W
i
t
a
n
I
n
v
e
s
t
m
e
n
t
T
r
u
s
t
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
6
ANNUAL
REPORT 2016
Capital and income growth from
active global equity investment
Printed by Park Communications on FSC® certified paper.
Park is an EMAS certified company and its Environmental Management System is certified to
ISO 14001.
100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further
use and, on average 99% of any waste associated with this production will be recycled.
This document is printed on Cocoon 50% Silk and Cocoon 50% Offset paper. The fibres are
sourced from well-managed, responsible, FSC® certified forests. The pulp used in this product is
bleached using an Elemental Chlorine Free (ECF) process.
Job No: 28447Proof Event: 25Black Line Level: 1Park Communications Ltd Alpine Way London E6 6LACustomer: WitanProject Title: Annual ReportT: 0207 055 6500 F: 020 7055 6600
WITAN’S OBJECTIVE
OUR RELATIONSHIP WITH THE RHS
Long-term growth in income and capital
through active multi-manager investment
in global equities
Witan is an investment trust which is listed
on the London Stock Exchange and was
founded in 1909.
Witan offers diversified exposure to global markets
(principally equities) using a multi-manager approach.
The portfolio is diversified by geographical region,
industrial sector and at the individual stock level.
Witan typically uses between 10 and 15 investment
managers. The blend of different active approaches
and styles aims to deliver added value for shareholders
while smoothing out the volatility normally associated
with a single manager.
To view the report online
If you would like to view video updates
about the Company, please visit:
www.witan.com
Witan Investment Trust plc has enjoyed a long and fruitful relationship with the Royal
Horticultural Society for almost 20 years. Over this time, Witan has helped to redevelop a
number of new gardens at Wisley including the Walled Garden West, the Herb Garden and
the Bowes-Lyon Rose Garden, and the Global Growth Vegetable Garden at Hyde Hall, which
will open to the public this year. In 2016, Witan sponsored a Show Garden (see picture)
at the RHS Hampton Court Palace Flower Show, designed by Jane Bailey and which was
awarded a Silver-gilt medal by the RHS judges. 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 two adults to any one of the four RHS
gardens in the UK.
If you would like to request a ticket then please phone us on 0800 082 8180 or email wisdom@
ifdsgroup.co.uk confirming the full name of the account holder.
Job No: 28447Proof Event: 25Black Line Level: 1Park Communications Ltd Alpine Way London E6 6LACustomer: WitanProject Title: Annual ReportT: 0207 055 6500 F: 020 7055 6600 ANNUAL REPORT 2016
1
CONTENTS
+18.4%
Shareholder total return
+22.9%
NAV total return
+11.8%
Dividends per share
Financial Highlights
02
Report of the Directors
2
4
6
Financial Highlights
Chairman’s Report
Chief Executive’s Report
Strateg y
Strategic Report
8
22
Investment Managers
25 Fifty Largest Investments
26 Classification of Investments
Statutory Information
27 Board of Directors
29 Directors’ Report
Corporate Governance Statement
Corporate Governance
33
43 Report of the Audit Committee
45 Directors’ Remuneration Report
56
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditors’ Report
57
62
Statement of Comprehensive Income
63 Statements of Changes in Equity
64 Balance Sheets
65 Cash Flow Statements
66
Notes to the Financial Statements
Other Information
89 Securities Financing Transactions
91 AIFMD disclosures
92 Historical Record
92
93 Witan Wisdom and Jump
94 Shareholder Information
IBC The Royal Horticultural Society
Unsolicited approaches for shares
Chairman’s Report
04
Chief Executive’s Report
06
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
2
WITAN INVESTMENT TRUST PLC
FINANCIAL HIGHLIGHTS
Corporate key performance indicators
Share price
NAV per ordinary share (debt at par value)
NAV per ordinary share (debt at fair value)
Discount (NAV including income, debt at fair value)(A)
(A) The average discount on this basis in 201 6 was 5.8 % (201 5: average premium 0.1 %), (Source: Morningstar).
2016
2015
% change
902.0p
952.8p
939. 2p
4.0 %
780.0p
788.4p
781.2p
0.2 %
15.6
20.9
20.2
Total return performance
Total shareholder return(B)
Net asset value total return(C)
Witan Benchmark(D)
FTSE All-Share Index(E)
FTSE World Index( E)
UK CPI return
1yr % Return 3yrs % Return 5yrs % Return
125.8
108.4
83.3
61.8
110.7
7.2
44.0
39.4
34.3
19.3
53.4
2.3
18.4
22.9
23.0
16.8
30.4
1.6
(B) Source: Morningstar. The movement in ordinary share price adjusted
(E) Source: Morningstar. See also FTSE International for conditions of use
to include the reinvestment of each dividend paid during the respective
period’s calculation.
(C) Source: Morningstar/Witan. The movement in the net asset value per
share (debt at fair value) adjusted to include the reinvestment of each
dividend paid during the respective period’s calculation.
(D) Source: Morningstar/Witan. The benchmark was a composite of four
indices: the FTSE All-Share Index 40%, the FTSE All-World North
America Index 20%, the FTSE All-World Europe (ex UK) Index 20% and
the FTSE All-World Asia Pacific Index 20%.
(www.ftse.com).
Total returns since the introduction of the multi-manager structure (30.09.04)
400
Total returns since the introduction of the multi-manager structure (30.09.04)(F)
350
Share price
NAV
Witan benchmark
300
250
200
150
100
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Morningstar.
Note:
The financial statements (on pages 62 to 88) set out the required statutory reporting measures of the Company’s
financial performance. In addition, the Board assesses the Company’s performance against a range of criteria which
are viewed as particularly relevant for investment trusts, which are summarised on this and the following page and
explained in greater detail in the Strategic Report on page 8. A reconciliation of the NAV per ordinary share (debt at par
value) to the NAV per ordinary share (debt at fair value) is shown in note 18 on page 86.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
3
Dividend information
Revenue per share
Dividend per share
2017 dividend schedule*
Ex-Dividend Date
2 March 2017
18 May 2017
24 August 2017
16 November 2017
2016
22.1 p
19.0p
2015
% change
18.5p
17.0p
19.5
11.8
Pay date
Dividend type
31 March 2017
Fourth Interim (2016)
16 June 2017
18 September 2017
18 December 2017
First Interim
Second Interim
Third Interim
Dividend payable
per share
6.25p
4.75p
4.75p
4.75p
*Please note that the dates and amounts for the first, second and third interim dividends could be subject to change.
Other financial information
Net assets
Number of ordinary shares in issue (A)
Gearing ( B)
Ongoing charge excluding performance fee
Ongoing charge including performance fee ( C)
2016
2015
% change
£1,726, 637,000
200,071,000
10.3%
0.7 5%
0.6 5%
£1,577,330,000
200,071,000
10.7%
0.7 6%
1.04%
9.5
-
(A) Of which 18,860,261 are held in treasury (2015: nil).
( B) The difference between shareholders’ funds and the total market value of the investments (including the face value of futures positions) expressed as a
percentage of shareholders’ funds (see note 14, page 83).
( C) Includes reversal of performance fees over-accrued at 31 December 2015 (see page 16).
Since 2006, Witan’s dividend per share has risen 107%, compared with 25% for the UK consumer price index
Witan’s dividend per share compared with the UK
Consumer Price Index
21.0
17.0
13.0
9.0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Datastream
Witan dividend in pence per share (left scale)
CPI index (right scale)
220
180
140
100
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
4
WITAN INVESTMENT TRUST PLC
CHAIRMAN’S REPORT
HARRY HENDERSON
Chairman
Highlights
•
•
•
•
•
•
NAV total return of 22. 9 % in line
with the benchmark’s return of
23.0 %
5 year NAV total return of 108 %,
25 % ahead of the benchmark
Share price discount to NAV of
4.0 % at year end (2015: discount
of 0.2%)
8.5% Debenture repaid, reducing
borrowing costs
18.9 m shares bought back,
adding £9.2m to net assets
Dividend increased by 11.8 % to
19.0p , well ahead of the 1.6%
rate of infl ation and more than
double the level paid ten years
ago
Summary
Witan has now been operating a multi-manager approach
for over twelve years, with the aim of providing superior
results for its shareholders. Over this period, decisions
by our in-house Executive team and our chosen external
managers have enabled Witan to beat the returns on our
equity benchmark and raise the dividend significantly
faster than the rate of inflation. Whilst there are many
uncertainties in the world, and at the best of times future
performance can never be firmly predicted, our objective
remains to extend this successful record.
2016 proved an unusually testing year for many equity
managers. A volatile start to the year saw sizeable falls
in equities during January, but the year ended with most
equity markets in positive territory, delivering outsize
returns for sterling investors as a result of the fall in
the pound following the unexpected Brexit referendum
result. The other major political surprise of the year was
Donald Trump’s victory in the US Presidential election.
Although the longer-term implications of these events
are unknown, the markets believe they will lead to easier
fiscal policies, reflected in a divergence between rising
equity markets and falling bond markets in the closing
months of the year. Further details of the year’s events
are discussed in the Chief Executive’s Report on page 6 .
After several years of significant outperformance, during
2016 our third party managers slightly underperformed
their benchmarks overall, with just three of our ten
third party managers, together with the direct holdings
portfolio, outperforming their benchmarks. There were
significant positive contributions from the use of gearing
and from share buybacks.
As a result, Witan shareholders enjoyed a profitable year,
though the net asset value (NAV) total return of 22. 9 %
was very slightly behind our benchmark’s total return
of 23.0 %. The NAV total return using the par value of
our debt was 23.5 %, a modest outperformance of the
benchmark. The share price total return was 18.4 %,
as the share price moved from a 0.2% discount at the
end of 2015 to a 4.0 % discount at the end of 2016. The
dividend for the year has been increased by 11.8 % to
19.0 pence per share (2015: 17.0 pence). This dividend
is more than double the level paid in 2006, and is fully
covered by revenue earnings, while we also added £6. 5m
to our revenue reserves. A fourth interim dividend of
6.25 pence was declared in February 2017, payable on
31 March 2017. This marks the 42nd consecutive year of
rising dividends at Witan.
Taking a longer perspective, over the past 5 years Witan
has achieved a NAV total return of 108 %, compared with
the + 83 % return from our benchmark over this period.
Over the 10 years to the end of 2016, shareholders have
enjoyed a NAV total return of 13 0 %, compared with the
benchmark’s return of 10 2 %.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
5
I am delighted to welcome two new directors who have
joined the Board since the last AGM. Ben Rogoff joined
in October 2016 and Jack Perry in January 2017. Each
brings valuable skills and experience to Witan’s Board and
both will be standing for election at this, their first, AGM.
I should like to thank the Chief Executive and the rest of
our team for their hard work and achievements this year.
Harry Henderson
Chairman
9 March 2017
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Witan’s shares in the market
Although our shares ended 2016 on an all-time high,
as reported earlier they did not fully match the rise in
NAV during the year. In 2015, Witan’s shares had traded
at a premium to NAV for much of the year but 2016
saw the reappearance of a discount . In response, Witan
has bought back shares persistently and purposefully
during the year, in accordance with our objective for
Witan’s shares to trade at a sustainable low discount (or
a premium) to NAV, subject to market conditions. This
activity was accretive to NAV and helped reduce the
discount, which was 4% at the year end.
It remains a long-term objective to create sustainable
liquidity in Witan’s shares at or near to asset value. We
will continue to work to establish this. As I said in last
year’s report, the challenge is to achieve this objective
through the full range of investment conditions.
Benchmark for measuring performance
As announced in December, Witan has reviewed the
equity performance benchmark which had been in place
since 2007, with the following changes taking effect
from 1 January 2017:
UK
North America
Asia Pacific
Europe ex-UK
Emerging Markets
2017
Previously
30%
25%
20%
20%
5%
40%
20%
20%
20%
–
Further details of the reasons for the change are set out
in the Strategic Report on page 9 . Our managers select
stocks on the basis of their potential to deliver above-
average returns and to outperform market indices and
this will continue to be the case.
Repayment of debt
In October 2016, the Company repaid its 8.5% Debenture,
originally issued in 1986. This redemption, together with
the low cost debt issued in 2015, significantly reduced the
average cost of the Company’s fixed borrowings from 7%
prior to the 2015 issue to 4.6%. Further details are set out
in the Strategic Report on page 14 .
AGM
Our Annual General Meeting will be held at Merchant
Taylors’ Hall on Thursday 27 April 2017 at 2.30 pm.
Formal notice of the meeting will be sent to shareholders
when the Annual Report is published. We look forward
to the opportunity to meet you then for the Company’s
109th AGM.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
6
WITAN INVESTMENT TRUST PLC
CHIEF EXECUTIVE’S REPORT
After several years when government bond yields had
been steered lower as a means of stimulating economic
growth, the process went into overdrive in 2016, with
over a quarter of government bonds at one stage offering
negative yields to investors. Paying for the privilege of
lending money to governments is a curiosity - akin to
paying rent to the tenants of a house you own. Some
began to question whether such abnormal rates were
more a sign of low confidence than a means of improving
it. The most extreme level of bond overvaluation began to
reverse from August onwards, with the sell-off in bonds
intensifying in the aftermath of the US election, owing to
the looser fiscal policies promised by the new President.
There had been fears during 2015 that weakness
and instability in commodity-dependent sectors and
economies would spread to create a more general global
recession. Economic growth was indeed weaker than
expected early in 2016 but expectations stabilised by the
summer, reflected in a recovery in the price of oil and
other commodities from the lows reached in January and
improved expectations for corporate earnings, which had
been weak since early 2015.
Given the influence of politics on market moves during
2016, active managers, who tend to concentrate on
company-specific factors, in general found the going
difficult and the majority of our third party managers
underperformed during the year, in contrast to 2015.
Witan remained fully and actively invested during the
year, using periods of market weakness (such as January
and June) to add to our market exposure and reducing
gearing into subsequent market strength. We also turned
the widening in our discount to shareholders’ advantage
by buying back our shares, boosting the NAV per share as
well as mitigating the level of the discount.
A number of our historically strongly performing
managers lagged the strong rises in markets, offsetting
good performances from value-oriented managers and
the direct holdings. However, our active use of gearing
and share buybacks meant that, even with a relative
performance shortfall from our portfolio we were able to
end the year with performance very close to the 23.0%
rise in our benchmark, after all costs. The Strategic
Report on pages 8 to 2 1 sets out details of our third
party managers’ performance during the year as well as
decisions made in the areas of gearing, the use of index
futures and changes in the portfolio of directly held fund
investments.
ANDREW BELL
Chief Executive
The investment markets in 2016
Equity markets delivered strongly positive returns for
UK investors during 2016, although the numbers were
flattered by the impact of the weaker pound on overseas
market returns and the overseas-exposed companies
concentrated in the FTSE 100 index. There was a marked
contrast between the hesitant performance seen in the
first half of the year and the more sizable gains seen in
the period between the Brexit referendum and the end
of the year. Although the referendum result and the
outcome of the US election were not widely expected,
the resolution of these known uncertainties was followed
by equity market rallies. Investors appeared to respond
to the hope of more stimulative economic policies,
putting to one side doubts over the incoming Trump
administration’s trade policy and the UK government’s
approach to negotiating an exit from the EU. There was
a notable gap between the total return on the UK market
and the sterling returns seen from overseas markets. The
relative strength of overseas returns for UK investors
was attributable to the weakness of the pound, which fell
sharply following the Brexit vote.
No account of 2016 would be complete without mention
of the extraordinary valuations reached in global
government bond markets. Concerns in January over
weak growth in the US and China, which led to sharp falls
in global equity markets, ushered in further easing moves
from the Bank of Japan and the European Central Bank,
both of which ended 2016 with negative official interest
rates. In the aftermath of the Brexit vote, the view took
hold that the resulting economic uncertainty would keep
central banks focused on monetary easing and indeed the
Bank of England did ease policy further in August.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
7
Whilst a strong dollar might offset the benefits to other
countries from a growing US economy it seems unlikely
to occur in the absence of robust growth in the US. So
the balance of risks and opportunities for emerging
markets may be more mixed than in past periods of dollar
strength.
The shift in the emphasis of economic policy, from
stimulating private sector growth via low interest rates
towards governments borrowing at low rates to boost
demand via tax cuts and investment spending is a
potentially significant turning point. Inflation risks are
rising, albeit from a very low base. Government bond
issuance is set to rise, at a time when central bank
buying is slowing down or stopping. These are factors
against which the level of bond yields offers very limited
protection – yields remain generally lower than at the
start of 2016, despite rising since the summer.
Although equities are capable of making progress even
if bond yields are rising, this depends on the extent of
any change in yields and its cause. If a rise is driven by
higher inflation expectations (reflecting better economic
growth and improved corporate pricing power) it would
potentially be viewed as positive for equities. If it
reflected higher post-inflation yields it would represent a
rise in the real cost of capital, which would be a headwind.
Either way, a major further rise in yields could undermine
equities, even if underlying economic growth improved.
With index levels offering few windfalls, 2017 seems likely
to require a more selective approach to equities after the
landmark returns enjoyed in 2016.
Andrew Bell
Chief Executive
9 March 2017
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Outlook
The strength of equity markets during 2016 reflects
increased hopes for faster, or more balanced, economic
growth in 2017. A significant fiscal stimulus is expected
from the new Trump administration in the US, in the form
of tax cuts and infrastructure spending. There is a risk
of disappointment if this takes longer than expected to
implement, or is significantly diluted. Similarly, although
some of the more exaggerated fears for UK growth in the
aftermath of the referendum have been reset, the fall
in sterling is likely to lead to a squeeze on real incomes
in 2017. Although the implications for the UK economy
remain uncertain, UK quoted companies in the portfolio
derive the majority of their earnings from overseas, thus
benefiting from the lower value of sterling.
The Company recognises that the UK’s eventual
departure from EU membership may have both good and
bad consequences for the UK’s economic performance
in coming years, some of which are not currently
predictable and will differ from sector to sector. Our
assessment is that this is primarily a UK economic and
political issue. Given our flexible global investment remit,
it represents one of many factors that both Witan and its
external managers take into account in making decisions
about where to invest our shareholders’ funds.
European politics pose additional threats to the outlook
for economic growth, as well as complicating the process
of negotiating EU exit terms with the UK – election
campaigns are not conducive to making trade deals
which may be unpopular with your own electorate.
With the Netherlands, France and Germany all facing
national elections in 2017 the air may not be clear until
September, leaving aside the risk of an upset result in
one or another country undermining confidence in the
Eurozone’s cohesion.
On a more positive note, the bottoming out of commodity
prices has removed a destabilising factor from a number
of emerging economies. This, allied with improved
economic governance, could allow them to build on their
strong 2016 performance, which broke a 4 year run of
underperformance. Although a strong dollar is often
seen as a threat to emerging economies, raising the cost
of servicing their dollar debts, the US also tends to have
limited tolerance for a strong dollar if it impinges on US
economic growth (or the new administration’s ambition to
bring manufacturing jobs back home).
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
8
WITAN INVESTMENT TRUST PLC
STRATEGIC REPORT
Strategy and business model
Companies are required to publish a Strategic Report,
which should provide a description of the objectives
which its strategy is designed to deliver for shareholders,
the business model and the outlook for the year
ahead. It should also include analysis of the Company’s
performance during the year, relative to the key elements
of its business strategy. This Strategic Report has been
prepared solely to provide additional information to
shareholders to assess the Company’s strategies and the
potential for those strategies to succeed.
The Strategic Report contains certain forward -looking
statements. These statements are made by the directors
in good faith based on the information available to them
up to the time of their approval of this report and such
statements should be treated with caution due to the
inherent uncertainties, including both economic and
business risk factors, underlying any such forward-
looking information.
This report falls into four main sections:
1. Strategy
2. Business model
3. Performance and principal developments in 2016
4. Corporate and operational structure
Witan is an Investment Trust, which was founded in
1909 and has been listed on the London Stock Exchange
since 1924. It is managed by the Executive team of
Witan Investment Services Limited (WIS), its Alternative
Investment Fund Manager (AIFM), under the control and
supervision of the Company’s Board of directors.
1. Strategy
The Company’s strategy is to create value for
shareholders by addressing its investment objective and
to communicate effectively with existing and potential
shareholders.
The Company invests its shareholders’ funds primarily
in individual companies across a broad spread of
global equity markets. The objective is to profit from
opportunities created by global economic growth and to
outperform a representative equity benchmark, thereby
generating long-term capital growth for shareholders,
together with an income that rises faster than the rate of
inflation.
The Company employs an active multi-manager
approach, allocating funds for investment by selected
managers with differing styles and specialisations. The
aim is to access the best available managers, including
those not accessible on the same terms (or at all) to UK
investors.
Witan’s multi-manager approach was adopted in 2004,
in the belief that no single manager was likely to excel
in all markets and at all points in the economic cycle.
Employing managers to invest in their areas of greatest
competence has the potential to improve returns and to
reduce risk relative to using a single manager across the
investment waterfront.
Our approach is to blend different factors (such as
quality, value or growth approaches and differing
geographical exposures), aiming to profit from asset
allocation and from our managers’ combined ability
to outperform over time. We seek managers who can
capture the longer -term growth rewards from equity
investment by focusing on fundamental share values
rather than chasing short-term momentum.
2. Business model
The Company has appointed Witan Investment Services
Limited as its Alternative Investment Fund Manager
under the Alternative Investment Fund Managers
Directive (‘AIFMD’). As AIFM, WIS has responsibility for
operating the Company’s portfolio and risk management
processes. WIS delegates certain portfolio management
responsibilities to third party portfolio managers. In
addition, the Company uses an outsourced model for
other corporate functions, such as fund accounting,
custody and specialist professional services. These
activities are overseen by the WIS and Witan Executive
team, covering Investment, Operations and Marketing,
headed by the Chief Executive Officer, who is a director of
the Company.
Whilst the third party managers appointed are
responsible for stock selection in their individual
portfolios, WIS and the Company’s Board are responsible
for the overall delivery of performance to shareholders,
through the following means:
➜ Setting the overall investment objective;
➜
➜
➜
➜
Selecting competent managers, who are expected
to outperform a suitable benchmark relating to the
investment remit set by the Company;
Operating appropriate portfolio, corporate
governance and risk management arrangements for
effective corporate management and to meet the
requirements of the AIFMD;
Adjusting asset allocation according to
opportunities that arise;
The judicious use of borrowings with the aim of
adding to performance;
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
9
➜
➜
➜
Direct investment in funds exposed to specialist
asset categories;
Controlled and selective use of exchange-traded
derivatives to adjust asset allocation; and
Clear communication of Witan’s objective and its
results to shareholders and potential investors.
The Board’s and the Executive’s role in investment
management
As noted above, the Company has appointed its wholly-
owned subsidiary WIS as its AIFM. WIS has responsibility
for ensuring that portfolio and risk management are
properly carried out, with appropriate safeguards to
ensure the functional and hierarchical independence of
those with portfolio and risk management responsibilities.
The Board remains responsible for setting the investment
strategy, policy and guidelines of the Company and the
AIFM operates within these.
The selection of individual investments is largely
delegated to third party managers, subject to investment
limits and guidelines which reflect the particular mandate
(e.g. UK or global equities) and the specific investment
approach which the Company and its AIFM have selected
(e.g. value, higher dividend yield, special situations). The
managers are chosen by the Witan and WIS Boards after
a disciplined selection process focused on the managers’
scope to add value and their fit with the overall portfolio.
The overwhelming majority of the portfolio is managed in
segregated accounts, held by the Company’s depositary
(via the custodian to whom it delegates safekeeping
responsibilities). This enables the Company to analyse
the risks and opportunities of the portfolio as a whole as
well as of each manager’s portfolio. The operations of the
custodian and the safeguarding of the Company’s assets
are supervised by the depositary, appointed by Witan and
its AIFM, in accordance with the AIFMD’s requirements.
At the end of 2016, the Company had 10 third party
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 13 . Following an extensive
search during 2016, since the year end an additional
manager, Global Quality Growth LLC, has been appointed
to manage an Emerging Markets portfolio .
Up to 10% of the portfolio (at the time of investment) may
be invested in collective funds selected by the Executive
team, with the objective of outperforming Witan’s equity
benchmark. This portfolio is managed subject to limits
set by the Board, and in accordance with portfolio and
risk management processes established by Witan and the
Company’s AIFM. These investments may represent asset
categories that are temporarily undervalued or funds
which are viewed as attractive longer-term generators of
superior returns.
The WIS Executive seeks to add to the third party
managers’ 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 viewed as
offering attractive returns. These activities are overseen
by the Board, with the Executive operating within
delegated parameters that are periodically reviewed
to take account of prevailing investment conditions. In
essence, the Company seeks to have sufficient levers to
pull to take advantage of investment opportunities that
may arise, in addition to the total returns arising from the
investment managers’ portfolios, which are expected to
be the driver of performance.
Our selected benchmark
The Company’s benchmark is used as a reference point
for comparing performance and is a combination of global
equity markets, which reflect the investment universe
from which most of the portfolio holdings are chosen.
The benchmark was reviewed during the year, with the
resulting new weights, as set out in the Chairman’s
Report on page 5 , taking effect from 1 January 2017. The
UK weighting has reduced from 40% to 30%, with the North
American component rising from 20% to 25% and a 5%
Emerging Markets weighting introduced. The weightings
in Asia Pacific and Europe ex-UK remain at 20% each.
The benchmark provides a transparent way of measuring
the results of an investment policy that is designed
to access a comprehensive range of investment
opportunities in the global economy. The introduction
of emerging markets to the benchmark recognises their
increased importance in the investment universe available
to investors. An increased weighting in North America
(albeit well below that in leading global indices) reflects
the enduring leadership of the US economy in a number of
influential growth sectors (such as information technology
and pharmaceuticals). The benchmark weighting in the
UK has been reduced from 40% to 30%. Although still
high relative to the significance of the UK in the world’s
economy, the UK stock market derives a significant
majority of its earnings from overseas and is the listing
domicile for many globally-significant companies.
The component weightings reflect the Board’s belief that
opportunities are related to the importance of economic
regions as they evolve over time, more than the market
capitalisation of regional equity markets. It should be
emphasised that the portfolio is actively managed and
not designed to track any index or combination of market
indices. Performance can be expected to vary, sometimes
considerably, from that of the benchmark, while aiming
for outperformance in the longer term.
Performance information for other commonly used
indices is also given in the key performance indicators
summary section on page 10 .
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
10
WITAN INVESTMENT TRUST PLC
STRATEGIC REPORT continued
3. Performance and principal
developments in 2016
The financial statements (on pages 62 to 88) set out the
required statutory reporting measures of the Company’s
financial performance. In addition, the Board assesses
the Company’s performance against a range of criteria
which are viewed as particularly relevant for investment
trusts.
Success in implementing the Company’s strategy is
monitored against a range of Key Performance Indicators
(‘KPIs’) which are viewed as significant measures of
success over the longer term. Although performance
relative to the KPIs is also monitored over shorter
periods, success over the long term is viewed as more
important, given the inherent volatility of short-term
investment returns.
Aside from the statutory accounting measures, the
principal financial KPIs are set out below, with a report
(in italics) of Witan’s performance against them during
2016. With respect to non-financial measures, details of
the Company’s policies and performance in relation to its
obligations under the UK Corporate Governance Code are
set out in the Corporate Governance Statement on pages
3 3 to 42 .
Key Performance Indicators
A. Investment performance
Outperformance compared with Witan’s equity benchmark. The Company seeks
to achieve at least 2% p.a. outperformance in NAV total return and shareholder total
return terms over the long term.
In 2016, Witan achieved a NAV total return of 22. 9% , slightly below that of its
combined global equity benchmark (see page 9), with a shareholder total return of
18.4 % which lagged the benchmark by 4.6 % owing to the wider discount. Returns over
the longer term are set out on page 2 and indicate that outperformance has been
achieved over the 3 year (1.7% p.a.) and 5 year (4.6% p.a.) periods to the end of 2016.
A positive long-term total return, after inflation, for shareholders.
In 2016, the NAV total return and shareholder total returns enjoyed by Witan
shareholders were well ahead of inflation of 1.6 % for the year to December 2016.
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 2016, three of the ten third party managers, together with the internally-
managed direct holdings portfolio outperformed their benchmarks, with seven
underperforming. The managers’ returns since appointment are set out in the table on
page 13 . Further details are set out on pages 11 and 1 2 .
B. Annual growth in the dividend per
share ahead of the rate of inflation
In 2016, the dividend increased by 11.8 %, compared with an inflation rate of 1.6 % in
the year to December 2016. Further details are set out on pages 12 and 13.
C. A positive contribution to investment
returns from the use of borrowings
D. A share price trading at a sustainable
low discount (or a premium) to NAV
(including income, with debt at fair
value), taking account of prevailing
investment conditions
E. A competitive level of ongoing
charges, below the costs of other
multi-manager funds, balancing
the need to pay for high quality
investment management with the aim
of keeping the costs of managing the
business as low as possible
The Company employed average gearing of 10.7 % during the year, which directly
contributed 2.3 % to returns. After allowing for the (mostly fixed) costs of borrowing
there was a contribution, after interest, of 1.7 %. Further details are set out on pages
13 and 14 .
The shares traded at an average discount of 5.8 % in 2016, compared with an average
0.1 % premium in 2015. The discount at the year end was 4.0 % (2015: 0.2% discount).
Further details of market conditions and actions taken during the year are set out on
page 15 .
In 2016, the ongoing charges figure (‘OCF’) was 0.7 5% excluding performance fees
(2015: 0.76%) and 0.6 5% including performance fees (2015: 1.04%). This compares
with the average OCF of 1.52% in the Investment Association Global equity funds
sector and 0.71% (0.74% including performance fees) for the AIC Global sector. Further
details are set out on page 16.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
11
Performance summary and attribution
The high equity market returns in 2016 were in contrast
to the previous two years in which returns were little
changed for much of the year and, in the end, only
modestly positive. The US was the strongest of the
major markets, with a 12% return in dollar terms boosted
to 33% in sterling terms. Local currency returns for
the Asia-Pacific (+11%) and Emerging Markets (+13%)
indices translated into strong returns of 32% and 34%
respectively for sterling investors. Japan ( 0% ) and Europe
ex-UK ( +3% ) were little changed in local terms but rose
23% and 20% in sterling terms. The UK’s performance
was competitive with other markets in local terms ( +17% )
but not after currency effects. Within the UK market, the
mid-cap index delivered much lower returns of 7% owing
to its greater exposure to the domestic economy where
investors have become less optimistic following the Brexit
vote.
During the year the Company invested its assets with a
view to spreading investment risk and in accordance with
the investment policy. It maintained a diversified portfolio
in terms of stocks, sectors and geography. The portfolio
has been actively managed by the investment managers,
in accordance with their individual mandates, with overall
asset allocation and risk being managed by the Executive
team, within delegated limits from the Board and the
Company’s AIFM.
Witan’s NAV total return (after all costs) was +22. 9 %,
slightly behind the 23.0 % return from the composite
equity benchmark. Excluding the effect of the rise in
the fair value of Witan’s debt securities, the NAV total
return was 23.5 %, 0.5 % ahead of the benchmark. The
shareholder total return was 18.4 %, as the shares closed
the year on a 4.0 % discount (2015: 0.2% discount).
In a year when market returns were substantially driven
by political and economic events, returns for stock
pickers were more elusive than in recent years. Witan’s
gross underlying portfolio return was 22.1 %, 0.9 %
behind the benchmark. Only three out of our ten third
party managers outperformed their benchmarks (in
contrast to 2015, when eight had outperformed). The
Direct Holdings portfolio also significantly outperformed
Witan’s composite benchmark during the year. However,
the outperformers were not sufficient to offset weaker
performances from other managers, particularly during
the first half of the year.
Significant value was added by Witan’s use of gearing
during the year, which averaged 10.7% but was adjusted
in response to market conditions, with additions to
exposure being made following the market falls in
January and June. The contribution from gearing
(2.3%) was 1.7% after taking account of the Company’s
mostly fixed borrowing costs of 0.6% . Share buybacks
contributed 0.6% to NAV returns, as the Company actively
responded to the widening of the discount. Further details
of the portfolio’s performance attribution are shown in
the table below.
Combined portfolio composition
The sector breakdown and regional exposure for the
aggregated portfolio are shown on page 26 . The top 50
holdings across the combined Witan portfolio are set out
on page 25 . They represented 4 4 % of Witan’s portfolio
at 31 December 2016 (2015: 42%). These analyses
highlight the substantial diversification provided by our
range of managers and the portfolio’s broad geographical
exposure.
It is important that diversification does not unduly dilute
returns, since the purpose of using active managers is to
outperform, which requires the portfolio to differ from
the benchmark. One measure of active management in
a portfolio is known as “active share”. This indicates the
degree to which a portfolio differs from its benchmark,
with a portfolio identical to the benchmark having an
active share of 0% while one with no holdings in common
with its benchmark would have an active share of 100%.
Although looking at active share at a particular date is an
incomplete measure of the degree to which a portfolio
is managed actively (let alone successfully), the active
share of our combined portfolio was circa 70 % at the end
of 2016 (2015: 66%). This level of active share indicates
that, even with the diversifying effects of the multi-
manager structure, Witan’s portfolio retains an active
approach, while relative performance in recent years also
demonstrates that Witan’s aggregated portfolio retains
an individual character distinct from the relevant indices.
A breakdown of the performance attribution in 2016 (based on the Company’s financial statements) is shown in the
table below.
Net asset value total return
Benchmark total return
+22. 9%
+23.0%
Relative performance
-0.1%
Portfolio total return (gross)
Benchmark total return
Relative investment performance
Gearing impact
Effect of changed fair value of debt
Share buybacks
Borrowing costs
Operating costs and tax
+2.3%
-0. 6%
+0.6%
-0.6 %
-0.9 %
+22.1%
+23.0%
-0.9%
+2.3 %
+1. 4%
-1.5 %
-0.1%
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
12
WITAN INVESTMENT TRUST PLC
STRATEGIC REPORT continued
Investment managers’ mandates, benchmarks and investment style
Equity mandate
Investment manager
Benchmark
Investment style
Artemis Investment Management LLP
FTSE All-Share
Recovery/special situations
Heronbridge Investment Management LLP
FTSE All-Share
Intrinsic value growth
UK
UK
UK
Global
Global
Global
Global
Global
Lindsell Train Limited
Lansdowne Partners (UK) LLP
MFS International (UK) Limited
Pzena Investment Management LLC
Tweedy, Browne Company LLC
Veritas Asset Management LLP
Pan-European
Marathon Asset Management LLP
Asia Pacifi c
Directly-held
investments
Matthews International Capital
Management LLC
Witan’s AIFM and Executive team
FTSE All-Share
DJ Global Titans
FTSE All-World
FTSE All-World
FTSE All-World
FTSE All-World
FTSE All-World
Developed Europe
Long-term growth from undervalued brands
Concentrated, benchmark-independent
investment in developed markets
Growth at an attractive price
Systematic value
Fundamental value
Fundamental value, real return objective
Capital cycles
MSCI Asia Pacifi c Free
Quality companies with dividend growth
Witan’s combined
equity benchmark
Collective funds invested in mispriced
or specialist assets, recovery situations
Manager structure and performance
The Company’s third party managers have a range of
investment approaches and follow differing mandates
set by the Company. Details of each manager’s mandate,
benchmark and investment style are shown above.
Further details, including the date of appointment are
shown in the manager summaries on pages 22 to 24 .
All of the third party delegated managers at the end
of 2016 were in place throughout the year. Pzena and
Tweedy, Browne had the strongest performance of our
five global managers, benefiting from a broadening of
investor interest to areas favoured by value managers.
Pzena’s return of 32.7% outperformed its global equity
benchmark by 3.1% , with Tweedy, Browne outperforming
by 0.4% with a return of 30.0 %. Lansdowne ( with a return
of 14.4% ) had a relatively weak year, underperforming
significantly during the first half of the year although
performance was in line with the global equity index
in the second half of the year. In the UK, Heronbridge
outperformed the UK market by 0.7% with a return of
17.5% . However, Artemis and Lindsell Train materially
lagged the UK market, after four years of significant
outperformance. Similarly, our European manager,
Marathon, underperformed its European benchmark,
which was itself weak relative to other global equity
regions. We are always attentive to performance but note
that the longer -term performance of all the managers
who lagged in 2016 remains ahead of their benchmarks
while those who had lagged in 2015 outperformed in
2016.
Directly held investments
In 2016, the Direct Holdings portfolio was 11.5% ahead
of Witan’s composite benchmark with a return of 34.4 %.
This portfolio held 8.7% of assets at the previous year
end and represented 10. 2% of the investment portfolio
at the end of 2016. The largest holding, in SVG Capital,
was sold following the bid for the Company in September.
The holding in BlackRock World Mining delivered a total
return of close to 100% during 2016, moving our position
from loss to a significant profit. We added to the holding
in Aberforth Geared Income Trust following post-
referendum weakness in UK small and midcap companies.
We also made a new investment in the Somerset
Emerging Markets Small Cap fund when emerging market
sentiment was depressed in January 2016 and late in the
year, we made an investment in Syncona (formerly called
BACIT Limited) following the change in its investment
objective to specialist life sciences investment.
The main investments are in listed private equity and
related funds, a UK smaller companies fund and specialist
regional and sector funds.
Dividend policy and performance in 201 6
The Company’s policy (subject to circumstances) is to
increase its dividend per share in real terms, ahead of the
increase in the UK Consumer Price Index (‘CPI’).
The Company’s revenue earnings increased by 19.5%
to 22. 1 pence per share in 2016. This was driven by an
increase in portfolio dividends and by strength in the US
dollar and other overseas currencies relative to sterling.
For 2016, the Board has declared a fourth interim
dividend of 6.25 pence per share, to be paid to
shareholders on 31 March 2017, making a total
distribution for the year of 19.0 pence (2015: 17.0
pence). This represents an increase of 11.8 %, well ahead
of the 1.6 % rate of CPI inflation in the year to December
2016. This is the 42nd consecutive year that Witan has
increased its dividend.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
13
Investment managers’ performance
Investment manager
Artemis
Heronbridge
Lindsell Train
Lansdowne Partners
MFS
Pzena
Tweedy, Browne
Veritas
Marathon
Matthews
Witan Direct Holdings
Value
of Witan
assets managed
at 31.12.16
£m
% of
Witan’s
assets under
management
at 31.12.16
(Note 1)
Performance
in 2016
(%)
Benchmark
performance in
2016
(%)
Performance
since
appointment
(%)
(Note 2)
Benchmark
performance
since
appointment
(%)
181.7
118.7
170.4
229.1
148.8
202.1
66.3
231.3
139.5
240.4
195.5
9.4
6.2
8.9
11.9
7.7
10.5
3.4
12.0
7.3
12.5
10.2
9.1
17.5
10.3
14.4
28.6
32.7
30.0
24.8
13.7
23.7
34.4
16.8
16.8
16.8
32.7
29.6
29.6
29.6
29.6
19.7
25.5
22.9
10.4
11.0
16.0
23.6
13.1
13.8
12.2
14.1
11.0
10.5
10.9
6.1
7.9
9.6
17.3
10.5
14.4
14.4
11.9
9.1
8.6
9.2
Notes:
1. Percentage of Witan's investments managed and cash balances held centrally by Witan.
2. The percentages are annualised where the date of appointment was more than one year ago.
Since 2006, Witan’s dividend per share has more than
doubled, rising 107 % compared with 25 % for the UK CPI.
In addition to increasing the dividend, the Company has
added £6. 5m to its revenue reserves. At £5 4.7m after
allowing for 2016’s fourth interim dividend payment, the
reserves are equivalent to approximately 30 pence per
share, over one and a half times the annual dividend.
The availability of these reserves enables the Company
to maintain or grow its dividends in years when revenue
from the portfolio is less buoyant, or falls.
The chart below shows the growth in dividends over the
past 10 years, which has been ahead of the rise in the UK
CPI in each year.
Witan’s dividend per share compared with the UK
Consumer Price Index
21.0
17.0
13.0
9.0
220
180
140
100
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Witan dividend in pence per share (left scale)
CPI index (right scale)
Source: Datastream
The Company pays dividends quarterly. The first three
payments for 2017 (in June, September and December)
will, in the absence of unforeseen circumstances, be
paid at a rate of 4.75 pence per share (2016: 4.25
pence), being one quarter of the full year payment for
2016. The fourth payment (in March 2018) will be a
balancing amount, reflecting the difference between the
three quarterly dividends already paid and the payment
decided for the full year.
Policy on gearing and the use of derivatives
Employment of gearing
Purpose
The purpose of using borrowings is to improve (or
“gear/leverage”) returns for shareholders, by achieving
investment returns higher than the interest cost of the
borrowings. Accordingly, attention is paid to using a level
of gearing appropriate for market conditions (having
more borrowings when markets are attractively valued
and borrowing less at times when returns are expected to
be poorer). In addition, a blend of long-term and short-
term borrowings is used, to balance the certainty of cost
associated with locking in fixed rates for longer periods
with the flexibility of using short-term facilities which can
be readily repaid when they are not required.
Limits
Although the Company has the legal power under its
Articles of Association to borrow up to 100% of the
adjusted total of shareholders’ funds (which is also the
maximum level of leverage set by its AIFM), this is subject
to practical constraints including a test of prudence. The
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
14
WITAN INVESTMENT TRUST PLC
STRATEGIC REPORT continued
Board’s longstanding policy is not to allow gearing (as
defined on page 3) to rise to more than 20%, other than
temporarily in exceptional circumstances. Over the past
five years it has generally varied between 5% and 15%
and where appropriate the Company may hold a small net
cash position.
Structure
Following the repayment of the Debenture in 2016, the
Company’s fixed-rate borrowings reduced from £185m
to £140m, principally consisting of £6 3m 2025 6. 125%
Secured Bonds, £21m 2035 3.29% Private Placement
Notes and £54m 2045 3.47% Private Placement Notes.
The average interest rate paid on the Company’s fixed-
rate borrowings is 4.6%. At the year end, the Company
also had a £75 m one-year facility, providing additional
flexibility over the level of gearing, as well as enabling
the Company to borrow in currencies other than sterling,
if deemed appropriate. Witan may either invest its
borrowings fully, or neutralise their effect with cash
balances (or the sale of equity index futures) according
to its assessment of the markets. The Company’s third
party managers are not permitted to borrow within their
portfolios but may hold cash if deemed appropriate.
Action taken in 2016
The Company repaid the 8.5% Debenture stock at the end
of its 30 year life, in October 2016. This scheduled event
had been taken into account in 2015 when the Company
issued £75m in 20 and 30 year Private Placement Notes,
at an average yield of 3.4%.
The size of the Company’s short-term facility was
increased to £75m in October 2016. At the end of
December, the drawn balance on this facility was £71m
(2015: £3m). Since the year end, this facility has been
increased to £125m.
Gearing was adjusted periodically during the year. It was
increased in January, when markets had fallen, reduced
in March following a recovery in market levels before
being increased into the market weakness surrounding
the Brexit referendum, as market setbacks created
opportunities. Gearing was 10.7% at the end of 2015,
12.2% mid-year and 10. 3 % at the end of 2016. The
calculation of gearing takes account of cash balances and
the full nominal value of any derivatives held, since this
represents the size of the asset or liability to which the
derivative provides exposure.
Gearing benefited performance during the year. The
estimated contribution of 2.3 % of shareholders’ funds
was particularly important during a year when our third
party managers performed less well and was greater
than the interest costs borne (0.6%), although the
majority of the finance cost is fixed and would have been
incurred irrespective of whether the funds were invested.
Following the repayment of the Debenture, greater use
was made of the short-term facility, to fund investments
and share buybacks.
At the end of 2015, gross gearing (adding together
the value of all positions (less cash), irrespective of
whether they were an asset or a liability) was 10.7%. This
included £37m in index futures (FTSE 100 £23m and
MSCI Emerging Markets £14m) equivalent to 2.4% of net
assets. Gearing excluding this was 8.3%.
At the end of 2016, gross gearing (on the same basis)
was 10. 3 %. This included £21m in MSCI Emerging Markets
index futures equivalent to 1.2% of net assets. Gearing
excluding this was 9. 1 %. Further details of the accounting
treatment for these positions are given in note 1 on
page 68 .
Use of derivatives
Policy
Witan’s policy on the use of derivatives emphasises
simplicity, transparency, cost effectiveness and the
minimisation of counterparty risk. Where financial
instruments are available that help the Company to
implement its investment policy (whether for the purpose
of increasing exposure to a particular asset or for
portfolio hedging) their use will be considered. In recent
years, exchange-traded index futures have been the only
instruments used. These give exposure to a particular
market index, are relatively liquid to trade and depend
upon the creditworthiness of the particular exchange, not
an individual firm. The value of the investments (which
are traded on official exchanges) is fully marked to market
every day.
The use of index futures enables Witan to adjust its
gearing rapidly, helping investment flexibility. It also
provides a means of changing asset allocation (by
directing investment to particular markets). In both
cases index futures enable the adjustments to be made
without interfering with the assigned objectives for our
investment managers, which are to pick stocks that
will grow in value over the medium to long term and
outperform their respective benchmarks. The operation
of this investment area is the responsibility of the AIFM,
acting under guidelines set by the Board. Transactions
are reported to the Board promptly, with the CEO and
AIFM being accountable for the financial results. The
Company’s third party managers are not generally
permitted to use derivatives and may not gear their
portfolios.
Activity during 2016
In February and March, the holding in FTSE 100 index
futures was sold, reducing our UK exposure by 1.5% of
assets in favour of allocations to overseas markets.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
15
Approximately 2% of assets was invested into Japanese
equity index futures in the spring, following a weak period
of performance by the Tokyo market, when sentiment was
depressed by strength in the yen. This position was sold
down and closed towards the end of 2016, following a
recovery in the market, catalysed by weakness in the yen
following the US election.
In March 3% of assets was invested in MSCI Emerging
Markets Index futures, in order to maintain exposure
following the sale of the Trilogy Emerging Markets fund
investment. This position was reduced into periods of
emerging market strength later in the year.
The realised gain on index futures during the year is
shown in the cash flow statement on page 65 .
Witan’s shares in the market – liquidity and discounts
Witan is a member of the FTSE 250 index, with a market
capitalisation of over £1. 7 billion. The Board places
great importance on the encouragement of a liquid
market in Witan’s shares on the London Stock Exchange.
Considerable effort is devoted to communicating Witan’s
objective and performance clearly to shareholders
and potential investors. There is a wide range of firms
and online investment platforms through which the
Company’s shares may be held and the Company’s
subsidiary Witan Investment Services Limited also
operates a savings plan for investing in Witan shares,
details of which are described on page 93 .
Whilst delivery of sound investment performance remains
the principal focus of the Board, it also pays attention
to discount-related issues. The Company has, over
many years, made significant use of share buybacks,
purchasing shares when they have stood at an unduly
wide discount (to the NAV taking debt at fair value). In
addition to being accretive to NAV, this had the objective
of reducing the discount. Over 49% of our shares were
repurchased between 1998 and 2013.
Witan Investment Trust discount trend
5.0
0.0
-5.0
-10.0
-15.0
5.0
0.0
-5.0
-10.0
-15.0
2011
2012
2013
2014
2015
2016
5 day average
3m average
1 year average
Source: Datastream
The discount trend since 2012 is illustrated in the chart
above. Although Witan’s shares ended 2016 on an all-
time high, they did not fully match the rise in NAV during
the year. After trading at a premium for much of 2015,
the Company’s shares moved to a discount during 2016,
ending the year on a discount of 4.0 %. The discount
was initially prompted by the market’s realisation that a
subsidiary of Aviva (which had taken over management of
an insurance business which held a number of investment
trust stakes) was seeking to sell its investment trust
holdings, including a 16% holding in Witan. This selling
helped push Witan’s and other discounts in the sector to
wider levels than seen in recent years. Witan proposed
to buy back the entire Aviva stake at a 6.5% discount
and, having obtained shareholders’ permission to do so,
purchased approximately 7% of the shares outstanding
in late May, the balance having been placed with other
investors. Shortly thereafter, the UK Brexit vote ushered
in a period of investor uncertainty when investment trust
discounts widened further.
Witan bought back shares regularly during the year,
starting when a low discount first became persistent
in February and at wider discounts throughout the
summer and autumn, in accordance with our objective
for Witan’s shares (subject to market conditions) to trade
at a sustainable low discount (or a premium) to NAV. In
total, 18.9m shares were bought into treasury at a cost
of £143m , resulting in an uplift of £9.2m to net assets,
equivalent to a boost of 0.6% in the NAV per share. Our
principal objective is to grow the NAV and dividend per
share rather than assets under management. We have no
conflict in buying back shares when there is a persistent
discount, as the process is accretive for shareholder value.
Discounts are affected by many factors outside the
Company’s control but where it is in shareholders’
interests, (taking account of market conditions) the
Company remains prepared to buy back shares at a
discount to NAV or to issue shares at a premium .
It remains a long-term objective to create sustainable
liquidity in Witan’s shares at or near to asset value
subject to general market conditions. We believe that
our proactive steps during 2016 are evidence of our
commitment in this area.
Marketing
For an investment trust the purpose of marketing
is to communicate the Company’s strategy and new
developments effectively to existing and potential
shareholders, to ensure they are properly informed of
our performance as stewards of their capital/savings
and to help sustain a liquid market in our shares. Clear
communication of the Company’s investment objective
and its success in executing its strategy makes it easier
for investors to decide how Witan fits in with their own
investment objectives. Other things being equal, this
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
16
WITAN INVESTMENT TRUST PLC
STRATEGIC REPORT continued
should help the shares to trade closer to NAV, from
which all shareholders benefit. If the shares trade on a
premium, this creates the possibility of increasing the size
of the Company to meet market demand by issuing new
shares, with benefits in terms of greater liquidity as well
as spreading costs. When the shares are on a discount,
there is an opportunity to create shareholder value by
buying back shares.
In view of these potential benefits, the Company has for
many years operated a marketing programme in order to
disseminate information about our investment strategy
and performance more widely. We communicate with
private and professional investors, financial advisers and
intermediaries using a range of media (including direct
meetings, press interviews and advertising through
traditional media and the internet). The Company also
provides an informative and easy to use website
(www.witan.com), to enable investors to make informed
decisions about including Witan shares in their investment
portfolios. The website, which was redesigned in 2016, is
regularly refreshed with new information and includes a
section focused on the requirements of financial advisers
as well as an investor disclosure document required by
the AIFMD and information about the Witan Wisdom
and Jump savings schemes operated by the Company’s
subsidiary, Witan Investment Services Limited.
Costs
Investment management fees
Each of the third party managers is entitled to a base
management fee rate, levied on the assets under
management . In some cases, a performance fee may be
payable, calculated according to investment performance
relative to an appropriate benchmark. Four managers,
covering 33% of Witan’s portfolio, have performance-
related fees. They have lower base fees than the
managers without performance-related fees.
The agreements can be terminated on one month’s notice
(except one, for which three months’ notice applies). The
base management fee rates for managers in place at the
end of 2016 ranged from 0.2% to 0.8% per annum. The
average base management fee, weighted according to
the value of the funds under management, was 0.49 %
as at 31 December 2016 (2015: 0.49%). Across the third
party managers the average performance fee (with
performance fees ranging from nil to 20% of the relevant
outperformance) is 5% of the outperformance of the
relevant benchmark (2015: 6%), subject to capping of
payments for any particular year.
As an illustration, if our managers uniformly
outperformed their benchmarks by 3% after base
management fees, this would generate a performance
fee of 0.15% of net assets, giving total investment
management fees of 0.64% (including a 0.49% base fee).
The comparable estimate in 2015 was 0.66%. The actual
fees payable will of course vary according to the level of
performance and the variation in performance between
managers with higher or lower fees.
Witan takes care to ensure the competitiveness of the fee
rates it pays and that where higher fees are incurred they
are linked to good performance, from which shareholders
benefit. A majority of the managers have base fees alone
(without performance fees) and a majority of the fee
structures incorporate a “taper” whereby the average fee
rate reduces as the portfolio grows.
The Company’s investment managers may use certain
services which are paid for, or provided by, various
brokers. In return, they may place business, including
transactions relating to the Company, with those brokers.
Ongoing charges and costs
The ongoing charges figure (‘OCF’) (which is the recurring
operating and investment management costs of the
Company, expressed as a percentage of average net
assets) was 0.7 5 % in 2016 (2015: 0.76%). Increased
investment management costs (arising from the growth
on net assets) were offset by a rise in the average level
of net assets, while other expenses were little changed.
When performance fees due to the relevant third party
managers are included, the OCF was 0.6 5 % in 2016
(2015: 1.04%). The lower figure including performance
fees for 2016 arises because accruals for performance
fee liabilities at the end of 2015 were reduced owing to
some external managers’ underperformance in 2016.
For comparison, the average OCF for 2016 was 1.52% in
the Investment Association Global equity funds sector
(source: IA, Morning star) and 0.71% (0.74% including
performance fees) for the AIC Global sector (source:
Morningstar).
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
17
Category of cost
Other expenses (excluding investment management
expenses)
Less expenses relating to the subsidiary
(whose expenses do not relate to the operation of the
investment company).
Investment management base fees (note 4, page 70)
Ongoing Charges Figure
(including investment management base fees)
Investment management performance fees (note 4,
page 70)
Ongoing charges (including performance fees)
Portfolio transaction costs
Relative performance during the year
(valuing debt at fair value)
2016
% of
average net
assets
2016
£m
2015
% of
average
net assets*
2015
£m
5. 21
0.3 3
5.41
0.36
(0.89)
7.62
(0.06)
(0. 84)
0.48
6.99
(0.0 6)
0.46
11.94
0.7 5
11. 56
0.76
(1.46)
10. 48
2.00
4. 30
15. 8 6
1.75
(0.10)
0.6 5
0.12
-0. 1%
0.28
1.04
0. 12
+2.9%
*
2015 OCF % figures have been restated to reflect a revised number for average net assets during 2015. The cash numbers remain the same as in the
2015 Annual Report.
The Company exercises strict scrutiny and control over
costs. This will not always result in the lowest absolute
costs, since the Board believes that it is in shareholders’
interests to pay for managers who add value. The Board
believes that the OCF during the year represented good
value for money for shareholders, taking account of
recent and longer-term performance.
There is continuing debate over the most appropriate
measure of investment company costs, to enable
investors to assess value for money and to make
comparisons between funds. Consensus on how best to
present a single figure for costs remains elusive, partly
because of concerns that oversimplification might distort
comparisons rather than facilitating them.
In the meantime, the Company will continue to focus on
the OCF (which is prepared in accordance with the AIC’s
recommended methodology) as a readily-understood
measure of the underlying expenses of running the
business. As in previous years, the information on costs
is presented in a single table above. This indicates the
main cost headings in money terms and as a percentage
of net assets. The figures for relative NAV total return
performance are also included, for comparison purposes.
Priorities for the year ahead
In 2017, the key priorities for Witan include:
➜ Investment. Seek to build on the good returns
achieved for shareholders in recent years, setting
an appropriate strategic asset allocation to reflect
changing opportunities in the world economy.
Make use of a range of active managers to deliver
our strategic objectives through a multi-manager
structure. Continue to deliver dividend growth ahead
of inflation;
➜ Communication. Communicate Witan’s distinct
and active investment approach and achievements
effectively to existing and potential shareholders.
Continue to increase the focus on improving
information for personal investors and financial
advisers, where direct meetings are less practicable;
➜ Regulatory change. Continue to operate risk and
investment management processes in compliance
with the AIFMD, liaising closely with the Company’s
AIFM, Witan Investment Services Limited. Ensure
compliance with other regulatory changes ;
➜ Client service. Provide good service to the corporate
and individual clients of Witan Investment Services
Limited.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
18
WITAN INVESTMENT TRUST PLC
STRATEGIC REPORT continued
4. 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’) which acts as the Company’s
AIFM.
Operational management arrangements
In addition to the appointment of delegated investment
managers, Witan and WIS contract with third parties for
the supporting services required, including:
➜ BNP Paribas Securities Services London Branch
for global depositary services, custody, investment
accounting and administration;
➜ Frostrow Capital LLP for company secretarial services;
➜ International Financial Data Services Ltd. (‘IFDS’) as
the WIS savings plan administrators of Witan Wisdom
and Jump Savings;
➜ Specialist advisers used for investment manager
research;
➜ The Company also takes specialist advice on
regulatory compliance issues and, as required,
procures legal, investment consulting, financial and
tax advice.
As with investment management, the contracts governing
the provision of these services are formulated with legal
advice and stipulate clear objectives and guidelines for
the level of service required.
Premises and staffing
Since November 2005 the Company has had a lease on
office premises at 14 Queen Anne’s Gate, London SW1H
9AA, which is also the Company’s registered office.
The current lease has a 5 year term, commencing in
October 2015.
The Company’s policy towards its employees is to attract
and retain staff with the particular skills and expertise
required to manage the affairs of an investment trust
company. Details of the Company’s remuneration policies
and required disclosures are set out in the Directors’
Remuneration Report on pages 45 to 55. Employees
and those who seek to work within the Group are treated
equally regardless of sex, marital status, creed, colour,
race or ethnic origin. The Company has seven direct
employees, four men and three women. The Board
currently consists of eight non-executive directors (six
men and two women) and the Chief Executive Officer,
Andrew Bell, who is an employee. Given its outsourced
model and small number of direct employees, the Group
has no specific policies in respect of environmental or
social and community affairs.
Witan Investment Services Limited (‘WIS’)
WIS is a wholly-owned subsidiary of Witan Investment
Trust plc (‘Witan’). It is authorised and regulated by the
Financial Conduct Authority (‘FCA’).
It was established in March 2005 to provide investment
savings accounts and marketing services and to give
investment advice to professional investors. Since July
2014 WIS has acted as the Company’s AIFM to fulfil the
requirements of the AIFMD.
In addition to its responsibilities as Witan’s AIFM, WIS’s
principal activities are to provide executive management
services to the Boards of Witan and Witan Pacific
Investment Trust plc (‘Witan Pacific’), to communicate
information about the companies to the market to
increase investor interest in their shares and to operate
cost-effective savings plans for investors to hold the
shares.
WIS’s operational objectives for 2017 are:
➜ to fulfil its investment and risk management
responsibilities as Witan’s AIFM;
➜ to provide a reliable and efficient investment savings
platform for Witan and Witan Pacific investors;
➜ to provide suitable advice to the Boards of its
corporate clients;
➜ to reduce the net operating costs for Witan; and
➜ to seek appropriate business opportunities that can
add value for shareholders.
WIS has two principal sources of income. These are
savings plan revenues and the fees (as AIFM or Executive
Manager and for marketing services) paid by its corporate
clients, Witan and Witan Pacific. The main costs incurred
by WIS are fees to the savings schemes administrator
(IFDS), staff costs to provide the services described above
and professional advice to ensure that its regulatory and
accounting obligations are properly satisfied.
The savings plans provided for WIS clients are marketed
under the Witan Wisdom and Jump Savings brands. They
currently have over 2 2,000 accounts with assets of some
£ 401 million invested.
Principal risks and uncertainties
The directors have carried out a robust assessment of the
principal risks facing the Company, including those that
would threaten its business model, future performance,
solvency or liquidity. These risks, and the actions taken to
mitigate them, are set out on pages 19 and 20.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
19
Risks are inherent in investment and corporate
management but it is important that their nature
and magnitude are understood, in order that risks,
particularly those which the Company does not wish to
take, can be identified and either avoided or controlled.
In accordance with the provisions of the AIFMD, WIS
has a Risk Committee in order to comply with its risk
management and reporting obligations as Witan’s AIFM.
The Company has established a detailed framework of the
key risks impinging on the business as set out below, with
associated policies and processes devised to mitigate or
manage those risks. This risk map is reviewed regularly by
the Audit Committee along with the WIS Risk Committee,
which report on issues arising to their respective boards,
for action as necessary. The guiding principles remain
watchfulness, proper analysis, prudence and a clear
system of risk management.
Where appropriate, the Witan and WIS Boards meet
jointly to cover matters of common interest. The WIS
Board consists of seven non-executives and one
executive director who are also directors of Witan, and
one executive director who is a Company employee.
The Group’s key risks fall broadly under the following
categories:
Market and investment portfolio risks
Witan is set up to invest in UK and overseas equity
markets on behalf of its shareholders. Equity exposure
is unlikely to drop below 80% of net assets, in normal
conditions. Therefore a key risk of investing in Witan is a
general fall in equity prices, which could be exacerbated
by gearing. Other risks, as with any international equity
portfolio, are the investment portfolio’s exposure to
country, currency, industrial sector and stock specific
factors. There are also risks associated with changes in
Witan’s share price discount or premium to NAV and the
performance of its investment managers.
The Board seeks to manage these risks through:
➜ appropriate asset allocation decisions, with a broadly
diversified equity benchmark;
➜ manager diversification and regular reviews of the
managers’ competence;
➜ attention to key economic and political events
affecting the global stock market outlook;
➜ active management of risk, whether to preserve
capital or capitalise on opportunities;
➜ the application of relevant policies on gearing and
liquidity; and
➜ the use of share buybacks and issuance to respond to
market supply and demand.
During the year, Andrew Bell (the Chief Executive Officer
(‘CEO’) managed the overall business and the investment
portfolio in accordance with limits and restrictions
determined by the Board and its AIFM. The Board
regularly reviews the matters delegated to Executive
management, on which the CEO reports at each Board
meeting. The Board also regularly reviews investment
strategy and performance, supported by comprehensive
management information including investment
performance data and financial reports.
Operational
Many of the Group’s financial systems are outsourced to
third parties, principally BNP Paribas Securities Services
(‘BNPSS’). Disruption to the accounting, payment systems
or custody records operated by BNPSS could prevent
the accurate reporting and monitoring of the Company’s
financial position. BNPSS as the Company’s depositary
has a key responsibility for monitoring such issues on
behalf of the Company and WIS, its AIFM. IFDS acts as the
Administrator for the Witan Wisdom and Jump Savings
Plans so the effectiveness of their systems and controls
is key for the efficient operation of those plans. Details
of how the Board monitors the services provided by its
suppliers, and the key elements designed to provide
effective internal control, are explained further in the
Corporate Governance Statement on pages 41 to 42.
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 3 3 to 42 . The
Board conducts an annual internal assessment of the
effectiveness of its governance processes in managing
the Company and enabling it to evolve in response
to future challenges. There is also a three-yearly
independent external review, the most recent of which
was conducted in late 2016. See page 37 for further
details.
Operational and regulatory risks are regularly and
extensively reviewed by Witan’s Audit Committee, in
conjunction with WIS’s Risk Committee. WIS is subject to
its own operating rules and regulations and is authorised
and regulated by the FCA. Since becoming the AIFM
for Witan, WIS has become more closely involved in
a wide range of Witan’s operations. The Company
has established a modus operandi for the effective
coordination of these responsibilities, which has been
adapted to ensure full compliance with the AIFMD’s
requirements without duplication of effort and will
continue to be adapted in the light of experience.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
20
WITAN INVESTMENT TRUST PLC
STRATEGIC REPORT continued
Operationally the multi-manager structure is robust, as
the investment managers, the custodian and the fund
accountants keep their own records which are regularly
reconciled. The depositary, AIFM and the Board provide
additional checks and risk management safeguards.
Management monitors the activities of all third parties
and reports any significant issues to the Board.
Accounting, legal and regulatory
In order to qualify as an investment trust the Company
must comply with sections 1158-59 of the Corporation
Tax Act 2010 (‘CTA’). A breach of these sections could
result in the Company losing investment trust status
and, as a consequence, capital gains realised within the
Company’s portfolio would be subject to Corporation
Tax. The criteria are monitored by the CEO and AIFM
and reviewed at each Board meeting. The Company also
carefully and regularly monitors compliance with the
accounting rules affecting investment trusts.
The Company is required to comply with the provisions of
the Companies Act 2006 (‘Companies Act’), and also with
the UK Listing Authority’s Listing Rules and Disclosure
Guidance and Transparency Rules (‘UKLA Rules’). A
breach of the Companies Act could result in the Company
and/or the directors being fined or becoming the subject
of criminal proceedings. Breach of the UKLA Rules could
result in the suspension of the Company’s shares which
would in turn lead to a breach of the provisions of the
CTA.
These legal and regulatory requirements offer significant
protection for shareholders. The Board relies on the
CEO, the AIFM, the Company Secretary and the Group’s
professional advisers to ensure compliance with all
applicable rules. WIS is authorised and regulated by
the FCA to act as the AIFM for Witan, for the marketing
and administration of savings plans and the provision of
investment advice to professional clients.
Liquidity
The Company’s portfolio consists mainly of securities
that are readily realisable. The Company and its AIFM
regularly review possible liquidity needs (for example to
cover operational costs, loan servicing and repayment,
shareholder dividends and share buybacks) relative to
the Company’s portfolio income and the significance of
possible liquidity calls relative to the value and tradability
of the Company’s assets. Given that most of the likely
liquidity requirements are readily foreseeable (for
example, loan payments and dividends are timetabled),
while others (such as share buybacks) are subject to
the Company’s discretion, the Board is satisfied that
unexpected liquidity needs are not significant relative to
the size of the Company’s portfolio and that they could
be readily met without compromising normal portfolio
management practice.
Viability statement
In accordance with the 201 4 UK Corporate Governance
Code, the Board has assessed the prospects of the
Company over a longer period than the 12 months
required by the ‘Going Concern’ provision. The provisions
require the Board to explain, taking account of the
Company’s current position and principal risks, how they
have assessed its prospects and over what period and
why they consider that period to be appropriate. The
directors must state whether they have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the
period of their assessment.
The Company’s current position and prospects are set
out in the Chairman’s and Chief Executive’s Report and
the Strategic Report. The principal risks are set out on
pages 18 to 20 . The Board has considered the Company’s
financial position and its ability to liquidate its portfolio
and meet its expenses as they fall due and notes the
following:
➜ The portfolio consists of investments traded on major
international stock exchanges and there is a spread of
investments by size of company. In normal conditions,
the current portfolio could be liquidated to the extent
of more than 85 % within 5 trading days and there is
no expectation that the nature of the investments
held within the portfolio will be materially different in
future;
➜ The closed-ended nature of the Company means that,
unlike an open-ended fund, it does not need to realise
investments when shareholders wish to sell their
shares;
➜ The Board has considered the viability of the Company
under various scenarios and concluded that it would
usually be able to take appropriate action to protect
the value of the Company’s assets. As set out in
note 14 to the accounts, the Board has considered
price risk sensitivity (the sensitivity of the profit
after taxation for the year and the value of the
shareholders’ funds to changes in the fair value of the
Group’s investments) and foreign currency sensitivity
(the sensitivity to changes in the exchange rates for
the £/US dollar, £/Euro and £/Japanese yen;
➜ In addition to its cash balances, which were £5 0. 6m at
31 December 2016 (2015: £57.6 m ), the Company has
a short -term bank facility which can be used to meet
its liabilities, and fixed-rate financing in the form
of Secured Bonds, Secured Notes and cumulative
preference shares. With the exception of the short -
term facility, this financing will remain in place until
at least 2025. Details of the Company’s non-current
liabilities are set out in note 13 to the accounts;
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
21
➜ The expenses of the Company are predictable and
Approval
This report was approved by the Board of Directors on
9 March 2017 and is signed on its behalf by:
H M Henderson
Chairman
9 March 2017
A L C Bell
Chief Executive
modest in comparison with the assets and there are
no capital commitments currently foreseen which
would alter that position.
As well as considering the principal risks on pages 18
to 20 and the financial position of the Company, the
Board has taken account of the following assumptions in
considering the Company’s longer-term viability:
➜ The Company’s remit of investing in the securities of
global listed companies will continue to be an activity
to which investors will wish to have exposure;
➜ Investors will continue to want to invest in closed-
ended investment trusts;
➜ The performance of the Company will continue to be
satisfactory. The Board is able to replace any of the
current investment managers when it considers it
appropriate to do so;
➜ The Company will continue to have access to adequate
capital when required;
➜ The Company will continue to be able to fund share
buybacks when required. The Company bought back
18.9m ordinary shares in 2016 at a cost of £143m
and experienced no difficulty with having sufficient
liquidity to do so. It had shareholders’ funds in excess
of £1.7bn at the end of 2016.
Based on the results of its review, and taking into
account the long-term nature of the Company and its
financing, the Board has a reasonable expectation that
the Company will be able to continue its operations and
meet its expenses and liabilities as they fall due for the
foreseeable future, taken to mean at least the next five
years. The Board has chosen this figure in view of the
fact that whilst it has no information to suggest this
judgement will need to change in the coming five years,
forecasting over longer periods is imprecise. The Board’s
long-term view of viability will of course be reviewed
each year in the Annual Report.
Going concern
In light of the conclusions drawn in the foregoing Liquidity
and Viability Statements, the Company has adequate
financial resources to continue in operational existence
for at least the next 12 months. Therefore, the directors
believe that it is appropriate to continue to adopt the
going concern basis in preparing the financial statements.
In reviewing the position as at the date of this report, the
Board has considered the guidance on this matter issued
by the Financial Reporting Council.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
22
WITAN INVESTMENT TRUST PLC
INVESTMENT MANAGERS
The investment managers’ summaries of their businesses are set out below.
Artemis Investment Management - UK
Lindsell Train - UK
Established in 1997, Artemis Investment Management Limited
manages over £2 4.5bn (as at 31.12.1 6) on behalf of a range of
retail and institutional clients. Witan’s portfolio is a segregated
mirror of Derek Stuart’s £1. 8bn UK Special Situations Strategy
launched in 2001 - a contrarian strategy that aims to outperform
the FTSE All–Share Index by 3% per annum. This approach seeks
to exploit market ineffi 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
06.05.08
situations
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 fi rm to achieve strong investment results for their
clients. Lindsell Train thinks 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 £ 8.87bn (as at
31.12.1 6). 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 fi rm was
founded.
Equity Mandate
UK
Investment style
Benchmark
FTSE All-Share Long-term growth
from undervalued
brands
Inception date
01.09.10
Heronbridge Investment Management LLP
Lansdowne Partners (UK) LLP
Heronbridge is a long–only, value–biased equity investment
management boutique. Founded in November 2005, it is a small,
focused, independent fi rm, controlled by its working partners
who were previously with Merrill Lynch Investment Managers
and Silchester International Investors. Heronbridge currently
manages £1. 6bn (as at 31.12.1 6) for institutional and charity
clients in the UK, the US and elsewhere. In order to maximise the
alignment of interests, the fi rm’s partners have capped the size of
the investment programme and 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
17.06.13
growth
Lansdowne Partners (founded in 1998) manages assets for
a diversifi ed client base that includes some of the world’s largest
and most sophisticated investors. Assets under management
are £14. 8bn (as at 31.12.1 6) across multiple equity investment
strategies; European, Developed Markets, Global Financials and
Global Energy, each with its own dedicated team of portfolio
managers and analysts. Lansdowne Partners employs over 100
people in its London offi 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 bottom-up research. The Developed Markets
Strategy is managed by Peter Davies and Jonathan Regis , who
have been with Lansdowne Partners since 2001 and 2003
respectively and who have worked together for over 20 years.
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 Concentrated,
14.12.12
benchmark–
independent
investment in
developed markets
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
23
MFS Investment Management
Tweedy, Browne Company LLC
MFS Investment Management is a global investment manager
with capabilities spanning all major asset classes. MFS actively
manages £345.3 bn for clients in 30 countries (as at 31.12.16).
As an active, global investment manager MFS has investment
professionals developing on-the-ground perspectives of local
companies from its offi ces in Boston, Hong Kong, London,
Mexico City, São Paulo, Singapore, Sydney, Tokyo, and Toronto.
MFS’ investment teams use both fundamental and quantitative
research techniques to construct portfolios designed to meet
client expectations. MFS employs a disciplined, consistent
approach across a global investment platform, which is guided by
three core principles: integrated research, global collaboration,
and active risk management; MFS integrates fundamental equity,
quantitative, and credit disciplines in each of its eight global
sector teams as it looks at investment opportunities around
the globe for its clients; the MFS team philosophy and incentive
structure promote strong collaboration across the fi rm; and MFS
takes a holistic approach to actively managing risk, with multiple
reviews in place at the security, portfolio, and enterprise levels.
MFS is a majority-owned subsidiary of Sun Life of Canada (U.S.)
Financial Services Holdings, Inc., which in turn is an indirect
majority-owned subsidiary of Sun Life Financial, Inc. (a diversifi ed
fi nancial services organization). MFS has been a subsidiary of Sun
Life since 1982.
Equity Mandate
Benchmark
Investment style
Inception date
Global
FTSE All–World Growth at an
30.09.04
attractive price
Pzena Investment Management
Pzena Investment Management is a global, institutional
investment manager with a strict focus on long–term classic
value investing. The fi rm was founded in late 1995 and began
managing assets on 1 January 1996. Pzena manages $ 30bn
(as at 31.12.1 6) in assets for leading endowments/foundations
and pension plans and for individual investors from around the
world. Pzena’s team has grown to approximately 100 employees.
The fi rm is based at its headquarters in New York City and has
offi ces in Melbourne, Australia and in London, United Kingdom for
business development and client service.
Equity Mandate
Benchmark
Investment style
Inception date
Global
FTSE All–World Systematic value
02.12.13
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
fi 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, fi 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 95 years, through depressions, recessions, and
stock market cycles, through a quadrupling of interest rates and
the advent of double digit infl 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 confi rmed their confi dence in this approach. Tweedy Browne
has £ 13.2bn (as at 31.12.1 6) of assets under management.
Equity Mandate Benchmark
Investment style
Inception date
Global
FTSE All–World Fundamental value 02.12.13
Veritas Asset Management
Veritas is an affi liate of AMG Group, managing £1 3.8bn (as
at 31.12.1 6) 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 UK operating
company of the Veritas Asset Partners Limited group, of which
Veritas Asset Management (Asia) Limited in Hong Kong is also
a subsidiary. In 2014 Veritas Asset Management LLP partnered
with AMG Group. AMG has a stake in a number of investment
boutiques and is quoted on the NYSE.
Equity Mandate Benchmark
Investment style
Inception date
Global
FTSE All–World Fundamental
11.11.10
value, real return
objective
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
24
WITAN INVESTMENT TRUST PLC
INVESTMENT MANAGERS continued
Marathon Asset Management
GQG Partners LLC
Marathon Asset Management was founded in 1986 and is totally
independent, managing some £ 43.4bn (as at 31.12.1 6) 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 industry standards, long stock holding periods.
GQG Partners LLC is an independent, employee-owned
investment boutique formed in June of 2016 by Rajiv Jain. As of
31.12.16, the fi rm managed £615 million for clients across three
products: Global, International and Emerging Markets equities.
GQG Partners employs a quality growth approach to investing
with an investment horizon of 5 years or longer. The portfolios are
managed in a concentrated, benchmark agnostic fashion with a
long term goal of outperforming the market at lower than market
risk levels.
GQG was appointed with effect from 16 February 2017.
Equity Mandate
Benchmark
Investment style
Inception date
Equity Mandate
Benchmark
Investment style
Inception date
Emerging Markets MSCI Emerging
Pan– European
FTSE All–World
Developed
Europe
Capital cycles
23.07.10
Markets
16.02.17
Investment in high
quality companies
with attractively
priced future
growth prospects
Matthews International Capital Management
(Matthews Asia)
Matthews Asia, an independent, privately owned fi rm based in
San Francisco, is the largest dedicated Asia-only investment
specialist in the U.S. Matthews has £ 19.9bn (as at 31.12.1 6)
in assets under management. 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 Pacifi c
MSCI Asia
Pacifi c Free
Quality companies
with dividend
growth
20.02.13
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
FIFTY LARGEST INVESTMENTS
at 31 December 2016
Market value of
Company
1 Comcast
2 Princess Private Equity
3 London Stock Exchange
4 BlackRock World Mining
5 Apax Global Alpha
6 Diageo
7 JP Morgan Chase
8 Syncona
9 Alphabet
10 BT
11 Relx
12 Unilever
13 Vonovia
14 Schroders
15 Daily Mail & General
16 Sage
17 Pearson
18 Charter Communications
19 Lloyds Banking
20 Delta Air Lines
21 Oracle
22 Taiwan Semiconductor Manufacturing
23 Barclays Bank
24 Amazon
25 Walt Disney
Top 25
26 Aberforth Geared Income
27 Somerset Emerging Markets Small Cap
28 Bank of America
29 Edinburgh Dragon 3.5% Conv. Bond
30 NB Distressed Debt Inv. Fund
31 HSBC Holdings
32 Glaxosmithkline
33 Unitedhealth
34 Burberry
35 Samsung Electronics
36 BP
37 American Express
38 Nike
39 Safran
40 Hargreaves Lansdown
41 iShares Trust MSCI ACWI ETF
4 2 Tesco
4 3 Airbus
4 4 Rathbone Brothers
4 5 Sumitomo Mitsui Financial
4 6 Microsoft
4 7 Roche Holdings
4 8 Allergan
4 9 Minth
50 Citigroup
Top 50
Country
USA
UK
UK
UK
UK
UK
USA
UK
USA
UK
UK
UK
Germany
UK
UK
UK
UK
USA
UK
USA
USA
Taiwan
UK
USA
USA
holding £ million % of portfolio
1.91
1.64
1.58
1.56
1.54
1.43
1.37
1.34
1.29
1.20
1.13
1.13
1.12
1.04
0.95
0.92
0.92
0.87
0.87
0.83
0.80
0.80
0.79
0.78
0.78
28.59
UK
0.77
UK
0.74
USA
0.73
UK
0.72
USA
0.70
UK
0.65
UK
0.64
USA
0.64
0.64
UK
0.63 South Korea
UK
0.62
USA
0.62
0.60
USA
France
0.58
UK
0.56
UK
0.56
0.56
UK
0.54 Netherlands
UK
0.54
Japan
0.53
0.52
USA
0.52 Switzerland
0.51
USA
China
0.50
0.49
USA
43. 70
35.9
30.9
29.8
29.4
29.0
27.0
25.8
25.3
24.3
22.7
21.3
21.2
21.1
19.6
18.0
17.3
17.3
16.4
16.3
15.7
15.1
15.1
14.9
14.7
14.6
538.7
14.6
13.9
13.8
13.6
13.1
12.2
12.1
12.1
12.0
11.8
11.7
11.7
11.3
11.0
10.6
10.6
10.5
10.2
10.1
9.9
9.8
9.7
9.6
9.4
9.2
8 23.2
ANNUAL REPORT 2016
25
Sector
Media
Equity Investment Instruments
Financial Services
Equity Investment Instruments
Equity Investment Instruments
Beverages
Banks
Equity Investment Instruments
Software & Computer Services
Fixed Line Telecommunications
Media
Personal Goods
Real Estate Investment Services
Financial Services
Media
Software & Computer Services
Media
Media
Banks
Travel & Leisure
Software & Computer Services
Technology Hardware & Equipment
Banks
General Retailers
Media
Equity Investment Instruments
Unit Trusts
Banks
Equity Investment Instruments
Equity Investment Instruments
Banks
Pharmaceuticals & Biotechnology
Health Care Equipment & Services
Personal Goods
Leisure Goods
Oil & Gas Producers
Financial Services
Personal Goods
Aerospace & Defen ce
Financial Services
Exchange -traded Fund
Food & Drug Retailers
Aerospace & Defen ce
Financial Services
Banks
Software & Computer Services
Pharmaceuticals & Biotechnology
Pharmaceuticals & Biotechnology
Automobiles & Parts
Banks
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
The top ten holdings represent 14.9% of the total portfolio (2015: 13.8%).
The full portfolio is not listed because it contains over 400 companies.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
26
WITAN INVESTMENT TRUST PLC
CLASSIFICATION OF INVESTMENTS
at 31 December 2016
Basic Materials
Consumer Goods
Consumer Services
Notes
Chemicals
Industrial Metals & Mining
Mining
Automobiles & Parts
Beverages
Food Producers
Household Goods & Home
Construction
Leisure Goods
Personal Goods
Tobacco
Food & Drug Retailers
General Retailers
Media
Travel & Leisure
Financials
Health Care
Industrials
Oil & Gas
Banks
Equity Investment Instruments
Financial Services
Life Insurance
Non-life Insurance
Real Estate Investment Services
Real Estate Investment Trusts
Health Care Equipment & Services
Pharmaceuticals & Biotechnology
Aerospace & Defence
Construction & Materials
Electronic & Electrical Equipment
General Industrials
Industrial Engineering
Industrial Transportation
Support Services
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 & Mulit-utilities
Open-ended Funds
(see note 3)
Total 2016
Total 2015
United
Kingdom
%
0.5
-
0.4
0.9
0.1
1.5
-
Continental
Europe
%
0.7
0.1
0.2
1.0
0.4
0.5
0.5
North
America
%
0.1
-
-
0.1
-
-
0.2
Asia
Pacifi c
(ex
Japan)
%
0.3
0.1
0.1
0.5
0.2
0.2
0.5
Japan
%
-
-
-
-
0.3
0.2
0.1
Latin
America
%
-
-
-
-
0.6
-
-
Other
%
-
-
-
-
-
-
-
0.5
-
1.7
0.5
4.3
0.9
0.4
4.5
1.6
7.4
2.2
7.0
4.5
0.3
0.5
0.1
0.3
14.9
0.2
0.9
1.1
0.8
0.4
0.6
0.4
0.6
0.2
3.0
6.0
-
0.7
0.2
0.9
2.1
0.2
2.3
1.2
0.3
1.5
-
0.4
0.4
0.1
39.8
42.9
-
-
0.6
0.3
2.3
0.1
0.2
0.4
0.2
0.9
1.3
1.5
0.1
0.1
0.7
1.4
-
5.1
0.7
0.4
1.1
1.6
0.3
0.4
0.1
0.4
0.3
0.2
3.3
0.1
1.1
0.1
1.3
0.5
0.1
0.6
0.2
0.1
0.3
0.2
-
0.2
0.1
0.1
0.8
0.2
1.4
0.4
1.8
4.3
1.2
7.7
2.9
0.7
1.6
-
0.2
-
-
5.4
3.5
1.4
4.9
0.1
-
0.3
0.6
0.1
0.3
0.3
1.7
-
0.1
0.5
0.6
2.9
0.9
3.8
0.1
-
0.1
-
-
-
0.2
0.6
0.5
0.4
2.6
0.3
-
0.3
0.2
0.8
1.2
-
0.1
0.2
0.2
0.2
0.1
2.0
0.5
-
0.5
0.2
-
0.1
-
0.4
0.4
0.4
1.5
-
-
0.2
0.2
0.9
0.8
1.7
0.2
0.4
0.6
0.1
-
0.1
0.2
16.3
15.3
0.3
26.0
25.9
0.3
10.8
10.2
0.2
0.1
0.4
-
1.3
0.2
-
0.5
0.7
1.2
-
-
-
-
-
-
1.2
-
-
-
-
-
0.4
-
-
0.2
-
0.6
-
0.1
-
0.1
-
0.5
0.5
-
0.2
0.2
-
-
-
-
4.6
4.4
-
-
-
-
0.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.3
0.3
-
-
0.1
-
-
-
-
0.1
-
-
-
-
-
-
-
0.4
0.1
-
0.5
-
-
-
-
0.3
-
0.3
-
0.3
0.3
-
-
-
Total
2016
%
1.6
0.2
0.7
2.5
1.6
2.4
1.3
1.0
0.8
4.0
1.4
12.5
1.7
2.6
9.5
4.0
17.8
8.8
9.2
6.4
0.6
1.6
1.7
0.4
28.7
4.9
2.7
7.6
2.7
0.7
1.8
1.1
1.9
1.5
3.9
13.6
0.1
2.0
1.0
3.1
6.7
2.5
9.2
1.7
1.3
3.0
0.3
0.4
0.7
-
0.6
0.5
0.4
1.3
1.9 100.0
0.8 100.0
1. The holding of £20.9 million equity futures (1.2% of net assets) is not included in this classification (see page 14).
2. Included in the above are fixed interest holdings (including convertibles) of £29,056,000 (2015: £25,312,000).
3. Open-ended Funds relates to an Emerging Markets fund and a global exchange traded equity fund.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
BOARD OF DIRECTORS
ANNUAL REPORT 2016
27
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
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 Offi cer (D)
Andrew Bell was appointed a director and
Chief Executive Offi 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,
Chairman of Gabelli Value Plus+ Trust
plc and is a former Chairman of the
Association of Investment Companies.
R W Boyle MA, FCA
Chairman of the Audit
Committee (A), (B), (D)
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
Centaur Media plc .
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
director of the Barclays UK Pension Fund
and an independent member of Unilever
UK Pension Fund’s Investment Committee
and was previously Deputy Chairman of
the BT Pension Scheme and a director of
Hermes Fund Managers Limited.
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. She is a qualifi ed barrister.
R J Oldfi eld BA
Director (A), (C), (D)
Richard Oldfi eld joined the Board in 2011.
He is chairman of Oldfi eld Partners,
an investment management fi rm. He
was chairman of the Oxford University
investment committee from 2007 to
2014 and of Keystone Investment Trust
plc from 2001 to 2010. He is a trustee
of Royal Marsden Cancer Charity,
Canterbury Cathedral Trust and Clore
Duffi eld Foundation, and a director of
Shepherd Neame Limited.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
28
WITAN INVESTMENT TRUST PLC
BOARD OF DIRECTORS continued
J S Perry CBE, BSc, CA
Director (A), (B), (D)
Jack Perry was appointed as a director
in January 2017. He is chairman of
European Assets Trust NV and ICG-
Longbow Senior Secured UK Property
Debt Investments Limited. He was Chief
Executive of Scottish Enterprise and a
former Managing Partner and Regional
Industry Leader of Ernst and Young LLP.
He has served on the Boards of FTSE 250
and other public and private companies
and is a member of the Institute of
Chartered Accountants of Scotland.
B C Rogoff MA
Director (A)
Ben Rogoff was appointed a director in
October 2016. He has been Portfolio
Manager of Polar Capital Technology
Trust plc since 2006 and is also joint
Manager of Polar Capital Global
Technology Fund. He has been a
technology specialist for 20 years having
begun his career in fund management
at CMI, as a Global Technology Analyst.
He moved to Aberdeen Fund Managers
in 1998 where he spent four years as
a Senior Technology Manager prior to
joining Polar Capital in May 2003.
A Watson CBE, BSc (Econ), ASIP,
Barrister-at-Law, FCISI (Hons),
D.Sc. (Hons) Senior Independent
Director (A), (B), (D)
Tony Watson was appointed a director
in 2006. He was appointed Senior
Independent Director in February 2008.
He is the Senior Independent Director
of Lloyds Banking Group plc. He was
formerly chairman of the Trustees of
the Marks & Spencer Pension Scheme,
chairman of the Strategic Investment
Board Limited (Northern Ireland), a
member of the Financial Reporting
Council, the Senior Independent
Director of Hammerson plc and a non-
executive director of Vodafone Group
Plc, the Shareholder Executive and the
Investment Management Association
(now the Investment Association).
Mr Watson retired in 2006 from an
executive career in the investment
management industry, most recently
as Chief Executive of Hermes Fund
Managers Limited.
(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.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
DIRECTORS’ REPORT
ANNUAL REPORT 2016
29
Statutory Information
There have not been any new holdings notified between
the year end and the date of this Report.
The directors present the Annual Report of the Group for
the year ended 31 December 2016.
Assets
Activities and business review
A review of the business is given in the Chairman’s and
Chief Executive’s reports on pages 4 to 7 and in the
Strategic Report on pages 8 to 21. 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 2016 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 2011.
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 and also acts as the Company’s AIFM.
ISAs
The Company intends to continue to manage its affairs
so that its shares fully qualify for the stocks and shares
component of an ISA and Junior ISA.
Substantial share interests
As at 31 December 2016, the Company had not been
notified of any substantial interests in the Company’s
voting rights.
At 31 December 2016 the total net assets of the Group
were £ 1,726.6 m (2015: £1,577.3 m ). At this date the
net asset value per ordinary share was 952.8p (2015:
788.4p).
Revenue and dividend
The total profit for the year was £ 327 m (2015: £83 m ).
A profit of £ 42 million is attributable to revenue (2015:
£36.0 m ). The profit for the year attributable to revenue
has been applied as follows:
Distributed as dividends:
First interim of 4.25p per ordinary share
(paid on 17 June 2016)
Second interim of 4.25p per ordinary share
(paid on 16 September 2016)
Third interim of 4.25p per ordinary share
(paid on 16 December 2016)
Fourth interim of 6.25 p per ordinary share
(payable on 31 March 2017)
Added to the Company's revenue reserve
£’000
8,490
7,817
7,739
11,246
6,537
41,829
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 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 £ 41,829,000 (2015: £35,645,000).
Directors
The current directors of the Company are shown on
pages 27 and 28.
All the directors held office throughout the year under
review with the exceptions of Mr Rogoff and Mr Perry who
were appointed on 1 October 2016 and 1 January 2017
respectively. They will seek election by shareholders at
the Annual General Meeting on 27 April 2017. In addition
Mr Oldfield will retire in accordance with the Company’s
Articles of Association and, being eligible, will seek
re-election by shareholders. Mr Boyle, Mr Henderson and
Mr Watson will also retire and stand for re-election, as
each of them has served as a director for more than nine
years and is eligible to stand for re-election.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
30
WITAN INVESTMENT TRUST PLC
DIRECTORS’ REPORT continued
The Board considers them to be independent despite
their length of service. This is explained in more detail in
sections 1 and 2 of the Corporate Governance Statement
on page 34. The Board has reviewed the performance
and commitment of the directors standing for re-election
and considers that each of them should continue to serve
on the Board as they bring wide, current and relevant
experience that allows them to contribute effectively to
the leadership of the Company.
The Board’s policy on the frequency of the re-election
of directors is set out on page 35 in the Corporate
Governance Statement.
During the year the membership of the Audit Committee
comprised Mr Boyle (Chairman), Mr Watson and Mrs
Claydon. Mr Perry was appointed as a member of the
Audit Committee with effect from 22 February 2017.
During the year the membership of the Remuneration
Committee comprised Mrs Claydon (Chairman),
Mr Henderson and Mr Oldfield.
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
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.
The interests of the directors in the share capital of the
Company are set out in the Directors’ Remuneration
Report on page 47.
Directors’ indemnity
The Company’s Articles of Association allow the
Company, subject to the provisions of UK legislation, to:
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 possibly could conflict, with the Company’s interests.
With 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 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
(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.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
31
Directors’ fees
The report on the directors’ remuneration is set out on
pages 45 to 55.
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 77 to 84.
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 and the Company’s AIFM review the
appointments of the investment managers on a regular
basis and make 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 2015 there were 200,071,000
shares in issue. During the year, 18,860,261 shares were
bought back and are held in treasury. At 31 December
2016 there were 200,071,000 shares in issue of which
18,860,261 were held in treasury. These shares do not
carry voting rights or the right to receive dividends and
thus the number of voting rights was 45,302,684 on a poll.
Since the year end, 1,409,821 shares have been bought
back and at the date of this report there were 200,071,000
shares in issue of which 20,270,082 were held in treasury.
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 2016 a special resolution was passed
giving the Company authority, until the conclusion
of the AGM in 2017, to make market purchases to be
held in treasury of the Company’s ordinary shares up
to a maximum of 29,953,520 shares (being 14.99% of
the issued ordinary share capital as at 28 April 2016).
A further special resolution was passed at a General
Meeting held on 26 May 2016 giving the Company
specific authority to buy back up to 31,636,753 shares
held by Aviva, as explained on page 15. The Company has
bought back 19,960,674 shares since the date of the last
AGM.
The Board is seeking to renew its powers at the
forthcoming Annual General Meeting to buy shares
into treasury, for possible reissuance when the shares
trade at a premium. The Company makes use of share
buybacks, purchasing shares to be held in treasury with
the objective of achieving a sustainable low discount (or a
premium) to net asset value. Shares are not bought back
unless the result is an increase in the net asset value per
ordinary share. 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 to renew 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
2016 there were 500,000 2.7% preference shares in
issue. Further details on the preference shares are given
in note 17 on page 85.
(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
2016 there were 2,055,000 3.4% preference shares in
issue. Further details on the preference shares are given
in note 17 on page 85.
At the AGM in April 2016 a special resolution was passed
giving the Company authority, until the conclusion of the
AGM in 2017, 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 authority has not been used. Accordingly, as at
31 December 2016 the Company had valid authority,
outstanding until the conclusion of the AGM in 2016,
to make market purchases for cancellation of 500,000
2.7% preference shares and 2,055,000 3.4% preference
shares. No 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 2017. 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
Following a tender of the audit in 2016, Grant Thornton
UK LLP were appointed as the Company’s auditor
and Deloitte LLP resigned. Resolutions to reappoint
Grant Thornton UK LLP as the Company’s auditor and
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
32
WITAN INVESTMENT TRUST PLC
DIRECTORS’ REPORT continued
to authorise the Audit Committee to determine their
remuneration will be proposed at the forthcoming AGM.
Further details are included in the Report of the Audit
Committee on pages 43 and 44.
Directors’ statement as to the disclosure of
information to the auditor
transactions, securities or commodities lending and
securities or commodities borrowing, buy-sell back
transactions or sell-buy back transactions and margin
lending transactions). In accordance with Article 13 of the
Regulation, the Company’s involvement in and exposures
related to securities lending as at 31 December 2016 are
detailed on pages 89 and 90.
Each of the directors at the date of approval of this report
confirms that:
Greenhouse gas emissions
The Company has a staff of seven employees, operating
from small serviced office premises. Accordingly it does
not have any significant greenhouse gas emissions
to 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 its underlying investment portfolio.
Annual General Meeting
The next AGM will be held at 2.30 pm on Thursday
27 April 2017 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.
By order of the Board
Frostrow Capital LLP
Secretary
9 March 2017
(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.
Listing Rule 9.8.4
Listing Rule 9.8.4 requires the Company to include
certain information in a single identifiable section of the
Annual Report. Details of Mr Bell’s Long-term Bonus are
included in the Directors’ Remuneration Report on pages
52 and 53. The directors confirm that there are no other
disclosures to be made in respect of Rule 9.8.4.
Modern Slavery Act 2015
As an investment vehicle, the Company does not provide
goods or services in the normal course of business and
does not have customers. Accordingly, the directors
consider that the Company is not required to make any
slavery or human trafficking statement under the Modern
Slavery Act 2015.
Securities Financing Transactions
As the Company undertakes securities lending, it is
required to report on Securities Financing Transactions
(as defined in Article 3 of Regulation (EU) 2015/2365,
securities financing transactions include repurchase
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
CORPORATE GOVERNANCE STATEMENT
ANNUAL REPORT 2016
33
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 2016 except as set out below:
➜ The Corporate Governance Code (C.3. 6) includes
provisions relating to the need for an internal audit
function. As explained on page 42, the Company does
not 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 35, 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 Guidance 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 ( ‘Corporate Governance
Code’), as issued by the Financial Reporting Council
(‘ FRC’). The provisions of the Corporate Governance
Code, which was issued by the FRC in September 2014,
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 (‘ 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 2015 was applicable in the year
under review. The AIC Code can be viewed at
www.theaic.co.uk.
The FRC published a revised version of the Corporate
Governance Code in April 2016 and the AIC published
a revised version of the AIC Code in July 2016. The
Company is not required to comply with the new Codes
until the year ending 31 December 2017 but the Board
considers that the Company already complies with the
provisions of the new Codes.
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.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
34
WITAN INVESTMENT TRUST PLC
CORPORATE GOVERNANCE STATEMENT continued
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 confl ict
with the interests of management; this in turn is a function
of confi 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 fi 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 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 2016 the Board was composed of seven
independent non-executive directors and one executive
director (the Chief Executive Offi cer). 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).
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
35
Principles of the AIC Code
Application of the principles
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.
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 are
currently three directors with service of more than nine years:
Mr H M Henderson, the Chairman, Mr Boyle and Mr Watson.
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 insuffi cient
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 37.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
36
WITAN INVESTMENT TRUST PLC
CORPORATE GOVERNANCE STATEMENT continued
Principles of the AIC Code
Application of the principles
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.
New directors are appointed for an initial term ending three
years from the date of their fi rst annual general meeting
after appointment and with the expectation that they will
serve a minimum of two three-year terms, but there is no
absolute limit to the period for which a director may serve.
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 non-executive 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, fi nance, marketing, fi nancial services, risk
management, custody and settlement, and investment
banking. Specialist agents are usually 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 benefi t from having directors with
a longer perspective of the Company’s history and its place in
the savings market.
Details of the directors are set out on pages 27 and 28. They
demonstrate a broad range of investment, professional and
commercial expertise and experience, gained overseas as well
as in the United Kingdom.
6. The board should aim to have a balance of skills,
experience, length of service and knowledge of
the Company.
The Board considers that it has achieved this aim. Brief
biographical details of each director are set out on pages
27 and 28.
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 benefi ts 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
qualifi cations 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.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
37
Principles of the AIC Code
Application of the principles
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 refl 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 offered 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.
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 and Nomination 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
2016, the Board appointed BoardAlpha Limited to carry out
an evaluation programme. The Board reviewed the report
from the BoardAlpha in March 2017 and the Chairman
will lead 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 Board intends to appoint an external
organisation to facilitate its evaluation in 2019.
The Directors’ Remuneration Report on pages 45 to 55 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 fi rm 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 lead
the process of selecting 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, fi nancial 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 AIFM 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.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
38
WITAN INVESTMENT TRUST PLC
CORPORATE GOVERNANCE STATEMENT continued
Principles of the AIC Code
Application of the principles
Board meetings and the relationship with the manager
12. Boards and managers should operate in a
supportive, co-operative and open environment.
Typically, the Board meets approximately ten times each
year. The Chief Executive Offi cer (who is himself a director),
other representatives of the Company’s Executive team and
the AIFM 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 suffi 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.
The Chief Executive Offi cer and the AIFM monitor investment
performance and all associated matters. The Chief Executive
Offi cer 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 Offi cer. The Chief Executive Offi cer
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 Offi cer leads on the selection and
monitoring of the investment managers and their terms of
reference, which are approved by the Board and the AIFM.
The Company manages its own operations through the Board
and that of its AIFM, as set out on page 40 . 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 40. Shares are
held by the Company’s custodian/depositary.
17. Boards should monitor the level of the share
price discount or premium (if any) and, if
desirable, take action to reduce it.
The Chief Executive Offi cer and his team monitor the share
price and the discount/premium to net asset value on a daily
basis and he reports to every Board meeting.
18. The board should monitor and evaluate other
service providers.
The Board makes use where appropriate of share buybacks
(at a discount) and issuance (at a premium) in order to add to
the net asset value per share and achieve a sustainable low
discount (or a premium) to net asset value.
The Chief Executive Offi cer and the AIFM are responsible for
monitoring and evaluating the performance of the Company’s
various service providers. The Board’s Audit Committee
oversees this process together with the WIS Risk Committee.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
39
Principles of the AIC Code
Application of the principles
Shareholder communications
19. The board should regularly monitor the
shareholder profi le of the company and put in
place a system for canvassing shareholder views
and for communicating the board’s views to
shareholders.
The Chairman is responsible for ensuring that there is
effective communication with the Company’s shareholders.
He works closely with the Chief Executive Offi cer 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 Offi cer, the
Chairman, or the Senior Independent Director, expects to be
available to meet the larger shareholders and the Chairman of
the Remuneration and Nomination Committee is available to
discuss remuneration matters.
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
Offi cer, 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 Offi cer
makes a presentation to the meeting.
The directors may be contacted through the Company
Secretary at the address shown on page 94.
20. The board should normally take responsibility
for, and have a direct involvement in, the
content of communications regarding major
corporate issues even if the manager is asked to
act as spokesman.
While the Chief Executive Offi cer and his team together
with the AIFM 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 a Committee
thereof.
21. The board should ensure that shareholders are
provided with suffi cient information for them
to understand the risk: reward balance to which
they are exposed by holding the shares.
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 notifi cation is sent when they are published online).
In addition, the Company publishes a factsheet 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.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
40
WITAN INVESTMENT TRUST PLC
CORPORATE GOVERNANCE STATEMENT continued
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
and the AIFM 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, in conjunction with
the AIFM, 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 and the AIFM receive 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
pages 27 and 28. The roles and responsibilities of the
Committees are described in the Report of the Audit
Committee on pages 43 and 44 and in the Directors’
Remuneration Report on pages 45 to 55.
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
M C Claydon
S E G A Neubert
R J Oldfield
B C Rogoff
A Watson
Board
12
Audit
Committee
5
Remuneration
and
Nomination
Committee
3
12
12
4/5
11
11
11
11
3/3
12
4*
5*
–
5
5
–
–
–
4
3
3*
–
–
3
–
3
–
–
*
Not a member of the Committee but in attendance by invitation for all
or part of the meetings.
All the then directors attended the Annual General
Meeting in April 2016 and the Board’s ‘Away Day’ in
May 2016.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
41
Directors’ remuneration
The directors’ remuneration is detailed in the Directors’
Remuneration Report on pages 45 to 55.
Accountability and audit
The directors’ statement of responsibilities in respect of
the accounts is set out on page 56.
The report of the independent auditor is set out on pages
57 to 61.
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 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 Corporate Governance Code 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 (under
delegation from the Board and the AIFM) 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.
The in-house Executive management team of Witan
and WIS 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 2016, 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 , along with
those of the third party managers.
The Company’s subsidiary, WIS, is authorised and
regulated by the Financial Conduct Authority to provide
investment products and services and was appointed as
the Company’s AIFM from July 2014. 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 seven people (including the Chief Executive Officer),
who are well known to and have frequent formal and
informal contact with the members of the Board.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
42
WITAN INVESTMENT TRUST PLC
CORPORATE GOVERNANCE STATEMENT continued
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, whilst 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.
Approval
This report was approved by the Board of directors on
9 March 2017 and is signed on its behalf by:
H M Henderson
Chairman
9 March 2017
The Company does not have an internal audit function.
Through WIS, the AIFM, 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
appointed by the depositary. 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 and the AIFM 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.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
REPORT OF THE AUDIT COMMITTEE
ANNUAL REPORT 2016
43
Statement by the Chairman 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 2016.
Composition and responsibilities of the Committee
During the year under review, the Committee comprised
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 requirements that the Committee as a whole
should have competence relevant to the sector in which
the Company operates and that at least one member
of the Committee should have recent and relevant
financial experience. The Committee is satisfied that the
Committee is properly constituted in both respects: I am
a Chartered Accountant and was previously a partner in
PricewaterhouseCoopers LLP and the other Committee
members have a combination of financial, investment
and other relevant experience gained throughout their
careers.
Mr Watson, who was appointed to the Committee in
2006, and Mrs Claydon, who was appointed to the
Committee in 2013, were members of the Committee
throughout the year. Mr Perry was appointed as a
member of the Committee with effect from 22 February
2017. He is also a Chartered Accountant and was
previously a partner in Ernst & Young LLP. Details of our
qualifications and experience are given on pages 27 and
28.
The role of the Committee is to assist the directors in
protecting shareholders' interests through fair, balanced
and understandable reporting , ensuring effective internal
controls and maintaining 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;
➜ ensuring the application of the Company’s internal
financial and regulatory compliance controls and risk
management systems using external consultants
where appropriate;
➜ the appointment, re-appointment and removal of the
external auditor and approving the remuneration and
terms of engagement of the external auditor;
➜ reviewing and monitoring the external auditor’s
independence and objectivity and the effectiveness of
the audit process; and
➜ reporting to the Board on how it has discharged its
duties.
Meetings of the Committee
The Committee held four meetings during 2016 and also
met in February 2017. Meetings are usually attended, by
invitation, by the Chairman, members of management,
relevant external advisers and the auditors. I report
to the Board after each meeting on the main matters
discussed at the meeting. In summary, the main matters
arising in relation to 2016 were :
➜ 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.
➜ Consideration of other matters in relation to the
financial statements including appropriateness of
accounting policies, revenue recognition , portfolio
valuation and calculation of management fees.
➜ Interim and year-end reporting, in the light of the
requirements of the Code of Corporate Governance
issued by the AIC . The Committee agreed the process,
timing and responsibility for compliance.
➜ A variety of specific matters including whistleblowing,
anti-money laundering compliance, data and IT
systems security and business continuity.
➜ In 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 42).
Following the appointment of WIS as the Company’s AIFM,
the Committee works with the Risk Committee of WIS, the
Company’s subsidiary, to ensure WIS’ compliance with
FCA regulations. Particular topics in 2016 included the
regulations contained within the Client Assets sourcebook
( ‘CASS ’) of the Financial Conduct Authority's (‘FCA’) and
the change of depository.
Risk
Management has identified (Strategic Report pages
19 and 20) five main areas of potential risk: market and
investment portfolio, operational, corporate governance,
accounting, legal and regulatory, and liquidity , and has
set out the actions taken to evaluate and manage these
risks.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
44
WITAN INVESTMENT TRUST PLC
REPORT OF THE AUDIT COMMITTEE continued
The auditor has also detailed three specific areas of risk
in its report: valuation and existence of investments;
accuracy and completeness of investment income
and accuracy and completeness of performance and
management fees and has set out the work it has
performed to satisfy itself that these have been properly
reflected in the financial statements.
The Committee has monitored the controls designed
to mitigate all these risks during the year including
reviewing management’s risk report at each meeting
and requiring amendments to both risks and mitigating
actions as appropriate. The Committee considers that
management has carried out a robust assessment of the
principal risks facing the Company, including those that
would threaten its business model, future performance
solvency or liquidity and has taken appropriate action to
mitigate those risks. There were no significant areas of
material judgement.
Going concern and viability
The Committee has reviewed the information,
forecasts and assumptions underlying the Viability and
Going Concern Statements on pages 20 and 21 and
recommended to the Board that they are appropriate.
External audit
The Committee carried out a formal competitive tender
for the Company’s statutory audit during 2016 . Four
firms were invited to tender , three of which presented to
the Committee in May 2016. Following the presentations,
the Committee agreed to appoint Grant Thornton and
approved their proposed audit fee. In accordance with the
current legislation, the Company will need to re-tender
for new auditors at least every 10 years and will have to
change its auditor after 20 years.
The audit partner is Marcus Swales. The auditor is
required to rotate partners every five years and it is
proposed that Mr Swales should serve until the AGM
in 2021, provided shareholders approve the continued
appointment of Grant Thornton.
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. The Committee will
conduct a formal review of the performance of the
auditor following the conclusion of the audit.
In addition, Grant Thornton has been appointed
to provide an assurance report on client assets in
accordance with the FCA’s Client Assets Sourcebook (the
CASS Report ) to the FCA in respect of Witan Investment
Services Limited, to be completed by the end of April
2017.
The Committee confirms that the Company has complied
this year with the provision of the Statutory Audit
Services for Large Companies Market Investigation
(Mandatory use of Competitive Tender Processes and
Audit Committee Responsibilities) Order 2014.
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
position and 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.
Non-audit services
The Committee has adopted the new limit on non-audit
fees that has been introduced with effect from January
2017, from which time non-audit fees cannot be more
than 70% of the average audit fees for the last three
years.
Grant Thornton are not provid ing any non-audit services
to the Company other than to provide the CASS report,
for which their fees are budgeted at £9,000. As noted
in note 5 on page 7 0, the Committee approved the
appointment of Deloitte LLP, while they were auditors to
the Company, to provide advice on one-off withholding
tax claims. 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 teams and
tax advisory team were independent of each other. The
fees incurred for this work during the year while Deloitte
LLP was auditor to the Company amounted to £ 11,000 .
Effectiveness of the Committee
BoardAlpha commented on the effectiveness of the
Committee as part of their evaluation of the Board
(see page 37).
Approval
This report was approved by the Committee on 9 March
2017 and is signed on its behalf by:
Robert Boyle
Chairman of the Audit Committee
9 March 2017
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT 2016
45
Chairman’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 2016.
This report covers the remuneration-related activities of
the Committee for the year ended 31 December 2016.
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’) and the requirements of the Association
of Investment Companies. 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 annual report on remuneration provides
details on remuneration during the financial year ending
31 December 2016 and other information required by the
Regulations. It will be subject to an advisory vote at the
Annual General Meeting in April 2017.
The Company’s existing remuneration policy was subject
to a binding shareholder vote at the Annual General
Meeting in 2016 and took effect from 1 January 2016.
The Companies Act 2006 requires the auditor 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
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 ( ‘CEO’) and evaluating his performance , as well
as assisting the CEO in determining the remuneration
arrangements for the Company’s staff. Second, the
Committee considers the remuneration of the non-
executive directors . In addition, the Committee 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 (www.witan.com).
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 three formal meetings during the year,
during which it addressed all the matters under its remit.
Mr Rogoff was appointed to the Board on 1 October
2016 and Mr Perry on 1 January 2017. In each case, the
Committee reviewed the skill and experience required of
the new directors and identified the person it considered
to be most suitable to fill the vacancy. Mr Rogoff was
appointed as the Board considered that his knowledge
and expertise in technology would be beneficial to
directors in their monitoring of the Company’s fund
managers. In the case of Mr Perry, the Committee was
assisted by Trust Associates, a firm of recruitment
consultants that has no other connection with the
Company. In each case the Board confirmed this choice
and the appointment was made.
There were no changes in the fees payable to
non-executive directors, during the year. In
February 2017, the Committee undertook a review
of the non-executive directors’ fees. The Committee
recommended to the Board, and the Board agreed, that
non-executive directors’ fees should be increased with
effect from 1 April 2017 by £ 1,500 per annum for the
non-executive directors other than the Chairman and
by £ 3,000 per annum for the Chairman. The additional
fee payable to the Chairman of the Audit Committee
was increased from £6,000 to £ 7,500 and that of
the Chairman of the Remuneration and Nomination
Committee and the Senior Independent Director from
£4,000 to £5,000. This will be the first increase in these
fees since 1 April 2014. Accordingly, with effect from
1 April 2017, the non-executive directors’ fees will be
paid at the following annual rates:
Chairman of the Company
Chairman of the Audit Committee
Chairman of the Remuneration
and Nomination Committee
Senior Independent Director
Other non-executive directors
£
60,000
39,000
36,500
36,500
31,500
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
46
WITAN INVESTMENT TRUST PLC
DIRECTORS’ REMUNERATION REPORT continued
The Company’s Articles of Association currently limit the
aggregate fees payable to the non-executive directors to
£350,000 per annum.
The aggregate non-executive directors’ fees currently
amount to £ 281,000 per annum. This will increase to
£ 298,000 with effect from 1 April 2017.
During 201 5, the Committee reviewed the components of
the variable remuneration for the CEO in light of revisions
to the UK Corporate Governance Code relating to
clawback and malus and compared the terms of the CEO’s
remuneration with market standards for similar roles. The
benchmark information was provided by McLagan.
As a result of the review, the Committee agreed that,
while the CEO’s salary was in line with those paid to the
peer groups, the current bonus arrangements were out
of line with payments made elsewhere in the market.
The Committee addressed this by making a number of
changes to the existing bonus arrangements, which
were approved by shareholders at the AGM in April 2016
and implemented with effect from 1 January 2016. The
current and prior arrangements are set out in the policy
statement on pages 5 1 and 5 2.
Catherine Claydon
Chairman of the Remuneration and Nomination
Committee.
J E B Bevan (retired 28 April 2016)
R W Boyle
M C Claydon
H M Henderson
S E G A Neubert
R J Oldfield
B C Rogoff (appointed 1 October 2016)
A Watson
Total
Annual report on remuneration
An ordinary resolution for the approval of this section
of the Report (together with the Chairman’s statement
on pages 45 to 46) 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 ended 31 December 2016. The information provided
in this part of the Report has been audited by Grant
Thornton UK 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 ended 31 December 2016, together with
the comparative figures for 2015:
31 December
2016
Fees and total
remuneration
£( 1) (2)
10,000
36,000
34,000
57,000
30,000
30,000
7,500
34,000
238,500
31 December
2015
Fees and total
remuneration
£( 1) ( 2 )
30,000
36,000
34,000
57,000
30,000
30,000
–
34,000
251,000
( 1) The non-executive directors are not entitled to any valuable payments or benefits. No taxable benefits were paid in the year, although all reasonably
incurred business expenses will be met.
( 2) Non-executive directors’ fees were last increased with effect from 1 April 2014.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
47
CEO
The following table shows a single total figure of remuneration in respect of qualifying services for the financial year
ending 31 December 2016 for the CEO, Mr A L C Bell, together with the comparative figures for 2015. Aggregate
emoluments are shown in the last column of the table.
Base pay(1)
£
Benefits(2)
£
Annual Bonus(3)
£
Long-Term
Bonus(3)
£
Pension related
benefits
£
Total
£
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Mr A L C Bell
281,000 278,000
18,366
16,251
89,920 132,380
76,425 139,000
28,100
27,800 493,811 593,431
Notes:
(1) Mr Bell is entitled to hold outside appointments and to retain any fees payable, subject to receiving the Board’s permission. During 2016, in addition to
the base salary set out above, Mr Bell received £57,750 (2015: £52,154) as director of Henderson High Income Trust plc and chairman of Gabelli Value
Plus + Trust plc.
(2) Taxable benefits include life assurance and health insurance.
(3) Mr Bell’s current service agreement provides that he is eligible to receive a bonus of up to 170% 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 perfomance against the performance criteria, described on page 53, over the preceding year at its meeting in February 2017 to
determine the appropriate level of the discretionary bonus that is payable for that year. Following that review, the Committee recommended, and
the Board agreed, that Mr Bell should receive a discretionary bonus equal to 32% (compared with the maximum of 40%) of his basic salary (£ 89,920)
in respect of the financial year ended 31 December 2016 (2015: 20%, £55,600).
(ii) One-year Bonus
For a description of the terms of the One-year Bonus (including the performance measures), please see the policy report. The Company
underperformed its benchmark in 2016 (net asset value debt at par, excluding the effect of share buybacks) and therefore Mr Bell will not receive
a bonus based on the Company’s financial performance for the year end ed 31 December 2016 (2015: 2.3%, £76,780).
(iii) Long-Term Bonus
A description of the terms of the Long-Term Bonus (including the performance measures), was included in the policy report approved by
Shareholders at the 2014 AGM. In summary, Mr Bell is eligible to receive up to 50% of his basic annual salary by reference to the Company’s
performance over the previous three financial years. The level of bonus is determined by reference to performance against the benchmark, where
performance is in line with benchmark generates a bonus rising on a straight line basis to a full bonus where the benchmark is exceeded by an
average of 3% per annum. The Company has outperformed its benchmark over the three financial years to 31 December 2016 by 4.9% (net asset
value debt at par, excluding the effect of share buybacks) and therefore a Long-Term Bonus of £ 76,425 will be paid to Mr Bell (2015: 11.2%,
£139,000).
Mr Bell’s total variable remuneration in respect of the year ended 31 December 2016 is £ 166,345 (2015: £271,380).
Payment of the discretionary bonus will be partly deferred in accordance with the current policy, with 60% paid in March 2017 and the remaining
40% paid on a deferred basis in three equal instal ments in March 2018, 2019 and 2020, subject to continuing employment. The Long-Term Bonus
of £ 76,425 is payable in March 2017 in accordance with the terms which applied under the previous policy in force when the terms of the Long-
Term Bonus were set.
Scheme interests awarded during the financial year
No directors were awarded any interest over shares
in the Company during the financial year ended
31 December 2016.
Payments to past directors
No payments were made to former directors of the
Company during the financial year ended 31 December
2016 (2015: £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 ended 31 December 2016
(2015: £nil).
Statement of directors’ shareholdings (audited)
The interests of the CEO and the non-executive directors
(including connected persons) in the Company’s ordinary
shares are shown in the table opposite. No share
options or other share-based awards, with or without
performance measures, were awarded to the CEO or to
any non-executive director. There are no requirements or
guidelines for the CEO or the non-executive directors to
own shares in the Company.
A L C Bell
R W Boyle
M C Claydon
H M Henderson
S E G A Neubert
R J Oldfield
B C Rogoff (2)
A Watson
Shares held
as at
31 December
2016
Shares held
as at
31 December
2015
140,000
55,092
49,271
788,232(1)
9,750
21,500
2,300
25,021
120,000
52,512
47,326
1,153,132(1)
9,537
21,500
–
25,021
Notes:
(1) H M Henderson is the legal and beneficial owner of 722,732 shares
in the Company and 65,500 shares in the Company are owned by
connected persons (2015: 722,732 and 430,400 shares : the reduction
in the non-beneficial holdings is due to his retirement as a trustee of a
trust which holds 364,900 shares.
(2) Mr Rogoff did not own any shares at the date of his appointment,
1 October 2016.
(3) Mr Perry owned 14,505 shares at the date of his appointment,
1 January 2017.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
48
WITAN INVESTMENT TRUST PLC
DIRECTORS’ REMUNERATION REPORT continued
350
300
250
200
150
100
Since the year end there have not been any other
changes in the directors’ interests.
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 eight-year
total shareholder return performance relative to the
FTSE All-Share Index and the FTSE World (ex UK) Index
(sterling adjusted). This line graph assumes a notional
investment of £100 into the Indices on 31 December
2008 and the reinvestment of all income, excluding
dealing expenses.
Note:
(1) Mr R E Clarke was the CEO until 8 February 2010, when Mr Bell was
appointed.
Percentage change in remuneration of CEO
The table below shows how the percentage change in the
CEO’s salary, benefits and bonus between 2015 and 2016
compares with the percentage increase in each of those
components of pay for the Group’s employees taken as
a whole:
Witan total shareholder return
FTSE World (ex UK) total return
FTSE All-Share total return
Benchmark
Salary and fees
All taxable benefits
Annual bonuses (discretionary
and One-year Bonus)
Long-Term Bonus
Total
Percentage
increase/(decrease)
in remuneration in
201 6 compared with
remuneration in 201 5
CEO
%
Employees
%
1
5
(32)
(45)
(17)
(6)
(25)
108
n/a
3
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Morningstar.
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
%
40.0
95.2
76.2
95.0
86.5
40.0
100.0
15.0
30.0
CEO single
figure of total
remuneration
£
493,811
593,431
544,514
486,802
400,535
314,160
409,495
111,318
253,273
Long-Term
Bonus
pay-out
against
maximum
%
54.4
100.0
100.0
64.2
13.7
n/a
n/a
n/a
n/a
Year ended
31 December
2016 – Mr Bell
2015 – Mr Bell
2014 – Mr Bell
2013 – Mr Bell
2012 – Mr Bell
2011 – Mr Bell
2010 – Mr Bell
2010 – Mr Clarke(1)
2009 – Mr Clarke(1)
The decrease in the CEO’s bonuses in 2016 is primarily
due to the slight under- performance of the Company in
201 6 , which resulted in the One-year Bonus not being
paid in respect of 2016 (see note 3(ii) on page 47) and a
reduction in the Long-Term Bonus.
The percentage increase for the employees’ salary and
fees and taxable benefits reflects a change in the number
of employees .
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(1)
Dividends paid to
shareholders in respect of
the year ended
31 December 201 6
Share buybacks(2)
Total payments to
shareholders
2016
£000
2015 Difference
£000
£000
239
251
(12)
1,020
1,103
(83)
35,292 33,565
–
142,918
1,727
142,918
178,210 33,565 144,645•
Notes:
(1) Includes any accruals for future payment of the CEO’s Long-Term
Bonus, subject to performance being sustained and to his continued
employment with the Company.
(2) Share buyback activity reflects changes in the discount, which widened
during the year (see also comments on page 15).
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
49
Statement of implementation of remuneration policy
The revised remuneration policy for the CEO as detailed
in the policy section of the report was agreed by
shareholders at the 2016 AGM and implemented with
effect from 1 January 2016. The proposed fee increases
for non-executive directors will be effective from
1 April 2017.
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.
The Committee was not provided with any advice or
services, during the financial year ending 31 December
2016, 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 during the year, including in relation to the
operation of the Company’s incentive arrangements and
on the CEO’s service agreement. 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
3/3
3/3
3/3
Statement of shareholder voting
At the Annual General Meeting held on 28 April 2016
ordinary resolutions to approve the Directors’
Remuneration Report for the year ended 31 December
2015 and to approve the remuneration policy were
passed on a show of hands. The proxy votes in each case
were as follows:
Votes
for
Votes
against
Votes at
proxies’
discretion
Votes
withheld
Approval of Directors’ Remuneration Report
Total
votes cast
(excluding
votes
withheld)
22,794,025 134,795
44,821
50,698
22,973,641
99.2%
0.6%
0.2%
–
100%
Approval of remuneration policy
22,358,405 399,993
48,204
217,226 22,806,602
98.0%
1.7%
0.3%
–
100%
The Company is committed to ongoing 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 Directors’ Remuneration Reports.
There were no substantial shareholder votes against the
resolutions at the Annual General Meeting in 2016.
Remuneration policy
A report on the Company’s remuneration policy in
accordance with the new Regulations was submitted for
the first time in the 2013 Annual Report. An ordinary
resolution for the approval of a revised policy was put to
members at the AGM on 28 April 2016 and passed by the
members. This policy took effect from 1 January 2016.
All provisions of the revised policy are expected, in the
absence of regulatory or other reasons for change, to
remain in effect until the AGM in 2019 when the Company
will next be required to submit its remuneration policy to
its members.
For ease of reference we have included the full policy
as approved by shareholders, updated to reflect
application of the policy in 2016, on the following pages.
The unamended version of the policy as approved by
shareholders may be viewed in the Annual Report for
2015 at www.witan.com
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.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
50
WITAN INVESTMENT TRUST PLC
DIRECTORS’ REMUNERATION REPORT continued
Remuneration policy for non-executive directors
The following table provides a summary of the key elements of the remuneration of the non-executive directors:
Fees
Purpose
Operation
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 clawback 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 or her. 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 onerous roles (see below).
The Chairman of the Board receives a fee of
£ 60,000 (previously £57,000) per annum. The
Senior Independent Director receives a fee of
£ 5,000 (previously £4,000) in addition to the
annual base fee.
Each non-executive director’s annual base fee is
£31,500 (previously £30,000).
Additional fees are payable as follows:
➜ Chairman of Audit Committee £ 7,500
(previously £6,000);
➜ Chairman of Remuneration and Nomination
Committee £ 5,000 (previously £4,000).
All of the above fees are effective from 1 April
2017. The maximum amount of fees, in aggregate,
that may be paid to non-executive directors in
any financial year is £350,000 following approval
by shareholders at the Annual General Meeting in
April 2014.
Directors’ and officers’ liability insurance cover is held by the Company in respect of all the directors (including the CEO).
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
51
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
clawback
Base salary is reviewed annually
and fixed for 12 months.
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.
An executive director may be
eligible to receive a range of
benefits including some or all of:
➜ 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.
Performance
measures
Not applicable.
Not applicable.
Maximum
opportunity
The Committee has
agreed to increase
the CEO’s salary, with
effect from 1 January
2017, by 1.4% to
£ 285,000 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%.
The maximum benefit
that can be offered or
paid to an executive
director is:
➜ private medical
insurance provided
on a family basis;
➜ death in service
insurance of
4 times base salary;
➜ business-related
expenses.
Pension
Offering market-
competitive levels
of guaranteed cash
earnings to help recruit
or retain an executive
director of a suitably
high calibre.
The CEO currently receives a
cash payment, equal to 10% of
base salary, in lieu of pension
contributions.
The maximum cash
payment in lieu of
pension contributions
is 10% of base salary.
Not applicable.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
52
WITAN INVESTMENT TRUST PLC
DIRECTORS’ REMUNERATION REPORT continued
Maximum
opportunity
The maximum cash
bonus payable to any
executive director is
40% of base salary.
The maximum cash
bonus payable to any
executive director is
40% of base salary.
Purpose and link to
strategy
Operation and
clawback
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
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 40% 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 change the
terms of this bonus or reduce
any bonus payment that would
otherwise be payable in order to
comply with any relevant current
or future regulations, including the
FCA Remuneration Code. See note
2 on page 53 for the operation of
deferral, malus and clawback.
The CEO is eligible to receive a
bonus of up to 40% of base salary
by reference to the performance
of the Company over the previous
financial year.
The Committee may change the
terms of this bonus or reduce
any bonus payment that would
otherwise be payable in order to
comply with any relevant current
or future regulations, including the
FCA Remuneration Code. See note
2 on page 53 for the operation of
deferral, malus and clawback.
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 (with effect
from 1 January 2016) to receive a
bonus of up to 90% of base salary
by reference to the performance
of the Company over the previous
three financial years.
The maximum cash
bonus payable to any
executive director is
90% of base salary.
The Committee may, with
shareholder approval as
appropriate, change the terms of
this bonus or reduce any bonus
payment that would otherwise be
payable in order to comply with
any relevant current or future
regulations, including the FCA
Remuneration Code. See note 2
on page 53 for the operation of
deferral, malus and clawback.
Performance
measures
Please see
Note 1 on
page 53 for
details of the
performance
measures
subject to
the CEO’s
discretionary
bonus.
Please see
Note 1 on
page 53 for
details of the
performance
measures
subject to the
CEO’s
One-year
Bonus.
Please see
Note 1 on
page 53 for
details of the
performance
measures
subject to the
CEO’s Long-
Term Bonus.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
53
Notes:
1. Performance measures
Mr Bell’s service agreement, as amended, provides that
with effect from 1 January 2016 he is eligible to receive a
bonus of up to 170% of his basic annual 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 40% of
his basic annual salary. The Committee has determined
a number of criteria that it takes 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.
(ii)
One-year Bonus
Each year Mr Bell is eligible to receive an additional cash
bonus of up to 40% 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 buybacks
or issuance) relative to its benchmark. Outperformance of
the benchmark by 3.0% or more will generate a bonus of
the full 40%. No bonus is payable if performance is in line
with or below that of the benchmark. Relative performance
of between nil and 3.0% will generate a pro rata bonus.
Until 1 January 2017, the benchmark (the ‘Benchmark’)
was 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. With effect from
1 January 2017, the benchmark is a composite of 30%
FTSE All-Share Index, 25% FTSE All-World North America
Index, 20% FTSE All-World Europe (ex UK) Index, 20%
FTSE All-World Asia Pacific Index and 5% FTSE All-World
Emerging Markets Index.
(iii) Long-Term Bonus
With effect from 1 January 2016 Mr Bell is eligible to receive
a Long-Term Bonus each year of up to 90% (previously 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 buybacks or issuance)
relative to its benchmark, as set out in the Company’s
audited annual accounts for the applicable financial years.
Compounded average annual outperformance of the
Benchmark by 2.5% per annum or more will generate a
bonus of the full 90%. No bonus is payable if performance
is in line with or below that of the Benchmark. Relative
performance of between nil and 2.5% 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 is payable for the first time on
this basis in respect of the three-year period from
1 January 2016 to 31 December 2018. Prior year Long-
Term Bonuses are payable in accordance with the policy
approved at the 2014 AGM. The discretionary bonus and
the One-year Bonus are both payable for the first time
on this basis in respect of the one-year period from 1
January 2016 to 31 December 2016.
2. Deferral, malus and clawback
2.1 Deferral
All bonuses (other than Long-Term Bonuses in respect of
which terms were set prior to this policy taking effect) are
subject to deferral in terms of payment. 60% of any bonus
will be paid in March following the performance year end
(“First Bonus Payment Date”). 40% of any bonuses will
be payable on a deferred basis over the following three
years, in equal instalments on each anniversary of the
First Bonus Payment Date.
2.2 Malus
Malus (where bonuses that have yet to be paid are
forfeited) may be applied by the Remuneration
Committee where:
(a)
there has been material misstatement or error that
causes an award to vest at a higher level than would
otherwise have been the case;
(b)
there has been a material failure in risk
management;
(c)
there has been serious misconduct that has or could
result in dismissal.
2.3. Clawback
Any bonus will be subject to a clawback period of two
years after it has been paid, whereby the CEO will be
required to pay back part or all of any bonus already
received. Clawback may be applied by the Remuneration
Committee where:
(a)
there has been material misstatement or error that
causes an award to vest at a higher level than would
otherwise have been the case;
(b)
there has been a material failure in risk
management;
(c)
there has been serious misconduct that has or could
result in dismissal.
3.
Legacy plans
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
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
54
WITAN INVESTMENT TRUST PLC
DIRECTORS’ REMUNERATION REPORT continued
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 making
awards of variable remuneration.
(4)
4.
Differences in the Company’s remuneration
policy for directors as compared to employees
The remuneration policy for the executive director differs
principally from that for employees in 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)
(2)
(3)
(4)
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.
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 the Remuneration and
Nomination Committees and to the Chairman of any
other Committees that the Company forms; and to the
Senior Independent Director.
Executive directors
(1)
(2)
(3)
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.
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 170%
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 Boyle, Mr Oldfield and Mr Watson are
proposed for re-election at the Annual General Meeting
in April 2017.
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,
provided in 2016 for a salary of £281,000 (2015:
£278,000) per annum. The salary has been increased
to £ 285,000 with effect from 1 January 2017. 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’ ( page 55)
for further details of the CEO’s service contract.
Illustration of application of remuneration policy
The chart on page 55 shows an indication of the values
of the CEO’s remuneration that would be received by the
CEO in accordance with this remuneration policy for the
year ending 31 December 2018 at three direct levels of
performance:
➜ 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 bonus
payments assuming a 50% pay-out of each of the
discretionary, One-year and Long-Term Bonuses; and
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
55
➜ maximum performance, fixed pay plus bonus
payments assuming 100% pay-out of each of the
discretionary, One-year and Long-Term Bonuses.
s
0
0
0
£
’
850
800
750
700
650
600
550
500
450
400
350
300
250
200
150
100
50
0
Fixed pay
Discretionary bonus
One-year Bonus
Long-Term Bonus
£332,000
100%
14.8%
£574,100
22%
10%
10%
58%
£816,400
32%
14%
14%
40%
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 any future executive directors)
The Company’s policy is to agree a notice period for the
CEO which would not exceed nine months.
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 a good
leaver reason (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
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 ended 31 December 2016 and
met with shareholders in general at the Annual General
Meeting held in 2016 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
9 March 2017 and is signed on its behalf by:
Catherine Claydon
Chairman of the Remuneration and Nomination Committee
9 March 2017
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
56
WITAN INVESTMENT TRUST PLC
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
in respect of the Annual Report, the Directors’ Remuneration Report and the
fi nancial statements
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, to the best of our knowledge, that:
➜ the financial statements, prepared in accordance
with International Financial Reporting Standards as
adopted by the EU, give a true and fair view of the
assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the
consolidation taken as a whole; and
➜ the Strategic Report includes a fair review of the
development and performance of the business and
the position of the Company and the undertakings
included in the consolidation taken as a whole,
together with a description (on pages 18 to 20) of the
principal risks and uncertainties that they face.
We also confirm that the financial statements, taken
as a whole, are fair, balanced and understandable, and
provide the information necessary for shareholders to
assess the Company’s position, performance, business
model and strategy.
By order of the Board
H M Henderson
Chairman
9 March 2017
A L C Bell
Chief Executive
9 March 2017
The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
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
➜ make an assessment of the Company’s ability to
continue as a going concern.
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.
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.
Note to those who access this document by electronic means
The Annual Report for the year ended 31 December 2016 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 Limited’s savings schemes and, where possible, to investors through
other providers’ products and nominee companies (or written notification is sent when they are published online).
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.
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
INDEPENDENT AUDITOR’S REPORT
to the members of Witan Investment Trust plc
ANNUAL REPORT 2016
57
➜ We performed full scope audit procedures and Witan
Investment Trust plc and Witan Investment Services
Limited; and
➜ Key audit risks were identified as:
- Valuation and existence of investments;
- Accuracy and completeness of investment income;
and
- Accuracy and completeness of performance and
management fees
Our opinion on the financial statements is unmodified
In our opinion:
➜ the financial statements give a true and fair view of
the state of the Group's and of the parent company's
affairs as at 31 December 2016 and of the Group's
profit for the year then ended;
➜ the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union;
➜ the parent company financial 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 financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
Who we are reporting to
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 the opinions we have formed.
What we have audited
Witan Investment Trust plc’s financial statements for the
year ended 31 December 2016 comprise the Consolidated
Statement of Comprehensive Income, the Consolidated
and Individual Company Statement of Changes in Equity,
the Consolidated and Individual Company Balance Sheets,
the Consolidated and Individual Company Cash Flow
Statements and the related notes .
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.
Overview of our audit approach
➜ Overall Group materiality: £17.2 million, which
represents 1% of the Group's net assets;
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
58
WITAN INVESTMENT TRUST PLC
INDEPENDENT AUDITOR’S REPORT continued
Our assessment of risk
In arriving at our opinions set out in this report, we highlight the following risks that, in our judgement, had the greatest
effect on our audit:
Audit risk
How we responded to the risk
Valuation and existence of investments
The Group’s investment objective is to provide long-term income
and capital growth by investing in a diversified portfolio of global
equities.
The investment portfolio at £1. 9 billion (2015: £1.7 billion) is a
significant material balance in the Consolidated B alance Sheet
at year end and the main driver of the Group’s performance.
We therefore identified the valuation and existence of
investments as risks that require particular audit attention.
Accuracy and completeness of investment income
Investment income is the Group’s major source of revenue and
a significant material balance in the Consolidated Statement of
Comprehensive Income. Accordingly, we identified the accuracy
and completeness of investment income from the investment
portfolio as risks that require particular audit attention.
Our audit work included, but was not restricted to:
➜ assessing whether the Group’s accounting policy
for the valuation of investments is in accordance
with IFRS as adopted by the European Union and
the Statement of Recommended Practice ‘Financial
Statements of Investment Trust Companies and
Venture Capital Trusts’ (the ‘SORP’) and testing
whether management have accounted for valuation
in accordance with that policy;
➜ on a sample basis, testing purchases and sales
transactions to trade instructions and cash
movements;
➜ independently pricing 100% of the listed equity
portfolio by obtaining the bid prices from
independent market sources and recalculating the
total valuation based on the Group’s investment
holdings, which was agreed to the holdings at
the balance sheet date as shown in the Group's
accounting records;
➜ testing that investments were actively traded by
extracting a report of trading volumes in the week
before and after the year end from an independent
market source for the equity investments held; and
➜ confirming the existence and completeness of
investments through agreeing the holdings listed
in the portfolio at year end to an independent
confirmation that we received directly from the
Group’s custodian;
The Group’s accounting policy on investments is shown in
note 1(h) and related disclosures are included in note 10.
The Audit Committee identified portfolio valuation as a
significant issue in its report on page 4 3 .
Based on our audit work, we found no issues in relation
to the valuation and existence of the investments.
Our audit work included, but was not restricted to:
➜ assessing whether the Group’s accounting policy for
revenue recognition is in accordance with IFRS as
adopted by the European Union and the SORP;
➜ obtaining an understanding of the Group’s process
for recognising revenue in accordance with the
Company’s stated accounting policy;
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
59
Audit risk
How we responded to the risk
➜ testing that income transactions were recognised
in accordance with the policy by selecting a sample
of quoted investments and agreeing the relevant
investment income receivable for those quoted
equities to the Group's records. For the selected
investments we also obtained the respective dividend
rate entitlements from independent sources and
checked against the amounts recorded in the Group's
accounting records that are maintained by the
administrator. In addition, we agreed the receipt of
the dividend income to bank statements;
➜ performing, on a sample basis, a search for special
dividends on the equity investments held during the
year to check whether dividend income attributable
to those investments has been properly recognised.
We checked the categorisation of special dividends as
either revenue or capital receipts ; and
➜ on a sample basis, recalculat ing the interest income
using the coupon rates and checked against the
amounts recorded in the Group's accounting records
that are maintained by the administrator.
The Group’s accounting policy on income, including
revenue recognition is shown in note 1(e) and related
disclosures are included in note 2. The Audit Committee
identified revenue recognition as a significant issue in its
report on page 43.
Our audit work included, but was not restricted to:
➜ assessing whether the Group’s policy for
performance and management fees is in accordance
with IFRS as adopted by the European Union and
SORP;
➜ reviewing relevant investment management
agreements to ensure that performance and
management fees have been calculated according
to the benchmarks and the basis provided in the
agreement ;
➜ recalculat ing the performance and management
fees with reference to the Investment Management
Agreements; and
➜ check ing that the performance and management fees
were properly allocated between revenue and capital.
The Group’s accounting policy on expenses is shown in
note 1(f) and related disclosures are included in note 4.
Accuracy and completeness of performance and management
fees
Performance and management fees are the Group’s main
expense and a significant material balance in the Consolidated
Statement of Comprehensive Income. Accordingly, we
identified the accuracy and completeness of performance and
management fees as risks that require particular audit attention.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
60
WITAN INVESTMENT TRUST PLC
INDEPENDENT AUDITOR’S REPORT continued
Our application of materiality and an overview of the
scope of our audit
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
in determining the nature, timing and extent of our audit
work and in evaluating the results of that work.
We determined materiality for the audit of the Group
financial statements as a whole to be £17.2 million, which
is 1% of net assets. This benchmark is considered the
most appropriate because net assets are fundamental to
the performance and financial position of the Company.
Materiality for the current year is higher than the level
that the previous auditor determined for the year ended
31 December 2015 to reflect to reflect the increase in net
asset value in the year from £1.5 billion to £1.7 billion.
We use a different level of materiality, performance
materiality, to drive the extent of our testing and this was
set at 60% of financial statement materiality for the audit
of the Group financial statements. We also determine a
lower level of specific materiality for certain areas such
as the revenue column of the Consolidated S tatement
of Comprehensive Income, directors’ remuneration and
related party transactions.
We determined the threshold at which we will
communicate misstatements to the Audit Committee
to be £10,000. In addition we will communicate
misstatements below that threshold that, in our view,
warrant reporting on qualitative grounds.
Overview of the scope of our audit
A description of the generic scope of an audit of financial
statements is provided on the Financial Reporting
Council's website at www.frc.org.uk/auditscopeukprivate.
We conducted our audit in accordance with International
Standards on Auditing (ISAs) (UK and Ireland). Our
responsibilities under those standards are further
described in the 'Responsibilities for the financial
statements and the audit' section of our report. We
believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our
opinion.
We are independent of the Group in accordance with the
Auditing Practices Board's Ethical Standards for Auditors,
and we have fulfilled our other ethical responsibilities in
accordance with those Ethical Standards.
Our audit approach was based on a thorough
understanding of the Group's business and is risk
based. The day-to-day management of the Group's
investment portfolio, the custody of its investments and
the maintenance of the Group's accounting records is
outsourced to third-party service providers. Accordingly,
our audit work included:
➜ obtaining an understanding of, and evaluating,
relevant internal controls at both the Group and third-
party service providers;
➜ obtaining and reading the internal control reports on
the description, design, and operating effectiveness
of internal controls at both the Group and third-party
service providers; and
➜ undertaking substantive testing on significant
transactions, balances and disclosures, the extent
of which was based on various factors such as our
overall assessment of the control environment and
our evaluation of the design and implementation of
controls and the management specific risks.
Other reporting required by regulations
Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006 .
In our opinion, based on the work undertaken in the
course of the audit:
➜ the information given in the Strategic Report and
Directors' Report for the financial year for which the
financial statements are prepared is consistent with
the financial statements;
➜ the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements;
➜ the information about internal control and risk
management systems in relation to financial reporting
processes and about share capital structures, given
in compliance with rules 7.2.5 and 7.2.6 in the
Disclosure Rules and Transparency Rules sourcebook
made by the Financial Conduct Authority (the FCA
Rules), is consistent with the financial statements and
has been prepared in accordance with applicable legal
requirements; and
➜ information about the Company’s corporate
governance code and practices and about its
administrative, management and supervisory bodies
and their committees complies with rules 7.2.2, 7.2.3
and 7.2.7 of the FCA Rules.
Matters on which we are required to report under the
Companies Act 2006.
In the light of the knowledge and understanding of the
Group and the parent company and its environment
obtained in the course of the audit, we have not identified
material misstatements in:
➜ the Strategic Report or the Directors’ Report; or
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
61
➜ the information about internal control and risk
management systems in relation to financial reporting
processes and about share capital structures, given
in compliance with rules 7.2.5 and 7.2.6 of the FCA
Rules.
Matters on which we are required to report by
exception
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
➜ 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 and the part
of the Directors' Remuneration Report to be audited
are not in agreement with the accounting records and
returns; or
➜ certain disclosures of directors’ remuneration
specified by law are not made;
➜ we have not received all the information and
explanations we require for our audit ; or
➜ a Corporate Governance Statement has not been
prepared by the Company.
Under the Listing Rules, we are required to review:
➜ the directors' statements in relation to longer-term
viability and going concern, set out on pages 20 and
21; and
➜ the part of the Corporate Governance Statement
relating to the Company's compliance with the
provisions of the UK Corporate Governance Code
specified for our review.
Under the ISAs (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
➜ otherwise misleading.
In particular, we are required to report to you if:
➜ 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; or
➜ the Annual Report does not appropriately disclose
those matters that were communicated to the Audit
Committee which we consider should have been
disclosed.
We have nothing to report in respect of any of the above
matters.
We also confirm that we do not have anything material to
add or to draw attention to in relation to:
➜ the directors’ confirmation in the Annual Report
that they have carried out a robust assessment of
the principal risks facing the Group including those
that would threaten its business model, future
performance, solvency or liquidity;
➜ the disclosures in the Annual Report that describe
those risks and explain how they are being managed
or mitigated;
➜ the directors’ statement in the financial statements
about whether they have considered it appropriate
to adopt the going concern basis of accounting
in preparing them, and their identification of any
material uncertainties to the Group's ability to
continue to do so over a period of at least twelve
months from the date of approval of the financial
statements; and
➜ the directors’ explanation in the Annual Report as to
how they have assessed the prospects of the Group,
over what period they have done so and why they
consider that period to be appropriate, and their
statement as to whether they have a reasonable
expectation that the Group or Company will be able to
continue in operation and meet its liabilities as they
fall due over the period of their assessment, including
any related disclosures drawing attention to any
necessary qualifications or assumptions.
Responsibilities for the financial statements and
the audit
What the directors are responsible for:
As explained more fully in the Statement of Directors'
Responsibilities set out on page 56, the directors
are responsible for the preparation of the financial
statements and for being satisfied that they give a true
and fair view.
What we are responsible for:
Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable
law and ISAs (UK and Ireland). Those standards require
us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
Marcus Swales
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
9 March 2017
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 6
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
62
WITAN INVESTMENT TRUST PLC
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
Investment income
Other income
Gains on investments held at fair value
through profit or loss
Foreign exchange losses on cash and
cash equivalents
Total income
Expenses
Management and performance fees
Other expenses
Profit before finance costs
and taxation
Finance costs
Profit before taxation
Taxation
Profit attributable to equity
shareholders of the parent company
Earnings per ordinary share
Year ended 31 December 2016
Year ended 31 December 2015
Notes
2
3
10
Revenue
return
£’000
52,452
1,475
-
-
Capital
return
£’000
-
-
Total
£’000
Revenue
return
£’000
52,452
45,818
1,475
1,460
Capital
return
£’000
-
-
Total
£’000
45,818
1,460
29 7, 032
29 7, 032
(417)
(417)
-
-
64, 786
64, 786
(223)
(223)
53,927
296,615
350,542
47,278
64,563
111,841
4
5
6
7
9
(1,905)
(4,252)
(6,157)
(1,747)
(9,539)
(11,286)
(5, 109)
(101)
(5, 210)
(5,309)
(101)
(5,410)
46, 913
292,262
339, 175
40,222
54,923
95,145
(2,467)
(7,148)
(9,615)
(2,484)
(7,199)
(9,683)
44, 446
285,114
329, 560
37,738
47,724
85,462
(2,415)
-
(2,415)
(1,779)
-
(1,779)
4 2, 031
285,114
327, 145
35,959
47,724
83,683
22. 11p
149.9 5p
17 2. 06p
18.49p
24.54p
43.03p
The total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance
with IFRSs as adopted by the European Union.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by
the Association of Investment Companies.
The Group does not have any other comprehensive income and hence the total profit, as disclosed above, is the same as
the Group’s total comprehensive income.
All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of Witan Investment Trust plc, the parent company. There are no
non-controlling interests.
The notes on pages 66 to 88 form part of these financial statements.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
63
CONSOLIDATED AND INDIVIDUAL
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Group
Year ended 31 December 2016
Total equity at 31 December 2015
Total comprehensive income:
Profit for the year
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid
Buy backs of ordinary shares
(held in treasury)
Total equity at 31 December 2016
Company
Year ended 31 December 2016
Total equity at 31 December 2015
Total comprehensive income:
Profit for the year
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid
Buy backs of ordinary shares
(held in treasury)
Total equity at 31 December 2016
Group
Year ended 31 December 2015
Total equity at 31 December 2014
Total comprehensive income:
Profit for the year
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid
Issue of ordinary shares
Total equity at 31 December 2015
Company
Year ended 31 December 2015
Total equity at 31 December 2014
Total comprehensive income:
Profit for the year
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid
Issue of ordinary shares
Total equity at 31 December 2015
Notes
Ordinary
share
capital
£’000
50,018
Share
premium
account
£’000
99,251
Capital
redemption
reserve
£’000
Other
capital
reserve
£’000
46,498 1,321,909
Revenue
reserve
£’000
Total
£’000
59,654 1,577,330
8
15,16
Notes
8
15,16
Notes
8
15,16
Notes
-
-
-
-
-
285,114
42,031
327, 145
-
-
(34,920)
(34,920)
-
50,018
-
99,251
-
(142,918)
46,498 1,464,105
-
(142,918)
66, 765 1,726, 637
Ordinary
share
capital
£’000
50,018
Share
premium
account
£’000
99,251
Capital
redemption
reserve
£’000
Other
capital
reserve
£’000
46,498 1,322,517
Revenue
reserve
£’000
Total
£’000
59,046 1,577,330
-
-
-
-
-
285,316
41, 829
327, 145
-
-
(34,920)
(34,920)
-
50,018
-
99,251
-
(142,918)
46,498 1,464,915
-
(142,918)
65, 955 1,726, 637
Ordinary
share
capital
£’000
47,390
Share
premium
account
£’000
18,106
Capital
redemption
reserve
£’000
Other
capital
reserve
£’000
46,498 1,274,185
Revenue
reserve
£’000
Total
£’000
55,068 1,441,247
-
-
-
47,724
35,959
83,683
-
2,628
50,018
Ordinary
share
capital
£’000
47,390
-
81,145
99,251
-
-
-
-
46,498 1,321,909
(31,373)
-
(31,373)
83,773
59,654 1,577,330
Share
premium
account
£’000
18,106
Capital
redemption
reserve
£’000
Other
capital
reserve
£’000
46,498 1,274,479
Revenue
reserve
£’000
Total
£’000
54,774 1,441,247
-
-
-
48,038
35,645
83,683
8
15,16
-
2,628
50,018
-
81,145
99,251
-
-
-
-
46,498 1,322,517
(31,373)
-
(31,373)
83,773
59,046 1,577,330
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
The notes on pages 66 to 88 form part of these financial statements.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
64
WITAN INVESTMENT TRUST PLC
CONSOLIDATED AND INDIVIDUAL
COMPANY BALANCE SHEETS
as at 31 December 2016
Non current assets
Investments at fair value through profit or loss
Current assets
Other receivables
Cash and cash equivalents
Total assets
Current liabilities
Other payables
81/2 per cent. Debenture Stock 2016
Bank loans
Total assets less current liabilities
Non current liabilities
At amortised cost:
6.125 per cent. Secured Bonds due 2025
3.29 per cent. Secured Notes due 2035
3.47 per cent. Secured Notes due 2045
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
Group
31 December
2016
£’000
Company
31 December
2016
£’000
Group
31 December
2015
£’000
Company
31 December
2015
£’000
Notes
10 1,884,037 1,885,747 1,708,728 1,710,236
11
12
13
13
13
13
13,17
13,17
11,638
50,556
62,194
6,547
56,582
63,129
1,946,231 1,945,940 1,773,570 1,773,365
7,255
57,587
64,842
11,038
49,155
60,193
(8, 102)
-
(71,000)
(79, 102)
(8,060)
(44,583)
(3,000)
(55,643)
1,86 7,129 1,86 7,129 1,717,722 1,717,722
(8,265)
(44,583)
(3,000)
(55,848)
(7, 811)
-
(71,000)
(78, 811)
(63,434)
(20, 864)
(5 3,639)
(2,055)
(500)
(140,492)
(63,354)
(20,491)
(53,992)
(2,055)
(500)
(140,392)
1,726, 637 1,726, 637 1,577,330 1,577,330
(63,354)
(20,491)
(53,992)
(2,055)
(500)
(140,392)
(63,434)
(20, 864)
(5 3,639)
(2,055)
(500)
(140,492)
15
16
16
50,018
99,251
46,498
50,018
99,251
46,498
50,018
99,251
46,498
50,018
99,251
46,498
16 1,464,105 1,464,915 1,321,909 1,322,517
59,046
16
1,726, 637 1,726, 637 1,577,330 1,577,330
65, 955
59,654
66, 765
Net asset value per ordinary share
18
952. 83p
952. 83p
788.39p
788.39p
The financial statements of Witan Investment Trust plc (registered number 101625) were approved by directors and
authorised for issue on 9 March 201 7 and were signed on their behalf by
H M Henderson
A L C Bell
As permitted by section 408 of the Companies Act 2006, the Company has not presented its own income statement.
The profit of the Company dealt with in the accounts of the Group amounted to £ 327,145,000 (2015: £ 83,683,000).
The notes on pages 66 to 88 form part of these financial statements.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
65
CONSOLIDATED AND INDIVIDUAL
COMPANY CASH FLOW STATEMENTS
for the year ended 31 December 2016
Cash flows from operating activities
Dividend income received
Interest received
Other income received
Operating expenses paid
Taxation on overseas income
Taxation received
Net cash inflow from operating activities
Cash flows from investing activities
Purchases of investments
Sales of investments
Realised gain on futures
Net cash inflow/(outflow) from investing activities
Cash flow from financing activities
Equity dividends paid
Issue of secured notes net of issue expenses
Buy backs of ordinary shares
Issue proceeds of ordinary shares
Repayment of debenture
Interest paid
Drawdown/(repayment) of bank loans
Net cash (outflow)/inflow from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the start of the period
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the period
Notes
Group
2016
£’000
Company
2016
£’000
Group
2015
£’000
Company
2015
£’000
49,178
90
1,384
(14,688)
(2,883)
371
33,452
49,178
87
291
(13,988)
(2,883)
371
33,056
44,246
124
1,324
(19,365)
(1,745)
103
24,687
44,246
120
178
(17,802)
(1,745)
103
25,100
19
(525,517)
641,967
7,548
123,998
(525,517)
641,967
7,548
123,998
(545,075)
453,142
1,048
(90,885)
(545,075)
453,142
1,048
(90,885)
(34,920)
-
(142,081)
-
(44,589)
(10,474)
68,000
(164,064)
(34,920)
-
(142,081)
-
(44,589)
(10,474)
68,000
(164,064)
(6,614)
57,587
(417)
50,556
(7,010)
56,582
(417)
49,155
(31,373)
74,472
-
85,702
-
(9,347)
(42,000)
77,454
11,256
46,554
(223)
57,587
(31,373)
74,472
-
85,702
-
(9,347)
(42,000)
77,454
11,669
45,136
(223)
56,582
In 2016 the direct method of cash flow presentation has been adopted as it is considered to provide a clearer
presentation of the gross cash flows. As the Company previously presented the cash flow statement using the indirect
method, comparative figures have been restated accordingly.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
The notes on pages 66 to 88 form part of these financial statements.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
66
WITAN INVESTMENT TRUST PLC
NOTES TO THE
FINANCIAL STATEMENTS
for the year ended 31 December 2016
1 Accounting policies
The financial statements of the Group have been
prepared in accordance with International Financial
Reporting Standards (‘IFRSs’) as adopted by the European
Union and therefore the Group financial statements
comply with Article 4 of the EU IAS Regulation. These
comprise standards and interpretations approved by
the International Accounting Standards Board (‘IASB’),
together with interpretations of the International
Accounting Standards and Standing Interpretations
Committee approved by the International Accounting
Standards Committee (‘IASC’) that remain in effect, to the
extent that they have been adopted by the European Union.
These financial statements are presented in pounds
sterling because that is the currency of the primary
economic environment in which the Group operates.
(a) Basis of preparation
The financial statements have been prepared on the
historical cost basis, except for the revaluation of
certain financial instruments. The principal accounting
policies adopted are set out below. Where presentational
guidance set out in the Statement of Recommended
Practice: Financial Statements of Investment Trust
Companies and Venture Capital Trusts (‘the SORP’)
(issued by the Association of Investment Companies
(‘the AIC’) in November 2014 and updated in January
2017 with consequential amendments) is consistent
with the requirements of IFRSs as adopted by the
European Union, the directors have sought to prepare
the financial statements on a basis compliant with the
recommendations of the SORP.
Judgements and s ources of estimation uncertainty
In the application of the Group’s accounting policies,
management is required to make judgements, estimates
and assumptions about carrying values of assets and
liabilities that are not always readily apparent from other
sources. The estimates and associated assumptions are
based on historical experience and other factors that
are considered to be relevant. Actual results may vary
significantly from these estimates.
(b) Going concern
The financial statements have been prepared on a going
concern basis. The Group’s business activities, together
with the factors likely to affect its future development
and performance, are set out in the Strategic Report
on pages 8 to 21. The financial position of the Group as
at 31 December 2016 is shown on the balance sheet on
page 64. The cash flows of the Group for the year ended
31 December 2016 are not untypical and are set out on
page 65. The Company had fixed debt and preference
share capital totalling £140,492,000, as set out in note
13 on page 76; the 8.5% Debenture Stock was repaid in
2016. In 2016, the Group renewed a one-year secured
multi-currency borrowing facility for £75 million, of which
£71 million was drawn down at 31 December 2016 (2015:
£3 million).
(c) Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and the entity
controlled by the Company (its subsidiary) made up to
31 December each year.
In accordance with IFRS10 the Company has been
designated as an investment entity on the basis that:
➜ It obtains funds from investors and provides those
investors with investment management services;
➜ It commits to its investors that its business purpose is
to invest solely for returns from capital appreciation
and investment income; and
➜ It measures and evaluates performance of substantially
all of its investments on a fair value basis.
The subsidiary of the Company was established for the
sole purpose of operating or supporting the investment
operations of the Company, and is not itself an investment
entity. Therefore, under the principles of IFRS 10,
the Company has consolidated its subsidiary as it is a
controlled entity that supports the investment activity of
the investment entity.
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 the end of the period.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
67
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 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.
The carrying amount of any 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 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.
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.
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.
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.
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
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.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
68
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
1 Accounting policies continued
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) Fixed borrowings
All secured bonds and notes 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.
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.
(m) Adoption of new and revised accounting standards
(i) Changes in accounting policy and disclosures
As explained on page 65, the Company has adopted the
direct method of presentation of the cash flow statement
in the current year. In all other respects the accounting
policies adopted are consistent with those of the previous
financial year.
(ii) Standards not affecting the reported results nor 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.
Key management personnel
IAS 1 Amendment Disclosure Initiative
IAS 24 Amendment
(AI 2010-12)
IFRS 10, IFRS
12 and IAS 28
Amendment
Investment Entities: Applying the
Consolidation Exception
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 effective (and in some cases had not yet been
adopted by the European Union).
IAS 7 Amendment Disclosure Initiative
IAS 12 Amendment Recognition of Deferred Tax Assets
IFRS 9
IFRS 16
IFRS 12
Amendment
(AI 2014-16)
IFRIC 22
Foreign Currency
for Unrealised Losses
Financial Instruments
Leases
Clarification of the scope of the
Standard
Transactions and Advance
Consideration
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.
Beyond the information above, it is not practical 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.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
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 stock dividends from listed investments
UK special dividends from listed investments
Unfranked:
Overseas dividends from listed investments
Overseas special dividends from listed investments
Property income dividends
Stock 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)
Latin America
Other
Total investment income
ANNUAL REPORT 2016
69
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
2016
£’000
2015
£’000
20,878
841
1,019
22,738
26,433
1,041
186
888
1,166
29,714
52,452
19,416
-
1,124
20,540
22,396
716
47
1,116
1,003
25,278
45,818
2016
£’000
2015
£’000
22,739
7,464
13,516
2,121
5,662
108
842
52,452
21,645
6,685
9,244
1,666
5,055
207
1,316
45,818
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
70
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
3 Other income
Deposit interest
Underwriting commission
Stock lending income
Income from the subsidiary company’s third party business
2016
£’000
91
34
242
1,108
1,475
2015
£’000
127
-
186
1,147
1,460
At 31 December 2016 the total value of securities on loan by the Company for stock lending purposes was £49,311,000
(2015: £119,797,000). The maximum aggregate value of securities on loan at any time during the year ended
31 December 2016 was £147,849,000 (2015: £132,302,000). Collateral, revalued on a daily basis at a level equivalent
to at least 105% (110% for equities) of the market value of the securities lent, was provided against all loans. Collateral in
respect of UK securities is usually in the form of Crest DBVs (Delivery by Values); the content of Crest DBVs (Delivery by
Values) is subject to a concentration limit of 10%.
4 Management fees
Management fees
Performance fees
Year ended 31 December 2016
Year ended 31 December 2015
Revenue
£’000
1,905
-
1,905
Capital
£’000
5,715
(1,463)
4,252
Total
£’000
7,620
(1,463)
6,157
Revenue
£’000
1,747
-
1,747
Capital
£’000
5,241
4,298
9,539
Total
£’000
6,988
4,298
11,286
A summary of the terms of the management agreements is given on page 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 - current auditors
Other services - previous auditors
Total non-audit fees
Total fees paid
* The fees for this work were specifically approved by the Audit Committee (see page 44).
2016
Revenue
£’000
2015
Revenue
£’000
41
10
51
-
11
11
22
73
54
5
59
61
-
3
64
123
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
71
2016
Revenue
£’000
73
20
238
26
1, 020
151
80
165
284
135
56
142
391
124
688
597
7 49
170
5, 109
2015
Revenue
£’000
123
9
250
27
1,103
153
81
149
269
130
52
104
381
118
766
616
780
198
5,309
Auditor’s remuneration (see page 70)
Tax advisory services
Non-executive directors’ fees (see the Directors’ Remuneration Report on page 46)
Employers’ national insurance contributions on the directors’ fees
Employee costs (including executive director’s remuneration):
- salaries and bonuses
- employer’s 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
Depositary fees
Marketing expenses*
Savings scheme expenses (Witan Wisdom and Jump Savings)
Other expenses
Irrecoverable VAT
Total **
includes £5,000 sponsorship paid to the Royal Horticultural Society (2015: £50,000).
*
** The total includes costs of £1,417,000 (2015: £1,277,000) 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 2016 were £101,000 (2015: £101,000). These related to investment
advisory costs.
The average number of employees during the year was 7 (2015: 7). The subsidiary company does not employ any staff.
6 Finance costs
Interest payable on overdrafts and loans
repayable within one year
Interest payable on secured bonds and notes
repayable in more than 5 years
Preference share dividends
Year ended 31 December 2016
Year ended 31 December 2015
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
733
2,197
2,930
1,025
3,072
4,097
1,651
83
2,467
4,951
-
7,148
6,602
83
9,615
1,376
83
2,484
4,127
-
7,199
5,503
83
9,683
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
72
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
7 Taxation
(a) Analysis of tax charge for the year
UK corporation tax at 20.00% (2015: 20.25%)
Foreign tax suffered
Recovery of prior years’ withholding tax
Foreign tax recoverable
Total current tax for the year
(see note 7 (b))
Year ended 31 December 2016
Year ended 31 December 2015
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
-
3,161
(399)
(347)
2,415
-
-
-
-
-
--
-
-
3,161
(399)
(347)
2,454
(381)
(294)
2,415
1,779
-
-
-
-
2,454
(381)
(294)
1,779
(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 20.00% (2015: 20.25%). The difference is explained below.
Profit before taxation
Corporation tax at 20.00% (2015: 20.25%)
Effects of:
Non-taxable UK dividends
Non-taxable overseas dividends
Withholding tax written off
Recovery of prior years’ withholding tax
Non-taxable gains on investments held at
fair value through profit or loss
Realised gains on non-reporting offshore
funds
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 2016
Year ended 31 December 2015
Revenue
£’000
44, 446
8,8 89
Capital
£’000
285,114
57,023
Total
£’000
329, 560
65, 912
Revenue
£’000
37,738
7,642
Capital
£’000
47,724
9,664
Total
£’000
85,462
17,306
(4,379)
(5,765)
2,398
(399)
-
–
3,2 44
379
17
(2, 003)
34
2,415
-
-
-
-
(4,379)
(5,765)
2,398
(399)
(4,159)
(4,907)
2,148
(381)
-
-
-
-
(4,159)
(4,907)
2,148
(381)
(59,323)
(59,323)
297
297
-
-
-
2, 003
-
-
3,2 44
379
17
-
34
2,415
-
-
3,089
1,717
17
(3,410)
23
1,779
(13,074)
(13,074)
-
-
-
-
3,410
-
-
-
3,089
1,717
17
-
23
1,779
(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 (2015: £nil).
(d) Factors that may affect future tax charges
The Company has not recognised a deferred tax asset of £3 3,542,000 (2015: £3 1,033,000) arising as a result of
having unrelieved loan relationship deficits and eligible unrelieved foreign tax because it is unlikely that the Company
will obtain relief for these in the future .
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
73
8 Dividends
Amounts recognised as distributions to equity holders in the year:
Fourth interim dividend for the year ended 31 December 2015 of 5.45p (2014: 4.6p) per
ordinary share
First interim dividend for the year ended 31 December 2016 of 4.25p (2015: 3.85p) per
ordinary share
Second interim dividend for the year ended 31 December 2016 of 4.25p (2015: 3.85p) per
ordinary share
Third interim dividend for the year ended 31 December 2016 of 4.25p (2015: 3.85p) per
ordinary share
Refund of unclaimed dividends
Fourth interim dividend for the year ended 31 December 2016 of 6.25p (2015: 5.45p) per
ordinary share
2016
£’000
2015
£’000
10,895
8,727
8,490
7,450
7,817
7,550
7,739
(21)
34,920
7,670
(24)
31,373
11,246
10,895
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 (Company only)
First interim dividend for the year ended 31 December 2016 of 4.25p (2015: 3.85p) per
ordinary share
Second interim dividend for the year ended 31 December 2016 of 4.25p (2015: 3.85p) per
ordinary share
Third interim dividend for the year ended 31 December 2016 of 4.25p (2015: 3.85p) per
ordinary share
Fourth interim dividend for the year ended 31 December 2016 of 6.25p (2015: 5.45p) per
ordinary share
Revenue retained for the year (Company only)
2016
£’000
4 1,829
2015
£’000
35, 645
(8,490)
(7,450)
(7,817)
(7,550)
(7,739)
(7,670)
(11,246)
6,537
(10,895)
2, 080
9 Earnings per ordinary share
The earnings per ordinary share figure is based on the net profit for the year of £327, 145,000 (2015: £83,683,000)
and on 190,131,108 ordinary shares (2015: 194,455,343), 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 securites 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
2016
£’000
4 2,031
285,114
327, 145
2015
£’000
35,959
47,724
83,683
Weighted average number of ordinary shares in issue during the year
190,131,108 194,455,343
Revenue earnings per ordinary share
Capital earnings per ordinary share
Total earnings per ordinary share
Pence
22. 11
149.9 5
17 2.06
Pence
18.49
24.54
43.03
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
74
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
10 Investments held at fair value through profit or loss
(i) Group changes in investments held at fair value through profit or loss
2016
2015
Listed in the United Kingdom
Listed abroad
Investment in subsidiary undertaking
Group
£’000
750,079
Company
£’000
750,079
1,133,958 1,133,958
1,710
Company
£’000
732,292
976,436
1,508
1,884,037 1,885,747 1,708,728 1,710,236
Group
£’000
732,292
976,436
-
-
(ii) Group changes in investments held at fair value through profit or loss
United Kingdom
North America
Continental Europe
Japan
Asia Pacific (ex Japan)
Latin America
Other
Valuation
31 December
2015
£’000
732,292
443,130
261,896
74,881
174,314
8,668
13,547
1,708,728
Purchases
£’000
229,945
120,868
51,466
49,627
63,661
53
13,698
529,318
Sales
£’000
226,224
195,385
111,160
41,528
63,492
4,964
1,565
644,318
Investment
gains
£’000
14,065
121,760
104,273
3,414
29,804
6,971
10,022
Cost
Valuation
31 December
31 December
2016
2016
£’000
£’000
62 4,9 93
750,078
318,258
490,373
232,221
306,475
72,686
86,394
151,634
204,287
5,833
10,728
30,528
35,702
290,309 1,884,037 1,43 6,1 53
The above figures do not include the gains/losses on futures positions.
Included in the above figures are purchase costs of £1,520,000 (2015: £1,317,000) and sales costs of £475,000
(2015: £436,000). These comprise mainly stamp duty and commission and include £nil in respect of changes in
portfolio managers (2015: £nil).
(iii) Gains/(losses) in investments held at fair value through profit or loss
Realised gains on sales of investments
Realised gain on futures
Movement in investment holding gains
Movement in unrealised (loss)/gain on futures
2016
£’000
8 0,509
7,548
20 9,8 00
(825)
29 7, 032
2015
£’000
86,781
1,048
(23,911)
868
64, 786
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
75
(iv) Derivatives
Open future contracts as at year ended 31 December 2016
Contract
MSCI Index Future
Position
long
600
Settlement
value
£’000
21,432
Nominal
exposure
£’000
20,853
Unrealised
loss
£’000
(579)
The realised gain on the closing of futures positions during 2016 was £7,548,000.
Open future contracts as at year ended 31 December 2015
Contract
FTSE Index Future
MSCI Index Future
Position
long
380
500
Settlement
value
£’000
23,187
13,477
36,664
Nominal
exposure
£’000
23,553
13,357
36,910
Unrealised
gain/(loss)
£’000
366
(120)
246
The realised gain on the closing of futures positions during 2015 was £1,048,000.
(v) Substantial share interests
The Company has notified interests in 3% or more of the voting rights of five 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).
11 Other receivables
Sales for future settlement
Unrealised gain on derivatives held at fair value through profit or loss*
Taxation recoverable
Amount due from subsidiary
Prepayments and accrued income
Other debtors
2016
2015
Group
£’000
2,506
-
1,042
-
4,533
3,557
11,638
Company
£’000
2,506
-
1,042
2,913
4,533
44
11,038
Group
£’000
155
366
945
-
3,077
2,712
7,255
Company
£’000
155
366
945
1,976
3,077
28
6,547
* The unrealised gain on derivatives related to a long position in FTSE 100 Futures, nominal value at 31 December 2015: £23,553,000.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
76
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
12 Other payables
Purchases for future settlement
Unrealised loss on derivatives held at fair value through profit or loss*
Preference dividends
Outstanding buy backs of ordinary shares
Accruals
2016
2015
Group
£’000
2,610
579
38
837
4, 038
8, 102
Company
£’000
2,610
579
38
837
3, 747
7, 811
Group
£’000
538
120
38
-
7,569
8,265
Company
£’000
538
120
38
-
7,364
8,060
* The unrealised loss on derivatives related to a long position in MSCI Emerging Market Futures, nominal value at 31 December 2016: £20,853,000 (2015:
MSCI Emerging Markets Futures, nominal value: £13,357,000)
13 Fixed borrowings
Financial instruments redeemable other than in instalments are as
follows:
Amounts falling due within one year:
81/2 per cent. Debenture Stock 2016
Amounts falling due after more than one year:
6.125 per cent. Secured Bonds due 2025
3.2 9% Secured Notes due 2035
3.47% Secured Notes due 2045
2,055,000 3.4 per cent. cumulative preference shares of £1 each
(see note 17 on page 85)
500,000 2.7 per cent. cumulative preference shares of £1 each
(see note 17 on page 85)
2016
2015
Group
£’000
Company
£’000
Group
£’000
Company
£’000
-
-
44,583
44,583
63,434
20, 864
5 3,639
63,434
20, 864
5 3,639
63,354
20,491
53,992
63,354
20,491
53,992
2,055
2,055
2,055
2,055
500
140,492
500
140,492
500
140,392
500
140,392
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 201 6) is redeemable on 15 December 2025. The nominal value of the Debenture Stock (£44,589,000)
was redeemed on 1 October 2016.
During 2015 the Company issued £21,000,000 (nominal) 3.2 9% Secured Notes due 2035 and £54,000,000 (nominal)
3.47% Secured Notes due 2045 net of issue costs totalling approximately £528,000. These costs will be written back
over the life of the Secured Notes.
The Secured Bonds and the Secured Notes 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.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
77
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.
14.1 Market risk
The fair value of 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 2015. 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 (i.e. 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 review investment performance. The
Board monitors the managers’ compliance with their mandates and also whether each mandate and asset allocation is
compatible with the Company’s objective.
When appropriate, the Company 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 equity investments, and on index
futures and investments, was as follows:
Investments held at fair value through profit or loss
Nominal futures exposure (long position)
Concentration of exposure to price risks
2016
£’000
2015
£’000
1,884,037 1,708,728
36,910
20,853
An analysis of the Group’s investment portfolio is shown on page 26. 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 and futures 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.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
78
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
14 Financial instruments continued
Changes to the consolidated income statement
Revenue return
Capital return – investments
Capital return – futures
2016
2015
Increase
in fair value
£’000
Decrease
in fair value
£’000
Increase
in fair value
£’000
Decrease
in fair value
£’000
-
282,606
3,128
285,734
-
(282,606)
(3,128)
(285,734)
-
256,309
5,537
261,846
-
(256,309)
(5,537)
(261,846)
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 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
Company receives a monthly report on the currency exposures of the entire fund.
Income denominated in foreign currencies is converted into sterling on 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.
2016
Receivables (due from brokers, dividends and other income
receivable)
Cash at bank and on deposit
Payables (due to brokers, accruals and other creditors)
Payables (unrealised loss on derivatives held at fair value through
profit or loss)
Total foreign currency exposure on net monetary items
Investments at fair value through profit or loss that are equities
Total net foreign currency exposure
2015
Receivables (due from brokers, dividends and other income
receivable)
Cash at bank and on deposit
Payables (due to brokers, accruals and other creditors)
Payables (unrealised loss on derivatives held at fair value through
profit or loss)
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
Euro
£’000
2,966
3,985
(2,822)
1,444
912
(309)
Yen
£’000
274
-
-
Other
£’000
1,311
167
-
(579)
3,550
526,782
530,332
-
2,047
213,500
215,547
-
274
101,060
101,334
-
1,478
246,075
247,553
US$
£’000
Euro
£’000
581
2,849
(1,081)
310
1,298
-
Yen
£’000
438
-
-
Other
£’000
875
147
-
(120)
2,229
460,610
462,839
-
1,608
171,963
173,571
-
438
76,686
77,124
-
1,022
253,128
254,150
The above amounts are not necessarily representative of the exposure to risk during the year as levels of monetary
foreign currency exposure change significantly throughout the year.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
79
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% (2015: 15%)
£/Euro +/- 15% (2015: 15%)
£/Japanese yen +/- 15% (2015: 15%)
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
If sterling had depreciated against the currencies shown, this would have the following effect:
Changes to the consolidated income
statement
Revenue return
Capital return
Change to the profit after tax
Change to the shareholders’ funds
US$
£’000
2016
Euro
£’000
Yen
£’000
US$
£’000
2015
Euro
£’000
Yen
£’000
1,920
91,096
93,016
93,016
972
37,313
38,285
38,285
355
17,834
18,189
18,189
1,649
79,784
81,433
81,433
931
31,107
32,038
32,038
240
13,533
13,773
13,773
If sterling had appreciated against the currencies shown, this would have the following effect:
Changes to the consolidated income
statement
Revenue return
Capital return
Change to the profit after tax
Change to the shareholders’ funds
14.4 Interest rate risk
US$
£’000
2016
Euro
£’000
Yen
£’000
US$
£’000
2015
Euro
£’000
Yen
£’000
(1,419)
(67,332)
(68,751)
(68,751)
(718)
(27,579)
(28,297)
(28,297)
(262)
(13,182)
(13,444)
(13,444)
(1,219)
(58,939)
(60,158)
(60,158)
(688)
(22,992)
(23,680)
(23,680)
(178)
(10,002)
(10,180)
(10,180)
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
secured bonds and notes that were issued as part of the Company’s planned gearing.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
80
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
14 Financial instruments continued
Interest rate exposure
The exposure at 31 December 2016 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 (liabilities)/assets is £(20,444,000) (2015: £54,587,000).
This represents cash holdings minus variable rate borrowing.
The Group’s exposure to fixed interest rates on assets is £29,056,000 (2015: £25,312,000). This represents
investments in bonds.
The Group’s exposure to fixed interest rates on liabilities is £140,492,000 (2015: £184,975,000). 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 (2015: same);
➜ the finance charge on the preference shares is at a weighted average interest rate of 3.3% (2015: 3.3%);
➜ the finance charge on the secured bonds is at a weighted average interest rate of 6.125% (2015: 6.125%); and
➜ the finance charge on the secured notes is at a weighted average interest rate of 3.41% for an average period of
25.7 years (2015: 3.41% for an average period of 26.6 years ).
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 after tax by £656,000 (2015: £1,137,000), capital
return after tax by £1,065,000 (2015: £45,000), and total profit after tax and shareholders’ funds by £409,000
(2015: £1,092,000).
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 £63,174,000 by its issue in 2000 of 6.125 per
cent Secured Bonds due 2025. During 2015, the Group issued 3.47% and 3.29% secured notes for £54,000,000
and £21,000,000 respectively. The Group is able to draw short-term borrowings of up to the sterling equivalent of
£75m from its secured and committed multi-currency borrowing facility with BNP Paribas, London Branch (expiring
6 December 2017). £71,000,000 was drawn down under the facility at 31 December 2016.
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 investment managers may hold cash from time to time but the Group’s
overall equity exposure is unlikely to fall below 80% in normal conditions.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
81
Liquidity risk exposure
Debenture stock*
Secured bonds*
Secured notes*
Preference shares †
Other creditors and accruals
Bank loan and interest payable
2016
Within
1 year
£’000
-
3,938
2,565
83
8,194
71,053
85,833
Between
1 and 5 years
£’000
-
15,751
10,259
332
-
-
26,342
More than
5 years
£’000
-
79,868
128,147
2,555
-
-
210,570
Within
1 year
£’000
47,432
3,938
2,565
83
8,263
3,003
65,284
2015
Between
1 and 5 years
£’000
-
15,751
10,259
332
-
-
26,342
More than
5 years
£’000
-
83,806
130,712
2,555
-
-
217,073
* The above figures show interest payable over the remaining terms of each instrument. The figures 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;
➜ stock lending transactions are carried out with a number of approved counterparties, the credit ratings of which are
reviewed periodically, and limits are set on the amount that may be sent to any one counterparty. Other than stock
lending, none of the Company’s financial assets or liabilities is secured by collateral or other credit enhancements;
➜ cash at bank is held only with reputable banks with high quality external credit ratings.
None of the Group’s financial liabilities is past its due date 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 derivative held at fair value through profit or loss
Taxation recoverable
Accrued income
Other debtors
2016
£’000
29,056
50,556
2,506
-
1,042
4,533
3,557
91,250
2015
£’000
25,312
57,587
155
366
945
3,077
2,712
90,154
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
82
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
14 Financial instruments continued
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).
Financial liabilities measured at amortised cost:
Non current liabilities
Preference shares
Debenture stock
Secured bonds
Secured notes
2016
2015
Fair
value
£’000
Balance
sheet
amount
£’000
Fair
value
£’000
Balance
sheet
amount
£’000
1,379
-
82,840
80,905
165,124
2,555
-
63, 434
74, 503
140, 492
1,399
46,765
78,198
73,009
199,371
2,555
44,583
63,354
74,483
184,975
The fair values shown above are derived from the offer price at which the securities are quoted on the London Stock
Exchange or, in the case of the Secured notes, calculating a present value by using a discount rate which reflects the
yield on a UK gilt of similar maturity plus a credit spread of 1.15%.
Level 1 Financial liabilities
The Company's preference shares, debenture stock (prior to redemption on 1 October 2016) and secured bonds are
actively traded on a recognised stock exchange. Their fair value has therefore been deemed Level 1. The carrying
values are disclosed in note 13.
Level 3 Financial liabilities
The Company’s secured notes are not traded on a recognised stock exchange and so the fair value is calculated by using
a discount rate which reflects the yield on a UK gilt of similar maturity plus a credit spread of 1.15%. Their fair value has
therefore been deemed Level 3. The carrying values are disclosed in note 13.
Fair value hierarchy disclosures
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.
Financial assets and financial liabilities at fair value through profit or loss
At 31 December 2016
Equity investments
Investments in other funds
Derivatives (nominal exposure of £20,853,000)
Total
At 31 December 2015
Equity investments
Investments in other funds
Derivatives (nominal exposure of £36,910,000)
Total
Level 1
£’000
1,859,596
-
(579)
1, 859,017
Level 1
£’000
1,640,781
-
246
1, 641,027
Level 2
£’000
-
24,441
-
24,441
Level 2
£’000
-
68,198
-
68,198
Level 3
£’000
Total
£’000
- 1,859,596
24,441
-
-
(579)
- 1, 883,458
Level 3
£’000
Total
£’000
- 1,640,781
-
68,198
246
-
– 1, 709,225
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:
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
83
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.
Level 2 Financial assets
Level 2 Financial assets refer to investments in iShares MSCI Fund and Somerset Emerging Markets Small Cap Fund
(2015: Trilogy Emerging Markets Fund and Polar Capital Insurance Fund ).
Level 3 Reconciliation of Level 3 fair value measurement of financial assets
There were no Level 3 investments at 31 December 2016 or 31 December 2015.
Capital management
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 2016 was £1,93 8, 129,000 (2015: £1,765,305,000) comprising
£211,492,000 of debt (2015: £187,975,000) and £1,726, 637,000 of equity share capital and other reserves (2015:
£1,577,330,000).
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 £20,853,000 long at 31 December 2016 (2015: £36,910,000 long)) expressed as a percentage of shareholders’
funds. At 31 December 2016 effective gearing was 10.3% (2015: 10.7%) and the calculation is set out below:
Value of investments per the b alance sheet
Add:
Nominal exposure of futures
Adjusted gross value of investments (including futures nominal exposure)
Shareholders’ funds per the b alance sheet (A)
Excess of gross value of investments over shareholders’ funds (B)
Effective gearing (B as a percentage of A)
2016
£’000
2015
£’000
1,884,037 1,708,728
20,853
36,910
1,904,890 1,745,638
1,726, 637 1,577,330
168,308
10.7%
178, 253
10.3%
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 opportunity to buy back equity shares, which takes account of the difference between the net asset value per
share and the share price (i.e. 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.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
84
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
14 Financial instruments continued
The Group’s objectives, policies and processes for managing capital are unchanged from the preceding accounting
period.
The Company is subject to several externally imposed capital requirements:
➜ the terms of issue of the Company’s secured bonds and notes 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 and issued:
181,210,739 ordinary shares of 25p each (2015: 200,071,000)
Held in treasury
18,860,261 ordinary shares of 25p each (2015: nil)
Total 200,071,000 shares (2015: 200,071,000)
Group and
Company
2016
£’000
Group and
Company
2015
£’000
45,303
50,018
4,715
50,018
-
50,018
During the year, 18,860,261 ordinary shares were bought back at a cost of £142,918,000 and are held in treasury
(2015: 10,510,000 shares issued for net proceeds of £83,773,000). Shares held in treasury do not carry voting rights
or the right to receive dividends.
16 Share premium account and reserves
Group
At 1 January 2016
Net movement on investments
Net movement on foreign exchange
Expenses and interest payable charged to capital net of
tax relief
Buy back of ordinary shares into treasury
Profit for the year
Ordinary dividends paid
At 31 December 2016
Capital
reserve
arising on
investments
sold
£’000
Capital
reserve
arising on
revaluation
of
investments
held
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
99,251
-
-
-
-
-
-
99,251
46,498 1,083,579
88,962
(417)
-
-
238,330
208,070
-
-
-
-
-
(11,501)
(142,918)
-
-
46,498 1,017,705
-
-
-
-
446,400
Revenue
reserve
£’000
59,654
-
-
-
-
4 2, 031
(34,920)
66, 765
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
85
Company
At 1 January 2016
Net movement on investments
Net movement on foreign exchange
Expenses and interest payable charged to capital net of
tax relief
Buy back of ordinary shares into treasury
Profit for the year
Ordinary dividends paid
At 31 December 2016
Capital
reserve
arising on
investments
sold
£’000
Capital
reserve
arising on
revaluation
of
investments
held
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
99,251
-
-
-
-
-
-
99,251
46,498 1,083,579
88,962
(417)
-
-
238,938
208,272
-
-
-
-
-
(11,501)
(142,918)
-
-
46,498 1,017,705
-
-
-
-
447,210
Revenue
reserve
£’000
59,046
-
-
-
-
41, 829
(34,920)
65, 955
In accordance with the Company’s Articles of Association, dividends may only be paid out of current period revenue or
revenue reserves.
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
2016
£’000
2,055
500
2,555
Group and
Company
2015
£’000
2,055
500
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 for
payments made prior to 6 April 2016) 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 and 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 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.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
86
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
18 Net asset value per ordinary share
The net asset value per ordinary share of 952. 83p (2015: 788.39p) is based on the net assets attributable to the
ordinary shares of £1,726, 637,000 (2015: £1,577,330,000) and on the 181,210,879 ordinary shares in issue
(excluding those held in treasury) at 31 December 2016 (2015: 200,071,000).
The movements during the year of the net assets attributable to the ordinary shares were as follows:
Total net assets at 1 January 2016
Total profit for the year
Dividends paid in the year on the ordinary shares (see note 8)
Buybacks of ordinary shares
Net assets attributable to the ordinary shares at 31 December 2016
£’000
1,577,330
327, 145
(34,920)
(142,918)
1,726, 637
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 and the secured bonds and notes 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 2016 calculated on this basis is 939. 2p (2015: 781.2p) as set out below .
Total assets less current liabilities per balance sheet*
Liabilities at balance sheet value/fair value
Ordinary shares in issue at 31 December
NAV per share
2016
2015
Debt at balance
sheet amount
£'000
1,867,129
(140,492)
1,726,637
Debt at
fair value
£'000
1,867,129
(165,124)
1,702,005
Debt at balance
sheet amount
£’000
1,762,305
(184,975)
1,577,330
Debt at
fair value
£’000
1,762,305
(199,371)
1,562,934
181,210,879 181,210,879 200,071,000 200,071,000
781.19p
952.83p
939.24p
788.39p
*2015 figures exclude debenture stock which was a current liability at 31 December 2015
19 Reconciliation of income from operations before tax to net cash inflow from
operating activities
Income from operations before tax
Gains on investments held at fair value through profit or loss
Scrip dividends included in investment income
Investment management fee
Other operating expenses
Increase in other receivables
Decrease in other payables
Taxation
Group
2016
£’000
350,542
(296,615)
(1,729)
(6,157)
(5, 210)
(2,398)
(2, 566)
(2,415)
33,452
Company
201 6
£’000
349,431
( 296,817)
( 1,729)
( 6,157)
( 4,301)
( 2,397)
( 2,559)
( 2,415)
33,056
Group
2015
£’000
111,841
( 64,563)
( 1,116)
(11,286)
(5,410)
(2,408)
(592)
(1,779)
24,687
Company
201 5
£’000
110,690
( 64,877)
(1,116)
(11,286)
(4,573)
(1,395)
(564)
(1,779)
25,100
20 Capital commitments and contingent liabilities
At 31 December 2016 and 31 December 2015 there were no capital commitments in respect of securities not fully paid
up and no underwriting liabilities. In November 2005 the Company took a five year lease on office premises at 14 Queen
Anne’s Gate, London SW1H 9AA which was renewed for a further five years in October 2010. In October 2015 the lease
was renewed for a further five years.
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ANNUAL REPORT 2016
87
21 Operating lease arrangements
Minimum lease payments under operating leases recognised for the year
2016
£’000
49
2015
£’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
2016
£’000
73
146
2015
£’000
73
219
The operating lease payments represent rentals payable by the Group for its office property.
The lease was re-negotiated during 2015 for a further term of five years and to include additional office space.
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 £452,000
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 46 and 47.
Directors’ transactions
Dividends totalling £262,000 (2015: £229,000) were paid in the year in respect of ordinary shares held by the
Company’s directors.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28447
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report 2016
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
88
WITAN INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS continued
for the year ended 31 December 2016
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 I FRS 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 69. Analyses of expenses by geographical segment and of profit by
geographical segment have not been given as it is not possible to prepare such in a meaningful way. An analysis of the
investments by geographical segment is set out in note 10 on page 74. 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 alternative investment fund manager, 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
31 December 2016
31 December 2015
Investment
trust
£’000
52,816
9,615
327, 145
Management
services
£’000
1,111
-
-
Total
£’000
53,927
9,615
327, 145
Investment
trust
£’000
46,127
9,683
83,683
Management
services
£’000
1,151
-
-
Total
£’000
47,278
9,683
83,683
Carrying amount of assets
1,724, 927
1,710 1,726, 637 1,575,822
1,508 1,577,330
* The investment and other income of the parent company.
25 Subsequent events
Since the year end, the Board has declared a fourth interim dividend in respect of the year ended 31 December 2016 of
6.25p per ordinary share (see also page 4 and note 8 on page 73).
Between 1 January and 8 March 2017, 1,409,821 ordinary shares of 25p were bought back for £ 13,077,000.
2 6 Company information
Company information
Certain information, including details of the Company’s registered office and registered number, which is required by
the Companies Act 2006 to be included in the Notes to the Financial Statements is shown on page 94.
Job No: 28442
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
OTHER INFORMATION
ANNUAL REPORT 2016
89
Securities Financing Transactions
The Company engages in Securities Financing Transactions (as defined in Article 3 of Regulation (EU) 2015/2365,
securities financing transactions include repurchase transactions, securities or commodities lending and securities or
commodities borrowing, buy-sell back transactions or sell-buy back transactions and margin lending transactions).
In accordance with Article 13 of the Regulation, the Company’s involvement in and exposures related to securities
lending as at 31 December 2016 are detailed below.
Global Data
The amount of securities on loan as a proportion of total lendable assets and the Company’s net assets at 31 December
are disclosed below:
Stock lending 2016
Market value of securities on loan
£49,311,000
Stock lending 2015
Market value of securities on loan
£119,797,000
Concentration Data
% of lendable
assets
2.62
% of AUM
2.60
% of lendable
assets
7.01
% of AUM
7.59
The ten largest collateral issuers across all the securities financing transactions as at 31 December are disclosed below:
Fannie Mae
Sanofi
Government of Finland
US Treasury
Syngenta
Siemens
Red Electrica
Vivendi
Ul ta Salon Cosmetics & Fragrance
Electrolux
2016
Market value
of collateral
received
£’000
10,731
5,236
4,852
3,592
3,445
2,537
2,443
2,381
2,133
1,729
39,079
2015
Market value
of collateral
received
£’000
-
-
-
5,042
-
-
-
-
-
-
5,042
The top ten counterparties of each type of securities financing transactions as at 31 December are disclosed below:
Deutsche Bank
BNP Paribas
Citigroup
ING Bank
HSBC
J P Morgan
Nomura
Commerzbank
2016
Market value
of collateral
received
£’000
18,026
16,939
7,717
4,709
1,770
147
3
-
49,311
2015
Market value
of collateral
received
£’000
44,583
58,085
7,193
-
-
8,832
1,056
48
119,797
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28442
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
90
WITAN INVESTMENT TRUST PLC
OTHER INFORMATION continued
Aggregate transaction data
The following table discloses a summary of aggregate transaction data related to the collateral received from securities
on loan as at 31 December:
Stock lending 2016
Counterparty
BNP Paribas
Citigroup
Counterparty
country of
origin
France
France
US
US
Type
Equity
Quality
Main Market Listing
Government Bond
Investment Grade
Equity
Main Market Listing
Government Bond
Investment Grade
Deutsche Bank
Germany
Equity
Main Market Listing
Germany
Government Bond
Investment Grade
HSBC
Hong Kong
Equity
Main Market Listing
Hong Kong
Corporate Bond
Investment Grade
Hong Kong
Government Bond
Investment Grade
ING Bank
Netherlands
Equity
Main Market Listing
Netherlands
Government Bond
Investment Grade
J P Morgan
Nomura
US
Japan
Government Bond
Investment Grade
Government Bond
Investment Grade
Collateral
currency
Settlement
basis
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
Bilateral
Bilateral
Triparty
Triparty
Triparty
Triparty
Triparty
Triparty
Triparty
Triparty
Triparty
Bilateral
Bilateral
Stock lending 2015
Counterparty
Counterparty
country of
origin
Type
Quality
Collateral
currency
Settlement
basis
BNP Paribas
France
Government Bond
Investment Grade
Citigroup
US
Government Bond
Investment Grade
Commerzbank
Germany
Government Bond
Investment Grade
Deutsche Bank
Germany
Equity
Main Market Listing
J P Morgan
Nomura
HSBC
US
Japan
Government Bond
Investment Grade
Government Bond
Investment Grade
Government Bond
Investment Grade
Hong Kong
Equity
Main Market Listing
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
Bilateral
Triparty
Bilateral
Triparty
Triparty
Bilateral
Bilateral
Bilateral
Custodian
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
Custodian
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
BNP Paribas
Market value
of collateral
received
£'000
17,124
1,667
4,650
3,674
8,600
10,732
1,169
546
198
39
4,922
158
6
53,485
Market value
of collateral
received
£'000
61,820
7,563
61
34,486
13,903
9,317
845
368
128,363
All the collateral is held within segregated accounts. The lending and collateral transactions are on an open basis and
can be recalled on demand.
Re-use of collateral
The funds do not engage in any re-use of collateral.
Return and cost
The return and cost of engaging in securities lending by the Company and the securities lending agent in absolute terms
and as a percentage of overall returns are disclosed below:
Total gross amount of
securities lending income
£ 323,000
Direct and indirect costs and
fees deducted by securities
lending agent
£ 81,000
% return of the securities
lending agent
25%
Net securities lending income
retained by the fund
£242,000
% return of the fund
75%
2015: The gross amount of lending income was £ 248,000 with direct and indirect expenses deducted of £ 62,000.
Job No: 28442
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
ALTERNATIVE INVESTMENT FUND
MANAGERS DIRECTIVE
ANNUAL REPORT 2016
91
Witan Investment Trust plc is an ‘alternative investment fund’ (‘AIF’) for the purposes of the EU Alternative Investment
Fund Managers Directive (Directive 2011/61/EU) (the ‘AIFMD’) and the Company has appointed its subsidiary, Witan
Investment Services Limited (‘WIS’), to act as its AIFM. WIS is authorised and regulated by the United Kingdom Financial
Conduct Authority as a ‘full scope UK AIFM’.
The Company is required to make certain disclosures available to investors in accordance with the AIFMD. Those
disclosures that are required to be made pre-investment are included within the Investor Disclosure Document (‘IDD’)
which can be found on the Company’s website www.witan.com. There have not been any material changes to the
disclosures contained within the IDD since it was last updated in January 2017.
The Company and AIFM also wish to make the following disclosures to investors:
➜ the investment strategy, geographic and sector investment focus and principal stock exposures are included in the
Strategic Report. A list of the top 50 portfolio holdings is included on page 25;
➜ none of the Company’s assets is subject to special arrangements arising from their illiquid nature;
➜ the Strategic Report and note 14 to the accounts set out the risk profile and risk management systems in place.
There have been no changes to the risk management systems in place in the period under review and no breaches of
any of the risk limits set, with no breach expected;
➜ there are no new arrangements for managing the liquidity of the Company or any material changes to the liquidity
management systems and procedures employed by the Company;
➜ all authorised Alternative Investment Fund Managers are required to comply with the AIFMD Remuneration Code in
respect of the AIFM’s remuneration. The relevant disclosures required are within the IDD; and
➜ information in relation to the Company’s leverage is contained within the IDD.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28442
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
92
WITAN INVESTMENT TRUST PLC
HISTORICAL RECORD
Debt at fair value
Debt at par value
Market price
per ordinary
share in pence
454.5
478.5
351.0
444.6
516.5
450.0
503.0
669.0
753.5
780.0
902.0
Net asset
value per
ordinary share
in pence( a)
508.4
537.9
400.3
497.0
578.1
503.7
568.9
717.6
749.2
781.2
939. 2
Share price
(discount)/
premium
%( a)
(10.6)
(11.0)
(12.3)
(10.5)
(10.7)
(10.7)
(11.6)
(6.8)
0.6
(0.2)(C)
(4.0)(C)
Net asset
value per
ordinary share
in pence(c)
517.1
545.7
410.1
502.7
584.4
516.9
581.8
725.2
760.3
788.4
952.8
Share price
discount
%(b )
(12.1)
(12.3)
(14.4)
(11.6)
(11.6)
(12.9)
(13.5)
(7.7)
(0.9)
(1.1)
(5.3)
Earnings
per ordinary
share in pence
10.24
11.08
11.60
10.63
9.45
13.27
14.50
15.44
15.88
18.49
22. 11
Dividends
per ordinary
share in pence
9.20
9.90
10.20
10.50
10.90
12.00
13.20
14.40
15.40
17.00
1 9.00
31 December 2006
31 December 2007
31 December 2008
31 December 2009
31 December 2010
31 December 2011
31 December 2012
31 December 2013
31 December 2014
31 December 2015
31 December 2016
( a) 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.
( b) 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.
( c) The average discount to the net asset value, including income, with debt at fair value, in 201 6 was 5.8 % (201 5: average premium was 0.1%). (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 94.
Job No: 28442
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
WITAN WISDOM AND JUMP
ANNUAL REPORT 2016
93
How to invest
There is a variety of ways to invest in Witan Investment
Trust plc. Witan’s shares can be traded through any UK
stockbroker and most share dealing services, including
online platforms that offer investment trusts (including
Alliance Trust Savings, Hargreaves Lansdown, Barclays
Stockbrokers, Halifax Share Dealing Limited, Interactive
Investor and AJ Bell). Witan is available for investment
through two savings schemes managed by Witan
Investment Services – Witan Wisdom and Jump Savings.
Advisers who wish to purchase Witan shares for their
clients can do so via a stockbroker, Witan Savings Schemes
or via a growing number of dedicated platforms (including
Ascentric, Nucleus, Seven Investment Management and
Transact).
Witan Wisdom
Shareholders who hold their investment via both the
Witan Wisdom Share Plan and ISA are charged a single
flat annual fee, which is £30+VAT until 5th April 2017
and £30.68 +VAT thereafter*. There is no further charge
other than government stamp duty, for regular savings or
dividend reinvestment. Lump sum dealing will be charged
at a flat rate of £15 for each transaction.
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
£15,240 for the 2016/17 tax year and £20,000 for the
2017/18 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:
The 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
(‘CTF’). The account can only be opened by a parent
though others can add to it. It currently has an annual
subscription limit of £4,080 for the 2016/17 tax year and
£4,128 for the 201 7/1 8 tax year . You can open a Jump
Junior ISA with a minimum lump sum investment of £250
or £50 per month or quarter.
The Jump Child Trust Fund is, l ike the Junior ISA, a tax
efficient savings vehicle with the same annual limits as the
Junior ISA (but the annual term is measured by the child’s
birthday) . 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 a Jump CTF or
directly into a Jump Junior ISA subject to a minimum
transfer value of £1,000.
The Jump Savings Plan offers greater flexibility than the
Junior ISA or CTF 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. Shareholders who hold their
investment via Jump are charged a single flat annual fee
of £31.60* + VAT.
NB: Given the flat rate annual fees for Wisdom and Jump,
the cost is high for the minimum subscription levels to our
plans and investors should consider carefully the suitability
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 94 . To keep up to date on news and commentary
from Witan Investment Trust plc please visit www.witan.
com/stayintouch to provide us with your email address.
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 Limited 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.
*
Subject to adjustment in line with the UK CPI inflation every 3 years
compounded. In accordance with this policy, an adjustment in line with
inflation has been applied to the Annual Management Fee (‘AMF’) for
Witan Wisdom shareholders with effect from 6th April 2017. A further
adjustment in line with inflation will be due with effect from 6th April
2020. For Jump shareholders, a further adjustment in line with inflation
will be due with effect from 6th April 2018 . You can select to pay the
AMF by direct debit thus avoiding the possibility of selling shares if
the AMF cannot be recovered from cash held at the time of dividend
reinvestment.
R
e
p
o
r
t
o
f
t
h
e
D
i
r
e
c
t
o
r
s
S
t
r
a
t
e
g
y
S
t
a
t
u
t
o
r
y
I
n
f
o
r
m
a
t
i
o
n
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
O
t
h
e
r
I
n
f
o
r
m
a
t
i
o
n
Job No: 28442
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
94
WITAN INVESTMENT TRUST PLC
SHAREHOLDER INFORMATION
Points of Contact
For Witan Wisdom and Jump Savings queries:
If you have any questions or need more information
concerning Witan, you may contact us in the following
ways:
Freephone: 0800 082 8180
From abroad: +44 1268 448646
E-mail:
wisdom@ifdsgroup.co.uk
Post:
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 6.25p per share has been
declared, payable on 31 March 2017. The record date for
the dividend was 3 March 201 7 and the ex-dividend date
for the dividend was 2 March 201 7 (see pages 4 and 29).
Dividend Tax Allowance
From April 2016 dividend tax credits have been replaced
by an annual £5,000 tax-free allowance on dividend
income across an individual’s entire share portfolio.
Above this amount, individuals pay tax on their dividend
income at a rate dependent on their income tax bracket
and personal circumstances. The Company will continue
to provide registered shareholders with a confirmation
of the dividends it has paid and this should be included
with any other dividend income received when calculating
and reporting total dividend income received. It is the
shareholder’s responsibility to include all dividend income
when calculating any tax liability.
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.
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 0370 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), you should dial 18001 followed by the number you
wish to dial.
Registered Office of the Company and its subsidiary,
Witan Investment Services Limited
14 Queen Anne’s Gate
London SW1H 9AA
The Company is a public company limited by shares.
Registered Number
Registered as an investment company in England and
Wales, Number 101625.
Company Secretary
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
Telephone: 020 3008 4910
Custodian, Investment Administrator and Depositary
BNP Paribas Securities Services
10 Harewood Avenue
London NW1 6AA
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0370 707 1408*
*
Calls cost no more than calls to geographic numbers (01 or 02) and
must be included in inclusive minutes and discount schemes in the same
way. Calls from landlines are typically charged up to 9p per minute; calls
from mobiles typically cost between 3p and 55p per minute. Calls from
landlines and mobiles are included in free call packages.
Auditor
Solicitors
Grant Thornton UK LLP
30 Finsbury Square
London EC2P 2YU
Stockbroker
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London EC2A 2HS
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
The Company is a member of:
The Company conducts its affairs so that its shares can be
recommended by independent financial advisers (‘IFAs’) to
retail private investors. The shares are excluded from the
Financial Conduct Authority’s restrictions which apply to
non-mainstream investment products because they are
shares in a UK-listed investment trust.
Job No: 28442
Customer: Witan
Proof Event: 2 7
Project Title: Annual Report
Black Line Level: 4
Park Communications Ltd Alpine Way London E6 6LA
T: 0207 055 6500 F: 020 7055 6600
WITAN’S OBJECTIVE
OUR RELATIONSHIP WITH THE RHS
Long-term growth in income and capital
through active multi-manager investment
in global equities
Witan is an investment trust which is listed
on the London Stock Exchange and was
founded in 1909.
Witan offers diversified exposure to global markets
(principally equities) using a multi-manager approach.
The portfolio is diversified by geographical region,
industrial sector and at the individual stock level.
Witan typically uses between 10 and 15 investment
managers. The blend of different active approaches
and styles aims to deliver added value for shareholders
while smoothing out the volatility normally associated
with a single manager.
To view the report online
If you would like to view video updates
about the Company, please visit:
www.witan.com
Witan Investment Trust plc has enjoyed a long and fruitful relationship with the Royal
Horticultural Society for almost 20 years. Over this time, Witan has helped to redevelop a
number of new gardens at Wisley including the Walled Garden West, the Herb Garden and
the Bowes-Lyon Rose Garden, and the Global Growth Vegetable Garden at Hyde Hall, which
will open to the public this year. In 2016, Witan sponsored a Show Garden (see picture)
at the RHS Hampton Court Palace Flower Show, designed by Jane Bailey and which was
awarded a Silver-gilt medal by the RHS judges. 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 two adults to any one of the four RHS
gardens in the UK.
If you would like to request a ticket then please phone us on 0800 082 8180 or email wisdom@
ifdsgroup.co.uk confirming the full name of the account holder.
Job No: 28447Proof Event: 25Black Line Level: 1Park Communications Ltd Alpine Way London E6 6LACustomer: WitanProject Title: Annual ReportT: 0207 055 6500 F: 020 7055 6600 W
i
t
a
n
I
n
v
e
s
t
m
e
n
t
T
r
u
s
t
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
6
ANNUAL
REPORT 2016
Capital and income growth from
active global equity investment
Printed by Park Communications on FSC® certified paper.
Park is an EMAS certified company and its Environmental Management System is certified to
ISO 14001.
100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further
use and, on average 99% of any waste associated with this production will be recycled.
This document is printed on Cocoon 50% Silk and Cocoon 50% Offset paper. The fibres are
sourced from well-managed, responsible, FSC® certified forests. The pulp used in this product is
bleached using an Elemental Chlorine Free (ECF) process.
Job No: 28447Proof Event: 25Black Line Level: 1Park Communications Ltd Alpine Way London E6 6LACustomer: WitanProject Title: Annual ReportT: 0207 055 6500 F: 020 7055 6600