Final Results
Page 1 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
This announcement contains regulated information
Chairman and Chief Executive's Report
Highlights
· The NAV total return of 29.4% outperformed the benchmark's return of 20.7%
· NAV total return over last five years of 104%, 22% ahead of the benchmark
· Dividend increased by 9.1% to 14.4p, 7.1% ahead of the rate of inflation
· The 39th consecutive year of increased dividends
· The discount narrowed from 10.2% to 6.1%
Summary
In 2013 Witan delivered a net asset value (NAV) total return of 29.4%, 8.7% more than our benchmark's total return of 20.7% and 8.6% more than the 20.8% return on the FTSE All-Share index of UK shares. The share price total return was 36.7%, enhanced by a narrowing in our share price discount to NAV.
The total dividend for the year was 14.4 pence per share (2012: 13.2 pence), an increase of 9.1%, marking the 39th consecutive year of rising dividends at Witan. This includes the fourth interim dividend of 4.5 pence declared in February 2014 and payable on 28 March 2014.
Over the past 5 years, despite the market gloom which initially followed the collapse of Lehman Brothers in 2008, Witan has achieved an NAV total return of +104%, compared with the +82% returns from our benchmark over this period (source: Datastream). It is encouraging to be able to report a healthy level of outperformance over the longer term, alongside the strong results achieved in 2013.
The returns were driven by widespread outperformance by our investment managers as well as the benefit of employing gearing, during a year of improving investor confidence and rising stock markets. Although this recovery in confidence is welcome, it is prudent to note that the rise in equity markets has reduced the safety margin previously provided by low valuations. The forthcoming corporate reporting season will be important in confirming whether the growth that equity investors have anticipated is being realised.
The investment markets in 2013
Equity markets performed very well in 2013, helped by the absence of the crises and persistent disappointments that had characterised the previous two years. Economic growth was weak during the first part of the year but improved, encouraging equity markets to factor in better times in 2014. In the US, the economy sustained close to 2% growth, improving during the year despite a sharp tightening of fiscal policy. The UK avoided a "triple-dip" recession (and the earlier "second dip" was revised away by more up to-date economic figures) and began to see stronger growth. Japan's economy responded positively to the devaluation of the previously overvalued yen and even Europe saw a modest recovery from the recessionary conditions experienced at the start of the year.
Page 2 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Chairman's and Chief Executive's Report continued
Equities may also have been helped by the first signs of investors turning away from bond markets. Yields had fallen so far in 2012 that the penny finally seemed to drop that buying bonds with yields below the inflation rate was a recipe for losing money. Yields rose sharply in the early summer, in response to hints that the US Federal Reserve ('the Fed') was considering reducing its bond purchases. It had previously been buying bonds in order to boost the money supply and encourage economic recovery. With some signs that this policy was proving successful, in May it signalled a possible change. This led to a sharp sell-off in bond markets which disturbed equity sentiment for several months and, in the case of emerging markets, for the rest of the year.
Once it became clear that any change in purchases by the Fed was dependent upon continued economic improvement and that they were a long way from deciding to raise interest rates, equity markets resumed progress, amid signs that economic growth was improving in most regions. Bonds did not recover, underscoring the point that the rise in yields was due to the overextended starting level, with the Fed's policy signal the catalyst not the cause of the rise.
Witan's strategy during the year was to remain fully invested into what seemed to be an improving outlook for economic growth and corporate earnings, although our gearing was reduced towards the end of the year. We increased our exposure to Japan, by appointing a manager (Matthews) for Far Eastern equities including Japan, by purchasing a Japanese fund (managed by Polar Capital) and by investing in Japanese equity index futures. We took profits in areas where we felt that valuations had become less attractive (including UK smaller companies and our holding in the private equity company 3i Group) and we allocated additional funds to the managers (Lansdowne, Matthews and Heronbridge) appointed since autumn 2012. We completed a review of our list of managers, culminating late in the year in the appointment of two global managers (Pzena and Tweedy, Browne) with a value-based approach. With hindsight, we should have had more in Europe (which outperformed) and less in emerging economies (which lagged) but overall our shareholders enjoyed a successful year.
The Discount, Share Buybacks and Treasury shares
The Company's discount (relative to the NAV excluding income, with debt at market value) progressively narrowed during the year, ending at 6.1%, compared with 10.2% at the end of 2012. The average discount for the year was 8.3% (2012: 10.7%).
This narrower discount is to be welcomed as it reflects, at least in part, increased investor enthusiasm for the Company's active multi-manager approach to investment in global equity markets. During the year, the Company purchased for cancellation a total of 0.4% of the starting shares in issue, at discounts between 8% and 11%, generating a small uplift in the NAV per share. This should also be seen as reflecting the Board's wish to encourage the trend of a narrowing discount, from which all shareholders would clearly benefit, although it is recognised that market conditions and investment performance will also have a material influence.
Although the Company's shares currently remain at a discount, the Board is seeking powers at the forthcoming Annual General Meeting to buy shares into Treasury, for possible reissuance in the event of the shares moving to a premium. Shares will only be re-sold from Treasury at (or at a premium to) the net asset value per ordinary share.
Page 3 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Chairman's and Chief Executive's Report continued
Additionally, the Company is seeking shareholder approval to issue shares, up to 10% of the starting total, provided that such shares are issued at or at a premium to net asset value.
Regulatory changes and Investment Management Fees
The Alternative Investment Fund Managers Directive ('AIFMD')passed into UK law in July 2013, after several years of debate in European political circles. Funds affected have until July 2014 to comply with its requirements. Although "alternative investment" in the UK is generally used to describe exposure to specialist investment strategies such as hedge funds and private equity, the Directive will also apply to mainstream investment funds, such as Witan and other investment trusts, as well as many open-ended funds.
For mainstream funds such as most investment trusts, the safeguards and reporting requirements required by the AIFMD are generally already covered by the Listing Rules for quoted companies or by existing corporate governance practices and regulations. The principal effect will be to require investment funds to appoint an Alternative Investment Fund Manager ('AIFM') and for AIFMs to be internally organised along prescribed lines and to meet amended reporting requirements.
Witan Investment Trust, along with its wholly-owned subsidiary Witan Investment Services ('WIS') is in the process of adapting its internal organisation in order to comply with the new regulation, enabling WIS to act as the AIFM for Witan. This is not expected to result in material changes to Witan's overall staffing, although there will be additional costs associated with legal advice and the requirement to appoint a Depositary. The Company expects to report to Shareholders under the new arrangements from the end of 2014.
Investment Management Fees
The most significant variable costs incurred by the Company are the investment management fees paid to our external managers. The introduction of the Retail Distribution Review ('RDR'), discussed below, has led to questioning of the role of performance fees, as well as introducing greater transparency over the structure of fees charged by open-ended funds. Over the past year, the proportion of our assets managed without performance fees has increased. However, the Company believes that performance fees can be appropriate, provided that the resulting total fee is competitive. The Company structures the fee agreement with each external manager to obtain the best deal for shareholders. Whilst this will not always produce the lowest costs in absolute terms, the Company believes it is in shareholders' interests to pay for managers who add value. Witan takes care to ensure the competitiveness of the fee rates it pays and that where higher fees are incurred they are linked to good performance, from which shareholders benefit. Further details are set out in the Strategic Report.
Page 4 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Chairman's and Chief Executive's Report continued
The Retail Distribution Review ('RDR'), which took effect at the start of 2013, was a positive development for investment trusts, removing some of the built-in financial incentives for financial advisers to favour open-ended funds over investment trusts. As a result of "levelling the playing field" the RDR has made the decision over which fund to buy based more clearly on the merits of the funds themselves, which is a welcome development. A more competitive market has resulted, which should be a benefit for investors. There are some signs of a downward trend in investment manager fees following the ending of "trail commission", while investment trusts have needed to develop better communications with financial advisers and their clients, many of whom have relatively little familiarity with investment trusts.
Witan welcomes the changes introduced by the RDR. With over two-thirds of our shares owned by private individuals or wealth managers and advisors managing portfolios on their behalf, the Company is run with a keen awareness of private investors' interests. Witan offers an actively-managed portfolio with a 39-year record of consecutive dividend rises as well as being diversified by manager, geographic region, business sector and at the individual company level. Further details of our investment approach and results are set out in the Strategic Report.
AGM
Our Annual General Meeting will be held at Merchant Taylors' Hall on Wednesday 30 April 2014 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 106th AGM.
Outlook
2014 may be the first year since the financial crisis that economic growth exceeds expectations. Alongside improving news on the growth outlook during 2013, there has been greater calm about the handling of issues such as the US budget deficit and tensions in the Eurozone which had caused such volatility in 2011 and 2012. Accordingly, equity investors have been prepared to pay a higher multiple of earnings for shares, perceiving the risks to have reduced.
Fundamental headwinds remain, in the form of pressures on consumer spending, with prices rising faster than wages, and the pressure on governments to rein in budget deficits. In addition, some emerging markets have encountered adjustment problems from the decline in commodity prices and from fears of a tightening in global liquidity as the US Federal Reserve begins to reduce the monetary stimulus applied to the US economy. The recent relative calm in Europe could yet be disturbed if the European elections in May generate significant support in Euro currency states for parties wishing to leave the Eurozone.
Maintaining the momentum of recovery remains a balancing act. Governments need to take action to address budget deficits and Central Banks to forestall future inflation but neither will wish to damage a recovery which still remains patchy. Although the Authorities have made clear since 2012 that they are committed to promoting economic recovery, without which the foregoing problems become more intractable, policy misjudgements are possible, to which equity markets may prove more vulnerable after the gains of the past two years.
Page 5 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Chairman's and Chief Executive's Report continued
On a more positive note, it appears increasingly possible that the recovery will become self-reinforcing, as companies begin to invest more in future growth and take on more staff. This would make it easier for consumers to maintain spending, while making inroads into their debt, and lead to a cyclical improvement in government finances. Although current inflation expectations are low, this follows several years of subdued growth. Government bond yields have risen from the unprecedentedly low levels of a year ago but remain well below levels viewed as normal prior to the financial crisis. However, it is possible that a year of surprisingly strong growth will rekindle fears that the exceptional money creation in recent years will lead to rising inflation. Bonds remain vulnerable both to a cyclical rise in inflation and changed expectations about where inflationary risks lie for the future.
Investors are demanding a lower risk premium for holding equities, which have shrugged off the rise in bond yields. This rerating of equities is a normal event when economies are improving but, unlike rises driven by increased profits, it is less repeatable. So, investors should look to earnings as the principal driver of returns in 2014. If corporate earnings grow, while interest rates remain low, equities should offer competitive returns, although the need to be selective, to find the areas of superior or underestimated growth, appears greater than before. This is reflected in Witan's continued focus on managers who base their portfolios on the merits of particular companies, not their weight in a benchmark index.
Harry Henderson Andrew Bell
Chairman Chief Executive
11 March 2014
Page 6 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report
Under updated guidelines for UK-listed Companies' Annual Reports, companies are required to publish a Strategic Report. This replaces the previously-required Business Review, although the objectives are similar. The Strategic Report should provide a description of the objectives which the strategy is designed to deliver for Shareholders, the business model and the outlook for the year ahead (page 4). It should also include analysis of the Company's performance during the year, relative to the key elements of its business strategy.
This Strategic Report has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for those strategies to succeed. The Strategic Report contains certain forward looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
Witan is an investment trust, which was founded in 1909 and has been listed on the London Stock Exchange since 1924. It is managed by an Executive team, under the control and supervision of the Board of Directors.
Strategy
The Company invests its shareholders' funds primarily in a broad geographical spread of global equity markets, in order to participate in opportunities created by growth in the world's economy and to outperform a representative equity benchmark. The objective is to generate long-term growth in capital for shareholders, together with an income that rises faster than the rate of inflation.
The Company employs an active multi-manager approach, allocating funds for investment by selected managers with differing styles and specialisations. The aim is to access the best available management ability, including managers not accessible on the same terms (or at all) to UK investors.
Witan's multi-manager approach was adopted in 2004, in the belief that no single manager was likely to excel in all markets and at all points in the economic cycle. Employing managers to invest in their areas of greatest competence has the potential to improve returns and to reduce risk relative to using a single manager across the investment waterfront.
Our approach aims to balance different factors (such as quality, value or growth approaches and geographical exposure), aiming to profit from managers' combined ability to outperform over time.
It is sometimes said of investment markets that whilst in the short-term they are a voting machine (affected by sentiment) in the long-term they are a weighing machine (recording substantive changes). We seek managers who can capture the longer term growth rewards from equity investment by focusing on fundamental share values rather than chasing short-term momentum.
Page 7 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Business Model
Whilst the external managers are responsible for stock selection in their individual portfolios, the Company's Board and Executive team are responsible for the overall delivery of performance to shareholders, through the following means:
· Setting the overall investment objective.
· Selecting competent managers, who are expected to outperform a suitable benchmark relating to the investment remit set by the Company.
· Adjusting asset allocation according to opportunities that arise.
· The selective use of borrowings with the aim of adding to performance.
· Direct investment in funds exposed to specialist asset categories.
· Controlled and selective use of exchange-traded derivatives to adjust asset allocation.
· Maintaining an effective system of risk management and corporate governance.
In addition to delegating investment management to external portfolio managers, the Company operates an outsourced model for other corporate functions, such as fund accounting, custody and specialist professional services. These are overseen by the in-house Executive Team, covering Investment, Operations and Marketing, headed by the Chief Executive Officer, who is a Director of the Company.
The Board's and the Executive's role in investment management
As already described, the selection of individual investments is delegated to external managers, subject to investment limits and guidelines which reflect the particular mandate (e.g. UK or Global equities) and the specific investment approach which the Company has selected (e.g. value, higher dividend yield, special situations). The managers are chosen by the Board after a disciplined selection process focused on the managers' scope to add value and their fit with the overall balance of the portfolio.
The overwhelming majority of the portfolio is managed in segregated accounts, held at the Company's custodian, which enables the Company to view the portfolio as a whole and analyse its risks and opportunities as well as those at the level of each manager's portfolio.
At the end of 2013, the Company had 11 external investment managers, covering a range of investment remits. Information regarding the proportion of Witan's assets managed by each and of their performance during the year is set out on page 11. Details of the manager changes during the year are set out on page 10.
Up to 10% of the portfolio (at the time of investment) may be invested in collective funds selected by the Chief Executive, with the objective of outperforming Witan's equity benchmark. These may represent asset categories that are temporarily undervalued or funds which are viewed as attractive longer-term generators of superior returns. This portfolio is subject to limits set by the Board.
Page 8 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
The Board and the Executive (under delegated guidelines from the Board) also seek to add to performance by adjusting the level of gearing employed, by the selective use of exchange-traded derivatives to alter the asset allocation and by the use of specialist funds to gain exposure to areas underrepresented in the rest of the portfolio. In essence, the Company seeks to have sufficient levers to pull to take advantage of investment opportunities that may arise, in addition to the total returns arising from the investment managers' portfolios, which are expected to be the most significant driver of the Company's performance.
Our Selected Benchmark
The Company's benchmark is a reference point for what shareholders can expect from an investment in Witan, in terms of the underlying investment structure and in performance. Since October 2007 the benchmark (based on the FTSE All-World indices) has been:
40% UK
20% North America
20% Europe ex-UK
20% Asia Pacific.
This reflects an investment policy that balances investment in the UK market (both for its domestic and international exposure) with access to growth in other regions of the world.
It should be emphasised that the portfolio is actively managed and not designed to track any index. Performance can be expected to vary, sometimes considerably, from that of the benchmark, while aiming for consistent outperformance in the longer term.
Performance information for other commonly used indices is also given in the Key Performance Indicators summary section on page 24.
Performance and Principal Developments in 2013
Success in implementing the Company's strategy is monitored against a range of Key Performance Indicators (KPIs) which are viewed as significant measures of success over the longer term. Although performance relative to the KPIs is also monitored over shorter periods, it is success over the long-term that is viewed as more important, given the inherent volatility of short-term investment returns. The principal financial KPIs are set out on page 9, with a report (in italics) of Witan's performance against them during 2013. In addition, details of the Company's performance in relation to its obligations under the UK Corporate Governance Code are set out in Corporate Governance Statement in the Annual Report.
Page 9 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Key Performance Indicators
A. Investment performance.
· Outperformance compared with Witan's equity benchmark. The Company seeks to achieve at least 2% p.a. outperformance in NAV total return and shareholder total return terms over the long-term. In 2013, Witan achieved 8.7% NAV total return outperformance relative to its combined global equity benchmark (see page 8) and a shareholder total return 16% above that of the benchmark.
· A positive long-term total return, after inflation, for shareholders. In 2013, Witan shareholders enjoyed an NAV total return of 29.4% and, owing to the narrowing of the discount, a shareholder total return of 36.7%. Inflation was 2.0% in the year to December 2013 Returns over the longer term are set out on page 24 and indicate that this objective has also been met over the past 3 and 5 year periods.
· Long-term investment outperformance by the individual managers relative to the relevant benchmark. In 2013, six of the seven managers who had been in place throughout the year outperformed their benchmarks. The portfolio of direct holdings managed by the CEO also outperformed, as well as the two new managers who had been in place for more than one month. The managers' returns since appointment are set out in the table on page 11. Further details are set out on pages 10 to 11.
B. Annual growth in the dividend per share ahead of the rate of inflation. In 2013, the dividend increased by 9.1%, compared with an inflation rate of 2.0% during the year. Further details are set out on page 12.
C. A positive contribution to investment returns from the use of borrowings. The Company employed average gearing of 9% during the year, which contributed 1.9% to returns after taking account of the costs of borrowing. Further details are set out on page 13.
D. A discount to NAV of 10% or less (compared with the NAV excluding income, with debt at market value). The discount on this basis averaged 8.3% during 2013, ending the year at 6.1%, compared with 10.2% at the end of 2012. Further details are set out on page 15.
E. A competitive level of ongoing charges, balancing the need to pay for high quality investment management with the aim of keeping the costs of managing the business as low as possible. In 2013, the ongoing charges figure was 0.69% excluding performance fees (2012: 0.69%) and 1.12% including performance fees (2012: 0.97%). This increase on the previous year was driven by changes in external manager fees, due to the strong performance delivered in 2013. Further details are set out on page 16.
Performance summary and attribution
2013 was a notably positive year for equity investors, with above average returns from most equity markets. Witan achieved an NAV total return of 29.4%, which compares with 20.7% from the composite equity benchmark the Company uses for comparison purposes and 20.8% from the FTSE All Share Index which is widely followed by UK investors. This strong performance was driven by outperformance by most of our appointed managers, in addition to the Company's use of gearing which augmented the positive returns from the portfolio. Excluding the effect of the change in the market value of Witan's quoted debt securities, the NAV total return was 27.8%, 7.1% ahead of the benchmark.
Page 10 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
A breakdown of the performance attribution in 2013 (based on the Company's financial statements) is shown in the table below.
|
Net asset value total return |
+29.4% |
Portfolio investment total return (gross) |
|
+27.1% |
|
Benchmark total return |
+20.7% |
Benchmark total return |
|
+20.7% |
|
|
|
Relative investment performance |
|
+6.4% |
|
|
|
Gearing impact |
+2.5% |
|
|
|
|
Effect of changed market value of debt |
+1.5% |
|
|
|
|
Share buy-backs |
+0.0% |
|
|
|
|
|
|
+4.0% |
|
|
|
|
|
+10.4% |
|
|
|
Borrowing costs |
-0.7% |
|
|
|
|
Operating costs and tax |
-1.0% |
|
|
|
|
|
|
-1.7% |
|
Relative performance |
+8.7% |
|
|
+8.7% |
Combined Portfolio composition
During the year the Company invested its assets with a view to spreading investment risk and in accordance with the investment policy. It has maintained a diversified portfolio in terms of stocks, sectors and geography. The portfolio has been actively managed by the investment managers, in accordance with their individual mandates, with overall asset allocation and risk being managed by Witan's Executive team, within delegated limits from the Board.
The sector breakdown and regional exposure for the aggregated portfolio and the top 50 holdings across the whole of Witan's portfolios are set out in the Annual Report. They represented 41.7% of Witan's portfolio at 31 December 2013 (2012: 44.4%). These analyses highlight the substantial diversification provided by our range of managers and the global geographical exposure. However, it is also important that diversification does not unduly dilute returns, since the purpose of using active managers is to outperform, which requires the portfolio to differ from the benchmark. The relative performance seen in recent years demonstrates that Witan's aggregated portfolio retains an individual character distinct from the relevant indices.
Changes in delegated Investment Managers during 2013
The Company made five changes to its manager structure during the year. This level of manager change is unusual for Witan, which takes a long-term view of investment performance and partnership with its investment managers. However, the changes outlined have resulted in a number of exciting additions to our list of managers and are expected to benefit future shareholder returns.
In February, the Company appointed Matthews International Capital Management ("Matthews") to manage a portfolio of Far Eastern equities, including Japan. The reflationary policy of the newly-elected government in Japan increased the possibility of economic recovery taking hold in the country after years of anaemic performance. Matthews, a San Francisco-based specialist investor in the region, was chosen to manage the Company's specialist Asian portfolio, replacing Comgest which had previously managed a portfolio which did not include Japan.
In June, the Company appointed Heronbridge LLP to manage a portfolio of UK equities with an approach that seeks out soundly-financed and well-managed companies with above-average prospects for growth in intrinsic value. They replaced NewSmith Asset Management LLP.
Page 11 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
In October, the remaining portfolio of UK Smaller Companies managed by Henderson Investors was sold. The manager had performed well since inception in 2004. However, the appointment of other UK managers in recent years, whose remit covered the whole market, meant that the need for a specialist manager to cover this section of the market had reduced. In addition, UK smaller and mid-sized companies had enjoyed a prolonged rise both in absolute terms and relative to the broader market. Accordingly, the Company wished to reduce its exposure in this area and the funds raised were used to reduce borrowings.
Finally, in December, the Company appointed two new value-oriented global managers, Pzena Investment Management and Tweedy, Browne Company LLC to manage the assets previously managed by Southeastern Asset Management and Thomas White International.
Investment Manager Performance
Of the seven managers in place throughout the year, six outperformed their benchmarks. Matthews (appointed in February) and Heronbridge (in June) also outperformed. For Pzena and Tweedy, Browne, appointed in December, it is too soon to comment. Particularly strong absolute and relative returns of over 35% were achieved by Artemis and Lindsell Train in the UK. MFS in Global Equities, Marathon in Europe and the portfolio of direct holdings achieved returns of close to 30%. The standout return was from Lansdowne who achieved a total return of 49% in their first year with Witan. Their proportion of Witan's portfolio was added to during the year, increasing from 2.5% to 8.8%. Trilogy's performance, whilst lagging its benchmark, was held back by adverse investment conditions in emerging economies.
Performance
For the year ended 31 December 2013 and from inception to 31 December 2013
|
Investment Manager |
Value of Witan assets managed £m at 31.12.13 |
% of Witan's assets under management at 31.12.13 Note 1) |
Performance in 2013 (%) |
Benchmark performance in 2013 (%) |
Performance since appointment to 31.12.13 (%) Note 2) |
Benchmark performance since appointment to 31.12.13 (%) |
|
Artemis (UK) |
149.4 |
10.1 |
35.7 |
20.8 |
12.9 |
6.1 |
|
Heronbridge (UK) |
104.7 |
7.1 |
n/a |
n/a |
16.2 |
9.6 |
|
Lindsell Train (UK) |
179.4 |
12.1 |
38.9 |
20.8 |
23.3 |
12.9 |
|
Lansdowne (Global) |
130.8 |
8.8 |
48.8 |
19.9 |
46.6 |
18.5 |
|
MFS (Global) |
131.1 |
8.9 |
27.7 |
21.0 |
12.5 |
9.3 |
|
Pzena (Global) |
141.3 |
9.5 |
n/a |
n/a |
1.1 |
1.0 |
|
Tweedy, Browne (Global) |
47.4 |
3.2 |
n/a |
n/a |
0.9 |
1.0 |
|
Veritas (Global) |
176.7 |
11.9 |
23.5 |
21.1 |
12.7 |
9.9 |
|
Marathon (Pan-Europe) |
121.4 |
8.2 |
29.1 |
23.1 |
13.0 |
10.6 |
|
Matthews (Asia) |
133.7 |
9.0 |
n/a |
n/a |
2.0 |
(1.0) |
|
Trilogy (Emerging Markets) |
51.0 |
3.5 |
(5.3) |
(4.1) |
(5.4) |
(2.4) |
|
Witan Direct Holdings |
92.4 |
6.3 |
31.0 |
20.7 |
9.8 |
8.3 |
Note 1 Percentages of Witan's investments managed, excluding the holdings in Polar Japan open-ended funds (£20.5m, 1.4% of assets) and cash balances held centrally by Witan.
Note 2 The percentages are annualised where the inception date was before 2013.
Page 12 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Directly held investments
This portfolio which held 10.3% of assets at the end of 2012, outperformed Witan's benchmark during 2013, with a return from the portfolio of 31%. The holding in 3i Group (Witan's largest equity holding at the end of 2012) was a significant contributor, as a favourable investor response to new management combined with a more positive stock market environment to drive a major rerating for the stock. This position has been sold, with profits also taken in a number of other holdings in the direct portfolio. The portfolio represented 6.3% of assets at the year end. The main investments were in listed private equity and related companies (Electra Private Equity, Princess Private Equity and NB Distressed Debt Investment Fund), UK domestic recovery (Aberforth Geared Income Trust), two specialist sector funds (Polar Capital Insurance Fund and Ludgate Environmental Fund Limited) and the convertible bonds of Edinburgh Dragon Investment Trust.
Manager structure and performance
The Company's 11 external managers have a range of investment approaches and follow differing mandates set by the Company. Details of each manager's mandate, benchmark, investment style and date of appointment are included in the Annual Report.
Dividend Policy and performance in 2013
The Company's policy, subject to circumstances, is to increase its dividend per share in real terms, ahead of the increase in UK Consumer Prices (CPI).
For 2013, the Board has declared a fourth interim dividend of 4.5 pence per share, to be paid to shareholders on 28 March 2014, making a total distribution for the year of 14.4 pence (2012: 13.2 pence). This represents an increase of 9.1%, over 7% ahead of the 2.0% rate of consumer price inflation (CPI) in the year to December 2013. This is the 39th consecutive year that Witan has increased the dividend.
A chart in the Annual Report shows the growth in dividends over the past 10 years. Our dividend per share has grown ahead of the rise in the UK consumer price index in each year and cumulatively has grown by 73%, more than twice the 31% rise in consumer prices.
The Company commenced paying quarterly dividends in 2013. The first three payments for 2014 (in June, September and December) will, in the absence of unforeseen circumstances, be paid at a rate of 3.6 pence per share (2013: 3.3 pence), being one quarter of the full year payment for 2013. The fourth payment (in March 2015) will be a balancing amount, reflecting the difference between the three quarterly dividends already paid and the payment decided for the full year.
Page 13 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Policy on Gearing and the use of Derivatives
Employment of Gearing
Purpose
The purpose of using borrowings is to improve (or "gear") returns for shareholders, by achieving investment returns higher than the interest cost of the borrowings. Accordingly, attention is paid to using a level of gearing appropriate for market conditions (put simply, having more borrowings when markets are attractively valued and borrowing less at times when returns are expected to be poorer). In addition, a blend of long-term and short-term borrowings is used, to balance the certainty of cost associated with locking in fixed rates for longer periods with the flexibility of using short-term facilities which can be readily repaid when they are not required.
Limits
Although the Company has the legal power under its Articles of Association to borrow up to 100% of the adjusted total of shareholders' funds, with the objective of enhancing returns, this is subject to practical constraints including a test of prudence. The Board's longstanding policy is not to allow gearing to rise to more than 20%, other than temporarily in exceptional circumstances. Over the past five years it has generally varied between 0% and 15% and where appropriate the Company may hold a small net cash position.
Structure
Witan has £110m of long-term debt consisting of debenture, secured bond and preference share capital. The Company also has a £50 million one-year facility, providing additional flexibility over the level of gearing, as well as enabling the Company to borrow in other currencies than sterling, if deemed appropriate. Witan may either invest its borrowings fully, or neutralise their effect with cash balances (or the sale of equity index futures) according to its assessment of the markets. The Company's investment managers are not permitted to borrow within their portfolios but may hold cash if deemed appropriate.
Action taken in 2013
Gearing was managed actively during the year. It was increased to 11% during the middle quarters of the year before being reduced in the autumn, ending the year at 7.3%. Gearing significantly benefited performance during the year, increasing the Group's exposure to the rise in markets.
The calculation of gearing takes account of the nominal value of any derivatives held, since this represents the size of the asset or liability to which the derivative provides exposure.
At the end of 2012, the published gearing figure of 6.1% took account of a £29.7 million short position in the 10-year gilt future, equivalent to 2.7% of net assets. Gearing before accounting for this position was 8.8%. Gross gearing (adding together the value of all positions (less cash), irrespective of whether they were an asset or a liability) was 11.5% at the end of 2012.
At the end of 2013, gross gearing on the same basis was 7.3%. This included a £35.2 million long position in Nikkei Index futures, equivalent to 2.6% of net assets. Further details of the accounting treatment for these positions are given in the Annual Report.
Page 14 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Use of Derivatives
Policy
Witan's policy on the use of derivatives emphasises simplicity, transparency, cost effectiveness and the minimisation of counterparty risk. Where financial instruments are available that help the Company to implement its investment policy (whether for the purpose of increasing exposure to a particular asset or for portfolio hedging) their use will be considered. In recent years, exchange-traded index futures have been the only instruments used. These give exposure to a particular market index, are relatively liquid to trade and depend upon the creditworthiness of the particular exchange, not an individual firm.
The use of index futures enables Witan to adjust its gearing rapidly, conferring tactical flexibility. It also provides a means of adjusting asset allocation (by allocating investment to particular markets). In both cases, the use of index futures enables the adjustments to be made without interfering with the assigned objectives for our investment managers, which are to pick stocks that will grow in value over the medium to long-term and outperform their respective benchmarks. The operation of this investment area is the responsibility of the CEO, within guidelines set by the Board. Transactions are reported to the Board as they occur, with the CEO being accountable for the financial results. The Company's external managers are not permitted to make use of derivatives or to gear their portfolios.
Activity during 2013
At the end of 2012, the Company held a short position in the 10-year gilt futures, which was established inter alia to reduce the potential adverse portfolio impact from an expected rise in gilt yields. However, this position was gradually reduced and finally closed in April, when the improving prospects for global equity markets led to a decision to redeploy the capital employed to increase exposure to the Japanese equity market. Since April, the Company has held a position in the Nikkei Index futures contract, equivalent to approximately 3% of net assets. This has given the Company additional exposure to the strongly-performing Japanese market at a time when its externally managed portfolios had relatively little Japanese exposure.
The underlying futures exposure varied between -2.7% (represented by a £29.7 million short position in the gilt future in January) and +4.0% of assets, finishing the year at +2.6% (represented by a £35 million position in Japanese equity index futures). The Company takes full account of the effect of the nominal value of the futures contracts when calculating its gearing. The value of the investments (which are traded on official exchanges) is fully marked to market every day. The realised gain on index futures during the year is shown in the cash flow statement on page 29.
Page 15 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Market liquidity and Discount Policy
Witan is a member of the FTSE 250 index, with a market capitalisation of over £1.2 billion. The Board places great importance on the encouragement of a liquid market in Witan's shares on the Stock Exchange. The Company makes use of share buybacks, purchasing shares for cancellation when they stand at a significant discount to the NAV (excluding income, with debt at market value), with the objective of achieving a sustainable and improving discount of 10% or less (subject to market conditions). This policy has the direct effect of improving NAV per share with the additional strategic aims of mitigating volatility in the discount and bringing the share price closer to the NAV.
The discount has shown an improving trend in recent years, particularly during 2013, illustrated in a chart shown in the Annual Report.
In view of the substantial narrowing of the discount during 2013, the Company is seeking shareholder approval to buy shares into Treasury, for possible reissue if the shares were to trade at a premium in the future. This would be more cost-effective for shareholders than cancelling shares at a discount and later issuing new shares at a premium.
Additionally, the Company is seeking shareholder approval to issue shares, up to 10% of the starting total, provided that such shares are issued at or at a premium to net asset value.
Marketing
Witan is a self-managed investment trust, so the purpose of "marketing" is to provide effective communication of developments at the Company to existing and potential shareholders to help sustain a liquid market in our shares. Clear communication of the Company's investment objective and its success in executing its strategy make it easier for investors to decide how Witan fits in with their own investment objectives. Other things being equal, this should help the shares to trade at a narrower discount, from which all shareholders would clearly benefit. If the shares trade on a premium, this creates the possibility of increasing the size of the Company by issuing new shares, with benefits in terms of greater liquidity as well as spreading costs over a larger base of shareholders' funds.
In view of these potential benefits, the Company has felt for many years that it is beneficial to incur the limited costs of operating a marketing programme in order to disseminate information about our investment strategy and performance more widely. This programme communicates with private and professional investors, financial advisers and intermediaries using a range of media (including direct meetings, press interviews and advertising through traditional media and the internet). The Company also provides an informative and easy to use website (www.witan.com) to enable investors to make informed decisions about including Witan shares in their investment portfolios. The website includes a section focused on the requirements of Financial Advisers, which was set up following the introduction of the Retail Distribution Review in January 2013.
Page 16 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Costs
Investment Management Fees
Each of the external managers is entitled to a base management fee rate, levied on the assets under management, and in some cases a performance fee, calculated according to investment performance relative to an appropriate benchmark. The agreements can be terminated on one month's notice (except one, for which a 3 month notice period applies). One of the investment mandates is operated via a fund vehicle, to simplify custody arrangements in emerging economies.
The base management fee rates for managers in place at the end of 2013 range from 0.2% to 0.8% per annum and the performance fees range from nil to 20 per cent of the relevant outperformance. The average base management fee, weighted according to the value of the funds under management, was 0.47% as at 31 December 2013 (2012: 0.35%). On a similar basis, the average performance fee is 6% of the outperformance of the relevant benchmark (2012: 11%), subject to capping of payments for any particular year. The average base fee has risen, while the average performance fee across the portfolio has fallen. This is due to a rise (from 31% to 57%) in the proportion of assets managed without performance fee arrangements.
As an illustration, if our managers uniformly outperformed their benchmarks by 3% after base management fees, this would generate a performance fee of 0.19% of net assets, giving total investment management fees of 0.66% (including a 0.47% base fee). The comparable estimate in 2012 was 0.69% (including a 0.36% base fee). The actual fees payable will of course vary according to the level of performance and the variation in performance between managers with higher or lower fees.
Witan takes care to ensure the competitiveness of the fee rates it pays and that where higher fees are incurred they are linked to good performance, from which shareholders benefit. A majority of the managers have base fees alone (without performance fees) and a majority of the fee structures incorporate a "taper" whereby the rate reduces for larger portfolios.
The Company's external investment managers may use certain services which are paid for, or provided by, various brokers. In return, they may place business, including transactions relating to the Company, with those brokers.
Ongoing Charges and costs
The ongoing charges figure ("OCF") (which is the recurring operating and investment management costs of the Company, expressed as a percentage of average net assets) was 0.69% in 2013, the same as in 2012 (0.69%). The higher average level of net assets (allowing fixed costs to be spread over a larger base) was offset by an increase in the average investment management fee payable to our external managers, following changes in the managers used. When performance fees due to the relevant external managers are included, the OCF was 1.12% in 2013 (2012: 0.97%), reflecting a very strong year in performance terms. This compares with the average OCF of 1.69% in the IMA Flexible Investment equity funds sector (source: IMA, Financial Express as at December 2013) and 0.77% (0.83% including performance fees) for the AIC Global Growth sector (source: AIC, as at 31 December 2013).
Page 17 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
The Company exercises strict scrutiny and control over costs. As a self-managed investment trust, any negotiated savings in investment management or other fees directly reduce the costs for shareholders. Whilst this will not always generate the lowest absolute costs, the Board believes that it is in shareholders' interests to pay for managers who add value. The Board believes that the increase in the OCF during the year represented good value for money for shareholders, given the significantly increased level of outperformance generated by the portfolio in 2013.
There is continuing debate over the most appropriate measure of investment company costs, to enable investors to assess value for money and to make comparisons between funds. In recent years, the Total Expense Ratio (TER) was overtaken by the Ongoing Charges Figures (OCF) and there is discussion in the fund sector about whether further changes should be made, for example to distil all costs into a single Cost of Ownership Figure for Investors. Consensus on how to present a single figure remains elusive at present, partly because of concerns that oversimplification might distort comparisons rather than facilitating them.
In the meantime, the Company will continue to focus on the OCF (which is prepared in accordance with the AIC's recommended methodology) as a readily-understood measure of the underlying expenses of running the business. This year, Witan has decided to present the information on costs, previously given in different parts of the Annual Report, in a single table below. This indicates the main cost heading in money terms and as a percentage of net assets. The figures for relative NAV total return performance are also included, for comparison purposes.
|
Category of cost |
2013 £m |
2013 % of net assets |
2012 £m |
2012 % of net assets |
|
Other Expenses (excluding investment management expenses) |
5.32
|
0.42
|
4.87
|
0.47
|
|
Less other non-recurring expenses and those relating to the subsidiary (whose expenses do not relate to the operation of the investment company). |
(1.16) |
(0.09) |
(1.15) |
(0.11) |
|
Investment management base fees (see note 4, page 32) |
4.58 |
0.36 |
3.38 |
0.33 |
|
Ongoing Charges Figure (including investment manager base fees) |
8.74 |
0.69 |
7.10 |
0.69 |
|
Investment manager performance fees (see note 4, page 32) |
5.49 |
0.43 |
2.93 |
0.28 |
|
Ongoing charges (including performance fees) |
14.23 |
1.12 |
10.03 |
0.97 |
|
Portfolio transaction costs* |
1.89 |
0.16 |
1.23 |
0.12 |
|
Relative outperformance during the year (valuing debt at par value) |
|
+7.1% |
|
+2.0% |
* excludes non-recurring portfolio transition costs of £0.9m arising from the manager changes (2012: £0.04m).
Priorities for the year ahead
In 2014, the key priorities for Witan include:
· Investment. Seek to build on the strong returns achieved for shareholders in 2013, setting an appropriate strategic asset allocation to reflect changing opportunities in the world economy. Make use of a range of active managers to deliver our strategic objectives through a multi-manager structure. Continue to deliver dividend growth ahead of inflation.
Page 18 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
· Communication. Communicate Witan's distinct and active investment approach and achievements more effectively to existing and potential shareholders. In particular increase the focus on improving information for personal investors and financial advisers, where direct meetings are less practicable.
· Regulatory change.Complete the process of authorisation under the AIFMD.
· Client service. Provide excellent service to the corporate and individual clients of Witan Investment Services.
Corporate and Operational Structure
As described earlier (page 6) Witan is an Investment Trust with a Premium Listing on the London Stock Exchange. It has a single, wholly owned, subsidiary, Witan Investment Services Limited ('WIS').
Operational Management Arrangements
In addition to the appointment of external investment managers, Witan contracts with third parties for the supporting services it requires, including:
· BNP Paribas Securities Services SA ('BNPSS') for global custody, investment accounting and administration.
· Frostrow Capital LLP for company secretarial services.
· International Financial Data Services ('IFDS') Ltd. as the savings plan administrators of Witan Wisdom and Jump Savings.
· Specialist advisers are also used for media relations, advertising and investment manager research.
· The Company also takes specialist advice on regulatory compliance issues and, as required, procures legal, investment consulting, financial and tax advice.
As with investment management, the contracts governing the provision of these services are formulated with legal advice and stipulate clear objectives and guidelines for the level of service required.
Premises and staffing
Since November 2005 the Company has had a lease on office premises at 14 Queen Anne's Gate, London SW1H 9AA, which is also the Company's registered office.
The Company's policy towards its employees is to attract and retain staff with the particular skills and expertise required to manage the affairs of an investment trust company. Details of the Company's remuneration policies and required disclosures are set out in the Directors' Remuneration Report in the Annual Report. Employees and those who seek to work within the Group are treated equally regardless of sex, marital status, creed, colour, race or ethnic origin. The Company has six direct employees, four men and two women. The Board currently consists of seven non-executive Directors (five men and two women) and the Chief Executive Officer, Andrew Bell, who is an employee. Given its outsourced model and small number of direct employees, the Group has no specific policies in respect of environmental or social and community affairs.
Page 19 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Witan Investment Services ('WIS')
Witan Investment Services Limited is a wholly owned subsidiary of Witan Investment Trust plc. It was established in March 2005 to provide investment savings accounts and marketing services and to give investment advice to professional investors. It is authorised and regulated by the Financial Conduct Authority (FCA).
The principal activities of WIS have historically been to provide executive management services to the Boards of Witan Investment Trust plc ('Witan') and Witan Pacific Investment Trust plc ('Witan Pacific'), to communicate information about the Companies to the market to increase investor interest in their shares and to operate cost-effective savings plans for investors to hold the shares. From 2014, as already noted, it is also expected to become the AIFM for Witan.
WIS's operational objectives are:
· to provide a reliable and efficient investment savings platform for Witan and Witan Pacific investors
· to provide suitable advice to the Boards of its corporate clients
· to reduce the net operating costs for Witan Investment Trust
· to seek appropriate business opportunities which can add value for shareholders
· (from 2014) to provide an appropriate system of investment and risk management to fulfil its obligations as Witan's AIFM under the AIFMD.
WIS has two principal sources of income. These are savings plan revenues and the executive management and marketing fees paid by its corporate clients, Witan and Witan Pacific. The main costs incurred by WIS are fees to the savings schemes administrator (IFDS), staff costs to provide the services described above and professional advice to ensure that its regulatory and accounting obligations are properly satisfied.
The savings plans provided for WIS clients are marketed under the Witan Wisdom and Jump Savings brands. They currently have over 24,000 accounts with assets of some £280 million invested. During 2013, the account fees paid by investors for Witan Wisdom accounts were reviewed, to ensure an equitable balance between administration fees and transaction costs and to reflect changes in the savings market. Details have been sent to account holders, with the changes taking effect from April 2014.
Principal risk and uncertainties
Risks are inherent in investment and corporate management but it is important that their nature and magnitude is understood, in order that risks, particularly those which the Company does not wish to take, can be identified and either avoided or controlled. The Company (and its subsidiary WIS) has established a detailed framework of the key risks impinging on the business (principally investment, operational, financial and regulatory), with associated policies and processes devised to mitigate or manage those risks. This Risk Map is reviewed regularly by the Audit Committee and the Board and updated as necessary. Under the AIFMD taking effect from July 2014, additional rules are being introduced regarding the monitoring and management of business risks. The Company expects to establish a Risk Committee within WIS in order to comply with the risk management and reporting obligations of the AIFMD. The guiding principles already in place (watchfulness, proper analysis, prudence and a clear system of risk management) will remain the same.
Page 20 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
The Group's key risks fall broadly under the following categories:
Market and investment portfolio risks
Witan is set up to invest in UK and overseas equity markets on behalf of its shareholders. Equity exposure is unlikely to drop below 80%, in normal conditions. Therefore a key risk of investing in Witan is a general fall in equity prices. Other risks, as with any international equity portfolio, are the overall investment portfolio's exposure to country, currency, industrial sector, and stock specific risks. There are also risks associated with the performance of its investment managers.
The Board seeks to manage these risks through:
· appropriate asset allocation decisions, with a broadly diversified equity benchmark
· regular reviews of the competence of our fund managers
· monitoring the global economic, geo-political and stock market outlook
· the application of relevant policies on gearing and liquidity
· manager diversification
· delegating authority to the executive management team to manage risk actively, whether to preserve capital or capitalise on opportunities.
During the year Witan's Chief Executive Officer (CEO), Andrew Bell, managed the overall business and the investment portfolio in accordance with limits and restrictions determined by the Board. The Board regularly reviews the matters delegated to Executive management, on which the CEO reports at each Board meeting. The Board also regularly reviews investment strategy and performance, supported by comprehensive management information including investment performance data and financial reports.
Operational
Many of the Group's financial systems are outsourced to third parties, principally BNPSS. Disruption to the accounting, payment systems or custody records operated by BNPSS could prevent the accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by its suppliers, and the key elements designed to provide effective internal control are explained further in the Corporate Governance Statement.
Corporate governance
The Board takes its own regulatory responsibilities very seriously and regularly reviews the main points of compliance against requirements. Details of the Company's compliance with corporate governance best practice are set out in the Corporate Governance Statement in the Annual Report. The Board conducts an annual internal assessment of the effectiveness of its governance processes in managing the Company and enabling it to evolve in response to future challenges. There is also a 3-yearly independent external review, the most recent of which was conducted in late 2013.
Page 21 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Operational and regulatory risks are regularly and extensively reviewed by Witan's Audit Committee. WIS is subject to its own operating rules and regulations and is regulated by the Financial Conduct Authority ("FCA"). From 2014, WIS is expected to become the AIFM for Witan, which will entail it becoming more closely involved in a wide range of Witan's operations. Ahead of this development, Witan and WIS are in the process of adapting the internal governance structure for review of the relevant risks and control framework.
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. Management monitors the activities of all third parties and reports any significant issues to the Board.
Accounting, legal and regulatory
In order to qualify as an investment trust the Company must comply with sections 1158-59 of the Corporation Tax Act 2010 ('CTA'). A breach of these sections could result in the Company losing investment trust status and, as a consequence, capital gains realised within the Company's portfolio would be subject to Corporation Tax. The criteria are monitored by the CEO and reviewed at each board meeting. The Company also carefully and regularly monitors compliance with the accounting rules affecting investment trusts.
The Company is required to comply with the provisions of the Companies Act 2006 ('Companies Act'), and the Company must also comply with the UK Listing Authority's Listing Rules and Disclosure Rules ('UKLA Rules'). A breach of the Companies Act could result in the Company and/or the directors being fined or becoming the subject of criminal proceedings. Breach of the UKLA Rules could result in the suspension of the Company's shares which would in turn lead to a breach of the provisions of the CTA.
These legal and regulatory requirements offer significant protection for shareholders. The Board relies on the CEO, the Company Secretary and the Group's professional advisers to ensure compliance with all applicable rules. WIS is regulated by the Financial Conduct Authority for the marketing and administration of savings plans and the provision of investment advice to professional clients. It will also assume additional responsibilities as the Alternative Investment Fund Manager ("AIFM") for Witan in 2014.
As noted in the Chairman's and Chief Executive's Statement, the Alternative Investment Fund Manager Directive ("AIFMD") became law in the UK in July 2013. The Company is reviewing its systems and procedures to ensure that it will be fully compliant with the Directive ahead of the deadline of July 2014. It remains the Company's policy to meet best practice in complying with all applicable regulations.
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 the foreseeable future. Therefore, the directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. In reviewing the position as at this date, the Board has considered advice on this matter issued by the Financial Reporting Council.
Page 22 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Strategic Report continued
Approval
This report was approved by the Board of Directors on 11 March 2014 and is signed on its behalf by:
H M Henderson
Chairman
11 March 2014
A L C Bell
Chief Executive Officer
11 March 2014
Page 23 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
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 Financial Report confirm to the best of their knowledge that:
· the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
· the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description on pages 19 to 21) of the principal risks and uncertainties that they face; and
· the financial statements, taken as a whole, are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
For and on behalf of the Board
H M Henderson
Chairman
11 March 2014
A L C Bell
Chief Executive Officer
11 March 2014
Page 24 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Corporate key performance indicators
|
Share price and net asset value (NAV) |
31 December 2013 |
31 December 2012 |
% Change |
|
Share price |
669.0p |
503.0p |
+33.0 |
|
NAV per ordinary share (debt at par value) |
725.2p |
581.8p |
+24.6 |
|
NAV per ordinary share (debt at market value) |
717.6p |
568.9p |
+26.1 |
|
Discount (debt at market value) (A) |
6.8% |
11.6% |
|
|
Discount (NAV excluding income, debt at market value) (B) |
6.1% |
10.2% |
|
(A) This is the discount to the NAV including income.
(B) The average discount on this basis in 2013 was 8.3% (2012: 10.7%). (Source: Datastream)
Total return performance
|
|
1 year % Return
|
3 years % Return |
5 years % Return |
|
Total shareholder return (C) |
36.7 |
40.1 |
117.7 |
|
Net asset value total return (D) |
29.4 |
33.7 |
104.0 |
|
Benchmark (E) |
20.7 |
26.9 |
82.2 |
|
FTSE All-Share Index (F) |
20.8 |
31.0 |
95.2 |
|
FTSE World (ex UK) Index (F) |
22.7 |
29.0 |
78.9 |
(C) Source: Datastream. The movement in the ordinary share price adjusted to include the reinvestment of dividends.
(D) Source: Datastream/Witan. The movement in the net asset value per share adjusted to include the reinvestment of dividends.
(E) Source: Witan. The benchmark is a composite of four indices: the FTSE All-Share Index 40%, the FTSE All-World North America Index 20%, the FTSE All-World Europe (ex UK) Index 20% and the FTSE All-World Asia Pacific Index 20%.
(F) Source: Datastream. See also FTSE International for conditions of use (www.ftse.com).
Dividend information
|
Dividend information |
2013 |
2012 |
% Change
|
|
Revenue per share |
15.4p |
14.5p |
+6.2% |
|
Dividend per share |
14.4p |
13.2p |
+9.1% |
2014 Dividend schedule*
|
Ex-Dividend Date |
Pay Date |
Dividend Type |
Dividend Payable per share
|
|
26/02/2014 |
28/03/2014 |
Fourth Interim |
4.5p |
|
21/05/2014 |
18/06/2014 |
First Interim |
3.6p |
|
20/08/2014 |
18/09/2014 |
Second Interim |
3.6p |
|
19/11/2014 |
18/12/2014 |
Third Interim |
3.6p |
* Please note that the dates and amounts for the first, second and third interim dividends could be subject to change.
Page 25 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Other financial information
|
Other financial information
|
2013 |
2012 |
% change |
|
Net assets |
£1,372,944,000 |
£1,105,847,000 |
+24.2 |
|
Number of ordinary shares in issue |
189,311,000 |
190,079,500 |
-0.4 |
|
Gearing (A) |
7.3% |
6.1% |
|
|
Share buy-backs (B) |
0.4% |
1.2% |
|
|
Ongoing charge excluding performance fee |
0.69% |
0.69% |
|
|
Ongoing charge including performance fee |
1.12% |
0.97% |
|
(A) The difference between shareholders' funds and the total market value of the investments (including the face value of futures positions) expressed as a percentage of shareholders' funds.
(B) The percentage of the ordinary share capital in issue at the previous year end that was bought back during the year.
Page 26 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Consolidated statement of comprehensive income
for the year ended 31 December 2013
|
|
Year ended 31 December 2013 |
Year ended 31 December 2012 |
||||
|
|
Revenue return £'000 |
Capital return £'000 |
Total £'000 |
Revenue Return £'000 |
Capital Return £'000 |
Total £'000 |
|
Investment income (note 2) |
37,943 |
- |
37,943 |
35,583 |
- |
35,583 |
|
Other income (note 3) |
1,449 |
- |
1,449 |
1,467 |
- |
1,467 |
|
Gains on investments held at fair value through profit or loss |
- |
289,871 |
289,871 |
- |
130,213 |
130,213 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
Total income |
39,392 |
289,871 |
329,263 |
37,050 |
130,213 |
167,263 |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Management fees (note 4) |
(1,146) |
(8,925) |
(10,071) |
(845) |
(5,465) |
(6,310) |
|
Other expenses |
(5,216) |
(101) |
(5,317) |
(4,764) |
(101) |
(4,865) |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
Profit before finance costs and Taxation |
33,030 |
280,845 |
313,875 |
31,441 |
124,647 |
156,088 |
|
|
|
|
|
|
|
|
|
Finance costs |
(2,144) |
(6,185) |
(8,329) |
(2,115) |
(6,092) |
(8,207) |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
Profit before taxation |
30,886 |
274,660 |
305,546 |
29,326 |
118,555 |
147,881 |
|
|
|
|
|
|
|
|
|
Taxation |
(1,623) |
- |
(1,623) |
(1,603) |
- |
(1,603) |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
Profit attributable to equity holders of the parent company |
29,263 |
274,660 |
303,923 |
27,723 |
118,555 |
146,278 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
|
|
|
|
|
|
|
|
|
Earnings per ordinary share (note 5) |
15.44p |
144.96p |
160.40p |
14.50p |
62.02p |
76.52p |
|
|
====== |
====== |
====== |
====== |
====== |
====== |
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.
The net profit for the year of the Company was £303,923,000 (2012: £146,278,000).
All income is attributable to the equity holders of Witan Investment Trust plc, the parent company. There are no minority interests.
Page 27 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Consolidated and individual company statements of changes in equity
for the year ended 31 December 2013
|
Group: Year Ended 31 December 2013 |
||||||||
|
|
|
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 2012 |
47,520 |
16,237 |
46,306 |
938,708 |
57,076 |
1,105,847 |
||
|
Total comprehensive income: |
|
|
|
|
|
|
||
|
Profit for the year |
- |
- |
- |
274,660 |
29,263 |
303,923 |
||
|
Transactions with owners, |
|
|
|
|
|
|
||
|
recorded directly to equity: |
|
|
|
|
|
|
||
|
Ordinary dividends paid (note 7) |
- |
- |
- |
- |
(32,389) |
(32,389) |
||
|
Buy-backs of ordinary shares |
(192) |
- |
192 |
(4,437) |
- |
(4,437) |
||
|
|
|
|
|
|
|
|
|
|
|
Total equity at 31 December 2013 |
47,328 |
16,237 |
46,498 |
1,208,931 |
53,950 |
1,372,944 |
||
|
|
|
|
|
|
|
|
|
|
|
Company: Year Ended 31 December 2013 |
||||||||
|
|
|
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 2012 |
47,520 |
16,237 |
46,306 |
938,734 |
57,050 |
1,105,847 |
||
|
Total comprehensive income: |
|
|
|
|
|
|
||
|
Profit for the year |
- |
- |
- |
274,773 |
29,150 |
303,923 |
||
|
Transactions with owners, |
|
|
|
|
|
|
||
|
recorded directly to equity: |
|
|
|
|
|
|
||
|
Ordinary dividends paid (note 7) |
- |
- |
- |
- |
(32,389) |
(32,389) |
||
|
Buy-backs of ordinary shares |
(192) |
- |
192 |
(4,437) |
- |
(4,437) |
||
|
|
|
|
|
|
|
|
|
|
|
Total equity at 31 December 2013 |
47,328 |
16,237 |
46,498 |
1,209,070 |
53,811 |
1,372,944 |
||
|
|
|
|
|
|
|
|
|
|
|
Group: Year Ended 31 December 2012 |
||||||||
|
|
|
Ordinary |
Share |
Capital |
Other |
|
|
|
|
|
|
share |
premium |
redemption |
capital |
Revenue |
|
|
|
|
|
capital |
account |
Reserve |
reserves |
reserve |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Total equity at 31 December 2011 |
48,092 |
16,237 |
45,734 |
830,930 |
53,356 |
994,349 |
||
|
Total comprehensive income: |
|
|
|
|
|
|
||
|
Profit for the year |
- |
- |
- |
118,555 |
27,723 |
146,278 |
||
|
Transactions with owners, |
|
|
|
|
|
|
||
|
recorded directly to equity: |
|
|
|
|
|
|
||
|
Ordinary dividends paid (note 7) |
- |
- |
- |
- |
(24,003) |
(24,003) |
||
|
Buy-backs of ordinary shares |
(572) |
- |
572 |
(10,777) |
- |
(10,777) |
||
|
|
|
|
|
|
|
|
|
|
|
Total equity at 31 December 2012 |
47,520 |
16,237 |
46,306 |
938,708 |
57,076 |
1,105,847 |
||
|
|
|
|
|
|
|
|
|
|
|
Company: Year Ended 31 December 2012 |
||||||||
|
|
|
Ordinary |
Share |
Capital |
Other |
|
|
|
|
|
|
share |
premium |
redemption |
capital |
Revenue |
|
|
|
|
|
capital |
account |
reserve |
reserves |
reserve |
Total |
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Total equity at 31 December 2011 |
48,092 |
16,237 |
45,734 |
830,893 |
53,393 |
994,349 |
||
|
Total comprehensive income: |
|
|
|
|
|
|
||
|
Profit for the year |
- |
- |
- |
118,618 |
27,660 |
146,278 |
||
|
Transactions with owners, |
|
|
|
|
|
|
||
|
recorded directly to equity: |
|
|
|
|
|
|
||
|
Ordinary dividends paid (note 7) |
- |
- |
- |
- |
(24,003) |
(24,003) |
||
|
Buy-backs of ordinary shares |
(572) |
- |
572 |
(10,777) |
- |
(10,777) |
||
|
|
|
|
|
|
|
|
||
|
Total equity at 31 December 2012 |
47,520 |
16,237 |
46,306 |
938,734 |
57,050 |
1,105,847 |
||
Page 28 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Consolidated and individual company balance sheets
for the year ended 31 December 2013
|
|
Group |
Company |
Group |
Company |
|
|
31 December |
31 December |
31 December |
31 December |
|
|
2013 |
2013 |
2012 |
2012 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Non current assets |
|
|
|
|
|
Investments held at fair value through profit or loss |
1,436,962 |
1,438,001 |
1,202,076 |
1,203,002 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Other receivables |
6,695 |
6,548 |
4,549 |
4,461 |
|
Cash and cash equivalents |
57,532 |
56,372 |
36,420 |
35,309 |
|
|
|
|
|
|
|
|
64,227 |
62,920 |
40,969 |
39,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
1,501,189 |
1,500,921 |
1,243,045 |
1,242,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Other payables |
(7,873) |
(7,605) |
(5,882) |
(5,609) |
|
Bank loan |
(10,000) |
(10,000) |
(21,000) |
(21,000) |
|
|
---------- |
---------- |
---------- |
---------- |
|
|
(17,873) |
(17,605) |
(26,882) |
(26,609) |
|
|
|
|
|
|
|
Total assets less current liabilities |
1,483,316 |
1,483,316 |
1,216,163 |
1,216,163 |
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
At amortised cost: |
|
|
|
|
|
81⁄2 per cent. Debenture Stock 2016 |
(44,584) |
(44,584) |
(44,587) |
(44,587) |
|
6.125 per cent. Secured Bonds due 2025 |
(63,233) |
(63,233) |
(63,174) |
(63,174) |
|
3.4 per cent. cumulative preference shares of £1 |
(2,055) |
(2,055) |
(2,055) |
(2,055) |
|
2.7 per cent. cumulative preference shares of £1 |
(500) |
(500) |
(500) |
(500) |
|
|
(110,372) |
(110,372) |
(110,316) |
(110,316) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
1,372,944 |
1,372,944 |
1,105,847 |
1,105,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to equity holders |
|
|
|
|
|
Ordinary share capital |
47,328 |
47,328 |
47,520 |
47,520 |
|
Share premium account |
16,237 |
16,237 |
16,237 |
16,237 |
|
Capital redemption reserve |
46,498 |
46,498 |
46,306 |
46,306 |
|
Retained earnings: |
|
|
|
|
|
Other capital reserves |
1,208,931 |
1,209,070 |
938,708 |
938,734 |
|
Revenue reserve |
53,950 |
53,811 |
57,076 |
57,050 |
|
|
|
|
|
|
|
Total equity |
1,372,944 |
1,372,944 |
1,105,847 |
1,105,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per ordinary share |
725.23p |
725.23p |
581.8p |
581.8p |
|
|
|
|
|
|
Page 29 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Consolidated and individual company cash flow statements
for the year ended 31 December 2013
|
|
Group |
Company |
Group |
Company |
|
|
2013 |
2013 |
2012 |
2012 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Operating activities |
|
|
|
|
|
Profit before taxation |
305,546 |
305,546 |
147,881 |
147,881 |
|
Interest paid |
8,329 |
8,329 |
8,207 |
8,207 |
|
Gains on investments held at fair value through profit or loss |
(289,871) |
(289,984) |
(130,213) |
(130,276) |
|
Net sales of investments held at fair value through profit or loss |
50,630 |
50,630 |
10,913 |
10,913 |
|
Net gain from futures contracts |
4,465 |
4,465 |
2,458 |
2,458 |
|
Scrip dividends included in investment income |
(1,256) |
(1,256) |
(1,136) |
(1,136) |
|
(Increase)/decrease in other receivables |
(6) |
53 |
467 |
468 |
|
Increase in other payables |
2,752 |
2,757 |
605 |
452 |
|
|
|
|
|
|
|
Net cash inflow from operating activities before interest and taxation |
80,589 |
80,540 |
39,182 |
38,967 |
|
|
|
|
|
|
|
Interest paid |
(8,285) |
(8,285) |
(8,161) |
(8,161) |
|
Tax on overseas income |
(1,624) |
(1,624) |
(1,651) |
(1,651) |
|
|
|
|
|
|
|
Net cash inflow from operating activities |
70,680 |
70,631 |
29,370 |
29,155 |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
Equity dividends paid |
(32,389) |
(32,389) |
(24,003) |
(24,003) |
|
Buy-backs of ordinary shares |
(4,617) |
(4,617) |
(10,899) |
(10,899) |
|
(Repayment)/drawdown of loans |
(11,000) |
(11,000) |
6,000 |
6,000 |
|
|
|
|
|
|
|
Net cash outflow from financing activities |
(48,006) |
(48,006) |
(28,902) |
(28,902) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
22,674 |
22,625 |
468 |
253 |
|
Cash and cash equivalents at the start of the year |
36,420 |
35,309 |
37,150 |
36,254 |
|
Effect of foreign exchange rate changes |
(1,562) |
(1,562) |
(1,198) |
(1,198) |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year |
57,532 |
56,372 |
36,420 |
35,309 |
|
|
|
|
|
|
|
|
|
|
|
|
Page 30 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Notes to the Financial Statements
for the year ended 31 December 2013
1. Accounting policies
The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation. These comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ('IASC') that remain in effect, to the extent that they have been adopted by the European Union.
These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.
(a) Basis of preparation
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts ('the SORP') issued by the Association of Investment Companies ('the AIC') in January 2009 is consistent with the requirements of IFRSs as adopted by the European Union, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
Sources of estimation uncertainty
In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not always readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may vary from these estimates.
(b) Going concern
The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Strategic Report on pages 6 to 22. The financial position of the Group as at 31 December 2013 is shown in the balance sheet on page 28. The cash flows of the Group for the year ended 31 December 2013, which are not untypical, are set out on page 29. The Company had fixed debt and preference share capital totalling £110,372,000, as set out in the notes in the Annual Report; none of the borrowings is repayable before 2016. In 2013, the Group renewed a one year secured multi-currency borrowing facility for £50 million, of which £10 million was drawn down at 31 December 2013 (2012: £21 million). Notes in the Annual Report set out the Group's risk management policies and procedures, including those covering currency risk, interest rate risk and liquidity risk. As at 31 December 2013 the Group's total assets less current liabilities exceeded its total non current liabilities by a multiple of over ten. The assets of the Group consist mainly of securities that are held in accordance with the Company's investment policy. Most of these securities are readily realisable even in volatile markets. The directors, who have reviewed carefully the Group's budget and forecast for the coming year, consider that the Group has adequate financial resources to enable it to continue in operational existence for the foreseeable future. Accordingly, the directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Group's accounts.
(c) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and the entity controlled by the Company (its subsidiary) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. Where necessary, adjustments are made to the financial statements of the subsidiary to bring the accounting policies used by it into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Page 31 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Notes to the Financial Statements continued
(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
|
|
|
|
|
|
2013 |
2012 |
|
|
£'000 |
£'000 |
|
Franked: |
|
|
|
UK dividends from listed investments |
15,529 |
15,868 |
|
UK special dividends from listed investments |
1,392 |
209 |
|
UK dividends from unquoted investments |
71 |
56 |
|
|
|
|
|
|
16,992 |
16,133 |
|
|
|
|
|
Unfranked: |
|
|
|
Overseas dividends from listed investments |
18,622 |
16,322 |
|
Overseas special dividends from listed investments |
372 |
843 |
|
Property income dividends |
5 |
5 |
|
Scrip dividends from listed investments |
1,256 |
1,136 |
|
Fixed interest and convertible bonds |
696 |
1,144 |
|
|
|
|
|
|
20,951 |
19,450 |
|
|
|
|
|
Total investment income |
37,943 |
35,583 |
|
|
|
|
|
|
2013 |
2012 |
|
|
£'000 |
£'000 |
|
Analysis of investment income by geographical segment: |
|
|
|
United Kingdom |
17,815 |
17,428 |
|
North America |
4,506 |
3,429 |
|
Continental Europe |
8,214 |
9,268 |
|
Japan |
922 |
369 |
|
Asia Pacific (ex Japan) |
4,568 |
3,302 |
|
South America |
445 |
444 |
|
Other |
1,473 |
1,343 |
|
|
|
|
|
Total investment income |
37,943 |
35,583 |
3. Other income
|
|
|
|
|
|
2013 |
2012 |
|
|
£'000 |
£'000 |
|
Deposit interest |
103 |
29 |
|
Stock lending income |
147 |
269 |
|
Underwriting commission |
13 |
15 |
|
Income from the subsidiary company's third party business |
1,186 |
1,154 |
|
|
1,449 |
1,467 |
Page 32 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Notes to the Financial Statements continued
4. Management fees
|
|
Year ended 31 December 2013 |
Year ended 31 December 2012 |
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
Management fees |
1,146 |
3,438 |
4,584 |
845 |
2,534 |
3,379 |
|
Performance fees |
- |
5,487 |
5,487 |
- |
2,931 |
2,931 |
|
|
|
|
|
|
|
|
|
|
1,146 |
8,925 |
10,071 |
845 |
5,465 |
6,310 |
5. Earnings per ordinary share
The earnings per ordinary share figure is based on the net profit for the year of £303,923,000 (2012: £146,278,000) and on 189,472,414 ordinary shares (2012: 191,174,313), 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.
|
|
2013 |
2012 |
|
|
£'000 |
£'000 |
|
|
|
|
|
Net revenue profit |
29,263 |
27,723 |
|
Net capital profit |
274,660 |
118,555 |
|
|
|
|
|
Net total profit |
303,923 |
146,278 |
|
|
|
|
|
Weighted average number of ordinary shares in issue during the year |
189,472,414 |
191,174,313 |
|
|
2013 |
2012 |
|
|
Pence |
Pence |
|
Revenue earnings per ordinary share |
15.44 |
14.50 |
|
Capital earnings per ordinary share |
144.96 |
62.02 |
|
|
|
|
|
Total earnings per ordinary share |
160.40 |
76.52 |
|
|
|
|
6. Issued Share Capital
|
The number of ordinary shares of 25p each in issue at 31 December 2013 was 189,311,000 (2012: 190,079,500). |
Page 33 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Notes to the Financial Statements continued
7. Dividends
|
|
2013 £'000 |
2012 £'000 |
|
Amounts recognised as distributions to equity holders in the year: |
|
|
|
Second interim dividend for the year ended 31 December 2012 of 7.2p (2011: 6.55p) per ordinary share |
13,665 |
12,589 |
|
First interim dividend for the year ended 31 December 2013 of 3.3p (2012: 6.0p) per ordinary share* |
6,229 |
11,414 |
|
Second interim dividend for the year ended 31 December 2013 of 3.3p (2012: nil) |
6,248 |
- |
|
Third interim dividend for the year ended 31 December 2013 of 3.3p (2012: nil) |
6,247 |
- |
|
|
---------- |
---------- |
|
|
32,389 |
24,003 |
|
|
====== |
====== |
|
*includes a write-back of £22,000 (2012: £17,000) of dividends unclaimed for 12 years or more. |
||
|
|
|
|
|
|
|
|
|
Fourth interim dividend for the year ended 31 December 2013 of 4.5p (2012: second interim dividend 7.2p) per ordinary share |
8,519 |
13,665 |
|
|
====== |
====== |
|
|
|
|
|
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 2012 are considered. |
||
|
|
||
|
|
2013 £'000
|
2012 £'000 |
|
Revenue profits available for distribution |
29,263 |
27,723 |
|
First interim dividend for the year ended 31 December 2013 of 3.3p (2012: 6.0p) per ordinary share |
(6,229) |
(11,414) |
|
Second interim dividend for the year ended 31 December 2013 of 3.3p (2012: nil) per ordinary share |
(6,248) |
- |
|
Third interim dividend for the year ended 31 December 2013 at 3.3p (2012: nil) per ordinary share |
(6,247) |
- |
|
Fourth interim dividend for the year ended 31 December 2013 of 4.5p (2012: second interim dividend 7.2p) per ordinary share |
(8,519) |
(13,665) |
|
|
---------- |
---------- |
|
Revenue retained for the year |
2,020 |
2,644 |
|
|
====== |
====== |
|
|
|
|
8. 2013 Accounts
The figures and financial information for 2013 are extracted from the Annual Report and Financial Statements for the year ended 31 December 2013 and do not constitute the statutory accounts for the year. The Annual Report and Financial Statements includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Financial Statements has not yet been delivered to the Registrar of Companies.
9. 2012 Accounts
The figures and financial information for 2012 are extracted from the published Annual Report and Financial Statements for the year ended 31 December 2012 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
Page 34 of 34
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2013
Notes to the Financial Statements continued
|
10. Annual Report and Financial Statements
|
|
Copies of the Annual Report and Financial Statements will be posted to shareholders by the end of March 2014 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, 30 April 2014 at Merchant Taylors' Hall, 30 Threadneedle Street, London EC2R 8JB.
|
For further information please contact:
Andrew Bell
Chief Executive Officer
Witan Investment Trust plc
Telephone: 020 7227 9770
James Frost
Marketing Director
Witan Investment Trust plc
Telephone: 020 7227 9770
Jason Nisse/Willa Malcolm
Newgate Communications
Telephone: 020 7680 6550
Email: witan@newgatecomms.com
- ENDS -
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
This information is provided by RNS
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