Page 1 of
33
WITAN INVESTMENT TRUST
PLC
This announcement contains regulated
information
Annual Financial Report for the year ended 31 December
2023
Chairman's
Report
2023 HIGHLIGHTS
·
Full-year NAV total return of +12.7%. Share price
total return +10.1%
·
The benchmark returned +14.7%, the AIC Global
sector's NAV total return was +12.8% and UK CPI rose
4.0%
·
Share price discount to NAV 7.8% at year-end
(2022: 5.4%)
·
The NAV uplift from share buybacks again offset
the majority of the Company's ongoing charges during the
year
·
Dividend increased by 4.1% to 6.04 pence, more
than double that paid in 2013 and an unbroken 49 year run of
increases
·
2024 NAV total return to 13 March 5.9%
·
Our CEO, Andrew Bell, has recently informed the
Board that he plans to retire from Witan during the coming year.
The Company has decided to undertake a review of its future
investment management arrangements and (in a separate announcement)
to invite proposals for the future management of the Company's
portfolio.
A
volatile but ultimately positive year for
equities
At the start of the year, our
portfolio benefited materially from a broad equity rally, as fears
of recession led to hopes of a turn in the monetary cycle,
encouraging investment in lower-rated companies and those with
cyclical exposure. However, continued central bank hawkishness
chilled these hopes over the summer, with rising bond yields
exerting downward pressure on equity valuations, such that a
relative performance lead for Witan of over 3% by the end of April
reversed into a similar level of underperformance by late October.
Accumulating evidence of declining inflation then led to a softer
message from central banks, kindling hopes that the next move in
rates would be down, even if not imminently. This ushered in a
two-month rally similar in character to that at the start of the
year, with a wider range of companies and sectors participating,
during which we recovered much of the lost relative ground, ending
at the highs of the year in total return terms. Our NAV total
return in the year was 12.7%, compared with our benchmark's total
return of 14.7%. The share price total return was 10.1%.
Two features of 2023's equity
returns are worth noting. The first was the extent to which global
equity indices were dominated by a small number of US-based
technology stocks. After a poor 2022, the technology leaders were
spurred on by strong earnings growth and enthusiasm for the rapidly
growing field of generative Artificial Intelligence ('AI'). 60% of
the US market's total return of 19.2% in sterling terms was
delivered by seven leading technology companies, with the remaining
493 stocks in the index delivering under half of the market's
return between them. Of the 14.7% return from Witan's benchmark,
46%, or 6.7 percentage points was driven by these seven US stocks,
which represented 14% of our benchmark and 6% of our portfolio.
This was a difficult backdrop for fund managers to navigate without
over concentrating their portfolios. The second point to note is
that, despite the headwind presented by the narrow base of market
returns, our core managers in aggregate outperformed. Our lagging
of the benchmark was entirely attributed to weakness from the GMO
Climate Change Investment Fund and Witan's holdings in investment
companies, which have both been strong areas for shareholders in
the past. We see prospects for both to recover in 2024.
Page 2 of 33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Chairman's Report (continued)
Andrew Bell's CEO report covers
these points, as well as the macroeconomic backdrop, in more
detail.
Over the long term, since Witan
adopted a multi-manager approach in 2004, our NAV total return of
428% has broadly matched the 433% total return on our benchmark,
while the share price total return (510%) has been well ahead and
we have raised the dividend above the rate of inflation over the
period. Although our managers have at times struggled in the
volatile and polarised investment environments since 2020, we
anticipate a convergence in performance between the narrow range of
companies that has driven market performance in recent years and
the broader swathe of more modestly rated companies which have been
out of favour during this period of heightened risk-aversion and
uncertainty about economic growth.
The evidence has begun to favour the
conclusion that the US economy may experience a soft landing,
regaining control of inflation without a recession, while weak
economic conditions in the UK and Europe seem to have bottomed out,
better than earlier fears. The biggest economic disappointment has
been the mediocre economic rebound in China, following the ending
of its Covid restrictions. Whilst the financial sector impact of
its housing downturn appears largely a local issue, a range of
sectors (luxury goods, industrials, and commodities) suffered from
weak demand in China, spreading the effects to other
markets.
To date in 2024, in continued
positive market conditions, Witan's NAV total return rose by 5.9%,
slightly ahead of the return on the Company's benchmark,
which was 5.8%.
RESPONSIBLE INVESTMENT
We have developed a robust process to
monitor our managers' approach to investing responsibly, with a
focus on how our investment policy can help deliver prosperity for
our shareholders as well as better outcomes for our investee
companies, their stakeholders and wider society. A key part of this
is our 'Sustainable by 2030' commitment, which involves detailed
engagement with our third-party managers and an assessment of their
portfolio companies, using the bespoke responsible investment
framework we introduced in 2022. This year our managers assessed
over 300 of the companies in which they invest on our behalf, on
the ten different sustainability issues we specify.
The results of these assessments are
shown in the responsible investment section, which is on pages 16
to 23 of the Annual Report.
Last year we reported that we had
committed to the Net Zero Asset Managers Initiative ('NZAM'). As
part of this commitment, we set decarbonisation targets (known as
the Initial Target Disclosure) in line with the NZAM guidelines.
Our target, which was set early in 2023, is to deliver (by 2030) a
50% reduction in our core portfolio's Weighted Average Carbon
Intensity ('WACI'), compared with the 2019 baseline year. We (i.e.
the companies within our core portfolio) are well on the way to
achieving this aim, as our portfolio's WACI is currently 43% below
the 2019 baseline level. It is important to note that this
commitment does not impose blanket exclusions on our managers, as
we believe that engagement with companies often has a greater
positive impact than divestment. We expect the lion's share of
progress towards our commitment to be made by companies improving
their carbon intensity, not simply by our managers selecting
companies with low emissions, leaving other (possibly less
attentive) investors to press for change in the heavier
emitters.
Page 3 of 33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Chairman's Report (continued)
2023 DIVIDEND
A fourth interim dividend of 1.69
pence was declared in February 2024, payable on 15 March 2024. As a
result, the dividend for the year increased by 4.1% to 6.04 pence
per share (2022: 5.80 pence). This year's dividend was covered 82%
by 2023 revenue earnings (2022: 84%), with a call of £7.0 million
on our revenue reserves (in 2022 we used £6.4 million).
The Board expects portfolio
dividends to recover further in the coming years and it is the
Company's intention to continue to make use of retained earnings to
increase the dividend to shareholders annually until full cover is
restored.
We have increased the dividend every
year for the last 49 years and the latest dividend is more than
double that paid in 2013. 2023's increase is ahead of the rate of
UK inflation (4.0% at the year-end) and Witan's dividend has grown
substantially ahead of UK inflation over the past 5 and 10
years.
BOARD COMPOSITION AND SUCCESSION
The Board currently consists of nine
directors, eight of whom are non-executive, representing a broad
diversity in background, experience, ethnicity, and gender. The
Board fully meets formal corporate governance guidelines on
diversity but, above all, it has the right balance of skills to
oversee the Company's affairs. All directors stand for re-election
each year.
Our CEO, Andrew Bell, has informed
the Board that he plans to retire from Witan during the coming
year. The Board has taken the opportunity to review the Company's
future management arrangements and (in a separate announcement) to
invite proposals for the future investment management of the
Company's portfolio.
The process of considering proposals
will take place over the coming months and a further announcement
will be made when a preferred option has been chosen. In the
meanwhile, Witan will continue to be managed by Andrew Bell and the
rest of the Executive Team, in accordance with the current
investment approach.
AGM
Witan was founded in 1909 but 2024
marks the 100th anniversary of our listing on the London Stock
Exchange. The ensuing years have been eventful and transformative
in many ways and the pace of change shows no sign of abating as we
progress through our second century. We welcome hearing
shareholders' views at any time but, in particular, very much look
forward to being able to meet shareholders again at this year's
Annual General Meeting ('AGM'). Our 116th AGM will be held on 1 May
2024, at the Merchant Taylors' Hall. For those not able to attend
in person, there will be the opportunity to attend the meeting
virtually and put questions to the Board. Details will be included
in the formal notice of the meeting which will be sent to
shareholders in early April.
Andrew Ross
Chairman
15 March 2024
Page 4 of 33
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December
2023
CEO's Review of the year
Inflation, volatile interest rates,
East-West tensions, and war in the Middle East. For those longer in
the tooth, there is a sense of 1970s déjà-vu in the conjunction of
circumstances that faced investors in 2023.
In many developed economies,
inflation reached levels not seen for several decades. Having
misjudged the balance between transitory factors driven by supply
disruptions and those driven by fiscal largesse, central banks
adopted and sustained a hawkish bias for much of 2023, until the
dying months when they began to declare advantage, if not victory.
A year ago, we characterised the peak of interest rates as likely
to resemble Table Mountain rather than the Matterhorn (a metaphor
which has since been plagiarised by two central bankers!) and we
have been on the Table-top now for many months. Whilst inflation
currently remains above official targets, it seems probable that
rates will start to fall before 2% inflation is reached - it is
easier to be patient about the pace of convergence when the
direction is clear.
At the start of the year, there was
a concern that most of the world was heading for a recession,
engineered by the central banks to reduce inflation. The one
exception was China, confidently expected to rebound as it ended
its Covid-suppression restrictions. Although the UK and Europe have
tiptoed near the shallows of recession, the US has grown robustly,
while China's recovery, in the year of the Rabbit, lacked the
staying power of the Duracell Bunny. Forecasts for 2024 are for
insipid growth but not recession. If inflation has subsided without
a widespread economic shakeout, this would suggest economies are
working better than in past inflationary bouts, which may be worth
something in terms of stock market valuations.
Perhaps surprisingly, despite the
conflicts in the Middle East and in Ukraine, energy costs, which
surged in 2022, fell in 2023. Record US oil production, the
availability of alternatives to Russian gas and subdued growth
worldwide have taken the edge off this driver of inflation, albeit
presenting a headwind for developers of non-fossil energy sources.
So far, the world has found a way to work around the economic
consequences of global conflicts, but they constitute highly
unpredictable "known unknowns".
If confirmed, the (so far)
relatively painless re-establishment of "normal" levels of interest
rates (i.e. something close to the growth rate of an economy aiming
for 2% growth and 2% inflation) would be a significant achievement
by central banks. Economies need a base level for determining the
cost of capital and how to allocate it within the economy. Aside
from the long-term unsustainability of maintaining high real
interest rates in economies with so much debt, a recession would
risk another round-trip towards zero interest rates, losing the
benefit of having restored a market-based cost of capital. This
seems another reason for policy rates to decline earlier than
expected, but much more gradually than they rose.
Despite the uncertainties associated
with geopolitics and the adjustment to a rapidly rising level of
interest rates, 2023 was (eventually) a benign year for equity
returns. In sterling terms, the MSCI All Country World index
('ACWI') rose by 16%, led (again) by the US +19% with Europe +16%
and Japan +13% in silver and bronze medal positions. The UK and
Emerging Markets brought up the rear with returns of 8% and 4%
respectively.
Page 5 of
33
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December
2023
CEO's review of the year (continued)
WITAN'S PERFORMANCE
Witan's NAV total return in 2023 was
12.7%, which was 2.0% short of the 14.7% return from our benchmark.
We entered 2023 expecting a stronger relative performance, as 2022
had seemed to be passing the performance baton from the rapidly
growing but highly rated technology sector to a wider range of
lower-rated but modestly growing businesses. The early months of
the year bore this hope out, with a strong relative and absolute
performance.
However, for a year which generated
such healthily positive equity returns, sentiment was unusually
fickle. The periods of weakest growth momentum (the first and last
quarters) saw broad-based equity rallies which included many
cyclical companies, while the intervening months when the US was
ostensibly booming saw weak returns, disproportionately favouring
highly rated growth stocks which would usually have come under
pressure from rising bond yields. In other words, investor
sentiment has been driven more by the perception of interest rate
moves than by economic growth.
The magic ingredient for equity
markets was excitement over the prospects for companies directly
exposed to the accelerating development of generative AI. This
requires intensive use of specialist semiconductor processors (as
produced by the US tech giant Nvidia), to help the software models
being developed by other US tech giants (such as Alphabet, Meta,
and Microsoft) to "learn", or refine themselves to a level of
interactive understanding able to be applied usefully across a wide
range of sectors. The double-dose of immediate capital investment
and ultimate hopes of boosting productivity (a missing element of
growth over the past 15 years) caught investors' imagination,
albeit initially through the narrow lens of seven technology
companies.
Our managers owned many of the
"Magnificent Seven" but insufficiently in aggregate to sustain
returns when the market could focus on nothing else. Our more
broadly diversified portfolios prospered better when the market
mood shifted towards the year end to consider hopes of falling
interest rates and the potential of an upswing in the economic
cycle.
Witan's portfolio is invested via a
diversified group of mainstream and specialist managers, with
well-tested and resourced investment approaches. It includes core
holdings of quality growth companies offering compounding earnings
growth, technology specialists and exposure to sectors expected to
benefit from economic growth, from decarbonisation, and from the
growth in infrastructure spending.
PRINCIPAL PERFORMANCE DRIVERS
The financial statements in the
Annual Report (see extracts on pages 25 to 32 below) set out the
required statutory reporting measures of the Company's financial
performance. The chart on page 11 of the Annual Report shows the
contributions (in pence per share) attributable to the various
components of investment performance and costs, which together
constitute the rise from the 234.1 pence starting NAV to the
year-end NAV of 257.6 pence, after the payment of dividends to
shareholders.
A breakdown of the relative
performance attribution in 2023 (based on the Company's financial
statements) is shown in the table on page 6.
Page 6 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
CEO's review of the year (continued)
Our core portfolio managers
collectively outperformed during the year, but their contribution
was outweighed by weak performance from the GMO Climate Change
Investment Fund and by Witan's direct investments in specialist
investment companies. As a result, our overall portfolio returns
lagged our benchmark. Gearing was a significant positive
contributor during the year, even allowing for additional interest
costs on the short-term portion of our borrowings. As in 2022,
Witan benefited from taking advantage of the widening in our
discount, buying 8.0% of our shares into treasury, which generated
an uplift in NAV of £11.5 million and offset the majority of our
ongoing charges.
BREAKDOWN OF THE PERFORMANCE ATTRIBUTION IN 2023
(%)
Net asset value total
return
|
+12.7
|
Portfolio total return (before
costs)
|
+11.7
|
|
Benchmark total return
|
+14.7
|
Benchmark total return
|
+14.7
|
|
|
|
Relative investment
performance
|
-3.0
|
|
|
|
Investment management
costs
|
-0.4
|
|
|
|
Investment contribution
|
|
-3.4
|
|
|
Gearing impact
|
+1.6
|
|
|
|
Borrowing costs
|
-0.6
|
|
|
|
Gearing contribution
|
|
+1.0
|
|
|
Effect of changed fair value of
debt
|
+0.1
|
|
|
|
Share buybacks
|
+0.7
|
|
|
|
Other contributors
|
|
+0.8
|
|
|
Other operating costs and
tax
|
-0.3
|
|
|
|
|
|
-0.3
|
Relative
performance(1)
|
-2.0
|
|
|
-2.0
|
(1) N.B. Figures may not sum due to
rounding.
PORTFOLIO STRUCTURE AND MANAGER PERFORMANCE
Our portfolio is structured with
c.75% allocated to mainstream 'core' managers (five global, one UK)
and the 25% balance allocated to specialist regional or sector
managers; up to 15% may be invested in investment companies
offering exposure to faster-growing or otherwise attractive asset
categories.
There were no changes to the six
core managers in 2023, although allocations were adjusted during
the year, to take account of early outperformance in the UK and to
provide resources for share buybacks. We increased our allocation
to the GMO Climate Change fund in November, after several months of
notably weak performance by climate change and alternative energy
portfolios. Despite a subsequent sharp recovery, the fund was our
weakest performer in 2023, with the 11.7% fall contrasting with the
15.9% rise in its MSCI ACWI benchmark. Although this was a strong
performance relative to many others in its sector, it was unable to
shrug off the market's concerns about the effect of rising interest
rates, delayed projects and falling inventories in the renewable
energy sector. Prior to 2023, the fund had delivered strong
relative and absolute returns since purchase in 2019. We believe
the long-term trend towards sustainable energy and other climate
change mitigation or adaptation measures will prove more enduring
than 2023's mixture of profit-taking and hesitancy over the
pace of the energy transition.
Page 7 of 33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
CEO's review of the year (continued)
Our third-party managers implement
mandates set by the Company. The managers' mandates, benchmarks,
investment styles and dates of appointment are shown on pages 26 to
30 of the Annual Report. Their returns during the year and since
appointment are set out in the table below. Four of our six core
external managers outperformed their benchmarks. Artemis was ahead
of the UK market by 7% and Jennison ahead of the MSCI ACWI by 19%,
while Veritas and WCM also outperformed their global benchmark by
0.4% and 4.7% respectively. GQG particularly excelled, with its 25%
return 21% ahead of its emerging market benchmark and 9% ahead of
the global equity index. Lansdowne's portfolio followed the
fortunes of the "broad versus narrow" equity path during 2023,
outperforming strongly during the early months, falling back over
the summer, and ending the year with a gain of 14.6%, just 1.3%
behind its benchmark. Lindsell Train's "buy and hold" portfolio of
enduring brands and other themes suffered from neither being on
growth investors' buy lists, nor sought out by those seeking
cyclical recovery. A positive return of 8.0% was nonetheless 7.9%
behind the global benchmark.
The other notable underperformer in
2023 was the directly held portfolio of investment companies
(discussed in the following section). This, together with the GMO
Climate Change mandate, offset positive contributions from the core
managers, from gearing and from share buybacks, which is why
Witan's returns for the year, while strongly positive and well
ahead of inflation, were behind the return from our composite
benchmark.
We believe our diverse range of
managers remains well-positioned for 2024 when, with a turn in the
interest rate cycle and unusually wide valuation spreads within the
markets, we expect to see share returns more evenly spread than in
the unusually concentrated markets of 2023.
ASSETS UNDER MANAGEMENT AND INVESTMENT MANAGERS'
PERFORMANCE
Investment manager and mandate
|
Appoint-
ment date
|
Witan assets managed as at
31.12.23(1)
|
Performance in
2023
%
|
Performance since
appointment(2) %
|
|
|
£m
|
%
|
Manager
|
Benchmark
|
Manager
|
Benchmark
|
CORE
|
|
|
|
|
|
|
|
Jennison (Global)
|
31.08.20
|
137.2
|
7.6
|
34.5
|
15.9
|
4.2
|
10.6
|
Lansdowne (Global)
|
14.12.12
|
328.8
|
18.1
|
14.6
|
15.9
|
13.2
|
12.2
|
Lindsell Train (Global)
|
31.12.19
|
290.6
|
16.1
|
8.0
|
15.9
|
4.8
|
9.8
|
Veritas (Global)
|
11.11.10
|
313.7
|
17.3
|
16.3
|
15.9
|
12.0
|
11.0
|
WCM (Global)
|
31.08.20
|
211.4
|
11.7
|
20.6
|
15.9
|
7.1
|
10.6
|
Artemis (UK)
|
06.05.08
|
61.2
|
3.4
|
14.8
|
8.0
|
8.2
|
5.7
|
SPECIALIST
|
|
|
|
|
|
|
|
GMO (Climate Change)
|
05.06.19
|
115.5
|
6.4
|
(11.7)
|
15.9
|
10.1
|
10.7
|
GQG (Emerging Markets)
|
16.02.17
|
91.4
|
5.0
|
25.3
|
4.0
|
9.5
|
3.8
|
Unquoted Growth (Specialist
Funds)
|
02.07.21
|
27.9
|
1.6
|
(14.7)
|
14.7
|
(12.5)
|
5.8
|
Witan Direct Holdings (Specialist
Funds)
|
19.03.10
|
202.8
|
11.2
|
(2.9)
|
14.7
|
8.7
|
9.1
|
(1) Percentage of Witan's investments managed, excluding centrally
managed cash. In addition, a holding in a FTSE 250 ETF was
purchased during the second half of the year as a liquid means of
increasing tactical exposure to UK mid-cap companies. This
represented 1.7% of assets at the year end.
(2) Percentages are annualised where the date of appointment was
more than one year ago.
(3) Source: BNP Paribas.
Page 8 of 33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for
the year ended 31 December 2023
CEO's review of the year (continued)
DIRECTLY HELD INVESTMENTS
The return on the portfolio of
directly managed investment company holdings was -2.9%, well behind
the 14.7% rise in our composite benchmark. The overriding factor
here was the widening of discounts in the investment trust sector,
which was at its sharpest amongst the more specialist
trusts.
The principal detractors were
Syncona (-31.8%) and VH Global Sustainable Energy Opportunities
(-18.6%), both notable victims of widening discounts in asset
categories that were out of favour, as the former's net asset value
total return was a small decline of -2.3% and the latter's a rise
of over 13%. We took advantage of the extreme discounts in the
private equity sector to add a new holding, in HarbourVest Private
Equity Ltd, on a near 50% discount. The position had gained 10% by
year end, principally from discount narrowing following its
introduction of a share buyback programme.
BlackRock World Mining Trust, which
was further reduced early in the year, declined 10.4% as
disappointing economic news from China weighed on sentiment towards
commodities.
Positive returns were enjoyed by
Princess Private Equity (+29.1%), which reinstated dividend
payments after a hedging misstep in 2022, and Schroder Real Estate
Investment Trust (+13.3%), both benefiting from narrower discounts
after price falls in 2022.
The direct portfolio was 11.3% of
the investment portfolio at the start of the year and 11.2% at the
end of 2023. From inception in March 2010 to the end of 2022, it
delivered a compound annual return of 9.6%, outperforming Witan's
benchmark by 0.9% p.a. Following the underperformance in 2023, the
returns are now +8.7% p.a., which is behind the 9.1% p.a. benchmark
return. Whilst it is disappointing to see a portfolio that had
historically performed strongly for Witan experience a second poor
year, the cyclical factors pertaining to the asset classes held
look set for better times, as interest rates peak, while the
structural factors hindering institutional demand for investment
companies (and other UK equities) are receiving greater political
and regulatory attention and look to be past their worst.
The two specialist Unquoted Growth
funds investing predominantly in unlisted assets amount to 1.6% of
assets. Lansdowne Opportunities Fund (0.9% of assets) declined in
value by c 1.3% during the year, with the fall in price of its
holding in Oxford Nanopore Technologies offsetting other, net positive, moves. Lindenwood (0.7%),
managed by Greenoaks Capital, experienced a 27% decline in sterling
terms, reflecting financing and valuation trends in the unlisted
technology sector and a decline in the
dollar against sterling. Regular reports (monthly and quarterly
respectively) are received on these funds, whose valuation policies
follow private equity industry guidelines.
Page 9 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
CEO's review of the year (continued)
GEARING ACTIVITY DURING THE YEAR
Gearing ranged between 13% and 16%
during the year. The average gearing level of 14.5% was towards the
upper end of the range Witan employs, reflecting our positive view
on equity markets. The widespread rises in markets meant that the
use of gearing was a positive influence, contributing 1.6% to
returns, or 1.0% after interest charges. Gearing has contributed
positively to returns in seven out of the past ten years, as
illustrated in the KPI chart on page 5 of the Annual
Report.
Under its Articles of Association,
the Company may borrow up to 100% of the adjusted total of
shareholders' funds. However, the Board's longstanding policy is
not to allow gearing (as defined on page 116 of the Annual Report)
to be more than 20%, other than temporarily in exceptional
circumstances.
At the end of 2022, net gearing (the
total value of borrowings less cash) was 14.2% of net assets. At
the end of 2023, gearing (on the same basis) was 14.2%.
STRUCTURE OF BORROWINGS
The Company has fixed-rate
borrowings (including £2.6 million preference shares) of £158
million, consisting principally of:
Secured Notes 2035 3.29%
|
£21m
|
Secured Notes 2045 3.47%
|
£54m
|
Secured Notes 2051 2.39%
|
£50m
|
Secured Notes 2054 2.74%
|
£30m
|
These borrowings were taken out in
2015-19, when interest rates were low, providing Witan shareholders
with low-cost borrowing at an average fixed rate of 3.0%, for the
next 24 years.
The Company also has a £125 million
one-year facility (expandable to £150 million), providing
additional flexibility, as well as enabling the Company to borrow
in currencies other than sterling, if deemed appropriate. The drawn
balance was £83.0 million at the end of 2023 (2022: £96.5 million).
The weighted average interest rate on the Company's fixed-rate
borrowings is 3.0% (2022: 3.0%). The average interest rate,
including short-term borrowings, is currently 4.0% (2022:
3.5%).
The fair value of the Company's
fixed-rate debt (valued based on the relevant gilt yield +1.4%) was
little changed, after a sharp rise in gilt yields during the first
half of the year almost exactly reversed in the second. The debt
stands at a discount to its eventual repayment value, reflecting
the low fixed interest rates. As in previous years, the Company
continues to follow AIC guidance that fair valuing both assets and
liabilities is the appropriate basis for calculating
NAVs.
Witan will either invest its
long-term borrowings fully or neutralise their effect with cash
balances according to its assessment of the markets. The Company's
third-party managers are not permitted to borrow within their
portfolios but may hold cash.
Page 10 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
CEO's review of the year (continued)
DERIVATIVES ACTIVITY
A position in Japan equity index
futures with a face value of £18.8 million (1.2% of assets) was
bought in January 2023 and sold later in the month for a gain of
£0.7 million.
DIVIDEND AND REVENUE PERFORMANCE
The Company has already paid three
quarterly dividends of 1.45 pence per share in respect of 2023
which, together with the fourth interim dividend of 1.69 pence per
share, increases the total distribution for the year to 6.04 pence
(2022: 5.80 pence). This marks the 49th consecutive year of
dividend growth. At the end of 2022, retained revenue reserves were
£31.3 million (after deducting the fourth interim dividend
payment). The purpose of such reserves is to enable income payments
to shareholders to be supported during leaner times, and £7.0
million was used towards funding the 2023 dividend (2022: £6.4
million). Revenue reserves were £24.2 million at the end of 2023,
after allowing for the fourth interim dividend payment.
Revenue earnings per share were 1.3%
higher in 2023 at 4.84 pence per share (2022: 4.78 pence). Although
revenue earnings rose by 16% in the first half, our caveat that
this flattered the underlying position was borne out in the second
half, when a number of large exceptional dividends in the mining
sector paid in 2022 were not repeated in 2023. As a result, current
year income cover for the increased dividend declined from 84% in
2022 to 82% in 2023, albeit still well up from the 65% cover in
2021.
The Board anticipates dividend cover
improving further in coming years, alongside continued annual
dividend growth. Recognising the importance for many shareholders
of a reliable and growing income, the Board intends to continue to
use revenue reserves (and, if necessary, capital reserves) to
bridge what is expected to be a narrowing gap between portfolio
revenue earnings and the dividends paid to shareholders.
2024 DIVIDENDS
The first three quarterly payments
for 2024 (in June, September, and December) will, in the absence of
unforeseen circumstances, be paid at a rate of 1.51 pence per share
(2023: 1.45 pence), being one quarter of the 6.04 pence per share
full-year payment for 2023. The fourth payment (in March 2025) will
be a balancing amount, reflecting the difference between the three
quarterly dividends already paid and the payment decided for the
full year.
WITAN'S SHARES IN THE MARKET - LIQUIDITY AND
DISCOUNTS
Witan is a member of the FTSE 250
Index, with a market capitalisation of £1.5 billion.
The Board has always paid attention
to discount-related issues and has, over many years, made
significant use of share buybacks, when Witan's shares have stood
at a discount as well as being prepared to issue shares at a
premium to NAV to meet demand from investors. Both actions are
accretive to NAV, provide liquidity in the market and help to
moderate discount volatility.
It remains a long-term objective to
create sustainable liquidity in Witan's shares at or near to asset
value and the robust actions taken over recent years are evidence
of this continuing commitment.
Page 11 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
CEO's review of the year (continued)
WITAN INVESTMENT TRUST DISCOUNT TREND
The discount trend during the past
five years is illustrated in a chart on page 15 in the Annual
Report. Along with most others in the sector, the discount widened
significantly for much of 2023, with the average discount in the
investment company sector reaching an extreme level similar to that
seen in the financial crisis of 2008. In part, this reflected the
substantial number of companies launched in the past decade to
invest in illiquid assets, where investor sentiment has become more
sceptical. Another influence was the effect of regulatory and other
changes on the propensity of UK institutional investors and wealth
managers to hold investment companies, a topic attracting political
and regulatory attention as concern has grown about the relative
decline of the UK stock market.
During the year, Witan was active in
buying back shares. 54.1 million shares were bought back (8.0% of
the total at the start of the year), at an average 8.6% discount to
NAV, which resulted in an uplift to NAV of £11.5 million, or 1.8
pence per share. For perspective, this sum exceeds the investment
management fees paid to our external managers, offsetting the vast
majority of the Company's ongoing charges. After the payment of dividends and the substantial commitment
to share buybacks, Witan's net assets grew from £1,541.8 million at
the end of 2022 to £1,561.7 million at the end of 2023, with a
total earnings per share for the year of 27.86 pence (2022: loss
per share 39.65 pence). The movement in total assets during the
year is shown in note 18 in the Annual Report.
The discount finished the year at
7.8% (2022: 5.4%) and the average discount during the year was 9.0%
(2022: 7.8%).
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 (though only at a premium).
OUTLOOK
The world economy could be described
as either reaching the end of one economic cycle or entering the
beginning of another. A surge in inflation, associated with
measures enacted to offset the pandemic and exacerbated by the
supply disruptions caused by the same pandemic, appears to be over.
Stimulating demand at a time when supply was under pressure has not
proved to be a winning formula. However understandable at the time,
it has required some cleaning up by the central banks.
Signs of improving inflation
performance have been sufficient for central banks (and markets) to
conclude that interest rates are high enough to control and curtail
the inflation overrun but there is disagreement whether they have
simply reached a plateau or will soon need to be cut. Some point to
fiscal largesse (in the US) and to the fixing of loans at low rates
by companies and mortgagors as
reasons why the impact of the rapid
rise in rates has simply been delayed and will hit home hard in
2024. If so, rate cuts might be brought forward in order to offset
economic weakness. Others suggest that retained pandemic savings
and improving real incomes as inflation falls will sustain
purchasing power, allowing moderate economic growth to resume as
inflation itself moderates. If so, rates need not be cut urgently
but could be reduced to prevent real rates from increasing as
inflation declines - a gently downward-sloping plateau, to extend
the geographical metaphor mentioned earlier in the
report!
Page 12 of 33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
CEO's review of the year (continued)
Either way, the likely conclusion is
that global policy rates will decline during 2024, which is a
fundamentally different investing environment from 2022-23. Rather
than speculating about how high discount rates will go and how much
collateral damage will be sustained by asset prices and those who
took on too much leverage at low rates, investors will be more
inclined to look through current conditions towards an economic
upswing in 2024-25, when financing costs and demand conditions may
well be better than at present. Rather than worrying about how
economic growth rates might slow in 2024, necessitating a defensive
approach, time is on investors' side if the future is seen as
brighter and the cost of waiting reduces.
With the nature of growth in the
coming decade shifting towards more resource-intensive areas
(infrastructure renewal, new energy investment, defence) inflation
seems likely to be higher in coming years than in recent decades.
Indebted governments will also have more of a bias to growth (and
slightly higher inflation) as the most plausible way to reduce
their debt burdens, avoiding explicit default. Consequently, a
return to the recent anomaly of zero (or negative) interest rates
appears unlikely, as markets price in the risk of a structurally
higher inflation rate than the 0-2% which has characterised much of
the century so far.
Two notable "disruption" themes seem
relevant. One is that the mantra of a few years ago to stress test
portfolios for the risks and opportunities from technological
change has evolved into a need (temporarily forgotten in 2023) to
find the winners and avoid the losers from the energy transition
and related moves to decarbonise economies. Lower conventional
energy costs and political argument over who should pay the costs
of moving to initially less efficient (but ultimately more
sustainable) energy sources led to heavy losses in the "new energy
economy" sector in 2023. Nonetheless, the trend to "phase down"
fossil fuels is likely to prove inexorable. Secondly, AI, with the
potential to transform productivity in many service sectors, as
well as manufacturing, must now be added to the list of risks for
specific companies, even while it holds out promise as a spur to
non-inflationary growth at the whole economy level. With the
development of the internet, initially the focus was on a small
number of technology companies, then on the wider universe of
companies whose businesses were transformed (for better or worse).
Although comparisons can be invidious, a similar broadening is
likely with the application of AI models.
Event risk is always an issue,
however hard to evaluate. 2024 sees a record proportion of the
world's population taking part in elections of various kinds. Some
might produce changes in a given country (e.g. Argentina in 2023),
others might have ramifications elsewhere (e.g. the US) or prompt
reactions from other countries (e.g. Taiwan). Given unresolved
global conflicts and a lack of sure-footed and secure political
leadership to handle them, there is no shortage of potential
geopolitical shocks. The fact that the days lengthen from December
to June does not guarantee trouble-free weather on the way.
Consequently, alongside a generally positive view of the world's
medium-term prospects, a heavy dose of watchfulness is
warranted.
Andrew Bell
Chief Executive Officer
15 March 2024
Page 13 of 33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for
the year ended 31 December 2023
Strategic Report
PRINCIPAL RISKS AND UNCERTAINTIES
The directors have carried out a
robust assessment of the principal and emerging risks facing the
Company, including those that would threaten its business model,
future performance, solvency, liquidity or reputation. These risks,
and the actions taken to mitigate them, are set out
below.
Risks are inherent in investment and
corporate management. It is important to identify risks and ways to
control or avoid them. Witan Investment Services Limited ('WIS')
has a Risk Committee in order to monitor compliance with its risk
management and reporting obligations as Witan's Alternative
Investment Fund Manager ('AIFM'). The Company maintains a framework
of the key risks, with the policies and processes devised to
monitor, manage and mitigate them where possible. Its detailed risk
map is reviewed regularly by the Audit & Risk Committee and the
WIS Risk Committee, which report on pertinent issues to their
respective Boards.
The guiding principles remain
watchfulness, proper analysis, prudence and a clear system of risk
management.
Where appropriate, the Witan and WIS
Boards meet jointly to cover matters of common interest. The WIS
Board consists of six non-executive directors and one executive
director who are also directors of Witan, and one executive
director who is a Company employee. The Board's policy on risk
management has not materially changed during the course of the
reporting period and up to the date of this report.
Page 14 of 33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Strategic Report continued
The Company's key risks fall broadly
under the following categories:
Market and investment portfolio
|
(Increased)
|
Risk
|
|
Mitigation
|
For
an equity fund, a key risk of investing is a general fall in equity
prices and investment income, which could be exacerbated by gearing
and the risks associated with the performance of its investment
managers and changes in Witan's share price
rating.
Other risks are the portfolio's exposure to country, currency,
industrial sector and stock-specific factors (including those
relating to the sustainability of the business model taking account
of environmental, social and governance factors). Political and
macroeconomic topics such as Brexit, inflation, pandemics (e.g.
Covid-19), trade wars and military conflicts (e.g. the Russian
invasion of Ukraine and the Middle East) can all be expected to
lead to market volatility.
|
|
The Board seeks to manage these
risks through:
· a broadly diversified equity benchmark;
· appropriate asset allocation decisions;
· selecting competent managers and regularly monitoring their
performance, awareness of emerging risks and the robustness of
their processes for taking account of those risks;
· paying attention to key economic and political
events;
· engagement with shareholders and other stakeholders
· active management of risk, whether to preserve capital or
capitalise on opportunities;
· the application of relevant policies on gearing and liquidity;
and
· share buybacks and issuance to respond to market supply and
demand.
During the year, Andrew Bell, the
CEO, managed the overall business and the investment portfolio in
accordance with limits determined by the Board and the AIFM, on
which the CEO reports at each Board meeting. The Board also
regularly reviews investment strategy and performance, supported by
comprehensive management information and analysis.
|
|
|
|
|
Operational and cyber
|
|
(Increased)
|
Risk
|
|
Mitigation
|
Many of the Company's financial systems are outsourced to
third parties, principally BNP Paribas. Disruption to their
accounting, payment systems or custody records could prevent the
accurate reporting and monitoring of the Company's financial
position. The potential impact of generative AI has been identified
as an emerging risk this year.
|
|
The Witan and WIS Executive
undertake a detailed due diligence programme, focused upon the
operational and cyber arrangements including
developments in AI, of all the
Company's suppliers. BNP Paribas, as the Company's depositary, has
a key responsibility for monitoring such issues on behalf of the
Company. The Board and AIFM monitor the depositary as well as its
other suppliers. Details of the Board's monitoring and control
processes are explained further in the Corporate Governance
Statement on pages 46 to 56 of the Annual Report.
|
Page 15 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2022
Strategic Report continued
Compliance and regulatory change
|
|
(Unchanged)
|
Risk
|
|
Mitigation
|
The
Company breaches compliance/regulatory requirements or fails to
assess the impact.
|
|
The Board takes its regulatory
responsibilities very seriously and compliance issues and potential
regulatory changes are regularly reviewed by the Board and its
AIFM.
Details of the Company's corporate
governance policies are set out in the Corporate Governance
Statement on pages 46 to 56 of the Annual Report. The Board
conducts an annual assessment of the effectiveness of its
governance processes.
There is also a three-yearly
independent external review, the most recent of which was in 2021.
See page 55 of the Annual Report for further details.
Operational and regulatory risks are
regularly reviewed by Witan's Audit & Risk Committee and WIS's
Risk Committee. WIS is subject to its own operating rules and
regulations and is regulated by the Financial Conduct Authority
('FCA'). The Company has established a modus operandi for the
effective coordination of its responsibilities and those of WIS, as
its AIFM.
Operationally the multi-manager
structure is robust, as the investment managers, the custodian and
the fund accountants keep their own records which are regularly
reconciled. The depositary, the AIFM and the Board provide
additional checks and safeguards. Management monitors the
activities of all third parties and reports any significant issues
to the Board.
|
Page 16 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2021
Strategic Report continued
Accounting, taxation and legal
|
|
(Unchanged)
|
Risk
|
|
Mitigation
|
The
Company must comply with sections 1158-59 of the Corporation Tax
Act 2010 ('CTA'). A breach could result in the Company losing
investment trust status and, as a consequence, capital gains
realised would be subject to corporation tax.
The
Company must comply with the provisions of the Companies Act 2006
('Companies Act') and with the UK Listing Authority's Listing Rules
and Disclosure Rules ('UKLA Rules'). A breach of the Companies Act
could result in the Company and/or the directors being fined or
becoming the subject of criminal proceedings. Breach of the UKLA
Rules could result in the suspension of the Company's shares which
would itself constitute a breach of the provisions of the
CTA.
|
|
The accounting requirements are
monitored by the CEO and AIFM and the Company carefully monitors
compliance with the applicable rules.
These requirements offer significant
protection for shareholders. The Board receives reports from the
CEO, the AIFM, the Company Secretary and the Company's professional
advisers to enable it to ensure compliance with all applicable
rules. WIS is authorised and regulated by the FCA to act as the
AIFM for Witan.
|
Liquidity
|
|
(Unchanged)
|
Risk
|
|
Mitigation
|
The
Company's portfolio of securities might not be
realisable.
|
|
The Company's portfolio consists
mainly of readily realisable securities. The Company and its AIFM
regularly review liquidity needs (for example, operational costs,
loan servicing and repayment, shareholder dividends and share
buybacks) relative to the Company's portfolio income and the value
and tradability of the Company's assets.
Most of the likely liquidity
requirements are foreseeable (for example, timetabled loan payments
and dividends) while others (such as share buybacks) are subject to
the Company's discretion. The Board is satisfied that unexpected
liquidity needs are not significant and could readily be met
without compromising normal portfolio management.
|
Page 17 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2021
Strategic Report continued
Environmental, social and governance factors
|
|
(Unchanged)
|
Risk
|
|
Mitigation
|
Failure to identify, understand or mitigate the risks arising
from ESG issues may negatively impact investment returns, increase
the potential for reputation risk to Witan and adversely affect the
net asset value and/or price of Witan's shares.
|
|
Witan has a responsible investment
policy which was developed by the Board in consultation with
Witan's Executive team. This is discussed fully on pages 16 to 23
of the Annual Report. Witan expects its external managers to
integrate ESG factors into their investment processes. Witan
requires managers to report on any ESG issues in a timely manner
and the Executive monitors the portfolios using various third-party
data providers to ensure that such issues are being identified.
Managers are also expected to report on engagement and voting
activities. The Executive holds regular ESG review meetings with
each of the managers where these activities, as well as evolving
best practice and new responsible investment initiatives, are
discussed. The Executive presents its findings to the Board on a
regular basis.
|
CORPORATE AND OPERATIONAL STRUCTURE
Witan is an investment trust with a
Premium Listing on the London Stock Exchange. It has a single,
wholly owned subsidiary, Witan Investment Services Limited ('WIS')
which acts as the Company's Alternative Investment Fund Manager
('AIFM').
The overwhelming majority of the
portfolio is in segregated accounts, held in custody by the
Company's depositary. The operations of the custodian and the
safeguarding of the Company's assets are supervised by the
depositary.
The Company's investment managers
may use services which are paid for, or provided by, various
brokers. They may place business, including transactions relating
to the Company, with those brokers. Under the requirements of MiFID
II, broker-provided services (other than the execution of
transactions) must either be minor non-monetary benefits or, for
research received by investment managers and charged to the
Company, separately accounted for.
OPERATIONAL MANAGEMENT ARRANGEMENTS
In addition to the appointment of
third-party investment managers, Witan and WIS contract with third
parties for other services, including:
· BNP
Paribas for depositary services, custody, investment accounting and
administration;
· Frostrow
Capital LLP for company secretarial services;
· MSCI,
StyleAnalytics and Morningstar/Sustainalytics for monitoring of its
investment holdings; and
· specialist
advice on regulatory compliance issues and, as required, legal,
investment consulting, financial and tax advice.
Page 18 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for
the year ended 31 December 2023
Strategic Report continued
The service quality and value
received from major service providers are reviewed regularly by the
Board.
The contracts governing the
provision of all services are formulated with legal advice and
stipulate clear objectives and guidelines for the service
required.
STAFFING
The Company's policy towards its
employees is to attract and retain staff with the skills and
expertise required to manage the affairs of an investment trust
company. Details of the Company's remuneration policies and
required disclosures are set out in the Directors' Remuneration
Report on pages 60 to 72 of the Annual Report. Employees and those
who seek to work at Witan are treated equally regardless of age,
gender, race, disability, marital status, sexual orientation and
religion. The Company currently has six direct employees, three men
and three women. The Board currently consists of eight
non-executive directors (four men and four women) and the CEO,
Andrew Bell, who is an employee. Given its
outsourced model and the small number of direct employees, the
Group has no employment-related specific policies in respect of
environmental or social and community affairs. However, as
described elsewhere, an increased focus on ESG issues has been
formalised by the Company's commitments, which are detailed in the
section on responsible investment on pages 16 to 23 of the Annual
Report.
WITAN INVESTMENT SERVICES
WIS is authorised and regulated by
the Financial Conduct Authority. It is authorised to act as Witan's
AIFM and to provide marketing services.
WIS's principal activities are
acting as Witan's AIFM, providing executive management services to
the Board of Witan and communicating information about the Company
to the market.
WIS's operational objectives for
2023 were:
● to
fulfil its responsibilities as Witan's AIFM; and
● to
control the net operating costs for Witan.
In 2023, WIS's sources of income
were the fees (as AIFM or Executive Manager and for marketing
services) paid by Witan Investment Trust plc. The main costs
incurred were staff costs and professional advice to ensure
compliance with regulatory and accounting obligations.
Page 19 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Strategic Report continued
COSTS
INVESTMENT MANAGEMENT FEES
Each of the third-party managers is
entitled to a management fee, based on the assets under management.
The agreements can be terminated on one to three months' notice.
The base fee rates for managers in place at the end of 2023 ranged
from 0.30% to 0.65% per annum. The weighted average base fee was
0.49% as at 31 December 2023 (2022: 0.51%).
Witan takes care to ensure the
competitiveness of the fees it pays. Many of the fee structures
incorporate a 'taper' whereby the average fee rate reduces as the
portfolio grows.
ONGOING CHARGES AND COSTS
The Company's established measure of
the costs of operation is the Ongoing Charges Figure ('OCF'). This
represents the recurring costs of operating the business
(principally the investment management fees paid to our external
managers as well as the Company's fixed and variable overhead
costs), as a percentage of net assets. This is calculated in
accordance with the AIC's guidelines and provides a consistent
basis for the comparison of costs from one year to the next and
relative to other investment companies. The OCF was marginally
lower in 2023 at 0.76% (2022: 0.77%).
The main cost headings within the OCF
are set out in the table below on page 20. The figures for
transaction costs, borrowing costs and the pro rata ongoing charges
of underlying funds are also included in the table, for easy
reference. In calculating the OCF, the Board does not consider it
relevant to consider the ongoing charges of investment companies in
which the Company invests, as the Company is not a fund of funds
and to include ongoing charges of some investee companies but not
of others would not be appropriate. For this reason, the Company
has chosen not to include these costs as part of its OCF but has
disclosed below an estimate of this figure.
The Company exercises strict
scrutiny and control over costs. The Board believes that the OCF
during the year represents good value for money for shareholders,
taking into account the benefits of manager style and portfolio
diversification in addition to active and engaged management over
the longer term.
The UK version of the EU PRIIPS
regulations, which are applicable to UK Investment Companies,
mandates the preparation of a Key Information Document ('KID')
calculated on a formulaic basis, which contains a different measure
of costs from the OCF, averaged over longer periods rather than
specific to one year. The other principal differences between the
OCF and the KID measure are the inclusion of transaction costs,
borrowing costs, and the underlying costs of holdings in other
collective investments.
The Company's investment performance
is reported after all costs.
Page 20 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Strategic Report continued
ANALYSIS OF COSTS
|
|
2023
|
|
2022
|
|
2023
|
% of
average
|
2022
|
% of
average
|
Category of cost
|
£m
|
net assets
|
£m
|
net
assets
|
Investment management base fees
(note 4, page 31)
|
6.85
|
0.43
|
7.67
|
0.45
|
Other expenses (excluding those
expenses not relating to the operation of the
subsidiary(1) loan arrangement and one-off
costs)
|
5.41
|
0.33
|
5.38
|
0.32
|
Ongoing Charges Figure
|
12.26
|
0.76
|
13.05
|
0.77
|
Pro rata ongoing charges of
underlying funds(2)
|
3.21
|
0.20
|
3.90
|
0.23
|
OCF plus look through fund
costs
|
15.47
|
0.96
|
16.95
|
1.00
|
Portfolio transaction
costs
|
1.28
|
0.08
|
1.84
|
0.11
|
Interest costs
|
9.86
|
0.61
|
6.29
|
0.37
|
Total costs including transaction
costs, borrowing costs and underlying fund costs
|
26.61
|
1.65
|
25.08
|
1.48
|
(1) those expenses not relating to
the operation of the investment company
(2) this cost represents an estimate
of the pro rata attributable fees charged by the managers of the
external
specialist collective funds held
within the portfolio.
N.B. Figures may not sum due to
rounding.
VIABILITY STATEMENT
In accordance with the UK Corporate
Governance Code, the Board has assessed the prospects of the
Company over a longer period than the 12 months required by the
'going concern' provision.
The Company's current position and
prospects are set out in the Chairman's and Chief Executive
Officer's reports and the Strategic Report. The principal risks are
set out on pages 13 to 17.
The Board has considered the
Company's financial position and its ability to liquidate its
portfolio and meet its expenses as they fall due and notes the
following:
● The
portfolio consists of investments traded on major international
stock exchanges and there
is a spread
of investments. In normal conditions, the current portfolio could
be liquidated to the extent of c. 85% (source: Bloomberg) within
five trading days and there is no expectation that the nature of
the investments held will be materially different in
future.
● The
closed-ended nature of the Company means that, unlike an open-ended
fund, it does not need to realise investments when shareholders
wish to sell their shares.
Page 21 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Strategic Report continued
● The
Board has considered the viability of the Company under various
scenarios, including periods of acute stock market and economic
volatility such as experienced in 2020, and concluded that it would
expect to be able to ensure the financial stability of the Company
through the benefits of having a diversified portfolio of listed
and realisable assets. As illustrated in note 14 to the accounts in
the Annual Report, the Board has considered price sensitivity risk
(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 key exchange rates to which the portfolio
is exposed).
● In
addition to its cash balances, which were £22 million at 31
December 2023 (2022 £35 million), the Company has a short-term bank
facility (which is renewable annually) which can be used to meet
its liabilities, and fixed-rate financing in the form of secured
notes and cumulative preference shares. With the exception of the
short-term facility, this financing will remain in place until at
least 2035. Details of the Company's current and non-current
liabilities are set out in note 13 to the accounts in the Annual
Report.
● The
expenses of the Company are predictable and modest in comparison
with the assets and there are no capital commitments currently
foreseen which would alter that position.
As well as considering the principal
risks on pages 13 to 17 and the financial position of the Company,
the Board has made the following assumptions in considering the
Company's longer-term viability:
● The
Company's remit of investing in the securities of global listed
companies will continue to be an activity to which investors will
wish to have exposure.
●
Investors will continue to want to invest in closed-ended
investment trusts.
● The
performance of the Company will continue to be satisfactory. The
Board is able to replace any of the current investment managers
when it considers it appropriate to do so.
● The
Company will continue to have access to adequate capital when
required.
● The
Company will continue to be able to fund share buybacks when
required.
● The
Company bought back 54 million ordinary shares in 2023 at a cost of
£123 million and experienced no problem with liquidity in doing so.
It had shareholders' funds of £1.5 billion at the end of
2023.
Based on the results of its review
and taking into account the long-term nature of the Company and its
financing, the Board has a reasonable expectation that the Company
will be able to continue its operations and meet its expenses and
liabilities as they fall due for the foreseeable future, taken to
mean at least the next five years. The Board has chosen this period
after reviewing its investment policy and evaluating the investment
cycle and the ability to deliver the Company's objectives over the
short to medium term. Forecasting over longer periods is imprecise.
The Board has no information to suggest this judgement will need to
change in the coming five years. The Board's long-term view of
viability will, of course, be updated each year in the Annual
Report.
Page 22 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Strategic Report continued
GOING CONCERN
In light of the conclusions drawn in
the foregoing statement on liquidity risk on page 16 and the
Viability Statement, the directors believe that the Company has
adequate financial resources to continue in operational existence
for at least the next 12 months from the date of this Report.
Therefore, the directors believe that it is appropriate to continue
to adopt the going concern basis in preparing the financial
statements. In reviewing the position as at the date of this
report, the Board has considered the guidance on this matter issued
by the Financial Reporting Council.
APPROVAL
This report was approved by the
Board of directors on 15 March
2024 and is signed on its behalf by:
Andrew Ross
|
Andrew Bell
|
Chairman
|
Chief Executive Officer
|
15 March 2024
Page 23 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Statement of Directors' Responsibilities
in
respect of the Annual Report and the financial
statements
Responsibility statement
The directors as at the date of the
Annual Report confirm, to the best of their knowledge,
that:
·
the financial statements, prepared in accordance
with UK-adopted International Accounting Standards, 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 13 to 17) of the
principal risks and uncertainties that they face.
The directors also confirm that the
financial statements, taken as a whole, are fair, balanced and
understandable, and provide the information necessary for
shareholders to assess the Company's position, performance,
business model and strategy.
By order of the Board
Andrew Ross
Chairman
Andrew Bell
Chief Executive
15 March 2024
Page 24 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Financial Highlights as at 31 December 2023
Key
data
|
2023
|
2022
|
Share price
|
237.5p
|
221.5p
|
NAV per ordinary share (debt at fair
value)(3)
|
257.6p
|
234.1p
|
Discount (NAV including income, debt
at fair value)(3)
|
7.8%
|
5.4%
|
Dividend per share
|
6.04p
|
5.80p
|
Revenue earnings per share
|
4.84p
|
4.78p
|
Total earnings per share
|
27.86p
|
(39.65)p
|
Net assets (£'000s)
|
1,561,665
|
1,541,809
|
Total return performance
|
|
|
|
|
1 year %
return
|
5 years %
return
|
10 years %
return
|
Share price total
return(1)(3)
|
10.1
|
39.3
|
125.0
|
NAV total
return(1)(3)
|
12.7
|
48.0
|
125.1
|
Witan
benchmark(1)
|
14.7
|
69.6
|
144.2
|
MSCI UK IMI
INDEX(2)
|
8.0
|
36.3
|
64.3
|
MSCI ACWI
INDEX(2)
|
15.9
|
78.2
|
193.2
|
UK CPI
|
4.0
|
23.4
|
32.8
|
Percentage of total funds(4)
|
|
|
North America
|
41%
|
|
Europe
|
21%
|
|
United Kingdom
|
17%
|
|
Investment Companies
|
11%
|
|
Asia ex Japan
|
5%
|
|
Japan
|
3%
|
|
Other
|
2%
|
|
Sector breakdown of the portfolio
|
|
Industrials
|
17%
|
Financials
|
16%
|
Information Technology
|
13%
|
Investment Companies
|
11%
|
Consumer Staples
|
9%
|
Healthcare
|
9%
|
Consumer Discretionary
|
8%
|
Materials
|
7%
|
Communication Services
|
6%
|
Energy
|
3%
|
Utilities
|
1%
|
Company size breakdown of the portfolio
|
|
Large Cap
|
73%
|
Mid Cap
|
11%
|
Investment Companies
|
11%
|
Small Cap
|
6%
|
(1)
Source: Witan/Morningstar. (2) Source: Morningstar. See also MSCI
for conditions of use (www.msci.com).
(3)
Alternative performance measure: The financial statements on pages
87 to 112 of the Annual Report set out the required statutory
reporting measures of the Company's financial
performance. In addition, the Board
assesses the Company's performance against a range of criteria
which are viewed as particularly relevant for investment trusts,
which are summarised in the key performance indicators on pages 4
and 5 of the Annual Report. Definitions of the terms used are set
out on page 116. 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 110 of the Annual Report..
(4) Funds and ETFs included on a "lookthrough" basis.
Page 25 of 33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Consolidated Statement of Comprehensive
Income
for the year ended 31 December
2023
|
Year ended
31 December
2023
|
Year
ended
31
December 2022
|
|
Revenue
return
£'000
|
Capital
return
£'000
|
Total
£'000
|
Revenue
return
£'000
|
Capital
return
£'000
|
Total
£'000
|
Investment income (note 2)
|
41,251
|
-
|
41,251
|
43,605
|
-
|
43,605
|
Other income (note 3)
|
1,223
|
-
|
1,223
|
601
|
-
|
601
|
Gains/(losses) on investments held at
fair value through profit or loss
|
-
|
165,476
|
165,476
|
-
|
(303,607)
|
(303,607)
|
Foreign exchange (losses)/gains on
cash and cash equivalents
|
-
|
(1,532)
|
(1,532)
|
-
|
87
|
87
|
|
----------
|
----------
|
----------
|
----------
|
----------
|
----------
|
Total income
|
42,474
|
163,944
|
206,418
|
44,206
|
(303,520)
|
(259,314)
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
Management and performance fees (note
4)
|
(1,712)
|
(5,135)
|
(6,847)
|
(1,918)
|
(5,754)
|
(7,672)
|
|
|
|
|
|
|
|
Other expenses
|
(5,390)
|
(129)
|
(5,519)
|
(5,384)
|
(101)
|
(5,485)
|
|
----------
|
----------
|
----------
|
----------
|
----------
|
----------
|
Profit/(loss) before finance costs and
taxation
|
35,372
|
158,680
|
194,052
|
36,904
|
(309,375)
|
(272,471)
|
Finance costs
|
(2,528)
|
(7,332)
|
(9,860)
|
(1,637)
|
(4,657)
|
(6,294)
|
|
----------
|
----------
|
----------
|
----------
|
----------
|
----------
|
Profit/(loss) before taxation
|
32,844
|
151,348
|
184,192
|
35,267
|
(314,032)
|
(278,765)
|
|
|
|
|
|
|
|
Taxation
|
(1,335)
|
(1,373)
|
(2,708)
|
(1,451)
|
(338)
|
(1,789)
|
|
----------
|
----------
|
----------
|
----------
|
----------
|
----------
|
|
|
|
|
|
|
|
Profit/(loss) attributable to equity
shareholders of the parent company
|
31,509
|
149,975
|
181,484
|
33,816
|
(314,370)
|
(280,554)
|
|
----------
|
----------
|
----------
|
----------
|
----------
|
----------
|
|
|
|
|
|
|
|
Earnings per ordinary share (note
5)
|
4.84p
|
23.02p
|
27.86p
|
4.78p
|
(44.43)p
|
(39.65)p
|
|
======
|
======
|
======
|
======
|
======
|
======
|
The total column of this statement
represents the Group's Statement of Comprehensive Income prepared
in accordance with IFRSs.
The revenue return and capital return
columns are supplementary to this and are prepared under guidance
published by the Association of Investment Companies.
The Group does not have any other
comprehensive income and hence the total profit/(loss), as
disclosed above, is the same as the Group's total comprehensive
income.
All items in the above statement
derive from continuing operations.
All income is attributable to the
equity holders of Witan Investment Trust plc, the parent company.
There are no non-controlling interests.
Page 26 of 33
WITAN INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December
2023
Consolidated and Individual Company Statements of Changes in
Equity
for the year ended 31 December
2023
Group: Year ended 31 December 2023
|
|
|
Ordinary
|
Share
|
Capital
|
Other
|
|
|
|
|
share
|
premium
|
redemption
|
capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserves
|
reserve
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Total equity at 31 December
2022
|
50,018
|
99,251
|
46,498
|
1,303,740
|
42,302
|
1,541,809
|
Total comprehensive
income:
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
-
|
149,975
|
31,509
|
181,484
|
Transactions with owners, recorded
directly to equity:
|
|
|
|
|
|
|
Ordinary dividends paid (note
7)
|
-
|
-
|
-
|
-
|
(38,748)
|
(38,748)
|
Buybacks of ordinary shares
(held in treasury)
|
-
|
-
|
-
|
(122,880)
|
-
|
(122,880)
|
|
|
--------
|
---------
|
---------
|
------------
|
---------
|
------------
|
Total equity at 31 December 2023
|
50,018
|
99,251
|
46,498
|
1,330,835
|
35,063
|
1,561,665
|
|
|
|
|
|
|
|
|
Company: Year ended 31 December 2023
|
|
|
Ordinary
|
Share
|
Capital
|
Other
|
|
|
|
|
share
|
premium
|
redemption
|
capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserves
|
reserve
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Total equity at 31 December
2022
|
50,018
|
99,251
|
46,498
|
1,304,031
|
42,011
|
1,541,809
|
Total comprehensive
income:
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
-
|
150,047
|
31,437
|
181,484
|
Transactions with owners, recorded
directly to equity:
|
|
|
|
|
|
|
Ordinary dividends paid (note
7)
|
-
|
-
|
-
|
-
|
(38,748)
|
(38,748)
|
Buybacks of ordinary shares
(held in treasury)
|
-
|
-
|
-
|
(122,880)
|
-
|
(122,880)
|
|
|
--------
|
---------
|
---------
|
------------
|
---------
|
------------
|
Total equity at 31 December 2023
|
50,018
|
99,251
|
46,498
|
1,331,198
|
34,700
|
1,561,665
|
|
|
|
|
|
|
|
|
Group: Year ended 31 December
2022
|
|
|
Ordinary
|
Share
|
Capital
|
Other
|
|
|
|
|
share
|
premium
|
redemption
|
capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserves
|
reserve
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Total equity at 31 December
2021
|
50,018
|
99,251
|
46,498
|
1,747,379
|
48,895
|
1,992,041
|
Total comprehensive
income:
|
|
|
|
|
|
|
(Loss) /profit for the
year
|
-
|
-
|
-
|
(314,370)
|
33,816
|
(280,554)
|
Transactions with owners, recorded
directly to equity:
|
|
|
|
|
|
|
Ordinary dividends paid (note
7)
|
-
|
-
|
-
|
-
|
(40,409)
|
(40,409)
|
Buybacks of ordinary shares
(held in treasury)
|
-
|
-
|
-
|
(129,269)
|
-
|
(129,269)
|
|
|
---------
|
---------
|
------------
|
---------
|
------------
|
------------
|
Total equity at 31 December
2022
|
50,018
|
99,251
|
46,498
|
1,303,740
|
42,302
|
1,541,809
|
|
|
|
|
|
|
|
|
Company: Year ended 31 December
2022
|
|
|
Ordinary
|
Share
|
Capital
|
Other
|
|
|
|
|
share
|
premium
|
redemption
|
capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserves
|
reserve
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Total equity at 31 December
2021
|
50,018
|
99,251
|
46,498
|
1,747,595
|
48,679
|
1,992,041
|
Total comprehensive
income:
|
|
|
|
|
|
|
(Loss)/profit for the
year
|
-
|
-
|
-
|
(314,295)
|
33,741
|
(280,554)
|
Transactions with owners, recorded
directly to equity:
|
|
|
|
|
|
|
Ordinary dividends paid (note
7)
|
-
|
-
|
-
|
-
|
(40,409)
|
(40,409)
|
Buybacks of ordinary shares (held in
treasury)
|
-
|
-
|
-
|
(129,269)
|
-
|
(129,269)
|
|
--------
|
---------
|
---------
|
---------------
|
---------
|
------------
|
Total equity at 31 December
2022
|
50,018
|
99,251
|
46,498
|
1,304,031
|
42,011
|
1,541,809
|
|
|
|
|
|
|
|
|
|
Page 27 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Consolidated and Individual Company Balance
Sheets
As at 31 December 2023
|
Group
|
Company
|
Group
|
Company
|
|
31 December
|
31 December
|
31
December
|
31
December
|
|
2023
|
2023
|
2022
|
2022
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Non
current assets
|
|
|
|
|
Investments held at fair value
through profit or loss
|
1,783,822
|
1,785,085
|
1,760,824
|
1,762,015
|
Right of use asset:
property
|
125
|
125
|
196
|
196
|
|
--------------
|
--------------
|
--------------
|
--------------
|
|
1,783,947
|
1,785,210
|
1,761,020
|
1,762,211
|
|
--------------
|
--------------
|
--------------
|
--------------
|
Current assets
|
|
|
|
|
Other receivables
|
3,982
|
3,832
|
4,661
|
4,885
|
Cash and cash equivalents
|
22,434
|
21,624
|
36,352
|
34,888
|
|
-----------
|
-----------
|
-----------
|
-----------
|
Total current assets
|
26,416
|
25,456
|
41,013
|
39,773
|
|
-----------
|
-----------
|
-----------
|
-----------
|
Total assets
|
1,810,363
|
1,810,666
|
1,802,033
|
1,801,984
|
|
---------------
|
---------------
|
---------------
|
---------------
|
Current liabilities
|
|
|
|
|
Other payables
|
(7,339)
|
(7,642)
|
(6,242)
|
(6,193)
|
Bank loans
|
(83,000)
|
(83,000)
|
(96,500)
|
(96,500)
|
|
----------
|
----------
|
----------
|
----------
|
Total current liabilities
|
(90,339)
|
(90,642)
|
(102,742)
|
(102,693)
|
|
----------
|
----------
|
----------
|
----------
|
Total assets less current liabilities
|
1,720,024
|
1,720,024
|
1,699,291
|
1,699,291
|
|
|
|
|
|
Non
current liabilities
|
|
|
|
|
Other payables
|
(160)
|
(160)
|
(218)
|
(218)
|
Deferred tax liability on Indian
capital gains
|
(1,573)
|
(1,573)
|
(667)
|
(667)
|
Borrowings:
|
|
|
|
|
Secured debt
|
(154,071)
|
(154,071)
|
(154,042)
|
(154,042)
|
3.4 per cent. cumulative
preference shares of £1
|
(2,055)
|
(2,055)
|
(2,055)
|
(2,055)
|
2.7 per cent. cumulative
preference shares of £1
|
(500)
|
500)
|
(500)
|
(500)
|
|
----------
|
----------
|
----------
|
----------
|
Total non current liabilities
|
(158,359)
|
(158,359)
|
(157,482)
|
(157,482)
|
|
----------
|
----------
|
----------
|
----------
|
Net
assets
|
1,561,665
|
1,561,665
|
1,541,809
|
1,541,809
|
|
|
|
|
|
Equity attributable to equity holders
|
|
|
|
|
Ordinary share capital
|
50,018
|
50,018
|
50,018
|
50,018
|
Share premium account
|
99,251
|
99,251
|
99,251
|
99,251
|
Capital redemption reserve
|
46,498
|
46,498
|
46,498
|
46,498
|
Retained earnings:
|
|
|
|
|
Other capital
reserves
|
1,330,835
|
1,331,198
|
1,303,740
|
1,304,031
|
Revenue reserve
|
35,063
|
34,700
|
42,302
|
42,011
|
|
----------
|
----------
|
----------
|
----------
|
Total equity
|
1,561,665
|
1,561,665
|
1,541,809
|
1,541,809
|
|
|
|
|
|
Net
asset value per ordinary share
|
249.57p
|
249.57p
|
226.80p
|
226.80p
|
|
|
|
|
|
The financial statements of Witan
Investment Trust plc (registered number 101625) were approved by
directors and authorised for issue on 15 March 2024 and were
signed on their behalf by
A J
S
Ross
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 £181,484,000 (2022: loss of
£280,554,000).
Page 28 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Consolidated and Individual Company Cash Flow
Statements
for the year ended 31 December
2023
|
Group
|
Company
|
Group
|
Company
|
|
2023
|
2023
|
2022
|
2022
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Cash flows from operating activities
|
|
|
|
|
Dividend income received
|
40,956
|
40,956
|
42,739
|
42,739
|
Interest received
|
1,073
|
1,008
|
299
|
291
|
Other income received
|
162
|
162
|
646
|
216
|
Operating expenses paid
|
(11,235)
|
(10,516)
|
(14,095)
|
(14,022)
|
Taxation on overseas
income
|
(1,490)
|
(1,490)
|
(1,870)
|
(1,870)
|
Taxation recovered
|
628
|
628
|
2,640
|
2,640
|
|
----------
|
-----------
|
----------
|
-----------
|
Net
cash inflow from operating activities
|
30,094
|
30,748
|
30,359
|
29,994
|
|
----------
|
-----------
|
----------
|
-----------
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
Purchases of investments
|
(538,699)
|
(538,699)
|
(797,777)
|
(797,777)
|
Sales of investments
|
681,035
|
681,035
|
948,911
|
948,911
|
Overseas capital gain on tax on
sales
|
(468)
|
(468)
|
(518)
|
(518)
|
Settlement of futures
contracts
|
718
|
718
|
1,001
|
1,001
|
|
----------
|
-----------
|
----------
|
-----------
|
Net
cash inflow from investing activities
|
142,586
|
142,586
|
151,617
|
151,617
|
|
----------
|
-----------
|
----------
|
-----------
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
Equity dividends paid (note
7)
|
(38,748)
|
(38,748)
|
(40,409)
|
(40,409)
|
Buybacks of ordinary
shares
|
(123,048)
|
(123,048)
|
(132,281)
|
(132,281)
|
Interest paid
|
(9,694)
|
(9,694)
|
(6,044)
|
(6,044)
|
Repayment of lease
liability
|
(76)
|
(76)
|
(67)
|
(67)
|
Drawdown of bank loans
|
149,250
|
149,250
|
195,000
|
195,000
|
Repayment of bank loans
|
(162,750)
|
(162,750)
|
(196,500)
|
(196,500)
|
|
----------
|
-----------
|
----------
|
-----------
|
Net
cash outflow from financing activities
|
(185,066)
|
(185,066)
|
(180,301)
|
(180,301)
|
|
----------
|
-----------
|
----------
|
-----------
|
|
|
|
|
|
(Decrease)/increase in cash and cash
equivalents
|
(12,386)
|
(11,732)
|
1,675
|
1,310
|
Cash and cash equivalents at the
start of the period
|
36,352
|
34,888
|
34,590
|
33,491
|
Effect of foreign exchange rate
changes
|
(1,532)
|
(1,532)
|
87
|
87
|
|
----------
|
-----------
|
----------
|
-----------
|
Cash and cash equivalents at the end of the
period
|
22,434
|
21,624
|
36,352
|
34,888
|
Page 29 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Notes to the Financial Statements
for the year ended 31 December
2023
1.
Accounting policies
The financial statements of the Group
and parent company have been prepared in accordance with UK-adopted
International Accounting Standards ('IASs'). These financial
statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the Group
operates.
(a)
Basis of preparation
The financial statements have been
prepared on the historical cost basis, except for the revaluation
of certain financial instruments. The principal accounting policies
adopted are set out in the financial statements. Where
presentational guidance set out in the Statement of Recommended
Practice 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts' (the 'SORP') issued by the Association of
Investment Companies (the 'AIC') in July 2022 is consistent with
the requirements of IASs, the directors have sought to prepare the
financial statements on a basis compliant with the recommendations
of the SORP.
Judgements and sources of estimation
uncertainty
In the application of the Group's
accounting policies, management is required to make judgements,
estimates and assumptions about carrying values of assets and
liabilities that are not always readily apparent from other
sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be
relevant. Actual results may vary from these estimates.
The directors do not consider that
there are any significant estimates or critical judgements in these
financial statements.
(b)
Going concern
The financial statements have been
prepared on a going concern basis. The Group's business
activities, together with the factors likely to affect its future
development and performance, are set out in the Strategic Report in
the Annual Report. The financial position of the Group as at 31
December 2023 is shown in the balance sheet on page 27. The cash
flows of the Group for the year ended 31 December 2023 are not
untypical and are set out on page 28.
(c)
Basis of consolidation
The consolidated financial statements
incorporate the financial statements of the Company and the entity
controlled by the Company (its subsidiary) made up to 31 December
each year.
In accordance with IFRS 10 the
Company has been designated as an investment entity on the basis
that:
· It obtains funds from investors and provides those investors
with investment management services;
· It commits to its investors that its business purpose is to
invest solely for returns from capital appreciation and
investment
income; and
· It measures and evaluates performance of substantially all of
its investments on a fair value basis.
The subsidiary of the Company was
established for the sole purpose of operating or supporting the
investment operations of the Company and is not itself an
investment entity. Therefore, under the principles of IFRS 10, the
Company has consolidated its subsidiary as it is a controlled
entity that supports the investment activity of the investment
entity.
Control is achieved where the Company
is exposed, or has the right, to variable returns from its
investment in the subsidiary and has the ability to affect those
returns through its power to direct the relevant activities. Where
necessary, adjustments are made to the financial statements of the
subsidiary to bring the accounting policies used by it into line
with those used by the Group. All intra-group transactions,
balances, income and expenses are eliminated on
consolidation.
Page 30 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Notes to the Financial Statements continued
(d)
Presentation of the Statement of Comprehensive
Income
In order to better reflect the
activities of an investment trust company, and in accordance with
guidance issued by the AIC, supplementary information which
analyses the Statement of Comprehensive Income between items of a
revenue and capital nature has been presented alongside the
Statement of Comprehensive Income. In accordance with the Company's
Articles of Association, net capital returns may not be distributed
by way of dividend. Additionally, the net revenue is the measure
the directors believe appropriate in assessing the Group's
compliance with certain requirements set out in section 1158 of the
Corporation Tax Act 2010.
2.
Investment income
|
|
|
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
UK dividends from listed
investments
|
12,676
|
11,869
|
UK special dividends from listed
investments
|
78
|
1,589
|
UK stock dividends from listed
investments
|
237
|
772
|
|
-----------
|
-----------
|
Total UK dividends
|
12,991
|
14,230
|
|
-----------
|
-----------
|
|
|
|
Overseas dividends from listed
investments
|
27,446
|
28,522
|
Overseas special dividends from
listed investments
|
814
|
832
|
Fixed interest
|
-
|
21
|
|
-----------
|
-----------
|
Total investment income
|
41,251
|
43,605
|
|
|
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Analysis of investment income by
geographical segment:
|
|
|
United Kingdom
|
12,991
|
14,251
|
North America
|
4,606
|
5,009
|
Continental Europe
|
7,169
|
5,906
|
Japan
|
1,263
|
1,517
|
Asia (ex Japan)
|
1,928
|
2,156
|
Latin America
|
2,424
|
5,735
|
Other
|
10,870
|
9,031
|
|
-----------
|
-----------
|
Total investment income
|
41,251
|
43,605
|
3.
Other income
|
|
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Deposit interest
|
1,061
|
379
|
Stock lending income
|
145
|
222
|
Other income
|
17
|
-
|
|
-----------
|
-----------
|
Total other income
|
1,223
|
601
|
At 31 December 2023 the total value
of securities on loan by the Company for stock lending purposes was
£45,656,000 (2022: £35,380,000). The maximum aggregate value of
securities on loan at any time during the year ended 31 December
2023 was £61,910,000 (2022: £122,950,000). Collateral, revalued on
a daily basis at a level equivalent to at least 105% (2022: 105%)
of the market value of the securities lent, was provided against
all securities on loan.
Page 31 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Notes to the Financial Statements continued
4.
Management and performance fees
|
Year ended 31 December
2023
|
Year
ended 31 December 2022
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
Management fees paid to third-party
managers
|
1,712
|
5,135
|
6,847
|
1,918
|
5,754
|
7,672
|
|
----------
|
-----------
|
-----------
|
----------
|
-----------
|
-----------
|
Total management and performance
fees
|
1,712
|
5,135
|
6,847
|
1,918
|
5,754
|
7,672
|
5.
Earnings per ordinary share
The earnings per ordinary share
figure is based on the net profit for the year of £181,484,000
(2022: loss of £280,554,000) and on 651,467,218 ordinary shares
(2022: 707,617,951), being the weighted average number of ordinary
shares in issue during the year.
The earnings per ordinary share
figure detailed above can be further analysed between revenue and
capital, as below. The Company has no securities in issue that
could dilute the return per ordinary share. Therefore the basic and
diluted earnings per ordinary share are the same.
|
2023
|
2022
|
|
£'000
|
£'000
|
|
|
|
Net revenue profit
|
31,509
|
33,816
|
Net capital profit/ (loss)
|
149,975
|
(314,370)
|
Net total profit/(loss)
|
181,484
|
(280,554)
|
|
|
|
Weighted average number of ordinary
shares in issue during the year
|
651,467,218
|
707,617,951
|
|
|
|
|
Pence
|
Pence
|
Revenue earnings per ordinary
share
|
4.84
|
4.78
|
Capital earnings/(loss)per ordinary
share
|
23.02
|
(44.43)
|
Total earnings/(loss) per ordinary
share
|
27.86
|
(39.65)
|
6.
Issued share capital
The number of ordinary shares of 5p
each in issue at 31 December 2023 was 1,000,355,000 (2022:
1,000,355,000), of which 374,604,155 ordinary shares of 5p each
(2022: 320,531,829) were held in treasury.
|
Page 32 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Notes to the Financial Statements continued
7.
Dividends
|
2023
£'000
|
2022
£'000
|
Amounts recognised as distributions to equity holders in the
year:
|
|
|
Fourth interim dividend for the year
ended 31 December 2022 of 1.60p (2021: 1.52p) per ordinary
share
|
10,746
|
11,107
|
First interim dividend for the year
ended 31 December 2023 of 1.45p
(2022: 1.40p) per ordinary
share
|
9,550
|
10,003
|
Second interim dividend for the year
ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary
share
|
9,325
|
9,779
|
Third interim dividend for the year
ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary
share
|
9,134
|
9,584
|
Refund of unclaimed
dividends
|
(7)
|
(64)
|
|
----------
|
----------
|
|
38,748
|
40,409
|
|
======
|
======
|
Fourth interim dividend for the year
ended 31 December 2023 1.69p (2022: 1.60p) per ordinary
share
|
10,464
|
10,746
|
|
======
|
======
|
|
|
|
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 minimum distribution requirements of section 1158 of the
Corporation Tax Act 2010 are considered.
|
|
|
2023
£'000
|
2022
£'000
|
Revenue profits available for
distribution (Company only)
|
31,437
|
33,741
|
First interim dividend for the year
ended 31 December 2023 of 1.45p
(2022: 1.40p) per ordinary
share
|
(9,550)
|
(10,003)
|
Second interim dividend for the year
ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary
share
|
(9,325)
|
(9,779)
|
Third interim dividend for the year
ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary
share
|
(9,134)
|
(9,584)
|
Fourth interim dividend for the year
ended 31 December 2023 of 1.69p (2022: 1.60p) per ordinary
share
|
(10,464)
|
(10,746)
|
|
----------
|
----------
|
Revenue reserves utilised in the year
(Company only)
|
(7,036)
|
(6,371)
|
|
======
|
======
|
8. 2023
Accounts
The figures and financial information
for 2023 are extracted from the Annual Report and financial
statements for the year ended 31 December 2023 and do not
constitute the statutory accounts for the year. The Annual
Report and financial statements include the Report of the
Independent Auditor which is unqualified and does not contain a
statement under either section 498(2) or section 498(3) of the
Companies Act 2006. The Annual Report and financial
statements have not yet been delivered to the Registrar of
Companies.
Page 33 of
33
WITAN INVESTMENT TRUST
PLC
Annual Financial Report for the year ended 31 December
2023
Notes to the Financial Statements continued
9. 2022
Accounts
The figures and financial information
for 2022 are extracted from the published Annual Report and
financial statements for the year ended 31 December 2022 and do not
constitute the statutory accounts for that year. The Annual Report
and financial statements have been delivered to the Registrar of
Companies and included the Report of the Independent Auditor which
was unqualified and did not contain a statement under either
section 498(2) or section 498(3) of the Companies Act
2006.
10.
Annual report and financial
statements
A copy of the Annual Report and
financial statements to 31 December 2023 will shortly be available
for inspection at the National Storage Mechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
and on the Company's website,
www.witan.com
Copies of the Annual Report and
financial statements will be posted to shareholders in early April
2024 and will be available on the Company's website (www.witan.com)
or in hard copy format from the Registered Office, 14 Queen
Anne's Gate, London, SW1H 9AA.
The Annual General Meeting will be
held on Wednesday 1 May 2024 at the Merchant Taylors' Hall, 30
Threadneedle Street, London EC2R 8JB. For further details regarding
arrangements, see the Notice of AGM which will be published in
early April 2024.
For further information please
contact:
Andrew Bell
Chief Executive
Witan Investment Trust
plc
Telephone: 020 7227
9770
James Hart
Investment Director
Witan Investment Trust
plc
Telephone: 020 7227
9770
Isabella Seekings
Director of Marketing
Witan Investment Trust
plc
Telephone: 020 7227
9770
- ENDS
-
Neither the contents of the
Company's website nor the contents of any website accessible from
hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.