Final Results

RNS Number : 5184S

Witan Investment Trust PLC

12 March 2019

 

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WITAN INVESTMENT TRUST PLC

This announcement contains regulated information

            Annual Financial Report for the year ended 31 December 2018

Chairman's Report

Highlights

·    NAV total return of -8.4%, underperforming the benchmark's return of -6.5% by 1.9%

·    5 year NAV total return of 52.1%, compared with 44.6% for the benchmark

·    Share price discount to NAV 1.3% at year-end (2017: 1.6%)

·    Dividend increased by 11.9% to 23.5 pence, more than double that paid in 2008 and an unbroken run of increases since 1974

Witan has invested with a multi-manager approach since 2004. Over this period we have beaten the returns on our equity benchmark and raised the dividend significantly faster than the rate of inflation. After several years of strong performance, our net asset value fell in 2018 and we underperformed, in what proved to be a challenging year.

During 2018, US economic growth (helped by a following wind from tax cuts) was stronger than in other developed economies, while growth elsewhere generally fell short of forecasts. In the UK the extended Brexit negotiations and related government disunity also continued to weigh on corporate and investor confidence. In addition, the US Federal Reserve steadily raised rates during the year and began to withdraw the liquidity from its earlier quantitative easing policy. Although this reflected strength in its own economy, the resulting squeeze put pressure on borrowers of dollars elsewhere, particularly in emerging markets. 

With generally positive news on corporate earnings contending with these emerging concerns about a future trade war and the tightening of global liquidity, market fortunes fluctuated. A volatile first quarter was followed by generally positive returns in the middle quarters of the year and a very weak final quarter, on fears that the US rate tightening may have gone too far and might push the US into recession.

For much of the year, Witan's returns were positive and ahead of our benchmark but the weakness towards the end of the year delivered a setback in both absolute and relative terms. The net asset value ('NAV') total return was -8.4%, 1.9% behind our benchmark's total return of -6.5%. The share price total return was -8.1 %.

Taking a longer perspective, over the past five years Witan has achieved a NAV total return of 52.1%, compared with the benchmark's 44.6% return over this period. During the ten years from the depths of the 2008 financial crisis to the end of 2018, shareholders have had a NAV total return of 207.1%, compared with the benchmark's return of 163.4%.

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Chairman's Report continued

2018's dividend

A fourth interim dividend of 7.75 pence was declared in February 2019, payable on 21 March 2019. As a result, the dividend for the year increased by 11.9% to 23.5 pence per share (2017: 21.0 pence), well ahead of the 2.1% rate of UK inflation at the year end. The dividend is fully covered by revenue earnings, with £4.7m added to revenue reserves. We have increased the dividend every year for the last 44 years, with the latest dividend more than double that paid in 2008. A chart in the annual report shows the dividend's growth over the past 10 years, compared with inflation.

Savings Schemes

As announced in January 2019, Witan will be closing the Witan Wisdom and Jump savings plans in May 2019. The reasons behind the decision were fully set out in the January letter to account holders. In summary, a wide range of alternative platforms has grown up offering greater choice and better online capability than our own schemes. The costs of operating the Witan Wisdom and Jump platforms exceed the charges paid by account holders, even before the cost of upgrading the capabilities to match those elsewhere. Reluctantly, therefore, the decision was made to cease managing our own savings plans, offering the choice between a transfer to Hargreaves Lansdown, a FTSE 100 company specialising in the provision of investment accounts, a move to the investor's preferred platform, a transfer to the main register or closure. Witan is waiving all transfer charges and believes that the change will be to the benefit of account holders, who will enjoy enhanced service and choice at a competitive cost.

Proposed share split

The Board is proposing a share split, whereby shareholders will receive five shares with a par value of 5 pence in place of every share of 25 pence par value currently held. In addition, the current voting arrangement whereby shareholders have one vote for every four shares held will be replaced by one vote for each new share of 5 pence par value.

This will make no fundamental difference to the value of shareholdings. Assuming the proposal is approved by shareholders, the share price, net asset value per share and dividend per share can be expected to be one fifth of the level prevailing the day before the split, exactly reflecting the increase in the number of shares.

The intention is to make Witan's shares more accessible, particularly for those making regular savings or reinvesting dividends, where the approximately £10 share price in recent years may not be an ideal unit size to deal in. Furthermore, the previous position of one vote per four shares held was anomalous.

Board changes

As announced to the Stock Exchange in December 2018, I shall be standing down as Chairman at the AGM in 2020. A search for a new Director, who will in due course take over as Chairman, is under way, using external consultants.

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Chairman's Report continued

The Board is committed to the benefits of having a diverse board and is aware that in 2018 it had a less diverse board with fewer female directors than the desired minimum of 25%. This is unusual, as the Company met this test for the five years from 2012 to 2016, and it results from the pattern of retirements and appointments since 2017. As part of its succession planning, the Company has put in place a search for an additional new director, with re-emphasised guidelines having been given to the search consultant to ensure a fully diverse list of qualified candidates. An announcement will be made when this search has been completed.

AGM

Our Annual General Meeting will be held at Merchant Taylors' Hall on Wednesday 1 May 2019 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 111th AGM.

Harry Henderson

Chairman

11 March 2019

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

CEO's review of the year

The investment markets in 2018

Equity markets were volatile during the year and, after a notably weak fourth quarter, they ended the year with moderate losses, with global equities down in sterling terms. The standout performer in 2018 was the US market, with a small positive return of 1.4%, in a reversal of 2017 (when it was the weakest region). The UK and Europe were down 9.5% and 9.1% respectively. The Pacific Basin was down 8.1% and Emerging Markets fell 7.6%.

2018 was a year when macro-economic and political worries (such as Brexit, rising US rates and the US-China trade dispute) dominated the headlines. This proved a less auspicious climate for stock pickers than 2017 and our external managers as a whole were barely ahead of their benchmarks, providing little offset to our operating costs. Gearing was also a handicap during a year when markets ended in negative territory.  As a result, our net asset value total return lagged our benchmark by 1.9% in 2018.

Outlook 

Towards the end of 2018, investors became unnerved by concerns that US interest rate rises and tightening liquidity might be overdone, jeopardising global economic growth. The trade disputes initiated by the US with its trading partners, particularly China, were a further negative factor. Oil price rises earlier in the year had also increased inflation rates, while the uninspiring progress of the Brexit negotiations continued to dampen the domestic mood in the UK.

Corporate earnings and dividends grew while share prices as a whole fell, particularly in the final months of the year, so equity valuations finished the year lower. A mood took hold that 2018 might prove to be the peak in the economic cycle, leading investors to discount today's sunshine for fear of rain tomorrow.

Although it is normal for financial markets to be forward looking they are not clairvoyant, being prone to over-optimism and excessive gloom. Even as the investment mood darkened in December, the prevailing policy worries appeared to be improving. The oil price fell sharply, as new supplies came to the market. This acts as a tax cut for consumers of oil and, by lowering inflation rates, reduces the risk that central banks will have to raise rates to combat inflation. The US-China trade dispute is unresolved but talks are underway to mitigate it. The US Federal Reserve still plans to raise rates but has made clear that its actions are dependent on news from the economy, not on an automated path.

The risk of a "cliff-edge" Brexit with no transitional arrangements appears to have reduced, although the shape of any ultimate deal remains profoundly uncertain. The risks have been widely analysed over the past two years and may well be largely discounted given the weak performance of the UK stock market (most of whose economic exposure is overseas). Our managers will continue to take account of the implications of Brexit when selecting stocks for their portfolios. Given the relatively minor economic importance of the UK and the Company's global investment remit, this is only one of a number of economic factors affecting the outlook for Witan's portfolio. The risks for the UK domestic economy are more significant and the political uncertainty related to the lack of unity in the government and the radical policies of the opposition continue to cloud investor attitudes towards the UK.

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

CEO's review continued

2018 started with apparently improving economic growth and (in the wake of the US tax cuts) a tangible mood of optimism. This set the stage for a tricky year as liquidity tightened, economic growth disappointed and US trade and foreign policy surprises proved unsettling. By contrast, 2019 started with sentiment overwhelmingly pessimistic. Whilst concerns over trade, recession and European disunity might be proved correct, recent developments suggest this is not a one-way bet. The risks are more fully recognised and positive surprises seem just as possible as unexpected shocks.

Given current equity valuations, against a background where interest rates are likely to remain well below historic norms, we believe that 2019 has the potential to deliver attractive investment returns despite (or partly because of) the pervading gloom at the end of 2018. At worst, time appears to be more clearly on the side of contrarian, patient equity investment than a year ago, with valuations lower and risk aversion in the ascendant.

2018 Performance summary and attribution

The financial statements set out the required statutory reporting measures of the Company's financial performance.

As referred to in the Chairman's Statement, Witan's NAV total return (with debt at fair value and after all costs) was -8.4%, 1.9% behind the return of -6.5% from the Company's benchmark.

Performance drivers of Witan's growth in net asset value during 2018

A chart in the annual report shows the contributions (in pence per share) attributable to the various components of investment performance and costs, which together add up to the decline from the starting NAV for the year of 1096.2 pence to the ending NAV of 983.4 pence, after the payment of dividends to shareholders.

In a difficult year for active management, the third party managers, in aggregate, performed only slightly ahead of their benchmarks (before costs) and gearing was a negative contributor in the falling markets that prevailed at the end of the year.

A breakdown of the performance attribution in 2018 (based on the Company's financial statements) is shown in the table below.  

Net asset value total return	-8.4%	Portfolio total return (gross)	-6.3%
Benchmark total return	-6.5%	Benchmark total return	-6.5%
		Relative investment performance	+0.2%
		Investment management costs	-0.6%
		Investment contribution		-0.4%
		Gearing impact	-0.8%
		Borrowing costs	-0.4%
		Gearing contribution		-1.2%
		Effect of changed fair value of debt	+0.2%
		Share buybacks	+0.0%
		Other contributors		+0.2%
		Other operating costs and tax	-0.5%
				-0.5%
Relative performance(1)	-1.9%			-1.9%

(1): n.b. figures may not sum, due to rounding

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

CEO's review continued

Portfolio structure and performance

There were no changes during 2018 to Witan's list of ten core third party managers.

The third party managers follow mandates set by the Company. The mandate, benchmark, investment style and the date of appointment for each manager are shown in the annual report. The returns since each manager's appointment are set out in the table below showing that, since inception, the majority have outperformed their benchmarks. Of the three which have underperformed, two have been in place for just over a year.

Although Witan's overall performance is the primary focus, monitoring individual managers' performance is an important check. In 2018, four of the ten third party managers in place for the full year and the internally managed Direct Holdings portfolio outperformed their benchmarks. These accounted for 49% of Witan's assets but were not sufficient to offset underperformance by the other six managers.

Positive relative performances were achieved by Lindsell Train (outperforming the UK market by 9.5%), Veritas (outperforming the world index by 4.6%), Matthews (outperforming the Pacific Basin by 2.3%), GQG (0.1% ahead of its emerging market benchmark) and the Direct Holdings portfolio (which outperformed Witan's benchmark by 5.1%). It is something of a comment on the year that only one of these (Veritas at +1.2%) delivered a positive absolute return. On the downside, our European managers both underperformed, SW Mitchell by 10.4% and CRUX by 3.5%. Artemis lagged the UK by 3.5% and Pzena underperformed the global index benchmark by 5.6%, in a difficult year for value managers.

 Investment managers' performance

	Witan assets managed at 31.12.18		Performance in 2018 (%)		Performance since appointment (%) (note 2)
Investment manager	£m	% (Note 1)	Manager	Benchmark	Manager	Benchmark
Artemis	151.4	7.5	(13.0)	(9.5)	7.7	5.2
Heronbridge	124.1	6.1	(10.1)	(9.5)	7.0	5.4
Lindsell Train	175.5	8.7	0.0	(9.5)	14.6	7.5
Lansdowne Partners	302.9	15.0	(5.4)	(3.4)	17.5	12.2
Pzena	276.5	13.7	(9.0)	(3.4)	8.9	10.6
Veritas	294.6	14.6	1.2	(3.4)	12.8	10.2
CRUX	92.1	4.6	(13.0)	(9.5)	(10.7)	(9.2)
SW Mitchell	85.9	4.2	(19.9)	(9.5)	(18.0)	(9.2)
Matthews	238.3	11.8	(5.6)	(7.9)	9.3	7.5
GQG	96.5	4.8	(8.8)	(8.9)	3.4	3.0
Witan Direct Holdings	201.8	10.0	(1.4)	(6.5)	11.2	8.0

(1)  The percentage of Witan's investments managed and cash balances held centrally by Witan.

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

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

CEO's review continued

Directly held investments

The Direct Holdings portfolio delivered a return of -1.4%, 5.1% ahead of the -6.5% performance from Witan's benchmark. Returns were driven by positive performances from the specialist life sciences company Syncona (+34%) and the NB Distressed Debt Investment Fund (+7.7%), offsetting falls in value for other holdings (source: Bloomberg).

The portfolio held 9.1% of assets at the start of the year and was 9.3% of the investment portfolio at the end of 2018, in addition to which 0.7% was allocated to a newly established manager, Latitude Investment Management (see details below).

The main direct investments are listed in the UK but the underlying exposure currently bears little relation to the UK economy or stock market. 40% is in listed private equity funds with mostly international investments. 30% is in life sciences and biotechnology. Within this, the largest holding, Syncona, has had significant success backing a portfolio of new companies based in the UK, in highly-specialised areas of cell and gene therapy where the markets are international. 16% is invested in the international mining sector via a holding the Blackrock World Mining Trust, with the remaining holdings being 8% in an emerging markets smaller companies fund and 7% in a distressed debt fund.

In addition to the collective fund holdings, a portfolio amounting to 0.7% of Witan's assets was allocated to Latitude Investment Management in April, for investment in global equities. This manager was chosen, after an extended period of due diligence, as part of a programme of seeking to identify newly established managers with the potential to contribute positively to Witan's future returns. This portfolio outperformed significantly, with a total return of 6.3% compared with the 1.0% return from its global index benchmark during the nine months from April to December.

Structure of borrowings

The Company has fixed-rate borrowings of £170.4m, principally consisting of:

Secured Bonds 2025 6.125%   £64m

Secured Notes 2035 3.29%     £21m

Secured Notes 2045 3.47%     £54m

Secured Notes 2054 2.74%     £30m

The Company has a £125m one-year borrowing 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. The drawn balance was £81m at the end of 2018. The average interest rate on the Company's fixed-rate borrowings is 4.3%. The average interest rate, including short-term borrowings, is currently 3.3%.

Witan may either invest its borrowings fully, or neutralise their effect with cash balances according to its assessment of the markets. The Company's third party managers are not permitted to borrow within their portfolios but may hold cash.

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

CEO's review continued

Gearing activity during 2018

There were no changes in the Company's longer-term gearing securities in 2018.

Gearing fluctuated around 10% for most of the year. In retrospect, this was a drawback, as the benefit gained during the first nine months of the year was more than negated by the headwind from being geared during the fourth quarter's 10.5% fall in global markets.

At the end of 2017, gross gearing (the total value of all investment positions less cash) was 9.7%. This included £23m in European equity index futures, equivalent to 1.2% of net assets. Gearing excluding this was 8.5%. At the end of 2018, gross gearing (on the same basis) was 11.6%. This included £25m in Emerging Markets equity index futures, equivalent to 1.4% of net assets. Gearing excluding this was 10.2%. Further details of the accounting treatment for these positions are given in a note to the financial statements.

Derivatives activity during 2018

The £23m holding in European equity index futures at the end of 2017 was sold in early January and £20m invested directly with our two Europe ex-UK equity managers.

During the summer, a small investment in Emerging Markets equity index futures was initiated. This was added to gradually, reflecting a balance between the market's evident concerns on the outlook for growth and the value on offer. The value as at the end of the year was £25m. 

There was a realised capital loss on index futures during the year of £1.3m, as shown in the cash flow statement on page 24 (2017: £7.6m gain).

Dividend performance in 2018

Revenue earnings increased by 8.8% to 25.9 pence per share in 2018. Portfolio dividends increased and, for much of the year, there was a favourable foreign exchange impact on overseas currency dividends, due to the weakness of sterling.

The Company pays dividends quarterly. For 2018, the Board has declared a fourth interim dividend of 7.75 pence per share, to be paid to shareholders on 21 March 2018, making a total distribution for the year of 23.5 pence (2017: 21.0 pence). This represents an increase of 11.9%, 9.7% ahead of the 2.1% rate of CPI inflation in the year to December 2018.

In addition to increasing the dividend, the Company has added £4.7m to its revenue reserves. At £65m after allowing for 2018's fourth interim payment, the reserves are equivalent to one and a half times the annual dividend. These reserves enable the Company to maintain or grow its dividends in years when revenue from the portfolio is less buoyant, or falls.

Since 2008, Witan's dividend per share has more than doubled, rising 130% compared with 25% for the UK CPI and 65% dividend growth for the UK market (Source: Datastream).

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

CEO's review continued

2019 Dividends

The first three quarterly payments for 2019 (in June, September and December) will, in the absence of unforeseen circumstances, be paid at a rate of 5.875 pence per share (2018: 5.25 pence), being one quarter of the 23.5 pence per share full-year payment for 2018.

Assuming that at the 2019 AGM shareholders approve the proposed five for one share split, the first three payments for 2019 will be adjusted proportionately, to 1.175 pence per share (compared with the adjusted equivalent of 1.05 pence per share for 2018), one quarter of the 4.7 pence full year payment for 2018 (23.5 pence divided by five).

The share split will not affect the dividend income received by shareholders, as the greater number of shares held will be offset exactly by the adjusted payment per share.

The fourth payment (in March 2020) will be a balancing amount, reflecting the difference between the three quarterly dividends already paid and the payment decided for the full year.

Witan's shares in the market - liquidity and discounts

Witan is a member of the FTSE 250 index, with a market capitalisation of over £1.7 bn.

The Board has also always paid attention to discount-related issues and has, over many years, made significant use of share buybacks, purchasing shares when they have stood at an unduly wide discount. In addition to being accretive to NAV, this has the objective of reducing the discount.

Witan Investment Trust discount trend

The discount trend since 2014 is illustrated in a chart in the annual report. After the exceptional discount widening experienced during 2016 (affected by an institutional share sale and the aftermath of the Brexit vote) the discount has been stable in a range around 2% since early 2017.

During 2018, Witan bought 240,221 shares into treasury, at an average discount of 1.7%. Although the £42,000 added to the net asset value for remaining shareholders was modest, the activity helps to maintain a balance between supply and demand in the market.

Discounts are affected by many factors outside the Company's control but where it is in shareholders' interests, (taking account of market conditions) the Company is prepared to buy back shares at a discount to NAV or to issue shares at a premium. It remains a long-term objective to create sustainable liquidity in Witan's shares at or near to asset value. The actions taken during 2018 are evidence of this continuing commitment.

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

CEO's review continued

Communication

The Board believes that it is important to communicate the Company's strategy and operating results to existing and potential shareholders, to ensure they have access to relevant information concerning Witan's record as stewards of shareholders' capital and to help sustain a liquid market in Witan's shares. Clear communication of the Company's investment objective and its success in implementing its strategy can help investors to decide how Witan fits in with their own investment objectives. This should help the shares to trade at a narrow discount or premium to NAV, from which all shareholders benefit. If the shares trade on a premium, new shares may be issued to meet market demand, increasing the size of the Company, which benefits liquidity as well as spreading costs. When the shares are on a discount, buying back shares is accretive for NAV per share and helps reduce the discount.

The Company has for many years operated a marketing programme, communicating information about its investment strategy and performance to private and professional investors, financial advisers and intermediaries using a range of media. Investors can purchase shares on a wide range of investment platforms.  The Company also maintains a website (www.witan.com), to enable investors to make informed decisions when considering Witan shares for their investment portfolios. The website is regularly refreshed with new information and includes Investor Disclosure and Key Information Documents.

Andrew Bell

Chief Executive

11 March 2019

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Strategic Report continued

Costs

Investment management fees

Each of the third party managers is entitled to a management fee, based on the assets under management. The agreements can be terminated on one to three months' notice. The base fee rates for managers in place at the end of 2018 range from 0.25% to 0.70% per annum. The weighted average base fee was 0.52% as at 31 December 2018 (2017: 0.52%). Two managers, in total managing 16% of Witan's portfolio, have performance-related fees, which are subject to capping in any particular year. They have lower base fees than the managers without performance fees.

As an illustration, if our third party managers uniformly outperformed their benchmarks by 3% after base management fees, this would generate a total investment management fee rate of 0.57% (including a 0.52% base fee and a performance fee of 0.05%), 1% lower than the comparable estimate in 2017 (0.58%). The actual fees payable will vary according to the actual performance of managers with higher or lower fees.

Witan takes care to ensure the competitiveness of the fees it pays. A majority of the fee structures incorporate a 'taper' whereby the average fee rate reduces as the portfolio grows.

The Company's investment managers may use certain services which are paid for, or provided by, various brokers. They may place business, including transactions relating to the Company, with those brokers. Under the requirements of MiFID II, broker-provided services (other than the execution of transactions) must either be minor non-monetary benefits or, for research received by investment managers and charged to the Company, separately accounted for.

Ongoing charges and costs

The Key Information Document on the Company's website contains a measure of costs calculated in accordance with EU PRIIPS regulations, which includes average figures over a period. In accordance with AIC guidance, Witan continues to calculate the ongoing charges figure ('OCF') (the recurring operating and investment management costs, as a percentage of average net assets) for the annual report on a consistent basis with those published in previous years, to facilitate comparison. It is emphasised that the Company's investment performance is reported after all costs, whichever measure is used.

The OCF was 0.75% in 2018 (2017: 0.76%). When performance fees due to the relevant third party managers are included, the OCF was 0.83% in 2018 (2017: 0.78%). One of the two managers with a performance fee structure significantly outperformed during 2018, which explains why the OCF including performance fees was greater than the basic OCF, in a year when the portfolio as a whole underperformed. This is a relatively unusual combination of circumstances. For perspective, the performance fee generated in 2017, when Witan's NAV total return outperformed by 3.7%, was relatively small, as performance in that year was driven by managers without performance fee structures.

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Strategic Report continued

The main cost headings within the OCF are set out in the table below. As in previous years, the figure for transaction costs is also shown. The figure for borrowing costs is also included in the table, for easy reference.

The Company exercises strict scrutiny and control over costs. The Board believes that the OCF during the year represents good value for money for shareholders, taking account of recent and longer-term performance.

Category of cost	2018 £m	2018 % of average net assets	2017 £m	2017 % of average net assets
Investment management base fees (note 4)	10.14	0.53	9.02	0.49
Other expenses (excluding loan arrangement and one-off costs)	5.85	0.30	6.46	0.35
Less expenses relating to the subsidiary (those expenses not relating to the operation of the investment company).	(1.45)	(0.08)	(1.45)	(0.08)
Ongoing Charges Figure (including investment management base fees)	14.54	0.75	14.03	0.76
Investment management performance fees (note 4)	1.56	0.08	0.53	0.02
Ongoing Charges Figure (including performance fees)	16.10	0.83	14.56	0.78
Portfolio transaction costs(including costs relating to manager changes)	2.52	0.13	3.18	0.17
Interest costs	8.37	0.43	7.62	0.41
Total costs including transaction costs and borrowing costs	26.99	1.40	25.35	1.37
Relative performance during the year (after all costs, valuing debt at fair value)		(1.9)%		3.9%

Corporate and operational structure

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.

The overwhelming majority of the portfolio is in segregated accounts, held in custody by the Company's depositary. The operations of the custodian and the safeguarding of the Company's assets are supervised by the depositary.

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Operational management arrangements

In addition to the appointment of third-party investment managers, Witan and WIS contract with third parties for other services, including:

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

§ Frostrow Capital LLP for company secretarial services;

§ DST Services Ltd. ('DST') as the savings plan administrator of Witan Wisdom and Jump Savings;

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

The service quality and value received from major service providers are reviewed regularly by the Board.

The contracts governing the provision of all services are formulated with legal advice and stipulate clear objectives and guidelines for service required.

Staffing

The Company's policy towards its employees is to attract and retain staff with the 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 at Witan are treated equally regardless of gender, marital status, colour, race, religion or ethnic origin. The Company has seven direct employees, four men and three women. The Board currently consists of seven non-executive directors (six men and one woman) 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 

Witan Investment Services Limited is authorised and regulated by the Financial Conduct Authority ('FCA'). It is authorised to act as Witan's AIFM, to provide investment savings accounts and marketing services and to give investment advice to professional investors.

WIS's principal activities are acting as Witan's AIFM, providing executive management services to the Boards of Witan and Witan Pacific Investment Trust plc ('Witan Pacific') and communicating information about the companies to the market.

WIS's operational objectives for 2018 were:

§ to fulfil its responsibilities as Witan's AIFM;

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

§ to facilitate the  implementation of new arrangements for members of the Witan Wisdom and Jump Savings Plans, which are due to close in May 2019;

§ to reduce the net operating costs for Witan; and

§ to seek appropriate business opportunities that can add value for shareholders.

In 2018, WIS had two principal sources of income. These were savings plan revenues and the fees (as AIFM or Executive Manager and for marketing services) paid by Witan and Witan Pacific. The main costs incurred were fees to the savings schemes administrator ('DST'), staff costs and professional advice to ensure compliance with regulatory and accounting obligations.

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WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Principal risks and uncertainties

The directors have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. These risks, and the actions taken to mitigate them, are set out on pages 14 to 16.

Risks are inherent in investment and corporate management. It is important to identify important risks and ways to control or avoid them. Witan Investment Services Limited ('WIS') has a Risk Committee in order to monitor compliance with its risk management and reporting obligations as Witan's Alternative Investment Fund Manager ('AIFM'). The Company maintains a framework of the key risks, with the policies and processes devised to manage them. Its detailed risk map is reviewed regularly by the Audit Committee and the WIS Risk Committee, which report on pertinent issues to their respective Boards. 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 six 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
Risk	Mitigation
Equity exposure is unlikely to drop below 80% of net assets in normal conditions so a key risk of investing in Witan is a general fall in equity prices, which could be exacerbated by gearing. Other risks are the portfolio's exposure to country, currency, industrial sector and stock specific factors. There are also risks associated with the performance of its investment managers and changes in Witan's share price rating.	The Board seeks to manage these risks through: § a broadly diversified equity benchmark; § appropriate asset allocation decisions § selecting competent managers and regularly monitoring performance; § paying attention to key economic and political events; § active management of risk, whether to preserve capital or capitalise on opportunities; § the application of relevant policies on gearing and liquidity; and § 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 determined by the Board and its AIFM, on which the CEO reports at each Board meeting. The Board also regularly reviews investment strategy and performance, supported by comprehensive management information and analysis.

Page 15 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Operational
Risk	Mitigation
Many of the Group's financial systems are outsourced to third parties, principally BNP Paribas Securities Services ('BNPSS'). Disruption to their accounting, payment systems or custody records 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. DST Services acts as the Administrator for the current Witan Wisdom and Jump Savings Plans so the effectiveness of their systems and controls is also key. Details of the Board's monitoring and control processes are explained further in the Corporate Governance Statement in the annual report.

Compliance and regulatory change
Risk	Mitigation
The Company breaches compliance/regulatory requirements or fails to assess the impact.	The Board takes its regulatory responsibilities very seriously and compliance issues and potential regulatory changes are regularly reviewed by the Board and its AIFM. Details of the Company's corporate governance policies are set out in the Corporate Governance Statement in the annual report. The Board conducts an annual assessment of the effectiveness of its governance processes. There is also a three-yearly independent external review, the most recent of which was in late 2016. Operational and regulatory risks are regularly reviewed by Witan's Audit Committee and WIS's Risk Committee. WIS is subject to its own operating rules and regulations and is regulated by the FCA. The Company has established a modus operandi for the effective coordination of its responsibilities and those of WIS, as its AIFM. 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 safeguards. Management monitors the activities of all third parties and reports any significant issues to the Board.

Page 16 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Accounting, taxation and legal
Risk	Mitigation
The Company must comply with sections 1158-59 of the Corporation Tax Act 2010 ('CTA'). A breach could result in the Company losing investment trust status and, as a consequence, capital gains realised would be subject to corporation tax. The Company must comply with the provisions of the Companies Act 2006 ('Companies Act') and 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 itself constitute a breach of the provisions of the CTA.	The accounting criteria are monitored by the CEO and AIFM and the Company carefully monitors compliance with the applicable rules. These 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 authorised and regulated by the FCA to act as the AIFM for Witan, for the administration of savings plans and to provide marketing services and investment advice to professional clients.

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

Page 17 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Viability statement

In accordance with the 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 Company's current position and prospects are set out in the Chairman's and Chief Executive's Report and the Strategic Report. The principal risks are set out on pages 14 to 16. 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. In normal conditions, the current portfolio could be liquidated to the extent of more than 87% within five trading days and there is no expectation that the nature of the investments held 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 note 14 to the accounts, 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 £72m at 31 December 2018 (2017: £76m), the Company has a short-term bank facility which can be used to meet its liabilities, and fixed-rate financing in the form of secured bonds, secured notes and cumulative preference shares. With the exception of the short-term facility, this financing will remain in place until at least 2025. Details of the Company's non-current liabilities are set out in note 13 to the accounts.

➜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.

As well as considering the principal risks on pages 14 to 16 and the financial position of the Company, the Board has made 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 will continue to be able to fund share buybacks when required. The Company bought back 0.24m ordinary shares in 2018 at a cost of £2.5m and experienced no problem with liquidity in doing so. It had shareholders' funds in excess of £1.7bn at the end of 2018.

Page 18 of 29

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2018

Viability statement continued

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. The Board has chosen this period because, whilst it has no information to suggest this judgement will need to change in the coming five years, forecasting over longer periods is imprecise. The Board's long-term view of viability will of course be updated each year in the annual report.

Going concern

In light of the conclusions drawn in the foregoing Liquidity and Viability Statements, the Company has adequate financial resources to continue in operational existence for at least the next 12 months. 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.

Approval

This report was approved by the Board of Directors on 11 March 2019 and is signed on its behalf by:

H M Henderson                                   A L C Bell

Chairman                                              Chief Executive

11 March 2019

Page 19 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

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; and

·    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 14 to 16) of the principal risks and uncertainties that they face.

The directors also confirm that 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.

By order of the Board

H M Henderson

Chairman

A L C Bell

Chief Executive

11 March 2019

                                                                                                                                          Page 20 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Financial Highlights as at 31 December 2018

Key data

	2018	2017	% change
Share price	971.0p	1079.0p	-10.0
NAV per ordinary share (debt at par value)(3)	995.1p	1109.8p	-10.3
NAV per ordinary share (debt at fair value)(3)	983.4p	1096.2p	-10.3
Discount (NAV including income, debt at fair value)(3)	1.3%	1.6%

Total return performance

	1yr % Return	3yrs % Return	5yrs % Return
Share price total return(1)(3)	-8.1	32.8	61.6
NAV total return(1)(3)	-8.4	34.0	52.1
Witan benchmark(1)	-6.5	32.4	44.6
FTSE All-Share Index(2)	-9.5	19.5	22.1
FTSE All-World Index(2)	-3.4	42.4	64.9

Dividend information

	2018	2017	% change
Revenue per share	25.9p	23.8p	8.8
Dividend per share	23.5p	21.0p	11.9

Other financial information

	2018	2017
Gearing(3)	11.6%	9.7%
Ongoing charge excluding performance fee(3)	0.75%	0.76%
Ongoing charge including performance fee(3)	0.83%	0.78%

(1)        Source: Morningstar.

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

(3)       Alternative Performance Measure.

Alternative Performance Measures

The financial statements in the annual report set out the required statutory reporting measures of the Company's financial performance. In addition, the Board assesses the Company's performance against a range of criteria which are viewed as particularly relevant for investment trusts, which are summarised in the key performance indicators in the annual report. Definitions of the terms used and a reconciliation of the NAV per ordinary share (debt at par value) to the NAV per ordinary share (debt at fair value) are set out in the annual report.

                                                                                                                                          Page 21 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2018

	Year ended 31 December 2018			Year ended 31 December 2017
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Investment income (note 2)	58,200	-	58,200	54,425	-	54,425
Other income (note 3)	1,576	-	1,576	1,318	-	1,318
(Losses)/gains on investments held at fair value through profit or loss	-	(194,105)	(194,105)	-	289,268	289,268
Foreign exchange losses on cash and cash equivalents	-	(1,083)	(1,083)	-	(1,686)	(1,686)
	----------	----------	----------	----------	----------	----------
Total income	59,776	(195,188)	(135,412)	55,743	287,582	343,325
Expenses
Management and performance fees (note 4)	(2,535)	(9,163)	(11,698)	(2,255)	(7,294)	(9,549)
Other expenses	(5,909)	(101)	(6,010)	(6,361)	(101)	(6,462)
	----------	----------	----------	----------	----------	----------
Profit/(loss)before finance costs and taxation	51,332	(204,452)	(153,120)	47,127	280,187	327,314
Finance costs	(2,156)	(6,217)	(8,373)	(1,967)	(5,651)	(7,618)
	----------	----------	----------	----------	----------	----------
Profit/(loss) before taxation	49,176	(210,669)	(161,493)	45,160	274,536	319,696
Taxation	(2,978)	-	(2,978)	(2,493)	-	(2,493)
	----------	----------	----------	----------	----------	----------
Profit/(loss) attributable to equity shareholders of the parent company	46,198	(210,669)	(164,471)	42,667	274,536	317,203
	----------	----------	----------	----------	----------	----------
Earnings per ordinary share (note 5)	25.92p	(118.18p)	(92.26p)	23.82p	153.24p	177.06p
	======	======	======	======	======	======

The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRSs as adopted by the European Union.

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

The Group does not have any other comprehensive income and hence the total profit/(loss), as disclosed above, is the same as the Group's total comprehensive income.

All items in the above statement derive from continuing operations.

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

Page 22 of 29

                                               WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Consolidated and Individual Statement of Changes in Equity

for the year ended 31 December 2018

Group: Year ended 31 December 2018
			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 2017			50,018	99,251	46,498	1,712,019	72,735	1,980,521
Total comprehensive income:
(Loss)/profit for the year			-	-	-	(210,669)	46,198	(164,471)
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid (note 7)			-	-	-	-	(40,090)	(40,090)
Buybacks of ordinary shares (held in treasury)			-	-	-	(2,518)	-	(2,518)
			--------	---------	---------	------------	---------	------------
Total equity at 31 December 2018			50,018	99,251	46,498	1,498,832	78,843	1,773,442
Company: Year ended 31 December 2018
			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 2017			50,018	99,251	46,498	1,712,471	72,283	1,980,521
Total comprehensive income:
(Loss)/profit for the year			-	-	-	(211,030)	46,559	(164,471)
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid (note 7)			-	-	-	-	(40,090)	(40,090)
Buybacks of ordinary shares (held in treasury)			-	-	-	(2,518)	-	(2,518)
			--------	---------	---------	------------	---------	------------
Total equity at 31 December 2018			50,018	99,251	46,498	1,498,923	78,752	1,773,442
Group: Year ended 31 December 2017
			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 2016			50,018	99,251	46,498	1,464,105	66,765	1,726,637
Total comprehensive income:
Profit for the year			-	-	-	274,536	42,667	317,203
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid (note 7)			-	-	-	-	(36,697)	(36,697)
Buybacks of ordinary shares (held in treasury)			-	-	-	(26,622)	-	(26,622)
			---------	---------	------------	---------	------------	------------
Total equity at 31 December 2017			50,018	99,251	46,498	1,712,019	72,735	1,980,521
Company: Year ended 31 December 2017
			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 2016			50,018	99,251	46,498	1,464,915	65,955	1,726,637
Total comprehensive income:
Profit for the year			-	-	-	274,178	43,025	317,203
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid (note 7)			-	-	-	-	(36,697)	(36,697)
Buybacks of ordinary shares (held in treasury)			-	-	-	(26,622)	-	(26,622)
			--------	---------	---------	---------------	---------	------------
Total equity at 31 December 2017			50,018	99,251	46,498	1,712,471	72,283	1,980,521

Page 23 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Consolidated and Individual Balance Sheet

As at 31 December 2018

	Group	Company	Group	Company
	31 December	31 December	31 December	31 December
	2018	2018	2017	2017
	£'000	£'000	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	1,954,114	1,955,105	2,149,267	2,150,619
	--------------	--------------	--------------	--------------
Current assets
Other receivables	8,198	8,664	5,217	5,077
Cash and cash equivalents	72,246	70,235	75,795	74,031
	-----------	-----------	-----------	-----------
	80,444	78,899	81,012	79,108
	-----------	-----------	-----------	-----------
Total assets	2,034,558	2,034,004	2,230,279	2,229,727
	---------------	---------------	---------------	---------------
Current liabilities
Other payables	(9,660)	(9,106)	(6,016)	(5,464)
Bank loans	(81,000)	(81,000)	(73,000)	(73,000)
	----------	----------	----------	----------
	(90,660)	(90,106)	(79,016)	(78,464)
	----------	----------	----------	----------
Total assets less current liabilities	1,943,898	1,943,898	2,151,263	2,151,263
Non current liabilities
Other payables	(43)	(43)	(377)	(377)
Borrowings at amortised cost:
6.125 per cent. Secured Bonds due 2025	(63,581)	(63,581)	(63,538)	(63,538)
3.29 per cent. Secured Notes due 2035	(20,873)	(20,873)	(20,871)	(20,871)
3.47 per cent. Secured Notes due 2045	(53,653)	(53,653)	(53,652)	(53,652)
2.74 per cent. Secured Notes due 2054	(29,751)	(29,751)	(29,749)	(29,749)
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)
	----------	----------	----------	----------
	(170,456)	(170,456)	(170,742)	(170,742)
	----------	----------	----------	----------
Net assets	1,773,442	1,773,442	1,980,521	1,980,521
Equity attributable to equity holders
Ordinary share capital	50,018	50,018	50,018	50,018
Share premium account	99,251	99,251	99,251	99,251
Capital redemption reserve	46,498	46,498	46,498	46,498
Retained earnings:
Other capital reserves	1,498,832	1,498,923	1,712,019	1,712,471
Revenue reserve	78,843	78,752	72,735	72,283
	----------	----------	----------	----------
Total equity	1,773,442	1,773,442	1,980,521	1,980,521
Net asset value per ordinary share	995.15p	995.15p	1109.85p	1109.85p

As permitted by section 408 of the Companies Act 2006, the Company has not presented its own income statement. The loss of the Company dealt with in the accounts of the Group amounted to £164,471,000 (2017: profit of £317,203,000).

Page 24 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Consolidated and Individual Company Cash Flow Statements

for the year ended 31 December 2018

	Group	Company	Group	Company
	2018	2018	2017	2017
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Dividend income received	57,202	57,202	55,464	55,464
Interest received	203	198	29	28
Other income received	1,712	280	2,105	195
Operating expenses paid	(19,292)	(18,102)	(12,644)	(11,096)
Taxation on overseas income	(3,102)	(3,102)	(3,014)	(3,014)
Taxation recovered	271	271	412	412
	----------	-----------	----------	-----------
Net cash inflow from operating activities	36,994	36,747	42,352	41,989
	----------	-----------	----------	-----------
Cash flows from investing activities
Purchases of investments	(801,410)	(801,410)	(1,097,207)	(1,097,207)
Sales of investments	806,173	806,173	1,113,894	1,113,894
Realised (loss)/gain on futures	(1,258)	(1,258)	7,593	7,593
	----------	-----------	----------	-----------
Net cash inflow from investing activities	3,505	3,505	24,280	24,280
	----------	-----------	----------	-----------
Cash flow from financing activities
Equity dividends paid	(40,090)	(40,090)	(36,697)	(36,697)
Issue of secured notes net of issue expenses	-	-	29,748	29,748
Buybacks of ordinary shares	(2,564)	(2,564)	(27,413)	(27,413)
Interest paid	(8,311)	(8,311)	(7,345)	(7,345)
Drawdown of bank loans	8,000	8,000	2,000	2,000
	----------	-----------	----------	-----------
Net cash outflow from financing activities	(42,965)	(42,965)	(39,707)	(39,707)
	----------	-----------	----------	-----------
(Decrease)/increase in cash and cash equivalents	(2,466)	(2,713)	26,925	26,562
Cash and cash equivalents at the start of the period	75,795	74,031	50,556	49,155
Effect of foreign exchange rate changes	(1,083)	(1,083)	(1,686)	(1,686)
	----------	-----------	----------	-----------
Cash and cash equivalents at the end of the period	72,246	70,235	75,795	74,031

Page 25 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Notes to the Financial Statements 

for the year ended 31 December 2018

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 in the financial statements. 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 and updated in February 2018 with consequential amendments, 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.

Judgements and 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. The Directors do not consider that there are any such items in these financial statements.

(b) Going concern

The financial statements have been prepared on a going concern basis.  The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Strategic Report. The financial position of the Group as at 31 December 2018 is shown in the balance sheet on page 23. The cash flows of the Group for the year ended 31 December 2018 are not untypical and are set out on page 24.

(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.            

In accordance with IFRS 10 the Company has been designated as an investment entity on the basis that:      

- It obtains funds from investors and provides those investors with investment management services;           

- It commits to its investors that its business purpose is to invest solely for returns from capital appreciation and investment income; and               

- It measures and evaluates performance of substantially all of its investments on a fair value basis.

The subsidiary of the Company was established for the sole purpose of operating or supporting the investment operations of the Company, and is not itself an investment entity. Therefore, under the principles of IFRS 10, the Company has consolidated its subsidiary as it is a controlled entity that supports the investment activity of the investment entity.   

Page 26 of 29

WITAN INVESTMENT TRUST PLC

                Annual Financial Report for the year ended 31 December 2018

Notes to the Financial Statements continued

Control is achieved where the Company is exposed, or has the right, to variable returns from its investment in the subsidiary and has the ability to affect those returns through its power to direct the relevant 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.

2.             Investment income

	2018	2017
	£'000	£'000
Franked:
UK dividends from listed investments	18,648	21,117
UK stock dividends from listed investments	-	43
UK special dividends from listed investments	1,660	1,040
	-----------	-----------
	20,308	22,200
	-----------	-----------
Unfranked:
Overseas dividends from listed investments	36,726	30,161
Overseas special dividends from listed investments	1,074	683
Property income dividends	-	81
Stock dividends from listed investments	-	491
Fixed interest and convertible bonds	92	809
	-----------	-----------
	37,892	32,225
	-----------	-----------
Total investment income	58,200	54,425
	2018	2017
	£'000	£'000
Analysis of investment income by geographical segment:
United Kingdom	20,308	22,200
North America	7,622	6,260
Continental Europe	11,644	15,290
Japan	2,269	2,145
Asia Pacific (ex Japan)	9,403	7,237
Latin America	230	536
Other	6,724	757
	-----------	-----------
Total investment income	58,200	54,425

Page 27 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Notes to the Financial Statements continued

3.             Other income

	2018	2017
	£'000	£'000
Deposit interest	214	41
Underwriting commission	-	4
Stock lending income	278	180
Income from the subsidiary company's third party business	1,084	1,093
	-----------	-----------
	1,576	1,318

4.             Management fees

	Year ended 31 December 2018			Year ended 31 December 2017
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Management fees	2,535	7,605	10,140	2,255	6,766	9,021
Performance fees	-	1,558	1,558	-	528	528
	----------	-----------	-----------	----------	-----------	-----------
	2,535	9,163	11,698	2,255	7,294	9,549

5.             Earnings per ordinary share

The earnings per ordinary share figure is based on the net loss for the year of £164,471,000 (2017: profit of £317,203,000) and on 178,265,167 ordinary shares (2017: 179,149,747), 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.

	2018	2017
	£'000	£'000
Net revenue profit	46,198	42,667
Net capital (loss)/profit	(210,669)	274,536
	----------	----------
Net total (loss)/profit	(164,471)	317,203
Weighted average number of ordinary shares in issue during the year	178,265,167	179,149,747
	Pence	Pence
Revenue earnings per ordinary share	25.92	23.82
Capital earnings per ordinary share	(118.18)	153.24
	----------	----------
Total earnings per ordinary share	(92.26)	177.06

Page 28 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Notes to the Financial Statements continued

6.            Issued share capital

The number of ordinary shares of 25p each in issue at 31 December 2018 was 200,071,000 (2017: 200,071,000), of which 21,861,632 ordinary shares of 25p each (2017: 21,621,411) were held in treasury.

7.             Dividends

	2018 £'000	2017 £'000
Amounts recognised as distributions to equity holders in the year:
Fourth interim dividend for the year ended 31 December 2017 of 6.75p (2016: 6.25p) per ordinary share	12,038	11,246
First interim dividend for the year ended 31 December 2018 of 5.25p (2017: 4.75p) per ordinary share	9,357	8,509
Second interim dividend for the year ended 31 December 2018 of 5.25p (2017: 4.75p) per ordinary share	9,357	8,485
Third interim dividend for the year ended 31 December 2018 of 5.25p (2017: 4.75p) per ordinary share	9,357	8,478
Refund of unclaimed dividends	(19)	(21)
	----------	----------
	40,090	36,697
	======	======
Fourth interim dividend for the year ended 31 December 2018 of 7.75p (2017: 6.75p) per ordinary share	13,764	12,038
	======	======
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.
	2018 £'000	2017 £'000
Revenue profits available for distribution (Company only)	46,559	43,025
First interim dividend for the year ended 31 December 2018 of 5.25p (2017: 4.75p) per ordinary share	(9,357)	(8,509)
Second interim dividend for the year ended 31 December 2018 of 5.25p (2017: 4.75p) per ordinary share	(9,357)	(8,485)
Third interim dividend for the year ended 31 December 2018 of 5.25p (2017: 4.75p) per ordinary share	(9,357)	(8,478)
Fourth interim dividend for the year ended 31 December 2018 of 7.75p (2017: 6.75p) per ordinary share	(13,764)	(12,038)
	----------	----------
Revenue retained for the year (Company only)	4,724	5,515
	======	======

8.         2018 Accounts

The figures and financial information for 2018 are extracted from the annual report and financial statements for the year ended 31 December 2018 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.

Page 29 of 29

WITAN INVESTMENT TRUST PLC

            Annual Financial Report for the year ended 31 December 2018

Notes to the Financial Statements continued

9.         2017 Accounts

The figures and financial information for 2017 are extracted from the published annual report and financial statements for the year ended 31 December 2017 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.

10.          Annual report and financial statements

Copies of the annual report and financial statements will be posted to shareholders by the end of March 2019 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 Wednesday, 1 May 2019 at Merchant Taylors' Hall, 30 Threadneedle Street, London EC2R 8JB.

For further information please contact:

Andrew Bell

Chief Executive

Witan Investment Trust plc

Telephone:  [phone]

Alexis Barling

Director of Marketing

Witan Investment Trust plc

Telephone:  [phone]

- 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.

 

END

 

 

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