Capital and income growth from
active global equity investment
Annual report 2013
Witan’s objective
Long term growth in income and
(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:123)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:80)(cid:88)(cid:79)(cid:87)(cid:76)(cid:16)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:85)(cid:3)
investment in global equities
Witan is an investment trust which is listed
on the London Stock Exchange and was
founded in 1909.
(cid:58)(cid:76)(cid:87)(cid:68)(cid:81)(cid:3)(cid:82)(cid:426)(cid:72)(cid:85)(cid:86)(cid:3)(cid:71)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:428)(cid:72)(cid:71)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)
markets (principally equities) using a
multi-manager approach. The portfolio is
(cid:71)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:428)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:74)(cid:72)(cid:82)(cid:74)(cid:85)(cid:68)(cid:83)(cid:75)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:76)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)
sector and at the individual stock level.
Witan typically uses between 10 and 15
(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:69)(cid:79)(cid:72)(cid:81)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:76)(cid:426)(cid:72)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)
active approaches and styles aims to deliver
added value for shareholders while smoothing
out the volatility normally associated with
(cid:68)(cid:123)(cid:86)(cid:76)(cid:81)(cid:74)(cid:79)(cid:72)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:85)(cid:17)
To view the report online
If you would like to view video updates
about the Company, please visit:
www.witan.com
Contents
Shareholder Total Return
NAV Total Return
Dividends per Share
Financial highlights
+36.7%
+29.4%
+9.1%
02
Chairman’s and Chief Executive’s report
Witan’s net asset value total
return was 29.4% in 2013
04
Report of the Directors
02 Financial Highlights
04
Chairman’s and Chief Executive’s
Report
Strategic Report
0 8 Strategic Report
21 Investment Managers
24 Fifty Largest Investments
25 Classi(cid:428) cation of Investments
Statutory Information
26 Board of Directors
Directors’ Report
28
Corporate Governance
32 Corporate Governance Statement
42 Report of the Audit Committee
44 Directors’ Remuneration Report
Financial Statements
55
Statement of Directors’
Responsibilities
56 Independent Auditor’s Report
60 Statement of Comprehensive Income
61 Statements of Changes in Equity
62 Balance Sheets
63 Cash Flow Statements
64 Notes to the Financial Statements
Other Information
86 Historical Record
86 Unsolicited approaches for shares
87 Witan Wisdom and Jump
88 Shareholder Information
IBC The Royal Horticultural Society
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Annual Report 2013 Witan Investment Trust plc
01
Financial highlights
Corporate key performance indicators
Share price and net asset value (NAV)
Share Price
NAV per ordinary share (debt at par value)
NAV per ordinary share (debt at market value)
Discount (debt at market value) (A)
Discount (NAV excluding income, debt at market value) (B)
2013
669.0p
725.2p
717. 6p
6.8%
6.1%
2012
% change
33.0
24. 6
26. 1
503.0p
581.8p
568.9p
11.6%
10.2%
(A) This is the discount to NAV including income.
(B) The average discount on this basis in 2013 was 8.3% (2012: 10.7%).
(Source: Datastream)
Total return performance
Total shareholder return (C)
Net asset value total return (D)
Benchmark (E)
FTSE All-Share Index (F)
FTSE World (ex UK) Index (F)
1yr % Return
3yrs % Return
5yrs % Return
36.7
29.4
20.7
20.8
22.7
40.1
33.7
26.9
31.0
29.0
117.7
104.0
82.2
95.2
78.9
(C) Source: Datastream. The movement in ordinary share price adjusted to include
(E) Source: Witan. The benchmark is a composite of four indices: the FTSE
the reinvestment of dividends.
(D) Source: Datastream/Witan. The movement in the net asset value per share
adjusted to include the reinvestment of dividends.
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 Paci(cid:428) c Index
20%.
(F) Source: Datastream. See also FTSE International for conditions of use
(www.ftse.com).
NAV total return since introduction of the multi-manager structure (30.09.04) (G)
300
275
250
225
200
175
150
125
100
Witan benchmark
Share Price Total Return
NAV
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
(G) Source: Datastream.
02
Witan Investment Trust plc Annual Report 2013
Dividend information
Dividend Information
Revenue per share
Dividend per share
2014 Dividend schedule*
Ex-Dividend Date
26/02/2014
21/05/2014
20/08/2014
20/11/2014
2013
15.4p
14.4p
2012
14.5p
13.2p
% change
6.2%
9.1%
Pay Date
Dividend Type
Dividend payable
per share
28/03/2014
Fourth Interim
18/06/2014
First Interim
18/09/2014
Second Interim
18/12/2014
Third Interim
4.5p
3.6p
3.6p
3.6p
*Please note that the dates and amounts for the first, second and third interim dividends could be subject to change.
Other (cid:428) nancial information
Other Financial Information
Net Assets
Number of ordinary shares in Issue
Gearing (A)
Share buy-backs (B)
Ongoing charge excluding performance fee
Ongoing charge including performance fee
2013
2012
% change
£1,372,944,000
£1,105,847,000
189,311,000
190,079,500
24.2%
-0.4%
7. 3%
0.4%
0.69%
1.12%
6.1%
1.2%
0.69%
0.97%
(A) The di(cid:426) erence 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 (see note 14, page 81).
(B) The percentage of the ordinary share capital in issue at the previous year end
that was bought back during the year.
Since 2003, Witan’s dividend per share has risen 73%, compared with +31% for the UK consumer price index
16.0
14.0
12.0
10.0
8.0
Witan dividend (pence per share) (left scale)
CPI Index (right scale)
188.0
164.5
141.0
117.5
94.0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Datastream.
Annual Report 2013 Witan Investment Trust plc
03
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Chairman’s and Chief Executive’s report
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 (cid:123) 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 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 bene(cid:428) t of employing gearing, during a year
of improving investor con(cid:428) dence and rising stock
markets. Although this recovery in con(cid:428) dence 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
con(cid:428) rming 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 (cid:428) rst 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 (cid:428) scal policy. The UK avoided a
“triple-dip” recession (and the earlier “second dip”
was revised away by more up -to -date economic
(cid:428) gures) and began to see stronger growth. Japan’s
economy responded positively to the devaluation
of(cid:123)the previously overvalued yen and even Europe
saw a modest recovery from the recessionary
conditions experienced at the start of the year.
Harry Henderson | Chairman
Andrew Bell | Chief Executive
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
04
Witan Investment Trust plc Annual Report 2013
How we’ve performed
> The NAV total return of 29.4% outperformed the benchmark’s return of 20.7%
> NAV total return over last (cid:428) ve years of 104% , 22% ahead of the benchmark
> Dividend increased by 9.1% to 14.4p, 7.1% ahead of the rate of in(cid:430) ation
> The 39th consecutive year of increased dividends
> The discount narrowed from 10.2% to 6.1%
Equities may also have been helped by the (cid:428) rst
signs of investors turning away from bond markets.
Yields had fallen so far in 2012 that the penny (cid:428) nally
seemed to drop that buying bonds with yields below
the in(cid:430) ation 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-o(cid:426) in bond markets which disturbed
equity sentiment for several months and, in the
case(cid:123)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(cid:123)was improving in most regions. Bonds did
not(cid:123)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(cid:123)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(cid:123)Eastern equities including Japan, by purchasing
a Japanese fund (managed by Polar Capital) and
by investing in Japanese equity index futures. We
took pro(cid:428) ts 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(cid:123)average discount for the year was 8.3%
(2012: 10.7%).
This narrower discount is to be welcomed as it re(cid:430) ects,
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
re(cid:430) ecting the Board’s wish to encourage the trend
of a narrowing discount, from which all shareholders
would clearly bene(cid:428) t, although it is recognised that
market conditions and investment performance will
also have a material in(cid:430) uence.
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.
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.
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Annual Report 2013 Witan Investment Trust plc
05
Chairman’s and Chief Executive’s report continued
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 a(cid:426) ected 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(cid:123)principal e(cid:426) ect 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 sta(cid:431) ng,
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(cid:123)end of 2014.
Investment Management Fees
The most signi(cid:428) cant 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 bene(cid:428) t. Further details are set out in
the Strateg ic Report.
The Retail Distribution Review (‘RDR’), which
took e(cid:426) ect at the start of 2013, was a positive
development for investment trusts, removing
some of the built-in (cid:428) nancial incentives for
(cid:428) nancial advisers to favour open-ended funds over
investment trusts. As a result of “levelling the playing
(cid:428) eld” 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 bene(cid:428) t 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 (cid:428) nancial 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
o(cid:426) er s an actively-managed portfolio with a 39-year
record of consecutive dividend rises as well as being
diversi(cid:428) ed 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.
06
Witan Investment Trust plc Annual Report 2013
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(cid:123)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 (cid:428) rst year since the (cid:428) nancial 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 de(cid:428) cit
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 de(cid:428) cits. 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 signi(cid:428) cant support in Euro currency
states for parties wishing to leave the Euro zone.
Maintaining the momentum of recovery remains a
balancing act. Governments need to take action to
address budget de(cid:428) cits and Central Banks to forestall
future in(cid:430) ation 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.
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 sta(cid:426) . This
would make it easier for consumers to maintain
spending, while making inroads into their debt,
and lead to a cyclical improvement in government
(cid:428) nances. Although current in(cid:430) ation 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
(cid:428) nancial 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 in(cid:430) ation. Bonds remain vulnerable both to
a cyclical rise in in(cid:430) ation and changed expectations
about where in(cid:430) ationary risks lie for the future.
Investors are demanding a lower risk premium
for holding equities, which have shrugged o(cid:426) the
rise in bond yields. This rerating of equities is a
normal event when economies are improving but,
unlike rises driven by increased pro(cid:428) ts, 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 o(cid:426) er competitive returns, although
the need to be selective, to (cid:428) nd the areas of superior
or underestimated growth, appears greater than
before. This is re(cid:430) ected in Witan’s continued focus
on managers who base their portfolios on the
merits of particular companies, not their weight
in(cid:123)a(cid:123)benchmark index.
Harry Henderson
Chairman
11 March 2014
Andrew Bell
Chief Executive
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Annual Report 2013 Witan Investment Trust plc
07
Strategic report
Strategy and business model
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 (cid:123)the outlook for the year ahead (see
page 7). It should also include analysis of (cid:123)the
Company’s performance during the (cid:123)year, relative
to the key elements of its (cid:123)business strategy.
This Strategic Report has been prepared solely to
provide additional information to shareholders to
assess the Company’s strategies and the potential
for those strategies to succeed. The Strategic
Report contains certain forward-looking
statements. These statements are made by the
directors in good faith based on the information
available to them up to the time of their approval
of this report and such statements should be
treated with caution due to the inherent
uncertainties, including both economic and
business risk factors, underlying any such
forward-looking information.
This report falls into four main sections:
Strategy
Business model
Performance and principal
developments in 2013
Corporate and operational structure
Page
08
08
10
17
Witan is an Investment Trust, which was founded
in 1909 and has been listed on the London Stock
Exchange since 1924. It(cid:123)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 in(cid:430) ation.
The Company employs an active multi-manager approach,
allocating funds for investment by selected managers with
di(cid:426) ering 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 di(cid:426) erent factors (such as
quality, value or growth approaches and geographical
exposure), aiming to pro(cid:428) t 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 (a(cid:426) ected 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.
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.
08
Witan Investment Trust plc Annual Report 2013
> Adjusting asset allocation according to opportunities
that(cid:123)arise.
> The selective use of borrowings with the aim of adding
to(cid:123)performance.
> Direct investment in funds exposed to specialist asset
categories.
> Controlled and selective use of exchange-traded
derivatives to adjust asset allocation.
> Maintaining an e(cid:426) ective 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 O(cid:431) cer, who is a Director of the Company.
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.
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 su(cid:431) cient 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
signi(cid:428) cant driver of the Company’s performance.
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 re(cid:430) ect the particular mandate
(e.g. UK or Global equities) and the speci(cid:428) c 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 (cid:428) t 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 12. Details of the manager changes during
the year are set out on page 11.
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 Paci(cid:428) c.
This re(cid:430) ects 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 2 .
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Annual Report 2013 Witan Investment Trust plc
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Strategic report
Performance and principal developments in 2013
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 below, 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 the
Corporate Governance Statement on pages 32 to 41.
Key performance indicators
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 9) and a shareholder total return 16% above that of
the(cid:123)benchmark.
A positive long-term total return, after in(cid:430) ation, 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% . In(cid:430) ation was 2.0% in the
year to December 2013. Returns over the longer term are set out on page 2 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(cid:123)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 12.
Further details are set out on pages 11-12.
Annual growth in the dividend
per share ahead of the rate of
in(cid:430) ation
In 2013, the dividend increased by 9.1%, compared with an in(cid:430) ation rate of 2.0% during
the year.
Further details are set out on page 13.
A positive contribution to
investment returns from the
use(cid:123)of borrowings
The Company employed average gearing of 9% during the year, which contributed 1. 9%
to(cid:123)returns after taking account of the costs of borrowing.
Further details are set out on pages 13-14.
A discount to NAV of 10% or
less (compared with the NAV
excluding income, with debt
at(cid:123)market value)
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
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.
In 2013, the ongoing charges (cid:428) gure was 0. 69% excluding performance fees (2012: 0.69%)
and 1.1 2% 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 1 6.
10
Witan Investment Trust plc Annual Report 2013
A breakdown of the performance attribution in 2013 (based on the Company’s
(cid:428) nancial statements) is shown in the table below .
Net asset value total return
Benchmark total return
+29.4% Portfolio investment total return (gross)
+20.7% Benchmark total return
Relative investment performance
Gearing impact
E(cid:426) ect of changed market value of debt
Share buy-backs
Borrowing costs
Operating costs and tax
+2.5%
+1.5%
+0.0%
-0.7%
-1.0%
+27.1%
+20.7%
+6.4%
+4.0%
+10.4%
-1.7%
+8.7%
Relative performance
+8.7%
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(cid:123)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 e(cid:426) ect 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.
A breakdown of the performance attribution in 2013 (based
on the Company’s (cid:428) nancial statements) is shown in the
table above.
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 set out on the inside front cover. It has
maintained a diversi(cid:428) ed 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 is shown on page 25. The top 50
holdings across the whole of Witan’s portfolios are set out on
page 24. They represented 4 1.7% of Witan’s portfolio at
31 December 2013 (2012: 44.4%). These analyses highlight
the substantial diversi(cid:428) cation provided by our range of
managers and the global geographical exposure. However, it
is also important that diversi(cid:428) cation does not unduly dilute
returns, since the purpose of using active managers is to
outperform, which requires the portfolio to di(cid:426) er 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 (cid:428) ve 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
bene(cid:428) t future shareholder returns.
In February, the Company appointed Matthews International
Capital Management (“Matthews”) to manage a portfolio
of Far Eastern equities, including Japan. The re(cid:430) ationary
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-(cid:428) nanced and well-managed companies with
above-average prospects for growth in intrinsic value. They
replaced NewSmith Asset Management LLP.
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.
Annual Report 2013 Witan Investment Trust plc
11
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Strategic report
Performance and principal developments in 2013 continued
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 (cid:428) rst 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(cid:123)adverse
investment conditions in emerging economies.
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 signi(cid:428) cant
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 pro(cid:428) ts 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(cid:123)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(cid:123)Edinburgh Dragon Investment Trust.
Manager structure and performance
The Company’s 11 external managers have a range of
investment approaches and follow di(cid:426) ering mandates
set by the Company. Details of each manager’s mandate,
benchmark, investment style and date of appointment are
included in the Manager summaries on pages 21 to 23.
Performance
for the year ended 31 December 2013 and
from inception to 31 December 2013
Investment Manager
Artemis (UK)
Heronbridge (UK)
Lindsell Train (UK)
Lansdowne (Global)
MFS (Global)
Pzena (Global)
Tweedy, Browne (Global)
Veritas (Global)
Marathon (Pan-Europe)
Matthews (Asia)
Trilogy (Emerging Markets)
Witan Direct Holdings
Value of
Witan assets
managed
at 31.12.13
% of Witan’s
assets under
£m management
at 31.12.13
(Note 1)
149.4
104.7
179.4
130.8
131.1
141.3
47.4
176.7
121.4
133.7
51.0
92.4
10.1
7.1
12.1
8.8
8.9
9.5
3.2
11.9
8.2
9.0
3. 5
6. 3
Performance
in 2013
(%)
Benchmark
Performance
in 2013
(%)
Performance
since
appointment
to 31.12.13
(%)
(Note 2)
Benchmark
Performance
since
appointment
to 31.12.13
(%)
35.7
n/a
38.9
48.8
27.7
n/a
n/a
23.5
29.1
n/a
(5.3)
31.0
20.8
n/a
20.8
19.9
21.0
n/a
n/a
21.1
23.1
n/a
(4.1)
20.7
12.9
16.2
23.3
46.6
12.5
1.1
0.9
12.7
13.0
2.0
(5.4)
9.8
6.1
9.6
12.9
18.5
9.3
1.0
1.0
9.9
10.6
(1.0)
(2.4)
8.3
Notes:
1.
2. The percentages are annualised where the inception date was before 2013.
Percentage of Witan’s investments managed, excluding the holdings in Polar Japan open -ended funds (£2 0.5m , 1.4% of assets) and cash balances held centrally by Witan.
12
Witan Investment Trust plc Annual Report 2013
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 in(cid:430) ation (CPI) in
the year to December 2013. This is the 39th consecutive year
that Witan has increased the dividend.
The chart below 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 grow n by 73%, more than twice the 31% rise in consumer
prices.
Since 2003, Witan’s dividend per share has risen 73%
compared with +31% for the UK consumer price index
Witan dividend (pence per share) (left scale)
CPI Index (right scale)
16.0
14.0
12.0
10.0
8.0
2003
2004
2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Datastream.
188.0
164.5
141.0
117.5
94.0
The Company commenced paying quarterly dividends
in 2013. The (cid:428) rst 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, re(cid:430) ecting the di(cid:426) erence between the three
quarterly dividends already paid and the payment decided for
the full year.
Policy on gearing and the use
of derivatives
Employment of Gearing
Purpose
The purpose of using borrowings is to improve (or “gear”)
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
(cid:428) xed rates for longer periods with the (cid:430) exibility 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 (as de(cid:428) ned on page 3) to rise to more than 20%,
other than temporarily in exceptional circumstances. Over
the past (cid:428) ve 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
(cid:430) exibility 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 e(cid:426) ect 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.
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Annual Report 2013 Witan Investment Trust plc
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Strategic report
Performance and principal developments in 2013 continued
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 signi(cid:428) cantly bene(cid:428) ted 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 (cid:428) gure 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 note 1 on page 67.
Use of Derivatives
Policy
Witan’s policy on the use of derivatives emphasises simplicity,
transparency, cost e(cid:426) ectiveness and the minimisation of
counterparty risk. Where (cid:428) nancial 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(cid:123)index, are relatively liquid to trade
and depend upon the creditworthiness of the particular
exchange, not an individual (cid:428) rm.
The use of index futures enables Witan to adjust its gearing
rapidly, conferring tactical (cid:430) exibility. 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 (cid:428) nancial 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 (cid:428) nally 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 (cid:123)has given the Company additional exposure to the
strongly-performing Japanese market at a time when
its externally managed portfolios had relatively little
Japanese (cid:123)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, (cid:428) nishing the year at
+2.6% (represented by a £35 million position in Japanese
equity index futures). The Company takes full account of the
e(cid:426) ect of the nominal value of the futures contracts when
calculating its gearing. The value of the investments (which
are traded on o(cid:431) cial exchanges) is fully marked to market
every day. The(cid:123)realised gain on index futures during the year
is shown in the cash (cid:430) ow statement on page 63.
14
Witan Investment Trust plc Annual Report 2013
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 signi(cid:428) cant 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 e(cid:426) ect 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 the chart below.
Witan Investment Trust Discount Trend
5 day average
3 month average
1 year average
-5
-6
-7
-8
-9
-10
-11
-12
-13
-14
Jan 2008
Jan 2009
Jan 2010
Jan 2011
Jan 2012
Jan 2013
Dec 2013
Source: Datastream.
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-e(cid:426) ective 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 e(cid:426) ective 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 (cid:428) ts 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 bene(cid:428) t. If the shares trade on a
premium, this creates the possibility of increasing the size of
the Company by issuing new shares, with bene(cid:428) ts in terms of
greater liquidity as well as spreading costs over a larger base
of shareholders’ funds.
In view of these potential bene(cid:428) ts, the Company has felt for
many years that it is bene(cid:428) cial 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, (cid:428) nancial 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 web site (www.witan.com) to enable investors to
make informed decisions about including Witan shares in
their investment portfolios. The web site 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.
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.
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Annual Report 2013 Witan Investment Trust plc
15
Strategic report
Performance and principal developments in 2013 continued
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 0.3 5% 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
bene(cid:428) t. 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 (cid:428) gure (“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 (cid:428) xed costs to be spread
over a larger base) was o(cid:426) set 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 1.1 2% in 2013 (2012: 0.97%), re(cid:430) ecting
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).
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 signi(cid:428) cantly 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 (cid:428) gure remains elusive at present, partly
because of concerns that oversimpli(cid:428) cation 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 di(cid:426) erent parts of the Annual
Report, in a single table on page 17. This indicates the main
cost heading in money terms and as a percentage of net
assets. The (cid:428) gures for relative NAV total return performance
are also included, for comparison purposes.
16
Witan Investment Trust plc Annual Report 2013
Corporate and operational structure
Category of cost
Other Expenses (excluding investment management expenses)
(see note 5 on page 6 9)
Less other non-recurring expenses and those relating to the
subsidiary (whose expenses do not relate to the operation
of the investment company).
Investment management base fees (see note 4, page 68)
Ongoing Charges Figure (including investment managers base fees)
Investment managers performance fees (see note 4, page 68)
Ongoing charges (including performance fees)
Portfolio transaction costs*
Relative out performance during the year (valuing debt at par value)
2013
£m
5.32
2013
% of net
assets
0.42
2012
£m
4.87
2012
% of net
assets
0.47
(1.16)
(0.09)
(1.15)
(0.11)
4.58
8.74
5.49
14.23
1.89
0.36
0.69
0.43
1.1 2
0. 16
+ 7.1%
3.38
7.10
2.93
10.03
1.2 3
0.33
0.69
0.28
0.97
0.12
+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(cid:123)for shareholders in 2013, setting an
appropriate strategic asset allocation to re(cid:430) ect
changing(cid:123)opportunities in the world economy. Make
use(cid:123)of a range of active managers to deliver our
strategic(cid:123)objectives through a multi-manager structure.
Continue to deliver dividend growth ahead of in(cid:430) ation.
> Communication. Communicate Witan’s distinct and
active investment approach and achievements more
e(cid:426) ectively to existing and potential shareholders. In
particular increase the focus on improving information
for personal investors and (cid:428) nancial advisers, where
direct(cid:123)meetings are less practicable.
> Regulatory change. Complete the process
of authorisation under the AIFMD.
Corporate and operational structure
As described earlier (page 8) 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.
> Client service. Provide excellent service to the corporate
and individual clients of Witan Investment Services.
> 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, (cid:428) nancial 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.
Annual Report 2013 Witan Investment Trust plc
17
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Strategic report
Corporate and operational structure continued
Premises and sta(cid:431) ng
Since November 2005 the Company has had a lease on o(cid:431) ce
premises at 14 Queen Anne’s Gate, London SW1H 9AA, which
is also the Company’s registered o(cid:431) ce.
The Company’s policy towards its employees is to attract and
retain sta(cid:426) with the particular skills and expertise required
to manage the a(cid:426) airs of an investment trust company.
Details of the Company’s remuneration policies and required
disclosures are set out in the Directors’ Remuneration Report
on page 44. 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 ((cid:428) ve men
and two women) and the Chief Executive O(cid:431) cer, Andrew
Bell, who is an employee. Given its outsourced model and
small number of direct employees, the Group has no speci(cid:428) c
policies in respect of environmental or social and community
a(cid:426) airs .
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 Paci(cid:428) c
Investment Trust plc (‘Witan Paci(cid:428) c’), to communicate
information about the Companies to the market to increase
investor interest in their shares and to operate cost-e(cid:426) ective
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 e(cid:431) cient investment savings
platform for Witan and Witan Paci(cid:428) c investors
> to provide suitable advice to the Boards of its
corporate clients
> to reduce the net operating costs for Witan
Investment Trust
18
Witan Investment Trust plc Annual Report 2013
> to seek appropriate business opportunities which can add
value for shareholders
> (from 2014) to provide an appropriate system of
investment and risk management to ful(cid:428) l 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 Paci(cid:428) c.
The main costs incurred by WIS are fees to the savings
schemes administrator (IFDS), sta(cid:426) costs to provide the
services described above and professional advice to
ensure that its regulatory and accounting obligations are
properly satis(cid:428) ed.
The savings plans provided for WIS clients are marketed
under the Witan Wisdom and Jump Savings brands. They
currently have over 2 4,000 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 re(cid:430) ect changes in the savings
market. Details have been sent to account holders, with the
changes taking e(cid:426) ect from April 2014.
Principal risks 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 identi(cid:428) ed 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, (cid:428) nancial 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 e(cid:426) ect 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.
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 speci(cid:428) c 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
diversi(cid:428) ed 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 diversi(cid:428) cation
> 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 O(cid:431) cer (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 (cid:428) nancial reports.
Operational
Many of the Group’s (cid:428) nancial 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 (cid:428) nancial position. Details of how the Board
monitors the services provided by its suppliers, and the key
elements designed to provide e(cid:426) ective 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 on pages 32 to 41. The Board
conducts an annual internal assessment of the e(cid:426) ectiveness
of its governance processes in managing the Company and
enabling it to evolve in response to future challenges. There is
also a 3-yearly independent external review, the most recent
of which was conducted in late 2013. See page 36 for further
details.
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 signi(cid:428) cant issues to the Board.
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Annual Report 2013 Witan Investment Trust plc
19
Strategic report
Corporate and operational structure continued
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 a(cid:426) ecting
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 (cid:428) ned 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 o(cid:426) er signi(cid:428) cant
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 AIFM for Witan in 2014.
As noted in the Chairman’s and Chief Executive’s Statement,
the Alternative Investment Fund Manager Directive 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 (cid:123)2014. It remains the Company’s policy to meet best
practice in complying with all(cid:123)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 the date of this report, the Board
has considered the guidance on this matter issued by the
Financial Reporting Council. (See also note 16 on page 64).
Approval
This report was approved by the Board of Directors on
11 March 2014 and is signed on its behalf by:
Harry Henderson
Chairman
11 March 2014
Andrew Bell
Chief Executive
20
Witan Investment Trust plc Annual Report 2013
Investment managers
Artemis Investment Management – UK
Established in 1997, Artemis Investment Management Limited
manages over £17.3bn (as at 31.12.13) on behalf of a range of retail and
institutional clients. Witan’s portfolio is a segregated mirror of Derek
Stuart’s £1.9bn UK Special Situations Strategy launched in 2001 – a
contrarian fund that aims to outperform the FTSE All-Share Index by 3%
per annum. This approach seeks to exploit market ine(cid:431) ciencies, with an
absolute return mindset, in order to generate maximum returns. It is a
stock-picking strategy that aims to achieve long-term capital growth by
focusing on stocks that are out of favour and have turnaround potential.
Equity Mandate
Benchmark
Investment style
Inception date
UK
FTSE All-Share
Recovery/special
situations
06.05.08
Heronbridge Investment Management LLP
Heronbridge is a long-only, value-biased equity investment
management boutique. Founded in November 2005, it is a small,
focused, independent (cid:428) rm, controlled by its working partners who
were previously with Merrill Lynch Investment Managers, Silchester
International Investors and Goldman Sachs Asset Management.
Heronbridge currently manage £1.3bn (as at 31.12.13) for institutional
and charity clients in the UK, the US and elsewhere. In order to maximise
the alignment of interests, the (cid:428) rm’s partners have a considerable
proportion of their own assets co-invested alongside those of clients.
Equity Mandate
Benchmark
Investment style
Inception date
UK
FTSE All-Share
Intrinsic value
growth
17.06.13
Lindsell Train – UK
Lindsell Train was established in 2000 by Michael Lindsell and Nick
Train and focuses on the management of UK, Global and Japanese
equity mandates for institutional clients. The business was founded
on the shared investment philosophy that developed while Michael
and Nick worked together during the early 1990s and which underlies
the business today. The “purpose” of Lindsell Train is to provide a
professional working environment that enables the (cid:428) rm to achieve
strong investment results for their clients. Lindsell Train think it
important to maintain a small and simple organisational structure that
avoids the bureaucracy and distractions experienced within some larger,
more complex investment management businesses. The structure
is designed to allow the investment professionals to concentrate on
investment issues and to give them the freedom to invest in line with
their investment principles, which they believe will maximise returns to
their investors over the longer term. The business has grown steadily
and assets under management total £3.4bn (as at 31.12.13). Lindsell
Train continues to be majority owned by the two founders. This is
important because it ensures they maintain the integrity of the business
principles on which the (cid:428) rm was founded.
Equity Mandate
UK
Benchmark
FTSE All-Share
Investment style
Long-term growth
from undervalued
brands
Inception date
01.09.10
Lansdowne Partners Limited
Lansdowne Partners Limited Partnership, acting through its general
partner Lansdowne Partners Limited (“Lansdowne Partners”) was
founded in 1998. Lansdowne Partners manages assets for a diversi(cid:428) ed
client base that includes some of the world’s largest and most
sophisticated investors. Assets under management are £10.5bn (as at
31.12.13) across three distinct Equity investment strategies; European,
Developed Markets and Global Financials, each with its own dedicated
team of portfolio managers and analysts, Lansdowne Partners employs
93 people in its London o(cid:431) ce. The investment philosophy is predicated
on generating consistent, absolute risk adjusted returns, through the
use of exceptional investment talent within a leading-edge operational
infrastructure. Central to Lansdowne Partners’ investment philosophy
is a rigorous process of fundamental research. The Developed Markets
Strategy is run by Co-Heads Peter Davies and Stuart Roden, who
have been with Lansdowne since 2001. The Developed Markets Long
Only Strategy leverages the fundamental stock analysis of the team,
investing predominantly in mega-cap companies (+$10bn market cap)
in developed markets.
Equity Mandate
Benchmark
Investment style
Inception date
Global
DJ Global Titans
14.12.12
Concentrated,
benchmark-
independent
investment in
developed markets
Annual Report 2013 Witan Investment Trust plc
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Strategic report
Investment managers continued
MFS Investment Management
MFS is a global investment (cid:428) rm managing £248.9bn (as at 31.12.13)
of equity and (cid:428) xed income assets for investors worldwide. Founded in
1924, MFS established one of the industry’s (cid:428) rst in-house fundamental
research departments in 1932. Today, MFS o(cid:426) ers a broad range of
investment styles that combine both fundamental and quantitative
research and portfolio management. Their investment philosophy
has remained consistent: to identify opportunities on behalf of
clients through the application of global research and bottom-up
security selection. MFS’ culture is investment driven, client centred,
and collaborative. To underscore their values of collaboration and
accountability, they structure ownership and compensation to
reward long-term investment performance and teamwork. Up to 22%
ownership of MFS is available to key MFS contributors. Their majority
shareholder since 1982 has been Sun Life of Canada (U.S.) Financial
Services Holdings, Inc.
Tweedy, Browne Company LLC
Tweedy, Browne Company LLC is principally engaged in the
management of international, global and global high dividend equity
portfolios for institutional and individual clients. Since the (cid:428) rm was
founded in 1920 as Tweedy & Co., a dealer in closely held and inactively
traded securities, they have pursued a value oriented approach to
securities, (cid:428) rst as a market maker, and later, as an investor and manager.
Their investment principles are based upon the broad concepts of
“intrinsic value” and “margin of safety” as conceived and practiced
by the late Benjamin Graham. For more than ninety years, through
depressions, recessions, and stock market cycles, through a quadrupling
of interest rates and the advent of double digit in(cid:430) ation, and through
the emergence and disappearance of numerous investment fads, they
have adhered to the same value oriented principles of analysis and
investment. The consistency of their results over many decades has
con(cid:428) rmed their con(cid:428) dence in this approach. As at 31 December 2013,
Tweedy Browne had £12.2bn of assets under management.
Equity Mandate
Benchmark
Investment style
Inception date
Global
FTSE All-World
Growth at an
attractive price
30.09.04
Equity Mandate
Benchmark
Investment style
Inception date
Global
FTSE All-World
Fundamental value 02.12.13
Pzena Investment Management
Pzena Investment Management, an independent registered investment
management (cid:428) rm, began managing assets in 1996. Pzena employs a
classic value investment approach and manages U.S., non-U.S. and
global portfolios with a goal of long-term alpha generation. As of
31 December 2013, Pzena managed approximately £16.1bn in assets
for leading endowments, foundations, pension plans and individual
investors. The team comprises 71 employees; the (cid:428) rm is based in New
York City, and has a representative o(cid:431) ce for Business Development
and(cid:123)Client Services in Melbourne, Australia.
Equity Mandate
Benchmark
Investment style
Inception date
Global
FTSE All-World
Systematic value
02.12.13
Veritas Asset Management
Veritas is an independent investment company, managing £10.0bn
(as(cid:123)at 31.12.13) of assets, with the key objective of delivering
long-term real returns to its clients. Veritas aligns its interest with
clients’ objectives and is committed to partnership. Veritas manages
both segregated portfolios and funds, with either long-only or
long-short real return mandates. Their clients include institutions,
charities, trusts and private clients. The Real Return Group Limited was
set up in 2003 as a boutique focused on real return investing. The Real
Return Group Limited and Veritas Asset Management (UK) Limited
merged in 2004. In 2013 Veritas Asset Management (UK) Limited
completed a corporate reorganisation and Veritas Asset Management
LLP was formed as a regulated fund management boutique running
Global and Asian Equity mandates. Veritas Asset Management LLP is
the(cid:123)UK operating company of the Veritas Asset Partners Limited group,
of which Veritas Asset Management (Asia) Limited in Hong Kong is also
a subsidiary. The Real Return Group is 100% owned by management
and(cid:123)employees and operates as a partnership.
Equity Mandate
Benchmark
Investment style
Inception date
Global
FTSE All-World
Fundamental
value, real return
objective
11.11.10
22
Witan Investment Trust plc Annual Report 2013
Marathon Asset Management
Marathon Asset Management was founded in 1986 and is
totally independent, managing some £31.0bn (as at 31.12.13) of
institutional client assets. At the heart of Marathon’s investment
philosophy is the ‘capital cycle’ approach to investment. This is
based on the idea that the prospect of high returns will attract
excessive capital (and hence competition), and vice versa. In
addition, the assessment of management and how they respond
to incentives and the forces of the capital cycle is critical to the
investment outcome. The investment philosophy is intrinsically
contrarian. Given the long-term nature of the capital cycle,
Marathon’s investment ideas generally require patience and,
by(cid:123)industry standards, long stock holding periods.
Equity Mandate
Benchmark
Investment style
Inception date
Pan- European
FTSE All-World
Developed Europe
Capital cycles
23.07.10
Trilogy Global Advisors
Trilogy Global Advisors is a long-only specialist equity investment
boutique managing global developed and global emerging
market portfolios for institutional pension schemes. Founded in
1999, it is wholly independent with all the equity owned by the
principal partners, other sta(cid:426) and non-executive directors. It has
two investment o(cid:431) ces in New York and Orlando, Florida, and a
marketing and client service o(cid:431) ce in London. Total assets under
management comprise £9.0bn (as at 31.12.13) with approximately
a third represented by UK pension fund clients and around a half
of(cid:123)total assets managed in dedicated global emerging market
equity(cid:123)portfolios.
Equity Mandate
Benchmark
Investment style
Inception date
Emerging Markets MSCI Emerging
Markets
Fundamental,
growth orientated
09.12.10
Matthews International Capital Management (Matthews Asia)
Matthews Asia, an independent, privately owned (cid:428) rm based in San
Francisco, is the largest dedicated Asia only investment specialist
in the U.S. Matthews has £15.6bn (as at 31.12.13) in assets under
management, including an Asia Dividend portfolio managed for
Witan Paci(cid:428) c Investment Trust since April 2012. Matthews Asia
employs a fundamental, bottom-up investment process that seeks
to identify companies with sustainable long-term growth prospects,
strong business models, quality management teams and reasonable
valuations. Matthews Asia will seek to invest its portion of the Trust
in companies that are paying high dividends relative to their current
share price, or are well positioned to do so in the future.
Equity Mandate
Benchmark
Investment style
Inception date
Asia Paci(cid:428) c
(including Japan)
MSCI Asia
Paci(cid:428) c Free
Quality companies
with dividend
growth
22.02.13
Annual Report 2013 Witan Investment Trust plc
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Fifty largest equity investments
at 31 December 2013 (unaudited)
Company
1 Reed Elsevier
2 Diageo
3 Electra Private Equity*
4 BP
5 Daily Mail & General
6 London Stock Exchange
7 Google
8 Unilever
9 Pearson
10 Princess Private Equity
11 Sage
12 GlaxoSmithKline
13 Vodafone Group
14 Schroders
15 Aberforth Geared Income
16 NB Distressed Debt
17 JP Morgan Chase
18 Wells Fargo
19 Lloyds Banking
20 Burberry
21 Edinburgh Dragon 3.5% Conv Bond
22 Rathbone Brothers
23 Capita
24 Microsoft
25 Amazon
Top 25
26 Comcast
27 Oracle
28 Nike
29 BT
30 Reckitt Benckiser
31 Greene King
32 Roche Holdings
33 Imperial Tobacco
34 Lockheed Martin
35 Walt Disney
36 Delta Air Lines
37 Qualcomm
38 Fidessa
39 Barclays Bank
40 Euromoney
41 Unitedhealth
42 Colgate-Palmolive
43 Orix
44 Ses
45 MTN
46 International Consolidated Airline
47 Citigroup
48 Hays
49 Safran
50 Hargreaves Lansdown
Top 50
Market value of
holding £ million
% of portfolio
Country
28.3
24.8
23.5
22.4
21.7
19.2
18.8
18.5
17.8
17.0
16.4
16.3
15.2
15.2
14.7
13.7
12.9
11.8
11.7
11.4
11.3
11.2
11.1
10.7
10.5
406.1
10.5
10.0
10.0
9.8
9.0
9.0
9.0
8.3
8.3
8.2
8.2
7.5
7.3
7.3
7.0
6.8
6.7
6.7
6.6
6.3
6.2
6.1
6.0
5.8
5.8
1.96
1.73
1.63
1.56
1.5 1
1.34
1.31
1.29
1.24
1.19
1.14
1.14
1.06
1.05
1.01
0.95
0.90
0.82
0.82
0.79
0.78
0.78
0.77
0.75
0.73
28.25
0.73
0.70
0.69
0. 68
0.6 3
0.6 3
0.6 3
0.5 8
0.5 7
0.5 7
0.5 7
0.5 2
0.5 1
0.5 1
0. 49
0.4 7
0.4 7
0.4 6
0.4 6
0.4 4
0.4 4
0.4 2
0.4 2
0.4 1
0.4 0
598.5
4 1.65
Sector
Media
Beverages
Equity Investment Instruments
Oil & Gas Producers
Media
Financial Services
Software & Computer Services
Food Producers
Media
Equity Investment Instruments
Software & Computer Services
Pharmaceuticals & Biotechnology
Mobile Telecommunications
Financial Services
Equity Investment Instruments
Equity Investment Instruments
Banks
Banks
Banks
Personal Goods
Equity Investment Instruments
Financial Services
Support Services
Software & Computer Services
General Retailers
Media
Software & Computer Services
Personal Goods
Fixed Line Telecommunications
Household Goods & Home Construction
Travel & Leisure
UK
UK
UK
UK
UK
UK
USA
UK
UK
UK
UK
UK
UK
UK
UK
USA
USA
USA
UK
UK
UK
UK
UK
USA
USA
USA
USA
USA
UK
UK
UK
Switzerland
Pharmaceuticals & Biotechnology
UK
USA
USA
USA
USA
UK
UK
UK
USA
USA
Japan
Luxembourg
South Africa
UK
USA
UK
France
UK
Tobacco
Aerospace & Defence
Media
Travel & Leisure
Technology Hardware & Equipment
Software & Computer Services
Banks
Media
Health Care Equipment & Services
Personal Goods
Financial Services
Media
Mobile Telecommunications
Travel & Leisure
Banks
Support Services
Aerospace & Defence
Financial Services
The top 10 holdings represent 14. 8% of the total portfolio (2012: 17. 8%).
The full portfolio is not listed because it contains over 4 00 companies. The above listing is of the largest individual equity investments and as such excludes a collective
investment used to invest in Emerging Markets (which is valued at £51.0 million), a specialist insurance fund ( valued at £8.5 million), Japan equity funds valued at
£20.5 million and an exchange traded FTSE All- World fund (which is valued at £36.1 million).
*Includes convertible bonds valued at £ 4.3 million.
24
Witan Investment Trust plc Annual Report 2013
Classi(cid:428) cation of investments
at 31 December 2013 (unaudited)
Basic Materials
Chemicals
Notes
Industrial Metals & Mining
Mining
Consumer Goods
Automobiles & Parts
Beverages
Food Producers
Household Goods & Home Construction
Leisure Goods
Personal Goods
Tobacco
Consumer Services
Food & Drug Retailers
General Retailers
Media
Travel & Leisure
Financials
Banks
Equity Investment Instruments
Financial Services
Life Insurance
Nonlife Insurance
Real Estate Investment Services
Real Estate Investment Trusts
Health Care
Health Care Equipment & Services
Pharmaceuticals & Biotechnology
Industrials
Aerospace & Defence
Construction & Materials
Electronic & Electrical Equipment
General Industrials
Industrial Engineering
Industrial Transportation
Support Services
Oil & Gas
Alternative Energy
Oil & Gas Producers
Oil Equipment Services & Distribution
Technology
Software & Computer Services
Technology Hardware & Equipment
Telecommunications
Fixed Line Telecommunications
Mobile Telecommunications
Utilities
Electricity
Gas, Water & Multiutilities
Open-Ended Funds (see note 3)
Totals 2013
Totals 2012
United
Kingdom
%
Continental
Europe
%
North
America
%
Asia Paci(cid:428) c
(ex Japan)
%
–
–
0.4
0.4
–
1.9
1.4
0.8
–
0.8
0.9
5.8
0.5
0.3
5.8
2.9
9.5
1.9
4.8
4.7
0.9
0.2
0.2
–
12.7
0.3
1.5
1.8
0.5
0.1
0.8
0.4
0.2
0.2
3.7
5.9
–
2.4
0.1
2.5
2.7
0.2
2.9
0.7
1.2
1.9
0.2
–
0.2
0.3
1.0
0.1
0.3
1.4
0.5
0.6
0.5
–
–
0.6
0.1
2.3
–
–
1.0
0.2
1.2
1.3
–
0.2
0.2
0.4
–
–
2.1
0.7
1.1
1.8
0.5
0.4
0.5
0.4
0.3
0.1
0.5
2.7
0.1
1.0
0.1
1.2
0.2
0.2
0.4
0.2
0.4
0.6
0.1
0.1
0.2
0.9
43.9
46.7
14.8
16.5
0.2
–
–
0.2
–
0.1
–
0.1
–
1.2
–
1.4
0.7
1.8
2.3
0.9
5.7
2.3
1.0
1.4
0.1
0.4
–
–
5.2
2.3
0.6
2.9
0.8
–
0.2
0.4
0.2
0.3
0.6
2.5
–
0.2
0.7
0.9
2.9
1.0
3.9
–
–
–
0.1
–
0.1
1.6
24.4
19.5
0.2
–
0.2
0.4
0.6
0.3
0.2
0.1
0.1
0.6
0.2
2.1
–
0.1
0.2
0.1
0.4
0.5
–
0.2
–
–
0.1
0.3
1.1
0.9
–
0.9
0.2
–
0.3
0.1
0.3
0.2
–
1.1
–
–
0.2
0.2
–
0.1
0.1
0.3
0.5
0.8
–
0.2
0.2
2.3
9.6
11.4
Japan
%
0.1
–
–
0.1
0.2
0.2
0.2
–
–
0.2
0.3
1.1
0.1
–
–
–
0.1
0.1
–
0.4
–
0.1
–
–
0.6
0.1
0.1
0.2
–
–
0.3
–
–
–
0.4
0.7
–
–
–
–
–
–
–
–
0.3
0.3
–
–
–
1.6
4.7
1.1
Latin
America
%
Other
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
0.1
–
–
–
–
–
–
–
–
–
–
–
–
Total
2013
%
1.5
0.1
0.9
2.5
1.3
3.1
2.3
1.0
0.1
3.4
1.5
12.7
1.3
2.2
9.3
4.1
16.9
6.4
5.8
6.9
1.2
1.1
0.3
0.3
0.2
0.1
22.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
0.3
0.7
1.2
2.3
–
–
–
–
–
–
–
0.2
–
–
0.2
–
–
–
–
–
–
–
–
0.4
0.4
–
–
–
0.7
1.4
2.5
4.3
3.3
7.6
2.0
0.5
2.1
1.3
1.2
0.8
5.2
13.1
0.1
3.6
1.1
4.8
5.8
1.5
7.3
1.2
2.8
4.0
0.4
0.6
1.0
8.1
100.0
100.0
1. The holding of £ 35m Japan equity index futures (2.5% of net assets) is not included in this classi(cid:428) cation.
2. Included in the above are (cid:428) xed interest holdings (including convertibles) of £15,543,000 (2012: £28,704,000).
3. Open-ended funds relates to the collective investment fund used to invest in Emerging Markets, a specialist insurance fund, two Japan equity fund s and an
exchange -traded MSCI global equity fund.
Annual Report 2013 Witan Investment Trust plc
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Board of Directors
H M Henderson
Chairman (A), (C), (D)
Appointed a director in 1988, Harry
Henderson became Chairman in March
2003. He was formerly a partner of
Cazenove & Co. and subsequently a senior
executive at Cazenove Group plc, retiring in
2002. Mr Henderson is Chairman of Witan
Investment Services Limited. He is also a
director of Cadogan Settled Estates Limited.
A L C Bell MA
Chief Executive O(cid:431) cer (D)
Andrew Bell was appointed a director and
Chief Executive O(cid:431) cer from February
2010. He is responsible for the overall
management of Witan. Previously he
worked at Rensburg Sheppards Investment
Management Limited as Head of Research
and as an equity strategist and Co-Head
of the Investment Trusts team at BZW and
Credit Suisse First Boston. Prior to the City,
he worked for Shell in Oman, leaving to take
a Sloan Fellowship at the London Business
School. He is a non -executive director
of Henderson High Income Trust plc and
became Chairman of the Association of
Investment Companies in January 2013.
R W Boyle MA, FCA
Chairman of the Audit Committee (A), (B)
Robert Boyle was appointed a director in
2007. He is a Chartered Accountant and was
a partner of PricewaterhouseCoopers LLP,
where he was responsible for multi-national
client accounts, specialising in the telecoms
and media sectors: he was chairman of the
PWC European Entertainment and Media
Practice for twelve years, retiring in 2006.
He is a non-executive director, and chairman
of the audit committee, of Maxis Berhad (in
Malaysia), Centaur Media plc and Prosperity
Voskhod Fund Ltd (an AIM listed company).
J E B Bevan MA
Director (A)
James Bevan was appointed a director
in 2007. He is CIO, CCLA Investment
Management. Before joining CCLA
in November 2006, he was the Chief
Investment O(cid:431) cer at Abbey. Prior to
Abbey, he was Chief Investment O(cid:431) cer
for Barclays Stockbrokers and Barclays
Personal Investment Management, having
joined BZW in 1988, following postgraduate
research in applied economics and asset
allocation at Cambridge University.
26
Witan Investment Trust plc Annual Report 2013
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(A) Independent non-executive directors.
(B) Members of the Audit Committee which
is chaired by Mr Boyle.
(C) Members of the Remuneration and Nomination
Committee which is chaired by Mrs Claydon.
(D) Director of Witan Investment Services Limited.
M C Claydon BA, MBA
Chairman of the Remuneration and
Nomination Committee (A), (B), (C), (D)
Catherine Claydon joined the Board in 2009.
Previously she was a Managing Director
in the Pension Advisory Group at Goldman
Sachs (1992-2007) and Lehman Brothers
(2007- 2008). She is a non-executive
director of the Dunedin Income Growth
Investment Trust. She is a trustee of the
Barclays UK Pension Fund and the BT
Pension Scheme, and an independent
member of Unilever UK Pension Fund’s
Investment Committee.
S E G A Neubert LLM
Director (A), (D)
Suzy Neubert joined the Board in 2012. She
is Sales & Marketing Director at J O Hambro
Capital Management, which she joined in
March 2006. She was previously Managing
Director of Equity Markets within the Global
Markets and Investment Banking Group at
Merrill Lynch Securities in London. From
1993, she worked at Smith New Court
Europe (later taken over by Merrill Lynch)
as a European equity analyst and later as
Director of European Equity Sales. Prior to
Smith New Court, she worked at Hambros
Bank as an Executive in the Corporate
Finance division. She is a quali(cid:428) ed barrister.
R J Old(cid:428) eld BA
Director (A), (C)
Richard Old(cid:428) eld joined the Board in 2011.
He is chief executive of Old(cid:428) eld Partners,
an investment management (cid:428) rm which he
founded in 2005 after nine years as chief
executive of a family investment o(cid:431) ce.
Before that he was a director of Mercury
Asset Management plc which he joined
in 1977. He is chairman of the Oxford
University investment committee and was
chairman of Keystone Investment Trust plc
from 2001 to 2010. He is a trustee of Royal
Marsden Cancer Charity and of Canterbury
Cathedral Trust.
A Watson CBE, BSc (Econ), ASIP, Barrister-
at-Law, FCISI (Hons), D.Sc. (Hons)
Senior Independent Director (A), (B)
Tony Watson was appointed a director in
2006. He was appointed Senior Independent
Director in February 2008. He is a
non-executive director of Hammerson plc,
Lloyds Banking Group plc, Vodafone Group
Plc and the Shareholder Executive. He was
formerly chairman of the Trustees of the
Marks & Spencer Pension Scheme , chairman
of the Strategic Investment Board Limited
(Northern Ireland) and a member of the
Financial Reporting Council. Mr Watson
retired in 2006 from an executive career in
the investment management industry, most
recently as Chief Executive of Hermes Fund
Managers Limited.
Annual Report 2013 Witan Investment Trust plc
27
Directors’ Report
Statutory Information
The directors present the Annual Report of the Group for the
year ended 31 December 2013.
Substantial Share Interests
As at 1 1 March 2014, the following had notified the Company
of interests in the Company’s voting rights:
Activities and Business Review
A review of the business is given in the Chairman’s and
Chief Executive’s report on pages 4 to 7 and in the Strategic
Report on pages 8 to 23. The Directors are required by
the Companies Act to prepare a Strategic Report for each
financial year, which contains a fair review of the business of
the Group during the financial year ended 31 December 2013
and of the position of the Group at the end of the year and a
description of the principal risks and uncertainties facing the
Group. This information can be found within the Strategic
Report on pages 18 to 20.
Investment Policy
The Company’s investment policy is set out on the inside
front cover.
Status
Witan Investment Trust plc (‘the Company’) is incorporated
in the United Kingdom and registered in England and Wales
and domiciled in the United Kingdom. It is an investment
company as defined in section 833 of the Companies Act
2006 and operates as an investment trust in accordance with
section 1158 of the Corporation Tax Act 2010. The Company
has received confirmation from HM Revenue and Customs
that it has been accepted as an approved investment trust
with effect from 1 January 2012, provided it continues to
meet the eligibility conditions of section 1158 and of the
ongoing requirements for approved companies
in the Investment Trust (Approved Company) (Tax)
Regulations 2012.
Subsidiary Company
The Company has one subsidiary company, Witan
Investment Services Limited, which provides marketing
services and investment products to the Company and
executive management and marketing services to third
party investment trust clients. Witan Investment Services
Limited is authorised and regulated by the Financial Conduct
Authority to manage savings schemes for investors and
provide investment advice to professional investors.
ISAs
The Company intends to continue to manage its affairs so
that its investments fully qualify for the stocks and shares
component of an ISA and Junior ISA.
AXA Investment Managers SA
Legal & General Group plc (direct)
%
18.1
4. 5
The above percentages are calculated by applying the shareholdings as notified
to the Company to the issued ordinary share capital as at 10 March 2014 (the
shareholdings representing the voting rights).
Assets
At 31 December 2013 the total net assets of the Group were
£ 1,372.9 million (2012: £1,105.8 million). At this date the net
asset value per ordinary share was 725.2p (2012: 581.8p).
Revenue and Dividend
The total profit for the year was £ 303.9 million (2012: £146.3
million). A profit of £ 29.3 million is attributable to revenue
(2012: £27.7 million). The profit for the year attributable to
revenue has been applied as follows:
Distributed as dividends:
First interim of 3.3p per ordinary share
(paid on 18 June 2013)
Second interim of 3.3p per ordinary share
(paid on 18 September 2013)
Third interim of 3.3p per ordinary share
(paid on 18 December 2013)
Fourth interim of 4.5p per ordinary share
(payable on 28 March 2014)
Added to the revenue reserve
£’000
6,229
6,248
6,247
8,519
2,020
29,263
The directors have declared a fourth interim dividend instead
of a final dividend in order to ensure that, as in previous
years, the distribution is made to the shareholders before
5 April. The Company intends to grow the dividend in real
terms, ahead of inflation.
Company Revenue Account
As permitted by section 408 of the Companies Act 2006, the
Company has not presented its own income statement. The
profit on the revenue return of the Company dealt with in
the accounts of the Group amounted to £29,150,000 (2012:
£27,660,000).
28
Witan Investment Trust plc Annual Report 2013
Directors
The current directors of the Company are shown on page s 26
and 27.
All the directors held office throughout the year under
review. In addition, Mr R A Bruce held office until his
retirement from the Board on 30 April 2013. At the Annual
General Meeting on 30 April 2014, Mr Oldfield and
Mr Watson will retire in accordance with the Company’s
Articles of Association and, being eligible, will seek
re-election by shareholders. Mr Henderson will also retire and
stand for re-election, as he has served as a director for more
than nine years and is eligible to stand for re-election.
The Board considers him to be independent despite his
length of service. This is explained in more detail in sections 1
and 2 on page 33.
The Board’s policy on the frequency of the re-election
of directors is set out on page 34 in the Corporate
Governance Statement.
During the year the membership of the Audit Committee
comprised Mr Boyle (Chairman), Mr Bruce, until his retirement
on 30 April 2013, Mr Watson, and Mrs Claydon who was
appointed as a member of the Committee on 6 August
201 3. During the year the membership of the Remuneration
Committee comprised Mrs Claydon (Chairman),
Mr Henderson and Mr Oldfield.
As noted on page 33, Mr Henderson was formerly a senior
executive at Cazenove and a partner in its predecessor firm.
As one of a number of institutional investors, the Company
purchased in 2001 a holding of shares in Cazenove Group plc
(‘Cazenove’), which was disposed of in 2013 (see note 10 (vi)
on page 73).
No director was a party to, or had an interest in, any contract
or arrangement with the Company at any time during the
year or to the date of this report. With the exception of
Mr Bell, no director has or had a service contract with
the Company.
Directors’ Interests
The interests of the directors in the share capital of the
Company are set out in the Directors’ Remuneration Report
on page 46.
Directors’ Conflicts of Interest
Directors have a duty to avoid situations where they have,
or could have, a direct or indirect interest that conflicts,
or(cid:123)possibly could conflict, with the Company’s interests.
With(cid:123)effect from 1 October 2008, the Companies Act
2006 (‘the Act’) has allowed directors of public companies
to authorise such conflicts and potential conflicts, where
appropriate, but only if the Articles of Association contain
a provision to this effect. The Act also allows the Articles
of Association to contain other provisions for dealing with
directors’ conflicts of interest to avoid a breach of duty.
There(cid:123)are two circumstances in which a potential conflict
of interest can be permitted: either the situation cannot
reasonably be regarded as likely to give rise to a conflict of
interest or the matter has been authorised in advance by the
directors. The Company’s Articles of Association, which were
adopted by shareholders on 27 April 2010, give the directors
the relevant authority required to deal with conflicts of interest.
Each of the directors has provided a statement of all
conflicts of interest and potential conflicts of interest, if any,
applicable to the Company. A register of conflicts of interest
has been compiled and approved by the Board. The directors
have also undertaken to notify the Chairman as soon as they
become aware of any new potential conflicts of interest that
need to be approved by the Board and added to the register,
which is reviewed annually by the Board. It has also been
agreed that directors will advise the Chairman
and the Company Secretary in advance of any proposed
external appointment and new directors will be asked to
submit a list of potential situations falling within the conflicts
of interest provisions of the Act in advance of joining the
Board. The Chairman will then determine whether the
relevant appointment causes a conflict or potential conflict
of interest and should therefore be considered by the Board.
Only directors who have no interest in the matter being
considered would be able to participate in the Board approval
process. In deciding whether to approve a conflict of interest,
directors will also act in a way they consider, in good faith, will
be most likely to promote the Company’s success in taking
such a decision. The Board can impose limits or conditions
when giving authorisation if the directors consider this to
be appropriate.
The Board believes that its arrangements for the
authorisation of conflicts have operated effectively since
they were introduced on 1 October 2008. The Board also
confirms that its procedures for the approval of conflicts of
interest have been followed by all the directors.
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Annual Report 2013 Witan Investment Trust plc
29
Directors’ Report continued
Directors’ Indemnity
The Company’s Articles of Association allow the Company,
subject to the provisions of UK legislation, to:
(a)
(b)
indemnify any person who is or was a director, or
a director of any associated company, directly or
indirectly against any loss or liability, whether in
connection with any proven or alleged negligence,
default, breach of duty or breach of trust by him or
her, or otherwise, in relation to the Company or any
associated company; and
purchase and maintain insurance for any person who
is or was a director, or a director of any associated
company, against any loss or liability or any expenditure
he or she may incur, whether in connection with any
proven or alleged negligence, default, breach of duty or
breach of trust by him or her, or otherwise, in relation to
the Company or any associated company.
Directors’ and officers’ liability insurance cover is in place in
respect of the directors and was in place throughout the year
under review.
Directors’ Fees
The report on the directors’ remuneration is set out on pages
44 to 54.
Financial Instruments and the Management of Risk
By its nature as an investment trust, the Company is exposed
to market risk, price risk, currency risk, interest rate risk,
liquidity risk and credit risk. The Company’s policies for
managing these risks are outlined in note 14 to the accounts
on pages 74 to 82.
Investment Managers
It is the opinion of the directors that the continuing
appointment of the investment managers listed on page
12 is in the interests of the Company’s shareholders as a
whole and that the terms of engagement negotiated with
them are competitive and appropriate to the investment
mandates.
The Board reviews the appointments of the investment
managers on a regular basis and makes changes
as appropriate.
Share Capital
The Company’s share capital comprises:
a) ordinary shares of 25p nominal value each (‘shares’)
The voting rights of the shares on a poll are one vote for
every four shares held (one vote per £1 of nominal value).
At 31 December 2012 there were 190,079,500 shares in
issue. During the year a total of 768,500 shares was bought
back by the Company for cancellation. At 31 December
2013 there were 189,311,000 shares in issue and thus
the number of voting rights was 47,327,750 on a poll. The
Company’s Articles of Association permit the Company to
purchase its own shares and to fund such purchases from
its accumulated realised capital profits. At the AGM in April
2013 a special resolution was passed giving the Company
authority, until the conclusion of the AGM in 2014, to make
market purchases for cancellation of the Company’s ordinary
shares up to a maximum of 28,398,105 shares (being 14.99%
of the issued ordinary share capital as at 30 April 2013). At
the date of this report, the Company had valid authority,
outstanding until the conclusion of the AGM in 2014, to make
market purchases for cancellation of 28,262,105 shares.
The directors intend to seek a fresh authority at the AGM
in April 2014. The Company makes use of share buybacks,
purchasing shares for cancellation when they stand at a
significant discount to NAV, with the objective of achieving
a sustainable discount of 10% or less. Shares are not bought
back unless the result is an increase in the net asset value per
ordinary share.
In addition, 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.
The Company is also 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.
b) 2.7% preference shares of £1 nominal value each
(‘2.7% preference shares’)
The 2.7% preference shareholders have no rights to attend
and vote at general meetings. At 31 December 2013 there
were 500,000 2.7% preference shares in issue. Further
details on the preference shares are given in note 17 on
page 83.
30
Witan Investment Trust plc Annual Report 2013
Annual General Meeting
The next AGM will be held at 2.30 pm on Wednesday 30 April
2014 at Merchant Taylors’ Hall, 30 Threadneedle Street,
London EC2R 8JB. The formal notice of the AGM is set out in
the accompanying circular to shareholders, together with
explanations of the resolutions.
Greenhouse Gas Emissions
The Company has a staff of six employees, operating from
small serviced office premises. Accordingly it does not have
any significant greenhouse gas emissions to(cid:123)report from its
own operations, nor does it have responsibility for any other
emission producing sources under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013,
including those within(cid:123)its underlying investment portfolio.
By order of the Board
Frostrow Capital LLP
Secretary
1 1 March 2014
c) 3.4% preference shares of £1 nominal value each
(‘3.4% preference shares’)
The 3.4% preference shareholders have no rights to attend
and vote at general meetings. At 31 December 2013 there
were 2,055,000 3.4% preference shares in issue. Further
details on the preference shares are given in note 17 on
page(cid:123) 83.
At the AGM in April 2013 a special resolution was passed
giving the Company authority, until the conclusion of the
AGM in 2014, to make market purchases for cancellation
of the Company’s own 2.7% preference shares and
3.4% preference shares up to a maximum of all those in
issue. This(cid:123)authority has not been used. Accordingly, as
at 31 December 2013 the Company had valid authority,
outstanding until the conclusion of the AGM in 2014,
to make market purchases for cancellation of 500,000
2.7% preference shares and 2,055,000 3.4% preference
shares. No(cid:123)preference shares were bought back between
the year end and the date of this report. Accordingly, the
Company has valid authority to make market purchases
for cancellation of 500,000 2.7% preference shares and
2,055,000 3.4% preference shares. The directors intend to
seek a fresh authority at the AGM in April 2014. There are no
restrictions on the transfer of the Company’s share capital
and there are no shares or stock which carry specific rights
with regards to control of the Company.
Independent Auditor
Resolutions to reappoint Deloitte LLP as the Company’s
auditor and to authorise the directors to determine their
remuneration will be proposed at the forthcoming Annual
General Meeting.
Directors’ Statement as to the Disclosure of Information
to the Auditor
Each of the directors at the date of approval of this report
confirms that:
(1)
(2)
so far as the director is aware, there is no relevant
audit information of which the Company’s auditor is
unaware; and
the director has taken all the steps that he/she ought to
have taken as a director to make himself/herself aware
of any relevant audit information and to establish that
the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of section 418 of the
Companies Act 2006.
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Annual Report 2013 Witan Investment Trust plc
31
Corporate governance statement
The Board considers that reporting against the principles and
recommendations of the AIC Code and by reference to the
AIC Guide (which incorporates the Corporate Governance
Code) will provide better information to shareholders.
The Company has complied with the recommendations of the
AIC Code and the best practice provisions of the Corporate
Governance Code throughout the year ended 31 December
2013 except as set out below:
>
>
The Corporate Governance Code (C.3.5) includes
provisions relating to the need for an internal audit
function. As explained on page 41, the Company does
not(cid:123)have an internal audit function.
The Corporate Governance Code (B.7.1) includes
provisions relating to the annual re-election of all
directors. As explained on page 34, the Company
considers that this provision is inappropriate to the
Company.
The Principles of the AIC Code
The AIC Code is made up of twenty one principles. Its three
sections cover the Board; board meetings and relations with the
investment managers; and shareholder communications.
Background
The UK Listing Authority’s Disclosure and Transparency Rules
(the ‘Disclosure Rules’) require listed companies to disclose
how they have applied the principles and complied with
the provisions of the UK Corporate Governance Code (the
‘ Corporate Governance Code’), as issued by the Financial
Reporting Council (‘the FRC’). The provisions of the Corporate
Governance Code, which was issued by the FRC in September
2012, were applicable in the year under review. The Corporate
Governance Code can be viewed at www.frc.org.uk
The related Code of Corporate Governance (‘the AIC Code’),
issued by the Association of Investment Companies (‘the
AIC’), provides specific corporate governance guidelines
to investment companies. The FRC has confirmed that
AIC member companies who report against the AIC Code
and who follow the AIC’s Corporate Governance Guide for
Investment Companies (the ‘AIC Guide’) will be meeting their
obligations in relation to the Corporate Governance Code
and the associated disclosure requirements of the Disclosure
Rules. The AIC Code issued in February 2013 was applicable
in the year under review. The AIC Code can be viewed at
www.theaic.co.uk
Compliance
The Board has considered the principles and
recommendations of the AIC Code by reference to the
AIC Guide. The AIC Code, as explained by the AIC Guide,
addresses all the principles set out in the Corporate
Governance Code, as well as setting out additional principles
and recommendations on issues that are of specific relevance
to the Company.
32
Witan Investment Trust plc Annual Report 2013
Principles of the AIC Code
The Board
1. The chairman should
be independent.
2. A majority of the board should
be independent of the manager.
Application of the principles
Mr H M Henderson has been Chairman of the Company since the
Annual General Meeting in March 2003; he joined the Board in
1988. The Board considers that Mr Henderson is, and has been
since his appointment, an independent non-executive director.
Independence stems from the ability to make those objective
decisions that may be in con(cid:430) ict with the interests of management;
this in turn is a function of con(cid:428) dence, integrity and judgement.
Mr Henderson has served on the Board for more than nine years.
Accordingly, he stands for re-election by the shareholders each
year and will do so for as long as he continues to serve on the Board.
The Board is (cid:428) rmly of the view, however, that length of service does
not of itself impair a director’s ability to act independently; rather,
a director’s longer perspective adds value to the deliberations
of a well-balanced investment trust company board. The other
independent non-executive directors, under the chairmanship of
the Senior Independent Director, review and evaluate annually the
performance and continuing independence of the Chairman.
Mr Henderson was formerly a partner of Cazenove & Co., the (cid:428) rm
which for many years acted as the Company’s stockbroker. However,
he did not have responsibility for or involvement with Cazenove’s
role with the Company, being for many years responsible for
aspects of Cazenove’s fund management division. Accordingly, the
Board considers that the Chairman has no relationships that might
create a con(cid:430) ict of interest between his interests and those of the
other shareholders.
Mr A Watson was appointed as the Senior Independent Director
in February 2008. As noted above, he takes the lead in the annual
evaluation of the Chairman. He is also able to act as a sounding
board for the Chairman and serve as an intermediary for the other
directors, should this prove necessary, and to act as a channel of
communication for shareholders in the event that contact through
the Chairman has failed to resolve concerns or is inappropriate.
At 31 December 2013 the Board was composed of seven
independent non-executive directors and one executive director
(the Chief Executive Officer). The Board is therefore independent
of the Company’s executive management. All the directors
are wholly independent of the Company’s various investment
managers. In the opinion of the Board, each of the directors
is independent in character and judgement and there are no
relationships or circumstances relating to the Company that are
likely to affect their judgement (see also section 1 above).
Annual Report 2013 Witan Investment Trust plc
33
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Corporate governance statement continued
Principles of the AIC Code
The Board
3. Directors should be submitted for re-election at regular
intervals. Nomination for re-election should not be
assumed but be based on disclosed procedures and
continued satisfactory performance.
Application of the principles
New directors stand for election by the shareholders at the annual
general meeting of the Company that follows their appointment.
Thereafter all directors stand for re-election at least every three
years, as required by the Company’s Articles of Association.
Directors who have served for more than nine years stand for
re-election annually. There is currently one director with service
of(cid:123) more than nine years: Mr H M Henderson, the Chairman.
The Board has reviewed Provision B.7.1 of the Corporate
Governance Code, which states that all directors of FTSE 350
companies should be subject to annual election by shareholders.
The Board considers that the annual re-election of all the
directors is inappropriate to the Company. There are two main
reasons for this view: (a) it appears to place excessive emphasis
on the short term and insufficient emphasis on the need for an
effective board to work together and to refresh its composition
over time; and (b) there is some danger, because many small and
nominee shareholders choose not to exercise their voting rights,
that if all the directors seek re-election at once a minority of the
shareholders could engineer the removal of the whole Board for
reasons injurious to the interests of the Company’s investors as a
whole. Therefore the Board considers it appropriate to continue
to apply Provision B.7.1 as if the Company were not a constituent
of the FTSE 350 Index, a view which a number of prominent
institutional investors have shared.
Every year the Board reviews its composition and the composition
of its two Committees. The Board’s Remuneration and Nomination
Committee oversees this process. Further details are given under
section 7 on page 36.
34
Witan Investment Trust plc Annual Report 2013
Principles of the AIC Code
The Board
4. The board should have a policy on tenure, which is
disclosed in the annual report.
5. There should be full disclosure of information about the
board.
6. The board should aim to have a balance of skills,
experience, length of service and knowledge of the
Company.
Application of the principles
New directors are appointed for an initial term ending three
years from the date of their first annual general meeting after
appointment and with the expectation that they will serve two
three-year terms. The continuation of directors’ appointments is
contingent on satisfactory performance evaluation and re-election
at annual general meetings. Directors’ appointments are reviewed
formally every three years by the Board as a whole. None of the
non-executive directors has a contract of service and a director
may resign by notice in writing to the Board at any time; there are
no set notice periods. The Board’s tenure and succession policy
seeks to ensure that the Board is well-balanced and refreshed
regularly by the appointment of new directors with the skills
and experience necessary, in particular, to replace those lost by
directors’ retirements. Directors must be able to demonstrate
their commitment to the Company, including in terms of time. The
Board seeks to encompass past and current experience of various
areas that is relevant to the Company’s objective and operations,
the most important skill-sets being investment management,
finance, marketing, financial services, risk management, custody
and settlement, and investment banking. Specialist agents are
used to assist with recruitment. While the roles and contributions
of longer serving directors are subject to rigorous review, the Board
is strongly of the view that length of service is only one factor and
that the shareholders benefit from having directors with a longer
perspective of the Company’s history and its place in the savings
market. Therefore there is no absolute limit to the period for which
a director may serve.
Details of the directors are set out on pages 26 and 27. They
demonstrate a broad range of investment, professional and
commercial expertise and experience, gained overseas as well as
in the United Kingdom.
The Board considers that it has achieved this aim. Brief biographical
details of each director are set out on pages 26 and 27 .
Board Diversity
The Company welcomes the objectives of the Davies Report to
improve the performance of corporate boards by encouraging
the appointment of the best people from a range of differing
perspectives and backgrounds. The Company recognises the
benefits of diversity on the board, including gender, and takes
this into account in its board appointments. The Company is
committed to ensuring that its director search processes actively
seek both men and women with the right qualifications so that
appointments can be made, on the basis of merit, against objective
criteria from a diverse selection of candidates. To this end the
Board will continue to dedicate time to consider diversity during
the director search process.
Annual Report 2013 Witan Investment Trust plc
35
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Corporate governance statement continued
Principles of the AIC Code
The Board
7. The board should undertake a formal and rigorous
annual evaluation of its own performance and that of its
committees and individual directors.
8. Director remuneration should re(cid:430) ect their duties,
responsibilities and the value of their time spent.
9. The independent directors should take the lead in the
appointment of new directors and the process should be
disclosed in the annual report.
10. Directors should be o(cid:426) ered relevant training and
induction.
11. The chairman (and the board) should be brought into
the process of structuring a new launch at an early
stage.
36
Witan Investment Trust plc Annual Report 2013
Application of the principles
The Board has established a process to evaluate its performance
on an annual basis. This process is based on open discussion and
seeks to assess the strengths and weaknesses of the Board and
its Committees. The Chairman leads on applying the conclusions
of the evaluation. The Chairman reviews with each director his
or her individual performance, contribution and commitment to
the Company. The Senior Independent Director leads the annual
evaluation of the Chairman and reviews the conclusions with him.
The Board’s Remuneration Committee oversees this process.
In addition, in consideration of Provision B.6.2 of the Corporate
Governance Code, which states that evaluation of the board of
FTSE 350 companies should be externally facilitated at least every
three years, the Board concluded that, regardless of the size of
the company, periodic external evaluation should add value to the
process. Accordingly, in July 2013, the Board appointed BoardAlpha
Limited to carry out an evaluation programme. The Board reviewed
the report submitted to it and the Chairman has led on implementing
those changes recommended by the report that the Board
considered should be made. The report did not identify any
material weaknesses or concerns. BoardAlpha Limited does not
have any other connection with the Company.
The Directors’ Remuneration Report on pages 44 to 54 details the
process for determining the directors’ remuneration and sets out
the amounts payable.
The Board’s Remuneration and Nomination Committee oversees
the recruitment process, which includes the use of a firm of
non-executive director recruitment consultants. However, all the
independent non-executive directors are asked to contribute and
to consider serving on the sub-committee appointed to draw up
the shortlist of candidates. Notwithstanding this, the Chairman
would not expect to be involved in the selection of his successor.
Directors newly appointed to the Board are provided with an
introductory programme covering the Company’s strategy, policies
and operations, including those outsourced to third parties.
Thereafter, directors are given, on a regular and ongoing basis,
key information on the Company’s investment portfolios, financial
position, internal controls and details of the Company’s regulatory
and statutory obligations (and changes thereto). The directors are
encouraged to attend industry and other seminars, conferences
and courses, if necessary at the Company’s expense, and to
participate generally in industry events. A log of directors’ training
is maintained and reviewed each year by the Audit Committee.
The directors have access to the advice and services of the
Company’s executive team and of the Company Secretary, through
its appointed representative, who are responsible to the Board for
ensuring that Board procedures are followed and that applicable
rules and regulations are complied with.
This principle does not apply to the Company, which is a long
established investment trust company.
Principles of the AIC Code
Board meetings and the relationship with the manager
12. Boards and managers should operate in a supportive,
Application of the principles
co-operative and open environment.
Typically, the Board meets approximately ten times each
year. The Chief Executive Officer (who is himself a director),
other representatives of the Company’s executive team and a
representative of the Company Secretary expect to be present
at all meetings. The Board devotes two full days each year to
meetings with the Company’s investment managers and each
investment manager sends representatives at least once a year.
The Chairman seeks to encourage open debate within the Board
and a supportive and co-operative relationship with the executive
team and with the Company’s investment managers, advisors and
support staff.
13. The primary focus at regular board meetings should
be a review of investment performance and associated
matters such as gearing, asset allocation, marketing/
investor relations, peer group information and industry
issues.
14. Boards should give su(cid:431) cient attention to overall
strategy.
15. The board should regularly review both the performance
of, and contractual arrangements with, the manager (or
executives of a self-managed company).
16. The board should agree policies with the manager
covering key operational issues.
17. Boards should monitor the level of the share price
discount or premium (if any) and, if desirable, take
action to reduce it.
18. The board should monitor and evaluate other service
providers.
The Chief Executive Officer and his team monitor investment
performance and all associated matters. He reports to each Board
meeting, at which investment performance, asset allocation,
gearing, marketing and investor relations are usually key
agenda items.
The Board is responsible for determining the strategic direction
of the Company and for promoting its success. At least one of
its meetings each year is devoted entirely to reviewing overall
strategy and progress is monitored throughout the year.
The Board’s Remuneration and Nomination Committee reviews
the performance of and the contractual arrangements with the
Chief Executive Officer. The Chief Executive Officer is responsible
to the Board for reviewing the performance and the contractual
arrangements of his staff. The Board’s Remuneration and
Nomination Committee oversees this process.
The Chief Executive Officer leads on the selection and monitoring
of the investment managers and their terms of reference, which
are approved by the Board.
The Company manages its own operations through the Board
as set out on page 39 . Each investment manager runs a discrete
investment portfolio within the terms of the mandate given to
them in an investment management contract. Further details are
given on page 39. Shares are held by the Company’s custodian.
The Chief Executive Officer and his team monitor the share price
and the discount to net asset value on a daily basis and he reports
to every Board meeting.
The Board has a share buy-back programme that seeks to add to
the net asset value per share and achieve a sustainable discount
of(cid:123)not more than 10%.
The Chief Executive Officer and his team are responsible for
monitoring and evaluating the performance of the Company’s
various service providers. The Board’s Audit Committee oversees
this process.
Annual Report 2013 Witan Investment Trust plc
37
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Corporate governance statement continued
Principles of the AIC Code
Shareholder communications
19. The board should regularly monitor the shareholder
pro(cid:428) le of the company and put in place a system for
canvassing shareholder views and for communicating
the board’s views to shareholders.
20. The board should normally take responsibility for,
and have a direct involvement in, the content of
communications regarding major corporate issues
even(cid:123)if the manager is asked to act as spokesman.
21. The board should ensure that shareholders are provided
with su(cid:431) cient information for them to understand
the risk: reward balance to which they are exposed by
holding the shares.
Application of the principles
The Chairman is responsible for ensuring that there is effective
communication with the Company’s shareholders. He works
closely with the Chief Executive Officer and there is regular
liaison with the Company’s stockbroker. There is a process in
place for analysing and monitoring the shareholder register and a
programme for meeting or speaking with the institutional investors
and with private client stockbrokers and advisors. In addition to the
Chief Executive Officer, the Chairman, or the Senior Independent
Director, expects to be available to meet the larger shareholders.
The Company encourages attendance at its Annual General
Meeting as a forum for communication with the individual
shareholders. The Notice of Annual General Meeting and related
papers are sent to shareholders at least 20 working days before the
meeting. The Chairman, the Chief Executive Officer, the Chairman
of the Audit Committee and the Chairman of the Remuneration
and Nomination Committee all expect to be present at the Annual
General Meeting and able to answer questions from shareholders
as appropriate. Details of the proxy votes received in respect of
each resolution are made available to shareholders. The Chief
Executive Officer makes a presentation to the meeting.
The directors may be contacted through the Secretary at the
address shown on page 88.
While the Chief Executive Officer and his team expect to lead on
preparing and effecting communications with investors, all major
corporate issues are put to the Board or, if time is of the essence,
to(cid:123)a Committee thereof.
The Board places importance on effective communication with
investors and approves a marketing programme and budget each
year to enable this to be achieved. Copies of the Annual Report
and the Half Year Report are circulated to shareholders, to those
who hold shares through the subsidiary company’s products and,
where possible, to investors through other providers’ products and
nominee companies (or written notification is sent when they are
published on-line). In addition, the Company publishes a fact sheet
monthly and its net asset value per share daily. All this information
is readily accessible on the Company’s website (www.witan.com).
The Company belongs to the Association of Investment Companies
which publishes information to increase investors’ understanding.
38
Witan Investment Trust plc Annual Report 2013
The Board
The Board is collectively responsible for the success of
the Company. Its role is to provide leadership within a
framework of prudent and effective controls that enable
risk to be assessed and managed. The Board sets the
Company’s strategic aims (subject to the Company’s Articles
of Association and to such approval of the shareholders in
general meeting as may be required from time to time) and
ensures that the necessary resources are in place to enable
the Company’s objectives to be met.
The Board has typically met approximately ten times a year
and deals with the most important aspects of the Company’s
affairs, including the setting of parameters for and the
monitoring of investment strategy, the review of investment
performance and the extent to which borrowings may
be used.
The Chief Executive Officer is responsible to the Board for the
overall management of the Company including investment
performance, business development, shareholder relations,
marketing, investment trust industry matters, administration
and unquoted investments. The duties of the Chief Executive
Officer include leading on investment strategy and asset
allocation, on the selection and monitoring of the investment
managers and their terms of reference and on the use of
derivatives. The Board sets limits on matters such as asset
allocation, gearing and investment in derivatives, within
which the Chief Executive Officer may operate at
his discretion.
The Chief Executive Officer reports to each meeting of the
Board. His report includes confirmation that the Board’s
investment limits and restrictions and those which govern
the Company’s tax status as an investment trust, have been
adhered to.
The individual investment managers are each appointed to
manage a discrete portfolio in accordance with guidelines
which limit, for example, the markets in which they can
invest, the size of each investment and the amount of cash
that may be held in their portfolio in normal circumstances.
They are not allowed to invest in unquoted securities, to
borrow against the security of the portfolio, to sell stocks
short or to use derivatives. The investment managers
take decisions as to the purchase and sale of individual
investments and are responsible for effecting those decisions
on the best available terms. The Company receives monthly
confirmation from each of the investment managers that
they have carried out their duties in accordance with the
terms of their investment mandates.
In addition to his responsibilities for the overall management
of the Company, the Chief Executive Officer manages
the Direct Holdings portfolio. A maximum of 10% of the
Company’s gross assets (at the time of purchase) may be
invested in this portfolio and there are restrictions on the
number, size and type of investments that may be made.
The Chairman is responsible for ensuring that the directors
are provided, in a timely manner, with management,
regulatory and financial information that is clear, accurate
and relevant, whether from the Chief Executive Officer
or otherwise.
Matters specifically reserved for decision by the full
Board have been defined. There is an agreed procedure
for directors, in the furtherance of their duties, to take
independent professional advice, if necessary, at the
Company’s expense.
Board Committees
The Board has established an Audit Committee and a
Remuneration and Nomination Committee. The membership
of the Audit Committee and the Remuneration and
Nomination Committee is set out on page s 26 and 27. The
roles and responsibilities of the Committees are described in
the Report of the Audit Committee on page s 42 and 43 and in
the Directors’ Remuneration Report on pages 44 to 54.
Meetings of the Board and its Committees
The number of formal meetings during the year of the
Board and its Committees, and the attendance of the
individual directors at those meetings, is shown in the table
that follows.
Number of meetings
H M Henderson
A L C Bell
J E B Bevan
R W Boyle
R A Bruce
M C Claydon
S E G A Neubert
R J Oldfield
A Watson
Remuneration
and
Nomination
Committee
2
2
2*
–
–
–
2
–
2
–
Audit
Committee
3
3*
3*
–
3
1 of 1
0 of 1
–
–
3
Board
11
10
11
9
11
4 of 4
10
10
10
10
* Not a member of the Committee but in attendance by invitation for all or part of
the meetings.
All the directors attended the Annual General Meeting in
April 2013 and the Board’s ‘Away Day’ in May 2013.
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Annual Report 2013 Witan Investment Trust plc
39
Corporate governance statement continued
Directors’ Remuneration
The directors’ remuneration is detailed in the Directors’
Remuneration Report on pages 44 to 54.
Accountability and Audit
The directors’ statement of responsibilities in respect of the
accounts is set out on page 55.
The report of the independent auditor is set out on page s 56
to 59.
The Board has delegated contractually to external
agents, including the various investment managers, the
management of the investment portfolio, global custody
(which includes the safeguarding of the assets), the
investment administration, management and financial
accounting, company secretarial and certain other
administrative requirements and the registration services.
Each of these contracts was entered into after full and proper
consideration by the Board of the quality and cost of the
services offered, including the control systems in operation in
so far as they relate to the affairs of the Company. The Board
receives and considers regular reports from the investment
managers and ad hoc reports and information are supplied
to(cid:123)the Board from its other contractors as required.
Internal Control
The Board has established an ongoing process for identifying,
evaluating and managing the significant risks faced by the
Company. This process accords with the Turnbull guidance,
is subject to regular review by the Audit Committee and was
fully in place during the year under review and up to the date
of this annual report. The Board remains responsible for the
Company’s system of internal control and has conducted its
annual review of the effectiveness of the system, covering all
the controls, including financial, operational and compliance
controls and risk management systems. This review took into
account points raised during the year in the regular appraisal
of specific areas of risk. However, such a system is designed
to manage rather than eliminate the risks of failure to achieve
the Company’s business objectives and can only provide
reasonable and not absolute assurance against material
misstatement or loss.
In accordance with provisions C2 and C3 of the Corporate
Governance Code the Board reviews the Company’s business
risks at least once a year. These are analysed and recorded in
a risk map. The Company receives from its main contractors
formal reports which detail the steps taken to monitor the
areas of risk and which report the details of any known
internal control failures.
As described elsewhere, the management of Witan’s
portfolio is outsourced to a number of third party investment
managers around the world. There are currently 11 such
investment managers as well as the Direct Holdings portfolio
which is managed by the Chief Executive Officer.
The Chief Executive Officer has responsibility for a number of
aspects of the management of the portfolio, including asset
allocation, gearing and investment in derivatives. The Board
has set guidelines in respect of each of these aspects within
which he may operate. The Chief Executive Officer reports to
the Board regularly on each of these areas, as well as on the
overall performance of the Company and other matters
of significance.
Witan’s in-house executive management team is responsible
for managing and controlling the relationships with the third
party managers. The management team receives monthly
reports on investment and compliance matters from each
manager. During 2013, the investment managers were
asked to provide detailed information on their operational
structures and systems. The Board also receives each year
from its investment managers reports on their internal
controls; in most cases these include a report from the
relevant company’s auditors on the control policies and
procedures in operation.
The Chief Executive Officer makes regular reports to the
Board on the performance of and activity within the Direct
Holdings portfolio. In addition, the portfolio’s performance is
independently measured by WM Performance Services, along
with those of the third party managers.
The Company’s subsidiary, Witan Investment Services
Limited, is authorised and regulated by the Financial Conduct
Authority to provide investment products and services.
The compliance structures required for these activities,
including a compliance manual and a compliance monitoring
programme, have been duly put into place.
The Company has a formal policy for staff to raise in
confidence any concerns about possible improprieties,
whether in matters of financial reporting or otherwise, for
appropriate independent investigation. Its staff comprises
only six people (including the Chief Executive Officer), who
are well known to and have frequent formal and informal
contact with the members of the Board.
40
Witan Investment Trust plc Annual Report 2013
The Board encourages the Company’s appointed investment
managers to engage with companies and to vote shares,
in the best long-term interest of Witan shareholders but
in accordance with their own investment philosophies.
Where applicable, it monitors the policies of the investment
managers in respect of the UK Stewardship Code. Elsewhere
in the world it can be more difficult to vote shares as each
country has its own rules and practices regarding shareholder
notification, voting restrictions, registration conditions and
share blocking, including, for example, dealing constraints.
Therefore, w hilst the Company’s investment managers are
apprised of the Company’s approach to the stewardship of its
assets and the importance of sound corporate governance,
they use their discretion according to their knowledge of
the relevant circumstances. The investment managers
report their compliance with the UK Stewardship Code, or
equivalent legislation, to the Audit Committee each year.
In respect of the direct investments held, the Company’s
executive management maintains regular touch with the
management of the investee holdings and engages when
issues arise that are controversial or potentially prejudicial
to the interests of Witan’s shareholders. An annual report is
provided to the Audit Committee in compliance with the UK
Stewardship Code.
The Company does not have an internal audit function. It
delegates to third parties the management of its investments
and most of its other operations and employs only a small
staff. The investment managers and certain other key
contractors are subject to external regulation and most have
compliance and internal audit functions of their own. The
Company’s investments are held on its behalf by a global
custodian. A specialist firm of investment accountants and
administrators is responsible for investment administration,
for maintaining accounting records and for preparing
financial accounts, management accounts and other
management information. Their work is reviewed by an
independent accountant who also carries out some of the
work that an internal audit function would cover. In addition,
the Board receives from the investment administrator an
annual report on its internal controls, including a report
from its auditor on the control policies and procedures in
operation. The investment performance of the investment
managers, both individually and collectively, is measured
for Witan by a company that is independent of all the
investment managers. The corporate company secretary
is a company with well-established experience in servicing
investment trusts.
The appointment of these and other professional contractors
provides a clear separation of duties and a structure of
internal controls that is balanced and robust. The Board will
continue to monitor its system of internal control in order
to provide assurance that it operates as intended and the
directors will review at least annually whether a function
equivalent to an internal audit is needed.
Stewardship and the Exercise of Voting Powers
It is the Board’s view that, in order to achieve long-term
success, companies need to maintain high standards
of corporate governance and corporate responsibility.
Therefore Witan expects the companies in which it
is invested to comply with best practice in corporate
governance matters, or to provide adequate explanation of
any areas in which they fail to comply, whilst recognising
that a different approach may be justified in special
circumstances. In respect of UK companies, current best
practice in corporate governance matters is set out in the UK
Corporate Governance Code.
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Annual Report 2013 Witan Investment Trust plc
41
Report of the audit committee
Statement by the Chairma n of the Committee
As Chairman of the Audit Committee (“the Committee”), I am
pleased to present the Report of the Committee for the year
ended 31 December 2013.
Composition and responsibilities of the Committee
The Committee comprises three non-executive directors,
including its Chairman, who are appointed by the Board.
I was appointed Chairman of the Committee in 2007. The
Board has taken note of the requirement that at least
one member of the Committee should have recent and
relevant financial experience and is satisfied that the
Committee is properly constituted in this respect, as I
am a Chartered Accountant and was previously a partner
in PricewaterhouseCoopers LLP. Mr Watson, who was
appointed to the Committee in 2006, was a member of the
Committee throughout the year. Mr Bruce was appointed to
the Committee in 2002 and retired as a director in April 2013.
Mrs Claydon was appointed to the Committee in August
2013. Details of their qualifications and experience are given
on page s 26 and 27.
The role of the Committee is to assist the directors in
applying financial reporting and internal control principles
and to maintain an appropriate relationship with the Group’s
auditor. The Committee’s role and responsibilities are set out
in its terms of reference, which comply with the UK Corporate
Governance Code. The terms of reference are available on
request from the Company Secretary and can be seen on
the Company’s website (www.witan.com). In summary, the
Committee is responsible for monitoring the integrity of the
Company’s financial statements, including consideration of
the Company’s accounting policies and significant reporting
judgements. It reviews the Company’s internal financial
controls and risk management systems using an external
consultant where appropriate.
Risk
Management has identified (Strateg ic Report pages 18 to
20) four main areas of risk: Market and Investment Portfolio,
Operational, Corporate Governance and Accounting,
Legal and Regulatory and has set out the actions taken to
evaluate and manage these risks. The Auditors have also
detailed two specific areas of risk in their report: Investmen t
valuation and liquidity and ownership of investments
and have set out the work they have performed to satisfy
themselves that these have been properly reflected in the
financial statements. The Committee reviews the various
actions(cid:123)taken and satisfies itself that they are sufficient:
in(cid:123)particular the Committee reviews management’s Risk
Report at each meeting and requires amendments to both
risks and mitigation actions if appropriate.
Meetings of the Committee
The Committee held three meetings during 2013, in February,
August and November and also met in February 2014.
Representatives of the external auditor were present at the
meetings held in February 2013 and 2014 and November
2013. I report to the Board after each meeting on the main
matters discussed at the meeting. In summary, the main
matters dealt with at these meetings were as follows:
>
>
Assessment of the controls to ensure the ownership,
valuation and liquidity of investments: this includes
assessing management reports on the controls and
procedures of external managers and the external
custodian/administrator and the review of the audit
work performed. No significant issues were identified.
Interim and year end reporting, in the light of the
requirements of the revised Code of Corporate
Governance issued by the(cid:123)AIC, the Financial Reporting
Council’s revised Guidance on Audit Committees and
the requirement for(cid:123)a Strategic Report. The Committee
agreed the process, timing and responsibility for
compliance, and in particular ensured that there was a
fuller explanation of the impact of the Company’s use
of derivatives.
42
Witan Investment Trust plc Annual Report 2013
>
>
A variety of more detailed matters including internal
controls, whistleblowing, anti-money laundering
compliance, data protection and business continuity.
In the light of the relative simplicity of the operations
and the use of independent external consultants to
advise on regulatory compliance and adherence to
internal procedures, it was concluded that no internal
audit function was required (see page 41).
External audit
The Committee reviews the scope and effectiveness of the
audit process, including agreeing the auditor’s assessments
of materiality, and monitors the auditor’s independence and
objectivity. It conducted a formal review of the performance
of the auditor during the year and concluded that
performance was satisfactory and there were no grounds for
change.
Deloitte & Touche, a predecessor firm of Deloitte LLP, was
first appointed as the Company’s auditor in March 1997.
The audit was subject to competitive tender in 2007, at
which time Deloitte LLP was reappointed. T he Committee
reviews the performance of the auditors annually. Relevant
guidance on audit rotation will be complied with when this
has been finalised.
The Committee approved the proposed audit fee . There is a
rule that a specified engagement of the auditor to provide
non-audit services cannot exceed 50% of the annual audit
fees without Committee approval. As noted in note 5 on
page 68, the Committee approved the appointment of
Deloitte LLP to provide advice on one-off withholding tax
claims for a fee of £15,000. The appointment, which was
made on a one-off basis, was awarded on a competitive basis
and the Committee satisfied itself that Deloitte’s audit team
and tax advisory team were independent of each other.
Financial Statements
The Board has requested the Committee to confirm that in
its opinion the Board can make the required statement that
the Annual Report taken as a whole is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s performance,
business model and strategy. The Committee has given
this confirmation on the basis of its review of the whole
document, underpinned by involvement in the planning
for its preparation, review of the processes to assure the
accuracy of factual content, and by assurances from the
Remuneration and Nomination Committee.
Approval
This report was approved by the Committee on 10 March
2014 and is signed on its behalf by:
Robert Boyle
Chairman of the Audit Committee
1 1 March 2014
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Annual Report 2013 Witan Investment Trust plc
43
Directors’ remuneration report
Chairma n’s statement
Introduction
As Chairman of the Remuneration and Nomination Committee
(“the Committee”), I am pleased to present the Directors’
Remuneration Report for the year ended 31 December 2013.
This report covers the remuneration-related activities of the
Committee for the year ended 31 December 2013. It sets out
the remuneration policy and remuneration details for the
non-executive and executive directors of the Company.
It has been prepared in accordance with the Large and
Medium-sized Companies and Groups (Accounts and
Reports) (Amendment Regulations) 2013 (the “Regulations”)
which came into force on 1 October 2013 and the requirements
of the Association of Investment Companies. This is the
first time that the Company has been required to report
in accordance with the Regulations. The report is split into
three main areas: this statement from me as Chairman of
the Committee, an annual report on remuneration and a
policy report. The policy report will be subject to a binding
shareholder vote at the Annual General Meeting in 2014
and will take effect from 1 January 2015. The annual
report on remuneration provides details on remuneration
in the financial year ending 31 December 2013 and other
information required by the Regulations. It will be subject to
an advisory vote at the Annual General Meeting in 2014.
The Companies Act 2006 requires the auditors to report to
shareholders on certain parts of the Directors’ Remuneration
Report and to state whether, in their opinion, those parts of
the report have been properly prepared in accordance with
the Regulations. The parts of the annual report on remuneration
that are subject to audit are indicated in the report.
Role of the Committee
It was agreed during the year that the Committee should
be renamed the Remuneration and Nomination Committee
(formerly the Remuneration Committee) to reflect its role
more accurately.
The remuneration-related role of the Committee is essentially
twofold. First, it has a role in respect of executive remuneration,
assisting the directors in determining the remuneration of the
Chief Executive Officer (the “CEO”) and evaluating his
performance; and assisting the CEO in determining the
remuneration arrangements for the Company’s staff. Second,
in respect of the non-executive directors, it serves as the Board’s
nomination committee with responsibility for reviewing the
effectiveness and composition of the Board and considering
the remuneration of the non-executive directors. The
Committee’s role and responsibilities are set out in its terms
of reference, which are available on request from the Company
Secretary and can be found on the Company’s website.
44
Witan Investment Trust plc Annual Report 2013
The Committee normally consists of three non-executive
directors, including its Chairman, who are appointed by the
Board. During the year I served as Chairman of the Committee
and Mr H M Henderson and Mr R J Oldfield were members of
the Committee. I was appointed to the Committee, and to act
as its Chairman, in 2009. Mr Henderson and Mr Oldfield were
appointed to the Committee in 2003 and 2011 respectively.
The Committee’s programme is to meet formally at least twice
a year and on such other occasions as required. The Committee
held two formal meetings during the year, during which it
addressed all the remuneration-related matters under its remit.
There have been no substantial changes in the Company’s
approach to the remuneration of the CEO, or the fees payable
to non-executive directors, during the year. In February 2014,
the Committee undertook a review of the non-executive
directors’ fees. The Committee’s recommendation, to which
the Board agreed, was for non-executive directors’ fees to be
increased with effect from 1 April 2014 by £3,000 per annum
in respect of the non-executive directors other than the
Chairman and £5,000 per annum in respect of the Chairman
of the Company. The additional fee payable to the Chairman
of the Audit Committee was increased from £4,000 to £6,000
per annum. This will be the first increase since 1 April 2011.
Accordingly, with effect from 1 April 2014, the non-executive
directors’ fees will be paid at the following annual rates:
Chairman of the Compan y
Chairman of the Audit Committee
Chairman of the Remuneration
and Nomination Committee
Senior Independent Director
Other non-executive directors
£
57,000
36,000
34,000
34,000
30,000
The implementation of the Alternative Investment Fund
Managers Directive is expected to result in additional duties
for non-executive directors. The degree to which this is
required will be reviewed after the future regulatory structure
has taken full effect to determine what, if any, additional
remuneration may be appropriate.
The aggregate non-executive directors’ fees currently
amount to £225,500 per annum. This will increase to
£251,000 with effect from 1 April 2014.
The Company’s Articles of Association currently limit the
aggregate fees payable to the non-executive directors to
£300,000 per annum. The Board has agreed to seek an
increase in this limit and a resolution will be put to the Annual
General Meeting in April 2014 which, if passed, will increase
the aggregate maximum to £350,000 per annum.
Catherine Claydon
Chairman of the Remuneration and Nomination Committee
Annual Report on Remuneration
This is the first occasion that we have submitted an annual
report in accordance with the new Regulations. An ordinary
resolution for the approval of this section of the report
(together with the Chairman’s statement on page 44) will be
put to members at the forthcoming Annual General Meeting.
The following section sets out the executive director’s and
the non-executive directors’ remuneration for the year
ending 31 December 2013. The information provided in this
part of the Report has been audited by Deloitte LLP.
Single Total Figure Table for the Year (Audited)
Non-executive directors
The following table shows the single figure of remuneration
of the non-executive directors for the financial year ending
31 December 2013, together with the comparative figures
for 2012:
H M Henderson
J E B Bevan
R A Bruce (1)
R W Boyle
M C Claydon
S E G A Neubert (2)
R J Oldfield
A Watson
Total
31 December
2013
Fees and total
Remuneration
£ (3)
51,500
27,000
9,000
31,000
31,000
27,000
27,000
31,000
234,500
31 December
2012
Fees and total
Remuneration
£ (3)
51,500
27,000
27,000
31,000
31,000
20,250
27,000
31,000
245,750
Notes:
1. R A Bruce retired on 30 April 2013.
2.
3.
S E G A Neubert became a non-executive director on 2 April 2012.
The non-executive directors are not entitled to any variable payments or benefits. No taxable benefits were paid in the year, although all reasonably incurred
business expenses will be met.
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Annual Report 2013 Witan Investment Trust plc
45
Directors’ remuneration report continued
CEO
The following table shows a single total figure of remuneration in respect of qualifying services for the financial year ending
31 December 2013 for the CEO, Mr A L C Bell, together with the comparative figures for 2012. Aggregate emoluments are
shown in the last column of the table.
Mr A L C Bell
Base pay(1)
£
2013
2012
252,000 245,440
Benefits(2)
£
2013
Long- Term
Bonus(3)
£
2013
12,006 10,559 119,700 106,204 80,952
Annual Bonus(3)
£
2013
2012
2012
Pension related
benefits
£
2013
Total
£
2013
2012
2012
16,764 22,144 21,568 486,802 400,535
2012
Notes:
(1)
Mr Bell is entitled to hold outside appointments and to retain any fees payable, subject to receiving the Board’s permission. During 2013, in addition to the base
salary set out above, Mr Bell received £55,750 in respect of his directorships of Henderson High Income Trust plc and the Association of Investment Companies.
(2) Taxable benefits include life assurance and health insurance
(3)
Mr Bell’s service agreement, as amended, provides that he is eligible to receive a bonus of up to 100% of his basic salary. The cash bonus arrangement consists of
three separate elements:
(i) Discretionary bonus
For a description of the terms of the discretionary bonus (including the performance measures), please see the policy report. The Committee reviewed
Mr Bell’s performance against the performance criteria, described on page 52, over the preceding year at its meeting in February 2014 to determine the
appropriate level of the discretionary bonus that is payable for that year. The Committee recommended, and the Board agreed, that Mr Bell should receive a
discretionary bonus equal to 17.5% of his basic salary (£44,100) in respect of the financial year ended 31 December 2013 (2012: 20%, £49,088).
(ii) One-year performance bonus
For a description of the terms of the one-year performance bonus (including the performance measures), please see the policy report. The Company
outperformed its benchmark in 2013 by 7.0 % (net asset value debt at par, excluding the effect of share buy-backs) and therefore a bonus of £75,600 will
be (cid:123)paid to Mr Bell based on the Company’s financial performance for the year ending 31 December 2013 (2012: 1.98%, £57,116).
(iii) Three -year performance bonus (the “Long-Term Bonus”)
For a description of the terms of the three-year performance bonus (including the performance measures), please see the policy report. The Company has
outperformed its benchmark over the three financial years to 31 December 2013 by 5. 8% (net asset value debt at par, excluding the effect of share buy-backs)
and therefore a Long-Term Bonus of £80,952 will be paid to Mr Bell (2012: 1.29%, £16,764).
Mr Bell’s total variable remuneration in respect of the year ended 31 December 2013 is £200,652 (2012: £122,968).
As in previous years, payment of the discretionary bonus and the one-year performance bonus will be partly deferred, with half paid in March 2014 and the
remaining half in January 2015, subject to continuing employment. The Long-Term Bonus of £80,952 is payable in March 2014.
Scheme interests awarded during the financial year
No directors were awarded any interest over shares in the
Company during the financial year ending 31 December
2013.
Payments to past directors
No payments were made to former directors of the Company
during the financial year ending 31 December 2013 (2012:
£nil).
Payments for loss of office
No loss of office payments were made to any person who has
previously served as a director of the Company at any time
during the financial year ending 31 December 2013 (2012:
£nil).
Statement of directors’ shareholdings
The interests of the CEO and the non-executive directors
(including connected persons) in the Company’s ordinary
shares are shown below. No share options or other
share-based awards, with or without performance measures,
were awarded to the CEO or to any non-executive director.
46
Witan Investment Trust plc Annual Report 2013
There are no requirements or guidelines for the CEO or the
non-executive directors to own shares in the Company.
A L C Bell
H M Henderson
J E B Bevan
R W Boyle
R A Bruce (retired 30 April 2013)
M C Claydon
S E G A Neubert
R J Oldfield
A Watson
Shares held
as at
31 December
2013
Shares held
as at
31 December
2012
120,000
1,155,232(1)
110,000
1,155,232(1)
–
17,198
n/a
46,929
4,309
21,500
25,000
–
14,935
3,546
43,093
–
21,500
25,000
Notes:
(1)
H M Henderson is the legal and beneficial owner of 722,732 shares in the
Company and 432,500 shares in the Company are owned by connected
persons.
There have not been any changes in the directors’ interests
since the year end.
None of the directors had an interest in the secured bonds,
debenture stock or preference shares of the Company.
Total Shareholder Return performance graph
The line graph below sets out the Company’s five-year
total shareholder return performance relative to the FTSE
A ll-Share Index and the FTSE World (ex UK) Index (sterling
adjusted). This line graph assumes a notional investment
of £1 00 into the Indices on 31 December 2008 and the
reinvestment of all income, excluding dealing expenses.
Percentage change in remuneration of CEO
The table below shows how the percentage change in the
CEO’s salary, benefits and bonus between 2012 and 2013
compares with the percentage increase in each of those
components of pay for the Group’s employees taken as
a (cid:123)whole:
FTSE All-Share Total Return
Witan Total Return
FTSE World (ex UK) Total Return
Benchmark
Salary and fees
All taxable benefits
Annual bonuses (discretionary
and one-year performance)
Long- Term Bonus
Total
Percentage increase
in remuneration in
2013 compared with
remuneration in 2012
CEO
%
3
14
13
383
23
Employees
%
4
27
(8)
n/a
3
225
200
175
150
125
100
2008
2009
2010
2011
2012
2013
Source: Datastream
The Company is required to compare the Company’s share
price with a single broad equity market index. The Company
has compared the share price total return against (i) a UK
market index, namely the FTSE All-Share Index because the
Company’s shares are listed on the UK market and the UK
forms the largest constituent of the Company’s benchmark;
and also (ii) a global index, namely the FTSE World (ex UK)
Index because more than half of the Company’s investments
are held in overseas companies. The performance of the
Company’s benchmark is also shown.
CEO remuneration table
Annual
discretionary
and one-year
bonus
pay-out against
maximum
%
95.0
86.5
40.0
100.0
15.0
30.0
CEO single
figure of total
remuneration
£
486,802
400,535
314,160
409,495
111,318
253,273
Long-term
bonus
pay-out
against
maximum
%
64.2
13. 7
n/a
n/a
n/a
n/a
Year ended 31 December
2013 – Mr Bell
2012 – Mr Bell
2011 – Mr Bell
2010 – Mr Bell
2010 – Mr Clarke(1)
2009 – Mr Clarke(1)
Note
(1) Mr R E Clarke was the CEO until 8 February 2010, when Mr Bell was appointed.
Relative importance of spend on pay
Spend
Fees of non-executive directors
Remuneration paid to or
receivable by all employees of
the Group (including the CEO)
in respect of the year
D ividends paid to shareholders
in respect of the year ending
31 December 2013
Share buybacks
Total payments to shareholders
2013
£000
235
2012 Difference
£000
£000
(11)
246
1, 0 89(1)
647
44 2
27,243 25,079
4,437 10,777
31,680 35,856
2,164
(2)
(1) Includes an accrual for future payment of the CEO’s three year performance
bonus, subject to performance being sustained and to his continued
employment with the Company.
(2) Share buyback activity reflects changes in the discount, which narrowed during
the year (see further comments on page 5).
Statement of implementation of remuneration policy in
2014
The Company will not be formally implementing the
approved remuneration policy in the current financial year, as
the approved remuneration policy will not take effect until
1 January 2015, although details of the fee increases for 2014
are set out in the Chairman’s statement.
Consideration by the directors of matters relating to
directors’ remuneration
The Board as a whole sets the fees that are payable to the
non-executive directors and it has appointed the Committee
to consider matters relating thereto. The Committee
also considers the remuneration of the CEO and makes a
recommendation on this to the Board for its approval.
Annual Report 2013 Witan Investment Trust plc
47
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Directors’ remuneration report continued
Remuneration Policy
This is the first occasion that we have submitted this report
on our remuneration policy in accordance with the new
Regulations. There has not been any significant change in
policy from the previous year.
An ordinary resolution for the approval of this policy will be
put to members at the forthcoming Annual General Meeting
and, if the resolution is passed by the members, this policy
will take effect from 1 January 2015. All provisions of this
policy are expected to remain in effect until the Annual
General Meeting in 2017 when the Company is next required
to submit its remuneration policy to its members.
The terms of the CEO’s Long-Term Bonus was specifically
approved at the 2013 Annual General Meeting.
Non-executive directors
All the directors are non-executive, with the exception of the
CEO. New directors are appointed for an initial term ending
three years from the date of their first annual general meeting
after appointment and with the expectation that they will
serve two three-year terms. The continuation of directors’
appointments is contingent on satisfactory performance
evaluation and re-election at annual general meetings.
Non-executive directors’ appointments are reviewed formally
every three years by the Board as a whole. Each of the
non-executive directors has a letter of appointment which
sets out the terms on which they provide their services. A
non-executive director may resign by notice in writing to the
Board at any time; there are no set notice periods.
The Committee was not provided with advice or services,
during the financial year ending 31 December 2013, in
respect of the fees payable to the non-executive directors or
the remuneration payable to the CEO.
The Committee assesses the workload and responsibilities of
the non-executive directors and reviews, from time to time,
the fees paid to non-executive directors of other investment
trust companies.
Herbert Smith Freehills LLP provided legal advice to the
Company throughout the year, including in relation to the
operation of the Company’s incentive arrangements and on
the CEO’s service agreements. This advice was available to be
considered by the Committee.
The table below sets out the members of the Committee
who were present during any consideration of the CEO’s
remuneration, and shows the number of meetings attended
by each non-executive director:
Name
M C Claydon
H M Henderson
R J Oldfield
Number of meetings
attended
2/2
2/2
2/2
Statement of shareholder voting
At the Annual General Meeting held on 30 April 2013, an
ordinary resolution to approve the Directors’ Remuneration
Report for the year ended 31 December 2012 was passed on a
show of hands. The proxy votes were as follows:
Votes
for
Votes
against
26,102,706 373,253
98.3%
1.4%
Votes at
proxies’
discretion
78,499
0.3%
Total
votes cast
(excluding
votes
withheld)
Votes
withheld
360,870 26,554,458
–
100%
The Company is committed to on-going shareholder dialogue
and takes an active interest in voting outcomes. Where
there are substantial votes against resolutions in relation
to directors’ remuneration, the reasons for any such vote
will be sought and any actions in response will be detailed
in future Remuneration Reports. There were no substantial
shareholder votes against the resolution at the Annual
General Meeting in 2013.
48
Witan Investment Trust plc Annual Report 2013
Remuneration policy for non-executive directors
The following table provides a summary of the key elements of the remuneration of the non-executive directors:
Purpose
Operation
Fees
Fees payable to the directors should reflect the time
committed to the Company’s affairs and should be
sufficient to enable candidates of high calibre to be
recruited.
There are no performance-related elements and no
fees are subject to claw-back provisions.
Non-executive directors are to be remunerated
in the form of fees, payable monthly in arrears, to
the director personally or to a third party specified
by him. There are no long-term incentive schemes
or pension arrangements and the fees are not
specifically related to their performance, either
individually or collectively.
The Committee determines the level of fee at
its discretion. The fees are reviewed each year,
although such review will not necessarily result in
any increase in the fees. Proposed increases in fees
are determined in the light of increases in inflation
and in the Company’s share price, net asset value
and dividend payments.
The Chairman of the Board, the Chairmen of the
Board’s Committees and the Senior Independent
Director are paid higher fees than the other
non-executive directors in recognition of their
more(cid:123)onerous roles (see below).
The Chairman of the Board receives a fee of
£57,000 per annum. The Senior Independent
Director receives a fee of £4,000 in addition to the
annual base fee.
Each non-executive director’s annual base fee is
£30,000.
Additional fees are payable as follows:
> Chairman of Audit Committee £6,000;
>
Chairman of Remuneration and Nomination
Committee £4,000.
All of the above fees will take effect on 1 April
2014. The maximum amount of fees, in aggregate,
that may be paid to non-executive directors in any
financial year is £300,000 (although a resolution
has been put to the Annual General Meeting in April
2014 which, if passed, will increase the aggregate
maximum to £350,000).
Directors’ and officers’ liability insurance cover is held by the Company in respect of all the directors (including the CEO).
Annual Report 2013 Witan Investment Trust plc
49
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Directors’ remuneration report continued
Remuneration policy for the CEO (and any future executive director)
Currently the Company operates with one executive director, the CEO. This policy applies to the CEO, but would also be
applied to any other executive director appointed by the Company.
Purpose and link to
strategy
Operation and
claw-back
Maximum
opportunity
Performance measures
Not applicable.
Base salary
Base salary is set at
market competitive
levels in order to recruit
and retain an executive
director of a suitably
high calibre.
The level of pay reflects
a number of factors
including individual
experience, expertise
and pay appropriate to
the position.
Benefits in
kind
Offering market-
competitive level of
benefits-in-kind to
help recruit or retain an
executive director of a
suitably high calibre.
Pension
Offering market-
competitive levels
of guaranteed cash
earnings to help recruit
or retain an executive
director of a suitably
high calibre.
Base salary is reviewed
annually and fixed for
12 months.
The Committee has
agreed to increase the
CEO’s salary, with effect
from 1 January 2014, by
6.3% to £268,000 per
annum.
Year-on-year, salary
increases for any
executive director will not
exceed 10% per annum
other than in times
of abnormal inflation
or other exceptional
circumstances, in which
case the increase will not
exceed 20%.
An executive director
may be eligible to receive
a range of benefits
including some or all of:
The maximum benefit
that can be offered or
paid to an executive
director is:
Not applicable.
>
>
>
private medical
insurance for the
executive director
and their family;
death in service
insurance;
business-related
expenses.
Where benefits are
sourced through third
party providers, the
expense will reflect the
cost of the provision of
the benefits from time
to time but will be kept
under review by the
Committee.
The CEO currently
receives a cash payment,
equal to 10% (8.7% to
31(cid:123)December 2013) of
base salary, in lieu of
pension contributions.
>
>
private medical
insurance provided
on a family basis;
death in service
insurance of
4 times base
salary ;
>
business-related
expenses.
The maximum cash
payment in lieu of
pension contributions is
10% of base salary.
Not applicable.
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Witan Investment Trust plc Annual Report 2013
Purpose and link to
strategy
Operation and
claw-back
Maximum
opportunity
Performance measures
The maximum cash
bonus payable to any
executive director is 20%
of base salary.
Please see Note 1 on
page 52 for details of the
performance measures
subject to the CEO’s
discretionary bonus.
The maximum cash
bonus payable to any
executive director is 30%
of base salary.
Please see Note 1 on
page 52 for details of the
performance measures
subject to the CEO’s
one-year performance
bonus.
The maximum cash
bonus payable to any
executive director is 50%
of base salary.
Please see Note 1 on
page 52 for details of the
performance measures
subject to the CEO’s
Long-Term Bonus.
Discretionary
bonus
The purpose of the
bonus arrangements is
to incentivise the CEO to
maximise the Company’s
performance and its
return to shareholders.
One-year
performance
bonus
The purpose of the
bonus arrangements is
to incentivise the CEO to
maximise the Company’s
performance and its
return to shareholders
Long-Term
Bonus
The purpose of the
bonus arrangements is
to incentivise the CEO to
maximise the Company’s
performance and its
return to shareholders.
The CEO is eligible to
receive a discretionary
bonus of up to 20% of
basic annual salary. The
Committee will review
the CEO’s performance
against the performance
criteria to determine
the appropriate level of
bonus payable in respect
of the preceding year.
The Committee may
reduce any bonus
payment that would
otherwise be payable in
order to comply with the
FCA Remuneration Code.
The CEO is eligible to
receive a bonus of up
to 30% of base salary
by reference to the
performance of the
Company over the
previous financial year.
The Committee may
reduce any bonus
payment that would
otherwise be payable in
order to comply with the
FCA Remuneration Code.
The CEO is eligible to
receive a bonus of up
to 50% of base salary
by reference to the
performance of the
Company over the
previous three financial
years.
The Committee may
reduce any bonus
payment that would
otherwise be payable in
order to comply with the
FCA Remuneration Code.
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Annual Report 2013 Witan Investment Trust plc
51
Directors’ remuneration report continued
Notes:
Performance measures
1.
Mr Bell’s service agreement, as amended, provides that he is
eligible to receive a bonus of up to 100% of his basic salary.
The cash bonus arrangement consists of three separate
elements as set out below:
(i) Discretionary bonus
Each year Mr Bell is eligible to receive, at the absolute
discretion of the Committee, a cash bonus of up to 20% of
his basic annual salary. The Committee has determined a
number of criteria that it may take into account, including
the management and administration of the Company and
reporting to the Board, shareholders and other stakeholders,
on which to judge his performance.
One-year performance bonus
(ii)
Each year Mr Bell is eligible to receive an additional cash
bonus of up to 30% of his basic annual salary. The bonus
will be determined by the Company’s net asset value per
share total return performance over the previous financial
year (debt at par, excluding the effect of share buy-backs)
relative to its benchmark. Outperformance of the benchmark
by 2.5% or more will generate a bonus of the full 30%. No
bonus is payable if performance is in line with or below that
of the benchmark. Relative performance of between nil and
2.5% will generate a pro rata bonus. (The benchmark is a
composite of 40% FTSE All-Share Index, 20% FTSE All-World
North America Index, 20% FTSE All-World Europe (ex UK)
Index and 20% FTSE All-World Asia Pacific Index, all on a
total return basis.)
(iii) Three -year performance bonus (the “Long-Term
Bonus”)
Each year Mr Bell is eligible to receive a Long-Term Bonus
of up to 50% of his basic annual salary by reference to the
Company’s performance over the previous three financial
years. The Long-Term Bonus will be determined by reference
to the Company’s net asset value per share total return (debt
at par, excluding the effect of share buy-backs) relative to
its benchmark, as set out in the Company’s audited annual
accounts for the applicable financial years. Outperformance
of the benchmark by an average of 3% per annum or more
will generate a bonus of the full 50%. No bonus is payable if
performance is in line with or below that of the benchmark.
Relative performance of between nil and 3% per annum will
generate a pro rata bonus.
The Long-Term Bonus will be halved if, despite
outperformance of the benchmark over the relevant three
financial years, the Company’s net asset value total return
per share is negative over that period. The Long-Term Bonus
was introduced in 2011 and paid, for the first time, in May
2013 following shareholder approval of the terms of the
Long-Term Bonus at the Annual General Meeting, in respect
of the three financial years ended 31 December 2012.
Legacy plans
2.
The Committee reserves the right to make remuneration
payments and payments for loss of office that are not in line
with the policy set out above (i) where the terms of such a
payment were agreed before the policy came into effect or
at a time when the relevant individual was not a director of
the Company and (ii) in the opinion of the Committee, such
a payment is not in consideration of the individual becoming
a director of the Company. For these purposes, payments
include the Committee satisfying awards of variable
remuneration.
Differences in the Company’s remuneration policy
3.
for directors as compared to employees
The only respect in which the remuneration policy for the
executive director differs from that for employees is that the
executive director’s remuneration is more heavily weighted
towards variable pay so that a greater proportion of his pay is
related to the Company’s performance and the value created
for shareholders.
Principles and approach to recruitment and internal
promotion of directors
Non-executive directors
1)
Remuneration of non-executive directors should
reflect the specific circumstances of the Company and
the duties and responsibilities of the non-executive
directors. It should provide appropriate compensation
for the experience and time committed to the proper
oversight of the affairs of the Company.
2)
3)
4)
Non-executive directors are not eligible to receive
bonuses, pension benefits, share options or other
benefits.
The total remuneration of the non-executive directors
is determined by the provisions of the Company’s
Articles of Association and by shareholder resolution.
The basic non-executive director’s fee will be paid
to each non-executive director with a higher fee per
annum for the Chairman of the Company. An additional
fee per annum will be paid to the Chairman of each
of the Audit and Remuneration and Nomination
Committees and to the Chairman of any other
Committees that the Company forms; and to the Senior
Independent Director.
52
Witan Investment Trust plc Annual Report 2013
Executive directors
1)
When hiring a new executive director, or promoting to
the Board from within the Group, the Committee will
offer a package that is sufficient to retain and motivate
and, if relevant, attract the right talent whilst paying no
more than is necessary.
2)
3)
4)
Ordinarily, remuneration for a new executive director
will be in line with the policy set out in the table.
The maximum level of variable pay that may be
awarded to a new director on recruitment or on
promotion to the Board shall be limited to 100% of base
salary (calculated at the date of grant, excluding any
buy-out awards – see below).
The Committee may, where it considers it to be in the
best interests of the Company and shareholders, offer
an additional cash payment to an executive director in
order to replace awards which would be foregone by
the individual on leaving his/her previous employment
(i.e. buy-out arrangements) which will be intended to
mirror forfeited awards as far as possible by reflecting
the value, nature, time horizons and performance
measures.
Letters of appointment/Service contract
Non-executive directors’ letters of appointment
The non-executive directors all have letters of appointment,
which may be inspected at the Company’s registered office.
None of the non-executive directors is subject to any notice
period. All continuing non-executive directors are required to
stand for re-election by the shareholders at least every three
years. The initial period of appointment is two terms of three
years. All reasonably incurred expenses will be met.
Mr Henderson, Mr Oldfield and Mr Watson are proposed for
re-election at the Annual General Meeting in April 2014.
CEO’s service contract
The CEO’s service contract with the Company may be
inspected at the Company’s registered office. The CEO’s
service agreement dated 3 February 2010, as amended,
provide d in 2013 for a salary of £252,000 (2012: £245,440)
per annum. The salary has been increased to £268,000 with
effect from 1 January 2014. Mr Bell’s appointment may be
terminated by either party on the giving or receiving of not
less than nine months’ written notice.
Please see “Policy on payment for loss of office” (below) for
further details of the CEO’s service contract.
Illustration of application of remuneration policy
The chart below shows an indication of the values of the
CEO’s remuneration that would be received by the CEO in
accordance with the director’s remuneration policy for the
first full year in which the policy applies at three direct levels
of performance:
>
>
>
s
0
0
0
£
’
600
550
500
450
400
350
300
250
200
150
100
50
0
minimum performance, i.e. fixed salary, taxable
benefits and payment in lieu of pension contributions,
with no bonus pay-out;
on-target performance, fixed pay plus short and
long-term bonus payments assuming a 50% pay out
of each of the discretionary, one year performance and
Long-Term bonuses; and
maximum performance, fixed pay plus short and
long-term bonus payments assuming 100% pay-out
of each of the discretionary, one year performance and
Long-Term bonuses.
Fixed pay
Discretionary bonus
One year performance bonus
Long-Term bonus
£412,150
15.3%
9.2%
6.1%
£286,150
£538,150
23.4%
14.0%
9.4%
100%
69.4%
53.2%
Minimum performance
On target performance
Maximum performance
Policy on payment for loss of office
Non-executive directors
None of the non-executive directors is subject to any notice
period. It is the Company’s policy not to enter into any
arrangement with any of the non-executive directors to
entitle any of the non-executive directors to compensation
for loss of office.
CEO (and other executive directors)
The Company’s policy is to agree a notice period for the CEO
which would not exceed nine months.
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Annual Report 2013 Witan Investment Trust plc
53
Directors’ remuneration report continued
the applicable bonus shall become payable to the extent
determined at the time of the change of control on, or as
soon as practicable after, the CEO’s cessation of employment.
Statement of consideration of conditions elsewhere in the
Company
The Committee considers the employment conditions,
including salary increases, of employees other than the CEO
when setting the CEO’s remuneration.
The Company did not consult with employees when drawing
up the remuneration policy.
Where possible, the Committee benchmarks the
remuneration of the employees and CEO by obtaining details
of remuneration paid to employees in comparable roles in
other companies.
Statement of consideration of shareholder views
The Company places great importance on communication
with its shareholders. The Company had frequent meetings
with institutional shareholders and City analysts throughout
the year to 31 December 2013 and met with shareholders in
general at the Annual General Meeting held in 2013 and can
confirm that it is not aware of negative views being expressed
by shareholders in relation to its policy on Directors’
Remuneration.
Approval
This report was approved by the Board of directors on
10(cid:123)March 2014 and is signed on its behalf by:
Catherine Claydon
Chairman of the Remuneration and Nomination Committee
1 1 March 2014
The Company may, in its absolute discretion and without
any obligation to do so, terminate the CEO’s employment
immediately by giving him written notice together with a
payment of such sum as would have been payable by the
Company to the CEO as salary (excluding future bonus
accrual) in respect of his notice period. The Company may, at
its discretion, make the termination payment in instalments
over a period of no longer than six months from the
termination date and on terms that any payment should be
reduced to take account of mitigation by the CEO.
If a new executive director is recruited, the Company’s policy
regarding payments for loss of office will be the same as for
the CEO.
If the CEO ceases employment as a result of one of the
good leaver reasons (i.e. death, ill-health, injury, disability,
redundancy, retirement or due to any other circumstance
that the Committee at its discretion permits), any bonus
payment shall be pro-rated for time and performance. The
Committee may, however, taking into account such factors
as it considers appropriate, increase the proportion of the
relevant bonus that becomes payable. If the CEO ceases
employment other than as a “good leaver”, or if the CEO gives
or receives notice prior to the date that the relevant bonus
would otherwise have been paid, the CEO will forfeit any right
to receive the relevant bonus for nil consideration unless the
Committee, in its absolute discretion, determines otherwise.
A change of control of the Company shall not affect the
amount of any bonus or the date on which it becomes
payable unless the Committee determines otherwise, in
which case the Committee shall determine whether the
pro-rated performance targets attached to the applicable
bonuses have been satisfied at that time.
If the Committee determines that the pro-rated performance
targets have not been satisfied on the change of control,
the applicable bonus shall immediately lapse unless the
Committee determines otherwise. To the extent that the
Committee determines that the pro-rated performance
targets have been satisfied on the change of control, if the
CEO ceases to be employed by the Company prior to the date
that the applicable bonus would otherwise have been paid to
the CEO other than as a result of:
>
>
a reason which would have justified his summary
dismissal;
his cessation of employment without the giving or
receiving of notice; or
>
his resignation
54
Witan Investment Trust plc Annual Report 2013
Statement of Directors’ responsibilities
in respect of the annual report, the directors’ remuneration report
and the (cid:428) nancial statements
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulations.
They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the Group financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union (‘EU’) and Article 4 of the EU IAS Regulation and
have also chosen to prepare the parent company financial
statements under IFRSs as adopted by the EU. Under
company law the directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Company and of the
profit or loss of the Company for that period. In preparing
these financial statements, International Accounting
Standard 1 requires that directors:
>
>
properly select and apply accounting policies;
present information, including accounting policies, in
a manner that provides relevant, reliable, comparable
and understandable information;
provide additional disclosures when compliance with
the specific requirements in IFRSs is insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the
entity’s financial position and financial performance;
and
The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
>
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 1 8 to 20) 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.
>
>
make an assessment of the Company’s ability to
continue as a going concern.
By order of the Board
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006.
H M Henderson
Chairman
1 1 March 2014
A L C Bell
Chief Executive O(cid:431) cer
1 1 March 2014
Note to those who access this document by electronic means
The Annual Report for the year ended 31 December 2013 has been approved by the Board of Witan Investment Trust plc.
Copies of the Annual Report and the Half Year Report are circulated to shareholders, to those who hold shares through
Witan Investment Services’ savings schemes and, where possible, to investors through other providers’ products and
nominee companies (or written notification is sent when they are published on-line). It is also made available in electronic
format for the convenience of readers. Printed copies are available from the Company’s Registered Office in London.
Annual Report 2013 Witan Investment Trust plc
55
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Independent auditor’s report
to the members of Witan Investment Trust plc
Opinion on financial statements of Witan Investment
Trust plc
In our opinion:
>
the (cid:428) nancial statements give a true and fair view of
the(cid:123)state of the Group’s and of the parent Company’s
a(cid:426) airs as at 31 December 2013 and of the Group’s
pro(cid:428) t(cid:123)for the year then ended;
>
>
>
the Group (cid:428) nancial statements have been properly
prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union;
the parent Company (cid:428) nancial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance
with the provisions of the Companies Act 2006; and
the (cid:428) nancial statements have been prepared
in accordance with the requirements of the
Companies Act 2006 and, as regards the Group
(cid:428) nancial statements, Article 4 of the IAS Regulation.
The financial statements comprise the Consolidated
Statement of Comprehensive Income, Consolidated and
Individual Company Statements of Changes in Equity,
Consolidated and Individual Company Balance Sheets,
Consolidated and Individual Company Cash Flow Statements
and the related notes 1 to 25. The financial reporting
framework that has been applied in their preparation is
applicable law and IFRSs as adopted by the European Union
and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies
Act 2006.
Going concern
As required by the Listing Rules we have reviewed the
directors’ statement contained within the Strategic Report
that the Group is a going concern. We confirm that:
>
we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the
(cid:428) nancial statements is appropriate; and
>
we have not identi(cid:428) ed any material uncertainties that
may cast signi(cid:428) cant doubt on the Group’s ability to
continue as a going concern.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s
ability to continue as a going concern.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below
are those that had the greatest effect on our audit strategy,
the allocation of resources in the audit and directing the
efforts of the engagement team:
56
Witan Investment Trust plc Annual Report 2013
Risk
How the scope of our audit responded to the risk
To test the valuation of investments as at 31 December 2013,
we performed the following:
>
assessed the design and implementation of controls
over the pricing of investments to identify whether
there were any weaknesses in internal control over
valuing investments;
>
>
for all quoted investments, valued at £1,43 7 million, we
agreed the bid prices to an independent pricing source;
and
for all derivative instruments, valued at £1.7 million, we
involved a (cid:428) nancial instrument specialist to value such
instruments, including assessing the discount factors
and other indices used in the valuations.
To test the liquidity of investments as at 31 December 2013,
we performed the following:
>
veri(cid:428) ed the trading activity and volume, on a sample
basis, of investments held around the year end; and
>
identi(cid:428) ed investments which are not frequently traded
and considered indicators of impairment by monitoring
the price of any post year-end sales.
We confirmed the ownership of all investments at year end
by obtaining independent third party confirmations directly
from the custodians and agreeing them to the listing of
investments held at year end.
We reviewed the latest available report on internal controls
of the Group’s outsourced custodian and assessed the
adequacy of the custodian’s controls over the safeguarding
and monitoring of the Group’s investments.
Valuation and liquidity of investments of the Group
The investment balance is the most quantitatively
significant(cid:123)balance on the balance sheet and is the main
driver of the group’s performance, standing at £1.4 billion as
at 31(cid:123)December 2013. There is a risk that if the investments
are(cid:123)not actively traded, the prices are not reflective of their
fair value.
Ownership of investments
The investment balance is the most quantitatively
significant(cid:123)balance on the balance sheet, standing at
£1.4 billion as(cid:123)at 31 December 2013. Therefore, the risk
that the Group does not hold the rights and obligations to
these investments could materially impact the financial
statements.
The Audit Committee’s consideration of these risks is set out
on page 42.
Our audit procedures relating to these matters were designed
in the context of our audit of the financial statements as a
whole, and not to express an opinion on individual accounts
or disclosures. Our opinion on the financial statements is not
modified with respect to any of the risks described above,
and we do not express an opinion on these individual matters.
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Annual Report 2013 Witan Investment Trust plc
57
Independent auditor’s report continued
Our application of materiality
We define materiality as the magnitude of misstatement
in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person
would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the
results of our work.
We determined materiality for the Group to be £41million,
which has been determined using 3% of Shareholders’ Funds.
We agreed with the Audit Committee that we would report
to the Committee all audit differences in excess of £10,000,
as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to
the Audit Committee on disclosure matters that we identified
when assessing the overall presentation of the(cid:123)financial
statements .
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the
Group and its environment, including group-wide controls,
and assessing the risks of material misstatement. Audit
work to respond to the risks of material misstatement for
all entities in the Group was performed directly by the audit
engagement team.
As the accounting is performed by service organisations,
we(cid:123)obtained an understanding of how the Group uses service
organisations in its operations and evaluated the design
and implementation of relevant controls at the Group that
relate to the services provided by service organisations.
We(cid:123)reviewed the latest reports on internal controls from the
service organisations and contacted them directly to obtain
specific information we needed to conduct our audit .
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion:
>
the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with
the Companies Act 2006; and
>
the information given in the Strategic Report and the
Directors’ Report for the (cid:428) nancial year for which the
(cid:428) nancial statements are prepared is consistent with
the(cid:123)(cid:428) nancial statements.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report
to(cid:123)you if, in our opinion:
>
we have not received all the information and
explanations we require for our audit; or
>
>
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to
report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the
Directors’ Remuneration Report to be audited is not in
agreement with the accounting records and returns. We have
nothing to report arising from these matters.
Corporate Governance Statement
Under the Listing Rules we are also required to review the
part of the Corporate Governance Statement relating to
the company’s compliance with nine provisions of the UK
Corporate Governance Code. We have nothing to report
arising from our review.
58
Witan Investment Trust plc Annual Report 2013
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland),
we are required to report to you if, in our opinion, information
in the annual report is:
>
materially inconsistent with the information in the
audited financial statements; or
>
>
apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired
in the course of performing our audit; or
o therwise misleading.
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge
acquired during the audit and the directors’ statement
that they consider the annual report is fair, balanced and
understandable and whether the annual report appropriately
discloses those matters that we communicated to the
Audit Committee which we consider should have been
disclosed. We confirm that we have not identified any such
inconsistencies or misleading statements.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors.
We also comply with International Standard on Quality
Control 1 (UK and Ireland). Our audit methodology and
tools aim to ensure that our quality control procedures are
effective, understood and applied. Our quality controls and
systems include our dedicated professional standards review
team, and independent partner reviews.
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or
for(cid:123)the opinions we have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the Group’s and the
parent Company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the directors;
and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements and
to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Stuart McLaren (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
1 1 March 2014
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Annual Report 2013 Witan Investment Trust plc
59
Consolidated statement of comprehensive income
for the year ended 31 December 2013
Investment income
Other income
Gains on investments held at fair value
through profit or loss
Total income
Expenses
Management fees
Other expenses
Notes
2
3
10
4
5
Year ended 31 December 2013
Year ended 31 December 2012
Revenue
return
£’000
37,943
1,449
Capital
return
£’000
–
–
Total
£’000
Revenue
return
£’000
Capital
return
£’000
37,943
35,583
1,449
1,467
–
–
Total
£’000
35,583
1,467
–
289,871
289,871
–
130,213
130,213
39,392
289,871
329,263
37,050
130,213
167,263
(1,146)
(8,925)
(10,071)
(845)
(5,465)
(6,310)
(5,216)
(101)
(5,317)
(4,764)
(101)
(4,865)
Pro(cid:428) t before (cid:428) nance costs and taxation
33,030
280,845
313,875
31,441
124,647
156,088
Finance costs
Pro(cid:428) t before taxation
6
(2,144)
(6,185)
(8,329)
(2,115)
(6,092)
(8,207)
30,886
274,660
305,546
29,326
118,555
147,881
Taxation
7
(1,623)
–
(1,623)
(1,603)
–
(1,603)
Pro(cid:428) t attributable to equity holders
of the parent company
29,263
274,660
303,923
27,723
118,555
146,278
Earnings per ordinary share
9
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 pro(cid:428) t, 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 pro(cid:428) t 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.
The notes on pages 64 to 85 form part of these (cid:428) nancial statements.
60
Witan Investment Trust plc Annual Report 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
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
capital
reserves
£’000
Notes
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2012
47,520
16,237
46,306
938,708
57,076 1,105,847
Total comprehensive income:
Pro(cid:428) t for the year
Transactions with owners, recorded directly
to equity: Ordinary dividends paid
8
–
–
Buy-backs of ordinary shares
15,16
(192)
–
–
–
–
–
274,660
29,263
303,923
–
(32,389)
(32,389)
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
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
capital
reserves
£’000
Notes
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2012
47,520
16,237
46,306
938,734
57,050 1,105,847
Total comprehensive income:
Pro(cid:428) t for the year
Transactions with owners, recorded directly
to equity: Ordinary dividends paid
–
–
8
Buy-backs of ordinary shares
15,16
(192)
–
–
–
–
–
274,773
29,150
303,92 3
–
(32,389)
(32,389)
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
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
capital
reserves
£’000
Notes
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2011
48,092
16,237
45,734
830,930
53,356
994,349
Total comprehensive income:
Pro(cid:428) t for the year
Transactions with owners, recorded directly
to equity: Ordinary dividends paid
Buy-backs of ordinary shares
–
–
(572)
8
15
–
–
–
–
–
118,555
27,723
146,278
–
(24,003)
(24,003)
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
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
capital
reserves
£’000
Notes
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2011
48,092
16,237
45,734
830,893
53,393
994,349
Total comprehensive income:
Pro(cid:428) t for the year
Transactions with owners, recorded directly
to equity: Ordinary dividends paid
Buy-backs of ordinary shares
–
–
(572)
8
15
–
–
–
–
–
118,618
27,660
146,278
–
(24,003)
(24,003)
572
(10,777)
–
(10,777)
Total equity at 31 December 2012
47,520
16,237
46,306
938,734
57,050 1,105,847
The notes on pages 64 to 85 form part of these (cid:428) nancial statements.
Annual Report 2013 Witan Investment Trust plc
61
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Consolidated and individual
company balance sheets
for the year ended 31 December 2013
Non current assets
Investments held at fair value through profit or loss
Current assets
Other receivables
Cash and cash equivalents
Total assets
Current liabilities
Other payables
Bank loan
Group
31 December
2013
£’000
Company
31 December
2013
£’000
Group
31 December
2012
£’000
Company
31 December
2012
£’000
Notes
10 1,436,962 1,438,001 1,202,076 1,203,002
11
6,695
57,532
64,227
6,548
56,372
62,920
4,549
36,420
40,969
4,461
35,309
39,770
1,501,189 1,500,921 1,243,045 1,242,772
12
(7,873)
(10,000)
(7,605)
(10,000)
(5,882)
(21,000)
(5,609)
(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:
8½ per cent. Debenture Stock 2016
6.125 per cent. Secured Bonds due 2025
3.4 per cent. cumulative preference shares of £1
2.7 per cent. cumulative preference shares of £1
Net assets
Equity attributable to equity holders
Ordinary share capital
Share premium account
Capital redemption reserve
Retained earnings:
Other capital reserves
Revenue reserve
Total equity
13
13
13, 17
13, 17
(44,584)
(63,233)
(2,055)
(500)
(44,584)
(63,233)
(2,055)
(500)
(44,587)
(63,174)
(2,055)
(500)
(44,587)
(63,174)
(2,055)
(500)
(110, 372)
(110, 372)
(110,316)
(110,316)
1,372,944 1,372,944 1,105,847 1,105,847
15
16
16
47,328
16,237
46,498
47,328
16,237
46,498
47,520
16,237
46,306
47,520
16,237
46,306
16 1,208,931 1,209,070
53,811
16
53,950
938,708
57,076
938,734
57,050
1,372,944 1,372,944 1,105,847 1,105,847
Net asset value per ordinary share
18
725.23p
725.23p
581.8p
581.8p
The financial statements of Witan Investment Trust plc (registered number 101625) were approved by the directors and
authorised for issue on 1 1 March 2014 and were signed on their behalf by
H M Henderson
A L C Bell
The notes on pages 64 to 85 form part of these (cid:428) nancial statements.
62
Witan Investment Trust plc Annual Report 2013
Consolidated and individual
company cash (cid:430) ow statements
for the year ended 31 December 2013
Operating activities
Profit before taxation
Interest paid
Gains on investments held at fair value through profit or loss
Net sales of investments held at fair value through profit or loss
Net gain from futures contracts
Scrip dividends included in investment income
(Increase)/decrease in other receivables
Increase in other payables
Net cash inflow from operating activities before
interest and taxation
Interest paid
Tax on overseas income
Net cash inflow from operating activities
Financing activities
Equity dividends paid
Buy-backs of ordinary shares
(Repayment)/drawdown of loans
Net cash outflow from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at the start of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
Group
2013
£’000
Company
2013
£’000
Group
2012
£’000
Company
2012
£’000
Notes
6
305,546
8,329
10 (289,871)
50,630
19
4,465
10
(1,256)
2
(6)
2,752
305,546
8,329
(289,98 4)
50,630
4,465
(1,256)
53
2,757
147,881
8,207
(130,213)
10,913
2,458
(1,136)
467
605
147,881
8,207
(130,276)
10,913
2,458
(1,136)
468
452
80,589
(8,285)
(1,624)
80, 540
(8,285)
(1,624)
39,182
(8,161)
(1,651)
70,680
70,631
29,370
38,967
(8,161)
(1,651)
29,155
8
(32,389)
(4,617)
(11,000)
(32,389)
(4,617)
(11,000)
(24,003)
(10,899)
6,000
(24,003)
(10,899)
6,000
(48,006)
(48,006)
(28,902)
(28,902)
22,674
36,420
(1,562)
22,625
35,309
(1,562)
468
37,150
(1,198)
253
36,254
(1,198)
57,532
56,372
36,420
35,309
The notes on pages 64 to 85 form part of these (cid:428) nancial statements.
Annual Report 2013 Witan Investment Trust plc
63
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Notes to the (cid:428) nancial 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(cid:123)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 8 to 23. The financial
position of the Group as at 31 December 2013 is shown in the
balance sheet on page 62. The cash flows of the Group for
the year ended 31 December 2013, which are not untypical,
are set out on page 63. The Company had fixed debt and
preference share capital totalling £110,3 72,000, as set out
in note 13 on page 74; none of the borrowings is repayable
before 2016. In 201 3, the Group renewed a one -year secured
multi-currency borrowing facility for £50 million, of which
£ 10 million was drawn down at 31 December 201 3 (201 2:
£ 21 million). Note 14 on pages 74 to 82 sets out the Group’s
risk management policies and procedures, including those
covering currency risk, interest rate risk and liquidity risk.
As (cid:123)at 31 December 201 3 the Group’s total assets less
current (cid:123)liabilities exceeded its total non current liabilities by
a multiple of over ten. The assets of the Group consist mainly
of securities that are held in accordance with the Company’s
investment policy, as set out on the inside front cover.
Most (cid:123)of these securities are readily realisable even in volatile
markets. The directors, who have reviewed carefully the
Group’s budget and forecast for the coming year, consider
that the Group has adequate financial resources to enable
it to continue in operational existence for the foreseeable
future. Accordingly, the directors believe that it is appropriate
to continue to adopt the going concern basis in preparing the
Group’s accounts.
(c) Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and the entity
controlled by the Company (its subsidiary) made up to 31
December each year. Control is achieved where the Company
has the power to govern the financial and operating
policies of an investee entity so as to obtain benefits from
its activities. Where necessary, adjustments are made to
the financial statements of the subsidiary to bring the
accounting policies used by it into line with those used by the
Group. All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
(d) Presentation of the Statement of Comprehensive
Income
In order to better reflect the activities of an investment trust
company, and in accordance with guidance issued by the AIC,
supplementary information which analyses the Statement
of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the Statement
of Comprehensive Income. In accordance with the Company’s
Articles of Association, net capital returns may not be
distributed by way of dividend. Additionally, the net revenue
is the measure the directors believe appropriate in assessing
the Group’s compliance with certain requirements set out in
section 1158 of the Corporation Tax Act 2010.
(e) Income
Dividends receivable on equity shares are recognised as
revenue for the year on an ex-dividend basis. Where no ex-
dividend date is available, dividends receivable on or before
the year end are treated as revenue for the year. Provision
is made for any dividends not expected to be received. The
fixed returns on debt securities and non-equity shares are
recognised on a time apportionment basis so as to reflect
the effective yield on the debt securities and shares. Interest
receivable from cash and short-term deposits is accrued to
64
Witan Investment Trust plc Annual Report 2013
the end of the period. Stock lending fees and underwriting
commission are recognised as earned. Any special dividends
are looked at individually to ascertain the reason behind the
payment. This will determine whether they are treated as
income or capital. Where the Group has elected to receive
its dividends in the form of additional shares rather than
cash, the amount of cash dividend foregone is recognised as
income. Any excess in the value of shares received over the
amount of cash dividend foregone is recognised as a gain in
the Statement of Comprehensive Income.
(f) Expenses
All expenses and interest payable are accounted for on an
accruals basis. Expenses are presented as capital where a
connection with the maintenance or enhancement of the
value of the investments can be demonstrated. In this respect
the investment management fees and finance costs are
allocated 25% to revenue and 75% to capital to reflect the
Board’s expectations of long-term investment returns. Any
performance fees payable are allocated wholly to capital,
reflecting the fact that, although they are calculated on
a total return basis, they are expected to be attributable
largely, if not wholly, to capital performance.
(g) Taxation
The tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on the taxable profit for
the period. Taxable profit differs from net profit as reported
in the Statement of Comprehensive Income because it
excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that
are never taxable or deductible. The Group’s liability for
current tax is calculated using tax rates that were applicable
at the balance sheet date.
In line with the recommendations of the SORP, the allocation
method used to calculate tax relief on expenses presented
against capital returns in the supplementary information in
the Statement of Comprehensive Income is the ‘marginal
basis’. Under this basis, if taxable income is capable of being
offset entirely by expenses presented in the revenue return
column of the Statement of Comprehensive Income then no
tax relief is transferred to the capital return column.
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method.
Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary
differences can be utilised. Investment trusts which have
approval as such under section 1158 of the Corporation Tax
Act 2010 are not liable for taxation on capital gains.
The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the
asset is realised. Deferred tax is charged or credited in the
Statement of Comprehensive Income, except when it relates
to items charged or credited directly to equity, in which case
the deferred tax is also dealt with in equity.
(h) Investments held at fair value through profit or loss
When a purchase or sale is made under a contract, the terms
of which require delivery within the timeframe of the relevant
market, the investments concerned are recognised or
derecognised on the trade date.
All the Group’s investments are defined by IFRSs as
adopted by the European Union as investments held at
fair(cid:123)value through profit or loss. All gains and losses are
allocated to the capital return within the Statement of
Comprehensive Income as “Gains or losses on investments
held at fair value through profit or loss”. Also included within
this heading are transaction costs in relation to the purchase
or sale of investments.
All investments are designated upon initial recognition as
held at fair value through profit or loss, and are measured at
subsequent reporting dates at fair value, which is either
the bid price or the last traded price, depending on the
convention of the exchange on which the investment is
quoted. Investments in unit trusts or OEICs are valued at the
closing price, the bid price or the single price as appropriate,
released by the relevant investment manager.
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the
risks and rewards of ownership of the asset to another entity.
On derecognition of a financial asset, the difference between
the asset’s carrying amount and the sum of the consideration
received and receivable and the cumulative gain or loss that
had been accumulated in equity is recognised in profit or loss.
Fair values for unquoted investments, or for investments for
which there is only an inactive market, are established by
using various valuation techniques. These may include
recent arm’s length market transactions, the current
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Annual Report 2013 Witan Investment Trust plc
65
Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
1 Accounting policies continued
fair value of another instrument that is substantially
the same, discounted cash flow analysis, option pricing
models and reference to similar quoted companies. Where
there is a valuation technique commonly used by market
participants to price the instrument and that technique has
been demonstrated to provide reliable estimates of prices
obtained in actual market transactions, that technique is
utilised. Where no reliable fair value can be estimated for
such instruments, they are carried at cost, subject to any
provision for impairment.
The subsidiary company, Witan Investment Services Limited,
is held at fair value in the Company balance sheet. This is
considered to be the net asset value of the shareholder’s
funds, as shown in its balance sheet.
(i) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and that are
subject to an insignificant risk of changes in value.
(j) Dividends payable
Interim dividends are recognised in the period in which they
are paid. Final dividends are not recognised until approved by
the shareholders in general meeting.
(k) Non current liabilities
All debentures and secured bonds are initially recognised
at cost, being the fair value of the consideration received,
less issue costs where applicable. After initial recognition,
all interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest
method, with the interest expense recognised on an effective
yield basis. The effective interest method is a method of
calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future payments over the expected life of the
financial liabilities, or, where appropriate, a shorter period,
to the net carrying amount on initial recognition.
(l) Foreign currency translation
Transactions involving foreign currencies are converted
at the rate ruling at the date of the transaction.
(m) Adoption of new and revised accounting standards
(i) Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those
of the previous financial year.
(ii) Standards and interpretations affecting the reported
results or financial position
IFRS 13 Fair Value Measurement
The Group has applied IFRS 13 Fair Value Measurement. This
standard replaces the guidance on fair value measurement
in existing IFRS accounting literature with a single standard.
This standard defines fair value, sets out a framework for
measurin g fair value and requires disclosure about fair value
measurements.
(iii) Standards not affecting the reported results no r the
financial position
The following new and revised Standards and Interpretations
have been adopted in the current year. Their adoption has not
had any significant impact on the amounts reported in these
financial statements.
IFRS 1 0
IFRS 11
IFRS 12
IAS 19
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other
Entities
Employee Bene(cid:428) ts
IAS 27 (revised)
Separate Financial Statements
IAS 28 (revised)
IAS 1 (amended)
IFRS 7 (amended)
IFRS 1 (amended)
Annual
Improvements
to IFRSs
Investments in Associates and
Joint Ventures
Presentation of items of Other
Comprehensive Income
Disclosures – O(cid:426) setting Financial
Assets and Financial Liabilities
Government Loans
2009-2011 Cycle
At the date of authorisation of these financial statements,
the following Standards and interpretations which have not
been applied in these financial statements were in issue
but not yet effective (and in some cases had not yet been
adopted by the European Union):
Foreign currency monetary assets and liabilities that are
fair valued and denominated in foreign currencies are
re-translated into sterling at the rate ruling on the
balance sheet date. Foreign exchange differences
arising on translation are recognised in the Statement of
Comprehensive Income and allocated to the capital return.
IAS 32 (amended)
IFRS 9
O(cid:426) setting Financial Assets and
Financial Liabilities
Financial Instruments
IFRS 10, IFRS 12 and
IAS 27 (amended)
Investment Entities
66
Witan Investment Trust plc Annual Report 2013
IAS 36 (amended)
IAS 39 (amended)
Recoverable Amount Disclosures
for(cid:123)Non-Financial Assets
Novation of Derivatives and
Continuation of Hedge Accounting
The directors do not expect that the adoption of the
Standards listed above will have a material impact on the
financial statements of the Group in future periods, except as
follows:
>
IFRS 9 will impact both the measurement and
disclosures of Financial Instruments.
Beyond the information above, it is not practicable to provide
a reasonable estimate of the effect of these Standards until a
detailed review has been completed.
(n) Derivative financial instruments
The Group’s activities expose it primarily to the financial
risks of changes in market prices, foreign currency exchange
rates and interest rates. Derivative transactions which
the Company may enter into comprise forward exchange
contracts (the purpose of which is to manage currency risks
arising from the Company’s investing activities), quoted
options on shares held within the portfolio, or on indices
appropriate to sections of the portfolio (the purpose of which
is to provide protection against falls in the capital values of
the holdings) and futures contracts appropriate to sections
of the portfolio (to provide additional market exposure or to
provide protection against falls in the capital values of the
holdings). The Company may also write options on shares
represented in the portfolio where such options are priced
attractively relative to the investment managers’ longer-
term expectations for the relevant share prices. The Group
does not use derivative financial instruments for speculative
purposes. Hedge accounting is not used.
The use of financial derivatives is governed by the Group’s
policies as approved by the Board, which has set written
principles for the use of financial derivatives.
Changes in the fair value of derivative financial instruments
are recognised in the Statement of Comprehensive Income
as they arise. If capital in nature, the associated change
in value is presented as a capital item in the Statement of
Comprehensive Income.
2 Investment income
Franked:
UK dividends from listed investments
UK special dividends from listed investments
UK dividends from unquoted investments
Unfranked:
Overseas dividends from listed investments
Overseas special dividends from listed investments
Property income dividends
Scrip dividends from listed investments
Fixed interest and convertible bonds
Total investment income
Analysis of investment income by geographical segment:
United Kingdom
North America
Continental Europe
Japan
Asia Pacific (ex Japan)
South America
Other
Total investment income
2013
£’000
2012
£’000
15,529
1,392
71
16,992
18,622
372
5
1,256
696
20,951
15,868
209
56
16,133
16,322
843
5
1,136
1,144
19,450
37,943
35,583
2013
£’000
2012
£’000
17,815
4,506
8,214
922
4,568
445
1,473
17,428
3,429
9,268
369
3,302
444
1,343
37,943
35,583
Annual Report 2013 Witan Investment Trust plc
67
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Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
3 Other income
Deposit interest
Stock lending income
Underwriting commission
Income from the subsidiary company’s third party business
2013
£’000
103
147
13
1,186
1,449
2012
£’000
29
269
15
1,154
1,467
At 31 December 2013 the total value of securities on loan by the Company for stock lending purposes was £36,094,000
(2012: £51,305,000). The maximum aggregate value of securities on loan at any time during the year ended 31 December
2013 was £69,633,000 (2012: £67,693,000). Collateral, revalued on a daily basis at a level equivalent to at least 105% of the
market value of the securities lent, was provided against all loans. Collateral i n respect of UK securities is usually in the form
of Crest DBVs (Delivery by Values); the content of Crest DBVs is subject to a concentration limit of 10%.
4 Management fees
Management fees
Performance fees
Year ended 31 December 2013
Year ended 31 December 2012
Revenue
£’000
1,146
–
1,146
Capital
£’000
3,438
5,487
8,925
Total
£’000
4,584
5,487
10,071
Revenue
£’000
845
–
845
Capital
£’000
2,534
2,931
5,465
Total
£’000
3,379
2,931
6,310
A summary of the terms of the management agreements is given on pages 15 to 16 in the Strategic Report.
5 Other expenses
Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
Fees payable to the Company’s auditor and its associates for the audit of the Company’s annual
accounts
Fees payable to the Company’s auditor and its associates for other services to the Group:
– the audit of the Company’s subsidiary
Total audit fees
Tax services (advice, preparation and submission within local jurisdictions of withholding tax claims)*
Other services
Total non-audit fees
Total fees paid
*The fees for this work were specifically approved by the Audit Committee (see page 43).
2013
Revenue
£’000
2012
Revenue
£’000
48
5
53
15
2
17
70
48
5
53
65
4
69
122
68
Witan Investment Trust plc Annual Report 2013
5 Other expenses continued
Auditor’s remuneration (see page 68)
Tax advisory services
Directors’ fees (see the Directors’ Remuneration Report on pages 44 to 54)
Employers’ national insurance contributions on the directors’ fees
Employee costs (including executive director’s remuneration):
– salaries and bonuses
– employers’ national insurance contributions
– pension contributions (or payments in lieu thereof)
Advisory, consultancy and legal fees
Investment accounting fees
Company secretarial fees
Insurances
Occupancy costs
Bank charges and overseas safe custody fees
Marketing expenses*
Savings scheme expenses (Witan Wisdom and Jump Savings)
Other expenses
Irrecoverable VAT
2013
Revenue
£’000
70
9
235
30
1,0 89
15 0
58
208
259
120
58
115
35 8
950
564
7 45
198
2012
Revenue
£’000
122
12
246
32
647
88
56
199
229
110
60
114
264
1,099
606
673
207
5, 216†
4,764†
* Includes £50,000 sponsorship paid to the Royal Horticultural Society (2012: £50,000).
† The total includes costs of £1,276,000 (2012: £1,294,000) in respect of the subsidiary company’s third party business which are offset by the subsidiary company’s
income from that business. The analysis relates to the revenue return column only.
Expenses included in the capital return column for 2013 were £101,000 (2012: £101,000). These related to investment advisory
costs.
The average number of employees during the year was 6 (2012: 6).
6 Finance costs
Interest payable on overdrafts and loans repayable
within one year
Interest payable on the secured bonds and
debenture stock repayable between 1 and 5 years
Interest payable on the secured bonds and
debenture stock repayable in more than 5 years
Preference share dividends
Year ended 31 December 2013
Year ended 31 December 2012
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
115
348
463
85
255
340
947
2,840
3,787
949
2,844
3,793
999
83
2,144
2,997
–
6,185
3,996
83
8,329
998
83
2,115
2,993
–
6,092
3,991
83
8,207
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Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
7 Taxation
(a) Analysis of the charge for the year
UK corporation tax at 23.25% (2012: 24.5%)
Foreign tax suffered
Foreign tax recoverable
Total current tax for the year (see note 7(b))
Year ended 31 December 2013
Year ended 31 December 2012
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
–
–
1,88 3
(260)
1,62 3
–
–
–
–
–
–
–
1,88 3
(260)
1,62 3
–
–
2,042
(439)
1,603
–
–
–
–
–
–
–
2,042
(439)
1,603
(b) Factors affecting the current tax charge for the year
The tax assessed for the year is lower than that resulting from applying the effective standard rate of corporation tax in the
UK for a large company of 23.25% (2012: 24.5%). The difference is explained below.
Net profit on ordinary activities before taxation
Corporation tax at 23.25% (2012: 24.5%)
Effects of:
Non-taxable UK dividends
Non-taxable overseas dividends
Withholding tax written off
Non taxable gains on investments held at fair value
through profit or loss
Excess management expenses not utilised in year
Unused loan relationship deficits for the year
Preference dividends not deductible in determining
taxable profit
Capitalised expenses
Disallowable expenses
Current tax charge
Year ended 31 December 2013
Year ended 31 December 2012
Revenue
£’000
30,886
7,181
Capital
£’000
274,660
63,858
Total
£’000
305,546
71,039
Revenue
£’000
29,326
7,185
Capital
£’000
118,555
29,046
Total
£’000
147,881
36,231
(3,951)
(4,608)
1, 623
–
3, 183
1, 706
19
(3,537)
7
1,623
–
–
–
(3,951)
(4,608)
1, 623
(67,395)
–
–
(67,395)
3, 183
1, 706
–
3,537
–
19
–
7
–
1,623
(3,953)
(4,407)
1,603
–
2,313
1,677
21
(2,856)
20
1,603
–
–
–
(3,953)
(4,407)
1,603
(31,902)
–
–
(31,902)
2,313
1,677
–
2,856
–
21
–
20
–
1,603
(c) Deferred tax
Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to obtain
approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the
revaluation or disposal of investments.
No provision has been made for deferred tax on income outstanding at the end of the year as this will be covered by
unrelieved business charges and eligible unrelieved foreign tax (2012: £nil).
(d) Factors that may affect future tax charges
The Company has not recognised a deferred tax asset of £ 2 8,338,000 (2012: £27,727,000) arising as a result of having
unrelieved loan relationship deficits and eligible unrelieved foreign tax.
It is unlikely that the Company will obtain relief for these in the future so no deferred tax asset has been recognised.
70
Witan Investment Trust plc Annual Report 2013
8 Dividends
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
First interim dividend for the year ended 31 December 2013 of 3.3p (2012: 6.0p)
per ordinary share*
Second interim dividend for the year ended 31 December 2013 of 3.3p (2012: nil) per ordinary share
Third interim dividend for the year ended 31 December 2013 of 3.3p (2012: nil) per ordinary share
2013
£’000
2012
£’000
13,665
12,589
6,229
6,248
6,247
11,414
–
–
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 2010 are considered.
Revenue profits available for distribution
First interim dividend for the year ended 31 December 2013 of 3.3p (2012: 6.0p) per ordinary share
Second interim dividend for the year ended 31 December 2013 of 3.3p (2012: nil) per ordinary share
Third interim dividend for the year ended 31 December 2013 of 3.3p (2012: nil) per ordinary share
Fourth interim dividend for the year ended 31 December 2013 of 4.5p (2012: second interim
dividend 7.2p) per ordinary share
Revenue retained for the year
2013
£’000
29,263
(6,229)
(6,248)
(6,247)
2012
£’000
27,723
(11,414)
–
–
(8,519)
(13,665)
2,020
2,644
9 Earnings per ordinary share
The earnings per ordinary share figure is based on the net profit for the year of £303,92 3,000 (2012: £146,278,000) and
on(cid:123)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.
Net revenue profit
Net capital profit
Net total profit
2013
£’000
29, 263
274, 660
303,92 3
2012
£’000
27,723
118,555
146,278
Weighted average number of ordinary shares in issue during the year
189,472,414 191,174,313
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Annual Report 2013 Witan Investment Trust plc
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Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
9 Earnings per ordinary share continued
Revenue earnings per ordinary share
Capital earnings per ordinary share
Total earnings per ordinary share
10 Investments held at fair value through profit or loss
(i) Group changes in investments held at fair value through profit or loss
2013
Pence
15.44
144.96
160.40
2012
Pence
14.50
62.02
76.52
Listed in the United Kingdom
Listed abroad
Unquoted at directors’ valuation (see note 10(vi))
Investment in subsidiary undertaking
(ii) Group changes in investments held at fair value through profit or loss
2013
2012
Group
£’000
630,736
806,226
–
–
Company
£’000
630,736
806,226
–
1,039
Group
£’000
560,328
640,788
960
–
Company
£’000
560,328
640,788
960
926
1,436,962 1,438,001 1,202,076 1,203,002
United Kingdom
North America
Continental Europe
Japan
Asia Pacific ( ex Japan)
Latin America
Other
Valuation
31 December
2012
£’000
561,288
233,952
198,418
13,486
136,346
27,954
30,632
Purchases
£’000
254,829
266,221
112, 579
50, 335
190,793
2, 345
4,048
Sales
£’000
369, 647
208,283
110, 576
24,240
18 9,339
12,081
17,288
Movement in
investment
holding
gains/(losses)
£’000
184, 266
59,043
11, 402
28, 236
1,364
(1 ,799)
2, 678
Valuation
31 December
2013
£’000
630,736
350,933
211,823
67,817
139,164
16,419
20,070
Cost
31 December
2013
£’000
47 1,131
2 89,009
17 2,668
66,103
149, 415
1 9,019
20,255
1,202,076
881,150
9 31,454
285, 190 1,436,962 1, 187,600
The above figures do not include the gains on futures positions.
Included in the above figures are purchase costs of £1,792,000 (2012: £865,000) and sales costs of £984,000
(2012: £411,000). These comprise mainly stamp duty and commission and include £882,000 in respect of changes in
portfolio managers (2012: £42,000).
(iii) Gains/(losses) on investments held at fair value though profit or loss
Realised gains on sales of investments
Realised gain on futures
Movement in investment holding gains
Movement in unrealised gain on futures
Net movement on foreign exchange on cash and cash equivalents
72
Witan Investment Trust plc Annual Report 2013
2013
£’000
160,414
4,465
124,776
1,778
(1,562)
2012
£’000
20,977
2,458
107,608
368
(1,198)
289,871
130,213
(iv) Derivatives
Open future contracts as at year ended 31 December 2013
Contract
Nikkei Index Future
During the period realised gains on closing of futures positions was £4,465,000.
Open future contracts as at year ended 31 December 2012
Contract
Long Gilt Future
Position
long
£’000
750
Settlement
value
£’000
33,497
Nominal
exposure
£’000
35,199
Unrealised
profit
£’000
1,702
Position
short
£’000
(250)
Settlement
value
£’000
(29,654)
Nominal
exposure
£’000
(2 9,730)
Unrealised
loss
£’000
(76)
During the period realised gains on closing of futures positions was £2,458,000.
( v) Substantial share interests
The Company has notified interests in 3% or more of the voting rights of three of the investee companies, all of which are
closed-ended investment funds. However, the Board does not consider any of the Company’s investments to be individually
material in the context of these financial statements.
It is the Company’s stated policy to invest no more than 15% of its gross assets in other listed investment companies
(including listed investment trusts).
(vi) Unquoted investments
The value of the unquoted investments as at 31 December 2013 was £nil (2012: £960,000 Cazenove Capital Holdings
Limited). The holding in Cazenove Capital Holdings Limited was disposed of as a result of the acquisition of Cazenove Capital
by Schroders plc. This was effective on 2 July 2013 at 135p per share, which compares with a carrying value of 64p per share
at(cid:123)31 December 2012.
11 Other receivables
Sales for future settlement
Unrealised gain on derivatives designated as held at fair value through profit
or loss*
Taxation recoverable
Intercompany account
Prepayments and accrued income
Other debtors
2013
2012
Group
£’000
1,132
1,702
919
–
2,343
599
6,695
Company
£’000
1,132
1,702
919
396
2,343
56
6,548
Group
£’000
695
–
918
–
2,337
599
4,549
Company
£’000
695
–
918
483
2,337
28
4,461
*The unrealised gain on derivatives relates to a long position in Nikkei 225 Futures, nominal value at 31 December 2013: £35,199,000 (2012: £nil).
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Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
12 Other payables
Purchases for future settlement
Unrealised loss on derivatives designated as held at fair value through profit
or loss*
Share buy-backs awaiting settlement
Preference dividends
Accruals
2013
2012
Group
£’000
896
–
–
38
6,939
7,873
Company
£’000
896
–
–
38
6,671
7,605
Group
£’000
1,389
76
180
38
4,199
5,882
Company
£’000
1,389
76
180
38
3,926
5,609
*The unrealised loss on derivatives is nil (2012 relate d to a short position in Long Gilt Futures, nominal value at 31 December 201 2: £29,730,000).
13 Non current liabilities
Financial instruments redeemable other than in instalments are as follows:
8½ per cent. Debenture Stock 2016
6.125 per cent. Secured Bonds due 2025
2,055,000 3.4 per cent. cumulative preference shares of £1 each (see note 17
on page 83)
500,000 2.7 per cent. cumulative preference shares of £1 each (see note 17
on page 83)
2013
Group
£’000
Company
£’000
2012
Group
£’000
Company
£’000
44,584
63,233
44,584
63,233
44,587
63,174
44,587
63,174
2,055
2,055
2,055
2,055
500
500
500
500
110, 372
110, 372
110,316
110,316
On 15 December 2000 the Company issued £100,000,000 (nominal) 6.125 per cent. Secured Bonds due 2025, net of
discount and issue costs totalling approximately £2,000,000. The discount and the issue costs will be written back over the
life of the Secured Bonds. The nominal value of the remaining Secured Bonds in issue (£64,290,000 at 31 December 2013)
is redeemable on 15 December 2025. The nominal value of the Debenture Stock is redeemable on 1 October 2016. The
Debenture Stock and the Secured Bonds are secured by floating charges over all the undertaking and assets of the Company.
The security of the charges applies pari passu to both issues.
14 Financial instruments
Risk management policies and procedures
As an investment company, Witan invests in equities and other investments for the long term so as to secure its investment
objective as stated on the inside front cover. In pursuing its investment objective, the Group is exposed to a variety of risks
that could result in either a reduction in the Group’s net assets or a reduction in the profits available for distribution by way
of dividends.
These risks, market risk (comprising price risk, currency risk and interest rate risk), liquidity risk and credit risk, and the
directors’ approach to the management of them, are set out below.
The objectives, policies and processes for managing the risks and the methods used to manage the risks, as set out below,
have not changed from the previous accounting period, although in some instances additional resources have been allocated
to some areas.
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Witan Investment Trust plc Annual Report 2013
14.1 Market risk
The fair value or future cash flows of a financial instrument held by the Group may fluctuate due to changes in market prices.
This market risk comprises: price risk (see note 14.2), currency risk (see note 14.3) and interest rate risk (see note 14.4). The
Board reviews and agrees policies for managing these risks, which policies have remained substantially unchanged from
those applying in the year ended 31 December 201 2. The investment managers assess the exposure to market risk when
making each investment decision and monitor the overall level of market risk on the whole of their investment portfolios on
an ongoing basis.
14.2 Price risk
Price risks (ie changes in market prices other than those arising from interest rate risk or currency risk) may affect the value
of the quoted and the unquoted investments.
Management of the risk
The Board manages the risks inherent in the investment portfolios by regularly reviewing relevant information from the
investment managers. The Board meets regularly and at each meeting reviews investment performance. The Board monitors
the managers’ compliance with their mandates and also whether each mandate and asset allocation is compatible with
Witan’s objective.
When appropriate, Witan has the ability to manage its exposure to risk through the controlled use of derivatives.
The Group’s exposure to other changes in market prices at 31 December on its quoted and unquoted equity investments, and
on options on indices and investments, was as follows:
Investments held at fair value through profit or loss
Nominal futures exposure (long position)
2013
£’000
2012
£’000
1,436,962 1,202,076
–
35,199
Concentration of exposure to price risks
An analysis of the Group’s investment portfolio is shown on page 25. This shows that the greater geographical weighting
is to UK companies, with significant exposure also to North America, Asia and Continental Europe. Accordingly, there is a
concentration of exposure to those regions, although an investment’s country of domicile or of listing does not necessarily
equate to its exposure to the economic conditions in that country.
Price risk sensitivity
The following table illustrates the sensitivity of the profit after taxation for the year and the value of the shareholders’
funds to an increase or decrease of 15% in the fair values of the Group’s equity investments (including exposure through
futures contracts). This level of change is considered to be reasonably possible based on observation of market conditions
and historical trends. The sensitivity analysis is based on the Group’s equities and equity exposure through options at each
balance sheet date, with all other variables held constant. The results of these example calculations are significant but not
unreasonable, given that most of the Group’s assets are equity investments.
2013
2012
Increase
in fair value
£’000
Decrease
in fair value
£’000
Increase
in fair value
£’000
Decrease
in fair value
£’000
Income statement – profit after tax
Revenue return
Capital return – investments
Capital return – futures
–
–
215,544 (215,544)
(5,280)
220,824 (220,824)
5,280
–
180,311
–
180,311
–
(180,311)
–
(180,311)
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Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
14 Financial instruments continued
14.3 Currency risk
A proportion of the Group’s assets, liabilities and income is denominated in currencies other than sterling (the Group’s
functional currency, and the currency in which it reports its results). As a consequence, movements in exchange rates affect
the sterling value of those items.
Management of the risk
The investment managers monitor their exposure to currencies as part of their normal investment processes. The Board
receives a monthly report on the currency exposures of the entire fund.
Income denominated in foreign currencies is converted into sterling upon receipt. The Group does not normally use financial
instruments to mitigate the currency exposure in the period between the time that income is included in the financial
statements and its receipt.
Foreign currency exposure
The fair values of the Group’s monetary items that have foreign currency exposure at 31 December are shown below.
Where the Group’s equity investments (which are not monetary items) are denominated in a foreign currency, they have
been included separately in the analysis so as to show the overall level of exposure.
2013
Receivables (due from brokers, dividends and other income receivable)
Receivables (unrealised gain on derivatives designated as held at fair
value(cid:123)through profit or loss)
Cash at bank and on deposit
Payables (due to brokers, accruals and other creditors)
Total foreign currency exposure on net monetary items
Investments at fair value through profit or loss that are equities
Total net foreign currency exposure
2012
Receivables (due from brokers, dividends and other income receivable)
Cash at bank and on deposit
Payables (due to brokers, accruals and other creditors)
Total foreign currency exposure on net monetary items
Investments at fair value through profit or loss that are equities
Total net foreign currency exposure
US$
£’000
1,525
–
Euro
£’000
235
Yen
£’000
65
–
1,702
Other
£’000
713
–
857
(591)
1,791
353,727
1,504
–
1,739
141,957
8,202
–
9,969
64,929
49
(144)
618
259,361
355,518
143,696
74,898
259,979
US$
£’000
276
2,214
(12)
2,478
250,723
Euro
£’000
704
1,991
(397)
2,298
133,054
Yen
£’000
23
1,077
–
1,100
13,486
Other
£’000
796
73
(891)
(22)
181,028
253,201
135,352
14,586
181,006
The above amounts are not representative of the exposure to risk during the year as levels of monetary foreign currency
exposure change significantly throughout the year.
Foreign currency sensitivity
The following table illustrates the sensitivity of the profit after tax for the year and the Group’s equity in regard to the Group’s
monetary financial assets and financial liabilities and the exchange rates for the £/US dollar, £/Euro and £/Japanese yen. The
results of these example calculations are significant but not unreasonable in the context of the majority of the Group’s assets
being invested overseas.
It assumes the following changes in exchange rates:
£/US dollar +/- 15% (2012: 15%)
£/Euro +/- 15% (2012: 15%)
£/Japanese yen +/- 15% (2012: 15%)
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Witan Investment Trust plc Annual Report 2013
The sensitivity analysis is based on the Group’s monetary foreign currency financial instruments held at the balance sheet
date and takes account of any forward foreign exchange contracts that offset the effects of changes in currency exchange
rates.
If sterling had depreciated against the currencies shown, this would have had the following effect:
Income statement – profit after tax
Revenue return
Capital return
Change to the profit after tax
US$
£’000
1,248
62,422
63,670
2013
Euro
£’000
798
25,051
25,849
Yen
£’000
US$
£’000
140
11,458
11,598
1,175
44,245
45,420
2012
Euro
£’000
828
23,480
24,308
Change to the shareholders’ funds
63,670
25,849
11,598
45,420
24,308
If sterling had appreciated against the currencies shown, this would have had the following effect:
Income statement – profit after tax
Revenue return
Capital return
US$
£’000
2013
Euro
£’000
Yen
£’000
US$
£’000
2012
Euro
£’000
(923)
(46,138)
(590)
(18,516)
(103)
(8,469)
(868)
(32,703)
(612)
(17,355)
Change to the profit after tax
(47,061)
(19,106)
(8,572)
(33,571)
(17,967)
Yen
£’000
61
2,380
2,441
2,441
Yen
£’000
(45)
(1,759)
(1,804)
Change to the shareholders’ funds
(47,061)
(19,106)
(8,572)
(33,571)
(17,967)
(1,804)
In the opinion of the directors, neither of the above sensitivity analyses is representative of the year as a whole since the level
of exposure changes frequently, as part of the currency risk management process used to meet the Group’s objective.
14.4 Interest rate risk
Interest rate movements may affect the level of income receivable from fixed interest securities and cash at bank and on
deposit.
Management of the risk
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account
when making investment decisions.
The Group holds cash balances, partly to meet payments as they fall due but also when appropriate to offset the long-term
borrowings that it has in place.
The Group finances part of its activities through preference shares that do not have redemption dates and through debenture
stock and secured bonds that were issued as part of the Company’s planned gearing.
Interest rate exposure
The exposure at 31 December 2013 of financial assets and financial liabilities to interest rate risk is shown by reference to:
>
>
floating interest rates: when the interest rate is due to be re-set; and
fixed interest rates: when the financial instrument is due be repaid.
The Group’s exposure to floating interest rates on assets is £47,532,000 (2012: £15,420,000). This represents cash holdings
minus variable rate borrowing.
The Group’s exposure to fixed interest rates on assets is £15,543,000 (2012: £28,704,000). This represents investments in bonds.
Annual Report 2013 Witan Investment Trust plc
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Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
14 Financial instruments continued
The Group’s exposure to fixed interest rates on liabilities is £110, 372,000 (2012: £110,316,000). This represents fixed rate
borrowing.
Interest receivable and finance costs are at the following rates:
>
interest received on cash balances, or paid on bank overdrafts and loans, is at margin under/over LIBOR or its foreign
currency equivalent (2012: same);
>
>
>
the finance charge on the preference shares is at a weighted average interest rate of 3.3% (2012: 3.3%);
the finance charge on the debenture stock is at a weighted average interest rate of 8.5% (2012: 8.5%); and
the finance charge on the secured bonds is at a weighted average interest rate of 6.125% (2012: 6.125%).
The above year end amounts are not representative of the exposure to interest rates during the year, as the level of exposure
changes as investments are made in fixed interest securities, long-term debt is partially redeemed and as the level of
cash balances varies during the year. In the context of the Group’s balance sheet, the exposure to interest rate risk is not
considered to be material.
Interest rate sensitivity
Based on the Group’s monetary financial instruments at each balance sheet date, an increase or decrease of 200 basis points
in interest rates would decrease or increase revenue return after tax by £1,101,000 (2012: £623,000), capital return after tax
by £150,000 (2012: £315,000), and total profit after tax and shareholders’ funds by £951,000 (2012: £308,000).
At 31 December 2012, the Group had a short position in Long Gilt Futures with a nominal value of £29,730,000. An increase
of 100 basis points in gilt yields would have increased net capital return after tax and shareholders’ funds by £2,081,000.
A decrease of 100 basis points in gilt yields would have decreased net capital return after tax and shareholders’ funds by
£2,081,000. At 31 December 2013, the Group did not have any interest rate exposure by way of futures contracts.
This level of change is considered to be reasonably possible based on observation of current market conditions. This is not
representative of the year as a whole, since the exposure changes as investments are made. In the context of the Group’s
balance sheet, the outcome is not considered to be material.
14.5 Liquidity risk
This is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the Group’s assets are investments in quoted equities and other quoted
securities that are readily realisable. The Group has borrowed £44,587,000 by its issue in 1986 of 8½ per cent Debenture
Stock 2016 and £63,174,000 by its issue in 2000 of 6.125 per cent Secured Bonds due 2025. The Group is able to draw short-
term borrowings of up to the sterling equivalent of £50 million from its secured and committed multi-currency borrowing
facility of £50 million with BNP Paribas, London Branch (expiring in December 2014). £10,000,000 was drawn down under the
facility at 31 December 2013 (2012: £21,000,000).
The Board gives guidance to the investment managers as to the maximum amount of the Company’s resources that should
be invested in any one company. The policy is that the Group should remain fully invested in normal market conditions.
Liquidity risk exposure
The remaining contractual maturities of the financial liabilities at 31 December 2013, based on the earliest date on which
payment can be required, were as follows:
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Witan Investment Trust plc Annual Report 2013
Debenture stock*
Secured bonds*
Preference shares†
Other creditors and accruals
Bank loan
Within
1 year
£’000
3,790
3,938
83
7,87 3
10,000
25,68 4
2013
Between
1 and 5 years
£’000
51,222
15,751
332
–
–
More than
5 years
£’000
–
91,681
2,555
–
–
67,305
94,236
Within
1 year
£’000
3,790
3,938
83
5,882
21,000
34,693
2012
Between
1 and 5 years
£’000
55,012
15,751
332
–
–
More than
5 years
£’000
–
95,619
2,555
–
–
71,095
98,174
* The above figures show interest payable over the remaining terms of each instrument. The figures in the ‘between 1 and 5 years’ and ‘more than 5 years’ columns also
include the capital to be repaid.
† The figures in the ‘more than 5 years’ columns do not include the ongoing annual finance cost of £83,000.
14.6 Credit risk
The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Group
suffering a loss.
Management of the risk
The risk is managed as follows:
>
interest received on cash balances, or paid on bank overdrafts and loans, is at margin under/over LIBOR or its foreign
currency equivalent;
>
>
>
transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into
account so as to minimise the risk to the Group of default;
investment transactions are carried out with a large number of brokers, whose credit standard is reviewed periodically
by the investment managers, and limits are set on the amount that may be due from any one broker;
cash at bank is held only with reputable banks with high quality external credit ratings.
None of the Group’s financial liabilities are past their due dates or impaired.
Credit risk exposure
The table below summarises the credit risk exposure of the Group as at the year end.
Fixed interest securities
Cash
Receivables:
Sales for future settlement
Unrealised gain on derivatives designated as held at fair value through profit or loss
Taxation recoverable
Accrued income
Other debtors
2013
£’000
15,543
57,532
1,132
1,702
919
2,343
599
2012
£’000
28,704
36,420
695
–
918
2,337
599
79,770
69,673
14.7 Fair values of financial assets and financial liabilities
Except for those financial liabilities measured at amortised cost that are shown below, the financial assets and financial
liabilities are either carried in the balance sheet at their fair value (investments and derivatives) or the balance sheet amount
is a reasonable approximation of fair value (amounts due from brokers, dividends and interest receivable, amounts due to
brokers, accruals, cash at bank and bank overdrafts).
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Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
14 Financial instruments continued
Financial liabilities measured at amortised cost:
Non current liabilities
Preference shares
Debenture stock
Secured bonds
2013
Fair
value
£’000
Balance
sheet
amount
£’000
2012
Fair
value
£’000
Balance
sheet
amount
£’000
1,379
51,359
71,992
2,555
44, 584
63,233
1,379
53,136
80,232
2,555
44,587
63,174
124,730
110, 372
134,747
110,316
The fair values shown above are derived from the offer price at which the securities are quoted on the London Stock Exchange.
Fair value hierarchy disclosures
The table below sets out fair value measurements using the IFRS 7 fair value hierarchy.
Financial assets at fair value through profit or loss
At 31 December 2013
Equity investments
Investments in other funds
Derivatives ( nominal exposure of £35,199,000)
Total
At 31 December 2012
Equity investments
Investments in other funds
Derivatives ( gross nominal value of £29,730,000)
Total
Level 1
£’000
1,320,871
–
1,702
Level 2
£’000
–
116,091
–
Level 3
£’000
Total
£’000
– 1,320,871
116,091
–
1,702
–
1,322,573
116,091
– 1,438,664
Level 1
£’000
1,140,648
–
(76)
1,140,572
Level 2
£’000
–
60,468
–
60,468
Level 3
Total
£’000
£’000
960 1,141,608
60,468
(76)
–
–
960 1,202,000
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair
value measurement of the relevant asset as follows:
Level 1 – valued using quoted prices in an active market for identical assets.
Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices within Level 1.
Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the Group are explained in the accounting policies in note 1(h). There were no transfers
during the year between Level 1 and Level 2. A reconciliation of fair value measurements in Level 3 is set out below.
Level 2 Financial assets
Level 2 Financial assets refer to investments in Trilogy Emerging Markets Fund, Polar Capital Insurance Fund, Polar Japan
funds and iShares MSCI fund (201 2: Trilogy Emerging Markets Fund and Polar Capital Insurance Fund).
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Witan Investment Trust plc Annual Report 2013
Level 3 Reconciliation of Level 3 fair value measurement of financial assets
At 31 December 2013
Opening fair value
Purchases at cost
Sales proceeds
Total gains included in gains on investments in the Statement of Comprehensive Income:
– on sold assets
– on assets held at the beginning of the year
Closing fair value
£’000
960
–
(2,025)
1,176
(111)
–
The Group’s capital management objectives are:
>
>
to ensure that it will be able to continue as a going concern; and
to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital
and debt.
The Group’s total capital employed at 31 December 2013 was £1,493,31 6,000 (2012: £1,237,163,000) comprising
£120, 372,000 of debt (2012: £131,316,000) and £1,372,94 4,000 of equity share capital and other reserves (2012:
£1,105,847,000).
Gearing
The Group’s policy is to manage the effective gearing in the portfolio to be below 20%, other than temporarily in exceptional
circumstances. Effective gearing is defined as the difference between shareholders’ funds and the total market value of the
investments (including the nominal value (effective underlying exposure) of futures positions which were £35,119,000 long
at 31 December 2013 (2012: £29,730,000 short)) expressed as a percentage of shareholders’ funds. At 31 December 2013
effective gearing was 7. 3% (2012: 6.1%) and the calculation is set out below:
Value of investments per the Balance Sheet
Add:
Nominal exposure of Gilt Futures
Nominal exposure of Nikkei 225 Futures
Adjusted Gross Value of Investments (including Futures nominal exposure)
Shareholders’ funds per the Balance Sheet (A)
Excess of Gross Value of Investments over shareholder funds (B)
Effective gearing (B as a percentage of A)
2013
£’000
2012
£’000
1,438,001 1,203,002
–
35,199
(29,730)
–
1,473,200 1,173,272
1,372,944 1,105,847
67,425
6. 1%
100,256
7.3%
The Board monitors and reviews the broad structure of the Group’s capital on an ongoing basis. This review includes:
>
>
the planned level of gearing, which takes into account the Chief Executive Officer’s view on the market;
the need to buy back equity shares for cancellation, which takes account of the difference between the net asset value
per share and the share price (ie the level of share price discount or premium); and
>
the extent to which revenue in excess of that which is required to be distributed should be retained.
The Group’s objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
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Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
14 Financial instruments continued
The Company is subject to several externally imposed capital requirements:
>
the terms of issue of the Company’s debenture stock and secured bonds require the aggregate amount outstanding in
respect of borrowings, measured in accordance with the policies used to prepare the annual financial statements, not
to exceed a sum equal to the Company’s capital and reserves at any time;
>
>
as a public company, the Company has a minimum issued share capital of £50,000; and
in order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be
able to meet one of the two capital restriction tests imposed on investment companies by company law.
These requirements are unchanged since the previous year end and the Company has complied with them.
15 Called up share capital
Called up, issued and fully paid:
189,311,000 ordinary shares of 25p each (2012: 190,079,500)
Group and
Company
2013
£’000
Group and
Company
2012
£’000
47,328
47,520
During the year, 768,500 ordinary shares were bought back for cancellation at a cost of £4,437,000 (2012: 2,287,500 ordinary
shares at a cost of £10,777,000).
16 Share premium account and reserves
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
arising on
investments
£’000
Capital
reserve
arising on
revaluation
of
investments
held
£’000
Revenue
reserve
£’000
57,076
–
–
–
–
29,263
(32,389)
46,306
–
–
–
192
–
–
814,198
177,622
(1,562)
(15,211)
(4,437)
–
–
124,510
113,811
–
–
–
–
–
46,498
970,610
238,321
53,950
46,306
–
–
–
192
–
–
814,198
177,622
(1,562)
(15,211)
(4,437)
–
–
124,536
113,924
–
–
–
–
–
57,050
–
–
–
–
29,150
(32,389)
46,498
970,610
238,460
53,811
Group
At 1 January 2013
Net movement on investments
Net movement on foreign exchange
Expenses and interest payable charged to capital net of tax relief
Buy-backs of ordinary shares
Profit for the year
Ordinary dividends paid
At 31 December 2013
Company
At 1 January 2013
Net movement on investments
Net movement on foreign exchange
Expenses and interest payable charged to capital net of tax relief
Buy-backs of ordinary shares
Profit for the year
Ordinary dividends paid
At 31 December 2013
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Witan Investment Trust plc Annual Report 2013
16,237
–
–
–
–
–
–
16,237
16,237
–
–
–
–
–
–
16,237
17 Preference shares
Included in non current liabilities is £2,555,000 in respect of issued preference shares as follows:
2,055,000 3.4 per cent. cumulative preference shares of £1 each
500,000 2.7 per cent. cumulative preference shares of £1 each
Group and
Company
2013
£’000
2,055
500
Group and
Company
2012
£’000
2,055
500
2,555
2,555
The 3.4 per cent. and 2.7 per cent. cumulative preference shares constitute a single class and confer the right, in priority to
any other class of shares:
(i)
to receive a fixed cumulative preferential dividend at the respective rates (exclusive of tax credit thereon) of 3.4 per
cent. and 2.7 per cent. per annum, such dividend being payable half-yearly on 15 January and 15 July in each year, in
respect of the 3.4 per cent. cumulative preference shares, and on 1 February and 1 August in each year, in respect of the
2.7 per cent. cumulative preference shares; and
(ii)
to receive repayment of capital at par in a winding up of the Company (but do not confer any further right to participate
in profits or assets).
The preference shareholders are entitled to receive notices of general meetings of the Company but are not entitled to attend
or vote thereat (except on a resolution for the voluntary liquidation of the Company or for any alteration to the objects of the
Company as set out in its Articles of Association).
In the event of a poll at a general meeting of the Company, every member of the Company who is present in person or
by proxy and who is entitled to vote thereat, whether an ordinary shareholder or, in the circumstances outlined above, a
preference shareholder, has one vote for every £1 nominal value of shares registered in their name. Accordingly, on a poll
each ordinary shareholder has one vote for every four shares held.
18 Net asset value per ordinary share
The net asset value per ordinary share 725.23p (2012: 581.8p) is based on the net assets attributable to the ordinary
shares of £1,372,94 4,000 (2012: £1,105,847,000) and on the 189,311,000 ordinary shares in issue at 31 December 2013
(2012: 190,079,500).
The movements during the year of the net assets attributable to the ordinary shares were as follows:
Total net assets at 1 January 2013
Total profit for the year
Dividends paid in the year on the ordinary shares (see note 8)
Buy-backs of ordinary shares
Net assets attributable to the ordinary shares at 31 December 2013
£’000
1,105,847
303,923
(32,389)
(4,437)
1,372,944
An alternative net asset value per ordinary share can be calculated by deducting from the total assets less current liabilities of
the Company the preference shares, the debenture stock and the secured bonds at their market (or fair) values rather than at
their par (or book) values. Details of the alternative values are set out in note 14.7. The net asset value per ordinary share at
31 December 2013 calculated on this basis is 717. 6p (2012: 568.9p).
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Annual Report 2013 Witan Investment Trust plc
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Notes to the (cid:428) nancial statements continued
for the year ended 31 December 2013
19 Note to the cash flow statements
Purchases and sales of investments are considered to be operating activities of the Company, given its purpose, rather than
investing activities. However, the cash flows associated with these activities are presented below.
Proceeds on disposal of fair value through profit or loss investments
Purchases of fair value through profit or loss investments
Group and
Company
2013
£’000
9 31,017
(8 80,387)
Group and
Company
2012
£’000
315,749
(304,836)
50,630
10,913
20 Capital commitments and contingent liabilities
At 31 December 201 3 there were capital commitments in respect of securities not fully paid up of £nil (201 2: £nil) and
underwriting liabilities of £nil (201 2: £nil). In November 2005 the Company took a five year lease on office premises at
14 Queen Anne’s Gate, London SW1 which was renewed for a further five years in October 2010.
21 Operating lease arrangements
Minimum lease payments under operating leases recognised for the year
2013
£’000
49
2012
£’000
49
At the balance sheet date, the Group had outstanding commitments for the future minimum lease payments under
non-cancellable operating leases, which fall due as follows:
Within one year
In the second to fifth years inclusive
2013
£’000
49
51
100
2012
£’000
49
100
149
The operating lease payments represent rentals payable by the Group for its office property.
The lease was re-negotiated during 2010 for a further term of five years. Rentals are fixed for an average of five years.
22 Subsidiary undertaking
The Company has an investment in the issued ordinary share capital of its wholly-owned subsidiary undertaking, Witan
Investment Services Limited, which was incorporated on 28 October 2004, is registered in England and Wales and operates in
the United Kingdom.
23 Related party transactions disclosures
Balances and transactions between the Company and its subsidiary, which are related parties, amounting to £286,000 have
been eliminated on consolidation and are not disclosed in this note.
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the company for each of the relevant
categories specified in IAS 24 Related Party Disclosures is provided in the audited part of the Directors’ Remuneration Report
on pages 45 to 46.
Directors’ transactions
Dividends totalling £235,000 (2012: £168,000) were paid in the year in respect of ordinary shares held by the Company’s directors.
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Witan Investment Trust plc Annual Report 2013
24 Segment Reporting
The Group adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be
identified on the basis of internal reports about components of the Group that are reviewed regularly by the Chief Executive
Officer and that are used to allocate resources to the segments and to assess their performance. The identification of the
Group’s reportable segments did not change as a result of the adoption of IFRS 8.
Geographical segments
Geographical segments are considered to be the primary reporting segment. An analysis of investment income by
geographical segment is set out in note 2 on page 67. Analyses of expenses by geographical segment and of profit by
geographical segment have not been given as it is not possible to prepare such information in a meaningful way. An analysis
of the investments by geographical segment is set out in note 10 on page 72. Analyses of the remaining assets and liabilities
by geographical region have not been given as either it is not possible to prepare such information in a meaningful way or the
results are not considered to be significant.
Business segments
Business segments are considered to be the secondary reporting segment. The Group has two business segments: (i) its
activity as an investment trust, which is the business of the parent company, Witan Investment Trust plc, and recorded in the
accounts of that company; and (ii) the provision of executive and marketing management services and the management of
savings schemes, which is the business of the subsidiary company, Witan Investment Services Limited, and recorded in the
accounts of that company.
Revenue
Interest expense
Net result
Investment
trust
£’000
38,203
8,329
303,923
2013
Management
services
£’000
1,189
–
–
Investment
trust
£’000
35,893
8,207
146,278
2012
Management
services
£’000
1,157
–
–
Total
£’000
37,050
8,207
146,278
Total
£’000
39,392
8,329
303,923
Carrying amount of assets
1,371,905
1,039 1,372,944 1,104,921
926 1,105,847
2 5 Subsequent events
Since the year end, the Board has declared a fourth interim dividend in respect of the year ended 31 December 2013 of 4.5p
per ordinary share (see also page 4 and note 8 on page 71).
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Annual Report 2013 Witan Investment Trust plc
85
Historical record
(unaudited)
Debt at fair value
Debt at par value
Market price
per ordinary
share in pence
331.5
414.0
454.5
478.5
351.0
444.6
516.5
450.0
503.0
669.0
Net asset
value per
ordinary share
Share price
discount
Net asset
value per
ordinary share
in pence(b)
384.4
458.9
508.4
537.9
400.3
497.0
578.1
503.7
568.9
717. 6
%(b)
13.8
9.8
10.6
11.0
12.3
10.5
10.7
10.7
11.6(d)
6.8(d)
in pence(c)
390.2(a)
469.5(a)
517.1
545.7
410.1
502.7
584.4
516.9
581.8
725.2
Share price
discount
%(c)
Earnings
per ordinary
share in pence
15.0
11.8
12.1
12.3
14.4
11.6
11.6
12.9
13.5
7.7
8.63(a)
8.96(a)
10.24
11.08
11.60
10.63
9.45
13.27
14.50
15.44
Dividends
per ordinary
share in pence
8.60
8.80
9.20
9.90
10.20
10.50
10.90
12.00
13.20
14.40
31 December 2004
31 December 2005
31 December 2006
31 December 2007
31 December 2008
31 December 2009
31 December 2010
31 December 2011
31 December 2012
31 December 2013
(a)
(b)
(c)
The figure for 2005 has been calculated in accordance with International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union and the figure
for 2004 has been restated in accordance with IFRSs. The figures for the earlier years have not been restated.
The net asset value per ordinary share is calculated by deducting from the total assets less current liabilities of the Group the fixed borrowings at their fair (or
market) values. The share price discount shown reflects this calculation.
The net asset value per ordinary share is calculated by deducting from the total assets less current liabilities of the Group the fixed borrowings at their par (not
their market) values. The share price discount shown reflects this calculation.
(d) The average discount to the net asset value, excluding income, with debt at market value, in 2013 was 8.3% (2012: 10.7%). (Source: Datastream)
Unsolicited approaches for shares: warning to Shareholders
Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence
concerning investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders offering to
sell them what often turn out to be worthless or high risk shares in US or UK investments. They can be very persistent and
extremely persuasive. Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at
a discount or offers of free company reports.
Please note that it is very unlikely that either the Company or the Company’s Registrar, Computershare Investor Services
PLC, would make unsolicited telephone calls to shareholders and that any such calls would relate only to official
documentation already circulated to shareholders and never in respect of investment ‘advice’.
If you are in any doubt about the veracity of an unsolicited phone call, please call either the Company Secretary or the
Registrar at the numbers provided on page 88.
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Witan Investment Trust plc Annual Report 2013
Witan Wisdom and Jump
How to invest
There is a variety of ways to invest in Witan Investment Trust
plc. Naturally, Witan’s shares can be traded through any UK
stockbroker. Advisers who wish to purchase Witan for their
clients can also do so via a growing number of platforms that
offer investment trusts including Ascentric, Alliance Trust
Savings, Nucleus, Raymond James, Seven IM and Transact.
Witan is also available for investment through the two
savings schemes managed by Witan Investment Services –
Witan Wisdom and Jump Savings.
Witan Wisdom
Shareholders who hold their investment via the Witan
Wisdom product have already been notified that from
6 April 2014 we will be changing the charging structure of
the savings scheme. From 6 April 2014, there will be a single
flat annual fee of £30 +VAT for both the Witan Wisdom Share
Plan and ISA. There will be no charge other than government
stamp duty, for regular savings or dividend reinvestment.
Lump sum dealing will be charged at a flat rate of £15.
Witan Wisdom offers two different savings wrappers:
The Witan Wisdom ISA is a stocks and shares ISA that
enables investors to buy Witan shares within a tax efficient
wrapper. Investors have an annual ISA allowance of up
to £11,520 for the 2013/14 tax year, rising to £11,880 for
the 2014/15 tax year. The minimum lump sum investment
with Witan Wisdom ISA is £2,000, with the regular savings
minimum being £100 per month. Investors can also transfer
existing ISAs to Witan Wisdom while retaining their tax
efficient wrapper during and after transfer.
The Witan Wisdom Share Plan is our straightforward, low-
cost savings scheme. The minimum lump sum investment
is £500, and the minimum regular contribution is £50 per
month or quarter. There is no maximum. Accounts can also
be held jointly, or designated to a child.
Jump Savings for children
Jump gives parents, grandparents and other adults the
chance to invest in Witan on behalf of a child. This flexible
savings plan has a minimum lump sum investment set at
£250 and regular contributions can be made from £50
per month or quarter. Jump is available in three different
wrappers:
Junior ISA – Is a tax efficient wrapper available to children
born before 1 September 2002 or after 3 January 2012, or
those who did not qualify for a Child Trust Fund. The account
can only be opened by the parent though others can add
to it. It currently has an annual subscription limit of £3,720
for the 2013/14 tax year, which will increase to £ 3,840 for
the 2014/15 tax year. You can open a Jump Junior ISA with a
minimum lump sum investment of £250 or £50 per month
or quarter.
Jump Child Trust Fund – Like the Junior ISA, the Child Trust
Fund (CTF) is a tax efficient savings vehicle with an annual
limit of £3,720 each year (measured by the child’s birthday),
which will increase to £ 3,840 from 6 April 2014. Each child
born in the UK from 1 September 2002 up to and including
2 January 2012 was eligible for a CTF. You can transfer
existing CTFs to Jump subject to a minimum transfer value
of £1,000.
Jump Savings Plan – the Jump Savings Plan offers greater
flexibility than the Junior ISA or Child Trust Fund in terms
of the limits, access and control of the investment. It can
also be opened by grandparents, relatives and other family
friends. You can open a Jump Savings Plan with a lump sum
investment of £250 or £50 per month or quarter.
(n.b. With a flat rate annual fee of £30 +VAT for Jump, the cost
is high for the minimum subscription level. Investors should
consider if this is suitable for them if they do not plan to add
to the account.)
Brochures and applications for all of our products are available
by calling 0800 082 81 80 or online via www.witan.com.
If you would prefer to write to request further information,
the address details can be found on page 88.
Witan Investment Trust plc is an equity investment. Investors
are reminded that past performance is not a guide to
future performance and the value of investments and the
income from them may go down as well as up and investors
may not get back the amount originally invested. Please
note that tax assumptions may change if the law changes,
and the value of tax relief (if any) will depend upon your
individual circumstances. Investors should consult their
own tax advisers in order to understand any applicable tax
consequences. Issued and approved by Witan Investment
Services Limited. Witan Investment Services Limited of
14 Queen Anne’s Gate, London SW1H 9AA is registered in
England and Wales number 5272533. Witan Investment
Services provides investment products and services and is
authorised and regulated by the Financial Conduct Authority.
We may record telephone calls for our mutual protection and
to improve customer service.
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Annual Report 2013 Witan Investment Trust plc
87
Shareholder information
Points of Contact
If you have any questions or need more information
concerning Witan, you may contact us in the following ways:
you should dial 18001 followed by the number you wish
to dial.
Freephone:
0800 082 8180
E-mail:
wisdom@ifdsgroup.co.uk
Post:
For Witan Wisdom and Jump Savings queries:
Witan Wisdom
PO Box 10550
Chelmsford
CM99 2BA
Points of Reference
You can follow the progress of your investment through the
newspapers. Witan’s share price appears daily in the national
press stock exchange listings under ‘Investment Trusts’ or
‘Investment Companies’ and is also included on the Witan
website (www.witan.com).
The London Stock Exchange Daily Official List (SEDOL) code
is 0974406.
Dividend
A fourth interim dividend of 4.5 p per share has been
declared, payable on 28 March 2014. The record date for the
dividend was 28 February 2014 and the ex-dividend date for
the dividend was 26 February 2014 (see pages 4 and 28).
Registered Office
14 Queen Anne’s Gate
London SW1H 9AA
Company Secretary
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
Telephone: 020 3008 4910
Registered Number
Registered as an investment company in England and Wales,
Number 101625.
Custodian and Investment Administrator
BNP Paribas Securities Services
55 Moorgate
London EC2R 7PA
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0870 707 1408*
* Calls cost about 7 pence per minute from a BT line; calls from other providers, or
from mobile phones, may cost more.
Capital Gains Tax
The calculation of the tax on chargeable gains will depend on
your personal circumstances. If you are in any doubt about
your personal tax position, you are recommended to contact
your professional adviser.
Auditor
Deloitte LLP
Chartered Accountants
2 New Street Square
London EC4A 3BZ
Solicitors
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London EC2A 2HS
Stockbroker
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
The Company is a member of:
Disability Act
Copies of this Annual Report and other documents issued by
Witan Investment Trust plc are available from the Company
Secretary. If needed, copies can be made available in a
variety of formats, including Braille, audio tape or larger type
as appropriate.
You can contact our Registrar, Computershare Investor
Services PLC, which has installed textphones to allow
speech and hearing impaired people who have their own
telephone to contact them directly, without the need for an
intermediate operator, by dialling 0870 702 0005. Specially
trained operators are available during normal business hours
to answer queries via this service.
Alternatively, if you prefer to go through a ‘typetalk’ operator
(provided by The Royal National Institute for Deaf People),
88
Witan Investment Trust plc Annual Report 2013
Our relationship with the RHS
Witan Investment Trust has enjoyed a fruitful relationship with
the Royal Horticultural Society (‘RHS’) for more than 15 years.
Over this time Witan has helped the RHS to redevelop a number
of new gardens at Wisley including the Walled Garden West, the
Herb Garden and most recently the Bowes-Lyon Rose Garden.
Witan shareholders who hold their shares through Witan
Wisdom or Jump Savings, or on the main register, are eligible
to apply for a ballot for a ticket that will allow free entry for
(cid:87)(cid:90)(cid:82)(cid:123)(cid:68)(cid:71)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:81)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:88)(cid:85)(cid:3)(cid:53)(cid:43)(cid:54)(cid:3)(cid:74)(cid:68)(cid:85)(cid:71)(cid:72)(cid:81)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:56)(cid:46)(cid:17)
If you would like to request a ticket then please
phone us on 0800 082 8180 or email us at
wisdom@ifdsgroup.co.uk.
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