Seeking to procure the world’s best stock pickers

Witan Investment Trust 5 April 2017 Review
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Witan Investment Trust

Seeking to procure the world’s best stock pickers

Investment trusts

5 April 2017

Price

960.5p

Market cap

£1,723m

AUM

£2,029m

NAV*

1,009.4p

Discount to NAV

4.8%

NAV**

998.2p

Discount to NAV

3.8%

*Debt at par excluding income. **Debt at fair value including income. As at 3 April 2017.

Yield

2.0%

Ordinary shares in issue

179.4m

Code

WTAN

Primary exchange

LSE

AIC sector

Global

Benchmark

Composite benchmark

Share price/discount performance

Three-year performance vs index

52-week high/low

970.0p

712.0p

1,010.2p

764.8p

**Including income.

Gearing

Net*

11.0%

*As at 28 February 2017.

Analysts

Tom Tuite Dalton

+44 (0)20 3077 5700

Mel Jenner

+44 (0)20 3077 5720

Witan Investment Trust is a research client of Edison Investment Research Limited

Witan Investment Trust (WTAN) uses a multi-manager investment approach to invest in global equities. Since 2004, it has allocated capital to eight to 13 external managers (currently 11), who all run high-conviction investment strategies and up to 10% of the fund is invested directly in collective specialist assets, which includes private equity. The multi-manager approach aims to generate an attractive NAV total return ahead of WTAN’s benchmark (a composite global equities index reflecting its chosen investment universe), as well as real dividend growth. NAV total return is ahead of its benchmark over one, three, five and 10 years.

12 months ending

Share
price (%)

NAV
(%)

Composite
benchmark* (%)

MSCI World
(%)

FTSE All-
Share (%)

FTSE AW North
America (%)

31/03/13

23.3

21.0

17.2

18.4

16.8

19.3

31/03/14

18.7

10.5

7.7

9.0

8.8

10.3

31/03/15

20.8

15.1

13.6

19.7

6.6

25.1

31/03/16

(6.7)

0.1

(2.9)

0.3

(3.9)

3.6

31/03/17

32.2

29.7

28.8

32.7

22.0

35.0

Source: Thomson Datastream. Note: All % on a total return basis in GBP. *See section on benchmark changes on page 5.

Investment strategy: Outsourced and unconstrained

For its external managers, WTAN seeks to identify and procure high-conviction managers with strong track records in their areas of expertise focused on both growth and value in developed and emerging markets. WTAN’s benchmark index is a blend of FTSE equity indices, recently adjusted to include an allocation to emerging markets; its geographic weightings represent the broad universe of stocks from which the managers can build their respective portfolios. There is no constraint as to which stocks they own from within the universe. Gearing is tactically deployed – up to 20% of net assets is permitted; at end-February, net gearing was 11.0%.

Market outlook: Scope for stock pickers to add value

With equity markets no longer supported by the expectation of ever looser monetary policy, few envisage a repeat of last year’s broad-based, high returns. More investor focus on companies and less on macroeconomics could be positive for accomplished stock pickers in 2017 and beyond.

Valuation: Proactive board and executive team

WTAN’s current share price discount to cum-income NAV is 3.8%, broadly in line with the global growth sector average. While WTAN acknowledges that the market is the ultimate arbiter of the share price, the board and manager are keen to enhance net asset value for shareholders by buying back shares and remain active in this regard. While WTAN’s 2.0% dividend yield is below that of the FTSE All-Share index, it has increased every year for the last 42 years.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

Witan Investment Trust (WTAN) aims to deliver long-term growth in income and capital through active multi-manager investment in global equities. Funds are currently allocated to 11 external managers (typically eight to 13) and, to a limited extent (currently around 10%) directly invested in specialist funds. Witan seeks managers with the conviction to take views that may diverge from benchmark weightings.

10 March 2017: Annual report for 12 months to end-December 2016: NAV TR of +22.9%, versus benchmark +23.0%. Share price TR +18.4%.

11 August 2016: Half -year report for six months to end June 2016. NAV TR of +6.4%, versus benchmark +7.7%. Share price TR -2.4%.

27 May 2016: Repurchase of 14.4m shares at 732.78p from Aviva Global Investors at a 6.5% discount to NAV.

Forthcoming

Capital structure

Fund details

AGM

April 2017

Ongoing charges

0.75% (see page 7)

Group

Self-managed (Witan Inv. Services)

Half-year results

August 2017

Net gearing

11.0%

Managers

Andrew Bell (CEO), James Hart (Investment Director)

Year end

31 December

Annual mgmt fee

Only multi-manager charges

Address

14, Queen Anne’s Gate,
London, SW1H 9AA

Dividend paid

Mar, Jun, Sep, Dec

Performance fee

Yes (see page 7)

Launch date

February 1909

Trust life

Indefinite

Phone

0800 082 8180

Continuation vote

No

Loan facilities

£190m at 31 December 2016

Website

www.witan.com

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

Quarterly dividends are paid, with the first three equivalent to a quarter of the previous year total and the final making up the full year payment. There have been 42 years of consecutive annual dividend increases.

Renewed annually, the board has authority both to repurchase (14.99%) and allot (10%) ordinary shares. 2015 allotments at a premium to NAV. 2016 includes repurchase from Aviva.

Shareholder base (as at 28 February 2017)

Portfolio exposure by sector (as at 28 February 2017)

Top 10 holdings (as at 28 February 2017)

Portfolio weight %

Company

Country

Sector

28 February 2017

28 February 2016

Comcast

US

Media

1.9

1.7

Princess Private Equity

UK

Private equity

1.7

1.3

London Stock Exchange

UK

Financial services

1.6

1.4

BlackRock World Mining Trust

UK

Investment company

1.5

1.2

Syncona

UK

Investment company

1.4

0.0*

JP Morgan

US

Banks

1.4

0.8*

Diageo

UK

Beverages

1.4

1.4

Alphabet

US

Software & services

1.2

1.1*

Unilever

UK

Consumer goods

1.1

1.4

Vonovia

Germany

Real estate

1.1

1.0*

Top 10

14.3

13.7

Source: Witan Investment Trust, Edison Investment Research, Bloomberg, Morningstar. Note: *Not in February 2016 top 10.

Market outlook: Higher US rates potentially positive

Macroeconomics was a key driver of global equity market returns in 2016, overshadowing individual companies’ operational performances. This environment proved tough for active managers focused primarily on stock-picking. In addition, the natural propensity of active managers to underweight sectors with limited earnings visibility such as mining (where fortunes are in large part dictated by commodity price moves) proved a further handicap, as highly operationally geared mining companies saw their share prices bounce sharply. In this environment, WTAN’s benchmark returned 23.0% in 2016, supported by continuing low government bond yields, a sharply weaker sterling and sustained US equity market optimism following the Trump victory.

Exhibit 2: WTAN benchmark performance and Datastream world index prospective P/E

Witan benchmark and benchmark relative to FTSE All-Share Index

Datastream world index forward P/E over 10 years

Source: Thomson Datastream, Composite benchmark modified from 1 January 2017. Note: See page 5 for details.

The charts in Exhibit 2 show how WTAN’s benchmark universe of stocks has advanced significantly over the last 10 years, both in absolute terms and relative to the FTSE All Share index. While the average forward P/E ratio of the Datastream world index does not appear cheap on an historic basis, one thing WTAN’s selection of high-conviction stock pickers is not doing, unlike a tracker fund, is buying the average. A global environment of tighter monetary policy may prove advantageous in relative terms to high-quality active managers able to navigate their way through tougher market conditions.

Fund profile: High-conviction external managers

Witan Investment Trust (WTAN) was created in 1909 and listed on the stock exchange in 1924. It is now one of the largest UK investment trusts, with more than £1.8bn in net assets. In 2004, there was a change in strategy; WTAN became self-managed, appointed its first chief executive and adopted a multi-manager investment approach, with the aim of reducing the performance volatility that can arise from dependence on a sole manager. The fund seeks long-term growth in capital via investment in global equities and real dividend growth. External managers are selected for their high-conviction, unconstrained approaches, focusing on both value and growth strategies investing in developed and emerging markets. Up to 10% of WTAN’s portfolio can be invested in specialist funds, which includes private equity and lesser-known/newly established managers. Since 1 January 2017, the composite benchmark based on FTSE All-World indices is 30% UK, 25% North America, 20% Asia Pacific, 20% Europe ex-UK and 5% emerging markets. Gearing of up to 20% of net assets is permitted (typically 5-15%) and a small net cash position may be held when appropriate. The use of derivatives is allowed to implement investment policy; in recent years, exchange-traded futures have been used to gain exposure to a particular market index quickly without having to interfere with the strategies of the external managers.

CEO and investment director: Andrew Bell, James Hart

The managers’ view: Guarded optimism

WTAN’s managers suggest that they are optimistic on the outlook for 2017, but need to be vigilant. Global economic growth is improving and corporate earnings growth turned more positive in Q316, which is supportive for equity prices. In a low interest rate environment, demand for equities is likely to remain robust and the managers consider that shares in aggregate are fairly valued, although some sectors are looking expensive. However, given outsized stock market returns in recent years, the managers suggest that further gains may rely on continued earnings growth rather than valuation uplifts. Key risks are seen as political rather than economic, so any sharp setback in global share prices could provide good investment opportunities for WTAN’s external managers, who are all unconstrained, active stock pickers. Brexit negotiations present a risk to growth, but monetary and fiscal policy could limit any damage, while sterling weakness is acting as a ‘pressure valve’ for the UK economy. The managers also suggest that the UK stock market is less at risk than the UK economy.

Commenting on the energy sector, the managers suggest that over the long term, the oil price is in structural decline. This is a function of technical advancements and lower demand for petrol as alternative energy sources are more widely adopted. The oil price has rallied following the November 2016 OPEC meeting, where members agreed to cut production, but is likely to remain well below the peak of recent years. This stability at a lower level should be a positive environment for many of the world’s corporate and individual consumers. WTAN remains positive on the outlook for Asian equities, despite US president Trump’s talk of protectionism. The managers comment that a lot of WTAN’s Asian exposure is focused on domestic demand, which is expected to continue to grow due to higher disposable incomes and they believe that US threats of protectionism are probably exaggerated; any blanket imposition of tariffs would likely face a corporate backlash.

Asset allocation

Investment process: Executive team led with board oversight

WTAN has employed a multi-manager approach since 2004. Should the executive team wish to add a new external manager, it first decides, in conjunction with the board, what type of manager is required. It then consults relevant databases and conducts internal research and due diligence, both qualitative and quantitative. This leads to having a final shortlist of at least three managers who present to WTAN’s board in London, a final decision is then made. External managers are reviewed by the board (including CEO Andrew Bell, and a number of individuals with significant investment management experience) at least annually. There is no set formula as to the duration of each manager’s tenure but, as Bell recently highlighted, the market backdrop is constantly shifting and changing circumstances can sometimes necessitate a change in manager. Other factors that can lead to termination are a change in personnel, style drift (when a mandated manager does not adhere to their stated investment methodology) or, more rarely, sustained underperformance.

Global managers manage around 45% of total assets, while Europe and Asian mandates account for 20% with the UK accounting for approximately 20%. Since February 2017, c 4% of assets have been invested in emerging markets. Around 10% of assets are managed internally in a direct holdings portfolio, which primarily comprises specialist investment companies trading on anomalous valuations. The direct investments portfolio has enhanced returns since being introduced in 2010: in 2016 its holdings in listed private equity funds, where discounts have narrowed across the board, performed especially well. Direct investments can also be made to access strategies that are too small to justify a separate mandate and too specialist to be accessed using derivatives. A recent example occurred in 2016 when WTAN invested in a small-cap emerging market OEIC managed by Somerset Capital Management.

Recent change in WTAN’s composite benchmark

Unchanged since 2007, the start of 2017 saw WTAN’s benchmark change – an emerging markets weighting of 5% was introduced to reflect the growing influence of emerging economies, while the North American weighting was increased by 5% to reflect the growing global dominance of US companies in technology and healthcare. From 1 September 2004 to 30 September 2007, the benchmark comprised 50% All-Share and 50% World (ex-UK). From 1 October 2007 to 31 December 2016 it was 40% All-Share, 20% All-World North America, 20% All-World Asia Pacific and 20% All-World Europe (ex-UK). Since 1 January 2017 the UK has reduced further, with the weightings at 30% All-Share, 25% All-World North America, 20% All-World Asia Pacific, 20% All-World Europe (ex-UK) and 5% Emerging Markets. According to Bell, the composite index reflects “where we think the opportunities are evolving over time for a global investor”.

Current portfolio positioning

In February 2017, WTAN allocated 4% of its net assets to GQG Partners. GQG is an emerging markets specialist recently set up by experienced active manager Rajiv Jain, who has a record of managing unconstrained portfolios. Apart from the addition of emerging markets, geographic weightings remain broadly unchanged since our last report in July 2016.

Exhibit 3: Witan portfolio analysis and performance by investment manager

Equity mandate

Investment manager

Benchmark
(total return)

Investment style

% of AUM at
31 Dec 2016*

Inception
date

FY16 performance (%)

Witan

B’mark

Diff.

UK

Artemis

FTSE All-Share

Recovery/special situations

9.4

06-May-08

9.1

16.8

(7.7)

UK

Heronbridge

FTSE All-Share

Intrinsic value growth

6.2

17-Jun-13

17.5

16.8

0.7

UK

Lindsell Train

FTSE All-Share

Long-term growth from undervalued brands

8.9

01-Sep-10

10.3

16.8

(6.5)

Global

Lansdowne Partners

DJ Global Titans

Concentrated, benchmark-independent investment in developed markets

11.9

14-Dec-12

14.4

32.7

(18.3)

Global

MFS Int'l

FTSE All-World

Growth at an attractive price

7.7

30-Sep-04

28.6

29.6

(1.0)

Global

Pzena

FTSE All-World

Systematic value

10.5

02-Dec-13

32.7

29.6

3.1

Global

Tweedy, Browne

FTSE All-World

Fundamental value

3.4

02-Dec-13

30.0

29.6

0.4

Global

Veritas

FTSE All-World

Fundamental value, real return objective

12.0

11-Nov-10

24.8

29.6

(4.8)

Pan-European

Marathon

FTSE All-World Developed Europe

Capital cycles

7.3

23-Jul-10

13.7

19.7

(6.0)

Asia Pacific (incl. Japan)

Matthews Int'l

MSCI Asia Pacific Free

Quality companies with dividend growth

12.5

20-Feb-13

23.7

25.5

(1.8)

Directly held investments

Witan's executive team

Witan’s composite benchmark

Collective funds invested in mispriced assets, recovery situations or specialist assets

10.2

19-Mar-10

34.4

22.9

11.5

Source: Witan Investment Trust. Note: *Percentage of Witan’s assets managed, excluding central cash balances.

WTAN continues to advocate a high-conviction investment approach as a prerequisite for sustained outperformance. One measure of active management in a portfolio is known as ‘active share’, where a portfolio identical to the benchmark has an active share of 0%, while one with no holdings in common with its benchmark has an active share of 100%. The active share of WTAN’s combined portfolio was c 70% at the end of 2016 (2015: 66%). This suggests that, even with the diversifying effects of the multi-manager structure, WTAN's portfolio retains an active approach.

Exhibit 4: Look-through geographic exposure vs FTSE All-World index (% unless stated)

Portfolio end-
February 2017

Portfolio end- February 2016

Change
(pp)

Index weight

Active weight
vs index (pp)

Trust weight/ index weight (x)

UK

38

41

-3

6

32

6.3

North America

24

26

-2

57

-33

0.4

Europe

16

16

0

15

1

1.1

Far East

13

11

2

8

5

1.6

Japan

5

5

0

8

-3

0.6

Other

4

1

3

6

-2

0.7

100

100

100

Source: Witan Investment Trust, Edison Investment Research, FTSE Russell. Note: Excluding cash, rebased to 100.

Performance: 2016 challenging, solid record overall

All the external managers set out in Exhibit 3 were in place throughout the year. Pzena and Tweedy, Browne had the strongest performance of the five global managers, benefiting from a broadening of investor interest to areas favoured by value managers, while Lansdowne had a relatively weak year (with a return of 14.4%), underperforming significantly during the first half of the year and improving a little in the second half of the year. In the UK, Heronbridge marginally outperformed the market. However, Artemis and Lindsell Train materially lagged the UK market, after four years of significant outperformance. Similarly, European manager, Marathon, underperformed. It is worth noting that the longer-term performance of all the managers that lagged in 2016 remains ahead of their benchmarks.

Exhibit 5: Investment trust performance to 31 March 2017

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised. The benchmark comprises FTSE indices. 1 Sep 2004 to 30 Sep 2007: 50% All-Share and 50% World (ex-UK). 1 Oct 2007 to 31 Dec 2016: 40% All-Share, 20% All-World North America, 20% All-World Asia Pacific and 20% All-World Europe (ex-UK). Since 1 Jan 2017: 30% All-Share, 25% All-World North America, 20% All-World Asia Pacific, 20% All-World Europe (ex-UK) and 5% Emerging Markets.

Exhibit 6: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to Composite benchmark

0.3

0.7

4.0

2.6

4.8

21.5

24.0

NAV relative to Composite benchmark

0.8

1.3

1.2

0.6

5.0

11.2

14.9

Price relative to MSCI World

1.2

1.2

2.3

(0.4)

(6.6)

5.9

2.6

NAV relative to MSCI World

1.7

1.9

(0.4)

(2.3)

(6.3)

(3.0)

(5.0)

Price relative to FTSE All-Share

0.6

2.5

6.9

8.4

19.2

37.3

48.2

NAV relative to FTSE All-Share

1.1

3.1

4.0

6.2

19.5

25.7

37.3

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-March 2017. Geometric calculation.

Exhibit 7: NAV total return performance relative to composite benchmark over three years

Source: Thomson Datastream, Edison Investment Research

While the performance of the majority of external managers lagged in 2016, the executive management team’s direct holdings portfolio outperformed. Also, the deployment of gearing added 1.7% to NAV returns, while share buybacks added a further 0.6%. This boosted the total NAV return so that it ended the year broadly in line with its benchmark. Over the long term, WTAN’s track record is robust, as shown in Exhibit 6; it has now outperformed its benchmark over one, three, five and 10 years.

Discount: Manager seeks to facilitate market liquidity

WTAN’s shares traded at an average discount to cum-income NAV of 5.8% in 2016, compared with an average 0.1% premium in 2015; the current discount is 3.8%. It remains the board and executive management team’s long-term objective to create sustainable liquidity in WTAN’s shares at or near asset value by issuing shares when trading at a premium to NAV and buying back at a discount. In doing so, the trust is both facilitating liquidity and enhancing NAV for continuing shareholders. During FY16, 18.9m shares were repurchased at a cost of £142.1m and in FY17 to date (4 April), 1.8m shares have been repurchased at a cost of £17.0m.

Exhibit 8: Share price premium/discount to NAV (including income) over three years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

WTAN currently has 179.4m ordinary shares in issue. In October 2016, WTAN repaid its 8.5% debenture, which brought the average cost of its fixed borrowings down to 4.6%. Gearing is managed by WTAN; external managers are not allowed to employ gearing, but may hold cash. The level of gearing reflects the managers’ assessment of market conditions and was 11.0% at the end of February 2017, compared to the general range of 5-15% over the last five years.

WTAN’s ongoing charge for FY16 was 0.75% compared to 0.76% the previous year. When performance fees paid to external managers are included, the FY16 ongoing charge was 0.65% (1.04% for FY15). The lower figure including performance fees arose because accruals for performance fee liabilities at the end of 2015 were reduced owing to the underperformance of some external managers in 2016.

Dividend policy and record

Along with capital growth, WTAN seeks to provide real dividend growth; it pays dividends quarterly in March, June, September and December. In FY16, the dividend was increased by 11.8% to 19.0p vs FY15 (17.0p), outstripping the 1.6% rise in the Consumer Price Index. WTAN’s revenue reserve is c 1.5x the FY16 dividend and the manager has confidence in the current year dividend outlook.

Peer group comparison

WTAN is one of the 24 trusts in the AIC Global sector. Exhibit 9 shows the 11 largest trusts, which all have market caps above £500m. Over most time horizons, WTAN finds itself towards the top end of the wider peer group in terms of NAV total return rankings. Of the peers shown, it was, until Alliance Trust followed suit, the only multi-manager trust in the selected group. However, unlike Alliance Trust, WTAN now has a well-established, 12-year-long record in multi-manager investing. The two trusts currently trade on similar levels of discount.

Exhibit 9: Selected peer group as at 31 March 2017

% unless stated

Market cap £m

NAV TR
1 Year

NAV TR
3 Year

NAV TR
5 Year

NAV TR 10 Year

Discount (ex-par)

Ongoing charge

Perf.
fee

Net gearing

Dividend yield (%)

Witan

1,715.9

29.7

49.3

99.6

138.5

(5.2)

0.8

Yes

111

2.0

Alliance Trust

2,498.3

30.8

52.8

85.4

109.3

(5.3)

0.5

No

107

1.9

Bankers

909.1

32.4

50.4

91.7

120.6

(7.2)

0.5

No

104

2.3

British Empire

799.4

42.2

41.9

77.6

93.7

(11.8)

0.9

No

105

1.8

Caledonia Investments

1,509.0

14.2

35.8

86.3

76.9

(16.1)

1.1

No

100

2.4

F&C Global Smaller Companies

719.3

27.5

50.9

118.4

176.6

1.3

0.5

No

103

0.9

Foreign & Colonial Investment Trust

3,071.0

30.6

57.2

97.3

132.7

(8.6)

0.5

No

106

1.8

Law Debenture Corporation

651.0

24.2

28.0

81.0

131.8

(13.3)

0.4

No

107

3.0

Monks

1,376.9

37.5

50.4

74.9

116.9

(1.6)

0.6

No

106

0.2

Scottish Investment Trust

668.8

32.8

46.1

82.1

109.6

(12.3)

0.6

No

99

1.7

Scottish Mortgage

5,016.1

38.3

76.2

143.2

236.3

1.8

0.5

No

105

0.8

Weighted average

32.1

56.1

104.2

150.6

(5.2)

0.6

105

1.5

Rank

4

8

7

3

3

4

3

1

4

Source: Morningstar, Edison Investment Research. Note: TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

There are nine members of the board at WTAN; eight are independent and non-executive. Chairman Harry Henderson was appointed in 1988 and became chairman in 2003. The other seven independent directors with year of appointment are Tony Watson (senior independent director, 2006), Robert Boyle (2007), Catherine Claydon (2009), Richard Oldfield (2011), Suzy Neubert (2012), Jack Perry (2017) and Ben Rogoff (2016). The executive member of the board is WTAN’s CEO Andrew Bell (2010). As well as selecting external managers, the board also sets guidelines for the executive team to follow in the day-to-day management of the portfolio and this includes setting parameters on gearing levels. Hence, WTAN’s board has a somewhat broader remit than that of most other investment company boards, in overseeing the selection of external managers, as well as selecting its own executive team.

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Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Witan Investment Trust and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable; however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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