help sustain a liquid market in our shares. Clear communication of the Company's investment objective and its success in executing its strategy makes it easier for investors to decide how Witan fits in with their own investment objectives. Other things being equal, this should help the shares to trade closer to NAV, from which all shareholders benefit. If the shares trade on a premium, as in 2015, this creates the possibility of increasing the size of the Company to meet market demand by issuing new shares, with benefits in terms of greater liquidity as well as spreading costs.

 

In view of these potential benefits, the Company has for many years operated a marketing programme in order to disseminate information about our investment strategy and performance more widely. This programme communicates with private and professional investors, financial advisers and intermediaries using a range of media (including direct meetings, press interviews and advertising through traditional media and the internet). The Company also provides an informative and easy to use website (www.witan.com) to enable investors to make informed decisions about including Witan shares in their investment portfolios. The website, which is regularly refreshed with new information, includes a section focused on the requirements of financial advisers as well as information about the Witan Wisdom and Jump savings schemes operated by the Company's subsidiary, Witan Investment Services Limited.

 

Costs

Investment management fees

Each of the delegated external managers is entitled to a base management fee rate, levied on the assets under management, and in some cases a performance fee, calculated according to investment performance relative to an appropriate benchmark. The agreements can be terminated on one month's notice (except one, for which three months' notice applies). One of the investment mandates is operated via a fund vehicle, to simplify custody arrangements in emerging economies.

 

The base management fee rates for managers in place at the end of 2015 ranged from 0.2% to 0.8% per annum and the performance fees ranged from nil (the majority) to 20% of the relevant outperformance. The average base management fee, weighted according to the value of the funds under management, was 0.49% as at 31 December 2015 (2014: 0.48%). On a similar basis, the average performance fee is 6% of the outperformance of the relevant benchmark (2014: 6%), subject to capping of payments for any particular year.

 

 

 

 

 

 

 

 

 

 

 

 

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Strategic Report continued

 

As an illustration, if our managers uniformly outperformed their benchmarks by 3% after base management fees, this would generate a performance fee of 0.17% of net assets, giving total investment management fees of 0.66% (including a 0.49% base fee). The comparable estimate in 2014 was 0.65% (including a 0.48% base fee). The actual fees payable will of course vary according 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 linked to good performance, from which shareholders benefit. A majority of the managers have base fees alone (without performance fees) and a majority of the fee structures incorporate a "taper" whereby the average fee rate reduces as the portfolio grows.

 

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.

 

Ongoing charges and costs

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 0.72% in 2015 (2014: 0.74%). Increased investment management and regulatory costs were offset by a rise in the average level of net assets. When performance fees due to the relevant external managers are included, the OCF was 0.99% in 2015 (2014: 0.96%). Relative performance was better than in 2014 but there was a greater contribution to this from managers without performance fees.

 

This compares with the average OCF for 2015 of 1.56% in the Investment Association Global equity funds sector (source: IA, Morningstar) and 0.73% (0.80% including performance fees) for the AIC Global sector (source: AIC).

 

Category of cost

2015

£m

2015

% of average net assets

2014

£m

2014

% of average net assets

Other expenses (excluding investment management expenses) 

5.41

 

 

0.34

 

4.90

 

 

0.36

 

Less expenses relating to the subsidiary (whose expenses do not relate to the operation of the investment company).

(0.93)

(0.06)

(1.01)

(0.07)

Investment management base fees (note 4)

6.99

0.44

6.17

0.45

Ongoing Charges Figure (including investment management base fees)

11.47

0.72

10.06

0.74

Investment management performance fees (note 4)

4.30

0.27

3.00

0.22

Ongoing charges (including performance fees)

15.77

0.99

13.06

0.96

Portfolio transaction costs

1.75

0.11

0.91

0.07

Relative outperformance during the year (with debt at fair value)


+2.9%


+1.1%

 

The Company exercises strict scrutiny and control over costs, since any negotiated savings in investment management or other fees directly reduce the costs for shareholders. This will not always result in the lowest absolute costs, since the Board believes that it is in shareholders' interests to pay for managers who add value. The Board believes that the OCF during the year represented good value for money for shareholders, taking account of recent and longer-term outperformance.

 

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Strategic Report continued

 

There is continuing debate over the most appropriate measure of investment company costs, to enable investors to assess value for money and to make comparisons between funds. Consensus on how best to present a single figure for costs remains elusive, partly because of concerns that oversimplification might distort comparisons rather than facilitating them.

 

In the meantime, the Company will continue to focus on the OCF (which is prepared in accordance with the AIC's recommended methodology) as a readily-understood measure of the underlying expenses of running the business. As last year, we are presenting the information on costs in a single table on page 19. This indicates the main cost headings in money terms and as a percentage of net assets. The figures for relative NAV total return performance are also included, for comparison purposes.

 

Priorities for the year ahead

In 2016, the key priorities for Witan include:

·    Investment. Seek to build on the good returns achieved for shareholders in recent years, setting an appropriate strategic asset allocation to reflect changing opportunities in the world economy. Make use of a range of active managers to deliver our strategic objectives through a multi-manager structure. Continue to deliver dividend growth ahead of inflation;

·    Communication. Communicate Witan's distinct and active investment approach and achievements effectively to existing and potential shareholders. Continue to increase the focus on improving information for personal investors and financial advisers, where direct meetings are less practicable;

·    Regulatory change. Continue to operate risk and investment management processes in compliance with the AIFMD, liaising closely with the Company's AIFM, Witan Investment Services Limited; and

·    Client service. Provide good service to the corporate and individual clients of Witan Investment Services Limited.

 

4. Corporate and operational structure

As described earlier (page 6) Witan is an Investment Trust with a Premium Listing on the London Stock Exchange. It has a single, wholly-owned, subsidiary, Witan Investment Services Limited ('WIS') which acts as the Company's AIFM.

 

Operational management arrangements

In addition to the appointment of delegated investment managers, Witan and WIS contract with third parties for the supporting services required, including:

 

·    BNP Paribas Securities Services London Branch ('BNPSS') for global depositary services, custody, investment accounting and administration;

 

·    Frostrow Capital LLP for company secretarial services;

 

·    International Financial Data Services ('IFDS') Ltd. as the savings plan administrators of Witan Wisdom and Jump Savings;

 

 

Page 21 of 38

 

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2015

 

Strategic Report continued

 

·    Specialist advisers used for investment manager research and investor communications;

 

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

 

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

 

Premises and staffing

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 current lease has a 5 year term, commencing October 2015.

 

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. Details of the Company's remuneration policies and required disclosures are set out in the Directors' Remuneration Report in the Annual Report. Employees and those who seek to work within the Group are treated equally regardless of sex, marital status, creed, colour, race or ethnic origin. The Company has seven direct employees, four men and three women. The Board currently consists of seven non-executive directors (five men and two women) and the Chief Executive Officer, Andrew Bell, who is an employee. 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 Investment Services ('WIS')

Witan Investment Services Limited is a wholly-owned subsidiary of Witan Investment Trust plc ('Witan'). It is authorised and regulated by the Financial Conduct Authority ('FCA').

 

It was established in March 2005 to provide investment savings accounts and marketing services and to give investment advice to professional investors. Since July 2014 WIS has acted as the Company's AIFM to fulfil the requirements of the AIFMD.

 

In addition to its responsibilities as Witan's AIFM, WIS's principal activities are to provide executive management services to the Boards of Witan and Witan Pacific Investment Trust plc ('Witan Pacific'), to communicate information about the companies to the market, to increase investor interest in their shares and to operate cost-effective savings plans for investors to hold the shares.

 

WIS's operational objectives for 2016 are:

 

·    to fulfil its investment and risk management responsibilities as Witan's AIFM;

 

·    to provide a reliable and efficient investment savings platform for Witan and Witan Pacific investors;

 

·    to provide suitable advice to the Boards of its corporate clients;

Page 22 of 38

 

Strategic Report continued 

 

·    to reduce the net operating costs for Witan; and

 

·    to seek appropriate business opportunities which can add value for shareholders.

 

WIS has two principal sources of income. These are savings plan revenues and the fees (as AIFM or Executive Manager and for marketing services) paid by its corporate clients, Witan and Witan Pacific. The main costs incurred by WIS are fees to the savings schemes administrator (IFDS), staff costs to provide the services described above and professional advice to ensure that its regulatory and accounting obligations are properly satisfied.

 

The savings plans provided for WIS clients are marketed under the Witan Wisdom and Jump Savings brands. They currently have over 23,000 accounts with assets of some £345 million invested.

 

 

Principal risks and uncertainties

Risks are inherent in investment and corporate management but it is important that their nature and magnitude are understood, in order that risks, particularly those which the Company does not wish to take, can be identified and either avoided or controlled. In accordance with the provisions of the AIFMD, WIS has established a Risk Committee in order to comply with its risk management and reporting obligations as Witan's AIFM. The Company has established a detailed framework of the key risks impinging on the business as set out below, with associated policies and processes devised to mitigate or manage those risks. This risk map is reviewed regularly by the Audit Committee along with the WIS Risk Committee, which report on issues arising to their respective boards, for action as necessary. The guiding principles remain watchfulness, proper analysis, prudence and a clear system of risk management.

 

Where appropriate, the Witan and WIS boards meet jointly to cover matters of common interest. The WIS board consists of five non-executives and one executive director who are also directors of Witan, and one executive director who is a Company employee.

 

The Group's key risks fall broadly under the following categories:

 

Market and investment portfolio risks

Witan is set up to invest in UK and overseas equity markets on behalf of its shareholders. Equity exposure is unlikely to drop below 80%, in normal conditions. Therefore a key risk of investing in Witan is a general fall in equity prices, which could be exacerbated by gearing. Other risks, as with any international equity portfolio, are the investment portfolio's exposure to country, currency, industrial sector and stock specific factors. There are also risks associated with changes in Witan's share price discount or premium to NAV and the performance of its investment managers.

 

 

 

 

 

 

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Strategic Report continued

 

The Board seeks to manage these risks through:

 

·    appropriate asset allocation decisions, with a broadly diversified equity benchmark;

 

·    manager diversification and regular reviews of the managers' competence;

 

·    monitoring the global economic, geo-political and stock market outlook;

 

·    active management of risk, whether to preserve capital or capitalise on opportunities;

 

·    the application of relevant policies on gearing and liquidity; and

 

·    the use of share buybacks and issuance to respond to market supply and demand.

 

During the year Andrew Bell (the Chief Executive Officer (CEO)) managed the overall business and the investment portfolio in accordance with limits and restrictions determined by the Board and its AIFM. The Board regularly reviews the matters delegated to Executive management, on which the CEO reports at each Board meeting. The Board also regularly reviews investment strategy and performance, supported by comprehensive management information including investment performance data and financial reports.

 

Operational

Many of the Group's financial systems are outsourced to third parties, principally BNP Paribas Securities Services ('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. BNPSS as the Company's depositary has a key responsibility for monitoring such issues on behalf of the Company and its AIFM, WIS. Details of how the Board monitors the services provided by its suppliers, and the key elements designed to provide effective internal control, are explained further in the Corporate Governance Statement.

 

Corporate governance

The Board takes its own regulatory responsibilities very seriously and regularly reviews the main points of compliance against requirements.

 

Details of the Company's compliance with corporate governance best practice are set out in the Corporate Governance Statement in the Annual Report. The Board conducts an annual internal assessment of the effectiveness of its governance processes in managing the Company and enabling it to evolve in response to future challenges. There is also a 3-yearly independent external review, the most recent of which was conducted in late 2013. See the Annual Report for further details.

 

 

 

 

 

 

 

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Strategic Report continued

 

Operational and regulatory risks are regularly and extensively reviewed by Witan's Audit Committee. WIS is subject to its own operating rules and regulations and is regulated by the FCA. Since becoming the AIFM for Witan, WIS has become more closely involved in a wide range of Witan's operations. The Company has established a modus operandi for the effective coordination of these responsibilities, which has been adapted to ensure full compliance with the AIFMD's requirements without duplication of effort and will continue to be adapted in the light of experience.

 

Operationally the multi-manager structure is robust, as the investment managers, the custodian and the fund accountants keep their own records which are regularly reconciled. The depositary, AIFM and the Board provide additional checks and risk management safeguards. Management monitors the activities of all third parties and reports any significant issues to the Board.

 

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 AIFM and reviewed at each Board meeting. The Company also carefully and regularly monitors compliance with the accounting rules affecting investment trusts.

 

The Company is required to comply with the provisions of the Companies Act 2006 ('Companies Act'), and 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 AIFM, the Company Secretary and the Group's professional advisers to ensure compliance with all applicable rules. WIS is regulated by the Financial Conduct Authority to act as the AIFM for Witan, for the marketing and administration of savings plans and the provision of investment advice to professional clients.

 

Liquidity and going concern

The Company's portfolio consists mainly of securities that are readily realisable. The Company and its AIFM regularly review possible liquidity needs (for example to cover operational costs, loan servicing and repayment, shareholder dividends and share buybacks) relative to the Company's portfolio income and the significance of possible liquidity calls relative to the value and tradability of the Company's assets. Given that most of the likely liquidity requirements are readily foreseeable (for example, loan payments and dividends are timetabled), while others (such as share buybacks) are subject to the Company's discretion, the Board is satisfied that unexpected liquidity needs are not significant relative to the size of the Company's portfolio and that they could be readily met without compromising normal portfolio management practice.

 

 

 

 

Page 25 of 38

 

 

Strategic Report continued

 

Accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future. Therefore, the directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. In reviewing the position as at the date of this report, the Board has considered the guidance on this matter issued by the Financial Reporting Council.

 

Viability Statement

In accordance with the 2014 UK Corporate Governance Code, the Board has assessed the prospects of the Company over a longer period than the 12 months required by the 'Going Concern' provision. The new provisions require the Board to explain, taking account of the Company's current position and principal risks, how they have assessed its prospects and over what period and why they consider that period to be appropriate. The directors must state whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.

 

The Company's current position and prospects are set out in the Chairman's and Chief Executive's Reports and the Strategic Report. The principal risks are set out on pages 22 to 25. The Board has considered the Company's financial position and its ability to liquidate its portfolio and meet its expenses as they fall due and notes the following:

 

·    The portfolio consists of investments traded on major international stock exchanges and there is a spread of investments by size of company. In normal conditions, the current portfolio could be liquidated to the extent of more than 85% within 5 trading days and there is no expectation that the nature of the investments held within the portfolio will be materially different in future;

 

·    The closed-ended nature of the Company means that, unlike an open-ended fund, it does not need to realise investments when shareholders wish to sell their shares;

 

·    The Board has considered the viability of the Company under various scenarios and concluded that it would usually be able to take appropriate action to protect the value of the Company's assets. As set out in the notes to the Annual Report, the Board has considered price risk sensitivity (the sensitivity of the profit after taxation for the year and the value of the shareholders' funds to changes in the fair value of the Group's investments) and foreign currency sensitivity (the sensitivity to changes in the exchange rates for the £/US dollar, £/Euro and £/Japanese yen.

 

·    In addition to its cash balances, which were £57.6 million at 31 December 2015 (2014: £46.6 million), the Company has a short-term bank facility which can be used to meet its liabilities and fixed-rate financing in the form of Debenture Stock, Secured Bonds, Secured Notes and cumulative preference shares. With the exception of the short term facility and the Debenture Stock, which is repayable in 2016, this financing will remain in place until at least 2025. Details of the Company's non current liabilities are set out in the notes to the Annual Report.

 

·    The expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments currently foreseen which would alter that position.

 

Page 26 of 38

 

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2015

 

Strategic Report continued

 

As well as considering the principal risks on pages 22 to 25 and the financial position of the Company, the Board has taken account of the following assumptions in considering the Company's longer-term viability:

 

·    The Company's remit of investing in the securities of global listed companies will continue to be an activity to which investors will wish to have exposure;

 

·    Investors will continue to want to invest in closed-ended investment trusts;

 

·    The performance of the Company will continue to be satisfactory. The Board is able to replace any of the current investment managers when it considers it appropriate to do so;

 

·    The Company will continue to have access to adequate capital when required. The Company issued 10.5m ordinary shares in 2015 and had shareholders' funds in excess of £1.5bn at the end of 2015. It also issued £75m of fixed interest debt in June 2015. This was done in anticipation of the repayment of the 8.5% Debenture Stock in 2016.

 

Based on the results of its review, and taking into account the long-term nature of the Company and its financing, the Board has a reasonable expectation that the Company will be able to continue its operations and meet its expenses and liabilities as they fall due for the foreseeable future, taken to mean at least the next five years.

 

Approval

This report was approved by the Board of directors on 8 March 2016 and is signed on its behalf by:

 

 

H M Henderson

Chairman

 

A L C Bell

Chief Executive

8 March 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 27 of 38

 

 

Statement of Directors' Responsibilities

in respect of the Annual Report and the financial statements

 

 

Responsibility statement

 

The directors as at the date of the Annual Report confirm to the best of their knowledge that:

 

·    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;

 

·    the Strategic 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 (on pages 22 to 25) of the principal risks and uncertainties that they face; and

 

·    the financial statements, taken as a whole, are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

 

For and on behalf of the Board

 

H M Henderson

Chairman

8 March 2016

 

A L C Bell

Chief Executive

8 March 2016

 

 

 

  

 

 

Page 28 of 38

 

 

 

Corporate key performance indicators

 

Share price and net asset value (NAV)

     2015 

2014

% change

Share price

780.0p

753.5p

+3.5

NAV per ordinary share (debt at par value)   

788.4p

760.3p

+3.7

NAV per ordinary share (debt at fair value)   

781.2p

749.2p

+4.3

(Discount)/premium (NAV including income, debt at fair value) (A)

(0.2)%

0.6%


 

(A) The average premium on this basis in 2015 was 0.1% (2014: average discount 2.8%), (Source: Morningstar)               

 

 

Total return performance

 

1 yr % Return

 

3 yrs % Return

5 yrs % Return

Total shareholder return(B)

5.7

66.3

70.4

Net asset value total return(C)           

6.4

47.0

51.2

Benchmark(D)       

3.5

31.9

38.7

FTSE All-Share Index(E)         

1.0

23.4

33.8

FTSE All-World Index(E)    

4.3

42.1

49.7

UK CPI Returns

0.2

2.8

10.0

 

(B)          Source: Morningstar. The movement in ordinary share price adjusted to include the reinvestment of dividends.

(C)          Source: Morningstar/Witan. The movement in the net asset value per share adjusted to include the reinvestment of dividends.

(D)          Source: Morningstar/Witan. The benchmark is 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%.  

(E)           Source: Morningstar.  See also FTSE International for conditions of use (www.ftse.com).

 

Dividend information

 

2015

2014

% change

 

Revenue per share

18.5p

15.9p

+16.4%

Dividend per share

17.0p

15.4p

+10.4%

 

2016 dividend schedule*

 

Ex-Dividend Date

Pay date

Dividend type

Dividend payable per share

 

3 March 2016

1 April 2016

Fourth Interim (2015)

5.45p

19 May 2016

17 June 2016

First Interim

4.25p

25 August 2016

16 September 2016

Second Interim

4.25p

17 November 2016

16 December 2016

Third Interim

4.25p

 

* Please note that the dates and amounts for the first, second and third interim dividends could be subject to change.

 

 

 

 

 

 

 

Page 29 of 38

 

 

 

Other financial information

 

2015

2014

% change

Net assets

£1,577,330,000

£1,441,247,000

+9.4

Number of ordinary shares in issue

200,071,000

189,561,000

+5.5

Gearing(A)

10.7%

10.1%


Ongoing charge excluding performance fee

0.72%

0.74%


Ongoing charge including performance fee

0.99%

0.96%


 

(A)          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 30 of 38

 

 

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2015

 

 

Year ended

31 December 2014


Revenue

return

£'000

Capital

return

£'000

 

Total

£'000

Revenue

return

£'000

Capital

return

£'000

 

Total

£'000

Investment income (note 2)

45,818

-

45,818

38,297

-

38,297

Other income (note 3)

1,460

-

1,460

1,440

-

1,440

Gains on investments held at fair value through profit or loss

 

 

-

 

 

64,563

 

 

64,563

 

 

-

 

 

79,073

 

 

79,073


----------

----------

----------

----------

----------

----------

Total income

47,278

64,563

111,841

39,737

79,073

118,810








Expenses







Management and performance fees (note 4)

 

(1,747)

 

(9,539)

 

(11,286)

 

(1,541)

 

(7,623)

 

(9,164)








Other expenses

(5,309)

(101)

(5,410)

(4,798)

(101)

(4,899)


----------

----------

----------

----------

----------

----------

Profit before finance costs and taxation

 

40,222

 

54,923

 

95,145

 

33,398

 

71,349

 

104,747








Finance costs

(2,484)

(7,199)

(9,683)

(2,115)

(6,095)

(8,210)


----------

----------

----------

----------

----------

----------

Profit before taxation

37,738

47,724

85,462

31,283

65,254

96,537








Taxation

(1,779)

-

(1,779)

(1,218)

-

(1,218)


----------

----------

----------

----------

----------

----------

Profit attributable to equity shareholders of the parent company

 

 

35,959

 

 

47,724

 

 

83,683

 

 

30,065

 

 

65,254

 

 

95,319


----------

----------

----------

----------

----------

----------








Earnings per ordinary share (note 5)

18.49p

24.54p

43.03p

15.88p

34.47p

50.35p


======

======

======

======

======

======

 

 

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 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, 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 £83,683,000 (2014: £95,319,000).

 

All income is attributable to the equity holders of Witan Investment Trust plc, the parent company. There are no minority interests.

 

Page 31 of 38

 

 

Consolidated and Individual Company Statements of Changes in Equity

for the year ended 31 December 2015

 

 

Group: Year ended 31 December 2015



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 2014

47,390

18,106

46,498

1,274,185

55,068

1,441,247

Total comprehensive income:







Profit for the year

-

-

-

47,724

35,959

83,683

Transactions with owners,







 recorded directly to equity:







 Ordinary dividends paid (note 7)

-

-

-

-

(31,373)

(31,373)

 Issue of ordinary shares

2,628

81,145

-

-

-

83,773



--------

---------

---------

------------

---------

------------

Total equity at 31 December 2015

50,018

99,251

46,498

1,321,909

59,654

1,577,330









Company: Year ended 31 December 2015



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 2014

47,390

18,106

46,498

1,274,479

54,774

1,441,247

Total comprehensive income:







Profit for the year

-

-

-

48,038

35,645

83,683

Transactions with owners,







   recorded directly to equity:







 Ordinary dividends paid (note 7)

-

-

-

-

(31,373)

(31,373)

 Issue of ordinary shares

2,628

81,145

-

-

-

83,773



--------

---------

---------

------------

---------

------------

Total equity at 31 December 2015

50,018

99,251

46,498

1,322,517

59,046

1,577,330









Group: Year ended 31 December 2014



 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 2013

47,328

16,237

46,498

1,208,931

53,950

1,372,944

Total comprehensive income:







 Profit for the year

-

-

-

65,254

30,065

95,319

Transactions with owners,







   recorded directly to equity:







  Ordinary dividends paid (note 7)

-

-

-

-

(28,947)

(28,947)

  Buybacks of ordinary shares

-

-

-

(363)

-

(363)

  Issue of ordinary shares

62

1,869

-

363

-

2,294



--------

---------

---------

------------

---------

------------

Total equity at 31 December 2014

47,390

18,106

46,498

1,274,185

55,068

1,441,247









Company: Year ended 31 December 2014



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 2013

47,328

16,237

46,498

1,209,070

53,811

1,372,944

Total comprehensive income:







 Profit for the year

-

-

-

65,409

29,910

95,319

Transactions with owners,







   recorded directly to equity:







 Ordinary dividends paid (note 7)

-

-

-

-

(28,947)

(28,947)

 Buybacks of ordinary shares

-

-

-

(363)

-

(363)

 Issue of ordinary shares

62

1,869

-

363

-

2,294


--------

---------

---------

------------

---------

------------

Total equity at 31 December 2014

47,390

18,106

46,498

1,274,479

54,774

1,441,247

 

Page 32 of 38

 

 

Consolidated and Individual Company Balance Sheets

for the year ended 31 December 2015

 

Group

Company

Group

Company


31 December

31 December

31 December

31 December


2015

2015

2014

2014


£'000

£'000

£'000

£'000

Non current assets





Investments held at fair value through profit or loss

 

1,708,728

 

1,710,236

 

1,552,278

 

1,553,472


--------------

--------------

--------------

--------------

Current assets





Other receivables

7,255

6,547

6,931

6,922

Cash and cash equivalents

57,587

56,582

46,554

45,136


-----------

-----------

-----------

-----------


64,842

63,129

53,485

52,058


-----------

-----------

-----------

-----------






Total assets

1,773,570

1,773,365

1,605,763

1,605,530


---------------

---------------

---------------

---------------






Current liabilities





Other payables

(8,265)

(8,060)

(9,088)

(8,855)

8½ per cent. Debenture Stock 2016

(44,583)

(44,583)

-

-

Bank loans

(3,000)

(3,000)

(45,000)

(45,000)


----------

----------

----------

----------


(55,848)

(55,643)

(54,088)

(53,855)


----------

----------

----------

----------

Total assets less current liabilities

1,717,722

1,717,722

1,551,675

1,551,675






Non current liabilities





At amortised cost:





 8½ per cent. Debenture Stock 2016

-

-

(44,581)

(44,581)

 6.125 per cent. Secured Bonds due 2025

(63,354)

(63,354)

(63,292)

(63,292)

 3.29 per cent. Secured Notes due 2035

(20,491)

(20,491)

-

-

 3.47 per cent. Secured Notes due 2045

(53,992)

(53,992)

-

-

 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)


----------

----------

----------

----------


(140,392)

(140,392)

(110,428)

(110,428)


----------

----------

----------

----------

Net assets

1,577,330

1,577,330

1,441,247

1,441,247











Equity attributable to equity holders





Ordinary share capital

50,018

50,018

47,390

47,390

Share premium account

99,251

99,251

18,106

18,106

Capital redemption reserve

46,498

46,498

46,498

46,498

Retained earnings:





  Other capital reserves

1,321,909

1,322,517

1,274,185

1,274,479

  Revenue reserve

59,654

59,046

55,068

54,774


----------

----------

----------

----------

Total equity

1,577,330

1,577,330

1,441,247

1,441,247











Net asset value per ordinary share

788.39p

788.39p

760.31p

760.31p

Page 33 of 38

 

 

Consolidated and Individual Company Cash Flow Statements

for the year ended 31 December 2015

 

 

Group

Company

Group

Company


2015

2015

2014

2014


£'000

£'000

£'000

£'000

Operating activities





Profit before taxation

85,462

85,462

96,537

96,537

Interest paid

9,683

9,683

8,210

8,210

Gains on investments held at fair value through profit or loss

 

(64,563)

 

(64,877)

 

(79,073)

 

(79,228)

Net purchases of investments held at fair value through profit or loss

 

(91,933)

 

(91,933)

 

(38,165)

 

(38,165)

Net gain from futures contracts

1,048

1,048

6,413

6,413

Scrip dividends included in investment income

 

(1,116)

 

(1,116)

 

(1,200)

 

(1,200)

Increase in other receivables

(2,545)

(1,846)

(302)

(440)

(Decrease)/increase in other payables

 

(592)

 

(564)

 

956

 

991


----------

-----------

----------

-----------

Net cash outflow from operating activities before interest and taxation

 

 

(64,556)

 

 

(64,143)

 

 

(6,624)

 

 

(6,882)






Interest paid

(9,347)

(9,347)

(8,149)

(8,149)

Tax on overseas income

(1,745)

(1,745)

(1,962)

(1,962)

Recovery of prior years' withholding tax

 

103

 

103

 

581

 

581


----------

-----------

----------

-----------

Net cash outflow from operating activities

 

(75,545)

 

(75,132)

 

(16,154)

 

(16,412)


----------

-----------

----------

-----------

Financing activities





Equity dividends paid

(31,373)

(31,373)

(28,947)

(28,947)

Issue of Secured Notes net of issue expenses

 

74,472

 

74,472

 

-

 

-

Buybacks of ordinary shares

-

-

(363)

(363)

Issue proceeds of ordinary shares

85,702

85,702

365

365

(Repayment)/drawdown of bank loans

(42,000)

(42,000)

35,000

35,000


----------

-----------

----------

-----------

Net cash inflow from financing

86,801

86,801

6,055

6,055


----------

-----------

----------

-----------






Increase/(decrease) in cash and cash equivalents

 

11,256

 

11,669

 

(10,099)

 

(10,357)

Cash and cash equivalents at the start of the period

 

46,554

 

45,136

 

57,532

 

56,372

Effect of foreign exchange rate changes

 

(223)

 

(223)

 

(879)

 

(879)


----------

-----------

----------

-----------

Cash and cash equivalents at the end of the period

 

57,587

 

56,582

 

46,554

 

45,136







 

 

Page 34 of 38

 

 

Notes to the Financial Statements 

for the year ended 31 December 2015

 

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 November 2014 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.

 

Sources of estimation uncertainty

In the application of the Group's accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not always readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may vary from these estimates.

 

(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 Strategic Report on pages 6 to 26. The financial position of the Group as at 31 December 2015 is shown on the balance sheet on page 32. The cash flows of the Group for the year ended 31 December 2015 are not untypical and are set out on page 33. The Company had fixed debt and preference share capital totalling £184,975,000, as set out in the Annual Report; the 8.5% Debenture Stock is repayable 2016. In 2015, the Group renewed a one-year secured multi-currency borrowing facility for £50 million, of which £3 million was drawn down at 31 December 2015 (2014: £45 million). The Company issued two Secured Notes repayable in 2035 and 2045 for £21 million and £54 million respectively.

 

 

(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.

 

 

 

 

 

Page 35 of 38

 

 

Notes to the Financial Statements continued

 

2.             Investment income

 




2015

2014


£'000

£'000

Franked:



UK dividends from listed investments

19,416

16,160

UK special dividends from listed investments

1,124

346


-----------

-----------


20,540

16,506


-----------

-----------

Unfranked:



Overseas dividends from listed investments

22,396

19,592

Overseas special dividends from listed investments

716

128

Property income dividends

47

-

Scrip dividends from listed investments

1,116

1,200

Fixed interest and convertible bonds

1,003

871


-----------

-----------


25,278

21,791


-----------

-----------

Total investment income

45,818

38,297





2015

2014


£'000

£'000

Analysis of investment income by geographical segment:



United Kingdom

21,645

17,409

North America

6,685

5,958

Continental Europe

9,244

7,515

Japan

1,666

1,218

Asia Pacific (ex Japan)

5,055

4,119

Latin America

207

389

Other

1,316

1,689


-----------

-----------

Total investment income

45,818

38,297

 

 

3.             Other income




2015

2014


£'000

£'000

Deposit interest

127

202

Stock lending income

186

140

Income from the subsidiary company's third party business

1,147

1,098


-----------

-----------


1,460

1,440

 

 

 

 

 

 

 

 

 

 

 

Page 36 of 38

 

 

Notes to the Financial Statements continued

 

4.             Management fees

 

Year ended 31 December 2014


Revenue

Capital

Total

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000








Management fees

1,747

5,241

6,988

1,541

4,625

6,166

Performance fees

-

4,298

4,298

-

2,998

2,998


----------

-----------

-----------

----------

-----------

-----------


1,747

9,539

11,286

1,541

7,623

9,164

 

 

5.             Earnings per ordinary share

 

The earnings per ordinary share figure is based on the net profit for the year of £83,683,000 (2014: £95,319,000) and on 194,455,343 ordinary shares (2014: 189,302,044), being the weighted average number of ordinary shares in issue during the year.

 

The earnings 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.

 

2015

2014


£'000

£'000




Net revenue profit

35,959

30,065

Net capital profit

47,724

65,254


----------

----------

Net total profit

83,683

95,319




Weighted average number of ordinary shares in issue during the year

194,455,343

189,302,044


2015

2014


Pence

Pence

Revenue earnings per ordinary share

18.49

15.88

Capital earnings per ordinary share

24.54

34.47


----------

----------

Total earnings per ordinary share

43.03

50.35




 

 

6.            Issued Share Capital

 

The number of ordinary shares of 25p each in issue at 31 December 2015 was 200,071,000 (2014: 189,561,000).

 

 

 

 

 

 

 

 

 

 

 

 

Page 37 of 38

 

 

Notes to the Financial Statements continued 

 

7.             Dividends

 

 2015

£'000

2014

£'000

Amounts recognised as distributions to equity holders in the year:



Fourth interim dividend for the year ended 31 December 2014 of 4.6p (2013 4.5p) per ordinary share

 

8,727

 

8,519

First interim dividend for the year ended 31 December 2015 of 3.85p (2014: 3.6p) per ordinary share

 

7,450

 

6,815

Second interim dividend for the year ended 31 December 2015 of 3.85p (2014: 3.6p) per ordinary share

 

7,550

 

6,815

Third interim dividend for the year ended 31 December 2015 of 3.85p (2014: 3.6p) per ordinary share

 

7,670

 

6,815




Refund of unclaimed dividends

(24)

(17)


----------

----------


31,373

28,947


======

======




Fourth interim dividend for the year ended 31 December 2015 of 5.45p (2014: 4.6p) per ordinary share

 

10,895

 

8,727


======

======




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 2010 are considered.



2015

£'000

2014

£'000

Revenue profits available for distribution

35,959

30,065

First interim dividend for the year ended 31 December 2015 of 3.85p (2014: 3.6p)

per ordinary share

 

(7,450)

 

(6,815)

Second interim dividend for the year ended 31 December 2015 of 3.85p (2014: 3.6p)

per ordinary share

 

(7,550)

 

(6,815)

Third interim dividend for the year ended 31 December 2015 at 3.85p (2014: 3.6p) per ordinary share

 

(7,670)

 

(6,815)

Fourth interim dividend for the year ended 31 December 2015 of 5.45p (2014: 4.6p) per ordinary share

 

(10,895)

 

(8,727)


----------

----------

Revenue retained for the year

2,394

893


======

======

 

8.         2015 Accounts

 

The figures and financial information for 2015 are extracted from the Annual Report and Financial Statements for the year ended 31 December 2015 and do not constitute the statutory accounts for the year.  The Annual Report and Financial Statements include the Report of the Independent Auditor 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 have not yet been delivered to the Registrar of Companies.

 

9.         2014 Accounts

 

The figures and financial information for 2014 are extracted from the published Annual Report and Financial Statements for the year ended 31 December 2014 and do not constitute the statutory accounts for that year.  The Annual Report and Financial Statements have been delivered to the Registrar of Companies and included the Report of the Independent Auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

 

 

Page 38 of 38

 

 

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 2016 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 Thursday, 28 April 2016 at Merchant Taylors' Hall, 30 Threadneedle Street, London EC2R 8JB.

 

 

 

For further information please contact:

 

Andrew Bell

Chief Executive

Witan Investment Trust plc

Telephone:  020 7227 9770

 

Hannah Philp

Director of Marketing

Witan Investment Trust plc

Telephone:  020 7227 9770

 

- 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
The company news service from the London Stock Exchange
 
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