Half-year Report

RNS Number : 7724V

Witan Investment Trust PLC

11 August 2020

 

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

SUMMARY

• During the first half of 2020, the Company's net asset value ('NAV') total return was -14.7, 12.6% below the new benchmark return of -2.1%

• The share price total return was -19.2%, as the discount widened from 0.7% at the end of 2019 to 5.9% at the end of June

• A second interim quarterly dividend of 1.34p per ordinary share will be paid in September. Total dividends paid in respect of the period are 2.68p per ordinary share (2019: 2.35p)

• 20.5m shares (2.4%) were bought into treasury at an average discount of 5.8%

• Portfolio restructured to reflect the new global orientation

Key data
	(Unaudited) 30 June  2020	(Audited) 31 December 2019	Change since 31 December 2019
Share price	184.0p	231.5p	(20.5)%
Net asset value per ordinary share(3) (debt at par value)	200.3p	236.9p	(15.4)%
Net asset value per ordinary share(3) (debt at fair value)	195.6p	233.1p	(16.1)%
Discount (NAV including income, debt at fair value)(3)	5.9%	0.7%

Total return performance
	6 months  return %	1 year  return %	3 years return %	5 years return %
Share price total return (1)(3)	-19.2	-11.6	-1.3	31.0
Net asset value total return (1)(3)	-14.7	-8.8	1.9	39.9
Witan benchmark (1)	-2.1	2.6	18.1	55.9
FTSE All-Share Index(2)	-17.5	-13.0	-4.6	15.2
FTSE All-World Index(2)	0.7	5.7	27.3	78.4

Dividend information
	30 June 2020	30 June 2019
Revenue per share	1.65p	3.42p
Dividend per share	2.68p	2.35p

(1)	Source: Morningstar.
(2)	Source: Morningstar.  See also FTSE International for conditions of use ( www.ftse.com ).
(3)	Alternative performance measures: The financial statements (on pages 11 to 18) 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.  Definition of the terms used and the Witan benchmark are set out in the Half Year Report.

Page 2 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

Other financial information
	(Unaudited) 30 June 2020 %	(Unaudited) 30 June 2019 %	(Audited) 31 December 2019 %
Gearing (3)	8.2	11.3	11.0
Ongoing charges excluding performance fees (3)	0.43	0.39	0.79
Ongoing charges including performance fees (3)	0.43	0.46	0.87

(1)	Source: Morningstar
(2)	Source: Morningstar.  See also FTSE International for conditions of use ( www.ftse.com ).
(3)	Alternative performance measures (see page 1)

PORTFOLIO INFORMATION

Portfolio by geographical classification as at 30 June 2020	%
North America	35
United Kingdom	23
Europe	13
Asia	11
Japan	5
Other (investment companies)	13

Sector breakdown of the portfolio as at 30 June 2020(1)	%
Consumer Goods	15.4
Consumer Services	15.2
Collective Investment Schemes	12.7
Industrials	12.2
Financials	11.9
Exchange Traded Fund ('ETF')	10.2
Technology	9.4
Healthcare	7.2
Basic Materials	2.7
Telecommunications	1.3
Oil & Gas	0.6
Utilities	0.3
Cash	1.0

Company size breakdown of the portfolio as at 30 June 2020(1)	%
Large Cap	72
Mid Cap	12
Small Cap	4
Investment Companies	13

Source: BNP Paribas Securities Services

(1) Figures may not sum due to roundings

Page 3 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

INTERIM MANAGEMENT REPORT

Market background

It is something of an understatement to say that the world in 2020 has turned out to be very different from initial expectations. At the start of the year, the US and China were expected to patch up their trade differences, the world economy to achieve moderate growth and the late 2019 stock market rallies in the UK and in global cyclical stocks were expected to continue.

Instead, the world experienced a major healthcare shock, in the form of the Covid-19 pandemic. The resultant widespread economic lockdown terminated a 10 year expansion and precipitated a deep recession. Central bank actions to reduce interest rates and provide liquidity have boosted parts of the financial markets, while households and companies have been cushioned by government measures to support incomes.

Despite these mitigating measures, cyclical sectors performed very poorly, especially those in the travel and hospitality sectors. By contrast technology companies enjoyed a surge, as working, viewing and shopping on line were boosted by "stay at home" rules.

It was truly a half of two quarters. The FTSE All-World Index experienced a dramatic fall in February and March and an equally dramatic recovery in April, falling 16% in the first quarter before rebounding 20% in the second, to end June almost unchanged. However there was a notable contrast between the US equity market, (heavily weighted in technology companies), which rose almost 4%, and declines in other markets, particularly the UK which suffered a loss of over 17%.

Investment performance

Witan's portfolio was particularly badly hit by two factors. The first was that our portfolio was positioned for the expectations noted above in January. Its economic sensitivity made it vulnerable to the recession created by the Covid-19 lockdown. The second was that we decided to phase in the portfolio changes entailed by the more global strategic asset allocation we announced late last year. This proved to be a mistake, as our portfolio was heavily weighted in Europe and the UK, which performed poorly, and underinvested in the US, which did well. These exceptional one-off factors severely impacted our absolute and relative performance during February and March, but as can be seen in the Portfolio Changes section below, we have now done much to address them.

Our NAV total return in the first half of the year was -14.7%, more than 12% behind the benchmark return of -2.1%. This was atypical and clearly disappointing, for which our CEO gave a frank explanation of the causes to shareholders in early June. The damage was all done in the first quarter. During the second quarter, performance improved with modest outperformance achieved from mid-May onwards.

Page 4 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

INTERIM MANAGEMENT REPORT, continued

Investment managers:  Assets under management and investment performance as at 30 June 2020 

		Witan assets under management at 30.06.20		Performance in the half year (%)		Performance since appointment(2) (%)
Investment manager	Appointment date	£'m	(%)(1)	Manager	Benchmark	Manager	Benchmark
GLOBAL
Lansdowne Partners	14.12.12	335.0	18.0	(21.8)	0.7	12.4	12.7
Lindsell Train	01.09.10	275.1	14.7	4.5	0.7	4.5	0.7
Veritas	11.11.10	375.9	20.1	1.7	0.7	13.4	10.9
THE UK
Artemis	06.05.08	121.3	6.5	(19.3)	(17.5)	7.1	4.4
Heronbridge	17.06.13	53.8	2.9	(19.7)	(17.5)	5.9	4.0
ASIA PACIFIC (INC. JAPAN)
Matthews	20.02.13	117.2	6.3	3.5	0.5	8.8	8.1
EMERGING MARKETS
GQG	16.02.17	109.7	5.9	5.7	(3.2)	8.9	4.8
WITAN DIRECT HOLDINGS
Witan Direct Holdings(3)	19.03.10	183.8	9.9	(10.7)	(2.1)	9.4	8.5
Latitude(4)	31.03.18	57.4	3.1	(1.5)	0.7	8.9	10.2
GMO(4)	05.06.19	50.1	2.7	(3.5)	0.7	8.1	9.5

Notes:

1	Percentage of Witan's investments managed.
2	Percentages are annualised where the appointment date was more before 2019.
3	Direct holdings do not include the US ETF held for part of the period (10.2% at 30 June 2020).
4	Specialist of newly-established managers.
Source: BNP Paribas Securities Services

The full table of the performance of our incumbent managers as at 30 June is shown above. Our two European managers (terminated in May) and our two UK managers were affected by the underperformance of their particular markets as well as stock selection. Amongst our global managers, Pzena (terminated in May) and Lansdowne were the weakest performers, suffering from overweight positions in cyclical sectors. Whilst we have become more sceptical of the prospects for certain 'value' style strategies (such as Pzena's), Lansdowne's positioning reflects their assessment of where they see the best returns rather than an entrenched style bias and we expect their adaptability to return to adding value for Witan's shareholders, after disappointing performance in recent years.

On a positive note, our other global managers Veritas and Lindsell Train delivered good absolute and relative returns, as did GQG in emerging markets and Matthews in Asia.

Portfolio changes

As announced in late 2019, we altered our strategic asset allocation in January 2020 to 85% Global, 15% UK (81% non UK on a look-through basis, with the UK making up 4% of the global index). As part of this move, we closed our two specialist European mandates at the end of April, increasing our allocation to global managers.

Page 5 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

INTERIM MANAGEMENT REPORT, continued

We expect an enduring effect from the Covid-19 epidemic to be an acceleration of the growth prospects for information technology and biotechnology and less predictable futures for many cyclical sectors. The increasing linkage of announced fiscal recovery packages to environmental themes introduces a further agent of change. Accordingly, we sold our only systematic deep value global portfolio (managed by Pzena), moving the portfolio towards managers with more growth-focused or pragmatic styles.

The proceeds from the liquidation of the Pzena global portfolio were partly invested in a US market ETF, as a low cost way to maintain equity exposure pending the selection of new global managers. Since the period end, the UK portfolio managed by Heronbridge is in the process of being sold and we have appointed two additional global managers, both based in the US and focused on less cyclical and more rapidly growing companies. WCM Investment Management, based in California, has been allocated 9% of assets and Jennison Associates, based in New York, has been allocated 4.5%. Details of their respective styles and investment approaches will be added to Witan's website shortly.

Changes in manager allocations in 2020 have amounted in total to around one third of the portfolio, reflecting our revised strategic assessment of the best long-term opportunities for shareholders as well as our response to economic changes arising from this exceptional period.

In future, we typically expect to have 65% (+/-5%) in global portfolios and 10% (+/-5%) in UK mandates. Of the remaining 20-25%, up to 10% (as at present) will be invested in special situations in the investment company sector. The remaining 10-15% will accommodate the appointment of newly established managers viewed as having the potential for significant outperformance or managers offering exposure to attractive long-term growth themes requiring a degree of specialisation (e.g. information technology, biotechnology, climate change).

Environmental, Social and Governance policy ('ESG')

Your Board continues to refine the monitoring and evaluation of how effectively its managers take account of known risks to the long-term sustainability of their portfolios (e.g. technological disruption, climate change, regulation).

In February, we became a signatory to the UN Principles of Responsible Investment (UNPRI). We have also stepped up engagement with our investment managers, covering the incorporation of ESG principles into their investment processes, as well as stock specific issues that have arisen during the period. All six of our incumbent investment managers are also signatories, as are both of the newly-appointed global managers. Compliance in this area is now a prerequisite for appointment as a manager for Witan. Based on our initial reviews, we are satisfied that ESG factors are properly taken into account in our managers' investment processes, on which we shall report in more detail at the end of the year.

Page 6 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

INTERIM MANAGEMENT REPORT, continued

We have increased our investment in the GMO Climate Change Fund from 1% to 3% of assets. The fund's objective is to outperform the MSCI All Country World Index by investing in companies benefiting from measures to curb or mitigate the long-term effects of climate change.

Investment income and expenses

Revenue earnings per share for the period were 1.7 pence per share, a decline of 52% from the 3.4 pence per share for the first half of 2019. Investment income was affected by widespread cuts in company dividends worldwide, together with a transition towards a lower yielding (but historically faster growing) portfolio, reflecting the change in strategic asset allocation.

Investment management base fees paid to external delegated managers were 5% lower than in the first half of 2019, as average net assets were lower, offset by changes in the allocation between managers. There was a £1.6m reduction in performance fee accruals. The manager who earned the performance fee in 2019 outperformed again but their fee had been simplified to a flat rate fee basis from 2020. Overall, therefore, investment management fees declined by 28% to £4.7m.

Other expenses declined by 21%, or £0.7m. This was principally owing to the non-recurrence of the costs relating to the closure of the WIS savings plans during 2019.

The ongoing charges figure ('OCF') for the six months was 0.43% (2019: 0.39%). Including performance fees, the OCF was also 0.43% for the first half of 2020 (2019: 0.46%). Lower costs during the period were offset by a reduction in average net assets. These figures apply for the first half and are not annualised. The OCF for the whole of 2019 was 0.79% excluding performance fees and 0.87% including performance fees.

Dividend

The Company's revenue earnings per share for 2020 are likely to be around half of the level earned in 2019, owing to the unprecedented cuts in market dividends by companies seeking to conserve cash during the Covid-19 lockdown, particularly in the UK. The Company began 2020 with revenue reserves amounting to over 1.5 times the annual dividend, having added to these reserves in each of the past nine years. Consequently, it is able to take advantage of investment trusts' ability to smooth dividend pay-outs using revenue reserves and has stated its willingness to do so.  Investment Companies also have the ability, where warranted, to use capital reserves to support distributions and a number of leading investment trusts already partly fund their dividends in this way. Although permitted by its Articles of Association, the Company would only propose such a step if this were judged to be sustainable, based upon the total returns earned by the portfolio over time.

The Company has increased its dividend every year since 1974 (a 45 year record of increases), recognising the importance for many of its investors of a reliable and growing income. The Board's policy remains to grow the dividend each year and the full year's dividend for 2020 is expected to show a further year of growth.

Page 7 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

INTERIM MANAGEMENT REPORT, continued

The first three interim dividends of the financial year (paid in June, September and December) are, in the absence of unforeseen events, paid at the rate of one quarter of the total payment made in respect of the previous year. The fourth payment (in March 2021) will be a balancing amount, reflecting the difference between the first three quarterly dividends and the payment decided for the full year.

Accordingly, a second interim dividend of 1.34p per ordinary share, being one quarter of the total paid in respect of 2019 (5.35p), will be paid on 18 September 2020. The ex-dividend date will be 20 August 2020. This follows the first interim dividend of 1.34p per ordinary share paid on 19 June 2020.

Gearing

The Company came into the year with gearing of 11%, which was sharply reduced to 4% during the exceptionally volatile conditions in March. As markets stabilised during the second quarter and the prospect of economies reopening drew closer, borrowings were gradually increased and gearing was close to 8% at the period end. Gearing detracted from returns during the first quarter declines, adding to them in the strong second quarter, but overall the contribution was negative for the first half.

During the period, we repaid our 2025 secured bonds, which had a relatively high interest coupon of 6.125%. We had to pay a premium of £22m for early repayment. However, with short-term borrowings available at rates below 1% most of this will come back in lower interest payments over the period to 2025. The ability to repay short-term borrowings at will also enables us to manage our gearing more flexibly. 

The Company has a £100m short-term multi-currency facility, in addition to its fixed-rate borrowings. This was reduced from £125m in July, to save on loan commitment fees. The drawn balance at the end of June 2020 was nil.

Discount and buybacks

One of the Company's key performance indicators is for its shares to trade at a sustainable low discount or a premium to NAV, subject to market circumstances. Witan's shares ended 2019 on a 0.7% discount, which widened to a discount of 5.9% at the end of June 2020.

The Company has stepped up its share repurchase actions in response, buying 20.5m shares (2.4% of the total) into treasury at an average discount of 5.8%. This added £2.3m to the net asset value and helped to reverse some of the widening of the discount that followed the sharp fall in markets.

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. The Company will only issue shares at a premium to NAV.

Page 8 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

INTERIM MANAGEMENT REPORT, continued

Board Composition

I became Chairman following the AGM in April, when my predecessor Harry Henderson retired from the Board after 32 years' service, 17 as Chairman. Richard Oldfield also retired at the AGM after nine years on the Board. Their contributions, experience and counsel were of huge value and I thank them both on behalf of shareholders and the Board.

Subsequent to the period end, on 1 July we welcomed Rachel Beagles to the Board. Rachel is a highly experienced investment company director and is the current Chair of the Association of Investment Companies.

Owing to the Covid-19 movement restrictions, we were regrettably unable to welcome shareholders to this year's AGM but I very much look forward to meeting shareholders at the next AGM in April 2021.

Outlook

Although global equity markets have recovered much of the ground they lost, the recovery has been narrowly based. Technology and defensive sectors have done well, offsetting substantial losses by many other sectors. Although part of this is due to a reassessment of longer-term prospects (for example positive for technology, but much less so for office property and retailers), it also reflects a lack of confidence in the timing and degree of cyclical recovery. Until there are more effective therapeutic treatments for Covid-19, or a vaccine, recovery hopes will remain vulnerable to secondary outbreaks, which might become more common as lockdown measures are gradually eased.

The extreme performance differential between the 'Covid winners' and 'Covid losers' suggests that there is scope for a broadening out in stock market leadership when recovery confidence takes hold, while there is an increased burden of expectations built into the valuations of some technology companies. Those who recall the dotcom boom in 1999 know well that stocks can get ahead of themselves, even when the subsequent achievements of technology outstripped assumptions made at the time.

Witan has a balanced and diversified portfolio, with more exposure to faster-growing regions and sectors than was provided by our previous asset allocation. Our relative performance stabilised in April and has achieved modest outperformance since mid-May. The exceptional factors linked to Covid-19 will not last forever and we are confident that, after the disappointing losses experienced during the early part of 2020, our restructured portfolio will reward our investors for their patience at the net asset value level and in terms of a recovering discount.

For and on behalf of the Board

Andrew Ross

Chairman

11 August 2020

Page 9 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

REGULATORY DISCLOSURES

Principal risks and uncertainties

The principal risks and uncertainties associated with the Company's business can be divided into various areas:

· market and investment portfolio;

· operational and cyber;

· compliance and regulatory change;

· accounting, taxation and legal; and

· liquidity.

Information on these risks and other risks is given in the Strategic Report and in the Notes to the Financial Statements in the Company's Annual Report for the year ended 31 December 2019. In the view of the Board, these principal risks and uncertainties are applicable to the remaining six months of the financial year, as they were to the six months under review. However, in reviewing the Company's risk map, Covid-19 risks (and pandemics in general) have been further emphasised as set out in the Interim Management Report.

These risks include the substantial impact on the global economy from Covid-19, which could affect the performance of the Company's underlying investments and therefore the performance of the Company. This is discussed in more detail in the Interim Management Report on page 4. Any volatility arising as a result of the conclusion of post-Brexit trade and other negotiations will be managed as part of our normal investment processes.

Since the Covid-19 lockdown arrangements, and in accordance with government recommended guidelines, Witan employees have all successfully adopted home working arrangements with little or no impact on operational activity. Close monitoring of key third party service providers, who in the main have also adopted working from home arrangements, has evidenced no significant operational difficulties impacting their respective services to the Company.

Going concern

The assets of the Company consist mainly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for at least the next 12 months.

Given the volatile conditions, gearing has been actively managed, with a mixture of long-term debt and short-term facilities conferring tactical flexibility. The Company has at all times traded, and remains, well clear of all financial covenants on its borrowings (which are detailed in note 13 of its 2019 Annual Report).

Since 2019 our business continuity contingency plans have envisaged staff working from home, accessing a secure cloud computing network on the internet. These arrangements proved well-suited to the circumstances created by the government's Covid-19 guidance and have worked well, with all Witan employees having worked from home since the middle of March, without interruption to operations. Similar arrangements have been in place for our major suppliers, with no interruption in service.

Page 10 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

REGULATORY DISCLOSURES continued

Therefore, the Board has determined 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.

Related party transactions

During the first six months of the year, no transactions with related parties have taken place which have materially affected the financial position or performance of the Company.  Details of related party transactions during 2019 are contained in the Company's Annual Report for the year ended 31 December 2019.

Directors' responsibility statement

The directors confirm that, to the best of their knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34;

(b) the Interim Management Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (an indication of important events that have occurred during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

(c) the Interim Management Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

For and on behalf of the Board

Andrew Ross, Chairman

11 August 2020

Page 11 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

Consolidated Statement of Comprehensive Income

	(Unaudited) Half year ended 30 June 2020			(Unaudited) Half year ended 30 June 2019			(Audited) Year ended 31 December 2019
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Investment income	20,069	-	20,069	36,473	-	36,473	65,045	-	65,045
Other income	442	-	442	1,415	-	1,415	2,223	-	2,223
(Losses)/gains on investments held at fair value through profit or loss (Note 2)	-	(276,391)	(276,391)	-	219,706	219,706	-	340,727	340,727
Foreign exchange losses on cash and cash equivalents	-	(2,076)	(2,076)	-	(343)	(343)	-	(1,633)	(1,633)
	----------	----------	-----------	---------	----------	-----------	---------	-----------	-----------
Total income	20,511	(278,467)	(257,956)	37,888	219,363	257,251	67,268	339,094	406,362
Expenses
Management and performance fees	(1,182)	(3,545)	(4,727)	(1,250)	(5,301)	(6,551)	(2,522)	(9,108)	(11,630)
Other expenses	(2,840)	(51)	(2,891)	(3,589)	(51)	(3,640)	(6,673)	(101)	(6,774)
	----------	----------	-----------	---------	----------	-----------	---------	-----------	-----------
Profit/(loss) before finance costs and taxation	16,489	(282,063)	(265,574)	33,049	214,011	247,060	58,073	329,885	387,958
Loss on early debt repayment	-	(22,064)	(22,064)	-	-	-	-	-	-
Finance costs	(1,017)	(2,920)	(3,937)	(1,021)	(3,046)	(4,067)	(2,253)	(6,485)	(8,738)
	----------	----------	-----------	---------	----------	-----------	---------	-----------	-----------
Profit/(loss) before taxation	15,472	(307,047)	(291,575)	32,028	210,965	242,993	55,820	323,400	379,220
Taxation	(1,256)	-	(1,256)	(1,726)	-	(1,726)	(3,028)	(369)	(3,397)
	----------	----------	-----------	---------	----------	-----------	---------	-----------	-----------
Profit/(loss) attributable to equity shareholders of the parent company	14,216	(307,047)	(292,831)	30,302	210,965	241,267	52,792	323,031	375,823
	======	======	======	=====	======	======	=====	======	======
Earnings per ordinary share (Note 3)	1.65p	(35.63p)	(33.98p)	3.42p	23.80p	27.22p	6.01p	36.77p	42.78p
	=====	======	======	=====	======	======	=====	======	======

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, 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.

The notes on pages 15 to 18 form part of these financial statements.

Page 12 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

Consolidated Statement of Changes in Equity

		(Unaudited) Half year ended 30 June 2020
	Ordinary share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 31 December 2019	50,018	99,251	46,498	1,768,281	87,058	2,051,106
Total comprehensive income:   (Loss)/profit for the period	-	-	-	(307,047)	14,216	(292,831)
Transactions with owners, recorded directly to equity:   Ordinary dividends paid	-	-	-	-	(27,319)	(27,319)
Buybacks of ordinary shares (held in   treasury) (Note 6)	-	-	-	(37,331)	-	(37,331)
	-----------	-----------	-------------	-------------	-----------	-------------
Total equity at 30 June 2020	50,018	99,251	46,498	1,423,903	73,955	1,693,625
	=======	=======	========	========	=======	========

		(Unaudited) Half year ended 30 June 2019
	Ordinary share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 31 December 2018	50,018	99,251	46,498	1,498,832	78,843	1,773,442
Total comprehensive income:   Profit for the period	-	-	-	210,965	30,302	241,267
Transactions with owners, recorded directly to equity:   Ordinary dividends paid	-	-	-	-	(24,143)	(24,143)
Buybacks of ordinary shares (held in   treasury) (Note 6)	-	-	-	(22,603)	-	(22,603)
	-----------	-----------	-------------	-------------	-----------	-------------
Total equity at 30 June 2019	50,018	99,251	46,498	1,687,194	85,002	1,967,963
	=======	=======	========	========	=======	========

		(Audited) Year ended 31 December 2019
	Ordinary share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 31 December 2018	50,018	99,251	46,498	1,498,832	78,843	1,773,442
Total comprehensive income:   Profit for the year	-	-	-	323,031	52,792	375,823
Transactions with owners, recorded directly to equity:   Ordinary dividends paid	-	-	-	-	(44,577)	(44,577)
Buybacks of ordinary shares (held in   treasury) (Note 6)	-	-	-	(53,582)	-	(53,582)
	-----------	-----------	-------------	-------------	-----------	-------------
Total equity at 31 December 2019	50,018	99,251	46,498	1,768,281	87,058	2,051,106
	=======	=======	========	========	=======	========

The notes on pages 15 to 18 form part of these financial statements.

Page 13 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

Consolidated Balance Sheet

	(Unaudited) 30 June  2020 £'000	(Unaudited) 30 June 2019 £'000	(Audited) 31 December 2019 £'000
Non current assets
Investments held at fair value through profit or loss	1,833,190	2,178,439	2,276,623
Right of use asset: property	448	-	490
	---------------	---------------	-------------
Total non current assets	1,833,638	2,178,439	2,277,113
Current assets
Other receivables	7,005	10,772	7,260
Cash and cash equivalents	19,280	51,399	44,723
	---------------	---------------	-------------
Total current assets	26,285	62,171	51,983
	---------------	---------------	-------------
Total assets	1,859,923	2,240,610	2,329,096
Current liabilities
Other payables	(9,252)	(12,001)	(6,641)
Bank loans	-	(90,000)	(50,500)
	---------------	---------------	-------------
Total current liabilities	(9,252)	(102,001)	(57,141)
	---------------	---------------	-------------
Total assets less current liabilities	1,850,671	2,138,609	2,271,955
	---------------	---------------	-------------
Non current liabilities
Other payables	(517)	(197)	(653)
Borrowings:
Secured debt (Note 5)	(153,974)	(167,894)	(217,641)
3.4 per cent. cumulative preference shares of £1	(2,055)	(2,055)	(2,055)
2.7 per cent. cumulative preference shares of £1	(500)	(500)	(500)
	---------------	---------------	-------------
Total non current liabilities	(157,046)	(170,646)	(220,849)
	---------------	---------------	-------------
Net assets	1,693,625	1,967,963	2,051,106
	=========	=========	========
Equity attributable to equity holders
Ordinary share capital (Note 6)	50,018	50,018	50,018
Share premium account	99,251	99,251	99,251
Capital redemption reserve	46,498	46,498	46,498
Retained earnings:
Other capital reserves	1,423,903	1,687,194	1,768,281
Revenue reserve	73,955	85,002	87,058
	---------------	---------------	-------------
Total equity	1,693,625	1,967,963	2,051,106
	=========	=========	========
Net asset value per ordinary share   (Note 7)	200.32p	223.56p	236.85p
	=========	=========	========

The notes on pages 15 to 18 form part of these financial statements.

Page 14 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

Consolidated Cash Flow Statement

	(Unaudited) 30 June  2020	(Unaudited) 30 June 2019	(Audited) 31 December 2019
	£'000	£'000	£'000
Cash flows from operating activities
Dividend income received	20,240	35,761	64,922
Interest received	54	98	156
Other income received	649	910	2,873
Operating expenses paid	(8,546)	(7,725)	(18,051)
Taxation on overseas income	(1,659)	(1,722)	(3,988)
Taxation recovered	451	211	494
	-------------	-------------	-------------
Net cash inflow from operating activities	11,189	27,533	46,406
Cash flows from investing activities
Purchases of investments	(1,072,646)	(458,195)	(971,055)
Sales of investments	1,237,146	448,503	982,575
Settlement of futures contracts	4,855	2,320	3,543
	-------------	-------------	-------------
Net cash inflow/(outflow) from investing activities	169,355	(7,372)	15,063
Cash flow from financing activities
Equity dividends paid	(27,322)	(24,143)	(44,577)
Issue of secured notes net of issue expenses	-	-	49,685
Repayment of secured bond	(85,750)	-	-
Buybacks of ordinary shares	(36,213)	(21,283)	(53,512)
Interest paid	(4,081)	(4,239)	(8,366)
Repayment of lease liability	(45)	-	(89)
Net (repayment)/drawdown of bank loans	(50,500)	9,000	(30,500)
	-------------	-------------	-------------
Net cash outflow from financing activities	(203,911)	(40,665)	(87,359)
Decrease in cash and cash equivalents	(23,367)	(20,504)	(25,890)
Cash and cash equivalents at the start of the period	44,723	72,246	72,246
Effect of foreign exchange rate changes	(2,076)	(343)	(1,633)
	-------------	-------------	-------------
Cash and cash equivalents at the end of the period	19,280	51,399	44,723
	========	========	========

The notes on pages 15 to 18 form part of these financial statements.

Page 15 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

Notes to the Financial Statements

1	Basis of preparation The condensed set of financial statements for the half year ended 30 June 2020 has been prepared on a going concern basis and in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and with the Statement of Recommended Practice of Investment Trust Companies and Venture Capital Trusts (the 'SORP') issued by the Association of Investment Companies (the 'AIC') in October 2019. Where the SORP is consistent with the requirements of International Financial Reporting Standards ('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. In assessing going concern, the directors have considered the effects and potential effects of the Covid-19 pandemic. The directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for at least a period of 12 months from the date of this report. For this reason the Company continues to adopt the going concern basis of accounting in preparing the financial statements. The condensed set of financial statements for the half year ended 30 June 2020 has been prepared on the basis of the accounting policies set out in the consolidated financial statements for the year ended 31 December 2019. These financial statements have been neither audited nor reviewed by the Company's auditors.
2	Transaction costs The (losses)/gains on investments held at fair value through profit or loss include purchase transaction costs of £1,561,000 (half year ended 30 June 2019: £930,000; year ended 31 December 2019: £2,071,000) and sale transaction costs of £940,000 (half year ended 30 June 2019: £325,000; year ended 31 December 2019: £674,000). The purchase and sale transaction costs comprise mainly stamp duty and commissions.
3	Earnings per ordinary share The earnings per ordinary share figure is based on the net loss for the half year of £292,831,000 (half year ended 30 June 2019: profit of £241,267,000; year ended 31 December 2019: profit of £375,823,000) and on 861,845,539 ordinary shares (half year ended 30 June 2019: 886,389,666; year ended 31 December 2019: 878,509,015) being the weighted average number of ordinary shares in issue during the period. 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.
		(Unaudited) Half year ended 30 June 2020 £'000	(Unaudited) Half year ended 30 June 2019 £'000	(Audited) Year ended 31 December 2019 £'000
	Net revenue profit	14,216	30,302	52,792
	Net capital (loss)/profit	(307,047)	210,965	323,031
		--------------	--------------	--------------
	Net total (loss)/profit	(292,831)	241,267	375,823
		========	========	========
	Weighted average number of ordinary shares in issue during the period	861,845,539	886,389,666	878,509,015

Page 16 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

Notes to the Financial Statements (continued)

3	Earnings per ordinary share (continued)
		Pence	Pence	Pence
	Revenue earnings per ordinary share	1.65	3.42	6.01
	Capital earnings per ordinary share	(35.63)	23.80	36.77
		--------------	--------------	--------------
	Total earnings per ordinary share	(33.98)	27.22	42.78
		========	========	========

4

Interim dividend The directors have declared a second interim dividend of 1.34p per ordinary share (2019: 1.175p), payable on 18 September 2020 to shareholders registered on 21 August 2020. The shares will be quoted ex-dividend on 20 August 2020. A first interim dividend of 1.34p (2019: 1.175p) was paid on 19 June 2020.

5	Secured debt
		(Unaudited) Half year ended 30 June 2020 £'000	(Unaudited) Half year ended 30 June 2019 £'000	(Audited) Year ended 31 December 2019 £'000
	6.125 per cent. secured bonds due 2025	-	63,616	63,663
	3.29 per cent. secured notes due 2035	20,880	20,875	20,878
	3.47 per cent. secured notes due 2045	53,663	53,651	53,657
	2.39 per cent. secured notes due 2051	49,674	-	49,688
	2.74 per cent. secured notes due 2054	29,757	29,752	29,755
		--------------	--------------	--------------
		153,974	167,894	217,641
		========	========	========
	The £64,290,000 6.125% secured bond due 2025 was repaid early in May 2020 at a total cost of £85,750,000.
6	Ordinary share capital At 30 June 2020 there were 845,452,301 ordinary shares in issue (30 June 2019: 880,265,283; 31 December 2019: 865,978,435) and 154,902,699 shares held in treasury (30 June 2019: 120,089,717; 31 December 2019: 134,376,565). During the half year ended 30 June 2020 the Company bought back 20,526,134 of its own ordinary shares (half year ended 30 June 2019: 10,781,557; year ended 31 December 2019: 25,068,405). The costs of the share buybacks were £37,331,000 (half year ended 30 June 2019: £22,603,000; year ended 31 December 2019: £53,582,000).
7	Net asset value per ordinary share The net asset value per ordinary share is based on the net assets attributable to the equity shareholders of £1,693,625,000 (30 June 2019: £1,967,963,000; 31 December 2019: £2,051,106,000) and on 845,452,301 (30 June 2019: 880,265,283; 31 December 2019: 865,978,435) ordinary shares, being the number of ordinary shares in issue at the period end.
8	Subsidiary undertaking The Company has an investment in the issued ordinary share capital of its wholly-owned subsidiary undertaking, Witan Investment Services Limited, which was incorporated on 28 October 2004, is registered in England and Wales, operates in the United Kingdom and is regulated by the Financial Conduct Authority.

Page 17 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

Notes to the Financial Statements (continued)

9	Financial instruments
	Balance sheet amount versus fair value At the period end, the carrying value of financial assets and financial liabilities approximates their fair value with the exception of the non current liabilities as detailed below:
	Financial liabilities:	Fair value £'000		Balance Sheet amount £'000
	Non current liabilities
	Preference shares (measured at par value)	1,354		2,555
	Secured notes (measured using effective interest method)	195,314		153,974
		--------------		--------------
		196,668		156,529
		--------------		--------------
	Fair value hierarchy
	The table above analyses fair value measurements for financial liabilities. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels are defined as follows: Level 1 financial liabilities: The Company's preference shares are actively traded on a recognised stock exchange. Their fair value has therefore been deemed to be Level 1. Level 3 financial liabilities: The Company's secured notes are not traded on a recognised stock exchange and so the fair value is calculated by using a discount rate which reflects the yield on a UK gilt of similar maturity plus a credit spread of 1.10%. Their fair value has therefore been deemed to be Level 3. The table below analyses fair value measurements for financial assets.
	Financial assets at fair value through profit or loss at 30 June 2020	Level 1 £'000	Level 2 £'000		Level 3 £'000	Total £'000
	Investments including derivatives:
	Equity securities designated at fair value through profit or loss	1,596,948	-		-	1,596,948
	Investments in other funds	-	236,242		-	236,242
		-------------	----------		---------	------------
	Total financial assets carried at fair value	1,596,948	236,242		-	1,833,190
		========	======		=====	=======
	There were no Level 3 investments during the six months to 30 June 2020. There have been no transfers between levels of the fair value hierarchy during the period.  Transfers between levels of fair value hierarchy are deemed to have occurred at the date of the event or change in circumstances that caused the transfer. Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows: Level 1: valued using quoted prices in an active market for identical assets. Level 2: valued by reference to valuation techniques using observable inputs other than quoted prices included in Level 1. Included in Level 2 are investments in Vanguard S&P 500 ETF and GMO Climate Change Fund. Level 3: valued by reference to valuation techniques using inputs that are not based on observable market data. The valuation techniques used by the Group are explained in the accounting policies in the year end accounts.

Page 18 of 18

WITAN INVESTMENT TRUST PLC

Financial Report for the Half Year ended 30 June 2020

Notes to the Financial Statements (continued)

10	Segment reporting
	As detailed in the Company's Annual Report for the year ended 31 December 2019, geographical segments are considered to be the Group's primary reporting segment and business segments the secondary reporting segment. The Group has two business segments: (i) its activity as an investment trust, which is the business of the parent company and (ii) the provision of alternative investment fund manager, executive and marketing management services, which is the business of the subsidiary, Witan Investment Services Limited, and recorded in the accounts of that company. The investment trust is managed by reference to a geographical benchmark; the geographical allocation of the portfolio, as at 30 June 2020, is set out on page 2. The schedule on page 4 summarises the assets under management and investment performance relating to each investment manager. This information is updated and reviewed regularly for internal management purposes and is essential for assessing the structure of the overall portfolio and the performance of each investment manager.
		(Unaudited) Half year ended 30 June 2020		(Unaudited) Half year ended 30 June 2019		(Audited) Year ended 31 December 2019
		Investment trust £'000	Management services £'000	Investment trust £'000	Management services £'000	Investment trust £'000	Management services £'000
Revenue		20,339	172	36,845	1,043	65,740	1,528
Interest expense		3,937	-	4,067	-	8,738	-
Net result		(292,831)	-	241,267	-	375,823	-
Carrying amount of assets		1,692,499	1,126	1,966,971	992	2,050,048	1,058
11	Comparative information The financial information contained in this half year financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  The financial information for the half years ended 30 June 2020 and 30 June 2019 has neither been audited nor reviewed by the auditors. The figures and financial information for the year ended 31 December 2019 are extracted from the latest published audited financial statements of the Company and do not constitute the statutory accounts for that year. The audited financial statements for the year ended 31 December 2019 have been filed with the Registrar of Companies. The report of the independent auditors on those accounts contained no qualification or statement under section 498(2) or section 498(3) of the Companies Act 2006.
Financial report for the half year ended 30 June 2020 The financial report for the half year ended 30 June 2020 will be filed with the UK Listing Authority by 31 August 2020 and will be made available on the Company's website. Printed copies or electronic notification will be sent to shareholders in August 2020 and will be available thereafter from the Secretary at the Company's registered office, 14 Queen Anne's Gate, London SW1H 9AA.

-  ENDS -

For further information please contact:

Andrew Bell Chief Executive Officer Witan Investment Trust plc Telephone:  [phone]

Alexis Barling Director of Marketing Witan Investment Trust plc Telephone:  [phone]

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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