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Collective
Wisdom
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
01 Financial highlights
02 Our investment approach
04 Key performance indicators
06 What we do
08 Chairman’s Statement
10 CEO’s review of the year
18 Responsible investment
26 Meet the managers
34 Forty largest investments
36 Classification of investments
37 Principal risks and uncertainties
40 Section 172: engaging with
ourstakeholders
42 Corporate and
operationalstructure
43 Costs
44 Viability Statement
CORPORATE GOVERNANCE
46 Board of directors
48 Corporate Governance
57 Report of the Audit Committee
60 Directors’ Remuneration Report
72 Directors’ Report
76 Statement of Directors’
Responsibilities
FINANCIAL STATEMENTS
77 Independent Auditor’s Report to
the members of Witan Investment
Trust plc
86 Consolidated Statement
ofComprehensive Income
87 Consolidated and Individual
Statements of Changes in Equity
88 Consolidated and Individual
Balance Sheets
89 Consolidated and Individual
Cash Flow Statements
90 Notes to the Financial Statements
112 Other Financial Information
(unaudited)
114 Additional Shareholder
Information
IBC Contacts
Company overview
Our investment policy
Witan invests primarily in listed companies across
global equity markets, using a multi-manager
approach. The Company’s actively managed
portfoliocoolio covers a broad range of markets and sectors,
offering a distinctive way for investors to access the
opportunities created by global economic growth.
Our purpose
is to achieve significant growth in our investors’
wealth by investing in global equity markets,
usinga multi-manager approach.
Our objective
is to achieve an investment total return exceeding
that of the Company’s benchmark
(1)
over the long
term, together with growth in the dividend ahead
of inflation.
Where to find us
Our website has a full range of information about Witan
and regular commentary about investment markets.
Find us online @ www.witan.com
The Annual Report is intended to help shareholders assess the Company’s strategy. It contains certain forward-looking statements. These are made by the directors in good faith based
on information available to them up to the time of their approval of this Report. Such statements should be treated with caution due to the inherent uncertainties, including economic
and business risks, underlying any such forward-looking information.
STRATEGIC REPORT
(1) Witan’s benchmark is 85% Global (MSCI All Country World Index)
and 15% UK (MSCI UK IMI Index).
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
01
SECTOR BREAKDOWN OF THE PORTFOLIO
14.6% Information Technology
13.2% Industrials
11.3% Investment Companies
10.7% Healthcare
10.5% Consumer Staples
9.7% Communication Services
9.1% Financials
8.7% Consumer Discretionary
7.4% Materials
1.7% Energy
1.7% Unquoted Funds
1.1% Utilities
0.3% Real Estate
COMPANY SIZE BREAKDOWN OF THE PORTFOLIO
72.0% Large Cap
11.0% Mid Cap
4.0% Small Cap
1.7% Unquoted Funds
11.3% Investment Companies
Financial
highlights
A high
conviction yet
well-diversified
portfolio
(1) Source: Morningstar.
(2) Source: Morningstar. See also MSCI for conditions of use (www.msci.com).
(3) Alternative performance measure (see page 115).
Key data
252.0p
SHARE PRICE 2021
2020: 230.5p
267.4p
NAV PER ORDINARY
SHARE (DEBT AT FAIR VALUE)
(3)
2020: 236.0p
5.8%
DISCOUNT (NAV INCLUDING
INCOME, DEBT AT FAIR VALUE)
(3)
2020: 2.4%
5.60p
DIVIDEND PER SHARE
2020: 5.45p
Total return performance
1 year
% return
5 years
% return
10 years
% return
SHARE PRICE TOTAL RETURN
(1)(3)
11.9 57.4 255.3
NAV TOTAL RETURN
(1)(3)
15.8 59.6 232.7
WITAN BENCHMARK
(1)
19.9 70.1 210.2
MSCI UK IMI INDEX
(2)
18.7 26.7 102.6
MSCI ACWI INDEX
(2)
20.1 83.3 270.6
Percentage of total funds
38%
NORTH AMERICA
20%
UNITED KINGDOM
17%
EUROPE
4%
OTHER
5%
AS IA PACIFI C
EX JAPAN
3%
JAPAN
2%
UNQUOTED
FUNDS
11%
INVESTMENT
COMPANIES
To read more about
our diversified portfolio see pages 34-36
To read more about
our KPIs see pages 4 and 5
Source: BNP Paribas
as at 31 December 2021.
79%
(3)
Active share at end 2021
We are active investors with a highly selective
approach to portfolio construction. This is
differentfrom a passive fund which
replicatesaparticularindex.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
02
Talent
We search for the best fund managers
worldwide, choosing managers to
complement each other, not to cover
allstyles. Our managers are active
investors and construct high conviction
portfolios focusing on their best ideas.
This high level of conviction produces
portfolios which are differentiated
fromtheir benchmarks which they
aimtooutperform.
Our investment approach
Experience
Founded in 1909, we have a long
trackrecord of producing capital
andincome growth. We have invested
through challenging economic cycles,
wars andpolitical crises, helping put
contemporary events into perspective.
Since the adoption of the current
multi-manager strategy in2004,
shareholders have enjoyed a share
pricetotal return of 514% versus 396%
forWitan’s benchmark and 226% for
theMSCIUKIndex.
Collective
Wisdom
A one-stop shop for global equity
investment, offering growth
incapital and income.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
03
Independence
Witan is an independent and self-
managed investment company –
dedicated to sustainable growth
initsshareholders’ wealth. Witan’s
employees are solely focused on the
success of theCompany.
Our independence means we simply
seek, without pre-set constraints, to
select the best managers available,
inthe interest of our shareholders.
Adaptable
Our multi-manager strategy allows
ustorespond to changes in long-term
trends either by changing managers
and investment style or investing via
ourspecialist portfolio with managers
who have expert knowledge of particular
sectors or regions. Using gearing and
derivatives we can also adapt our
portfolio to short-term opportunities
orto manage risk.
We search for the best managers
aroundthe world to create a portfolio
thatisdiversified by region, investment
sectorand individual company level.
Thisprovides broad opportunities for
investors and reduces the risks arising
fromreliance on a single manager.
Our highly experienced Board of directors
and Executive have many years’ collective
experience of both managing assets,
selecting managers and of delivering
sound, independent governance.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
04
Key performance
indicators
The financial key performance indicators (‘KPIs’) below are monitored
as significant measures of longer-term success. With respect to
non-financial measures, details of the Company’s policies and
compliance in relation to the UK Corporate Governance Code are
setout in the Corporate Governance Statement on pages 48 to 56.
KPI OUTCOME
Share price
total return
(1)
TOTAL RETURN PERFORMANCE (%)
The Company seeks at
least2%p.a. long-term
outperformance in the
shareprice total return
TOTAL RETURN PERFORMANCE (%)
2012
2021
-20
-10
0
+10
+20
+30
+40
Benchmark total returnPrice total return
The share price total return in 2021 was 11.9%,
compared with the benchmark’s return of 19.9%.
Theshortfall was partly because our NAV total return
was less than that of the benchmark and partly due
to a wider discount at year end. Over five years, the
share price total return was 9.5% p.a. compared
with11.2% for the benchmark.
+11.9%
IN 2021
NAV total return
(1)
TOTAL RETURN PERFORMANCE (%)
The Company seeks at
least2%p.a. long-term
outperformance in NAV total
return, debt at fair value
TOTAL RETURN PERFORMANCE (%)
2012
2021
-15
-10
-5
0
+10
+5
+15
+20
+25
+30
BenchmarkNet asset value
Witan’s NAV total return in the year was 15.8%,
compared with the return on our benchmark
whichwas 19.9%. Over the past five years, the NAV
total return was 9.8% p.a., compared with 11.2% for
thebenchmark.
+15.8%
IN 2021
Dividend growth
(1)
DIVIDEND PER SHARE GROWTH (%)
The Company seeks to grow
its dividend ahead of the
rateofinflation
DIVIDEND PER SHARE GROWTH (%)
2011
2021
+2.0
+3.0
+4.0
+5.0
+6.0
+84
+125
+167
+208
+250
Dividend growth %CPI inflation %
The dividend rose by 2.8% in 2021, which was ahead
of the 2.6% average increase in the UK CPI during
theyear. This was Witan’s 47th consecutive year
ofdividend increases. Over the past five years,
thedividend has risen by over 47%, compared
witha13%rise in the UK Consumer Price Index.
+2.8%
IN 2021
Key performance
indicators
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
05
Net contribution from
borrowings
(1)
CONTRIBUTION FROM BORROWINGS (% OF NAV)
Gearing to contribute to returns,
after interest costs
Net contributionCost
CONTRIBUTION FROM BORROWINGS (% of NAV)
2012
2021
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
+1.0
+0.5
+1.5
+2.0
+2.5
In 2021, gearing contributed 1.8% to returns
beforeinterest costs and 1.6% including interest
costs. Gearing was varied around an average
ofc.11% during the year, which amplified the
benefitsofrisingmarkets. Interest costs were lower,
benefiting from the repayment of a high cost debt
instrument in 2020. Over the long term, as shown in
the chart, gearing has been a material benefit to
Witan’s returns.
+1.6%
IN 2021
Discount/premium
toNAV
(1)
DISCOUNT/PREMIUM TO NAV PER SHARE
Achieve a sustainable low
discount or a premium to
NAV,taking account of
marketconditions
DISCOUNT/PREMIUM TO NAV PER SHARE
2012
2021
-12.0
-10.0
-8.0
-6.0
-4 .0
-2.0
0.0
+2.0
In 2021, the year-end discount was 5.8%, compared
with 2.4% at the end of 2020. 2021’s average discount
of 6.9% was wider than that in 2020 (6.0%). A widening
trend in recent years is also evident in a number of
sector peers. Witan continued to buy back shares at
adiscount, which helps limit discount volatility and
boosts the NAV for continuing shareholders. In 2021,
we bought back 8% of our shares at an average
discount of 7%. The resulting £10.7million uplift
offsetthe majority of the Company’s ongoing
charges during the year.
-5.8%
AT YEAR END
Ongoing Charges
Figure (‘OCF’)
(1)
ONGOING CHARGES AS % OF AVERAGE NET ASSETS
Achieve an OCF as low
aspossible, consistent
withchoosing the best
availablemanagers
ONGOING CHARGES AS % OF NET AVERAGE ASSETS
2012
2021
0.5
0.6
0.7
0.8
1.0
0.9
1.2
1.1
Including performance fees
Excluding performance fees
In 2021, we achieved a significant reduction in
theOCF, which was 0.71% (2020: 0.78%) excluding
performance fees and 0.73% (2020: 0.82%) including
them. There were also reductions in indirect costs
from collective fund holdings, transaction charges
and interest costs. Further details of costs are set
outon page 43.
0.71%
IN 2021
(0.73% INCLUSIVE OF PERFORMANCE FEES)
KPI OUTCOME
(1) Alternative Performance Measures
The financial statements (on pages 86 to 111) 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 to 5. Definitions of the terms used are set out on page 115. 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 108.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
06
Witan is an investment trust which aims to grow shareholders’
wealth and outperform its benchmark through active investment
in listed individual companies across a broad spread of global
equity markets.
What we do
Portfolio structure
Specialist portfolio
25%
(1)
Managers able to deliver superior
growth through specialist regional
or sectoral expertise.
Direct holdings in collective funds.
Actively managed with no fixed
allocation.
Investments in Unquoted
Growthfunds
Provides exposure to specialist
asset classes andother
opportunities including Emerging
Markets, Climate Change, Private
Equity and Life Sciences.
Witan’s portfolio consists of two primary components: core and specialist. The core
portfolio provides shareholders with access to a select but diversified group of managers
investing in high-quality, predominantly large and mid-sized global companies. The
specialist portfolio recognises that there are many attractive investment opportunities
which fall outside the remit of most mainstream fund managers due to their size,
domicile or their unlisted or specialist nature. The specialist portfolio aims to capture
thepotential for these themes to produce superior and often uncorrelated returns
overthe long run. This combination provides a one-stop shop for our shareholders
tobenefit from a wide variety of opportunities via a single investment in Witan.
Disciplined risk management
see pages 37 to 39
Underpinned by:
(1) Indicative allocation +/-10%.
Core portfolio
75%
(1)
Global UK
65% 10%
+/- 10% +/- 5%
Managers employ a range of approaches to select
from abroad universe of high-quality companies
throughout theworld.
The core portfolio includes companies with enduring
cash flows, underappreciated growth prospects or
undervalued, often cyclical businesses.
Meet the managers
see pages 26 to 32
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
07
Choosing our managers Capital allocation Value creation
We select third-party managers
from across the world. Our team
uses a variety of networks,
databases and comprehensive
duediligence to identify and
interview potential managers.
Shortlisted managers present to
theBoard, which takes thefinal
decision on appointment.
What we look for from
our managers
People Talented and accountable
investment leadership, committed
toserving their clients’ interests
Process High-conviction portfolio
construction, using clear and simple
processes, with analysis taking
account of secular change
Portfolio Investments characterised
by long-term growth in sustainable
cash flows and the integration of
ESG principles
Performance Potential for material
outperformance over the long term,
after fees
We seek to add
toperformance by
varying the use of
gearing and a range
ofadditional levers
toadapt to different
conditions.
Capital allocation
framework
The Company seeks
toset gearing at levels
appropriate for market
conditions, borrowing
more when markets are
attractively valued and
less when returns are
expected to be poorer.
Witan uses derivatives
as transparent, cost-
effective tools for
efficient portfolio
management and
to help control risk.
We aim to generate
total returns which
exceed the
benchmark over
thelong term.
Outperformance
ofbenchmark
6/10
years to 31/12/2021
NAV total return
over past ten years
232.7%
vs
210.2%
for benchmark to
31/12/2021
Dividend growth
over past ten years
8.8%
p.a.
For more information,
see page 14
For more information,
see pages 26 to 32
Commitment to responsible investment
see pages 18 to 21
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
08
Chairman’s Statement
Strong absolute
returns from an
incomplete recovery
Although this is the Annual Report for
2021, the outlook at the time of writing is
dominated by the consequences flowing
from the Russian invasion of Ukraine. Apart
from the immediate suffering imposed
on the Ukrainian people, the longer-
term effects on international relations
and economies are hard to predict. In
investment terms, this calls for steady
judgement and a long-term perspective.
Looking back, 2021 was a year of
considerable progress for markets
and it is pleasing to be able to report
a15.8% advance in your Company’s NAV
total return. However, progress was not
smooth, with changing investor reactions
to COVID-19 outbreaks, vaccination
programmes, struggling global supply
chains and rising interest rates causing
erratic swings in market leadership.
The relative fortunes of ‘COVID winners’
and ‘COVID losers’ in the market tracked
the fluctuations in news about the
pandemic. The seasonal rise in cases
in the Northern hemisphere and the
rapid spread of the new Omicron
variant meant that the year ended with
renewed restrictions and a reversal in
the share prices of companies linked
to the reopening of economies.
These events were reflected in Witan’s
performance, which showed a strong
absolute trend and was ahead of our
global benchmark until the final furlong.
Unfortunately, the last two months saw
market leadership move away from the
economically sensitive stocks which had
served our managers well and a further
dramatic shrinkage in the breadth of
performance in the US market. Of the
500 companies in the index, in both
2020 and 2021 a disproportionate share
of the US market’s return (over 50% in
2020, over 30% in 2021) was generated
by five technology-related stocks.
Thislate correction meant Witan’s
NAVreturn was below the 19.9% return
from our benchmark at the year end.
We believe our managers were right
to be positioned for a broadening of
economic recovery as, following the
technology leaders’ strong performance
in 2021, the 2022 earnings prospects for
a wider range of companies looked set
to improve. In the early weeks of 2022,
there was a correction in the highly
rated technology sector and better
performance from sectors seen as
beneficiaries from economic recovery,
Highlights
Full-year NAV total return of 15.8%. Share price total
return11.9%
The benchmark returned 19.9%, led by the US, whose
return was disproportionately driven by five companies
Ten-year NAV total return of 233%, compared with 210%
for the benchmark
Share price discount to NAV 5.8% at year end (2020:2.4%)
The NAV uplift from share buybacks offset the majority
ofthe Company’s ongoing charges during the year
Dividend increased by 2.8% to 5.6 pence, more than
double that paid in 2011 and an unbroken run of
increases since 1974
Became a signatory to the Net Zero Asset Managers
initiative in early 2022
Andrew Ross
Chairman
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
09
such as natural resources and financials.
However, the Russian invasion of Ukraine
shifted the focus from hopes of a recovery
from COVID-19 to the uncertainties
created by an outbreak of war in Europe.
This has made the outlook much less
predictable, with much depending upon
the duration, scale and outcome of the
Russian aggression. Andrew Bell’s CEO
report covers these points as well as the
macroeconomic backdrop in more detail.
The other aspect that impacted returns
during the year was the widening of the
discount. After a number of years during
which the shares traded close to asset
value, Witan is suffering from a sector-
wide phenomenon of widening discounts
despite the continuation of our share
buyback programme. Your Board remains
committed to this because we believe it
offers heightened market liquidity and
NAV enhancement for long-term holders.
Taking a longer-term perspective,
since Witan adopted a multi-manager
approach in 2004, we have beaten the
returns on our benchmark and raised
the dividend well ahead of therate of
inflation. Over the ten years to the end
of 2021, Witan achieved a NAV total
return of 233% and a share price total
return of 255%, both of which exceeded
the benchmark’s 210% return.
RESPONSIBLE INVESTMENT
We have built on 2020’s progress
in formalising our engagement on
Environmental, Social and Governance
(‘ESG’) issues with our investment
managers and continue to integrate
ESG issues more deeply into our
manager selection, investment analysis,
risk management and the central
oversight of our investment portfolio.
Managing these risks is, in our view,
inextricably bound up with the delivery
of strong and sustainable returns for
shareholders, not a separate activity.
The Responsible Investment section
of the report is on pages 18 to 25. This
highlights our activities in 2021 and
shows the commitments your Board has
made to the Net Zero Asset Managers
initiative (‘NZAM’) and the UN Principles
of Responsible Investment (‘UNPRI’). It is
notable that all our delegated external
managers are signatories to the UNPRI
and four out of eight have also committed
to the NZAM in the past 12 months. These
initiatives provide a structured framework
for engagement and reporting on how
we and our managers are addressing the
regulatory and business risks associated
with corporate governance, changing
social attitudes towards business and
meeting the objectives set out in the
Paris Agreement on climate change.
However, I would like to concentrate
here on Witan’s attitude to Responsible
Investment and our intentions for the
future. As an investment company, we
aim to make well-informed investment
decisions that ensure that the pursuit
of prosperity for our shareholders is not
achieved at the expense of the planet or
its people. Indeed, we believe companies
which disregard this will fail to deliver
sustainable returns to shareholders in the
long term. Far from there being a conflict
between good returns and responsible
investing, managing your assets in line
with these principles is key to achieving
good returns that are sustainable in terms
of businesses’ strategies as well as the
enterprises’ wider acceptance by society.
We are therefore adopting a new target
to ensure that Witan is managed in line
with these beliefs. The target is that our
portfolio will consist entirely of sustainable
businesses (as defined on pages 20 and
21) by 2030 or earlier. This is in addition to
the portfolio carbon reduction targets
which we will commit to as a signatory
to the NZAM. It is important to stress
that this does not impose blanket
exclusions on our managers (other than
a prohibition on ‘controversial weapons’)
as we believe that engagement with
companies has a greater positive impact
than divestment, as well as the potential
for better returns for shareholders. We
will, of course, continue working with
our managers to ensure ESG issues are
accounted for, to hold them to account
where necessary and if warranted make
changes to the manager line-up.
2021 DIVIDEND
A fourth interim dividend of 1.52
pence was declared in February 2022,
payable on 18 March 2022. As a result,
the dividend for the year increased
by 2.8%to 5.60 pence per share (2020:
5.45 pence), ahead of the 2.6% average
rate of UK consumer price inflation
during the year. This was partly funded
using £14.6 million from our revenue
reserves (in 2020 we used £19 million).
The Board expects portfolio dividends to
recover further in coming years and it is
the Company’s intention to continue to
make use of these retained earnings to
increase the dividend to shareholders
annually while cover is rebuilt. If
necessary, realised capital reserves
could also be used, as part of a defined
path towards our dividends once again
being fully funded by revenue earnings.
We have increased the dividend every
year for the last 47 years. The latest
dividend is more than double that
paid in 2011 and well ahead of inflation
over the period, albeit that dividend
growth is likely to be slower in coming
years as dividend cover is rebuilt.
BOARD COMPOSITION
The Board consists of eight directors,
seven of whom are non-executive,
representing a broad diversity in
background, experience, ethnicity
and gender. This fulfils the primary
need to have the right balance of
skills to oversee the Company’s affairs
while fully meeting formal corporate
governance guidelines on diversity.
In terms of length of service on the
Board,there is a balance to be struck
between stability and change. Six of
Witan’s seven non-executive directors
have been appointed within the past two
to six years, while Suzy Neubert, our Senior
Independent Director has, exceptionally,
ten years’ service on the Board, providing
an essential element of continuity. All
directors stand for re-election each year.
AGM
We very much look forward to being able
to meet shareholders in person at this
year’s AGM, after two years when the AGM
had to be conducted remotely. Our 114th
Annual General Meeting will be held on
5 May 2022, 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 at the end of March.
Andrew Ross
Chairman
15 March 2022
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
10
Recovery hopes
clouded by
Russian
aggression
CEO’s review of the year
Andrew Bell
CEO
Although the Russian war against Ukraine
currently overshadows the outlook for
2022, this report covers events in 2021.
Where 2020 was defined by the shock
of the pandemic and the search for a
way to combat it, 2021 marked a turning
of the tide, as vaccines, more effective
treatment of the sick, help from fiscal
and monetary stimulus and the adoption
of new systems of working and routes
to market began to alleviate the health
consequences and economic costs of
COVID-19. Progress was uneven, with some
countries experiencing the worst of their
outbreaks, while others saw improving
trends. Consequently, despite the case
numbers through the year showing signs
of improvement in the severity associated
with successive infection waves, the
mood remained hesitant. This was clearly
illustrated by the reaction to the more
contagious Omicron variant towards
the year end, with renewed lockdowns
in some European economies and the
reintroduction of travel restrictions.
As noted in the Chairman’s Statement,
fluctuating hopes for an end to the
pandemic, and differing regional
experience, were reflected in changeable
trends within investment markets. An early
rise in bond yields and cyclically sensitive
stocks was reversed in the summer when
a slowdown in economic growth played
on fears of renewed recession and
rekindled interest in highly rated faster-
growing companies. This was followed
inturn by a rise in inflation, as companies
were unable to meet the surge in demand
from reopening economies. There was
unexpected disruption to production
in key sectors, such as autos and
semiconductors, and in labour markets,
where several factors (including early
retirement, reduced international mobility,
health worries) have reduced the number
of people seeking employment in a
resurgent economy. Energy prices also
rose sharply, as the growth in sustainable
non-polluting sources of energy is not
yet sufficient to accommodate the
world’s growing overall demand for
energy at a time when oil and gas output
has stalled due to supply restrictions
from OPEC and the effect of several
years of weak capital investment.
By the year end, some central banks
began to curtail the exceptional
liquidity support provided during
thecrisis and to raise interest rates in
response to this rise in inflation, helped
by confirmation of a revival in growth
after the pause during the summer.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
11
Nonetheless, the developed world’s
equity markets enjoyed a buoyant year,
fuelled by abundant liquidity and sharply
recovering earnings. Global equities
finished the year up 20%, led by a 30%
rise in the US. The UK (+19%) and Europe
(+18%) also delivered a strong recovery.
Emerging markets and Asia fared
less well, owing to slower vaccination
rates and lockdowns associated with
successive pandemic waves. The Pacific
Basin fell 2%, Japan rose only 2% and
Emerging Markets declined by 1%.
WITAN’S PERFORMANCE
Witan’s net asset value (‘NAV’) total
return in 2021 was +15.8%. This strong
absolute return was outstripped late
in the year by the return on our global
benchmark which was 19.9%. Our share
price total return was 11.9%, owing to the
discount ending the year wider than at
the end of 2020. For most of 2021, our
performance was ahead of our global
benchmark, but the end of the year
coincided with renewed lockdowns
and a setback to recovery hopes.
Despite the uncertainties created
by Russia’s aggression in Ukraine,
our managers believe that being
positioned for a recovery from the
COVID-19 pandemic and the prospect
of a broadening economic recovery
is appropriate, although the timing
has become less certain and the
risks have increased. Witan’s portfolio
includes coreholdings of quality growth
companies offering compounding
earnings growth, as well as exposure
to sectors expected to benefit from the
post-pandemic reopening of economies,
from decarbonisation, and from the
growth in infrastructure spending.
PRINCIPAL PERFORMANCE DRIVERS
The financial statements on pages
86to111 set out the required statutory
reporting measures of the Company’s
financial performance.
The chart to the right shows the
contributions (in pence per share)
attributable to the various components
ofinvestment performance and costs,
which together add up to the rise from the
236.0pence starting NAV to the year-end
NAV of 267.4pence, after the payment of
dividends to shareholders.
A breakdown of the relative
performanceattribution in 2021 (based
onthe Company’s financial statements)
isshown in the table on page 12.
Witan benefited from maintaining a
significant level of gearing during the year
(amplifying our portfolio gains) and from
taking advantage of the widening in our
discount to buy back 8% of our shares,
which generated an uplift in NAV of £10.7
million (offsetting the majority of our
ongoing charges). In addition, the rise in
gilt yields reduced the fair value of our
fixed-rate debt, benefiting the debt at
fairvalue NAV. By contrast, our external
managers collectively underperformed
significantly during the year, so our
overallreturns lagged our benchmark.
The benefits of gearing and buybacks
aremeant to be the icing on the cake in
performance terms but in 2021 our cake
did not fully rise to the occasion. This was
a disappointing relative outcome in the
short term. However, the portfolio is
positioned for a normalisation of
economic activity as the pandemic
becomes less acute, while paying
closeattention to the new risks
posedbyRussia’s invasion of
Ukraineinlate February.
290.0
280.0
270.0
260.0
240.0
250.0
230.0
220.0
210.0
200.0
190.0
End 2020
NAV
Portfolio
gains
Portfolio
income
Returns
from use
of gearing
Uplift
from
buybacks
Change
in value
of debt
Expenses
(inc. tax)
End 2021
NAV
NAV BRIDGE
Dividends
paid
Finance
costs
236.0
27.3
4.8
4.6
1.4
1.8
-2.2
267.4
-0.7
Pence per share
-5.5
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
12
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 2021, although the
allocation to Jennison was gradually
increased. Their focus on companies with
exceptional growth prospects is attractive
for the long term and we have taken
advantage of tactical opportunities to
add to our small initial allocation (which
reflected the elevated performance of
growth companies at their appointment
date in August 2020). During the first half
of the year, we reduced the Lansdowne
allocation on several occasions following
outperformance and we added to
Lindsell Train and GQG late in the year.
This followed their underperformance
of global equities which we do not
expect to be sustained, although we
can rationalise it given the cross-
currents of 2021’s markets (with quality
growth portfolios being derated and
emerging markets underperforming).
We sold the Matthews Asian portfolio in
April and the Latitude global portfolio in
October, the former to remove a previous
structural overweighting of Asian equities,
the latter to concentrate allocations
upon our core global managers.
We increased our allocation to the GMO
Climate Change fund in May and October,
reflecting our increasing conviction in this
as a long-term growth area. The fund has
delivered strong returns since purchase in
2019 and 2021’s price consolidation offered
a good chance to increase our exposure.
We invested in two specialist funds during
the year, both unavailable to individual
investors. The first, in July, was an £18
million investment in Lindenwood, a
fund managed by Greenoaks Capital
Partners, a San Francisco based
specialist technology investor. The
fund invests in selected unquoted
technology companies, seeking to
identify future winners in the sector
at an earlier stage rather than simply
investing in the known leaders in the
quoted markets. The second, in October,
was to invest £20 million (1% of assets)
in the Lansdowne Opportunities fund,
a fund which invests in mostly unlisted
companies capitalising on the intellectual
property of the UK’s leading universities.
Lansdowne has long-established
links in this area and the position was
funded by realising assets from our
existing Lansdowne global portfolio.
Our third-party managers implement
mandates set by the Company. Each
manager’s mandate, benchmark,
investment style and date of appointment
are shown on pages 28 to 31. Their returns
during the year and since appointment
are set out in the table opposite (page 13).
Highly unusually, only one of our external
managers (GQG) outperformed its
benchmark during the year, despite many
being ahead for most of the year.
However, over the longer term since
inception, most of the principal current
managers have outperformed their
benchmarks, despite a difficult
performance environment in 2021. The
exceptions are Lindsell Train (appointed
with a global mandate at the start of
2020, after nine years successfully
managing a UK portfolio for Witan)
andJennison (August 2020).
In the case of Lindsell Train, the market
appeared to have an appetite for either
fast-growing profitable technology stocks
or selected cyclical sectors during 2021.
The more steadily growing mainstream
consumer areas favoured by Lindsell Train
were bypassed and, after many years
when this strategy performed well, they
lagged the global benchmark by over 13%
in 2021. There was also adverse sentiment
towards several holdings such as London
Stock Exchange (which completed a large
acquisition in 2021) and some Japanese
holdings (affected by COVID-related weak
conditions in the Japanese and Chinese
consumer markets). Jennison was ahead
of the global market for much of the year
but, reflecting its focus on fast-growing
companies, performance was volatile,
and the year end coincided with a
reversal in sentiment towards this area.
The weakest absolute performance came
from GQG’s emerging markets portfolio.
Although they outperformed the
emerging market universe, emerging
markets had to contend with extended
COVID-19 disruption (partly owing to the
delayed availability of vaccines) and with
the lockdown and regulatory disruptions
to China’s economy during the year.
CEO’s review of the year continued
BREAKDOWN OF THE PERFORMANCE ATTRIBUTION IN 2021 (%)
Net asset value
total return 15.8 Portfolio total return (before costs) 13.5
Benchmark
totalreturn 19.9 Benchmark total return 19.9
Relative investment performance -6.4
Investment management costs -0.5
Investment contribution -6.9
Gearing impact 1.8
Borrowing costs -0.2
Gearing contribution 1.6
Effect of changed fair value of debt 0.9
Share buybacks 0.6
Other contributors 1.5
Other operating costs and tax -0.3
-0.3
Relative
performance
(1)
-4.1 -4.1
(1) N.B. Figures may not sum due to rounding.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
13
INVESTMENT MANAGERS’ PERFORMANCE
Appointment
date
Witan assets
managed
as at 31.12.21
(1)
Performance in 2021 %
Performance since
appointment
(2)
%
Investment manager Mandate £m % Manager Benchmark Manager Benchmark
Core
Jennison Global 31.08.20 143.1 6.3 10.1 20.1 17.3 22.3
Lansdowne Global 14.12.12 431.6 18.9 17.5 20.1 15.4 14.2
Lindsell Train Global 31.12.19 335.6 14.7 4.0 20.1 8.6 16.5
Veritas Global 11.11.10 427.2 18.7 17.1 20.1 14.0 12.4
WCM Global 31.08.20 261.6 11.5 16.9 20.1 23.5 22.3
Artemis UK 06.05.08 142.3 6.1 16.0 18.7 9.2 5.8
Specialist
GMO Climate Change 05.06.19 106.2 4.7 13.0 20.1 24.3 16.6
GQG Emerging Markets 16.02.17 148.8 6.5 0.2 (1.3) 11.0 6.7
Unquoted Growth Specialist Funds 02.07.21 37.9 1.7 n/a n/a (5.2) 6.9
Witan Direct Holdings
Specialist Funds 19.03.10 247.9 10.9 18.8 19.9 12.0 10.1
(1) Amount and percentage of Witan’s investments managed, excluding centrally managed cash.
(2) The percentages are annualised where the date of appointment was more than one year ago.
The markets are no respecters of
financialreporting calendars, with
adipinour portfolio’s relative
performance coinciding with the
yearend. The changeable investment
environment meant that out of 11 sectors
in total, the only sectors to outperform
global market indices in 2021 were
information technology and financials,
together with two smaller sectors (energy
and real estate). This is an unusual
assortment of ‘winners’ which is rarely
held in combination by active managers.
Without being remotely complacent, we
believe Witan’s external managers are
well positioned, and appropriately
diversified, to deliver outperformance
incoming years andtheBoard is closely
focused on securing aturnaround in
themanager underperformance of
thetwopandemic years.
DIRECTLY HELD INVESTMENTS
The return on the portfolio of directly
managed investment company holdings
was +19%, marginally lagging the 19.9%
return from our composite benchmark
but the best absolute portfolio return
during the year. The listed private equity
funds (amounting to 52% of the total)
alldelivered strong returns. Apax Global
Alpha rose 23.9% and Princess Private
Equity was up 21.6%. We trimmed the
latterin December following a strong run.
Electra Private Equity delivered a 56.7%
return over the year, despite falling back
during a period of market indigestion late
in the year. This followed its split into two
separate companies, Hostmore being the
Fridays restaurant chain and Electra itself
(renamed ‘Unbound’) consisting of an
online retail platform including the Hotter
Shoes brand.
Our holding in Schroder Real Estate
Investment Trust rose 45.3%, having been
depressed by poor sentiment towards the
sector during the pandemic lockdowns.
We added significantly to the position at
that time, since when the dividend has
increased, the NAV has risen, and the
shares’ discount has narrowed.
The BlackRock World Mining Trust
delivered a return of 17.5% over the
year.This masks a period of significant
earlier strength, when we reduced our
exposure before adding to it again
duringthe summer, when the mining
sector weakened. The trust, although
invested in an energy intensive sector,
ismanaged according to best ESG
practice and gives Witan exposure to
metals (notably copper) that are
essentialto electrification programmes
and reducing the carbon intensity of the
world economy. On the environmental
theme, we invested 1% of assets in the
VHSustainable Energy Opportunities fund,
totake advantage of growing investment
in power generation which does not
require fossil fuels.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
14
GEARING ACTIVITY DURING THE YEAR
Gearing was varied according to
opportunity during the year, ranging
from9.1% to 13.4%. The average of 10.7%
boosted returns by 1.8% in the year, or 1.6%
after taking account of the (mostly fixed)
interest charges. Gearing has contributed
positively to returns in eight out of the
past ten years, as illustrated in the KPI
chart on page 5.
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 115) to be more than 20%, other than
temporarily in exceptional circumstances.
Where appropriate, the Company may
hold a net cash position.
At the end of 2020, net gearing (the total
value of borrowings less cash) was 12.3%
of net assets. At the end of 2021, gearing
(on the same basis) was 11.3%.
STRUCTURE OF BORROWINGS
The Company has fixed-rate borrowings
(including £2.6 million preference shares)
of £158 million, consisting principally of:
Secured Notes £21m
2035 3.29%
Secured Notes £54m
2045 3.47%
Secured Notes £50m
2051 2.39%
Secured Notes £30m
2054 2.74%
The Company has a £150 million one-year
borrowing facility, providing additional
flexibility over the level of gearing, as well
as enabling the Company to borrow in
currencies other than sterling, if deemed
appropriate. The drawn balance was
£98 million at the end of 2021 (2020:
£109million). The average interest rate
on the Company’s fixed-rate borrowings
is 3.0% (2020: 3.0%). The average interest
rate, including short-term borrowings,
is currently 2.1% (2020: 2.0%).
Witan will either invest its 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.
On the downside, after a strong 2020,
Syncona had a disappointing year in
share price terms but not before we
significantly pruned the position at
elevated prices. 2021’s weak performance
was principally due to a reduction in its
premium to NAV from over 30% at the start
of the year to an estimated 6% at the year
end. The NAV fell by 4% during the year,
owing to substantial declines in three
holdings listed on the Nasdaq market,
where early-stage biotech stocks were
out of favour. The pandemic had delayed
trials of their innovative drug treatments,
but a number of results are expected
during 2022 which will determine future
progress. Towards the year end, Syncona
agreed the sale of their largest holding,
Gyroscope Therapeutics, to the Swiss
pharmaceutical company Novartis, for
aprice which represented a 55% IRR on
Syncona’s investment and resulted in
a16% uplift to its prevailing NAV. This
continued the management team’s
successful record of profitable exits from
investments. Despite the price falls in its
quoted holdings, which weighed on
itsoverall 2021 NAV performance, we
believe Syncona gives Witan access
toadifferentiated and successful
investment area that mainstream
managers cannot offer.
The remaining holding of note, the NB
Distressed Debt fund, which represents
under 0.4% of assets, is in run-off, awaiting
the optimal opportunity to realise the
remaining investments. Its total return
over the year was 4.4%.
The portfolio held 10.2% of assets at the
start of the year and was 10.9% of the
investment portfolio at the end of 2021.
Over the period since March 2010, it has
delivered a compound annual return of
12%, outperforming Witan’s benchmark
by1.9% p.a. Aside from performance, it
gives Witan’s shareholders exposure to
specialist asset categories that our core
managers (and many shareholders
themselves) do not cover.
Since March 2010, the
directholdings portfolio
hasdelivered a compound
annual return of 12%,
outperforming Witan’s
benchmark by 1.9% p.a.
CEO’s review of the year continued
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
15
DERIVATIVES ACTIVITY
There was no derivatives investment
activity during the year.
DIVIDEND AND REVENUE PERFORMANCE
The Company has already paid three
quarterly dividends of 1.36 pence per
share in respect of 2021 which, together
with the fourth interim dividend of
1.52 pence per share, increases the
total distribution for the year to 5.60
pence (2020: 5.45 pence). At the end
of 2020, retained revenue reserves
were £52 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
£14.6 million was used towards funding
the 2021 dividend (2020: £19.0 million).
Revenue earnings per share rose by
almost 17% to 3.6 pence per share in 2021,
with the recovery quickening through the
year. The recovery in revenue earnings
has facilitated an increase in the dividend,
an increased level of dividend cover and
a lower call on past revenue reserves.
The Board has reviewed the prospects
for portfolio dividend growth in 2022
and future years and, recognising the
importance for many shareholders of
a reliable and growing income, intends
to use revenue reserves to bridge what
is expected to be a narrowing gap
between portfolio revenue earnings
and the dividends paid to shareholders.
The Board anticipates dividend cover
improving each year, alongside
continued annual dividend growth.
2022 DIVIDENDS
The first three quarterly payments for
2022 (in June, September and December)
will, in the absence of unforeseen
circumstances, be paid at a rate of
1.40 pence per share (2021: 1.36 pence),
being one quarter of the 5.60 pence
per share full-year payment for 2021.
The fourth payment (in March 2023)
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 over £1.8 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.
WITAN INVESTMENT TRUST
DISCOUNTTREND
The discount trend during the past five
years is illustrated in the chart below.
Although the discount narrowed in the
second half of 2021, it remained wider
than the pre-pandemic trend (along
withmany of our peers), despite the
morepositive market environment.
Witanwas active in buying back
shares, helping to moderate the level
of the discount, as well as delivering
an uplift to NAV. During the year 63.7
million shares were bought back (8%
of the total at the start of the year), at
an average 7% discount to NAV, which
resulted in an uplift to NAV of £10.7 million,
or 1.4 pence per share. For perspective,
this sum exceeds the investment
management fees paid to our external
managers, offsetting the majority of
the Company’s ongoing charges.
The discount finished the year at 5.8%
(2020: 2.4%) and the average discount
during the year was 6.9% (2020: 6.0%).
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).
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 the past two years are
evidence of this continuing commitment.
OUTLOOK
The early weeks of 2022 saw a contrast
between the accelerating numbers of
cases of COVID-19 and increasing hopes
that the Omicron variant responsible
was less of a threat to most of those
infected. Effective vaccines and improved
therapeutic treatments for those most
affected offer hope that 2022 will be the
year when the world learns to coexist with
a virus that is becoming endemic. This,
of course, depends upon the continued
global vaccine rollout, wider availability
of treatments for those most seriously
affected and immunity holding up
against future mutations of the virus.
WITAN DISCOUNT TO NET ASSET VALUE (%)
2016
2017
2018
2019
2020
20 21
-10
-8
-6
-4
-2
0
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
16
The reopening in many economies
thatwas interrupted in 2021 seems likely
to resume in 2022, which will deliver
significant recoveries in the service
sectors which have been most affected,
notably travel and hospitality. Supply
disruptions (caused by the speed of the
bounce-back in growth during 2021, allied
to the impact of COVID-19 on component
factories, ports and transport logistics)
are moderating, allowing a recovery in key
manufacturing sectors, including autos.
On top of this hoped-for cyclical
rebound, there are two new drivers of
future growth, namely the interrelated
areas of infrastructure and measures
to combat global warming. Over
coming decades, the power generation,
heating and cooling of premises and
transportation sectors are set to be
re-engineered to reduce dependence
on coal and hydrocarbons.
This will create opportunities in
the emergent industries as well as
obsolescence risks for incumbents.
TheUSis also set to embark on a
programme of repairing and renewing
its ageing civil engineering infrastructure,
while the EU has agreed a €750billion
Next Generation EU investment
programme to help support economies
adversely affected by the pandemic.
Resurgent growth, damaged production
systems (due to COVID-19 effects) and
an energy crisis caused by premature
disinvestment in oil and gas have
caused inflation to surge in many
economies. This has been exacerbated
by the surge in energy prices following
Russia’s military aggression in Ukraine.
Whilst some of the inflation drivers may
be transient, others are potentially
structural – the cheapness of goods
from emerging markets is waning,
supply chains are being shortened,
pandemic-related changes in the
workforce may endure and governments
seem set to run bigger deficits.
Central bank policy is turning. The Bank
of England has raised rates twice and
the US Federal Reserve is phasing out
its liquidity-boosting bond purchases
and signalling rate rises during 2022.
The resulting rise in bond yields has
implications for equities as well as for
relative returns within the markets.
Rapidly growing companies (in many
cases ‘pre-profit’) have been rerated in
recent years due to a lower discount rate
being applied to the major proportion
of their value represented by sales far
into the future. We have seen a reality
check for some of the most optimistically
valued parts of the markets at a time of
improving dividend cheques from the
laggards. As investors in undervalued
growth (rather than cheapness alone)
we have been surprised by the widening
disparity in ratings within the markets.
We believe central banks will stop short
of aggressive rises as, given the debt
burden in major economies, high rates
would rapidly impact growth. This is
aside from the hard-to-forecast effect
of the Russian invasion on economic
confidence, particularly in Europe.
Furthermore, moderate inflation is an
effective way to reduce debt burdens,
particularly if (as in the decades after
the Second World War) it coincides
with consistent economic growth. Both
governments and central banks seem
likely to seek (or condone) faster inflation
than the 2% norm of recent decades,
while hoping that government bond
yields remain low. This policy, of financial
repression, depends upon buyers of
government bonds either being surprised
by inflation or being under pressure to
hold them (e.g. requirements for banks to
hold gilts as liquidity, pension funds and
insurers matching assets and liabilities).
CEO’s review of the year continued
Although equity market valuations are
high by historic standards, interest rates
remain exceptionally low. Rising interest
rates will shift the burden onto earnings
growth to offset potential PE derating,
acting as a headwind for equities,
presumably more so where valuations
have expanded the most speculatively.
With the exceptional liquidity injections
of recent years now being withdrawn
by central banks, amid rate increases
aimed at tackling unexpectedly high
inflation, 2022 already looked like a year
when a more selective, value-conscious
approach to equities was called for,
while bond yields below prevailing
inflation rates appeared increasingly
hard to justify. Added to this, the actual
and potential ramifications of the
Russian military aggression against
Ukraine make the immediate outlook
less predictable, calling for steady
judgement, a long-term approach and
a focus on distinguishing substance
from mirage in investment terms.
Andrew Bell
Chief Executive Officer
15 March 2022
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
17
Stay
in touch
The Company maintains a
website(www.witan.com), to
enable investors to keep up to
datewith developments at Witan
and to make informed decisions
when considering Witan shares
fortheir investment portfolios.
Thewebsite isregularly refreshed
with new information and
includesInvestor Disclosure
andKey Information Documents.
Any investor who would like to
bekept informed byemail of
developments at Witan(including
factsheets andnewsletters) can
register ontheCompany’s website
(www.witan.com) or by sending
their details to contact@witan.co.uk.
Witan Investment Trust plc
Annual Report 2021
18
STRATEGIC REPORT
Driving prosperity through responsible investment
in sustainable businesses
Our responsible
investment policy
As an investment trust, Witan is an integral part of the wider
financialsystem that powers the global economy. The global
economy is facing a significant challenge: ensuring that prosperity
does not come at the expense of the environment and wider socio-
economic development. Witan’s responsible investment strategy
continues to evolve both to respond to this challenge and to
capitalise on the opportunities it presents.
Witan’s role in the world is to allocate
capital effectively to businesses that
cangenerate long-term, outstanding
investment returns for the benefit of
ourshareholders.
Far from there being a conflict between
good returns and responsible investing,
owning well-managed businesses with
attractive and undervalued growth
prospects is key to achieving returns
thatare sustainable. Well-run businesses
incorporating resilient business practices
with sustainable cash flows are likely
to perform better than companies
whichareat risk of disruption, litigation,
regulation, or loss of business because
ofpoor ESG practices.
As an investment company, Witan aims to
make well-informed investment decisions
to ensure our pursuit of prosperity for our
shareholders is not detrimental to people
and the planet. This entails integrating
these considerations into our manager
selection, investment analysis and
oversight of our investment portfolio. Our
commitment to Net Zero Asset Managers
initiative (‘NZAM’) is core to this approach.
It is the role of Witan’s appointed
fundmanagers to identify investment
opportunities that deliver superior returns
for our investors. We provide oversight,
holding managers to account and
making changes to the manager
line-up,if warranted.
GOVERNING OUR APPROACH
Witan has embedded sustainable
considerations across our entire
investment approach, not just in a limited
part of our portfolio. Blanket exclusions,
with the exception of controversial
weapons, run counter to this strategy.
Theinvestment managers the
Companyengages are required to
investresponsibly, with the expectation
that its principles will be adopted by
thecompanies we invest in.
The Board and the Investment Team
review and take ownership of this strategy.
Members of the Board and Investment
Team are responsible for the delivery
ofour strategy and the due diligence
andmonitoring of how our managers
engageand consider sustainability-
related issues.
DEVELOPING OUR STRATEGY
Although Witan’s direct corporate
footprint is small, the scale of our portfolio
means we must consider its wider impact
to ensure investee companies adopt
sustainable business models for the
benefit of all stakeholders.
Witan has developed a comprehensive
but targeted strategy that reflects Witan
as a business, our role in the world and
what is most important to us. The strategy
has been designed with consultation
andfull support from the Board. It is
embedded across all of Witan and
isconveyed to the fund managers
weengage.
The pursuit of prosperity is
achieved by working in
partnership with our fund
managers to ensure Witan
invests in sustainable
businesses
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
19
Witan has developed a comprehensive but targeted strategy that reflects where Witan can
have the biggest positive impact, namely the characteristics of our investment portfolio
andour engagement with the companies in it. We believe that capital allocation and
engagement have more long-term impact than an exclusionary approach. The visual
below provides more detail on Witan’s strategy, target and focus areas.
Our own responsibility
We will identify and implement all the steps
necessary to ensure that Witan is itself a ‘sustainable
business’ by addressing our own carbon footprint
and ensuring we have experienced management,
skilled employees and strong corporate governance
with an inclusive and diverse culture. Our ownership
structure ensures that we are aligned with
ourshareholders.
Portfolio stewardship
Witan works with our fund managers to engage
withthe companies we are invested in. Through this
engagement and using our votes as shareholders,
we use the tools at our disposal to influence business
culture and to ensure our managers are considering
issues including net zero. As part of our active
management strategy, our fund managers engage
with investee companies to hold them to account
when they fall short of the criteria of being a
‘sustainable business’. This is the foundation
fordelivering good returns for shareholders
aswellasasustainable economy.
Fund manager engagement
Witan ensures that ‘sustainable business’ thinking
isembedded in our investment processes and that
these policies are integrated into the direction of our
fund managers. Our commitment to NZAM is core to
this approach. We regularly engage with our fund
managers to inform them of our expectations and
toensure they are equipped with the insights and
toolstodrive sustainable progress in their portfolios.
Managers who fail to meet these expectations will
notbe appointed or retained.
Industry advocacy
As a multi-manager investment fund, Witan will
advocate a sustainable approach, principally
through our membership of industry initiatives
andour network of asset managers.
Drivers
Our strategy is to ensure that our portfolio will entirely consist
ofsustainable businesses by 2030.
Climate change
Change in societal expectations
Net zero transition Stewardship
Responses
Witan Investment Trust plc
Annual Report 2021
20
STRATEGIC REPORT
Driving prosperity through responsible investment
in sustainable businesses continued
What this means to us
We believe that every sustainable
business is underpinned bya strong
culture and set of values that encourage
the right behaviour.
Andrew Bell, CEO
A sustainable business backs up its
commitments with investment and
action particularly in the area of
diversityand inclusion.
Andrew Ross, Chairman
Prosperity People
What this means
to Witan
Prosperity flows from the success of
companies with sustainable cash flows,
exhibiting good corporate behaviour,
strong stakeholder engagement and
arespect for their shareholders. Such
businesses have a long-term outlook,
are adaptive to changes in the
sustainable economy and likely to
provide better returns to shareholders
over the longrun.
What does this look like?
> A robust purpose, vision and ambition
based on a strong culture and values
> Businesses which are well positioned
to benefit from long-term tailwinds,
with a competitive advantage and
high barriers to entry
> Companies which are growing
butwhere growth prospects
areunder-appreciated
> Good corporate governance with
strong policies and compliance
> Regular and open engagement
withstakeholders to ensure both
internal and external risks and
opportunities are identified
What this means
to Witan
A company that has a strong and
experienced management team (and
Board) with an inclusive and diverse
culture that respects the well-being
ofits customers and others within
theorganisation, its value chain
anditscommunity.
What does this look like?
> A committed management team
with deep and relevant experience
overseen by a strong and
independent Board
> A diverse and inclusive work force
with a clear commitment to adopt
and integrate ESG principles and
sustainable working practices
> A focus on customer and client
service excellence
> A remuneration policy which is
commensurate with responsibility,
fair by industry and regional
standards and which strikes a
balance between the interests of the
employees and other stakeholders
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
21
What this means to us
Witan has served its shareholders for over 110 years by evolving to meet the challenges
presented by an ever-changing world. We believe that investing in well-managed ‘sustainable
businesses’ is the foundation for achieving good returns for our shareholders as well as for a
better future for the planet and its people. But what defines a ‘sustainable business’? We have
identified four key elements which define a truly sustainable business. Our target is that,
by2030, Witan’s listed equity portfolio will entirely consist of such businesses.
Companies which are aligned with,
orhelpenable, the net zero transition
stand to benefit from measures to curb
ormitigate global warming while those
that do not are at risk from obsolescence
and financial or regulatory headwinds.
James Hart, Investment Director
The key thing is what companies are
doing rather than just saying. Political
and ‘coalition’ engagement is a good
start but has to translate into action.
Jack Perry, Non-Executive Director
Planet Partnership
What this means
to Witan
A company with a clear strategy and
roadmap to minimise its environmental
impact and, wherever possible, to
transition towards net zero by 2050 in
line with global efforts to limit warming
to 1.5°C. Additionally, a company which
is positioned to help accelerate the
energy transition and or carbon
reduction.
What does this look like?
> A strategic approach to assess,
limitand, where possible, eliminate
environmental impacts including
emissions
> A commitment to follow Science
Based Targets, in its climate change
approach
> A clear roadmap to minimise
environmental risk and capitalise
onopportunity
> Transparent disclosure around
environmental impacts
What this means
to Witan
A company that is open to
collaboration, stakeholder
engagement and participation in
industry initiatives which promote
goodpractice. A company that
istransparent in acknowledging
mistakesand addressing issues
wherethey arise, working to deliver
amore sustainable future.
What does this look like?
> Membership of key industry coalitions
to address global and regional issues
> The implementation of multi-
stakeholder strategies to work
inpartnerships, whether internal
orexternal
> A clear position on the key corporate
challenges, led by management
Witan Investment Trust plc
Annual Report 2021
22
STRATEGIC REPORT
Our activity in 2021
Against a backdrop of one of the hottest years on record and the
global pandemic, responsible investing became the key issue within
the financial sector and across the wider investment community.
Building on our track record to date, we continued to work in
partnership with our managers to encourage businesses to
becomemore sustainable in their pursuit of good returns
forshareholders aswell as planet and people.
FULFILLING OUR RESPONSIBILITY
As an investment trust with six employees,
Witan has a minimal corporate footprint.
Nevertheless, we have taken steps to
manage and disclose our environmental,
social and governance impacts.
Witan’s direct environmental impacts
consist of our energy, water and paper
consumption, waste production, and the
transport related to our commuting and
business travel. Based in serviced offices
in London, this year we stopped using
non-recycled paper throughout the
business and eliminated plastic from
ourpresentation materials to clients.
Wealso replaced halogen bulbs with
LEDsthroughout the office to reduce
ourenergy consumption.
Looking ahead to 2022, Witan will measure
and disclose the carbon footprint of our
operations in London to set our baseline.
We will also remove bottled water from
our offices completely and phase out
theconsumption of other single-use
materials.
Out of six direct employees of the
Company, 50% are female (2020: 50%).
Consisting of seven non-executive
directors, the Board has three female
directors (2020: 2).
Driving prosperity through responsible investment
in sustainable businesses continued
CARBON RISK
Negligible
Severe
Low
Medium
High
0
5
10
15
25
20
30
35
45
40
50
MSCI ACWI
Portfolio
the United Nations Principles for
Responsible Investment (‘UNPRI’)
since2019. Witan’s policies reflect these
principles and are integrated into our
direction to our external fund managers.
Because our portfolio is the result of
ourexternal investment managers’
investment decisions, our requirement
isthat Witan’s managers integrate
responsible investing into their investment
analysis and investment decision making.
All Witan’s managers have ESG policies to
this effect in place and, to underline this,
all our external fund managers were
signatories to the UNPRI (2020: all).
We regularly engage with our
fundmanagers to inform them
ofourexpectations. At least yearly
weassess each of the Company’s
externalmanagers’ ESG credentials and
performance through ESG-focused due
diligence meetings. Witan also receives
regular reporting on ESG compliance from
the external fund managers. Managers
who fail to meet our expectations would
not be appointed or retained to invest
money on behalf of Witan shareholders.
Looking ahead to 2022, Witan will continue
to regularly engage with our external
fundmanagers on responsible
investment practices.
PORTFOLIO CARBON INTENSITY
tCO
2
2019
2021
2020
50
100
150
200
250
MSCI ACWIPortfolio
ENGAGING OUR MANAGERS
As part of our ESG commitment, Witan
ensures that our responsible investment
strategy is embedded in our investment
processes. We have been signatories of
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
23
OUR INDUSTRY ADVOCACY
As a multi-manager investment trust,
Witan expects the financial system to help
drive long-term sustainability objectives.
Alongside our membership of UNPRI and
NZAM, we became a supporter of the
Transition Pathway Initiative (‘TPI’) in 2021.
Atthe core of the TPI sits a tool that helps
us assess our portfolio’s preparedness for
the transition to a low carbon economy.
This will enable us to identify further
opportunities for engagement with
ourinvestments.
Ahead of COP26 in November 2021, we
also supported The Investor Agenda’s
2021Global Investment Statement to
Governments on the Climate Crisis. Witan
joined more than 450 global investors,
representing $41 trillion in assets, to call
oncountries to commit to net zero and to
bring in legislation on mandatory climate
reporting for companies. This is part
ofour overall engagement with the
Institutional Investors Group on
ClimateChange (‘IIGCC’) in 2021.
Looking ahead to 2022, Witan is
committed to continue its public
advocacy around sustainable
businesses.We will work with our
managers responding to what we
learnfrom our portfolio, such as in
thecase studies onthe next page.
Witan regularly reviews voting and
engagement records of our fund
managers. Through engagement and
voting strategies, Witan and our fund
managers use all the tools at our disposal
to improve business culture and to support
our portfolio companies on their net zero
and multi-stakeholder strategies.
One of the primary engagement tools is
voting and, in 2021, Witan’s fund managers
voted on over 97% of the proposals of our
portfolio companies. Of those votes, 94.2%
was with management (2020: 93.4%) and
5.1% against management (2020: 6.0%).
We saw a big increase in votes
againstmanagement around the issue of
compensation: this accounted for 27.4% in
2021 (2020: 19.2%). This was the issue most
voted against, closely followed by capital
management and director-related issues.
There were small increases in votes
against management on environmental
and social issues at 1.5% and 3.7%
respectively in 2021 (2020: 2.7% and 5.2%).
Witan joined the Net Zero Asset Managers
initiative (‘NZAM’) in 2021. The NZAM is an
international group of asset managers
committed to supporting investing
aligned with net zero emissions by 2050
orsooner. In 2021, 50% of our managers
signed up to the NZAM (2020: 0%).
Looking ahead to 2022, Witan will define
our NZAM commitments in more detail,
focusing on reducing the carbon risk and
carbon intensity of our portfolio further.
We will also identify what we can do to
strengthen our engagement on social
and governance issues.
STEERING OUR PORTFOLIO
Investing in ‘sustainable businesses’ is
atthe core of our responsible investment
strategy. With our target to ensure that
100% of our portfolio consists of
‘sustainable businesses’ by 2030, we work
closely with our fund managers to invest in
the right businesses. As part of our active
management strategy, fund managers
must hold their investee companies to
account when they fall short of the criteria
of being a ‘sustainable business’ and use
engagement tools to promote changes.
This is the foundation for delivering good
returns for shareholders as well as
asustainable economy.
The Witan Executive assesses each of the
Company’s external managers’ portfolio
investments every year.
In 2021, five out of eight externally
managed portfolios achieved a Low
Carbon Designation from Morningstar.
Inaggregate, 71.4% (2020: 73%) of Witan’s
portfolio was assessed as having a low
tonegligible carbon risk with less than
4%fossil fuel involvement. Only 1.6% of our
portfolio carries a high carbon risk (2020:
1.5%). On all these indicators Witan
performs better than the MSCI All Country
World Index which in 2021 carried 2.5% high
and 71.2% low or negligible carbon risk with
7.5% fossil fuelinvolvement.
Another measure of a portfolio’s
environmental performance is its carbon
intensity, expressed in metric tonnes of CO
2
emitted per million US dollars of revenue.
Witan’s portfolio carbon intensity, as
calculated by Sustainalytics/Morningstar,
was 164 tCO
2
in 2021 (2020: 156 tCO
2
0), while
the MSCI All Country World Index had a
carbon intensity score of 174 tCO
2
(2020: 165
tCO
2
). It is important to note that, whilst we
expect this figure to decline over time, in
line with our commitment to reach net
zeroby 2050, the progress towards that
target may not be linear. Additionally,
wecontinue to focus on acompany’s
contribution to long-term global carbon
reduction rather than its own historic
carbon footprint. Provided, ofcourse,
thatthese companies are ‘best-in-class’
and on a clear path toreduce emissions
over time.
CATEGORISATION OF VOTES
AGAINST MANAGEMENT
27.4% Director related
27.4% Compensation
20.6% Capital management
9.2% Routine/Business
7.7% Corporate
3.7% Social/Human rights
2.5% Other
1.5% Health, safety, environmental
VOTING SUMMARY
94.2% Votes with management
5.1% Votes against management
0.7% Votes abstain
Witan Investment Trust plc
Annual Report 2021
24
STRATEGIC REPORT
Our engagement
in practice
a voluntary (not mandatory) recall for
theproduct, the manager decided
tosellthe position for our portfolio.
Subsequent further reports of treadmill
accidents led to the possibility of a
class-action suit being filed against
Peloton. Swift and decisive action by
ourmanager enabled Witan to exit
theposition above the purchase cost,
avoiding the subsequent fall of 50% in
the share price.
Witan and its managers are, as
investors, important stakeholders in the
listed equity companies we invest in, but
we also look at their overall stakeholder
engagement for signals that they have
the culture and processes to act on
feedback. Executives that approach
stakeholder engagement strategically
and manage it systematically are in
ouropinion more future-focused and
more likely to succeed longer term.
Company
Peloton Interactive
Country
US
Sector
Consumer Services
Peloton Interactive: using ESG as proxy for good management
A core aspect of responsible investment
is regularly engaging with a wide range
of stakeholders, in order to enhance
company performance. A good
example of the importance of
stakeholder engagement was Peloton.
Peloton is the world’s largest interactive
fitness platform. Founded in 2012, the
company pioneered connected,
technology-enabled fitness and
on-demand streaming of
instructor-led classes.
Following a fatal accident involving
aPeloton treadmill in early 2021, our
manager held a call with the company’s
CFO to discuss product safety. Although
the company emphasised that health
and safety were of paramount concern,
our Manager was concerned with the
apparent lack of urgency with which
company leadership was addressing
the issue. When the company issued
Driving prosperity through responsible investment
in sustainable businesses continued
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
25
Heineken has made progress with
environmental targets now integrated
into their operating framework and
progress is being made on clean
energy adoption, although this is
currently region-specific due to a
shortage of clean energy in some
areas.Diageo are similarly stretching
their ambitions. They are integrating ESG
metrics ever more strongly into business
performance and long-term share
rewards. Notable projects include a
newsolar farm for a Scottish distillery
and the opening of a carbon neutral
bourbon distillery in Kentucky. Both
companies are also committed to
asignificant reduction in water
consumption, supporting sustainable
agriculture in their supply chain and
social inclusion in their workforce and
local communities. There is work to be
done for both companies, especially
toreach their Net Zero targets, but
thereis clear evidence of progress.
Diageo and Heineken
The Manager engaged with Diageo
andHeineken on their initiatives to
promote drinking in moderation.
Diageo’s strategy is focused on
encouraging their customers to drink
less and drink better, while Heineken
hashad tremendous success with its
zero-alcohol beer brand. Heineken 0.0
isnow available in over 60 countries,
making it the fastest scaling of a brand
in Heineken’s 150 year history.
Whilst healthier drinking is at the
forefront of Manager engagement with
these companies, environmental issues
are not being overlooked. The Manager
engaged with Heineken and Diageo
ontheir environmental policies and
strategy. These, as well as social
initiatives, are summed up in
Heineken’s‘Brew a Better World’
andDiageo’s ‘Society 2030: Spirit
ofProgress’ initiatives.
Company
Diageo and Heineken
Country
UK/Netherlands
Sector
Consumer staples
Witan Investment Trust plc
Annual Report 2021
26
STRATEGIC REPORT
Meet the managers
We act as a one-stop shop for global equity
investment. We search for the best fund
managers internationally, so the portfolio is
notreliant on the stock-picking skills of one
individual. The multi-manager team-based
approach ensures that the portfolio embraces
many companies, sectors and geographies.
However, the sheer variety of investment
opportunities means that they are not always
obvious or easy to reach.
Andrew Bell
Chief Executive Officer,
Witan Investment Trust
James Hart
Investment Director,
Witan Investment Trust
Andrew Bell and James Hart
manage Witan’s portfolio of
direct holdings in specialist
investment companies, as well
as having overall responsibility
for Witan’s investment portfolio,
under the direction of the Board.
Our breadth of expertise adds value throughout the asset allocation process as follows:
Structuring our portfolio
Witan’s investment team
Drawing on our experience to deliver collective wisdom
Some managers focus on large, well-known
companies; while others might seek to profit
from pioneering businesses in specialist
sectors. However, investment opportunities
evolve over time. When that happens, we can
appoint or replace managers accordingly.
Engaging
with
managers
Making
changes
where
appropriate
Selecting
the right
managers
Monitoring
the portfolio
Identifying
opportunities
Witan Investment Trust plc
Annual Report 2021
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27
We identify managers who can
demonstrateindependence of thought
anda clear alignment of interest between
themselves and their clients. They will
haveaclearly articulated and repeatable
investment process, a high degree
of intellectual rigour and sound judgement
to enable them to identify attractive
companies and combine them into
concentrated, differentiated portfolios.
All of our managers are signatories to the
UNPRI and each is expected to demonstrate
a clear commitment to incorporating ESG
factors into their investment process.
We meet with our managers regularly
todiscuss investment and governance
issues and we expect them to uphold
thehighest fiduciary standards. As part
ofour investment process, we can adjust
manager selection and allocations to
ensure we create a combined portfolio
which can deliver consistent long-term
outperformance, while our multi-manager
structure helps reduce the risks associated
with a single management style.
The core portfolio accounts for 75%
It is predominantly invested in global,
large cap listed companies with strong
fundamentals generating enduring cash
flows or with underappreciated growth
prospects. Our core portfolio managers
tend to have concentrated, high-conviction
portfolios with low portfolio turnover.
The specialist portfolio accounts for 25%
It provides exposure to a range of key
investment themes best accessed
through managers with specialist
knowledge. Through our due diligence
process, we identify long-term themes
which offer the ability to deliver higher
returns and outperformance. Current
investment themes include:
> Climate change
> Emerging markets
> Unquoted growth companies
> Listed private equity
> Life sciences
These are held either via segregated
portfolios, or funds held within the
directholdings portfolio.
Selecting the
right managers
Identifying
opportunities
Monitoring and
engaging with
our managers
Core portfolio
Specialist portfolio
What sets Witan apart is our unique,
diversified but high-conviction portfolio
structure, consisting of two distinct but
complementary elements: core and
specialist. This gives shareholders access
to a range of investments with the aim
ofproviding better returns over the long
term while short-term performance
maybe quite different from that
oftheCompany’s benchmark.
Witan Investment Trust plc
Annual Report 2021
28
STRATEGIC REPORT
JENNISON ASSOCIATES,
LLC
Mark Baribeau, Head of
Global Equities at Jennison
Associates, seeks to invest in
a portfolio of market-leading
companies with innovative
business models, positively
inflecting growth rates,
and long-term competitive
advantages. Mark, along
with co-portfolio manager
Tom Davis and a team
of global sector analysts,
employs a high-conviction,
concentrated approach
thatis sector, region and
country-agnostic. The
team invests in a select
group of companies with
innovative and disruptive
businesses that are driving
structural shifts in their
respective industries. They
also look for companies
with defensible business
models and attractive
product offerings, supported
by secular demand trends.
The portfolio typically has
between 35 and 45 holdings
and securities must meet
stringent standards in
order to remain or earn
a place in the portfolio.
Name:
Mark Baribeau
Style:
Companies with exceptional
growth prospects
Benchmark:
MSCI ACWI
Inception date:
31/08/2020
UNPRI signatory:
Yes
6.3%
Witan assets
2020: 4.8%
2021 performance
Jennison
Associates, LLC
10.1%
MSCI ACWI
20.1%
LANSDOWNE PARTNERS
Founded in 1998, Lansdowne
Partners has evolved to
become one of the UK’s
pre-eminent investment
management boutiques.
The Long Only Developed
Markets Strategy, managed
by Peter Davies and
Jonathon Regis, combines
a detailed thematic
approach with rigorous
companyanalysis to
identify anadaptable
portfolio positioned
forunderappreciated or
contrariantrends. The two
lead managers benefit
from the support provided
by a team of experienced
and insightful analysts who
tend to focus on key sectors
of interest to the team.
The high-conviction
portfolio is the result of
detailed company-specific
research, allied with an
appreciation of global
thematic developments.
The team is willing to make
significant adjustments
to the portfolio to reflect
its view of the changing
investment landscape.
Name:
Peter Davies
Style:
Concentrated, benchmark-
independent investment in
developed markets
Benchmark:
MSCI ACWI
Inception date:
14/12/2012
UNPRI signatory:
Yes
18.9%
Witan assets
2020: 19.4%
2021 performance
Lansdowne
Partners
17.5%
MSCI ACWI
20.1%
Core portfolio managers
We have six portfolio managers in our core portfolio.
Meet the managers continued
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
29
VERITAS ASSET
MANAGEMENT
Andy Headley, Head of
Global Strategies at Veritas,
uses a number of research
methods to help identify
industries and companies
that are well positioned to
benefit from medium-term
growth, regardless of where
they are located. The aim is
to generate excellent real
returns and minimise the risk
of permanent capital loss.
Potential investments are
analysed from an absolute
basis rather than relative
to any benchmark or index.
This equity portfolio follows
a Global Focus strategy,
investing with a disciplined
approach to valuation
in ‘quality’ mid to large
capitalisation companies.
It typically contains fewer
than 30 stocks, chosen
with a highly selective and
rigorous approach, and
is focused on a handful
of investment themes.
Name:
Andy Headley
Style:
Real return objective from
high-quality companies
Benchmark:
MSCI ACWI
Inception date:
11/11/2010
UNPRI signatory:
Yes
18.7%
Witan assets
2020: 18.6%
2021 performance
Veritas Asset
Management
17.1%
MSCI ACWI
20.1%
LINDSELL TRAIN
Lindsell Train, headed by
Nick Train and Michael
Lindsell, is guided by four
investment beliefs: investors
undervalue durable,
cash-generative business
franchises; concentration
can reduce risk; transaction
costs are a ‘tax’ on returns;
and dividends matter even
more than you think. These
tenets have led to the
creation of a high-conviction
portfolio of approximately 20
stocks which they describe
as “rare and beautiful
assets” with a focus on
those businesses with
truly sustainable business
models and/or established
resonant brands. In building
the portfolio they focus on
companies demonstrating
long-term durability in
cash and profit generation.
Lindsell Train Limited is a
small company with about
20 employees. This small size
allows the two founders and
their team the freedom to
concentrate on investment
issues. The ownership
structure allows the partners
to focus on long-term
performance rather than
short-term market ‘noise’.
This clear sense of purpose
and single-minded pursuit
of investment excellence is
a key distinguishing feature
of Lindsell Train’s approach.
Name:
Nick Train and Michael Lindsell
Style:
Long-term growth from
undervalued brands
Benchmark:
MSCI ACWI
Inception date:
01/09/2010
(1)
UNPRI signatory:
Yes
(1) Lindsell Train managed a UK
portfolio from 01/09/10 until 31/12/19.
14.7%
Witan assets
2020: 13.6%
2021 performance
Lindsell Train
4.0%
MSCI ACWI
20.1%
Core portfolio managers
We have six portfolio managers in our core portfolio.
Witan Investment Trust plc
Annual Report 2021
30
STRATEGIC REPORT
WCM INVESTMENT
MANAGEMENT
Based in Laguna Beach,
California, WCM is an
independent asset
management firm that
runs focused portfolios,
comprised of high-quality
businesses with growing
economic moats, aligned
with strong, adaptable
corporate cultures, and
supported by durable global
tailwinds. The portfolio is
concentrated in 30-40 high-
conviction investments with
the objective of securing
long-term excess return
and downside protection.
As an active manager, WCM
believes that their investee
companies have meaningful
structural advantages
which, when allied with
a ‘buy and manage’ low
turnover approach, will allow
long-term outperformance
of the relevant benchmark.
Name:
Mike Trigg
Style:
High-quality companies with
strong culture and increasing
competitive advantage
Benchmark:
MSCI ACWI
Inception date:
31/08/2020
UNPRI signatory:
Yes
11.5%
Witan assets
2020: 9.5%
2021 performance
WCM
16.9%
MSCI ACWI
20.1%
Core portfolio managers
ARTEMIS
Derek Stuart, manager
ofArtemis’s UK Special
Situations strategy, aims
to achieve superior long-
term growth by looking
for unrecognised growth
potential in companies,
often those that are unloved
or out of favour. The strategy,
which favours smaller and
medium-sized companies,
identifies hidden value within
‘problem investments’, which
can be companies in need
of new management or
refinancing or are suffering
from investor indifference.
The focus on those
companies which can
help themselves rather
than relying on a change
in the business climate
aims to avoid ‘value traps’
and other risks associated
with a ‘special situations’
strategy. The Artemis team
places great emphasis
on personal knowledge of
management teams and
meets with them regularly.
This helps them understand
what can be achieved and
how aligned management
are with shareholders.
The portfolio typically has
fewer than 50 holdings.
Name:
Derek Stuart
Style:
Recovery/special situations
Benchmark:
MSCI UK IMI
Inception date:
06/05/2008
UNPRI signatory:
Yes
6.1%
Witan assets
2020: 6.4%
2021 performance
Artemis
16.0%
FTSE All-Share
18.7%
Meet the managers continued
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
31
Specialist portfolio managers
Each of our specialist portfolio managers is an expert in one of our chosen themes.
GQG PARTNERS
GQG Partners’ Emerging
Markets Equity strategy
seeksto invest in high-
quality companies with
attractively priced future
growth prospects. Portfolio
manager Rajiv Jain focuses
primarily on high-quality,
large-cap companies in
emerging market economies
and employs a fundamental
investment process to
evaluate each business.
Theresulting portfolio,
whichis constructed without
reference to benchmark
country weights, seeks to
limit downside risk while
providing attractive returns
to long-term investors over
afull market cycle. GQG
Partners’ portfolio aims to
participate in the growth
that emerging economies
promise to deliver over the
long term, while avoiding
some of the risks that are
often associated with
individual countries
andstocks within their
investment universe.
GMO
GMO was co-founded in
1977by the well-known
investor and climate-
focused philanthropist,
Jeremy Grantham.
The investment process is
grounded in a long-term,
valuation-based investment
philosophy – an approach
which GMO believes
provides the best risk-
adjusted returns. The
Climate Change strategy
seeks to deliver high total
return by investing primarily
in equities of companies
that are positioned to
benefit, directly or indirectly,
from efforts to curb or
mitigate the long-term
effects of global climate
change, to address the
environmental challenges
presented by global climate
change, or to improve the
efficiency of resource
consumption. As climate
change is among the most
important investment issues
facing investors today, GMO
believes that there are
exceptional opportunities
forlong-term investors in a
world mobilising to address
climate change.
Name:
Rajiv Jain
Style:
High-quality companies
withattractively priced
growth prospects
Benchmark:
MSCI Emerging Markets
Inception date:
16/02/2017
UNPRI signatory:
Yes
Name:
Lucas White
Style:
Companies positioned to
benefit from climate change
mitigation/adaptation efforts
Benchmark:
MSCI ACWI
Inception date:
05/06/2019
UNPRI signatory:
Yes
6.5%
Witan assets
2020: 6.2%
4.7%
Witan assets
2020: 3.1%
2021 performance
GQG Partners
0.2%
MSCI Emerging
Markets
-1.3%
2021 performance
GMO
13.0%
MSCI ACWI
20.1%
Witan Investment Trust plc
Annual Report 2021
32
STRATEGIC REPORT
Meet the managers continued
Specialist portfolio managers
Name:
Witan
Style:
Specialist collective funds
Benchmark:
Witan’s benchmark
Inception date:
19/03/2010
UNPRI signatory:
Yes
10.9%
Direct Holdings
2020: 10.2%
1.7%
(1)
Unquoted Growth
2020: N/A
(1)
2021 performance
Direct Holdings
Unquoted Growth
18.8%
N/A
(1)
Benchmark
19.9%
DIRECT HOLDINGS
Private equity
Apax Global Alpha (3.1%)
Extensive portfolio of private
equity investments in
growing sectors.
Princess Private Equity (1.7%)
Portfolio of private equity
investments managed by
Swiss-based Partners Group.
Electra (0.1%)
Private equity fund
inrealisation mode.
Hostmore (0.9%)
Owner and operator
ofTGIFriday’s UK casual
dining franchise spun
outofElectra.
Life sciences
Syncona (1.2%)
A healthcare investment
company focused on
founding, building and
funding global leaders in
innovative life sciences.
Commodities
BlackRock World Mining
(1.5%)
Fund investing in mining and
metal assets worldwide,
principally via listed
securities.
Real estate
Schroder Real Estate (1.1%)
Fund of UK commercial
realestate investments.
Clean Energy
VH Global Sustainable
Energy(1.0%)
Diversified energy
infrastructure investments
focused on accelerating
theenergy transition.
Credit
NB Distressed Debt (0.3%)
Portfolio of distressed,
stressed and special
situations investments
inrealisation situations.
UNQUOTED GROWTH
Lansdowne Opportunities
(0.9%)
Invests mostly in unquoted
companies capitalising on
the intellectual property
ofleading universities.
Lindenwood (0.8%)
Invests in unquoted,
highgrowth companies,
seeking the next generation
of technology leaders.
A selection of specialist collective funds investing in both
quoted and unquoted companies, with the overall objective
of outperforming Witan’s equity benchmark. These specialist
themes tend to be outside the scope of investment for most
equity investment managers.
(1) Invested during 2021
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
33
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
34
Top 40 investments:
Company
Market
value of
holding
£m
% of
portfolio
1 GMO Climate Change
Specialist fund investing in companies which benefit from efforts
tocurb or mitigate the effects of climate change
106.2 4.8
2 Apax Global Alpha
Investment company offering exposure to private equity investments
inthe Technology, Services, Healthcare and Consumer sectors
68.3 3.1
3 Unilever
Multi-national consumer goods company with food, home care
andpersonal care divisions
41.9 1.9
4 Alphabet
The holding company for Google 40.3 1.8
5 Princess Private Equity
Investment company providing exposure to a portfolio of private
equityinvestments
38.2 1.7
6 BlackRock World Mining
Diversified fund investing in mining and metal assets worldwide 33.4 1.5
7 Taiwan Semiconductor
Manufacturing
The world's largest dedicated semiconductor foundry 32.8 1.5
8 Intuit
Develops and markets business and financial software solutions 30.9 1.4
9 Diageo
UK-based global leader in spirits and liqueurs and owner of the
Guinness beer brand
30.2 1.3
10 Charter Communications
US cable telecommunications company offering broadcasting,
internet, voice, entertainment and business services
28.2 1.3
11 Syncona
Healthcare fund focused on founding, building and funding a portfolio
of innovative life science companies
27.6 1.2
12 Heineken
The world's second largest brewer offering premium brand and
zero-alcohol beers
26.5 1.2
13 Schroder Real Estate
An investment trust offering exposure to a diversified portfolio of UK
commercial real estate
24.5 1.1
14 CVS Health
A US integrated pharmacy healthcare provider 23.8 1.1
15 BT
Home, work and mobile telecoms services provider offering
broadband, TV and internet products and networked IT services
22.7 1.0
16 RELX
Global provider of information and analytics for professional
andbusiness customers across industries
21.9 1.0
17 Nintendo
Gaming console company which develops, manufactures and
sellsvideo game hardware and software
21.8 1.0
18 VH Global Sustainable Energy
Fund of diversified energy infrastructure investments focused
onaccelerating the energy transition
21.8 1.0
19 Microsoft
Operating systems, server applications, business and consumer
applications, software development tools and internet software
21.5 1.0
20 NatWest
A UK-based banking and financial services company 21.5 1.0
Top 20 684.0 30.9
The top ten holdings represent 20.3% of the total portfolio (2020: 19.6%).
The full portfolio is not listed because it contains over 250 companies.
Forty largest investments
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
35
Top 40 investments:
Company
Market
value of
holding
£m
% of
portfolio
21 Amazon.com
Online retailer and provider of on-demand cloud-computing
platformservices
21.1 1.0
22 Hostmore
Owner and operator of TGI Friday’s UK casual dining franchise 20.5 0.9
23 Lansdowne Opportunities Fund
Fund investing mostly in unquoted companies capitalising on
theintellectual property of leading UK universities
20.4 0.9
24 Thermo Fisher Scientific
Offers medical products and services to the pharmaceutical and
biotech industry, hospitals and research & diagnostic organisations
20.0 0.9
25 Lloyds Banking
UK-based banking and financial services company 19.5 0.9
26 London Stock Exchange
Operates international equity, bond and derivatives markets
andprovides indexing and financial data services
19.0 0.9
27 PepsiCo
Global beverage, snack and food business 18.8 0.8
28 Mondelez
Multinational confectionery and snack food company 18.7 0.8
29 PayPal
Technology platform offering online, digital and mobile payment
solutions to consumers and merchants
18.1 0.8
30 Canadian Pacific Railway
Transcontinental railway providing freight and container services
across its network in Canada and the United States
17.9 0.8
31 Lindenwood
Fund investing in unquoted, high growth companies, seeking the
nextgeneration of technology leaders
17.4 0.8
32 Baxter
Develops, manufactures, and markets essential healthcare products 17.3 0.8
33 BAE Systems
Manufactures military aircraft, surface ships, submarines, radar,
avionics, communications, electronics and guided weapon systems
17.1 0.8
34 Meta
Social media company which operates under the Facebook,
Instagram, Messenger, WhatsApp, Oculus, Workplace, Portal and
Novibrands
16.9 0.8
35 Shopify
Global cloud-based e-commerce platform offering retailers and
brands a bespoke and customisable, multi-channel retail presence
16.8 0.8
36 Walt Disney
Global entertainment company with operations in media networks,
theme parks, studio entertainment and direct-to-consumer networks
and channels
16.6 0.7
37 Vinci
Global leader in construction and concessions management with
expertise in building, civil, hydraulic and electrical engineering
16.2 0.7
38 LVMH
Diversified luxury goods company, produces and sells wine, cognac,
perfumes, cosmetics, luggage, watches and jewellery
16.1 0.7
39 Safran
Supplies aerospace and defence systems with a focus on aircraft
engines, propulsion systems and ancillary services
15.8 0.7
40 Catalent
Healthcare company which supports pharmaceutical, biotech and
consumer health innovators with delivery technologies, development,
drug manufacturing, biologics, gene therapies and consumer
healthproducts
15.4 0.7
Top 40 1,043.6 47.1
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
36
Classification of investments
at 31 December 2021
North
America
%
United
Kingdom
%
Continental
Europe
%
Asia
Pacific
(ex Japan)
%
Japan
%
Latin
America
%
Other
(1)
%
Total
2021
%
Energy Energy
0.4 0.1
0.5
0.1 – 0.3 0.3 1.7
0.4 0.1
0.5
0.1 – 0.3 0.3 1.7
Materials Materials
2.0 1.8
2.5
0.4 – 0.2 0.5 7.4
2.0 1.8
2.5
0.4 – 0.2 0.5 7.4
Industrials Capital Goods
2.0 1.9
2.5
0.3 0.1 – 0.2 7.0
Commercial & Professional
Services
0.4 1.7
–
– – – – 2.1
Transportation
1.9 0.9
1.3
– – – - 4.1
4.3 4.5
3.8
0.3 0.1 – 0.2 13.2
Consumer
Discretionary
Automobiles & Components
0.7 –
0.4
– – – – 1.1
Consumer Durables &
Apparel
0.6 0.1
2.0
0.1 – – – 2.8
Consumer Services
0.3 1.1
0.9
– – – – 2.3
Retailing
2.0 0.2
–
0.1 – 0.2 – 2.5
3.6 1.4
3.3
0.2 – 0.2 – 8.7
Consumer Staples
Food & Staples Retailing
0.4 0.3
–
– – – – 0.7
Food, Beverages & Tobacco
1.9 1.7
2.4
0.2 – 0.1 – 6.3
Household & Personal
Products
0.3 1.9
0.2
– 1.1 – – 3.5
2.6 3.9 2.6 0.2 1.1 0.1 – 10.5
Healthcare
Healthcare Equipment &
Services
4.9 0.1
0.4
0.7 – – – 6.1
Pharmaceuticals,
Biotechnology & Life
Sciences
3.1 0.8
–
0.4 0.2 – 0.1 4.6
8.0 0.9
0.4
1.1 0.2 – 0.1 10.7
Financials Banks
0.4 2.2
1.2
0.3 – 0.2 0.7 5.0
Diversified Financial Services
1.0 2.1
–
0.2 0.2 – 0.1 3.6
Insurance
– 0.2
–
0.2 – – 0.1 0.5
1.4 4.5
1.2
0.7 0.2 0.2 0.9 9.1
Information
Technology
Software & Services
6.6 0.2
0.6
– – – 0.6 8.0
Technology Hardware &
Equipment
1.0 0.4
–
0.3 0.3 – – 2.0
Semiconductors &
Semiconductor Equipment
2.4 –
0.6
1.5 0.1 – – 4.6
10.0 0.6
1.2
1.8 0.4 – 0.6 14.6
Communication
Services
Telecommunications
Services
– 1.0
–
– – – – 1.0
Media & Entertainment
5.7 0.5
1.2
0.3 1.0 – – 8.7
5.7 1.5
1.2
0.3 1.0 – – 9.7
Utilities Utilities
0.1 0.7
0.2
0.1 – – – 1.1
0.1 0.7
0.2
0.1 – – – 1.1
Real Estate Real Estate
– 0.3
–
– – – – 0.3
– 0.3
–
– – – – 0.3
Investment
Companies
Investment Companies
(1)
– –
–
– – – 13.0 13.0
– –
–
– – – 13.0 13.0
Total 2021
38.1 20.2
16.9
5.2 3.0 1.0 15.6 100.0
Total 2020
33.6 19.5
16.7
11.7 4.8 1.4 12.3 100.0
(1) Investment Companies are included under the heading of Other because the underlying geographic exposure is not readily identifiable.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
37
Principal risks and uncertainties
The directors have carried
outarobust assessment of
theemerging and principal
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
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 seven 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.
The Company’s key risks fall broadly under the following categories:
ReducedUnchangedIncreased
Market and investment portfolio
RISK MITIGATION
As 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,
pandemics (e.g. COVID-19), trade wars and
military conflicts (e.g. the Russian invasion
ofUkraine) can all be expected to lead to
market volatility.
The Board seeks to manage these
risksthrough:
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
topreserve 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 Chief
Executive Officer (‘CEO’)) managed the
overall business and the investment
portfolio in accordance with limits
determined by the Board and its 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.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
38
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48 to 56. 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 for further details.
Following the closure of the Company’s
savings plans, the risks associated with the
holding of and accounting for client assets
has been substantially reduced and will be
eliminated in future.
Operational and regulatory risks are
regularly reviewed by Witan’s Audit
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 ofits 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.
Compliance and regulatory change
RISK MITIGATION
Accounting, taxation and legal
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.
Operational and cyber
RISK MITIGATION
Many of the Company’s financial systems
are outsourced to third parties, principally
BNP Paribas Securities Services (‘BNPSS’).
Disruption to their accounting, payment
systems or custody records could prevent
the accurate reporting and monitoring of
the Company’s financial position.
The Witan and WIS Executive undertake
adetailed due diligence program,
focusedupon the operational and
cyberarrangements of all the Company’s
suppliers. BNPSS, 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
controlprocesses are explained further
inthe Corporate Governance Statement
onpages48 to 56.
Principal risks and uncertainties continued
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
39
Liquidity
RISK MITIGATION
COVID-19 – Global pandemic
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.
The COVID-19 pandemic has given rise to
unprecedented challenges for businesses
across the globe and the Board has taken
into consideration the risks, both investment
and operational, posed to the Company by
the crisis.
The Board and the WIS Executive maintain
close oversight of the Company’s portfolio
and monitor the investment income flows
from its investee companies. The Board
monitors the effects of COVID-19 on the
operations of the Company and its
serviceproviders to ensure that they
continue to beappropriate, effective
andproperly resourced.
Environmental, social and governance factors
RISK MITIGATION
Failure to identify, understand or mitigate the
risks arising from environmental, social and
governance 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.
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.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
40
Section 172: engaging with
our stakeholders
Who?
STAKEHOLDER GROUP
Why?
THE BENEFITS OF ENGAGEMENT
WITH OURSTAKEHOLDERS
How?
HOW THE BOARD AND WIS EXECUTIVE
ENGAGED WITH OUR STAKEHOLDERS
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
Outcomes and actions
WHAT ACTIONS WERE TAKEN, INCLUDING
PRINCIPAL DECISIONS?
Investors
Clear communication of our strategy and
theCompany’s performance against our
objective can help the share price trade at
anarrower discount or a premium to its net
asset value, which benefits shareholders.
New shares may be issued at a premium
toNAV to meet demand without dilution to
existing shareholders. Increasing the size of
the Company can benefit liquidity as well
asspread costs.
WIS, on behalf of the Board, completes a programme of investor
relations throughout the year.
Key mechanisms of engagement included:
AGM
The Company’s website which hosts reports, monthly
factsheets, video interviews with the external managers,
CEO,Investment Director and regular market commentary
Online newsletters
One-on-one meetings with professional investors with
eitherthe CEO, Investment Director or Chairman
Group meetings with professional investors with
ourexternalmanagers
Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs
and objective, and the selection and monitoring of our external managers.
Ongoing impact of the COVID-19 pandemic on economies,
markets and companies
The WIS Executive held regular meetings with shareholders
throughout the year and provided updates via the Company’s
website and newsletters on performance of the Company as well
as the usual financial reports and monthly factsheets
Impact of dividend cuts on the Company’s revenues and the
Company’s dividends
See page 9 in the Chairman’s Statement and page 15 in the CEO’s
Review for the Board’s comments on the dividend policy
Share price performance and the Company’s and wider
investment trust sector discounts
The Company maintained a high rate of share buybacks. See
page 15 in the CEO’s Review
The integration of ESG into the Company’s investment processes ESG included in presentations to investors, ad hoc updates
Informing investors of their rights to attend and vote in the AGM Holders of shares via online platforms were written to, informing
them of how they could vote and view the Annual Report
External
managers
As Witan has a multi-manager approach,
engagement with our managers is necessary
to evaluate their performance against their
stated strategy and benchmark and to
understand any risks or opportunities this
maypresent to the Company. This also
helpsensure that investment management
costs are closely monitored and remain
competitive. Witan ensures that all
managersare paid in accordance
withtheirterms of trade.
The WIS Executive meets with the Company’s external managers
throughout the year and receives monthly performance and
compliance reporting. This provides the opportunity for both the
manager and WIS Executive to explore and understand how and
why the relationship has performed and what may be expected
inthe future. Each manager also presents annually to the Board
ofdirectors, providing the opportunity for the manager and Board
to reinforce their mutual understanding of what is expected from
all parties.
Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and
business updates.
The ongoing impact of COVID-19 on their business and strategy All managers successfully implemented remote working in 2021
with no adverse impact on service delivery
The integration of ESG into each manager’s investment processes See pages 22 and 23 in Responsible investment for a report on
manager activity in 2021
Service
providers
Witan and WIS contract with third parties
forother services including: custodian,
depositary, investment accounting
andadministration, company secretary.
Ensuringthe third parties to whom we have
outsourced services complete their roles
diligently and correctly is necessary for
theCompany’s success.
Witan pays all service providers in
accordance with their terms of business and
is a signatory to the Prompt Payments Code.
The WIS Operations team engages regularly with all service
providers both in one-to-one meetings and via regular written
reporting. This regular interaction provides an environment
wheretopics, issues and business development needs can
bedealt with efficiently and collegiately.
The Audit Committee reviews annually a summary of the
contracts of all service providers to further reinforce the
overviewof the Company’s service providers at the
corporatelevel.
Impact of COVID-19 and restrictions on service providers All service providers successfully implemented remote working
in2021 with no adverse impact on service delivery
Employees
Attract and retain talent to ensure the
Company has the resources to successfully
implement its strategy and manage third-
party relationships.
All employees of the Company sit in one open-plan office with the
CEO, facilitating interaction and engagement. During periods of
remote working, the WIS Executive holds regular video meetings to
update and share information. As well as the CEO, the Investment
Director, Director of Operations and Director of Marketing report to
the Board at each meeting. Given the small number of employees,
engagement is at an individual level rather than as a group.
COVID-19 restricted employees to working from home Existing system functionality allowed all employees to move to
remote working during lockdown restrictions without detriment
toproductivity or service to stakeholders
Performance and compensation of employees is decided
bytheRemuneration Committee with the CEO
See the Directors’ Remuneration Report on pages 60 to 71
Debt
holders
To communicate and demonstrate a strong
financial position that supports the financing
arrangements.
The WIS Executive provides regular financial covenant
compliance validation and financial reports to the stakeholders.
N/A N/A
The following ‘Section 172’ disclosure, which is required
by the Companies Act 2006 and the AIC Code, as
explained on page 52, describes how the directors
have had regard to the views of the Company’s
stakeholders in their decision making.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
41
Who?
STAKEHOLDER GROUP
Why?
THE BENEFITS OF ENGAGEMENT
WITH OURSTAKEHOLDERS
How?
HOW THE BOARD AND WIS EXECUTIVE
ENGAGED WITH OUR STAKEHOLDERS
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
Outcomes and actions
WHAT ACTIONS WERE TAKEN, INCLUDING
PRINCIPAL DECISIONS?
Investors
Clear communication of our strategy and
theCompany’s performance against our
objective can help the share price trade at
anarrower discount or a premium to its net
asset value, which benefits shareholders.
New shares may be issued at a premium
toNAV to meet demand without dilution to
existing shareholders. Increasing the size of
the Company can benefit liquidity as well
asspread costs.
WIS, on behalf of the Board, completes a programme of investor
relations throughout the year.
Key mechanisms of engagement included:
AGM
The Company’s website which hosts reports, monthly
factsheets, video interviews with the external managers,
CEO,Investment Director and regular market commentary
Online newsletters
One-on-one meetings with professional investors with
eitherthe CEO, Investment Director or Chairman
Group meetings with professional investors with
ourexternalmanagers
Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs
and objective, and the selection and monitoring of our external managers.
Ongoing impact of the COVID-19 pandemic on economies,
markets and companies
The WIS Executive held regular meetings with shareholders
throughout the year and provided updates via the Company’s
website and newsletters on performance of the Company as well
as the usual financial reports and monthly factsheets
Impact of dividend cuts on the Company’s revenues and the
Company’s dividends
See page 9 in the Chairman’s Statement and page 15 in the CEO’s
Review for the Board’s comments on the dividend policy
Share price performance and the Company’s and wider
investment trust sector discounts
The Company maintained a high rate of share buybacks. See
page 15 in the CEO’s Review
The integration of ESG into the Company’s investment processes ESG included in presentations to investors, ad hoc updates
Informing investors of their rights to attend and vote in the AGM Holders of shares via online platforms were written to, informing
them of how they could vote and view the Annual Report
External
managers
As Witan has a multi-manager approach,
engagement with our managers is necessary
to evaluate their performance against their
stated strategy and benchmark and to
understand any risks or opportunities this
maypresent to the Company. This also
helpsensure that investment management
costs are closely monitored and remain
competitive. Witan ensures that all
managersare paid in accordance
withtheirterms of trade.
The WIS Executive meets with the Company’s external managers
throughout the year and receives monthly performance and
compliance reporting. This provides the opportunity for both the
manager and WIS Executive to explore and understand how and
why the relationship has performed and what may be expected
inthe future. Each manager also presents annually to the Board
ofdirectors, providing the opportunity for the manager and Board
to reinforce their mutual understanding of what is expected from
all parties.
Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and
business updates.
The ongoing impact of COVID-19 on their business and strategy All managers successfully implemented remote working in 2021
with no adverse impact on service delivery
The integration of ESG into each manager’s investment processes See pages 22 and 23 in Responsible investment for a report on
manager activity in 2021
Service
providers
Witan and WIS contract with third parties
forother services including: custodian,
depositary, investment accounting
andadministration, company secretary.
Ensuringthe third parties to whom we have
outsourced services complete their roles
diligently and correctly is necessary for
theCompany’s success.
Witan pays all service providers in
accordance with their terms of business and
is a signatory to the Prompt Payments Code.
The WIS Operations team engages regularly with all service
providers both in one-to-one meetings and via regular written
reporting. This regular interaction provides an environment
wheretopics, issues and business development needs can
bedealt with efficiently and collegiately.
The Audit Committee reviews annually a summary of the
contracts of all service providers to further reinforce the
overviewof the Company’s service providers at the
corporatelevel.
Impact of COVID-19 and restrictions on service providers All service providers successfully implemented remote working
in2021 with no adverse impact on service delivery
Employees
Attract and retain talent to ensure the
Company has the resources to successfully
implement its strategy and manage third-
party relationships.
All employees of the Company sit in one open-plan office with the
CEO, facilitating interaction and engagement. During periods of
remote working, the WIS Executive holds regular video meetings to
update and share information. As well as the CEO, the Investment
Director, Director of Operations and Director of Marketing report to
the Board at each meeting. Given the small number of employees,
engagement is at an individual level rather than as a group.
COVID-19 restricted employees to working from home Existing system functionality allowed all employees to move to
remote working during lockdown restrictions without detriment
toproductivity or service to stakeholders
Performance and compensation of employees is decided
bytheRemuneration Committee with the CEO
See the Directors’ Remuneration Report on pages 60 to 71
Debt
holders
To communicate and demonstrate a strong
financial position that supports the financing
arrangements.
The WIS Executive provides regular financial covenant
compliance validation and financial reports to the stakeholders.
N/A N/A
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
42
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.
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 Securities Services
London Branch for depositary
services, custody, investment
accounting and administration;
> Frostrow Capital LLP for company
secretarial services;
> RepRisk and Sustainalytics for ESG
monitoring of its investment
holdings;and
> specialist advice on regulatory
compliance issues and, as required,
procure legal, investment consulting,
financial and tax advice.
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 71.
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 has six direct employees,
three men and three women. The
Board currently consists of seven non-
executive directors (four men and three
women) and the Chief Executive Officer,
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 environmental, social and
governance issues has been formalised
by the Company’s membership of the
Institutional Investors Group on Climate
Change since July 2019, a signatory
to the UN-supported Principles for
Responsible Investment from February
2020 and a commitment to Net Zero
Asset Managers initiative in early 2022.
WITAN INVESTMENT SERVICES
WIS is authorised and regulated by
theFinancial Conduct Authority. It is
authorised to act as Witan’s AIFM,
toprovide marketing services and
togiveinvestment advice to
professionalinvestors.
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 2021 were:
> to fulfil its responsibilities as Witan’s
AIFM; and
> to control the net operating costs
forWitan.
In 2021, WIS’s principal 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.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
43
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 2021 ranged from 0.30% to 0.60%
per annum. The weighted average
base fee was 0.51% as at 31 December
2021 (2020: 0.51%). One manager
(covering 6% of Witan’s portfolio), has
a performance-related fee, which is
subject to capping in any particular year.
Witan takes care to ensure the
competitiveness of the fees it pays. Most
of the fee structures incorporate a ‘taper’
whereby the average fee rate reduces
asthe portfolio grows.
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.
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.
value for money for shareholders, taking
account of longer-term performance.
The UK version of the EU PRIIPS regulations,
which are applicable to UK Investment
Companies, mandate 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, however measured.
The OCF was 0.71% in 2021, 9% lower than
the previous year (2020: 0.78%). When
performance fees due to third-party
managers are included, the OCF was
0.73% in 2021 (2020: 0.82%). The sole
manager with a performance fee
structure significantly outperformed
during 2020 and early 2021. This generated
the payment of a performance fee for
that manager (which has a lower base
fee than comparable managers).
The main cost headings within the
OCF are set out below. 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. All the costs
measured showed an improvement
on the previous year, either increasing
by less than the growth in net assets
or declining in absolute terms.
The Company exercises strict scrutiny and
control over costs. The Board believes that
the OCF during the year represents good
ANALYSIS OF COSTS
Category of cost
2021
£m
2021
% of
average
net assets
2020
£m
2020
% of
average
net assets
Investment management base fees
(note 4, page 93) 9.33 0.47 8.70 0.51
Other expenses (excluding loan
arrangement and one-off costs) 4.81 0.24 4.91 0.28
Less expenses relating to the
subsidiary (those expenses not
relating to the operation of the
investment company) (0.04) – (0.15) (0.01)
Ongoing Charges Figure
(including investment management
base fees) 14.10 0.71 13.46 0.78
Investment management
performance fees (note 4, page 93) 0.39 0.02 0.58 0.04
Ongoing Charges Figure
(including performance fees) 14.49 0.73 14.04 0.82
Pro rata ongoing charges of
underlying funds
(1)
4.37 0.22 4.34 0.25
OCF plus look through fund costs 18.86 0.95 18.38 1.07
Portfolio transaction costs including
costs relating to manager changes 3.95 0.20 3.58 0.21
Interest costs 5.21 0.26 6.43 0.37
Total costs including transaction
costs, borrowing costs and
underlying fund costs 28.02 1.41 28.39 1.65
(1) 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. See pages 31 and 32 for more details on these holdings.
N.B. Figures may not sum due to rounding.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT
44
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 37 to 39.
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 more than 83% 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.
> 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, 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 portfoliois exposed).
> In addition to its cash balances, which
were £33 million at 31 December 2021
(2020: £35 million), the Company has
a short-term bank facility which can
beused to meet its liabilities, and
fixed-rate financing in the form
ofsecured 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.
> 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 37 to 39 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63.7 million ordinary shares
in2021 at a cost of£153.5 million and
experienced no problem with liquidity
in doing so. It had shareholders’ funds
in excess of £1.9 billionat the end
of2021.
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.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
45
GOING CONCERN
In light of the conclusions drawn in the
foregoing statement on liquidity risk on
page 39 and the Viability Statement,
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 2022 and is
signed on its behalf by:
Andrew Ross Andrew Bell
Chairman Chief Executive Officer
15 March 2022
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
58
Board of directors
Key to membership
ofBoard and
Committees
Chairman of the
Board or a
Committee.
Members of the Audit
Committee which is
chaired by Mr Perry.
Members of the
Remuneration and
Nomination
Committee which
is chaired by
Mr Yates.
Director of Witan
Investment Services
Limited.
1. Andrew Ross
CHAIRMAN
Date of appointment
May 2019.
Career & background
Previously chief executive of
Cazenove Capital Management
which, in 2013, was acquired
by Schroders, where he
became global head of Wealth
Management until 2019. Prior to
this, chief executive of HSBC Asset
Management (Europe) Limited
and managing director of James
Capel Investment Management.
Skills & expertise
Andrew has substantial experience
in senior leadership roles as CEO
and chairman in investment
management and wealth
management businesses. He
hasoverseen three different multi-
manager businesses and under
his tenure the businesses he led
significantly grew and prospered.
External appointments
Non-executive director at
Polar Capital Holdings plc
andCadogan Settled Estates.
6. Jack Perry
NON-EXECUTIVE DIRECTOR
Date of appointment
January 2017.
Career & background
Previously chief executive of Scottish
Enterprise and a former Managing
Partner and Regional Industry
Leader of Ernst & Young LLP. Served
on the boards of FTSE 250 and other
public and private companies
and is a member of the Institute of
Chartered Accountants of Scotland.
Skills & expertise
Jack is chairman of two other listed
investment companies and has
developed an understanding of
the needs of all stakeholders. His
experience as a senior audit partner
and subsequently in service on
numerous audit committees has
enabled him to be an effective
Audit Committee Chairman.
External appointments
Chairman of European Assets
Trust PLC and ICG-Longbow
Senior Secured UK Property
Debt Investments Limited.
8.
1.
4. 5.
7.
2. 3.
6.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
59
2. Andrew Bell
CEO
Date of appointment
February 2010.
Career & background
Previously Head of Research at
Rensburg Sheppards and an
equity strategist and Co-Head
of the Investment Trusts team
atBZW and CSFB. Prior to the
City, he worked for Shell in Oman,
leaving to take a Sloan Fellowship
at the London Business School.
Skills & expertise
Andrew’s roles prior to joining Witan
have given him valuable experience
of economic and geopolitical events
and how they influence equity
markets, along with considerable
knowledge and experience of
the investment trust sector.
External appointments
Chairman of The Diverse
Income Trust plc.
7. Ben Rogoff
NON-EXECUTIVE DIRECTOR
Date of appointment
October 2016.
Career & background
Lead manager of Polar Capital
Technology Trust plc since 2006 and
a fund manager of Polar Capital
Global Technology Fund and Polar
Capital Automation and Artificial
Intelligence Fund. He has been a
technology specialist for 23 years.
Skills & expertise
As a highly experienced listed
equities fund manager, Ben has a
deep understanding of the analysis
process required for investing in
public companies. His knowledge of
the technology sector particularly
enables him to identify the risks from
disruption not just to the sector but in
general. Ben applies this knowledge
to his questioning and monitoring
of Witan’s external managers.
External appointments
Director, Technology at
Polar Capital.
3. Rachel Beagles
NON-EXECUTIVE DIRECTOR
Date of appointment
July 2020.
Career & background
Previously a managing director
and co-head of pan-European
banks equity research and sales at
Deutsche Bank. Since 2003 she has
worked as a non-executive director
in the investment company, asset
management, charity and social
housing sectors. She was Chair
of the Association of Investment
Companies from 2018 to 2021.
Skills & expertise
Rachel has extensive knowledge
and understanding of the equity
markets from her experience
in research and sales. She is
an experienced non-executive
director of investment trusts.
External appointments
Non-executive director of
Gresham House plc and The
Mercantile Investment Trust plc
and Chair of the Investment
Committee at Parkinson’s UK.
8. Paul Yates
NON-EXECUTIVE DIRECTOR
Date of appointment
May 2018.
Career & background
Previously CEO of UBS Global Asset
Management (UK) Limited and
held a number of global roles
at UBS prior to retiring in 2007.
Skills & expertise
Paul‘s prior roles give him
wide experience of the fund
management business including
equity management, marketing,
people and business management.
Paul also offers investment
trust experience having sat
on four other trust boards.
External appointments
Chairman of the Advisory Board of
33 St James’s Limited, non-executive
director of Fidelity European Trust
PLC and Capital Gearing Trust plc.
4. Gabrielle Boyle
NON-EXECUTIVE DIRECTOR
Date of appointment
August 2019.
Career & background
Senior Fund Manager and
Head ofResearch at Troy Asset
Management since 2011. She is the
Senior Fund Manager for the Trojan
Global Equity Fund and the Electric
& General Investment Fund.
Skills & expertise
Gabrielle has over 30 years’
experience in fund management
and has managed global equity
portfolios since 2001 and European
portfolios since 1998. With this
background she brings knowledge
of investing through market cycles
and understanding of the skills
required of fund managers.
External appointments
Investment director and Head of
Research at Troy Asset Management.
5. Suzy Neubert
SENIOR INDEPENDENT DIRECTOR
Date of appointment
April 2012.
Career & background
Previously Global Head of
Distribution at J O Hambro
Capital Management. Prior
to that, managing director of
Equity Markets at Merrill Lynch
Securities in London following
roles in equity research and
sales. She is a qualified barrister.
Skills & expertise
Suzy’s 32 years’ experience in
sales and marketing roles on
both the sell and buy sides of
financial services has given her a
thorough understanding of equity
markets. Her role at J O Hambro
provided her with insight into the
distribution of funds to institutions
and private wealth managers.
External appointments
Non-executive director
at ISIO, Jupiter Fund
Management plc and LV=.
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
60
Corporate Governance
This statement forms part of the Directors’ Report on pages 72 to 75.
Effective
governance
CHAIRMAN’S INTRODUCTION
I am pleased to report below on the Board’s
approach to corporate governance. The Board
is responsible for effective governance of the
Company and we take our responsibilities
underthe UK Corporate Governance Code
veryseriously.
The UK Listing Authority’s Disclosure Guidance and Transparency
Rules (the ‘Disclosure Rules’) require listed companies to disclose
how they have applied the principles and complied with the
provisions of the UK Corporate Governance Code (‘Corporate
Governance Code’), as issued by the Financial Reporting Council
(‘FRC’). The Corporate Governance Code issued in July 2018 was
applicable to the Company in the year under review. The
Corporate Governance Code can be viewed at www.frc.org.uk.
The related Code of Corporate Governance (the ‘AIC Code’),
issued by the Association of Investment Companies (‘AIC’),
provides specific corporate governance guidelines to investment
companies. The FRC has confirmed that AIC member companies
who report against the AIC Code will be meeting their obligations
in relation to the Corporate Governance Code and the
associated disclosure requirements of the Disclosure Rules. The
AIC Code that was issued in February 2019 was applicable to the
Company in the year under review. The AIC Code is available on
the AIC website (www.theaic.co.uk). It includes an explanation of
how the AIC Code adapts the Principles and Provisions set out
inthe Corporate Governance Code to make them relevant for
investment companies.
Andrew Ross
Chairman
15 March 2022
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
61
The role of the Board
The role of the Board is to promote
the long-term sustainable success of the
Company, generating value for shareholders
and contributing to wider society.
The Board is collectively responsible for the success
oftheCompany. Its role is to provide leadership within a
framework of controls that enable risk to be assessed and
managed. The Board sets the Company’s strategic aims
(subject to the Company’s Articles of Association and to
such approval of the shareholders in general meeting as
may be required from time to time) and ensures that the
necessary resources are in place to enable the
Company’s objectives to be met.
The Board is responsible in particular for the overall
delivery of performance to shareholders through setting
an appropriate investment objective, ensuring that
proper resources are applied to the management of
theCompany’s portfolio and the monitoring, control
andmitigation of the associated risks.
For details of our managers,
pages 26 to 32
COMPLIANCE
The Board has considered the Principles and Provisions of the AIC
Code. The AIC Code addresses the Principles and Provisions set
out in the Corporate Governance Code, as well as setting out
additional Provisions on issues that are of specific relevance
tothe Company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the FRC,
provides more relevant information to shareholders.
The Company has complied with the Principles and Provisions of
the AIC Code during the year ended 31 December 2021 except
asset out below:
> The Corporate Governance Code (Provisions 25 and 26)
includes provisions relating to the need for an internal audit
function. The Company does not have an internal audit
function, for reasons that are explained on page 56.
The principles of the AIC Code
The AIC Code is made up of 17 principles supported by
35Provisions.
Details of how the Company has applied the Principles and
Provisions are set on the following pages.
1 BOARD LEADERSHIP AND PURPOSE
Board and director independence
At 31 December 2021 the Board was composed of seven
independent non-executive directors and one executive director,
the CEO. The Board is therefore independent of the Company’s
executive management. All the directors are wholly independent
of the Company’s various investment managers. In the opinion
ofthe Board, each of the directors is independent in character
and judgement and there are no relationships or circumstances
relating to the Company that are likely to affect their judgement.
Two of the directors, Ms Neubert and Mr Bell, have been on the
Board for nine years or more. Mr Bell, who is the CEO of Witan,
isan executive director but is independent of the Company’s
appointed fund managers and other service providers. His
longservice is beneficial to the Company. The Board considers
that Ms Neubert is, and has been since her appointment, an
independent non-executive director. Those directors who
haveserved on the Board for more than nine years stand for
re-election by the shareholders each year and will do so for
aslong as they continue to serve on the Board. The Board is
firmly ofthe view that length of service does not of itself impair
adirector’s ability to act independently; rather, a director’s
longerperspective can add value to the deliberations of a
well-balanced investment trust company board. Independence
stems from the willingness to make decisions that may conflict
with the interests of management; this is a function of
confidence, integrity and judgement. The Board will continue
totake account of length of service in its succession planning,
asone of a number of factors, including the need to maintain
aproper balance of diversity, skills and experience.
Mr Ross, the Chairman of the Company, is considered to be
independent. He does not have any relationships that might
create a conflict of interest between the Chairman’s interests
and those of shareholders.
The non-executive directors, led by the SID, meet without the
Chairman present at least annually to appraise the Chairman’s
performance, and on other occasions as necessary.
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
62
Corporate Governance continued
Board commitments
When considering new appointments, the Board takes
intoaccount other demands on directors’ time. Prior to
appointment, new directors are asked to disclose any existing
significant commitments with an indication of the time involved.
Additional external appointments require the prior approval of
the Remuneration and Nomination Committee on behalf of the
Board, with the reasons for permitting significant appointments
explained in the Annual Report.
Company’s purpose, values and strategy
The Board assesses the basis on which the Company generates
and preserves value over the long term. The Strategic Report
describes how opportunities and risks to the future success
ofthe business have been considered and addressed, the
sustainability of the Company’s business model and how
itsgovernance contributes to the delivery of its strategy.
TheCompany’s investment objective and investment
policyaresetout on the inside front cover.
Culture
The Board seeks to establish and maintain a corporate culture
characterised by fairness in its treatment of employees and
service providers, whose efforts are collectively directed
towardsdelivering returns to shareholders in line with the
Company’s purpose and objectives. It is the Board’s belief
thatthis contributes to the greater success of the Company,
aswell as being an appropriate way to conduct relations
between parties engaged in a common purpose.
2 DIVISION OF RESPONSIBILITIES
The Board
The Board normally consists of eight directors, including the CEO,
which is considered to be an appropriate number. This ensures
that no one individual or small group of individuals dominates
the Board’s decision making. Details of the directors are set out
on pages 46-47. They demonstrate a broad range of skills and
experience, gained overseas as well as in the United Kingdom,
which are relevant to the strategy of the Company. There are
currently eight directors on the Board. The Board has typically
met eight to ten times a year.
The Chairman
Mr Ross was appointed as Chairman of the Company in
April2020.
The Chairman’s primary role is to provide leadership to the
Board, assuming responsibility for its overall effectiveness in
directing the Company. The Chairman is responsible for:
> taking the chair at general meetings and Board meetings,
conducting meetings effectively and ensuring all directors
are involved in discussions and decision making;
> setting the agenda for Board meetings and ensuring the
directors receive accurate, timely and clear information for
decision making;
> taking a leading role in determining the Board’s composition
and structure;
> overseeing the induction of new directors and the
development of the Board as a whole;
> leading the annual Board evaluation process and assessing
the contribution of individual directors;
> supporting and also challenging the CEO and other suppliers
where necessary;
> ensuring effective communications with shareholders and,
where appropriate, other stakeholders; and
> engaging with shareholders to ensure that the Board has
aclear understanding of shareholder views.
Senior Independent Director
Ms Neubert was appointed as the Senior Independent Director
(‘SID’) in April 2021 following the retirement of Mr Watson from
theBoard at the AGM in April 2021. The SID serves as a sounding
board for the Chairman and acts as an intermediary for other
directors and shareholders. The SID is responsible for:
> working closely with and supporting the Chairman;
> leading the annual assessment of the performance of
theChairman;
> holding meetings with the other directors without the
Chairman being present, on such occasions as necessary;
> carrying out succession planning for the Chairman’s role;
> working with the Chairman, other directors and shareholders
to resolve major issues; and
> being available to shareholders and other directors to
address any concerns or issues they feel have not been
adequately dealt with through the usual channels of
communication (i.e. through the Chairman or the CEO).
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
63
Director responsibilities
The Board is responsible for determining the strategic direction
of the Company and for promoting its success. At least one of
itsmeetings each year is devoted entirely to reviewing overall
strategy and progress is monitored throughout the year.
The Chief Executive Officer and the AIFM monitor investment
performance and all associated matters. The Chief Executive
Officer reports to each Board meeting, at which investment
performance, asset allocation, gearing, marketing and
investorrelations are usually key agenda items.
Matters specifically reserved for decision by the full Board
havebeen defined. These include decisions relating to strategy
and management; structure and capital; financial reporting
andcontrols; internal controls; contracts with third parties;
communication; Board membership and other appointments;
Board and employee remuneration; delegations of authority;
corporate governance matters; and Company policies. There
isan agreed procedure for directors, in the furtherance of their
duties, to take independent professional advice, if necessary,
atthe Company’s expense.
The directors have access to the advice and services of the
Company’s Executive team, AIFM and the Company Secretary,
through its appointed representative, who are responsible to
theBoard for ensuring that Board procedures are followed
andthat applicable rules and regulations are complied with.
Board Committees
The Board has established an Audit Committee and a
Remuneration and Nomination Committee. The Board has
chosen to combine the roles of remuneration and nomination
inone Committee. The memberships of the Audit Committee
and the Remuneration and Nomination Committee are set out
on pages 46-47. The roles and responsibilities of the Committees
are described in the Report of the Audit Committee on pages 57
to 59 and in the Directors’ Remuneration Report on pages 60-61.
Every year the Board reviews its composition and the
composition of its two Committees. The Board’s Remuneration
and Nomination Committee oversees this process. Further
details are given on page 55 under Board evaluation.
The Chief Executive Officer (‘CEO’)
The CEO is responsible to the Board and the AIFM for the
overallmanagement of the Company including investment
performance, business development, shareholder relations,
marketing, investment trust industry matters, administration
andunquoted investments. The duties of the CEO include leading
on investment strategy and asset allocation, on the selection
and monitoring of the investment managers and their terms of
reference and on the use of derivatives. The Board, in conjunction
with the AIFM, sets limits on matters such as asset allocation,
gearing and investment in derivatives, within which the CEO
hasdiscretion.
The CEO reports to each meeting of the Board. His reports include
confirmation that the Board’s investment limits and restrictions
and those which govern the Company’s tax status as an
investment trust, have been adhered to.
The CEO and his team monitor the share price and the discount/
premium to net asset value on a daily basis and he reports to
every Board meeting on this subject. Where appropriate, the
Board makes use of share buybacks (at a discount) and
issuance (at a premium) to add to the net asset value per
shareand achieve a sustainable low discount (or a premium)
tonet asset value.
In addition to his responsibilities for the overall management of
the Company, the CEO manages the Direct Holdings portfolio.
A maximum of 15% of the Company’s gross assets (at the time
ofpurchase) may be invested in specialist funds within this
portfolio and there are restrictions on the number, size and
typeof investments that may be made.
The Board’s Remuneration and Nomination Committee reviews
the performance of and the contractual arrangements with
theCEO. The CEO is responsible to the Board for reviewing the
performance and the contractual arrangements of his staff.
TheBoard’s Remuneration and Nomination Committee
overseesthis process.
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
64
Corporate Governance continued
Shareholder engagement
The Chairman is responsible for ensuring that there is
effectivecommunication with the Company’s shareholders.
He works closely with the CEO and there is regular liaison
withthe Company’s stockbroker. There is a process in place
foranalysing and monitoring the shareholder register and
aprogramme for meeting or speaking with the institutional
investors and with private client stockbrokers and advisers.
Inaddition to the CEO, the Chairman, or the Senior
Independent Director, expects to be available to meet the
larger shareholders and the Chairman of the Remuneration
and Nomination Committee is available to discuss
remuneration matters.
In normal circumstances, the Company encourages
attendance at its Annual General Meeting (‘AGM’) as a forum
for communication with individual shareholders. The Notice of
the AGM and related papers are sent to shareholders at least
20 working days before the meeting. The Chairman, the CEO,
the Chairman of the Audit Committee and the Chairman of
the Remuneration and Nomination Committee all expect
tobepresent at the AGM and to answer questions from
shareholders as appropriate. The CEO makes a presentation
tothe meeting.
Details of the proxy votes received in respect of each
resolution are made available to shareholders. In the event
ofa significant (defined as 20% or more) vote against any
resolution proposed at the AGM, the Board would consult
shareholders in order to understand the reasons for this
andconsider appropriate action to be taken, reporting
toshareholders within six months.
In the circumstances of the COVID-19 pandemic, the Company
was unable to hold a physical AGM in 2021. The Board very
much hopes that it will be possible to hold a physical meeting
this year and the Notice of AGM has been prepared on that basis.
In addition, arrangements will be put in place for shareholders
to attend the meeting virtually and put questions to the Board
if they cannot attend the AGM in person.
The directors may be contacted through the Company
Secretary at the address shown on the inside back cover.
While the CEO and his team expect to lead on preparing and
effecting communications with investors, all major corporate
issues are put to the Board or, if time is of the essence, to a
Committee thereof.
The Board places importance on effective communication
with investors and approves a marketing programme each
year to enable this to be achieved. Copies of the Annual
Report and the Half Year Report are circulated to shareholders
and, where possible, to investors through other providers’
products and nominee companies (or written notification
issent when they are published online). In addition, the
Company publishes a monthly factsheet and its net asset
value per share is released daily. All this information is readily
accessible on the Company’s website (www.witan.com). A Key
Information Document, prepared in accordance with the UK
version of EU rules, is also published on the Company’s
website. The Company belongs to the Association of
Investment Companies which publishes information
toincrease investors’ understanding ofthe sector.
Stakeholder engagement
The AIC Code requires directors to explain their statutory duties
as stated in sections 171–177 of the Companies Act 2006. Under
section 172, directors have a duty to promote the success of the
Company for the benefit of its members as a whole and in doing
so have regard to the consequences of any decisions in the long
term, as well as having regard to the Company’s stakeholders
amongst other considerations.
The Board’s report on its compliance with Section 172 of the
Companies Act 2006 is contained within the Strategic Report
onpages 40 to 41.
The Board is responsible for ensuring that workforce policies
andpractices are in line with the Company’s purpose and
valuesand support its culture. The Remuneration and
Nomination Committee advises the Board in respect of policies
on remuneration-related matters. Since the Company has only
sixemployees including the CEO, the Board considers that the
CEO, who is also a director, is best-placed to engage with the
workforce. In accordance with the Company’s whistleblowing
policy, members of staff who wish to discuss any matter with
someone other than the CEO are able to contact the Audit
Committee Chairman, or in his absence another member
oftheAudit Committee.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
65
Board meetings
The CEO (who is a director), other representatives
of the Company’s Executive team and the AIFM
and a representative of the Company Secretary
expect to be present at all meetings.
The primary focus at Board meetings is a review of
investment performance and associated matters such
asgearing, asset allocation, attribution analysis, marketing
and investor relations, peer group information and industry
issues. The Board devotes two days each year to meetings
with the Company’s investment managers and each
investment manager sends representatives at least once a
year. The Chairman seeks to encourage open debate within
the Board and a supportive and co-operative relationship
with the Executive team and with the Company’s investment
managers, advisers and other service providers.
The number of formal meetings during the year of the Board
and its Committees, and the attendance of the individual
directors at those meetings, is shown in the table that follows.
The Board normally meets eight to ten times a year. All the
then directors attended the AGM in April 2021 and the Board’s
‘Strategy Day’ in July 2021.
What happened
Witan became a signatory to the Net
Zero Asset Managers initiative (‘NZAM’)
in February 2022. The NZAM is an
international group of asset managers
committed to supporting the goal of
net zero greenhouse gas emissions by
2050 or sooner, in line with global efforts
to limit warming to 1.5 degrees Celsius;
and to supporting investing aligned with
net zero emissions by 2050 or sooner.
Why
The Company believes that combating
climate change is one of the greatest
challenges facing the world today
and a failure to adapt to it is one of the
greatest risks to investment returns. As
an allocator of capital, Witan has a role
to play in, and can benefit from, the
transition to net zero by encouraging
investee companies to adopt a clear
strategy to minimise environmental
damage, by avoiding companies which
pose the greatest risk and by investing
in companies which stand to benefit
from efforts to adapt to, curb or mitigate
environmental degradation. Becoming
a signatory to theNZAM reinforces this
belief and enables us to engage more
effectively with portfolio companies via
our managers.
How
The Board requires the Executive to
report regularly to them on all investment
matters, including ESG issues. The
Executive actively reviews developments
related to responsible investing and
engages with managers, industry bodies
and ESG initiatives to remain abreast of
evolving best practice. Witan’s responsible
investment policy has evolved over
several years and, in July 2021, net zero
alignment was a key focus of a Board
Strategy Day at which the Executive
recommended the Company become
a signatory to the NZAM. Before making
a decision, the Board considered how
becoming a signatory to the NZAM could
benefit shareholders and would align with
the Company’s overall objectives. It also
considered what commitments would be
required, the implications for its external
managers and what impact, if any, it
would have on the Company’s portfolio.
Board
Audit
Committee
Remuneration
and
Nomination
Committee
Number of meetings 9 4 2
A J S Ross 9 4
(1)
2
R A Beagles 9 4 -
A L C Bell 9 4
(1)
2
(1)
G M Boyle 8 – –
S E G A Neubert 9 – 2
J S Perry 9 4 –
B C Rogoff 8 – –
A Watson
(2)
4/4 1/1 1/1
P T Yates 9 4 2
(1) Not a member of the Committee but in attendance by invitation for all or part
of the meetings.
(2) Mr Watson retired from the board at the AGM in April 2021.
Example Board decision
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
66
Corporate Governance continued
Conflicts of interest
The Board’s actions taken to identify and manage conflicts of
interest are set out in the Directors’ Report. The Company has no
significant shareholders. A number of nominee companies are
the registered holders of significant numbers of shares, but these
represent beneficial holdings by a very large number of retail
investors who invest through the nominees’ platforms.
Relationship with the AIFM and fund managers
The Company manages its own operations through the Board
and that of its AIFM. Each investment manager runs a discrete
investment portfolio within the terms of their investment
management contract. Shares are held by the Company’s
custodian/depositary. The CEO leads on the selection and
monitoring of the investment managers and their terms of
reference, which are approved by the Board and the AIFM.
The individual investment managers are each appointed to
manage a discrete portfolio in accordance with guidelines
whichlimit, for example, the markets in which they can invest,
themaximum size of each investment and the amount of cash
that may be held in normal circumstances. They are not allowed
to invest in unquoted securities, to gear the portfolio, to sell
stocks short or to use derivatives. The investment managers
takedecisions on individual investments and are responsible
foreffecting transactions on the best available terms. The
Company and the AIFM receive monthly confirmation from
eachinvestment manager that it has carried out its duties
inaccordance with its investment mandate.
The Board scrutinises the performance of the investment
managers at each meeting and discusses their performance
with each manager at least once a year. The directors consider
itappropriate for the full Board to do this rather than delegating
this to a committee as it is considered appropriate for all
directors to be aware of the managers’ performance. The
AuditCommittee reviews the contractual relationships with the
investment managers at least annually. Further information
onthe investment managers’ fees is contained within the
Strategic Report on page 43.
Relationship with other service providers
The Board has delegated a wide range of activities to external
agents, in addition to the various investment managers. These
services include global custody (which includes the
safeguarding of the assets), investment administration,
management and financial accounting, Company Secretarial
and certain other administrative requirements and registration
services. Each of these contracts was entered into after full and
proper consideration by the Board of the quality and cost of the
services offered, including the control systems in operation
insofar as they relate to the affairs of the Company. Further
information on the service providers is contained within the
Strategic Report on page 42.
The Board receives and considers reports and information
fromthese contractors as required. The CEO and the AIFM are
responsible for monitoring and evaluating the performance of
the Company’s service providers. The Board’s Audit Committee
oversees this process together with the WIS Risk Committee: they
review the contractual relationships at least annually.
3 COMPOSITION, SUCCESSION AND EVALUATION
Appointments to the Board
The Board’s Remuneration and Nomination Committee
overseesthe recruitment process. The Remuneration and
Nomination Committee reviews the length of service of each
director each year and makes recommendations to the Board
when it considers that a new director should be recruited. All the
independent non-executive directors are asked to contribute to
the process and to consider serving on the sub-committee
appointed to draw up the shortlist of candidates. The process
generally includes the use of a firm of non-executive director
recruitment consultants or open advertising. The work of the
Remuneration and Nomination Committee during the year
issetout in the Committee’s report on pages 60 to 71.
New directors are appointed for an initial term ending three
yearsfrom the date of their first annual general meeting after
appointment, with the expectation that they will serve a
minimum of two three-year terms. There is no absolute limit
tothe period for which a director may serve, although the
continuation of directors’ appointments is contingent on
satisfactory performance evaluation and re-election at annual
general meetings. Directors’ appointments are reviewed formally
by the Board ahead of their submission for re-election. None of
the non-executive directors has a contract of service and a
non-executive director may resign by notice in writing to the
Board at any time. The Board’s tenure and succession policy
seeks to ensure that the Board is well-balanced and refreshed
regularly by the appointment of new directors with the skills
andexperience necessary, in particular, to replace those
lostbydirectors’ retirements.
Directors must be able to demonstrate their commitment to
theCompany, including in terms of time. The Board seeks to
encompass past and current experience of areas relevant to the
Company’s objective and operations, the most important being
investment management, finance, marketing, financial services,
risk management, custody and settlement, and investment
banking. Whilst the roles and contributions of longer-serving
directors are subject to rigorous review, the Board is strongly
ofthe view that length of service is only one factor and that
shareholders benefit from having directors with a longer
perspective of the Company’s history and its place in the
savingsmarket.
Directors newly appointed to the Board are provided with an
introductory programme covering the Company’s strategy,
policies and operations, including those outsourced to third
parties. Thereafter, directors are given, on a regular and ongoing
basis, key information on the Company’s investment portfolios,
financial position, internal controls and details of the Company’s
regulatory and statutory obligations (and changes thereto). The
directors are encouraged to attend industry and other seminars,
conferences and courses, if necessary at the Company’s
expense, and to participate generally in industry events. A log
ofdirectors’ training is maintained and reviewed each year by
both the Remuneration and Nomination Committee and the
Audit Committee.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
67
Board diversity
The Company supports the objectives of improving the
performance of corporate boards by encouraging the
appointment of the best people from a range of differing
perspectives and backgrounds. The Company recognises the
benefits of diversity (of which gender is one aspect) on the
Boardand takes this into account in its Board appointments.
TheCompany is committed to ensuring that its director search
processes actively seek men and women with the right
qualifications so that appointments can be made, on the basis
of merit, against objective criteria from a diverse selection of
candidates. The Board actively considers diversity during
directorsearches.
The Board consists of five men and three women. The Company’s
employees, including the CEO, are three men and three women.
The Company is committed to facilitating equal opportunity
andhas readily embraced flexible working arrangements for
existing staff.
Election and re-election by shareholders
New directors stand for election by the shareholders at the
annual general meeting that follows their appointment.
Thereafter all directors stand for re-election each year in
accordance with the Corporate Governance Code. The
Company’s Articles of Association require directors to stand
forre-election at least every three years, and those who have
served for more than nine years to stand for re-election annually.
The directors’ biographies on pages 46 to 47 and the notes to the
notice of AGM set out the specific reasons why each director’s
contribution is, and continues to be, important to the Company’s
long-term sustainable success.
Tenure of the Chairman
The Board’s policy is that the Chairman should not normally
remain in post beyond nine years from the date of his/her first
appointment to the Board. However, this period may be extended
for a limited time to facilitate effective succession planning and
the development of a diverse board, particularly in those cases
where the Chairman was an existing non-executive director on
appointment as Chairman.
The Board considers that the policy provides a balance between
the need for Board continuity as well as regular refreshment
anddiversity.
4 AUDIT, RISK AND INTERNAL CONTROL
The statement of directors’ responsibilities on page 76 describes
the directors’ responsibility for preparing this Annual Report.
The work of the Audit Committee is set out in the Committee’s
report on pages 57-59.
The principal risks and details of how they are managed are set
out on pages 37-39.
For details of our managers,
pages 26 to 32
The Chairman leads on
applying the conclusions
of the evaluation. The
Chairman reviews with
each director his or her
individual performance,
contribution and
commitment to the
Company. The SID leads
the annual evaluation
of the Chairman and
reviews the conclusions
with him. The Board’s
Remuneration and
Nomination Committee
oversees this process. The
Board is aware of Provision
26 of the AIC Code, which
states that evaluation
of the Board of FTSE 350
companies should be
externally-facilitated at
least every three years,
and has complied with
this provision every
three years since it was
first introduced except
in 2019 when the Board
considered it more
appropriate to defer
an externally facilitated
evaluation until 2020 when
Mr Ross had taken over
as Chairman. The Board
appointed Lintstock Ltd
tocarry out an evaluation
programme in the autumn
of 2020 and again in the
autumn of 2021. Lintstock
did not have any other
connection with the
Company. The Board
reviewed their report in
February 2022 and the
Chairman is leading
on implementing those
changes recommended
by the report that the
Board considered should
be made. The report did
not identify any material
weaknesses or concerns.
Board evaluation
The Board has established a process to
evaluate its performance annually. This
process is based on open discussion and
seeks to assess the strengths and weaknesses
of the Board and its Committees.
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
68
Internal control
The Board has established an ongoing process for identifying,
evaluating and managing the significant risks faced by the
Company. This process accords with the Corporate Governance
Code guidance, is subject to regular review by the Audit
Committee and was fully in place during the year under review
and up to the date of this Annual Report. The Board remains
responsible for the Company’s system of internal control and has
charged the Audit Committee with conducting an annual review
of the effectiveness of the system, covering all the controls,
including financial, operational and compliance controls and
riskmanagement systems. This review takes into account points
raised during the year in the regular appraisal of specific areas
of risk. However, such a system is designed to manage rather
than eliminate the risks of failure to achieve the Company’s
business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
In accordance with Principle O and provision 34 of the AIC Code,
the Board reviews the Company’s business risks at least once a
year. These are analysed and recorded in a risk map, which the
Audit Committee reviews at each meeting. It is also reviewed
and challenged regularly by the Board. Emerging risks are added
to the matrix as soon as identified together with any mitigating
actions required. The key risks which pose the greatest potential
risks to shareholders are set out on pages 37-39. The Company
receives from its main contractors formal reports which detail
the steps taken to monitor the areas of risk and which report the
details of any known internal control failures. The Committee
believes that these processes allow it to identify emerging
riskson a timely basis.
As described elsewhere, the management of Witan’s portfolio is
outsourced to a number of third-party investment managers
around the world. There are currently eight such investment
managers as well as the Direct Holdings portfolio which is
managed by the CEO.
The CEO has responsibility (under delegation from the Board and
the AIFM) for a number of aspects of the management of the
portfolio, including asset allocation, gearing and investment in
derivatives. The Board has set guidelines in respect of each of
these aspects within which he may operate. The CEO reports
tothe Board regularly on each of these areas, as well as on
theoverall performance of the Company and other matters
ofsignificance.
The in-house Executive management team of Witan and WIS
isresponsible for managing and controlling the relationships
with the third-party managers.
The management team receives monthly reports on
investmentand compliance matters from each manager.
During2021, theinvestment managers were asked to provide
detailed information on their operational structures and
systems.Each year, the Board also receives reports on their
internal controls from its investment managers; in most cases
these include areport from the relevant company’s auditors
onthe control policies and procedures in operation.
The CEO makes regular reports to the Board on the performance
of and activity within the Direct Holdings portfolio. In addition, the
portfolio’s performance is independently measured, along with
those of the third-party managers.
The Company’s subsidiary, WIS, is authorised and regulated by
the Financial Conduct Authority to provide investment products
and services and was appointed as the Company’s AIFM from
July 2014. The compliance structures required for these activities,
including a compliance manual and a compliance monitoring
programme, have been put into place.
The Company has a formal policy for staff to raise in confidence
any concerns about possible improprieties, whether in matters
offinancial reporting or otherwise, for appropriate independent
investigation. Its staff comprises only six people (including the
CEO), who are well known to and have frequent formal and
informal contact with the members of the Board.
The Company does not have an internal audit function. Through
WIS, the AIFM, it delegates the management of its investments
and most of its other operations to third parties and employs
only a small number of staff. The investment managers and
certain other key contractors are subject to external regulation
and most havecompliance and internal audit functions of their
own. The Company’s investments are held on its behalf by a
global custodian appointed by the depositary. A specialist firm
ofinvestment accountants and administrators is responsible for
investment administration, for maintaining accounting records
and for preparing financial accounts, management accounts
and other management information. In addition, the Board
receives an annual report on the investment administrator’s
internal controls, including a report from the investment
administrator’s auditor on the control policies and procedures
inoperation. The investment performance of the investment
managers, both individually and collectively, is measured for
Witan by a company that is independent of all the investment
managers. The corporate Company Secretary has well-
established experience in servicing investment trusts.
The appointment of these and other professional contractors
provides a clear separation of duties and a structure of internal
controls that is balanced and robust. The Board and the AIFM
willcontinue to monitor its system of internal control in order to
provide assurance that it operates as intended and the directors
will review at least annually whether a function equivalent to an
internal audit is needed.
5 REMUNERATION
The Directors’ Remuneration Report on pages 60 to 71 details the
process for determining the directors’ remuneration and sets out
the amounts payable. It reports on the Company’s compliance
with the provisions of the AIC Code relating to remuneration and
also a number of provisions from the UK Corporate Governance
Code that have not been included in the AIC Code, as most
investment trusts do not have executive directors.
Andrew Ross
Chairman
15 March 2022
Corporate Governance continued
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
69
Report of the Audit Committee
STATEMENT BY THE CHAIRMAN OF THE COMMITTEE
As Chairman of the Audit Committee
(the‘Committee’), I am pleased to present
theReportof the Committee for the year
ended31 December 2021.
COMPOSITION AND RESPONSIBILITIES OF THE COMMITTEE
The members of the Committee are appointed by the Board.
There are normally three members of the Committee. I was
appointed as Chairman of the Committee in May 2018,
havingbeen a member of the Committee since February 2017.
Mrs Beagles and Mr Yates, who were appointed to the Committee
in 2020 and 2018, respectively, were members of the Committee
throughout the year. Mr Watson was also a member of the
Committee until he retired from the Board at the AGM in April 2021.
The Board has taken note of the requirements that the
Committee as a whole should have competence relevant to
thesector in which the Company operates and that at least
onemember of the Committee should have recent and relevant
financial experience. The Board is satisfied that the Committee
isproperly constituted in both respects. I am a Chartered
Accountant and was previously a partner at Ernst & Young. The
other Committee members have a combination of financial,
investment and other relevant experience gained throughout
their careers. Details of our qualifications and experience are
given on pages 46 to 47.
The role of the Committee is to assist the directors in
protectingshareholders’ interests through fair, balanced
andunderstandable reporting, ensuring effective internal
controls and maintaining an appropriate relationship with
theGroup’s auditor. The Committee’s role and responsibilities
aresetout inits terms of reference, which comply with the
UKCorporate Governance Code. The terms of reference are
available on request from the Company Secretary and can be
seen on theCompany’s website (www.witan.com). In summary,
the Committee is responsible for:
> monitoring the integrity of the Company’s financial
statements, including consideration of the Company’s
accounting policies and significant reporting judgements;
> ensuring the application of the Company’s internal financial
and regulatory compliance controls and risk management
systems using external consultants where appropriate;
> the appointment, reappointment and removal of the
externalauditor and approving the remuneration
andtermsof engagement of the external auditor;
> reviewing and monitoring the external auditor’s
independence and objectivity and the effectiveness
oftheaudit process;
> developing and implementing policy on the engagement
ofthe external auditor to supply non-audit services; and
> reporting to the Board on how it has discharged its duties.
MEETINGS OF THE COMMITTEE
The Committee held four meetings during 2021 and also met in
March 2022. Meetings are usually attended, by invitation, by the
Chairman of the Company, members of management, relevant
external advisers and, twice a year, the auditors. I report to the
Board after each meeting on the main matters discussed
atthemeeting.
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
70
In summary, the main matters arising in relation to 2021 were:
> Assessment of the controls to ensure the ownership,
valuation and liquidity of investments: this includes
assessing management reports on the controls and
procedures of external managers and the external
custodian/administrator and the review of the audit
workperformed. No significant issues were identified.
> As part of the Committee’s detailed review of the financial
statements, particular attention was paid to the key areas
ofthe existence and valuation of assets; recognition of
revenue; determination of the fair value of own debt and the
appropriateness of the discount rate used to assign a present
value to that debt; and the reasonableness of the scenarios
envisaged in developing the sensitivity analysis for each
significant risk.
> Interim and year-end reporting, in light of the requirements
of the Codes of Corporate Governance issued by the AIC
andFinancial Reporting Council (‘FRC’) guidance to audit
committees on key developments for annual reports and
non-financial reporting. The Committee agreed the process,
timing and responsibility for compliance. The Committee
agreed to recommend to the Board that it should approve
the Half Year and Annual Reports.
> Reviews were conducted on a variety of specific matters
including whistleblowing, anti-money laundering compliance,
data and IT systems security and business continuity. As
explained elsewhere in this report (see page 42), the Company
makes extensive use of third-party service providers, who
areoverseen by the WIS Executive. TheCommittee approves
the programme of oversight and reviews the results.
> In light of the relative simplicity of the operations and the
useof independent external consultants, who report directly
to the Committee, to advise on regulatory compliance and
adherence to internal procedures, it was concluded that
nointernal audit function was required (see page 56).
> The Committee has worked with the Risk Committee of WIS,
the Company’s subsidiary, to ensure WIS’ compliance with
Financial Conduct Authority (‘FCA’) regulations.
> The Committee also monitored the work required to ensure
the Company’s compliance with new legislation, including
the FRC’s guidance on reporting on the impact of COVID-19;
reports from the Financial Stability Board’s Task Force on
climate-related reporting (from which the Company, as an
investment trust, is exempt); the requirements to produce the
Annual Report in the European Single Electronic Format; and
the FRC report on the use of alternative performance
measures. In particular:
– The Committee reviewed the BEIS consultation paper
onaudit and governance reform, ‘Restoring trust in audit
and corporate governance’ and I submitted a response
to BEIS on behalf of the Company.
– The FRC published the key findings of its review of the
viability and going concern disclosures for a selection
ofannual reports and accounts for Main Market and AIM
listed companies, in which it provided useful guidance
forpreparers of annual accounts by identifying areas
where viability and going concern disclosures could
beimproved, and by providing examples of better
disclosures. The Committee reviewed this report and has
endeavoured to ensure that its recommendations have
been considered in the drafting of this Annual Report.
RISK
Management has identified (Strategic Report pages 37 to 39)
seven main areas of potential risk: market and investment
portfolio; operational and cyber; compliance and regulatory
change; accounting, taxation and legal; liquidity; COVID-19; and
ESG factors, and has set out the actions taken to evaluate and
manage these risks. The Committee also monitors newly
emerging risks that arise from time to time (e.g. Brexit from 2016
and the COVID-19 virus outbreak in 2020) to ensure that the
implications for the Company are properly assessed and
mitigating controls introduced where necessary.
The auditor has also detailed two key audit matters in
itsreport:valuation and existence of investments and the
occurrence and completeness of investment income; and
hasset out the work it has performed to satisfy itself that
thesehave been properly reflected in the financial statements.
The Committee has monitored the controls designed to mitigate
the risks associated with these matters during the year, including
reviewing management’s risk report at each meeting and
requiring amendments to both risks and mitigating actions as
appropriate. The Committee considers that management has
carried out a robust assessment of the emerging and principal
risks facing the Company and has taken appropriate action to
mitigate those risks. There were no significant areas of material
judgement or unadjusted errors.
GOING CONCERN AND VIABILITY
The Committee has assessed the information, forecasts
andassumptions underlying the Viability and Going Concern
Statements on pages 44 and 45 and recommended to the Board
that they are appropriate. This assessment included areview of
the scenario analysis set out on page 44.
EXTERNAL AUDIT
Grant Thornton UK LLP (‘Grant Thornton’) was appointed
asstatutory auditor in 2016. In accordance with the current
legislation, the Company will need to re-tender for new auditors
at least every ten years and has to change its auditor after
20years. The audit partner is Paul Flatley. The auditor is required
torotate the principal engagement partner every five years;
thisis Mr Flatley’s first year as audit partner. Accordingly, the
Committee considers that the Company has complied with
theprovisions of the Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 during the financial year.
The Committee reviews the scope and effectiveness of the
auditprocess, including agreeing the auditor’s assessments
ofmateriality, and monitors the auditor’s independence
andobjectivity.
The Committee has reviewed the FRC’s Audit Quality Review
report for Grant Thornton and discussed the findings with the
audit partner. The Committee was satisfied that none of the
indicators in that report had particular relevance to this year’s
audit of the Company.
Report of the Audit Committee continued
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
71
The Committee discussed the audit plan. It challenged the
auditor’s assessment of the key audit matters and was satisfied
that these had been adequately identified. The auditor was not
instructed to look at any additional specific areas. The final audit
findings report was discussed and agreed with the auditor. The
Committee is satisfied that it implemented sufficiently robust
processes to deliver a high-quality audit.
As part of their audit work, Grant Thornton carried out a review of
the design and effectiveness of relevant controls in place at BNP
Paribas Securities Services related to specific line items such as
the valuation of the portfolio and completeness of investment
income. They did not discover anysignificant issues. In addition,
Grant Thornton has been appointed to provide an assurance
report on client assets in accordance with the FCA’s CASS
reportto the FCA in respect ofWIS, to be completed by
theendofApril 2022.
FINANCIAL STATEMENTS
The Board has requested the Committee to confirm that in
itsopinion the Board can make the required statement that
theAnnual Report taken as a whole is fair, balanced and
understandable and provides the information necessary
forshareholders to assess the Company’s position and
performance, business model and strategy. The Committee
hasgiven this confirmation on the basis of its review of the
wholedocument, underpinned by involvement in the planning
for its preparation, review of the processes to assure the
accuracy of factual content.
NON-AUDIT SERVICES
The Committee has previously agreed that non-audit fees
cannot be more than 70% of the average audit fees for the
lastthree years. The Company’s policy on non-audit services
was updated in 2020 to comply with the FRC Revised Ethical
Standard 2019. Any new engagement with Grant Thornton for
anynon-audit service must, if material, be tendered and
anyappointment approved in advance by the Committee.
TheCommittee assesses each service individually, having
considered the cost-effectiveness of the service and the impact
on the auditor’s independence. Grant Thornton did not provide
any non-audit services to the Company other than the CASS
report, for which their fees are £25,000. The ratio of audit to
non-audit work in the year was 75:25. The Committee considered
that it was in the interests of the Company to appoint Grant
Thornton for this assurance work as it would not be cost-effective
to appoint another firm.
EFFECTIVENESS OF THE COMMITTEE
In assessing its own effectiveness, the Committee has reviewed
the report produced by Lintstock as part of its review of the Board
(see page 55) and will implement the recommendations from
that report. The Committee considers that its approach is
comprehensive and appropriate, that it focuses on the
rightissues and is managed well.
APPROVAL
This report was approved by the Committee on 15 March 2022
and is signed on its behalf by:
Jack Perry
Chairman of the Audit Committee
15 March 2022
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
72
Directors’ Remuneration Report
CHAIRMAN’S STATEMENT
I am pleased to present my report as Chairman
of the Remuneration and Nomination Committee
(the ‘Committee’)
The Committee deals with both nominations and remuneration-
related matters. Reports on both aspects of the Committee’s
work are covered below.
The Committee’s roles and responsibilities are set out in its
termsof reference, which are available on request from the
Company Secretary and can be found on the Company’s
website (www.witan.com).
NOMINATIONS
The Committee has responsibility for reviewing the effectiveness
and composition of the Board and for overseeing the recruitment
process for non-executive directors.
There have not been any appointments to the Board in 2021.
Mr Watson retired as a director at the Annual General Meeting
(‘AGM’) in April 2021. Following his retirement, Ms Neubert was
appointed as the Senior Independent Director. Mrs Beagles
wasappointed as a member of the Audit Committee in 2020
inanticipation of his retirement.
During the year, the Committee reviewed the composition of the
Board and its Committees, using a skills matrix. The Committee
recommended to the Board that there was no immediate need
to change the composition of the Board or its Committees but
notes that Ms Neubert has been on the Board for more than
nineyears. The Board agreed with the Committee’s
recommendations. As explained on page 49, the Board
considersMs Neubert to be an independent director.
The Board has seen a number of experienced directors retire
inarelatively short space of time and has, therefore, asked
Ms Neubert, the longest-standing non-executive director, to
stayon as Senior Independent Director for a further year,
subjectto the identification of a suitable successor.
A report on the Board’s evaluation of itself and its Committees
isset out on page 55.
The Board’s policy on diversity is set out on page 55.
REMUNERATION
The remainder of this report covers the remuneration-related
activities of the Committee for the year ended 31 December 2021.
It sets out the remuneration policy and remuneration details for
the non-executive and executive directors of the Company. It has
been prepared in accordance with the Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013 (the ‘Regulations’) and the requirements of
theAssociation of Investment Companies.
The report is split into three main areas: this statement
frommeas Chairman of the Committee; an annual report
onremuneration; and a policy report. The annual report on
remuneration provides details of remuneration during the
financial year ended 31 December 2021 and other information
required by the Regulations. It will be subject to an advisory
voteat the AGM on 5 May 2022.
The Company’s existing remuneration policy was subject to
abinding shareholder vote at the AGM in 2019 and took effect
from 1 January 2019. No changes were made to the remuneration
policy existing at that time. The Committee is required to submit
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
73
its remuneration policy to a shareholder vote every three years
and, accordingly, will be putting a resolution to approve the
remuneration policy to shareholders at the AGM to be held on
5 May 2022. If approved by shareholders, the policy will apply
fora further three years until the AGM in 2025, when it will next
bevoted on by shareholders.
The Committee is not proposing to make any significant changes
to the remuneration policy this year. The Committee reviewed the
terms of Mr Bell’s contract, in particular the details of his bonuses,
and considered whether any of the deferred elements of the
bonuses should be paid in shares (a ‘Deferred Award’). After
careful consideration, the Committee decided that, in light of
Mr Bell’s substantial holding in the Company (worth £1.89 million
at the time of writing, 6.0 times the CEO’s base salary) and the
Corporate Governance Code’s requirements for clarity and
simplicity in determining executive directors’ remuneration policy
and practices, it would not be cost-effective to establish a share
scheme for one person. The Committee expects the CEO to
maintain a shareholding in the Company equivalent to at least
three times his salary and reserves the right to make Deferred
Awards in the form of an award over shares in the Company
infuture.
In addition, the Committee reviewed the criteria that it takes
intoaccount in determining the CEO’s discretionary bonus
andfurther developed the criteria to focus additionally on the
long-term strategy of the Company and ESG. The criteria are
setout in full in note 1(i) on page 69.
The Companies Act 2006 requires the auditor to report to
shareholders on certain parts of the Directors’ Remuneration
Report and to state whether, in their opinion, those parts of the
report have been properly prepared in accordance with the
Regulations. The parts of the Annual Report on remuneration
thatare subject to audit are indicated in the Report.
Role of the Committee
The remuneration-related role of the Committee is twofold.
First,it has a role in respect of executive remuneration, assisting
thedirectors in determining the remuneration policy for the
ChiefExecutive Officer (‘CEO’) and evaluating his performance,
aswellas assisting the CEO in determining the remuneration
arrangements for the Company’s staff. Secondly, the Committee
considers the remuneration of the non-executive directors and
has delegated responsibility for determining the remuneration
ofthe Chairman. The Committee considers the need to appoint
external remuneration consultants when necessary.
The Committee consists of three non-executive directors,
including its Chairman, who are appointed by the Board. I have
been a member of the Committee since May 2018 and was
appointed as Chairman in April 2020. Ms Neubert and Mr Ross
were appointed as members of the Committee in April 2020.
The Committee’s programme is to meet formally at least twice
ayear and on such other occasions as required. The Committee
held two meetings during the year, during which it addressed all
the matters under its remit.
As part of its annual work, the Committee reviewed thenon-
executive directors’ fees in February 2022. The Committee’s
recommendation, to which the Board agreed, was that
non-executive directors’ fees should be increased and
witheffect from 1 April 2022, directors’ fees will be:
£
Chairman of the Company 73,500
Chairman of the Audit Committee 48,000
Chairman of the Remuneration and Nomination
Committee 44,000
Senior Independent Director 44,000
Other non-executive directors 38,000
Since 1 April 2020, the fees have been:
£
Chairman of the Company 68,500
Chairman of the Audit Committee 45,000
Chairman of the Remuneration and Nomination
Committee 42,000
Senior Independent Director 42,000
Other non-executive directors 36,000
With effect from 1 April 2022, the aggregate fees for the current
non-executive directors’ fees will amount to£323,500 per annum
(2021: £305,500).
The Company’s Articles of Association currently limit the
aggregate fees payable to the non-executive directors
to£450,000 per annum.
Paul Yates
Chairman of the Remuneration
and Nomination Committee
15 March 2022
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
74
Directors’ Remuneration Report continued
ANNUAL REPORT ON REMUNERATION
An ordinary resolution for the approval of this section of the report (together with the Chairman’s Statement on pages 60 to 61) will
beput to members at the forthcoming AGM.
The following section sets out the executive director’s and the non-executive directors’ remuneration for the year ended 31 December
2021. The information provided on pages 62 to 65 of this report (other than the total shareholder return performance graph) has
beenaudited by Grant Thornton UK LLP.
Single total figure table for the year (audited)
Non-executive directors
The following table shows the single figure of remuneration of the non-executive directors for the financial year ended 31 December
2021, together with the comparative figures for 2020:
31 December 2021 31 December 2020
Fees
£
(1)
Taxable
benefits
(2)
Total
remuneration
Fees
£
(1)
Taxable
benefits
(2)
Total
remuneration
A J S Ross 68,500 – 68,500 56,600 – 56,600
R A Beagles (appointed 1 July 2020) 36,000 79 36,079 18,000 – 18,000
G M Boyle 36,000 – 36,000 34,900 – 34,900
S E G A Neubert 40,115 450 40,565 34,900 – 34,900
J S Perry 45,000 1,613 46,613 43,500 1,763 45,263
B C Rogoff 36,000 – 36,000 34,900 – 34,900
A Watson (retired 28 April 2021) 14,000 – 14,000 40,600 233 40,833
P T Yates 42,000 – 42,000 38,900 – 38,900
H M Henderson (retired 29 April 2020) – – – 20,700 – 20,700
R J Oldfield (retired 29 April 2020) – – – 12,600 – 12,600
(1) The non-executive directors are not entitled to any variable payments or benefits. Non-executive directors’ fees were last increased with effect from 1 April 2020.
(2) Taxable benefits comprise reasonably incurred business expenses, principally travel costs.
CEO
The following table shows a single total figure of remuneration in respect of qualifying services for the financial year ended
31 December 2021 for the CEO, Mr Bell, together with the comparative figures for 2020. Aggregate emoluments are shown in the
lastcolumn of the table.
Base pay
(1)
£
Benefits
(2)
£
Annual bonus
(3)
benefits
£
Long-Term
Bonus
(3)
£
Pension-related
benefits
£
Total
(4)
£
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
A L C Bell 308,424 308,424 33,554 30,847 85,000 77,106 - – 30,842 30,842 457,820 447,219
(1) Mr Bell is entitled to hold outside appointments and to retain any fees payable, subject to receiving the Board’s permission. During 2021, in addition to the base salary set out
above, Mr Bell received £39,528 (2020: £26,690) in respect of his chairmanship of The Diverse Income Trust plc.
(2) Taxable benefits include life assurance and health insurance.
(3) Mr Bell’s service agreement provides that he is eligible to receive a bonus of up to 170% of his basic salary. The cash bonus arrangement consists of three separate elements:
(i) Discretionary bonus
For a description of the terms of the discretionary bonus (including the performance measures), please see the policy report. The Committee reviewed Mr Bell’s performance
against the performance criteria, described on page 69, over the preceding year at its meeting in February 2022 to determine the appropriate level of the discretionary
bonus that is payable for that year. Following that review, the Committee recommended, and the Board agreed, that Mr Bell should receive a discretionary bonus equal to
28% (compared with the maximum of 40%) of his basic salary, (£85,000), in respect of the financial year ended 31 December 2021 (2020: 25%, £77,106).
(ii) One-year Bonus
For a description of the terms of the One-year Bonus (including the performance measures), please see the policy report. The Company underperformed its benchmark in
2021 (net asset value debt at par, excluding the effect of share buybacks) and therefore no bonus will be paid to Mr Bell based on the Company’s financial performance for
the year ended 31 December 2021 (2020: underperformed, £nil).
(iii) Long-Term Bonus
For a description of the terms of the Long-Term Bonus (including the performance measures), please see the policy report. In summary, Mr Bell is eligible to receive up to
90%of his basic annual salary by reference to the Company’s performance over the previous three financial years. The level of bonus is determined by reference to the
performance against the benchmark, where performance in line with benchmark generates a bonus rising on a straight-line basis to a full bonus where the benchmark is
exceeded by an average of 2.5% per annum. The Company has underperformed its benchmark over the three financial years to 31 December 2021 (net asset value debt at
par, excluding the effect of share buybacks) and therefore no Long-Term Bonus will be paid to Mr Bell (2020: underperformed %, £nil).
(4) Mr Bell’s total fixed and variable remuneration in respect of the year ended 31 December 2021 was £372,820 and £85,000, respectively, (2020: £370,113 and £77,106, respectively).
(5) Employer’s national insurance contributions of £46,722 (2020: £46,729) were paid in respect of Mr Bell’s remuneration for the year.
Payment of the discretionary bonus will be partly deferred in accordance with the current policy, with 60% paid in March 2022 and the
remaining 40% paid on a deferred basis in three equal instalments in March 2023, 2024 and 2025, subject to continued employment.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
75
Scheme interests awarded during the financial year
No directors were awarded any interest over shares in the
Company during the financial year ended 31 December 2021
(2020: nil).
Payments to past directors
No payments were made to former directors of the Company
during the financial year ended 31 December 2021 (2020: £nil).
Payments for loss of office
No loss of office payments were made to any person who has
previously served as a director of the Company at any time
during the financial year ended 31 December 2021 (2020: £nil).
Statement of directors’ shareholdings (audited)
The interests of the CEO and the non-executive directors
(including connected persons) in the Company’s ordinary
sharesare shown in the table below. No share options or other
share-based awards, with or without performance measures,
were awarded to the CEO or to any non-executive director. There
are no requirements or guidelines for the non-executive directors
to own shares in the Company. The Committee expects the CEO
to maintain a shareholding in the Company equivalent to at
least three times his salary.
Ordinary shares
held as at
31December 2021
Ordinary shares
held as at
31 December 2020
A J S Ross 250,000 250,000
R A Beagles 42,073 42,073
A L C Bell 850,000 850,000
G M Boyle 28,683 28,683
S E G A Neubert 53,996 52,793
J S Perry 82,498 79,760
B C Rogoff 43,950 42,740
P T Yates 25,245 25,245
Since the year end, Ms Neubert has bought a further 287 shares.
There have not been any other changes in the directors’ interests
since the year end.
None of the directors had an interest in the Company’s
preference shares.
Total shareholder return performance graph
The Company is required to present a graph comparing the
Company’s share price with a single broad equity market index.
The Company has compared the share price total return against
(i) a UK market index, namely the MSCI UK IMI Index (‘MSCI UK
Index’), because the Company’s shares are listed on the UK
market, and also (ii) a global index, namely the MSCI All Country
World Index (‘MSCI ACWI’), because the Company invests across
a broad spread of global equity markets. The performance of
theCompany’s benchmark is also shown.
Price Benchmark MSCI ACWI MSCI UK
31/12/2017
31/12/2018
31/12/2019
31/12/2020
31/12/2021
150
100
200
250
300
350
400
50
0
31/12/2012
31/12/2011
31/12/2013
31/12/2014
31/12/2015
31/12/2016
The line graph above sets out the Company’s ten-year total
shareholder return performance relative to the MSCI UK Index
and the MSCI ACWII (sterling adjusted). This line graph assumes
anotional investment of £100 into the indices on 31 December 2011
and the reinvestment of all income, excluding dealing expenses.
CEO remuneration table
Year ended
31 December
CEO single
figure of total
remuneration
£
Annual
discretionary
and One-year
Bonus payout
against
maximum
%
Long-Term
Bonus against
maximum
%
2021 457,820 34.4 0.0
2020 447,219 31.2 0.0
2019 590,975 62.9 29.9
2018 497,881 50.0 12.4
2017 658,906 87.5 89.0
2016 493,811 40.0 54.4
2015 593,431 95.2 100.0
2014 544,514 76.2 100.0
2013 486,802 95.0 64.2
2012 400,535 86.5 13.7
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
76
Directors’ Remuneration Report continued
Annual percentage change in remuneration of directors and employees for the year ended 31 December 2021
The table below shows how the percentage change in the directors’ salaries, benefits and bonuses between 2020 and 2021 compares
with the average percentage change in each of those components of pay for the Group’s employees taken as a whole:
Percentage increase/(decrease) in remuneration for 2021 compared with remuneration for 2020
Salary
and fees
%
Taxable
benefits
%
Annual
bonuses
%
Long-Term
Bonus
%
A J S Ross
(1)
21.0 – n/a n/a
R A Beagles
(2)
100.0 n/a
(5)
n/a n/a
G M Boyle 3.2 – n/a n/a
S E G A Neubert
(3)
14.9 n/a
(5)
n/a n/a
J S Perry 3.4 (8.5) n/a n/a
B C Rogoff 3.2 – n/a n/a
P T Yates
(4)
8.0 – n/a n/a
A L C Bell 0.0 8.8 10.2 0.0
Average pay of employees (14.0) (13.0) (33.0) n/a
(1) Appointed as chairman with effect from 29 April 2020.
(2) Appointed as a director on 1 July 2020.
(3) Fee increase reflects her appointment as Senior Independent Director with effect from 28 April 2021.
(4) Appointed as Chairman of the Remuneration and Nominations Committee with effect from 29 April 2020.
(5) Percentage increase cannot be calculated since the value in the previous year was £nil.
The increase in the CEO’s annual bonuses in 2021 is due to an increase in the amount of his discretionary bonus. The fees of the
non-executive directors were increased with effect from 1 April 2020. There was no increase in their fees in 2021. The decrease in
employees’ remuneration is due to the fact that there were seven members of staff in 2020 and six in 2021.
Percentage increase/(decrease) in remuneration for 2020 compared with remuneration for 2019
Salary
and fees
%
Taxable
benefits
%
Annual
bonuses
(discretionary
and One-year
bonus)
%
Long-Term
Bonus
%
A J S Ross
(1)
170.8 n/a n/a n/a
R A Beagles n/a
(2)
n/a n/a n/a
G M Boyle
(3)
195.8 n/a n/a n/a
S E G A Neubert 10.8 (100.0) n/a n/a
J S Perry 11.5 (68.4) n/a n/a
B C Rogoff 10.8 n/a n/a n/a
A Watson 11.2 (72.2) n/a n/a
P T Yates
(4)
23.5 n/a n/a n/a
A L C Bell 2.5 11.2 (49.1) (100.0)
Average pay of employees 2.9 1.6 (15.7) n/a
Following a triennial review, the fees of the non-executive directors were increased with effect from 1 April 2020. With effect from 2021,
fees are subject to annual review.
(1) Appointed as a director on 2 May 2019 and as chairman with effect from 29 April 2020.
(2) Percentage increase cannot be calculated since she was appointed as a director on 1 July 2020 and therefore the value in the prior year was £nil.
(3) Appointed as a director on 16 August 2019.
(4) Fee increase reflects his appointment as Chairman of the Remuneration and Nominations Committee with effect from 29 April 2020.
The decrease in the CEO’s bonuses in 2020 was principally due to the underperformance of the Company in 2020, which resulted
intheOne-year Bonus and Long-Term Bonus not being paid in 2020.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
77
Relative importance of spend on pay
Spend
2021
£’000
2020
£’000
Difference
£’000
Fees of non-executive directors 318 336 (18)
Remuneration paid to or receivable by all employees of the Group (including the CEO)
inrespectofthe year
(1)
1,001 1,115 (114)
Dividends paid to shareholders in respect of the year ended 31 December 2021 42,212 44,814 (2,602)
Share buybacks
(2)
153,511 122,484 31,027
Total payments to shareholders 195,723 167,298 28,425
NAV per ordinary share (debt at fair value) 267.4p 236.0p 13.3%
(1) Includes any accruals for future payment of the CEO’s Long-Term Bonus, subject to performance being sustained and his continued employment with the Company.
(2) Share buyback activity was at a high level during the year, reflecting the level of the discount during the year (see also comments on page 15).
(3) The Committee considered that this table should include the NAV per ordinary share (debt at fair value) as this would assist shareholders to understand the relative importance
of spend on pay but did not consider that there were any other significant distributions or payments that should be included.
Statement of implementation of remuneration policy
The remuneration policy for the CEO, as detailed in the policy
section of the report, was agreed by shareholders at the 2019
AGM and implemented with effect from 1 January 2019. The fees
for non-executive directors were last increased with effect from
1 April 2020.
A revised remuneration policy will be put to shareholders for
approval at the AGM to be held on 5 May 2022 and, if approved,
will be implemented with effect from 1 January 2022.
Consideration by the directors of matters relating to directors’
remuneration
The Board as a whole sets the fees that are payable to the
non-executive directors and it has appointed the Committee to
consider matters relating thereto. The Committee also considers
the remuneration of the CEO and makes a recommendation on
this to the Board for its approval.
The Committee was not provided with any external advice or
services, during the financial year ended 31 December 2021, in
respect of the fees payable to the non-executive directors or the
remuneration payable to the CEO.
The Committee assesses the workload and responsibilities of
thenon-executive directors and reviews, from time to time,
thefees paid to non-executive directors of other investment
trustcompanies.
The table below sets out the members of the Committee
whowere present during any consideration of the CEO’s
remuneration, and shows the number of meetings attended
byeach non-executive director:
Name
Number of
meetings
attended
P T Yates 2
S E G A Neubert 2
A J S Ross 2
Statement of shareholder voting
At the AGMs held on 28 April 2021 and 1 May 2019, respectively,
ordinary resolutions to approve the Directors’ Remuneration
Report for the year ended 31 December 2020 and to approve
theremuneration policy were passed on a show of hands.
Theproxy votes in each case were as follows:
Votes for Votes against Votes withheld
Total votes cast
(excluding votes
withheld)
Approval of Directors’ Remuneration Report
184,541,404 4,843,952 3,340,386 189,385,356
97.4% 2.6% – 100%
Approval of remuneration policy
(1)
58,498,865 1,497,230 248,390 59,996,095
97.5% 2.5% – 100%
(1) Figures adjusted to take account of the sub-division of each ordinary share of 25p
into five ordinary shares of 5p on 28 May 2019.
The Company is committed to ongoing shareholder dialogue
and takes an active interest in voting outcomes. Where there
aresubstantial votes against resolutions in relation to directors’
remuneration, the reasons for any such vote will be sought and
any actions in response will be detailed in future Directors’
Remuneration Reports. There were no substantial shareholder
votes against theresolutions at the AGMs in 2021 or 2019.
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
78
Directors’ Remuneration Report continued
REMUNERATION POLICY
The Company reports on its remuneration policy in accordance with the Regulations each year and is required to submit its
remuneration policy to a shareholder vote every three years. Anordinary resolution for the approval of the current policy wasput
tomembers at the AGM on 1 May 2019 and passed bythemembers. This policy took effect from 1 January 2019. Nochanges were
madeto the policy.
The Committee is required to submit its remuneration policy to ashareholder vote every three years and accordingly will be
puttingaresolution to shareholders at the Annual General Meeting to be held on 5 May 2022 to approve the remuneration policy.
TheCommittee is not proposing to make any significant changes to the remuneration policy this year, as set out on page 61.
Ifapproved by shareholders, the policy will apply for three years until the AGMin 2025, when it will next be voted on by
shareholders.The proposed policy is set out on pages 66-71.
Non-executive directors
All the directors are non-executive, with the exception of the CEO. New directors are appointed for an initial term ending three years
from the date of their first annual general meeting after appointment and with the expectation that they will serve a minimum of two
three-year terms. The continuation of directors’ appointments is contingent on satisfactory performance evaluation and re-election
at annual general meetings. Non-executive directors’ appointments are reviewed formally every three years by the Board as a whole.
Each of the non-executive directors has a letter of appointment which sets out the terms on which they provide their services.
Anon-executive director may resign by notice in writing to the Board at any time; there are no set notice periods.
Remuneration policy for non-executive directors
The following table provides a summary of the key elements of the remuneration of the non-executive directors.
Purpose Operation
Fees Fees payable to the directors
shouldreflect their responsibilities
asdirectors and the time committed
totheCompany’s affairs and should
besufficient to enable candidates
ofhighcalibre to be recruited.
There are no performance-related
elements and no fees are subject
toclawback provisions.
Non-executive directors are to be remunerated in the form of
fees, payable monthly in arrears, to the director personally. There
are no long-term incentive schemes or pension arrangements
and the fees are not specifically related to their performance,
either individually or collectively.
The Committee determines the level of fee at its discretion.
Thefees are reviewed each year, although such review will not
necessarily result in any increase in the fees. Proposed increases
in fees are determined in the light of increases in inflation and in
the returns to the Company’s shareholders, and a comparison
with the fees paid to the directors of other investment trusts
ofasimilar size, structure and investment objective.
The Chairman of the Board, the Chairmen of the Board’s
Committees and the Senior Independent Director are paid
higher fees than the other non-executive directors in recognition
of their more onerous roles (see below).
With effect from 1 April 2022, the Chairman’s fee is £73,500 and
each non-executive director’s annual base fee is £38,000.
Additional fees are payable as follows:
> Chairman of Audit Committee £10,000.
> Chairman of Remuneration and Nomination Committee
£6,000.
> Senior Independent Director £6,000.
The maximum amount of fees, in aggregate, that may be paid
tonon-executive directors in any financial year is £450,000.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
79
Remuneration policy for the CEO (and any future executive directors)
Currently, the Company operates with one executive director, the CEO. This policy applies to the CEO, but would also be applied to
anyother executive director appointed by the Company. Executive director remuneration is set at market-competitive levels, with the
majority of any variable pay (bonus amounts) contingent on the attainment of audited outperformance of the Company’s benchmark,
in accordance with the Company’s objective. Any discretionary bonus is dependent on annual appraisal by the Remuneration and
Nomination Committee and Board against a range of financial and corporate governance criteria.
Purpose and link
tostrategy
Operation and
clawback
Maximum
opportunity
Performance
measures
Base salary Base salary is set at
market-competitive
levelsin order to recruit
and retain an executive
director of a suitably
highcalibre.
The level of pay reflects
anumber of factors
including individual
experience, expertise
andpay appropriate
tothe position.
Base salary is reviewed
annually and fixed for
12months.
The CEO’s salary was
increased to £315,000 per
annum with effect from
1January 2022.
Year-on-year salary
increases for any
executive director will not
exceed 10% per annum
other than in times of
abnormal inflation or
other exceptional
circumstances, in which
case the increase will
notexceed 20%.
Not applicable
Benefits-in-
kind
Offering market-
competitive level of
benefits-in-kind to
helprecruit or retain
anexecutive director of
asuitably high calibre.
An executive director
maybe eligible to receive a
range of benefits including
some or all of:
> private medical
insurance for the
executive director
andtheir family;
> death in service
insurance; and
> business-related
expenses.
Where benefits are sourced
through third-party
providers, the expense
willreflect the cost of the
provision of the benefits
from time to time but will
bekept under review by
theCommittee.
The maximum benefit
that can be offered or
paid to an executive
director is:
> private medical
insurance provided
ona family basis;
> death in service
insurance of four
timesbase salary; and
> business-related
expenses.
Not applicable
Pension Offering market-
competitive levels
ofguaranteed cash
earnings to help recruit
orretain an executive
director of a suitably
highcalibre.
The CEO currently receives
acash payment, equal to
10% of base salary, in lieu
ofpension contributions.
The maximum cash
payment in lieu of
pension contributions
is10% of base salary,
which is the same as the
pension contribution rate
applicable to other staff.
Not applicable
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
80
Directors’ Remuneration Report continued
Purpose and link
tostrategy
Operation and
clawback
Maximum
opportunity
Performance
measures
Discretionary
bonus
The purpose of the bonus
arrangements is to
incentivise the CEO to
maximise the Company’s
performance and its
return to shareholders.
The CEO is eligible to
receivea discretionary
bonus of upto 40% of
basicannual salary. The
Committee willreview the
CEO’s performance against
the performance criteria to
determine the appropriate
level of bonus payable
inrespect of the
precedingyear.
The Committee may
change the terms of
thisbonus or reduce any
bonus payment that would
otherwise be payable in
order to comply with any
relevant current or future
regulations, including the
FCA Remuneration Code.
See note 2 on page 69 for
the operation of deferral,
malus and clawback.
The maximum cash
discretionary bonus
payable to any executive
director is 40%of base
salary.
Please see note 1 on
page 69 for details
ofthe performance
measures applicable
to the CEO’s
discretionary bonus.
One-year Bonus The purpose of the
bonusarrangements is
toincentivise the CEO to
maximise the Company’s
performance and its
return to shareholders.
The CEO is eligible to receive
a bonus of up to 40% of
base salary by reference
tothe performance of
theCompany over the
previousfinancial year.
The Committee may
change the terms of this
bonus or reduce any
bonuspayment that would
otherwise be payable in
order to comply with any
relevant current or future
regulations, including the
FCA Remuneration Code.
See note 2 on page 69 for
the operation of deferral,
malus and clawback.
The maximum cash
One-year bonus payable
to any executive director
is 40%of base salary.
Please see note 1 on
page 69 for details
ofthe performance
measures applicable
to the CEO’s One-year
Bonus.
Long-Term Bonus The purpose of the
bonusarrangements is
toincentivise the CEO to
maximise the Company’s
performance and its
return to shareholders.
The CEO is eligible to receive
a bonus of up to 90% of
basesalary by reference
tothe performance of the
Company over the previous
three financial years.
The Committee may, with
shareholder approval as
appropriate, change the
terms of this bonus or
reduce any bonus payment
that would otherwise be
payable in order to comply
with any relevant current or
future regulations, including
the FCA Remuneration Code.
See note 2 on page 69 for
the operation of deferral,
malus and clawback.
The maximum cash
Long-Term bonus
payable to any
executivedirector is
90%of base salary.
Please see note 1 on
page 69 for details
ofthe performance
measures applicable
to the CEO’s Long-Term
Bonus.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
81
Notes:
1. Performance measures
Mr Bell’s service agreement, as amended, provides that he
iseligible to receive a bonus of up to 170% of his basic annual
salary, two elements of which, totalling a maximum of 130% of
salary, are calculated by reference to the performance of the
Company. The cash bonus arrangement consists of three
separate elements as set out below:
(i) Discretionary bonus
Each year Mr Bell is eligible to receive, at the absolute discretion
of the Committee, a cash bonus of up to 40% of his basic annual
salary. The Committee has determined a number of criteria that
it takes into account on which to judge his performance and
based on which it agrees the amount of the discretionary
bonus.These include the management and development of
theinvestment process; advising the Board on and evolving
thelong-term strategy of the Company; the commitment,
development and presentation of the Company’s approach
toESG; performance against annual objectives; management
ofstaff; administration of the office; reporting to the Board
andshareholders; and relationships with the Board and
otherstakeholders.
(ii) One-year Bonus
Each year Mr Bell is eligible to receive an additional cash
bonusof up to 40% of his basic annual salary. The bonus will
bedetermined by the Company’s net asset value per share
totalreturn performance over the previous financial year (debt
at par,excluding the effect of share buybacks or issuance)
relative to its benchmark. Outperformance of the benchmark
by3.0% ormore will generate a bonus of the full 40%. No bonus
ispayable if performance is in line with or below that of the
benchmark. Relative performance of between nil and 3.0%
willgenerate a pro rata bonus.
(iii) Long-Term Bonus
Mr Bell is eligible to receive a Long-Term Bonus each year
ofupto90% of his basic annual salary by reference to the
Company’s performance over the previous three financial
years.The Long-Term Bonus will be determined by reference to
the Company’s net asset value per share total return (debt at
par, excluding the effect of share buybacks or issuance) relative
toitsbenchmark, as set out in the Company’s audited annual
accounts for the applicable financial years. Compounded
average annual outperformance of the benchmark by 2.5% per
annum or more will generate a bonus of the full 90%. No bonus
ispayable if performance is in line with or below that of the
benchmark. Relative performance of between nil and 2.5%
perannum will generate a pro rata bonus.
The Long-Term Bonus will be halved if, despite outperformance
ofthe benchmark over the relevant three financial years, the
Company’s net asset value total return per share is negative
overthat period.
2. Deferral, malus and clawback
2.1 Deferral
All bonuses are subject to deferral in terms of payment. 60% of
any bonus will be paid in March following the performance year
end (‘First Bonus Payment Date’). 40% of any bonuses will be
payable on a deferred basis over the following three years,
inequal instalments on each anniversary of the First Bonus
Payment Date.
2.2 Malus
Malus (where bonuses that have yet to be paid are forfeited)
may be applied by the Remuneration and Nomination
Committee where:
(a) there has been material misstatement or error that causes
an award to vest at a higher level than would otherwise
havebeen the case;
(b) there has been a material failure in risk management; or
(c) there has been serious misconduct that has resulted or
couldresult in dismissal.
2.3 Clawback
Any bonus will be subject to a clawback period of two years after
it has been paid, whereby the CEO will be required to pay back
part or all of any bonus already received. Clawback may be
applied by the Remuneration and Nomination Committee where:
(a) there has been material misstatement or error that causes
an award to vest at a higher level than would otherwise
havebeen the case;
(b) there has been a material failure in risk management; or
(c) there has been serious misconduct that has resulted or
couldresult in dismissal.
3. Legacy plans
The Committee reserves the right to make remuneration
payments and payments for loss of office that are not in line with
the policy set out above (i) where the terms of such a payment
were agreed before the policy came into effect or at a time
whenthe relevant individual was not a director of the Company
and (ii)in the opinion of the Committee, such a payment is not
inconsideration of the individual becoming a director of
theCompany. For these purposes, payments include the
Committeemaking awards of variable remuneration.
4. Differences in the Company’s remuneration policies
fordirectors and employees
The remuneration policy for the executive director differs
principally from that for employees in that the executive
director’s remuneration is more heavily weighted towards
variable pay so that a greater proportion of his pay is
relatedtothe Company’s performance and the value
createdforshareholders.
Principles and approach to recruitment and internal promotion
of directors
Non-executive directors
(1) Remuneration of non-executive directors should reflect the
specific circumstances of the Company and the duties
andresponsibilities of the non-executive directors. It should
provide appropriate compensation for the experience and
time committed to the proper oversight of the affairs of
theCompany.
(2) Non-executive directors are not eligible to receive bonuses,
pension benefits, share options or other benefits.
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
82
Directors’ Remuneration Report continued
(3) The total remuneration of the non-executive directors is
determined by the provisions of the Company’s Articles
ofAssociation and by shareholder resolution.
(4) The basic non-executive director’s fee will be paid to each
non-executive director, with a higher fee per annum for the
Chairman of the Company. An additional fee per annum
willbe paid to the Chairman of each of the Audit and the
Remuneration and Nomination Committees and to the
Chairman of any other Committees that the Company
forms;and to the Senior Independent Director.
Executive directors
(1) When hiring a new executive director, or promoting to
theBoard from within the Group, the Committee will offer
apackage that is sufficient to retain and motivate and, if
relevant, attract the right talent whilst paying no more than
isnecessary.
(2) Ordinarily, remuneration for a new executive director will
beinline with the policy set out in the table.
(3) The maximum level of variable pay that may be awarded to
a new director on recruitment or on promotion to the Board
shall be limited to 170% of base salary (calculated at the
dateof grant, excluding any buy-out awards – see below).
(4) The Committee may, where it considers it to be in the best
interests of the Company and shareholders, offer an
additional cash payment to an executive director in order to
replace awards which would be foregone by the individual
on leaving his/her previous employment (i.e. buy-out
arrangements) which will be intended to mirror forfeited
awards as far as possible by reflecting the value, nature,
timehorizons and performance measures.
Letters of appointment/service contract
Non-executive directors’ letters of appointment
The non-executive directors all have letters of appointment,
which may be inspected at the Company’s registered office.
None of the non-executive directors is subject to any notice
period. All continuing non-executive directors are required to
stand for re-election by the shareholders at least every three
years. The initial period of appointment is two terms of three
years. All reasonably incurred expenses will be met.
All the directors are proposed for re-election at the AGM in
May2022.
CEO’s service contract
The CEO’s service contract with the Company may be inspected
at the Company’s registered office. The CEO’s service agreement
dated 3 February 2010, as amended, provided in 2021 for a salary
of £308,424 (2020: £308,424) per annum. His salary has been
increased to £315,000 with effect from 1 January 2022. Mr Bell’s
appointment may be terminated by either party on the giving
orreceiving of not less than nine months’ written notice.
Please see ‘Policy on payment for loss of office’ below for
furtherdetails of the CEO’s service contract.
Illustration of application of remuneration policy
The chart below shows an indication of the values of the CEO’s
remuneration that would be received by the CEO, in accordance
with this remuneration policy, for the year ending 31 December
2022 at three direct levels of performance:
> minimum performance, i.e. fixed salary, taxable benefits
andpayment in lieu of pension contributions, with no
bonuspayout;
> on-target performance, i.e. fixed pay plus bonus payments
assuming a 50% payout of each of the discretionary,
One-year and Long-Term Bonuses; and
> maximum performance, i.e. fixed pay plus bonus payments
assuming 100% payout of each of the discretionary, One-year
and Long-Term Bonuses.
0
400
200
600
800
£380,054
Minimum
performance
On-target
performance
Maximum
performance
100%
£647,804
22%
10%
10%
58% 42%
£915,554
14%
14%
31%
1,000
Fixed pay Discretionary bonus
One-year Bonus Long-Term Bonus
Policy on payment for loss of office
Non-executive directors
It is the Company’s policy not to enter into any arrangement
withany of the non-executive directors to entitle any of the
non-executive directors to compensation for loss of office.
CEO (and any future executive directors)
The Company’s policy is to agree a notice period for the
CEOwhich would not exceed nine months.
The Company may, in its absolute discretion and without
anyobligation to do so, terminate the CEO’s employment
immediately by giving him/her written notice together with
apayment of such sum as would have been payable by the
Company to the CEO as salary (excluding future bonus accrual)
in respect of his/her notice period. The Company may, at its
discretion, make the termination payment in instalments over
aperiod of no longer than six months from the termination
dateand on terms that any payment should be reduced to
takeaccount of mitigation by the CEO.
If a new executive director is recruited, the Company’s policy
regarding payments for loss of office will be the same as for
theCEO.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
83
If the CEO ceases employment as a result of a ‘good leaver’
reason (i.e. death, ill-health, injury, disability, redundancy,
retirement or due to any other circumstance that the Committee
at its discretion permits), any bonus payment shall be pro-rated
for time and performance. The Committee may, however, taking
into account such factors as it considers appropriate, increase
the proportion of the relevant bonus that becomes payable. If
the CEO ceases employment other than as a ‘good leaver’, or
ifthe CEO gives or receives notice prior to the date that the
relevant bonus would otherwise have been paid, the CEO will
forfeit any right to receive the relevant bonus for nil consideration
unless the Committee, in its absolute discretion, determines
otherwise.
A change of control of the Company shall not affect the
amountof any bonus or the date on which it becomes payable
unless the Committee determines otherwise, in which case the
Committee shall determine whether the pro-rated performance
targets attached to the applicable bonuses have been satisfied
at that time.
If the Committee determines that the pro-rated performance
targets have not been satisfied on the change of control, the
applicable bonus shall immediately lapse unless the Committee
determines otherwise. To the extent that the Committee
determines that the pro-rated performance targets have been
satisfied on the change of control, if the CEO ceases to be
employed by the Company prior to the date that the applicable
bonus would otherwise have been paid to the CEO other than
asa result of:
> a reason which would have justified his/her summary
dismissal;
> his/her cessation of employment without the giving
orreceiving of notice; or
> his/her resignation,
the applicable bonus shall become payable to the extent
determined at the time of the change of control on, or as
soonaspracticable after, the CEO’s cessation of employment.
Statement of consideration of conditions elsewhere
intheCompany
The Committee considers the employment conditions, including
salary increases, of employees other than the CEO when setting
the CEO’s remuneration.
The Company did not consult with employees when drawing up
the remuneration policy.
Where possible, the Committee benchmarks the remuneration of
the employees and the CEO by obtaining details of remuneration
paid to employees in comparable roles in other companies.
Witan had six employees during 2021. The ratio of the CEO’s
remuneration to the median of the other employees was under 5.
We have not reported in any greater detail on this point in order
to protect the privacy of individuals.
Statement of consideration of shareholder views
The Company places great importance on communication
withits shareholders. The Company had frequent meetings with
institutional shareholders and City analysts throughout the year
ended 31 December 2021. Due to the COVID-19 pandemic, it was
not possible to meet shareholders at the AGM held in 2021 in the
usual way, but shareholders were invited to submit questions
tothe Board. The Company also responded to shareholder
enquiries during the year. The Board can confirm that it is not
aware of negative views being expressed by shareholders
inrelation to its policy on directors’ remuneration.
Approval
This report was approved by the Committee on 15 March2022
and is signed on its behalf by:
Paul Yates
Chairman of the Remuneration and Nomination Committee
15 March 2022
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
84
STATUTORY INFORMATION
The directors present the Annual Report of the Group for the
yearended 31 December 2021.
ACTIVITIES AND BUSINESS REVIEW
A review of the business is given in the Strategic Report on pages
1 to 45 including the Chairman’s Statement and Chief Executive’s
review on pages 8 to 16. The directors are required by the
Companies Act to prepare a Strategic Report for each financial
year, which contains a fair review of the business of the Group
during the financial year and of the position of the Group at the
end of the year, future developments and a description of the
principal risks and uncertainties facing the Group. This
information can be found within the Strategic Report on
pages37to 39.
The Corporate Governance Statement on pages 48 to 56
formspart of this Directors’ Report.
INVESTMENT POLICY
The Company’s investment policy is set out on the inside
frontcover.
STATUS
Witan Investment Trust plc (the ‘Company’) is incorporated in
theUnited Kingdom and registered in England and Wales and
domiciled in the United Kingdom. It is an investment company as
defined in section 833 of the Companies Act 2006 and operates
as an investment trust in accordance with section 1158 of the
Corporation Tax Act 2010. The Company has received
confirmation from HM Revenue and Customs that it has been
accepted as an approved investment trust with effect from
1 January 2012, provided it continues to meet the eligibility
conditions of section 1158 and the ongoing requirements for
approved companies in the Investment Trust (Approved
Company) (Tax) Regulations 2011.
SUBSIDIARY COMPANY
The Company has one subsidiary company, Witan Investment
Services Limited, which provides marketing services to the
Company. Witan Investment Services Limited is authorised
andregulated by the Financial Conduct Authority to act
astheCompany’s AIFM.
ISA
s
The Company intends to continue to manage its affairs so that
its shares fully qualify for the stocks and shares component of
anISA and a Junior ISA.
SUBSTANTIAL SHARE INTERESTS
As at 31 December 2021, the Company had not been notified
ofany substantial interests in the Company’s voting rights.
There have not been any new holdings notified between
theyearend and the date of this Report.
Directors’ Report
ASSETS
At 31 December 2021 the total net assets of the Group were
£1,992.0million (2020: £1,925.2 million). At this date the net
assetvalue per ordinary share was 263.93p (2020: 240.14p).
REVENUE AND DIVIDEND
The profit for the year was £263million (2020: £46 million). A profit
of £28million is attributable to revenue (2020: £26 million). The
profit for the year attributable to revenue has been applied
asfollows:
£’000
Distributed as dividends:
First interim of 1.36p per ordinary share (paid on 18
June 2021) 10,563
Second interim of 1.36p per ordinary share (paid on
18 September 2021) 10,385
Third interim of 1.36p per ordinary share (paid on 17
December 2021) 10,157
Fourth interim of 1.52p per ordinary share (payable
on 18 March 2022) 11,107
Utilisation of the Company’s revenue reserve (14,545)
Company revenue profit available for distribution 27,667
The directors have declared a fourth interim dividend instead of
a final dividend in order to ensure that, as in previous years, the
distribution is made to shareholders before 5 April.
DIRECTORS
The current directors of the Company are shown on pages 46 to 47.
Mr Watson was a director until his retirement at the Annual General
Meeting (‘AGM’) on 28 April 2021. All the other directors held office
throughout the year under review. In accordance with the UK
Corporate Governance Code, all the directors will retire and,
beingeligible, will seek re-election by shareholders.
The Board has reviewed the performance and commitment of
thedirectors standing for election or re-election and considers
thateach of them should continue to serve on the Board as they
bring wide, current and relevant experience that allows them to
contribute effectively to the leadership of the Company. More
details are contained within the Notice of AGM.
During the year the membership of the Audit Committee
comprised Mr Perry (Chairman), Mrs Beagles, Mr Watson until
hisretirement in April 2021 and Mr Yates. During the year the
membership of the Remuneration and Nomination Committee
comprised Mr Yates (Chairman), Ms Neubert and Mr Ross.
No director was a party to, or had an interest in, any contract or
arrangement with the Company at any time during the year or to
the date of this report. With the exception of Mr Bell, no director
hasor had a service contract with the Company.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
85
DIRECTORS’ INTERESTS
The interests of the directors in the share capital of the Company
are set out in the Directors’ Remuneration Report on page 63.
DIRECTORS’ CONFLICTS OF INTEREST
Directors have a duty to avoid situations where they have, or
could have, a direct or indirect interest that conflicts, or possibly
could conflict, with the Company’s interests. The Companies Act
2006 (the ‘Act’) allows directors of public companies to authorise
such conflicts and potential conflicts, where appropriate, but
only if the Articles of Association contain a provision to this effect.
The Act also allows the Articles of Association to contain other
provisions for dealing with directors’ conflicts of interest to avoid
a breach of duty.
There are two circumstances in which a potential conflict of
interest can be permitted: either the situation cannot reasonably
be regarded as likely to give rise to a conflict of interest or the
matter has been authorised in advance by the directors. The
Company’s Articles of Association, which were adopted by
shareholders on 1 May 2019, give the directors the relevant
authority required to deal with conflicts of interest.
Each of the directors has provided a statement of all conflicts of
interest and potential conflicts of interest, if any, applicable to the
Company. A register of conflicts of interest has been compiled
and approved by the Board. The directors have also undertaken
to notify the Chairman as soon as they become aware of any
new potential conflicts of interest that need to be approved by
the Board and added to the register, which is reviewed annually
by the Board. It has also been agreed that directors will advise
the Chairman and the Company Secretary in advance of any
proposed external appointment and new directors will be asked
to submit a list of potential situations falling within the conflicts of
interest provisions of the Act in advance of joining the Board. The
Chairman will then determine whether the relevant appointment
causes a conflict or potential conflict of interest and should
therefore be considered by the Board. Only directors who have
no interest in the matter being considered would be able to
participate in the Board approval process. In deciding whether
toapprove a conflict of interest, directors will also act in a way
they consider, in good faith, will be most likely to promote the
Company’s success in taking such a decision. The Board can
impose limits or conditions when giving authorisation if the
directors consider this to be appropriate.
The Board believes that its arrangements for the authorisation
ofconflicts operate effectively. The Board also confirms that its
procedures for the approval of conflicts of interest have been
followed by all the directors and that there are currently no
conflicts of interest.
DIRECTORS’ INDEMNITY
The Company’s Articles of Association allow the Company,
subject to the provisions of UK legislation, to:
(a) indemnify any person who is or was a director, or a director
ofany associated company, directly or indirectly against
anyloss or liability, whether in connection with any proven or
alleged negligence, default, breach of duty or breach of trust
by him or her, or otherwise, in relation to the Company or any
associated company; and
(b) purchase and maintain insurance for any person who is
orwas a director, or a director of any associated company,
against any loss or liability or any expenditure he or she may
incur, whether in connection with any proven or alleged
negligence, default, breach of duty or breach of trust by
himor her, or otherwise, in relation to the Company or
anyassociated company.
With effect from 8 March 2022, the Company has provided an
indemnity for each director in respect of costs incurred in the
defence of any proceedings brought against them and also
liabilities owed to third parties, in either case arising out of
theirpositions as directors.
Directors’ and officers’ liability insurance cover is in place
inrespect of the directors and was in place throughout
theyearunder review.
DIRECTORS’ FEES
The report on the directors’ remuneration is set out in
theDirectors’ Remuneration Report on pages 60 to 71.
TheCompany’s Articles of Association currently limit the
aggregate fees payable to the non-executive directors to
£450,000 per annum.
INVESTMENT MANAGERS
It is the opinion of the directors that the continuing appointment
of the investment managers listed on page 13 is in the interests
ofthe Company’s shareholders as a whole and that the terms
ofengagement negotiated with them are competitive and
appropriate to the investment mandates. The Board and the
Company’s AIFM review the appointments of the investment
managers on a regular basis and make changes as appropriate.
SHARE CAPITAL
The Company’s share capital comprises:
(a) ordinary shares of 5p nominal value each (‘shares’)
At 31 December 2021, there were 1,000,355,000 (2020:
1,000,355,000) ordinary shares of 5p each in issue.
During the year, 63,737,420 shares were bought back and are
held in treasury and at 31 December 2021 there were 262,379,133
shares held in treasury. These shares do not carry voting rights
orthe right to receive dividends and thus the number of voting
rights was 737,975,867 on a poll. Since the year end, 9,733,038
shares have been bought back and at 14 March 2022 there
were1,000,355,000 shares in issue of which 272,112,171 were held
intreasury. The voting rights of the shares on a poll are one vote
for every share held.
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
86
The Company’s Articles of Association permit the Company
topurchase its own shares and to fund such purchases from its
accumulated realised capital profits. At the AGM on 28 April 2021
a special resolution was passed giving the Company authority,
until the conclusion of the AGM in 2022, to make market
purchases to be held in treasury of the Company’s ordinary
shares up to a maximum of 117,084,724 shares, being 14.99% of the
issued ordinary share capital as at 28 April 2021. The Company
has bought back 52,842,722 shares between the date of the last
AGM and 14 March 2022.
The Board is seeking to renew its powers at the forthcoming AGM
to buy shares into treasury, for possible reissuance when the
shares trade at a premium. The Company makes use of share
buybacks, purchasing shares to be held in treasury with the
objective of achieving a sustainable low discount (or a premium)
to net asset value. Shares are not bought back unless the result is
an increase in the net asset value per ordinary share. Shares will
only be re-sold from treasury at, or at a premium to, the net asset
value per ordinary share.
The Company is also seeking to renew shareholder approval to
issue shares, up to 10% of the starting total, provided that such
shares are issued at, or at a premium to, net asset value.
(b) 2.7% preference shares of £1 nominal value each
(‘2.7% preference shares’)
The 2.7% preference shareholders have no rights to attend
and vote at general meetings. At 31 December 2021 there
were 500,000 2.7% preference shares in issue. Further details
on the preference shares are given in note 17 on page 108.
(c) 3.4% preference shares of £1 nominal value each
(‘3.4% preference shares’)
The 3.4% preference shareholders have no rights to attend
and vote at general meetings. At 31 December 2021 there
were 2,055,000 3.4% preference shares in issue. Further details
on the preference shares are given in note 17 on page 108.
At the AGM in 2021 a special resolution was passed giving the
Company authority, until the conclusion of the AGM in 2021, to
make market purchases for cancellation of the Company’s
own2.7% preference shares and 3.4% preference shares up to a
maximum of all those in issue. This authority has not been used.
Accordingly, as at 31 December 2021 the Company had valid
authority, outstanding until the conclusion of the AGM in 2022,
tomake market purchases for cancellation of 500,000 2.7%
preference shares and 2,055,000 3.4% preference shares. No
preference shares were bought back between the year end
andthe date of this report. Accordingly, the Company has valid
authority to make market purchases for cancellation of 500,000
2.7% preference shares and 2,055,000 3.4% preference shares.
The directors intend to seek a fresh authority at the AGM in 2022.
There are no restrictions concerning the transfer of securities in
the Company; no special rights with regard to control attached
to securities; no agreements between holders of securities
regarding their transfer which are known to the Company; and
no agreements to which the Company is party that might
affectits control following a successful takeover bid.
INDEPENDENT AUDITOR
Resolutions to reappoint Grant Thornton UK LLP as the Company’s
auditor and to authorise the Audit Committee to determine their
remuneration will be proposed at the forthcoming AGM. Further
details are included in the Report of the Audit Committee on
pages 57 to 59.
DIRECTORS’ STATEMENT AS TO THE DISCLOSURE
OFINFORMATION TO THE AUDITOR
Each of the directors at the date of approval of this report
confirms that:
(1) so far as the director is aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
(2) the director has taken all the steps that he/she ought to have
taken as a director to make himself/herself aware of any
relevant audit information and to establish that the
Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the Companies
Act 2006.
LISTING RULE 9.8.4
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual Report.
Details of Mr Bell’s Long-Term Bonus are included in the Directors’
Remuneration Report on page 69. The directors confirm that
there are no other disclosures to be made in respect of Rule 9.8.4.
ANTI-BRIBERY AND CORRUPTION POLICY
The Board has a zero-tolerance approach to instances of bribery
and corruption. Accordingly, it expressly prohibits any director or
associated persons when acting on behalf of the Company, from
accepting, soliciting, paying, offering or promising to pay or
authorise any payment, public or private in the UK or abroad to
secure any improper benefit for themselves or for the Company.
The Board applies the same standards to its service providers in
their activities for the Company. A copy of the Company’s
Anti-Bribery and Corruption Policy can be found on its website
atwww.witan.com. The policy is reviewed regularly by the
AuditCommittee.
Directors’ Report continued
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
87
PREVENTION OF THE FACILITATION OF TAX EVASION
During the year and in response to the implementation of
theCriminal Finances Act 2017, the Board has adopted a
zero-tolerance approach to the criminal facilitation of tax
evasion. A copy of the Company’s policy on preventing the
facilitation of tax evasion can be found on the Company’s
website www.witan.com. The policy is reviewed annually
bytheAudit Committee.
COMMON REPORTING STANDARD (‘CRS’)
CRS is a global standard for the automatic exchange of
information commissioned by the Organisation for Economic
Cooperation and Development and incorporated into UK law by
the International Tax Compliance Regulations 2015. CRS requires
the Company to provide certain additional details to HMRC in
relation to certain shareholders. The reporting obligation began
in 2016 and is an annual requirement. The Company’s registrar,
Computershare, has been engaged to collate such information
and file the reports with HMRC on behalf of the Company.
MODERN SLAVERY ACT 2015
As an investment vehicle, the Company does not provide goods
or services in the normal course of business and does not have
customers. Accordingly, the directors consider that the Company
is not required to make any anti-slavery or human trafficking
statement under the Modern Slavery Act 2015.
SECURITIES FINANCING TRANSACTIONS
As the Company undertakes securities lending, it is required to
report on Securities Financing Transactions (as defined in Article
3 of Regulation (EU) 2015/2365, securities financing transactions
include repurchase transactions, securities or commodities
lending and securities or commodities borrowing, buy-sell back
transactions or sell-buy back transactions and margin lending
transactions). In accordance with Article 13 of the Regulation, the
Company’s involvement in and exposures related to securities
lending as at 31 December 2021 are detailed on pages 112 to 113.
GREENHOUSE GAS EMISSIONS
The Company has a staff of six employees, operating from
smallserviced office premises. Accordingly, it does not have
anysignificant greenhouse gas emissions to report from its
ownoperations (as it has consumed less than 40,000 kilowatts
of energy in the United Kingdom during the year), nor does it
have responsibility for any other emission producing sources
under the Companies Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013, including those within its underlying
investment portfolio.
TASKFORCE FOR CLIMATE RELATED FINANCIAL DISCLOSURES
(‘TCFD’)
The Company notes the TCFD recommendations on climate-
related financial disclosures. The Company is an investment
trustand, as such, it is exempt from the Listing Rules
requirementto report against the TCFD framework.
ANNUAL GENERAL MEETING
The AGM will be held at 2.30 pm on Thursday 5 May 2022 at
Merchant Taylors’ Hall, 30 Threadneedle Street, London EC2R 8JB.
The formal notice of the AGM is set out in the accompanying
circular to shareholders, together with explanations of the
resolutions and arrangements for the meeting.
Approved by the Board and signed on its behalf by:
Frostrow Capital LLP
Company Secretary
15 March 2022
Witan Investment Trust plc
Annual Report 2021
CORPORATE GOVERNANCE
88
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
lawand regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
are required to prepare the Group financial statements in
accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006
as applicable to companies reporting under those standards
and have also chosen to prepare the parent company financial
statements under UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006
as applicable to companies reporting under those standards.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give atrue and fair
view of the state of affairs of the Group and Company and of
theprofit or loss of the Group and Company for that period.
Inpreparing these financial statements, International
AccountingStandard 1 requires that directors:
> properly select and apply accounting policies;
> present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
> provide additional disclosures when compliance with
thespecific requirements in UK-adopted International
Accounting Standards is insufficient to enable users to
understand the impact of particular transactions, other
events and conditions on the entity’s financial position
andfinancial performance; and
> make an assessment of the Company’s ability to continue
asa going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any
timethe financial position of the Company and enable them
toensure that the financial statements comply with the
Companies Act 2006.
They are also responsible for safeguarding the assets of
theCompany and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Statement of Directors’ Responsibilities
in respect of the Annual Report, the Directors’ Remuneration Report
and the financial statements
RESPONSIBILITY STATEMENT
We confirm, to the best of our 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 37 to 39) of the principal risks
anduncertainties that they face.
We also confirm that the financial statements, taken as a
whole,are fair, balanced and understandable, and provide the
information necessary for shareholders to assess the Company’s
position, performance, business model and strategy.
By order of the Board
Andrew Ross Andrew Bell
Chairman Chief Executive Officer
15 March 2022 15 March 2022
Note to those who access this document by electronic means:
The Annual Report for the year ended 31 December 2021 has been
approved by the Board of Witan Investment Trust plc. Copies of
the Annual Report and the Half Year Report are circulated to
shareholders and, where possible, to investors through other
providers’ products and nominee companies (orwritten
notification is sent when they are published online). Itis also
made available in electronic format for the convenience of
readers. Printed copies are available from the Company’s
registered office in London.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
77
Independent Auditor’s Report to the members of
Witan Investment Trust plc
for the year ended 31 December 2021
OPINION
Our opinion on the financial statements is unmodified
We have audited the financial statements of Witan Investment
Trust plc (the ‘parent company’) and its subsidiaries (the ‘Group’)
for the year ended 31 December 2021, which comprise the
Consolidated Statement of Comprehensive Income, the
Consolidated and Individual Statements of Changes in Equity,
the Consolidated and Individual Balance Sheets, the
Consolidated and Individual Company Cash Flow Statements
and notes to the financial statements, including a summary
ofsignificant accounting policies. The financial reporting
framework that has been applied in the preparation of the
Groupfinancial statements is applicable law and UK-adopted
International Accounting Standards. The financial reporting
framework that has been applied in the preparation of
theparent company financial statements is UK-adopted
International Accounting Standards as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
> the financial statements give a true and fair view of the
stateof the Group’s and of the parent company’s affairs as
at31 December 2021 and of the Group’s profit for the year
then ended;
> the Group financial statements have been properly
preparedin accordance with UK-adopted International
Accounting Standards;
> the parent company financial statements have been
properly prepared in accordance with UK-adopted
International Accounting Standards as applied in
accordance with the provisions of the Companies
Act2006;and
> the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
‘Auditor’s responsibilities for the audit of the financial statements’
section of our report. We are independent of the Group and the
parent company in accordance with the ethical requirements
thatare relevant to our audit of the financial statements in the
UK,including the FRC’s Ethical Standard as applied to listed
publicinterest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We
believethat the audit evidence we have obtained is sufficient
andappropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We are responsible for concluding on the appropriateness
ofthedirectors’ use of the going concern basis of accounting
and,based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s and the parent company’s
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify the auditor’s
opinion. Our conclusions are based on the audit evidence
obtained up to the date of our report. However, future events or
conditions may cause the Group or the parent company to
cease to continue as a going concern.
Our evaluation of the directors’ assessment of the Group’s and
the parent company’s ability to continue to adopt the going
concern basis of accounting included:
> determining the appropriateness of the Company’s
goingconcern policy and procedures under the relevant
accounting framework and the rationale for why no going
concern issues are noted;
> assessing the disclosures concerning the basis of
preparation of the financial statements and going concern;
and
> inspecting management’s going concern assessment and
conclusions made.
Specifically, we performed the following procedures as a result of
the recent development of macro-economic uncertainties such
as COVID-19 and their potential impact on going concern:
> evaluating the income forecasts prepared by management,
including the assumptions used and level of headroom
available, both in terms of cash resources and
compliancewith loan covenants;
> obtaining support for the renewal of the revolving credit
facility in November 2021 and obtaining an understanding
ofthe liquidity position of the Group;
> considering the robustness of the forecasts to potential
changes in underlying assumptions;
> obtaining an understanding of how management has
assessed the impact of events/market conditions in
relationto COVID-19 in their forecasts;
> assessing disclosures included in the financial statements
inrelation to the impact of uncertainties such as COVID-19;
and
> identifying applicable subsequent events and discussing
their implications with management.
In our evaluation of the directors’ conclusions, we considered
theinherent risks associated with the Group’s and the parent
company’s business model including effects arising from
macro-economic uncertainties such as Brexit and COVID-19,
weassessed and challenged the reasonableness of estimates
made by the directors and the related disclosures and analysed
how those risks might affect the Group’s and the parent
company’s financial resources or ability to continue
operationsover the going concern period.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s and the parent company’s ability to continue as a going
concern for a period of at least 12 months from when the
financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
78
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2021
In relation to the Group’s and the parent company’s reporting
onhow they have applied the UK Corporate Governance Code,
we have nothing material to add or draw attention to in relation
tothe directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt the
going concern basis of accounting.
The responsibilities of the directors with respect to going concern
are described in the ‘Responsibilities of directors for the financial
statements’ section of this report.
OUR APPROACH TO THE AUDIT
Key audit
matters
Scoping
Materiality
OVERVIEW OF OUR AUDIT APPROACH
Overall materiality:
Group: £19.9 million, which represents 1% of the Group’s
netassets.
Parent company: £17.9 million which represents 1% of the parent
company’s net assets, capped at 90% of Group materiality.
Key audit matters were identified as:
> valuation and existence of investments measured at
fairvalue through profit or loss (Same as previous year);
> occurrence and completeness of investment income
(Same as previous year);
> our auditor’s report for the year ended 31 December 2020
included one key audit matter that has not been reported
as a key audit matter in our current year’s report. This
relates to going concern which had been included as akey
audit matter as a result of the uncertainties of COVID-19.
Since the Group has sufficient funds readily available to
withstand a significant liquidity event, wenolonger
consider this a key audit matter.
The Group is comprised of two components, the parent
company and the subsidiary, and we have performed
fullscope audit procedures on both.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters
included those that had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Description Audit response
Disclosures Our results
KAM
In the graph below, we have presented the key audit matters,
significant risks and other risks relevant to the audit.
Extent of management judgement
Potential financial statement impact
Low
Low
High
High
Investment
income
Management
fees
Performance
fees
Investments
measured at fair
value through
profit or loss
Going concern
Management
override of controls
Taxation
Directors’ remuneration
Key audit matter
Significant risk
Other risk
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
79
Key Audit Matter – Group and parent company
How our scope addressed the matter – Group and parent
company
Valuation and existence of investments measured at fair value
through profit or loss
We identified valuation and existence of investments measured
at fair value through profit or loss as one of the most significant
assessed risks of material misstatement due to error. The parent
company’s investment objective is to provide long-term income
and capital growth by investing in a diversified portfolio of
globalequities.
The investment portfolio of £2.2 billion as at 31 December 2021
(2020: £2.2 billion) is a significant material balance in the
Consolidated Balance Sheet at year end and the main
driverofthe Group’s performance.
Incorrect asset pricing or a failure to maintain proper legal title
of the investments held by the Group could have an impact on
the portfolio valuation and therefore, the return generated
forshareholders.
We identified the valuation and existence of investments
measured at fair value through profit or loss as a significant
riskat risk of material misstatement due to error as a result
ofthelarge volume of transactions in the year, the magnitude
ofthe transactions being material in aggregate, as well as the
overall material value of the investments held at year end.
In responding to the key audit matter, we performed the
following audit procedures:
> assessing whether the Group’s accounting policy for the
valuation of investments is in accordance with UK-adopted
International Accounting Standards and the Statement of
Recommended Practice ‘Financial Statements of Investment
Trust Companies and Venture Capital Trusts’ (the ‘SORP’) and
testing whether management have accounted for valuation
in accordance with that policy;
> independently pricing 100% of the listed equity and
fundportfolio by obtaining the relevant bid prices and
NetAsset Values (‘NAV’) from independent market
information providers;
> recalculating the total investment valuation based on
theGroup’s investment holdings, which was agreed to the
holdings at the reporting date as reflected in the Group’s
accounting records;
> testing that investments were actively traded by extracting
areport of trading volumes in the week before and after the
year-end from an independent market information provider
for the equity investments held; and
> confirming the existence of investments by agreeing
investments held by the parent company as at the year-end
to an independent confirmation received directly from the
parent company’s custodian.
Relevant disclosures in the Annual Report and Accounts 2021
> Financial statements: Note 1(h), Note 10
The Group’s accounting policy on investments held at
fairvalue through profit or loss is shown in note 1(h) to the
financial statements and related disclosures are included
innote 10.
Our results
Our testing did not identify any material misstatements in the
valuation of the Group’s investment portfolio as at the year-end
or any issues with regards to the existence of the underlying
investments at the year end.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
80
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2021
Key Audit Matter – Group and parent company
How our scope addressed the matter – Group and parent
company
Occurrence and completeness of investment income
We identified occurrence and completeness of investment
income as one of the most significant assessed risks of
materialmisstatement due to fraud or error. The parent
company measures performance on a total return basis and
investment income is one of the significant components of this
performance measure. The investment income reported by the
Group for the year is £37.4 million (2020: £36.1 million) and is a
significant material balance in the Consolidated Statement of
Comprehensive Income.
The parent company is subject to Investment Trust Company
(ITC) regulations and as a result is required to allocate returns
between revenue and capital. There is a risk that income
recognised in the year may be materially misstated through
fraudulent transactions or error due to high volume of
transactions. This could also impact the level of
distributionrequired under ITC regulations.
In responding to the key audit matter, we performed the
following audit procedures:
> assessing whether the Group’s accounting policy for
recognition of investment income is in accordance with
UK-adopted International Accounting Standards;
> obtaining an understanding of the Group’s business process
for recognising such income in accordance with the Group’s
stated accounting policy;
> testing that income transactions were recognised in
accordance with the policy by selecting a sample of
investments and agreeing the relevant investment
incomereceivable for those equities to the parent
company’s records. For the selected investments we also
obtained the respective dividend rate entitlements from
independent market information providers and agreed to
the amounts recorded in the Group’s accounting records.
Inaddition, weagreed the receipt of the dividend income
tobank statements; and
> performing, on a sample basis, a search for special
dividends on the equity investments held during the year
todetermine whether dividend income attributable to those
investments has been properly recognised. We assessed the
appropriateness of categorisation of special dividends as
either revenue or capital receipts.
Relevant disclosures in the Annual Report and Accounts 2021
> Financial statements: Note 1e, Note 2
The Group’s accounting policy on income, including
investment income, is shown in note 1(e) to the financial
statements and related disclosures are included in note 2.
Our results
Our testing did not identify any material misstatements in the
amount of investment income recognised during the year.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
81
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements
on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure Group Parent company
Materiality for financial statements
asawhole
We define materiality as the magnitude of misstatement in the financial statements
that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of these financial statements. We use materiality in
determining the nature, timing and extent of our audit work.
Materiality threshold £19.9 million, which is 1% of the Group’s
netassets.
£17.9 million, which is 1% of the parent
company’s net assets, capped at 90%
ofGroup materiality.
Significant judgements made by auditor
in determining materiality
In determining materiality, we made
thefollowing significant judgements:
Net assets, which primarily comprise
theGroup’s investment portfolio, are
considered to be the key driver of the
Group’s total return performance and
form a part of the NAV calculation.
In addition, 1% of NAV has been deemed
reasonable based on the nature of the
Group as it invests largely in listed
investments.
Materiality for the current year is higher
than the level that we determined for the
year ended 31 December 2020 to reflect
the increase in net asset value in the
yearfrom £1.92 billion to £1.99 billion.
In determining materiality, we made
thefollowing significant judgements:
Net assets, which primarily comprise the
parent company’s investment portfolio,
are considered to be the key driver of
theCompany’s total return performance
and form a part of the net asset value
calculation.
In addition, the parent company invests
largely in liquid investments and so by
benchmarking against other entities
inthesame industry, 1% is considered
appropriate.
Materiality for the current year is higher
than the level that we determined for the
year ended 31 December 2020 to reflect
the increase in net asset value in the year
from £1.92 billion to £1.99 billion.
Performance materiality used to drive
the extent of our testing
We set performance materiality at an amount less than materiality for the financial
statements as a whole to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality for the
financial statements as a whole.
Performance materiality threshold £14.9 million, which is 75% of financial
statementmateriality.
£13.4 million, which is 75% of financial
statementmateriality.
Significant judgements made by auditor
in determining performance materiality
In determining performance materiality,
we made the following significant
judgements:
A 75% performance materiality was
determined based on no uncorrected
misstatements from the prior year, low
levels of adjustments from previous years
and the high quality of the accounting
records maintained by the client.
We set a lower level of performance
materiality in the year ended 31 December
2020 due to the heightened risk of fraud
across the market as a result of the
COVID-19 pandemic. Since the
performance has stabilised and the
Group has sufficient funds readily
available to withstand a significant
liquidity event, the risk of fraud is
lowerand therefore a lower level of
performance materiality is no longer
deemed necessary.
In determining performance materiality,
we made the following significant
judgements:
A 75% performance materiality was
determined based on no uncorrected
misstatements from the prior year, low
levels of adjustments from previous years
and the high quality of the accounting
records maintained by the client.
We set a lower level of performance
materiality in the year ended 31 December
2020 due to the heightened risk of fraud
across the market as a result of the
COVID-19 pandemic. Since the
performance has stabilised and the
parent company has sufficient funds
readily available to withstand a
significantliquidity event, the risk of
fraudis lower and therefore a lower
levelof performance materiality is
nolonger deemed necessary.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
82
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2021
Materiality measure Group Parent company
Specific materiality
We determine specific materiality for one or more particular classes of transactions,
account balances or disclosures for which misstatements of lesser amounts than
materiality for the financial statements as a whole could reasonably be expected
toinfluence the economic decisions of users taken on the basis of the financial
statements.
Specific materiality threshold We determined a lower level of specific
materiality for the following areas:
Investment income, management fees
and performance fees
Related party transactions and
directors’remuneration
We determined a lower level of specific
materiality for the following areas:
Investment income, management fees
and performance fees
Related party transactions and
directors’remuneration
Communication of misstatements to the
Audit Committee
We determine a threshold for reporting unadjusted differences to the Audit Committee.
Threshold for communication £1 million and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£0.9 million and misstatements below
thatthreshold that, in our view, warrant
reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
OVERALL MATERIALITY – GROUP
Net assets £1.99bn
FSM £19.9m, 1%
PM £14.9m, 75%
TFPUM £1m, 5%
OVERALL MATERIALITY – PARENT COMPANY
Net assets £1.99bn
FSM £17.9m, 1%, capped at 90%
ofGroup
PM £13.4m, 75%
TFPUM £0.9m, 5%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
We performed a risk-based audit that requires an understanding of the Group’s and the parent company’s business and in particular
matters related to:
Understanding the Group, its components, and their environments, including Group-wide controls
> The engagement team obtained an understanding of the Group and its environment and assessed the risks of material
misstatement at the Group level.
> The engagement team obtained an understanding of relevant internal controls at both the Group and third-party service
providers. This included obtaining and reading internal controls reports prepared by the third-party service providers on the
description, design, and operating effectiveness of the internal controls at the investment manager, custodian and administrator.
Identifying significant components
The Group audit team evaluated the identified components to assess their significance and determined the planned audit response
based on a measure of materiality. Significance was determined, as a percentage of the Group’s total assets, total income and profit
before taxation.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
83
Type of work to be performed on financial information of parent and other components (including how it addressed the key
auditmatters)
> For each component of the audit, (the parent company and the subsidiary, Witan Investment Services Limited) the following
approach was undertaken:
– audit of the financial information of the component using component materiality (full scope audit procedures)
This ensured all key audit matters were addressed.
Changes in approach from previous period
> There have not been any changes in the scope of the current year audit from the scope of that of the prior year.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the Annual Report,
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
wearerequired to determine whether there is a material misstatement in the financial statements or a material misstatement
oftheother information. If, based on the work we have performed, we conclude that there is a material misstatement of this
otherinformation, we are required to report that fact.
We have nothing to report in this regard.
Our opinions on other matters prescribed by the Companies Act 2006 are unmodified
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
> the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
> the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT UNDER THE COMPANIES ACT 2006
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you
if, in our opinion:
> adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
> the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
> certain disclosures of directors’ remuneration specified by law are not made; or
> we have not received all the information and explanations we require for our audit
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
84
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2021
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of
theCorporate Governance Statement relating to the Group’s and the parent company’s compliance with the provisions of the
UKCorporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
> the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going
concern basis of accounting in preparing the financial statements and the directors’ identification of any material uncertainties
tothe Group’s and the parent company’s ability to continue to do so over a period of at least 12 months from the date of approval
of the financial statements;
> the directors’ explanation in the Annual Report as to how they have assessed the prospects of the Group and the parent company,
over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group and the parent company will be able to continue in operation and meet their
liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any
necessaryqualifications or assumptions;
> the directors’ statement that they consider the Annual Report and financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s and the parent company’s
performance, business model and strategy;
> the directors’ confirmation in the Annual Report that they have carried out a robust assessment of the principal and emerging risks
facing the Group and the parent company (including the impact of Brexit and COVID-19) and the disclosures in the Annual Report
that describe the principal risks, procedures to identify emerging risks and an explanation of how they are being managed or
mitigated (including the impact of Brexit and COVID-19);
> the section of the Annual Report that describes the review of the effectiveness of Group’s and the parent company’s risk
management and internal control systems, covering all material controls, including financial, operational and compliance
controls; and
> the section of the Annual Report describing the work of the Audit Committee, including significant issues that the Audit Committee
considered relating to the financial statements and how these issues were addressed.
RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL STATEMENTS
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no
realisticalternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
isahighlevel of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
materialmisstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
intheaggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent
limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be detected,
eventhough the audit is properly planned and performed in accordance with ISAs (UK).
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
85
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:
> We obtained an understanding of the legal and regulatory frameworks applicable to the Company and the industry in which it
operates. We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial
statements from our sector experience and through discussion with the directors and management. We determined that the most
significant laws and regulations were UK-adopted International Accounting Standards, the Companies Act 2006, the Association of
Investment Companies (AIC) Statement of Recommended Practice (SORP) ‘Financial Statements of Investment Trust Companies
and Venture Capital Trusts’, the AIC Code of Corporate Governance, sections 1158 to 1164 of the Corporation Tax Act 2010 and the
Listing Rules of the Financial Conduct Authority (the ‘FCA’).
> We enquired of the directors and management to obtain an understanding of how the Company is complying with those legal
and regulatory frameworks and whether there were any instances of non-compliance with laws and regulations and whether they
had any knowledge of actual or suspected fraud. We corroborated the results of our enquiries through our review of the minutes of
the Company’s Board and Audit Committee meetings.
> We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might
occurby evaluating management’s incentives and opportunities for manipulation of the financial statements. This included an
evaluation of the risk of management override of controls. Audit procedures performed by the engagement team in connection
with the risks identified included:
– evaluation of the design and implementation of controls that management has put in place to prevent and detect fraud;
– testing journal entries, including manual journal entries processed at the year-end for financial statements preparation
andjournals with unusual account combinations; and
– challenging the assumptions and judgements made by management in its significant accounting estimates.
> These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or
error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
errorand detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as
fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed non-
compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we
wouldbecome aware of it.
> The engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the engagement
team included consideration of the engagement team’s:
– understanding of, and practical experience with audit engagements of a similar nature and complexity through appropriate
training and participation
– knowledge of the industry in which the Group and parent company operate
– understanding of the legal and regulatory frameworks applicable to the Company.
OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
Following the recommendation of the Audit Committee, we were appointed by Witan Investment Trust plc in August 2016 to audit the
financial statements for the year ended 31 December 2016 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments of the firm is six years, covering the
periods ended 31 December 2016 to 31 December 2021.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company and we remain
independent of the Group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit Committee.
USE OF OUR REPORT
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Paul Flatley
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
15 March 2022
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
86
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
Year ended 31 December 2021 Year ended 31 December 2020
Notes
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Investment income 2 3 7, 4 4 3 – 3 7, 4 4 3 36 ,083 – 36 ,083
Other income 3 129 – 129 604 – 604
Gains on investments held at fair value
through profit or loss 10 – 248, 107 248, 107 – 5 7, 8 1 3 5 7, 8 1 3
Foreign exchange losses on cash and
cash equivalents – (1 , 1 7 8) (1 ,1 7 8) – (3 , 2 5 9) (3 , 25 9)
Total income 3 7, 5 7 2 2 46,929 2 84,5 01 36,687 54,554 91 , 241
Expenses
Management and performance fees 4 (2 , 3 3 1) (7,383) (9 ,7 1 4) (2 , 1 7 6) (7, 1 0 3) (9 , 2 79)
Other expenses 5 (4 , 8 1 5) (1 0 1) (4 , 9 1 6) (5 , 0 5 0) (2 6 0) (5 , 3 1 0)
Profit before finance costs and taxation 30,4 26 239,44 5 269,871 29,461 4 7, 1 9 1 76 , 6 52
Finance costs 6 (1 , 3 6 6) (3 , 84 2) (5 , 2 0 8) (1 , 6 74) (2 6 , 8 1 5) (2 8 , 4 8 9)
Profit before taxation 29,0 60 235,60 3 264 ,663 2 7,7 87 20 , 3 76 48 ,163
Taxation 7 (1 , 4 3 2) (488) (1, 920) (1 , 8 7 6) (3 9 8) (2 , 2 74)
Profit attributable to equity
shareholders of the parent company 2 7, 6 2 8 2 35,11 5 2 6 2 ,74 3 25,91 1 19 ,97 8 4 5,8 89
Earnings per ordinary share (basic and
diluted) 9 3 .59p 30 .53p 34 .12p 3.08p 2 . 37p 5. 45p
The total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance with
UK-adopted International Accounting Standards.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the
Association of Investment Companies.
The Group does not have any other comprehensive income and hence the total profit as disclosed above is the same as the Group’s
total comprehensive income.
All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of Witan Investment Trust plc, the parent company. There are no non-controlling interests.
The notes on pages 90 to 111 form part of these financial statements.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
87
Consolidated and Individual Statements of Changes in Equity
for the year ended 31 December 2021
Group
Year ended 31 December 2021 Notes
Ordinary
share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2020 50, 018 99 ,251 4 6,49 8 1,665 ,775 63,666 1, 925, 208
Total comprehensive income:
Profit for the year – – – 235,115 2 7, 62 8 26 2, 7 43
Transactions with owners, recorded
directly toequity:
Ordinary dividends paid 8 – – – – (42, 399) (42,399)
Buybacks of ordinary shares
(held in treasury) 15 – – – (153,511) – (153,511)
Total equity at 31 December 2021 50,018 9 9, 251 46,498 1 , 7 4 7, 3 79 48, 895 1,9 92 ,041
Company
Year ended 31 December 2021 Notes
Ordinary
share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2020 50,018 99,251 46,498 1,666,030 63,411 1,925,208
Total comprehensive income:
Profit for the year – – – 235,076 27,667 262,743
Transactions with owners, recorded
directly toequity:
Ordinary dividends paid 8 – – – – (42,399) (42,399)
Buybacks of ordinary shares
(held in treasury) 15 – – – (153,511) – (153,511)
Total equity at 31 December 2021 50,018 99,251 46,498 1,747,595 48,679 1,992,041
Group
Year ended 31 December 2020
Notes
Ordinary
share capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2019 50, 018 99 ,251 4 6,49 8 1,768 ,281 8 7, 0 5 8 2,051,106
Total comprehensive income:
Profit for the year – – – 19 ,978 25 ,911 45, 889
Transactions with owners, recorded
directly toequity:
Ordinary dividends paid 8 – – – – (49, 303) (49,303)
Buybacks of ordinary shares
(held in treasury) 15 – – – (1 2 2 , 4 8 4) – (1 2 2 , 4 8 4)
Total equity at 31 December 2020 50, 018 99 ,251 4 6,49 8 1,665 ,775 63,666 1, 925, 208
Company
Year ended 31 December 2020
Notes
Ordinary
share capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2019 50,018 99,251 46,498 1,768,439 86,900 2,051,106
Total comprehensive income:
Profit for the year – – – 20,075 25,814 45,889
Transactions with owners, recorded
directly toequity:
Ordinary dividends paid 8 – – – – (49,303) (49,303)
Buybacks of ordinary shares
(held in treasury) 15 – – – (122,484) – (122,484)
Total equity at 31 December 2020 50,018 99,251 46,498 1,666,030 63,411 1,925,208
The notes on pages 90 to 111 form part of these financial statements.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
88
Consolidated and Individual Balance Sheets
as at 31 December 2021
Notes
Group
31 December
2021
£’000
Company
31 December
2021
£’000
Group
31 December
2020
£’000
Company
31 December
2020
£’000
Non current assets
Investments at fair value through profit or loss 10 2 , 2 1 7, 4 5 5 2,218,571 2,16 2,7 22 2,163,877
Right-of-use asset: property 21 249 249 315 315
2 ,2 17,704 2,218,820 2,16 3, 037 2,164,192
Current assets
Other receivables 11 5,84 0 5,782 1 0, 87 7 10,759
Cash and cash equivalents 34,59 0 33,491 36 ,145 35,152
Total current assets 40,4 30 39,273 47 ,022 45,911
Total assets 2, 258,134 2,258,093 2, 21 0, 059 2,210,103
Current liabilities
Other payables 12 (1 0 , 34 7) (10,306) (1 8 , 4 8 8) (18,532)
Bank loans 13 (98,000) (98,000) (109,000) (109,000)
Total current liabilities (1 0 8 , 34 7) (108,306) (1 2 7, 4 8 8) (127,532)
Total assets less current liabilities 2 ,149,787 2,149,787 2, 08 2,571 2,082,571
Non current liabilities
Other payables 12 (2 8 7) (287) (4 1 7) (417)
Deferred tax liability on Indian capital gains (8 8 6) (886) (3 9 8) (398)
Borrowings:
Secured debt 13 (1 5 4 , 0 1 8) (154,018) (153,993) (153,993)
3.4 per cent. cumulative preference shares of £1 13, 17 (2 , 0 5 5) (2,055) (2 , 0 5 5) (2,055)
2.7 per cent. cumulative preference shares of £1 13, 17 (5 0 0) (500) (5 0 0) (500)
Total non current liabilities (1 57, 74 6) (157,746) (157,363) (157,363)
Net assets 1,99 2 ,041 1,992,041 1, 925, 208 1,925,208
Equity attributable to equity holders
Ordinary share capital 15 50,018 50,018 50,01 8 50,018
Share premium account 9 9, 251 99,251 99,251 99,251
Capital redemption reserve 46,49 8 46,498 46 ,498 46,498
Retained earnings:
Other capital reserves 16 1 ,7 4 7, 3 7 9 1,747,595 1,665 ,775 1,666,030
Revenue reserve 48,895 48,679 63,666 63,411
Total equity 1,9 92 ,041 1,992,041 1, 925, 208 1,925,208
Net asset value per ordinary share 18 269.93p 269.93p 24 0 .1 4p 240.14p
The financial statements of Witan Investment Trust plc (registered number 101625) were approved by directors and authorised for issue
on 15 March 2022 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 £262,743,000 (2020: profit of £45,889,000).
The notes on pages 90 to 111 form part of theses financial statements.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
89
Consolidated and Individual Company Cash Flow Statements
for the year ended 31 December 2021
Notes
Group
2021
£’000
Company
2021
£’000
Group
2020
£’000
Company
2020
£’000
Cash flows from operating activities
Dividend income received 3 7, 9 8 6 37,986 3 7, 1 5 2 37,152
Interest received 149 149 89 88
Other income received 361 141 1 , 142 281
Operating expenses paid (1 5 , 4 30) (15,316) (1 5 ,7 5 7) (14,733)
Taxation on overseas income (3 , 7 9 4) (3,794) (2 , 2 3 3) (2,233)
Taxation recovered 81 81 4 85 485
Net cash inflow from operating activities 19, 353 19,247 20, 878 21,040
Cash flows from investing activities
Purchases of investments (1 ,004 ,934) (1,004,934) (1,687,329) (1,687,329)
Sale of investments 1,19 4,779 1,194,779 1, 859,846 1,859,846
Settlement of futures contracts – – 4, 892 4,892
Net cash inflow from investing activities 189,845 189,845 1 7 7, 4 0 9 177,409
Cash flow from financing activities
Equity dividends paid 8 (4 2 , 3 9 9) (42,399) (49,303) (49,303)
Expenses relating to issue of secured notes 19 – – (17) (17)
Buybacks of ordinary shares (150,942) (150,942) (12 0 , 4 3 7) (120,437)
Repayment of secured bond 19 – – (8 5 , 7 50) (85,750)
Interest paid (5 , 1 6 7) (5,167) (6 , 5 2 9) (6,529)
Repayment of lease liability (6 7) (67) (7 0) (70)
Drawdown of bank loans 19 176, 25 0 176,250 360,000 360,000
Repayment of bank loans 19 (1 8 7, 2 5 0) (187,250) (3 0 1 , 5 0 0) (301,500)
Net cash outflow from financing activities (2 0 9 , 57 5) (209,575) (2 0 3 , 6 0 6) (203,606)
Decrease in cash and cash equivalents (3 7 7) (483) (5 , 3 1 9) (5,157)
Cash and cash equivalents at the start of the period 36,145 35,152 44 ,723 43,568
Effect of foreign exchange rate changes (1 ,1 7 8) (1,178) (3 , 2 5 9) (3,259)
Cash and cash equivalents at the end of the period 34,59 0 33,491 36 ,145 35,152
The notes on pages 90 to 111 form part of these financial statements.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
90
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 below. Where presentational guidance set out in the
Statement of Recommended Practice Financial Statements of
Investment Trust Companies and Venture Capital Trusts (the
‘SORP’) issued by the Association of Investment Companies
(the‘AIC’) in April 2021 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 on pages 1 to 45. The financial
position of the Group as at 31 December 2021 is shown on the
balance sheet on page 88. The cash flows of the Group for the
year ended 31 December 2021 are not untypical and are set out
on page 89.
(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.
(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. Additionally, the net revenue is the
measure the directors believe appropriate in assessing the
Group’s compliance with certain requirements set out in
section1158 ofthe Corporation Tax Act 2010.
(e) Income
Dividends receivable on equity shares are recognised as revenue
for the year on an ex-dividend basis. Where no ex-dividend date
is available, dividends receivable on or before the year end
aretreated as revenue for the year. Provision is made for any
dividends not expected to be received. The fixed returns on debt
securities and non-equity shares are recognised on a time
apportionment basis so as to reflect the effective yield on the
debt securities and shares. Interest receivable from cash and
short-term deposits is accrued to the end of the period. Stock
lending fees and underwriting commission are recognised as
earned. Any special dividends are looked at individually to
ascertain the reason behind the payment. This will determine
whether they are treated as revenue or capital. Where the
Grouphas elected to receive its dividends in the form of
additional shares rather than cash, the amount of cash
dividendforegone is recognised as revenue. Any excess
inthevalue of shares received over the amount of cash
dividendforegone is recognised as a gain in the
StatementofComprehensive Income.
(f) Expenses
All expenses and interest payable are accounted for on
anaccruals basis. Expenses are presented as capital where
aconnection with the maintenance or enhancement of the
valueof the investments can be demonstrated. In this respect
the investment management fees and finance costs are
allocated 25% to revenue and 75% to capital to reflect the
Board’sexpectations of long-term investment returns. Any
performance fees payable are allocated wholly to capital,
reflecting the fact that, although they are calculated on
atotalreturn basis, they are expected to be attributable
largely,ifnot wholly, to capital performance.
Notes to the Financial Statements
for the year ended 31 December 2021
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
91
(g) Taxation
The tax currently payable is based on the taxable profit for
theperiod.
Taxable profit differs from net profit as reported in the Statement
of Comprehensive Income because it excludes items of income
or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The
Group’s liability for current tax is calculated using tax rates that
were applicable at the balance sheet date.
In line with the recommendations of the SORP, the allocation
method used to calculate tax relief on expenses presented
against capital returns in the supplementary information in
theStatement of Comprehensive Income is the ‘marginal basis’.
Under this basis, if taxable income is capable of being offset
entirely by expenses presented in the revenue return column
ofthe Statement of Comprehensive Income then no tax relief
istransferred to the capital return column.
Deferred tax is the tax expected to be payable or recoverable
ondifferences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding
taxbases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method.
Deferredtax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised.
Investment trusts which have approval as such under section
1158 of the Corporation Tax Act 2010 are not liable for taxation
oncapital gains. Deferred tax liabilities and assets are not
recognised if they arise from the initial recognition of an asset
orliability which, at the time of the transaction, does not affect
the accounting profit or taxable profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected
toapply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the Statement of
Comprehensive Income, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is
also dealt with in equity.
(h) Investments held at fair value through profit or loss
When a purchase or sale is made under a contract, the terms
ofwhich require delivery within the timeframe of the relevant
market, the investments concerned are recognised or
derecognised on the trade date.
All the Group’s investments are defined by IASs as investments held
at fair value through profit or loss. All gains and losses are allocated
to the capital return within the Statement of Comprehensive
Income as ‘Gains or losses on investments held at fair value
through profit or loss’. Also included within this heading are
transaction costs in relation to the purchase or sale of investments.
The classification and measurement criteria determine if financial
instruments are measured at amortised cost, fair value through
other comprehensive income, or fair value through profit or loss.
Investment assets are classified based on both the business
model, and the contractual cash flow characteristics of the
financial instruments. This approach determined that all
investments are classified and measured at fair value through
profit or loss, which is either the bid price or the last traded price,
depending on the convention of the exchange on which the
investment is quoted. Investments in unit trusts or OEICs are
valued at the closing price, the bid price or the single price as
appropriate, released by the relevant investment manager.
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the
risksand rewards of ownership of the asset to another entity.
Onderecognition of a financial asset, the difference between
theasset’s carrying amount and the sum of the consideration
received and receivable is recognised in profit or loss.
Fair values for unquoted investments, or for investments for
which there is only an inactive market, are established by using
various valuation techniques. These may include recent arm’s
length market transactions, the current fair value of another
instrument that is substantially the same, discounted cash flow
analysis, option pricing models and reference to similar quoted
companies. Where there is a valuation technique commonly
used by market participants to price the instrument and that
technique has been demonstrated to provide reliable estimates
of prices obtained in actual market transactions, that technique
is utilised.
The subsidiary company, Witan Investment Services Limited,
isheld at fair value in the Company balance sheet. This is
considered to be the net asset value of the shareholder’s
funds,as shown in its balance sheet.
(i) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and that are
subject to an insignificant risk of changes in value.
(j) Dividends payable
Interim dividends are recognised in the period in which they are
paid. Final dividends are not recognised until approved by the
shareholders in general meeting.
(k) Fixed borrowings
All secured notes are initially recognised at cost, being the
fairvalue of the consideration received, less issue costs where
applicable. After initial recognition, all interest-bearing loans
andborrowings are subsequently measured atamortised cost
using the effective interest method, with theinterest expense
recognised on an effective yield basis. Theeffective interest
method is a method of calculating the amortised cost of a
financial liability and of allocating interest expense over the
relevant period. The effective interest rate is the rate that exactly
discounts estimated future payments over the expected life of
the financial liabilities, or, where appropriate, a shorter period,
tothe net carrying amount on initial recognition.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
92
Notes to the Financial Statements continued
for the year ended 31 December 2021
1 ACCOUNTING POLICIES CONTINUED
(l) Foreign currency translation
Transactions involving foreign currencies are converted at the
rate ruling at the date of the transaction.
Foreign currency monetary assets and liabilities that are fair
valued and denominated in foreign currencies are re-translated
into sterling at the rate ruling on the balance sheet date. Foreign
exchange differences arising on translation are recognised in
theStatement of Comprehensive Income and allocated to
thecapital return.
(m) Adoption of new and revised accounting standards
Standards not affecting the reported results nor the
financialposition
The following new and revised Standards and Interpretations
areapplicable in the current year. Their application has not
hadany significant impact on the amounts reported in
thesefinancial statements.
> IAS 39, IFRS 4, 7, 9 and 16 Amendments: Interest Rate
Benchmark Reform.
At the date of authorisation of these financial statements, the
following Standards and Interpretations, which have not been
applied in these financial statements, were in issue but not
effective (and in some cases had not yet been adopted).
> IAS 1 Amendments: Classification of Liabilities as Current
orNon Current;
> IAS 1 Amendments: Disclosure of Accounting Policies;
> IAS 8 Amendments: Definition of Accounting Estimates.
The directors do not expect that the adoption of the Standards
listed above will have a material impact on the financial
statements of the Group in future periods. Beyond the
information above, it is not practical to provide a reasonable
estimate of the effect of these Standards until a detailed
reviewhas been completed.
(n) Derivative financial instruments
The Group’s activities expose it primarily to the financial risks of
changes in market prices, foreign currency exchange rates and
interest rates. Derivative transactions which the Company may
enter into comprise forward exchange contracts (the purpose
ofwhich is to manage currency risks arising from the Company’s
investing activities), quoted options on shares held within the
portfolio, or on indices appropriate to sections of the portfolio
(the purpose of which is to provide protection against falls in the
capital values of the holdings) and futures contracts appropriate
to sections of the portfolio (to provide additional market
exposure or to provide protection against falls in the capital
values of the holdings). The Company may also write options
onshares represented in the portfolio where such options
arepriced attractively relative to the investment managers’
longer-term expectations for the relevant share prices.
TheGroupdoes not use derivative financial instruments
forspeculative purposes. Hedge accounting is not used.
The use of financial derivatives is governed by the Group’s
policies as approved by the Board, which has set written
principles for the use of financial derivatives.
Changes in the fair value of derivative financial instruments
arerecognised in the Statement of Comprehensive Income as
they arise. If capital in nature, the associated change in value
ispresented as a capital item in the Statement of
Comprehensive Income.
(o) Nature and purpose of reserves
Ordinary share capital
The ordinary share capital on the balance sheet relates to the
number of shares in issue and in treasury. Only when the shares
are cancelled, either from treasury or directly, is a transfer made
to the capital redemption reserve.
Share premium account
The balance classified as share premium includes the premium
above nominal value from the proceeds on issue of any equity
share capital comprising ordinary shares of 5p.
Capital redemption reserve
The capital redemption reserve is used to record the amount
equivalent to the nominal value of any of the Company’s own
shares purchased and cancelled in order to maintain the
Company’s capital.
Other capital reserves
Gains and losses on disposal of investments and changes in
fairvalues of investments are transferred to the capital reserve.
The capital element of the management and performance fees
and relevant finance costs are charged to this reserve. Any
associated tax relief is also credited to this reserve. Other capital
reserves also comprise treasury shares. Realised capital reserves
are distributable by way of dividend.
Revenue reserve
This reflects all income and costs which are recognised in the
revenue column of the Statement of Comprehensive Income.
Therevenue reserve is distributable by way of dividend.
(p) Leases
A lease is identified at inception of a contract where it conveys
rights to control the use of an identified asset for a period of time
in exchange for consideration. At commencement, the Company
as a lessee recognises a right-of-use asset equal to the lease
liability at inception plus any direct costs, and the lease liability
ismeasured at the present value of the unpaid lease payments
discounted at the incremental borrowing rate of the Company.
Subsequently, the Company as a lessee applies the cost model
to the right-of-use asset which is depreciated over the useful
lifeof the right-of-use asset, the lease liability is increased
byinterest on the outstanding balance and reduced by lease
payments paid. A remeasurement of the right-of-use asset
andthe lease liability occurs when there is a change to the
leasecontract.
The Company has elected not to separate any non-lease
element from the lease payments.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
93
2 INVESTMENT INCOME
2021
£’000
2020
£’000
UK dividends from listed investments 11,693 10,549
UK special dividends from listed investments 455 104
UK stock dividends from listed investments 170 –
Total UK dividends 12,318 10,653
Overseas dividends from listed investments 24,502 25,122
Overseas special dividends from listed investments 623 257
Overseas stock dividends from listed investments – 51
Total investment income 37,443 36,083
2021
£’000
2020
£’000
Analysis of investment income by geographical segment:
United Kingdom 12,318 10,653
North America 4,407 5,840
Continental Europe 5,614 5,236
Japan 1,450 1,933
Asia Pacific (ex Japan) 2,709 3,764
Latin America 2,147 –
Other 8,798 8,657
Total investment income 37,443 36,083
3 OTHER INCOME
2021
£’000
2020
£’000
Deposit interest 3 81
Stock lending income 126 281
Income from the subsidiary company’s third-party business – 242
129 604
At 31 December 2021 the total value of securities on loan by the Company for stock lending purposes was £57,111,000 (2020:£83,074,000).
The maximum aggregate value of securities on loan at any time during the year ended 31 December 2021 was £188,480,000 (2020:
£128,597,000). Collateral, revalued on a daily basis at a level equivalent to at least 105% (2020: 105%) of the market valueof the securities
lent, was provided against all loans.
4 MANAGEMENT AND PERFORMANCE FEES
Year ended 31 December 2021 Year ended 31 December 2020
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Management fees paid to third-party managers 2,331 6,994 9,325 2,176 6,528 8,704
Performance fees paid to third-party managers – 389 389 – 575 575
2,331 7,383 9,714 2,176 7,103 9,279
A summary of the terms of the management agreements is given on page 43 in the Strategic Report.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
94
Notes to the Financial Statements continued
for the year ended 31 December 2021
5 OTHER EXPENSES
Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
2021
Revenue
£’000
2020
Revenue
£’000
Fees payable to the Company’s auditor and its associates for the audit of the Company’s annual accounts 66 58
Fees payable to the Company’s auditor and its associates for other services to the Group:
– the audit of the Company’s subsidiary 10 10
Total audit fees 76 68
Other services
(1)
:
– audit-related services 25 25
– other assurance services – 3
Total non-audit fees 25 28
Total fees paid 101 96
(1) These fees relate to the Client Assets Sourcebook (CASS) audit for the year ended 31 December 2021 (£25,000) and, in relation to the year ended 31 December 2020, a review of the
interim financial statements (£3,000) and expenses incurred. The fees for this work were specifically approved by the Audit Committee (see page 59).
2021
Revenue
£’000
2020
Revenue
£’000
Auditor’s remuneration (see above) 101 96
Tax advisory services 80 20
Directors’ fees (see the Directors’ Remuneration Report on pages 60 to 71) 318 336
Employers’ national insurance contributions on the directors’ fees 35 35
Employee costs (including executive director’s remuneration):
– salaries and bonuses 1,001 1,115
– employers’ national insurance contributions 144 160
– pension contributions (or payments in lieu thereof) 82 89
Total employee costs 1,227 1,364
Advisory, consultancy and legal fees 232 187
Investment accounting fees 330 307
Company secretarial fees 158 154
Insurances 128 82
Occupancy costs – office fees and rates 68 77
Depreciation on right-of-use asset – property 66 81
Bank charges and overseas safe custody fees 513 543
Depositary fees 134 128
Marketing expenses 676 618
Other expenses 642 796
Irrecoverable VAT 107 226
Total
(1)
4,815 5,050
(1) The total includes costs of £479,000 (2020: £579,000) in respect of the subsidiary company’s third-party business which are partially offset (2020: partially offset) by the subsidiary
company’s income from that business. The analysis relates to the revenue return column only.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
95
Expenses included in the capital return column for 2021 were £101,000 (2020: £260,000). These related to investment advisory costs
andcosts incurred relating to the change of portfolio managers.
The average number of staff employed by the Group during the year:
2021 2020
Management, marketing and operation of Witan Investment Trust and Witan Investment Services 6 7
6 FINANCE COSTS
Year ended 31 December 2021 Year ended 31 December 2020
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Interest payable on overdrafts and loans repayable
within one year 127 380 507 67 199 266
Interest payable on secured bonds and notes
repayable inmore than five years 1,154 3,462 4,616 1,518 4,552 6,070
Loss on early repayment of secured bonds – – – – 22,064 22,064
Preference share dividends 83 – 83 83 – 83
Interest payable on lease liability 2 – 2 6 – 6
1,366 3,842 5,208 1,674 26,815 28,489
7 TAXATION
7.1 Analysis of tax charge for the year
Year ended 31 December 2021 Year ended 31 December 2020
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
UK corporation tax at 19% (2020: 19%) – – – – – –
Foreign tax suffered 1,672 2,279 3,951 2,575 – 2,575
Recovery of prior years’ withholding tax (81) – (81) (485) – (485)
Foreign tax recoverable (159) (2,279) (2,438) (214) – (214)
Movement in deferred tax liability on Indian
capitalgains – 488 488 – 398 398
Total current tax for the year (see note 7.2) 1,432 488 1,920 1,876 398 2,274
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
96
Notes to the Financial Statements continued
for the year ended 31 December 2021
7 TAXATION CONTINUED
7.2 Factors affecting the current tax charge for the year
The UK corporation tax rate is 19% for the year (2020: 19%). The tax assessed for the year is lower than that resulting from applying
theeffective standard rate of corporation tax in the UK. The difference is explained below.
Year ended 31 December 2021 Year ended 31 December 2020
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Profit before taxation 29,060 235,603 264,663 27,787 20,376 48,163
Corporation tax at 19% (2020: 19%) 5,521 44,765 50,286 5,280 3,871 9,151
Effects of:
Non-taxable UK dividends (2,340) – (2,340) (2,024) – (2,024)
Non-taxable overseas dividends (4,774) – (4,774) (4,832) – (4,832)
Withholding tax suffered 1,432 – 1,432 1,876 – 1,876
Non-taxable gains on investments held at fair value
through profit or loss – (47,140) (47,140) – (10,984) (10,984)
Currency losses not taxable – 224 224 – 619 619
Corporate interest restriction – – – 294 4,724 5,018
Expenses not deductible for tax purposes – – – – 159 159
Excess management expenses not utilised in year 1,577 2,151 3,728 1,266 1,611 2,877
Movement in deferred tax liability on Indian
capitalgains – 488 488 – 398 398
Preference dividends not deductible in determining
taxableprofit 16 – 16 16 – 16
Current tax charge 1,432 488 1,920 1,876 398 2,274
7.3 Deferred tax
The Company is liable to Indian capital gains tax under Section 115 AD of the Indian Income Tax Act 1961. On 1 April 2018, the Indian
Government withdrew an exemption from capital gains tax on investments held for 12 months or longer. The Company has
recogniseda deferred tax liability of £886,000 (2020: £398,000) on capital gains which may arise if Indian investments are sold.
Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to maintain that
status in the foreseeable future, the Company has not provided for any other deferred tax on any capital gains and losses arising on
the revaluation or disposal of investments. No provision has been made for deferred tax on income outstanding at the end of the year
as this will be covered by unrelieved business charges and eligible unrelieved foreign tax (2020: £nil).
7.4 Factors that may affect future tax charges
At 31 December 2021, the Company has excess expenses of £288,534,000 (2020: £273,750,000) carried forward. This sum has arisen due
to cumulative deductible expenses having exceeded income over the life of the Company. It is considered too uncertain that there will
be sufficient taxable profits against which these expenses can be offset and, therefore, in accordance with IAS 12, a deferred tax asset
of £72,120,000 (2020: £52,013,000) in respect of unrelieved loan relationship deficit and unrelieved management expenses based on
aprospective corporation tax rate of 25% (2020: 19%) has not been recognised. The increase in the standard rate of corporation tax
willbe effective from 1 April 2023. Provided the Company continues to maintain its current investment profile, it is unlikely that the
expenseswill be utilised and that the Company will obtain any benefit from this contingent asset.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
97
8 DIVIDENDS
2021
£’000
2020
£’000
Amounts recognised as distributions to equity holders in the year:
Fourth interim dividend for the year ended 31 December 2020 of 1.43p (2019: 1.825p) per ordinary share 11,294 15,783
First interim dividend for the year ended 31 December 2021 of 1.36p (2020: 1.34p) per ordinary share 10,563 11,536
Second interim dividend for the year ended 31 December 2021 of 1.36p (2020: 1.34p) per ordinary share 10,385 11,099
Third interim dividend for the year ended 31 December 2021 of 1.36p (2020: 1.34p) per ordinary share 10,157 10,885
42,399 49,303
Fourth interim dividend for the year ended 31 December 2021 of 1.52p (2020: 1.43p) per ordinary share 11,107 11,294
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.
2021
£’000
2020
£’000
Revenue profits available for distribution (Company only) 27,667 25,814
First interim dividend for the year ended 31 December 2021 of 1.36p (2020: 1.34p) per ordinary share (10,563) (11,536)
Second interim dividend for the year ended 31 December 2021 of 1.36p (2020: 1.34p) per ordinary share (10,385) (11,099)
Third interim dividend for the year ended 31 December 2021 of 1.36p (2020: 1.34p) per ordinary share (10,157) (10,885)
Fourth interim dividend for the year ended 31 December 2021 of 1.52p (2020: 1.43p) per ordinary share (11,107) (11,294)
Revenue reserves utilised in the year (Company only) (14,545) (19,000)
9 EARNINGS PER ORDINARY SHARE
The earnings per ordinary share figure is based on the net profit for the year of £262,743,000 (2020: profit of £45,889,000) and
on770,137,797 ordinary shares (2020: 841,523,451), 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.
2021
£’000
2020
£’000
Net revenue profit 27,628 25,911
Net capital profit 235,115 19,978
Net total profit 262,743 45,889
Weighted average number of ordinary shares in issue during the year 770,137,797 841,523,451
Pence Pence
Revenue earnings per ordinary share 3.59 3.08
Capital earnings per ordinary share 30.53 2.37
Total earnings per ordinary share 34.12 5.45
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
98
Notes to the Financial Statements continued
for the year ended 31 December 2021
10 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
10.1 Analysis of investments held at fair value through profit or loss
2021 2020
Group
£’000
Company
£’000
Group
£’000
Company
£’000
Listed in the United Kingdom 447,597 447,597 421,258 421,258
Listed abroad 1,769,858 1,769,858 1,741,464 1,741,464
Investment in subsidiary undertaking – 1,116 – 1,155
2,217,455 2,218,571 2,162,722 2,163,877
10.2 Group changes in investments held at fair value through profit or loss
Valuation
31 December
2020
£’000
Purchases
£’000
Sales
£’000
Investment
gains/
(losses)
£’000
Valuation
31 December
2021
£’000
Cost
31 December
2021
£’000
United Kingdom 421,258 171,336 196,010 51,013 447,597 390,692
North America 716,975 314,914 375,989 188,452 844,352 649,485
Continental Europe 358,861 250,428 250,382 16,705 375,612 294,151
Japan 104,732 19,975 42,859 (14,303) 67,545 68,066
Asia Pacific (ex Japan) 247,005 112,282 229,819 (15,114) 114,354 78,397
Latin America 31,141 25,684 11,869 (21,864) 23,092 19,726
Other 282,750 99,818 80,883 43,218 344,903 262,358
2,162,722 994,437 1,187,811 248,107 2,217,455 1,762,875
The above figures do not include any gains/losses on futures positions (see note 10.4).
Total transactions costs included in gains or losses on investments at fair value through profit or loss include purchase costs of
£3,246,000 (2020: £2,410,000) and sales costs of £706,000 (2020: £1,170,000). Thesecomprise mainly stamp duty and commission and
includes £Nil in respect of changes in portfolio managers (2020: £66,000).
The Group received £1,187,811,000 (2020: £1,865,043,000) from investments sold in the period. The book cost of these investments when
they were purchased was £965,319,000 (2020: £1,938,731,000). These investments have been revalued over time and until they were
soldany unrealised gains/losses were included in the fair value of the investments.
10.3 Gains in investments held at fair value through profit or loss
2021
£’000
2020
£’000
Gains on investments 248,107 52,921
Gains on derivatives – 4,892
248,107 57,813
10.4 Derivatives
2021
£’000
2020
£’000
Gains on futures – 4,892
Open futures contracts
There were no open contracts as at 31 December 2021 or 31 December 2020.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
99
10.5 Substantial share interests
The Company has notified interests in 3% or more of the voting rights of seven of the investee companies, all of which are closed-
ended investment funds. The Company holds 13.1% of the shares in issue of Unbound Group plc (formerly Electra Private Equity PLC),
which represents £4,004,000 of investments held at fair value through profit or loss. It is the Company’s stated policy to invest no
morethan 15% of its gross assets in other listed investment companies (including listed investment trusts).
11 OTHER RECEIVABLES
2021 2020
Group
£’000
Company
£’000
Group
£’000
Company
£’000
Sales for future settlement – – 6,968 6,968
Taxation recoverable 3,548 3,548 1,288 1,288
Amounts due from subsidiary – 278 – –
Prepayments and accrued income 2,120 1,784 2,421 2,421
Other debtors 172 172 200 82
5,840 5,782 10,877 10,759
12 OTHER PAYABLES – CURRENT LIABILITIES
2021 2020
Group
£’000
Company
£’000
Group
£’000
Company
£’000
Purchases for future settlement 1,569 1,569 12,066 12,066
Preference dividends 39 39 39 39
Outstanding buybacks of ordinary shares 4,686 4,686 2,117 2,117
Lease liability 76 76 62 62
Amounts due to subsidiary – – – 128
Accruals 3,977 3,936 4,204 4,120
10,347 10,306 18,488 18,532
Other payables – non current liabilities
Group
£’000
Company
£’000
Group
£’000
Company
£’000
Bonuses payable in more than one year 101 101 149 149
Lease liability payable in more than one year 186 186 268 268
287 287 417 417
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
100
Notes to the Financial Statements continued
for the year ended 31 December 2021
13 BORROWINGS
2021 2020
Group
£’000
Company
£’000
Group
£’000
Company
£’000
Financial instruments redeemable other than in instalments are as follows:
Amounts falling due within one year:
Bank loans 98,000 98,000 109,000 109,000
Amounts falling due after more than one year:
Secured debt:
3.29 per cent. secured notes due 2035 20,891 20,891 20,884 20,884
3.47 per cent. secured notes due 2045 53,677 53,677 53,669 53,669
2.39 per cent. secured notes due 2051 49,686 49,686 49,679 49,679
2.74 per cent. secured notes due 2054 29,764 29,764 29,761 29,761
154,018 154,018 153,993 153,993
2,055,000 3.4 per cent. cumulative preference shares of £1 each
(see note 17 on page 108) 2,055 2,055 2,055 2,055
500,000 2.7 per cent. cumulative preference shares of £1 each
(see note 17 on page 108) 500 500 500 500
254,573 254,573 265,548 265,548
At the year end, the Company had a £150,000,000 secured and committed multi-currency borrowing facility with BNP Paribas, London
Branch (expiring 2 December 2022). The terms of this loan facility contain covenants that total net borrowings do not exceed 20% of
theNAV.
During 2015 the Company issued £21,000,000 (nominal) 3.29 per cent. secured notes due 2035 and £54,000,000 (nominal) 3.47 per cent.
secured notes due 2045 net of issue costs totalling approximately £528,000. These costs will be written back over the life of the
securednotes.
During 2017 the Company issued £30,000,000 (nominal) 2.74 per cent. secured notes due 2054 net of issue costs totalling
approximately £252,000. These costs will be written back over the life of the secured notes.
During 2019 the Company issued £50,000,000 (nominal) 2.39 per cent. secured notes due 2051 net of issue costs totalling
approximately £315,000. These costs will be written back over the life of the secured notes.
The secured notes are secured by floating charges over all the undertakings and assets of the Company. Thesecurity of the charges
applies pari passu to the issues. The terms of each of the four secured notes contain covenants that theNAV should at no time be less
than £575,000,000 and that total net borrowings do not exceed 25% of the NAV at any time.
14 FINANCIAL INSTRUMENTS
Risk management policies and procedures
As an investment company, Witan invests in equities and other investments for the long term so as to secure its investment objective
as stated on the inside front cover. In pursuing its investment objective, the Group is exposed to a variety of risks that could result
ineither a reduction in the Group’s net assets or a reduction in the profits available for distribution by way of dividends.
These risks, market risk (comprising price risk, currency risk and interest rate risk), liquidity risk and credit risk, and the directors’
approach to the management of them, are set out below.
The objectives, policies and processes for managing the risks and the methods used to manage the risks, as set out below, have not
changed from the previous accounting period, although in some instances additional resources have been allocated to some areas.
14.1 Market risk
The fair value of a financial instrument held by the Group may fluctuate due to changes in market prices. This market risk comprises:
price risk (see note 14.2), currency risk (see note 14.3) and interest rate risk (see note 14.4). The Board reviews and agrees policies for
managing these risks; these policies have remained substantially unchanged from those applying in the year ended 31 December
2020. The investment managers assess the exposure to market risk when making each investment decision and monitor the overall
level of market risk on the whole of their investment portfolios on an ongoing basis.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
101
14.2 Price risk
Price risks (i.e. changes in market prices other than those arising from interest rate risk or currency risk) may affect the value of the
quoted and the unquoted investments.
Management of the risk
The Board manages the risks inherent in the investment portfolios by regularly reviewing relevant information from the investment
managers. The Board meets regularly and at each meeting reviews investment performance. The Board monitors the managers’
compliance with their mandates and also whether each mandate and asset allocation is compatible with the Company’s objective.
When appropriate, the Company has the ability to manage its exposure to risk through the controlled use of derivatives.
The Group’s exposure to other changes in market prices at 31 December on its quoted equity investments was as follows:
2021
£’000
2020
£’000
Investments held at fair value through profit or loss 2,217,455 2,162,722
Concentration of exposure to price risks
An analysis of the Group’s investment portfolio is shown on page 36. This shows that the greater geographical weighting is to
NorthAmerican companies, with significant exposure also to the UK, Asia and Continental Europe. Accordingly, there is a concentration
ofexposure to those regions, although an investment’s country of domicile or of listing does not necessarily equate to its exposure
tothe economic conditions in that country.
Price risk sensitivity
The following table illustrates the sensitivity of the profit after taxation for the year and the value of the shareholders’ funds to an
increase or decrease of 15% in the fair values of the Group’s equity investments (including exposure through futures contracts).
Thislevel of change is considered to be reasonably possible based on observation of market conditions and historical trends.
Thesensitivity analysis is based on the Group’s equities and equity exposure through options and futures at each balance sheet
date,with all other variables held constant. The results of these example calculations are significant but not unreasonable, given
thatmost of the Group’s assets are equity investments.
2021 2020
Increase in
fair value
£’000
Decrease in
fair value
£’000
Increase in
fair value
£’000
Decrease in
fair value
£’000
Changes to the Consolidated Statement of Comprehensive Income
Revenue return – – – –
Capital return – investments 332,618 (332,618) 324,408 (324,408)
332,618 (332,618) 324,408 (324,408)
14.3 Currency risk
A proportion of the Group’s assets, liabilities and income is denominated in currencies other than sterling (the Company’s functional
currency in which it reports its results). As a consequence, movements in exchange rates affect the sterling value of those items.
Management of the risk
The investment managers monitor their exposure to currencies as part of their normal investment processes. The Board receives
amonthly report on the currency exposures of the entire fund.
Income denominated in foreign currencies is converted into sterling on receipt. The Group does not normally use financial instruments
to mitigate the currency exposure in the period between the time that income is included in the financial statements and its receipt.
Foreign currency exposure
The fair values of the Group’s monetary items that have foreign currency exposure at 31 December are shown overleaf. Where the
Group’s equity investments (which are not monetary items) are denominated in a foreign currency, they have been included
separately in the analysis so as to show the overall level of exposure.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
102
Notes to the Financial Statements continued
for the year ended 31 December 2021
14 FINANCIAL INSTRUMENTS CONTINUED
2021
US$
£’000
Euro
£’000
Yen
£’000
Other
£’000
Receivables (due from brokers, dividends and other income receivable) 464 2,817 170 912
Cash at bank and on deposit 9,938 (34) – 454
Payables (due to brokers, accruals and other creditors) (1,386) – – (1,847)
Total foreign currency exposure on net monetary items 9,016 2,783 170 (481)
Investments at fair value through profit or loss that are equities 851,973 330,707 62,535 175,324
Total net foreign currency exposure 860,989 333,490 62,705 174,843
2020
US$
£’000
Euro
£’000
Yen
£’000
Other
£’000
Receivables (due from brokers, dividends and other income receivable) 1,694 4,010 154 3,640
Cash at bank and on deposit 7,871 31 1 500
Payables (due to brokers, accruals and other creditors) (4,001) (2,075) – (4,321)
Total foreign currency exposure on net monetary items 5,564 1,966 155 (181)
Investments at fair value through profit or loss that are equities 791,813 318,554 100,579 247,369
Total net foreign currency exposure 797,377 320,520 100,734 247,188
The above amounts are not necessarily representative of the exposure to risk during the year as levels of foreign currency exposure
change significantly throughout the year.
Foreign currency sensitivity
The following table illustrates the sensitivity of the profit/loss after tax for the year and the Group’s equity in regard to the Group’s
monetary financial assets and financial liabilities and the exchange rates for the £/US dollar, £/Euro and £/Japanese yen. The results
ofthese example calculations are significant but not unreasonable in the context of the majority of the Group’s assets being
investedoverseas.
It assumes the following changes in exchange rates:
£/US dollar +/- 15% (2020: 15%)
£/Euro +/- 15% (2020: 15%)
£/Japanese yen +/- 15% (2020: 15%)
The sensitivity analysis is based on the Group’s foreign currency financial instruments held at the balance sheet date and takes
account of any forward foreign exchange contracts that offset the effects of changes in currency exchange.
If sterling had depreciated against the currencies shown, this would have the following effect:
2021 2020
US$
£’000
Euro
£’000
Yen
£’000
US$
£’000
Euro
£’000
Yen
£’000
Changes to the Consolidated Statement of
Comprehensive Income
Revenue return 1,200 1,195 228 1,321 693 338
Capital return 150,348 58,360 11,036 139,732 56,215 17,749
Change to the profit/loss after tax 151,548 59,555 11,264 141,053 56,908 18,087
Change to the shareholders’ funds 151,548 59,555 11,264 141,053 56,908 18,087
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
103
If sterling had appreciated against the currencies shown, this would have the following effect:
2021 2020
US$
£’000
Euro
£’000
Yen
£’000
US$
£’000
Euro
£’000
Yen
£’000
Changes to the Consolidated Statement of
Comprehensive Income
Revenue return (887) (884) (168) (976) (512) (250)
Capital return (111,127) (43,136) (8,157) (103,280) (41,550) (13,119)
Change to the profit/loss after tax (112,014) (44,020) (8,325) (104,256) (42,062) (13,369)
Change to the shareholders’ funds (112,014) (44,020) (8,325) (104,256) (42,062) (13,369)
14.4 Interest rate risk
Interest rate movements may affect the level of income receivable from fixed interest securities and cash at bank and on deposit.
Management of the risk
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when
making investment decisions.
The Group holds cash balances, partly to meet payments as they fall due but also when appropriate to offset the long-term
borrowings that it has in place.
The Group finances part of its activities through preference shares that do not have redemption dates and through secured notes
thatwere issued as part of the Company’s planned gearing.
Interest rate exposure
The exposure at 31 December 2021 of financial assets and financial liabilities to interest rate risk is shown by reference to:
> floating interest rates: when the interest rate is due to be re-set; and
> fixed interest rates: when the financial instrument is due to be repaid.
The Group’s exposure to floating interest rates on assets/liabilities is £63,410,000 (2020: £72,855,000). This represents cash holdings
minus variable rate borrowing.
The Group’s exposure to fixed interest rates on assets is £Nil (2020: £Nil).
The Group’s exposure to fixed interest rates on liabilities is £156,573,000 (2020: £156,548,000). This represents fixed-rate borrowing.
Interest receivable and finance costs are at the following rates:
> interest received on cash balances, or paid on bank overdrafts and loans, is at margin under/over SONIA or its foreign currency
equivalent (2020: same);
> the finance charge on the preference shares is at a weighted average interest rate of 3.3% (2020: 3.3%); and
> the finance charge on the secured notes is at a weighted average interest rate of 2.96% for an average period of 26.0 years
(2020:2.96% for an average period of 27.0 years).
The above year-end amounts are not representative of the exposure to interest rates during the year, as the level of exposure changes
as investments are made in fixed interest securities, long-term debt is partially redeemed and as the level of cash balances varies
during the year. In the context of the Group’s balance sheet, the exposure to interest rate risk is not considered to be material.
Interest rate sensitivity
Based on the Group’s monetary financial instruments at each balance sheet date, an increase or decrease of 200 basis points
ininterest rates would decrease or increase revenue after tax by £202,000 (2020: £178,000), capital return after tax by £1,470,000
(2020:£1,635,000), and total profit after tax and shareholders’ funds by £1,268,000 (2020: £1,457,000).
This level of change is considered to be reasonably possible based on observation of current market conditions. This is not
representative of the year as a whole, since the exposure changes as investments are made. In the context of the Group’s
balancesheet, the outcome is not considered to be material.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
104
Notes to the Financial Statements continued
for the year ended 31 December 2021
14 FINANCIAL INSTRUMENTS CONTINUED
14.5 Liquidity risk
This is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the Group’s assets are investments in quoted equities and other quoted securities that
are readily realisable. During 2015, the Group issued 3.47 per cent. and 3.29 per cent. secured notes for £54,000,000 and £21,000,000
respectively. During 2017, the Group issued 2.74 per cent. secured notes for £30,000,000. During 2019, the Group issued 2.39 per cent.
secured notes for £50,000,000. The Group is able to draw short-term borrowings of up to the sterling equivalent of £150 million from its
secured and committed multi-currency borrowing facility with BNP Paribas, London Branch (expiring 2 December 2022). £98,000,000
was drawn down under the facility at 31 December 2021.
Liquidity risk exposure
2021 2020
Within 1 year
£’000
Between 1
and 5 years
£’000
More than
5years
£’000
Within 1 year
£’000
Between 1
and 5 years
£’000
More than
5years
£’000
Secured notes
(1)
4,582 18,327 257,869 4,582 18,327 262,739
Preference shares
(2)
83 332 2,555 83 332 2,555
Other creditors and accruals 9,547 1,173 – 17,572 815 –
Bank loan and interest payable 98,045 – – 109,050 – –
112,257 19,832 260,424 131,287 19,474 265,294
(1) The above figures show interest payable over the remaining terms of each instrument. The figures also include the capital to be repaid.
(2) The figures in the ‘More than 5 years’ columns do not include the ongoing annual finance cost of £83,000.
The Board gives guidance to the investment managers as to the maximum amount of the Company’s resources that should be
invested in any one company.The investment managers may hold cash from time to time but the Group’s overall equity exposure
isunlikely to fall below 80% in normal conditions.
14.6 Credit risk
The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Group suffering
aloss.
Management of the risk
The risk is managed as follows:
> cash at bank is held only with reputable banks with high-quality external credit ratings;
> transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account
soasto minimise the risk to the Group of default;
> investment transactions are carried out with a large number of brokers, whose credit standard is reviewed periodically by the
investment managers, and limits are set on the amount that may be due from any one broker; and
> stock lending transactions are carried out with a number of approved counterparties, the credit ratings of which are reviewed
periodically, and limits are set on the amount that may be sent to any one counterparty. Other than stock lending, none of the
Company’s financial assets or liabilities is secured by collateral or other credit enhancements.
None of the Group’s financial assets is past its due date or impaired.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
105
Credit risk exposure
The table below summarises the credit risk exposure of the Group as at the year end.
2021
£’000
2020
£’000
Cash 34,590 36,145
Receivables:
Sales for future settlement – 6,968
Taxation recoverable 3,548 1,288
Accrued income 2,120 2,421
Other debtors 172 200
40,430 47,022
14.7 Fair values of financial assets and financial liabilities
Except for those financial liabilities measured at amortised cost that are shown below, the financial assets and financial liabilities
areeither carried in the balance sheet at their fair value (investments and derivatives) or the balance sheet amount is a reasonable
approximation of fair value (amounts due from brokers, dividends and interest receivable, amounts due to brokers, accruals, cash
atbank, bank overdrafts and bank loans).
Financial liabilities
2021 2020
Fair value
£’000
Balance
sheet
amount
£’000
Fair value
£’000
Balance
sheet
amount
£’000
Financial liabilities measured at amortised cost:
Non current liabilities
Preference shares 1,354 2,555 1,354 2,555
Secured notes 173,961 154,018 188,077 153,993
175,315 156,573 189,431 156,548
The fair values shown above are derived from the offer price at which the securities are quoted on the London Stock Exchange or,
inthe case of the secured notes, calculating a present value by using a discount rate which reflects the yield on a UK gilt of similar
maturity plus a credit spread of 1.20% (2020: 1.20%).
Level 1 Financial liabilities
The Company’s preference shares are actively traded on a recognised stock exchange. Their fair value has therefore been deemed
Level 1. The carrying values are disclosed in note 13.
Level 3 Financial liabilities
The Company’s secured notes are not traded on a recognised stock exchange and so the fair value is calculated by using a discount
rate which reflects the yield on a UK gilt of similar maturity plus a credit spread of 1.20% (2020: 1.20%). Their fair value has therefore been
deemed Level 3. The carrying values are disclosed in note 13.
Fair value hierarchy disclosures
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
106
Notes to the Financial Statements continued
for the year ended 31 December 2021
14 FINANCIAL INSTRUMENTS CONTINUED
Financial assets at fair value through profit or loss
At 31 December 2021
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity investments 2,072,010 – – 2,072,010
Warrants – 1,491 – 1,491
Investments in other funds – 106,180 37,774 143,954
Total 2,072,010 107,671 37,774 2,217,455
At 31 December 2020
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity investments 2,090,801 – – 2,090,801
Warrants – 5,082 – 5,082
Investments in other funds – 66,839 – 66,839
Total 2,090,801 71,921 – 2,162,722
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value
measurement of the relevant asset as follows:
Level 1 – valued using quoted prices in an active market for identical assets.
Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices within Level 1.
Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the Group are explained in the accounting policies in note 1(h). There were no transfers during the
year between Level 1 and Level 2.
Level 2 Financial assets
Level 2 Financial assets refers to investments in GMO Climate Change Fund (2020: GMO Climate Change Fund) and warrant holdings
inWulliangye Yibin and Kweichow Moutai (2020: Wulliangye Yibin and Kweichow Moutai).
Level 3 Reconciliation of Level 3 fair value measurement of financial assets
A reconciliation of fair value movements within Level 3 is set out below:
Level 3 investments at fair value through profit or loss
2021
£’000
2020
£’000
Opening balance – –
Acquisitions 38,138 –
Total losses included in the Statement of Comprehensive Income – on assets held at year end (364) –
Closing balance 37,774 –
The key inputs to unquoted investments (i.e. the holdings in Unquoted Growth Funds with Lindenwood and Lansdowne) included
withinLevel 3 are net asset value statements provided by investee entities, which represent fair value (2020: no Level 3 investments).
Capital management
The Group’s capital management objectives are:
> to ensure that it will be able to continue as a going concern; and
> to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt.
The Group’s total capital employed at 31 December 2021 was £2,246,614,000 (2020: £2,190,756,000) comprising £254,573,000 of debt
(2020: £265,548,000) and £1,992,041,000 of equity share capital and other reserves (2020: £1,925,208,000).
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
107
Gearing
The Group’s policy is to manage the effective gearing in the portfolio to be below 20%, other than temporarily in exceptional
circumstances. Effective gearing is defined as the difference between shareholders’ funds and the total market value of the
investments expressed as a percentage of shareholders’ funds. At 31 December 2021 effective gearing was 11.3% (2020: 12.3%)
andthecalculation is set out below:
2021
£’000
2020
£’000
Value of investments per the balance sheet 2,217,455 2,162,722
Shareholders’ funds per the balance sheet (A) 1,992,041 1,925,208
Excess of gross value of investments over shareholders funds (B) 225,414 237,514
Effective gearing (B as a percentage of A) 11.3% 12.3%
The Board monitors and reviews the broad structure of the Group’s capital on an ongoing basis. This review includes:
> the planned level of gearing, which takes into account the Chief Executive Officer’s view on the market;
> the opportunity to buy back equity shares, which takes account of the difference between the net asset value per share and
theshare price (i.e. the level of share price discount or premium); and
> the extent to which revenue in excess of that which is required to be distributed should be retained.
The Group’s objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
The Company is subject to several externally imposed capital requirements:
> the terms of issue of the Company’s secured notes require the aggregate amount outstanding in respect of borrowings,
measuredin accordance with the policies used to prepare the annual financial statements, not to exceed a sum equal to
theCompany’s capital and reserves at any time (see also note 13 on page 100 for details of other covenants);
> as a public company, the Company has a minimum issued share capital of £50,000; and
> in order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be able
tomeet one of the two capital restriction tests imposed on investment companies by company law.
These requirements are unchanged since the previous year end and the Company has complied with them.
15 CALLED UP SHARE CAPITAL
Group and
Company
2021
£’000
Group and
Company
2020
£’000
Called up and issued:
737,975,867 ordinary shares of 5p each (2020: 801,713,287) 36,899 40,086
Held in treasury:
262,379,133 ordinary shares of 5p each (2020: 198,641,713) 13,119 9,932
Total 1,000,355,000 shares (2020: 1,000,355,000) 50,018 50,018
During the year, 63,737,420 ordinary shares were bought back at a cost of £153,511,000 (2020: 64,265,148 shares bought back at a cost of
£122,484,000). All of the shares were placed in treasury. Shares held in treasury do not carry a right to receive a dividend.
In the event of a poll at a general meeting of the Company, an ordinary shareholder who is present in person or by proxy has one vote
for every £0.05 nominal value of shares registered in their name. Accordingly, on a poll, each ordinary shareholder has one vote for
every one share held.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
108
Notes to the Financial Statements continued
for the year ended 31 December 2021
16 RESERVES
Other capital reserves of £1,747,379,000 (2020: £1,665,775,000) comprises capital reserve arising on investments sold of £1,292,799,000
(2020: £1,236,809,000) and capital reserve arising on revaluation of investments held of £454,580,000 (2020: £428,966,000), inclusive
ofa provision for Indian capital gains tax. Other capital reserves also comprise treasury shares.
17 PREFERENCE SHARES
Included in non current liabilities is £2,555,000 in respect of issued preference shares as follows:
Group and
Company
2021
£’000
Group and
Company
2020
£’000
2,055,000 3.4 per cent. cumulative preference shares of £1 each 2,055 2,055
500,000 2.7 per cent. cumulative preference shares of £1 each 500 500
2,555 2,555
The 3.4 per cent. and 2.7 per cent. cumulative preference shares constitute a single class and confer the right, in priority to any other
class of shares:
(i) to receive a fixed cumulative preferential dividend at the respective rates (exclusive of tax credit thereon for payments made prior
to 6 April 2016) of 3.4 per cent. and 2.7 per cent. per annum, such dividend being payable half-yearly on 15 January and 15 July in
each year, in respect of the 3.4 per cent. cumulative preference shares, and on 1 February and 1 August in each year in respect of
the 2.7 per cent. cumulative preference shares; and
(ii) to receive repayment of capital at par in a winding up of the Company (but do not confer any further right to participate in profits
or assets).
The preference shareholders are entitled to receive notices of general meetings of the Company but are not entitled to attend or vote
thereat, except on a resolution for the voluntary liquidation of the Company or for any alteration to the objects of the Company set out
in its Articles of Association.
In the event of a poll at a general meeting of the Company, every member of the Company who is present in person or by proxy and
who is entitled to vote thereat, whether an ordinary shareholder or, in the circumstances outlined above, a preference shareholder,
has one vote for every £0.05 nominal value of shares registered in their name. Accordingly, on a poll each preference shareholder
has20 votes for every one share held.
18 NET ASSET VALUE PER ORDINARY SHARE
The net asset value per ordinary share of 269.93p (2020: 240.14p) is based on the net assets attributable to the ordinary shares
of£1,992,041,000 (2020: £1,925,208,000) and on the 737,975,867 ordinary shares in issue at 31 December 2021 (2020: 801,713,287).
The movements during the year of the net assets attributable to the ordinary shares were as follows:
£’000
Total net assets at 1 January 2021 1,925,208
Total profit for the year 262,743
Dividends paid in the year on the ordinary shares (see note 8) (42,399)
Share buybacks (153,511)
Net assets attributable to the ordinary shares at 31 December 2021 1,992,041
An alternative net asset value per ordinary share can be calculated by deducting from the total assets less current liabilities of the
Company, the bonus and leases payable in greater than one year, the preference shares and the secured bonds and notes at their
market (or fair) values rather than at their par (or book) values. Details of the alternative values are set out in note 14.7. The net asset
value per ordinary share at 31 December 2021 calculated on this basis is 267.40p (2020: 236.04p) as set out on page 109.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
109
2021 2020
Debt at
balance
sheet
amount
£’000
Debt
at fair
value
£’000
Debt at
balance
sheet
amount
£’000
Debt
at fair
value
£’000
Total assets less current liabilities per balance sheet 2,149,787 2,149,787 2,082,571 2,082,571
Liabilities at balance sheet value/fair value (157,746) (176,488) (157,363) (190,246)
1,992,041 1,973,299 1,925,208 1,892,325
Ordinary shares in issue at 31 December 737,975,867 737,975,867 801,713,287 801,713,287
NAV per share 269.93p 267.39p 240.14p 236.04p
19 RECONCILIATION OF GROUP LIABILITIES ARISING FROM FINANCING ACTIVITIES
2021 2020
Long-term
debt
£’000
Short-term
debt
£’000
Lease
liability
£’000
Total
£’000
Long-term
debt
£’000
Short-term
debt
£’000
Lease
liability
£’000
Total
£’000
Opening liabilities from
financing activities 156,548 109,000 330 265,878 220,196 50,500 493 271,189
Cash flows:
Net (repayment)/
drawdown of bank loans – (11,000) – (11,000) – 58,500 – 58,500
Repayment of secured
bonds net of expenses – – – – (85,767) – – (85,767)
Repayment of lease
finance – – (70) (70) – – (70) (70)
Non-cash:
Effective interest 25 – – 25 55 – – 55
Loss on early redemption
of secured bonds – – – – 22,064 – – 22,064
Modifications to lease
liability – – – – – – (99) (99)
Interest on lease liability – – 2 2 – – 6 6
Closing liabilities from
financing activities 156,573 98,000 262 254,835 156,548 109,000 330 265,878
20 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
At 31 December 2021 and 31 December 2020 there were no capital commitments in respect of securities not fully paid up and
nounderwriting liabilities. In November 2005 the Company took a five-year lease on office premises at 14 Queen Anne’s Gate,
LondonSW1H 9AA which was renewed most recently in October 2020 for five years to October 2025.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
110
Notes to the Financial Statements continued
for the year ended 31 December 2021
21 LEASE ARRANGEMENTS
21.1 Right-of-use asset: property
2021
£’000
2020
£’000
Opening balance 315 490
Modifications during the period – (94)
Depreciation through profit and loss (66) (81)
Closing balance 249 315
21.2 Lease liabilities
At the balance sheet date, the Group had outstanding commitments for the future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
2021
£’000
2020
£’000
Within one year 78 67
In the second to fifth years inclusive 207 286
After the fifth year – –
Total undiscounted lease payments at the end of the period 285 353
At the balance sheet date, the Group had a discounted lease liability as follows:
2021
£’000
2020
£’000
Current 76 62
Non current 186 268
Total lease liability 262 330
21.3 Amounts recognised in the profit/(loss) for the year
2021
£’000
2020
£’000
Depreciation on right-of-use asset 66 81
Interest on lease liability 2 6
Modification of lease – (2)
21.4 Outflows recognised in the cash flow statement for the year
Financing
2021
£’000
2020
£’000
Repayment of lease finance 67 70
21.5 Other leasing information
The lease payments represent rentals payable by the Group for its office property.
The Company renegotiated the lease on its premises during 2020 which resulted in a lease modification. A separate lease was not
recognised as the modification did not increase the scope of the lease or lease payment. There were no changes to the original
leaseterm as a result of the modified lease. There were changes to the lease liability due to the revised lease payments which
werediscounted at the Company’s current incremental borrowing rate. The modification led to measurement changes regarding
(i)derecognition of a proportion of the right-of-use asset and lease liability due to the reduced floor space, with any differences
accounted for as a capital profit; and (ii) adjustments made to reduce the lease liability due to the modified lease payment with
anequivalent adjustment to reduce the right-of-use asset.
22 SUBSIDIARY UNDERTAKING
The Company has an investment in the issued ordinary share capital of its wholly owned subsidiary undertaking, Witan Investment
Services Limited, which was incorporated on 28 October 2004, is registered in England and Wales and operates in the United Kingdom.
Its registered office is shown on the inside back cover.
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
111
23 RELATED PARTY TRANSACTIONS DISCLOSURES
Balances and transactions between the Company and its subsidiary, which are related parties, amounting to £440,000 have been
eliminated on consolidation and are not disclosed in this note.
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Company for each of the relevant categories
specified in IAS 24 ‘Related Party Disclosures’ is provided in the audited part of the Directors’ Remuneration Report on pages 62 to 65.
Directors’ transactions
Dividends totalling £77,000 (2020: £153,000) were paid in the year in respect of ordinary shares held by the Company’s directors.
24 SEGMENT REPORTING
Operating segments are determined based on internal management reporting of the Group that is reviewed regularly by the
‘ChiefOperating Decision Maker’ (who is the Chief Executive Officer) and used to allocate resources and assess their performance.
Geographical information
The Group operates in one geographic area, the UK, and primarily invests in companies listed in the UK and other recognised
overseasexchanges.
Operating segments
The Group has two reportable segments: (i) its activity as an investment trust, which is the business of the parent company, Witan
Investment Trust plc, and recorded in the accounts of that company; and (ii) the provision of alternative investment fund manager,
executive and marketing management services which is the business of the subsidiary company, Witan Investment Services Limited,
and recorded in the accounts of that company. Each segment is managed separately as they have different objectives.
Performance is measured based on segment profit or loss included in the internal management reports that are reviewed by the
Chief Executive Officer. Transactions between reportable segments include activities from the provision of alternative investment fund
manager, executive and marketing management services. Segment information is measured on the same basis as that used in the
preparation of the Group financial statements.
31 December 2021 31 December 2020
Investment
trust
£’000
Management
services
£’000
Total
£’000
Investment
trust
£’000
Management
services
£’000
Total
£’000
External revenue 37,572 – 37,572 36,445 – 36,445
Other revenue 246,929 – 246,929 54,554 - 54,554
Revenue from other operating segments – – – – 242 242
Segment expense
Management expense (9,714) – (9,714) (9,279) - (9,279)
Other expense (4,437) (479) (4,916) (4,725) (585) (5,310)
Finance costs (5,208) – (5,208) (28,489) – (28,489)
Segment profit/(loss) before taxation 265,142 (479) 264,663 48,506 (343) 48,163
Segment assets 1,990,925 1,116 1,992,041 1,924,053 1,155 1,925,208
The non current assets are located in the United Kingdom.
25 SUBSEQUENT EVENTS
Since the year end, the Board has declared a fourth interim dividend in respect of the year ended 31 December 2021 of 1.52p per
ordinary share (see also page 9 and note 8 on page 97).
From 1 January to 14 March 2022, 9,733,038 ordinary shares of 5p were bought back for £22.9 million.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
112
SECURITIES FINANCING TRANSACTIONS
The Company engages in Securities Financing Transactions (as defined in Article 3 of Regulation (EU) 2015/2365, securities financing
transactions include repurchase transactions, securities or commodities lending and securities or commodities borrowing, buy-sell
back transactions or sell-buy back transactions and margin lending transactions). In accordance with Article 13 of the Regulation,
theCompany’s involvement in and exposures related to securities lending as at 31 December 2021 are detailed below.
GLOBAL DATA
The amount of securities on loan as a proportion of total lendable assets and of the Company’s net assets at 31 December 2021
isdisclosed below:
Stock lending
Market value of securities on loan
% of
lendable
assets % of AUM
£57,111,000 2.58 2.57
CONCENTRATION DATA
The ten largest collateral issuers across all the securities financing transactions as at 31 December 2021 are disclosed below:
Issuer
Market
value of
collateral
received
£’000
Seven and I 7,515
Intuitive Surgical Inc 5,915
Hess Corporation 3,199
Veolia Environnement SA 2,843
Texas Instruments Inc 2,833
American International Group 2,793
Salesforce Com Inc 2,447
Hilton Worldwide Holdings Inc 2,317
Qualcomm Inc 2,146
Exxon Mobil Corporation 1,979
33,987
The top counterparties of each type of securities financing transactions as at 31 December 2021 are disclosed below:
Counterparty
Market
value of
securities
on loan
£’000
BNP Paribas 55,052
HSBC 1,537
Citigroup 522
57,111
Other Financial Information (unaudited)
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
113
AGGREGATE TRANSACTION DATA
The following table discloses a summary of aggregate transaction data related to the collateral received from securities on loan as at
31 December 2021:
Counterparty
Counterparty
country of origin Type Quality
Collateral
currency
Settlement
basis Custodian
Market
value of
collateral
received
£’000
BNP Paribas France Equity Main Market Listing CHF Triparty BNP Paribas 1,369
Equity Main Market Listing EUR Triparty BNP Paribas 3,096
Equity Main Market Listing JPY Triparty BNP Paribas 7,515
Equity Main Market Listing USD Triparty BNP Paribas 45,977
Citigroup US Government Bond Investment Grade EUR Triparty BNP Paribas 30
Government Bond Investment Grade JPY Triparty BNP Paribas 1,356
Government Bond Investment Grade USD Triparty BNP Paribas 18
HSBC Hong Kong Equity Main Market Listing EUR Triparty BNP Paribas 166
Equity Main Market Listing USD Triparty BNP Paribas 33
Government Bond Investment Grade DKK Triparty BNP Paribas 1
Government Bond Investment Grade EUR Triparty BNP Paribas 806
Government Bond Investment Grade JPY Triparty BNP Paribas 618
60,985
All of the collateral is held within segregated accounts.
The lending and collateral transactions are on an open basis and can be recalled on demand.
Re-use of collateral
The funds do not engage in any re-use of collateral.
Return and cost
The return and cost of engaging in securities lending by the Company and the securities lending agent in absolute terms
andasapercentage of overall returns are disclosed below:
Total gross amount of
securitieslending income
Direct and indirect costs
and fees deducted by
securitieslending agent
% return of the securities
lendingagent
Net securities lending
income retained by
theCompany % return of the Company
£168,000 £42,000 25% £126,000 75%
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
114
ALTERNATIVE INVESTMENT FUND MANAGERS’ DIRECTIVE
Witan Investment Trust plc is an ‘alternative investment fund’ (‘AIF’) for the purposes of the UK version of the EU Alternative Investment
Fund Managers’ Directive (Directive 2011/61/EU) (the ‘AIFMD’) as transposed into UK Law on the UK’s exit from the EU. The Company has
appointed its subsidiary, UK version of the Witan Investment Services Limited (‘WIS’), toact as its AIFM. WIS is authorised and regulated
by the UnitedKingdom Financial Conduct Authority as a ‘full scope UK AIFM’.
The Company is required to make certain disclosures available to investors in accordance with the AIFMD. Those disclosures that
arerequired to be made pre-investment are included within the Investor Disclosure Document (‘IDD’) which can be found on the
Company’s website (www.witan.com). There have not been any material changes to the disclosures contained within the IDD
sinceitwas last updated in March 2021.
The Company and AIFM also wish to make the following disclosures to investors:
> the investment strategy, geographic and sector investment focus and principal stock exposures are included in the Strategic
Report. A list of the top 40 portfolio holdings is included on pages 34 to 35;
> none of the Company’s assets is subject to special arrangements arising from their illiquid nature;
> the Strategic Report and note 14 to the accounts set out the risk profile and risk management systems in place. There have been
nochanges to the risk management systems in place in the period under review and no breaches of any of the risk limits set,
withno breach expected;
> there are no new arrangements for managing the liquidity of the Company or any material changes to the liquidity management
systems and procedures employed by the Company;
> all authorised Alternative Investment Fund Managers are required to comply with the AIFMD Remuneration Code in respect
oftheAIFM’s remuneration. The relevant disclosures required are contained within the IDD; and
> information in relation to the Company’s leverage is contained within the IDD.
SHAREHOLDER INFORMATION
Points of reference
Shareholders can follow the progress of their investment through the newspapers. Witan’s share price appears daily in the national
press stock exchange listings under ‘Investment Trusts’ or ‘Investment Companies’ and is also included ontheWitanwebsite
(www.witan.com). The London Stock Exchange Daily Official List (‘SEDOL’) code is BJTRSD3.
Dividend
A fourth interim dividend of 1.52p per share has been declared, payable on 18 March 2022. The record date for the dividend
was25 February 2022 and the ex-dividend date for the dividend was 24 February 2022 (see page 9 and note 8 on page 97).
Dividend Tax Allowance
From April 2019 individuals have an annual £2,000 tax-free allowance on dividend income across an individual’s entire share portfolio.
Above this amount, individuals pay tax on their dividend income at a rate dependent on their income tax bracket and personal
circumstances. The Company will continue to provide registered shareholders with a confirmation of the dividends it has paid and
thisshould be included with any other dividend income received when calculating and reporting total dividend income received.
Itisthe shareholder’s responsibility to include all dividend income when calculating any tax liability.
Capital Gains Tax
The calculation of the tax on chargeable gains will depend on your personal circumstances. If you are in any doubt about
yourpersonal tax position, you are recommended to contact your professional adviser.
Please note that tax assumptions may change if the law changes, and the value of tax relief (if any) will depend upon your individual
circumstances. Investors should consult their own tax advisers in order to understand any applicable tax consequences.
Beneficial Owners of Shares – Information Rights
Beneficial owners of shares who have been nominated by the registered holder of those shares to receive information rights
undersection 146 of the Companies Act 2006 should direct all communications to the registered holder of their shares rather
thantothe Company’s Registrar, Computershare, or to the Company directly.
Additional Shareholder Information
Witan Investment Trust plc
Annual Report 2021
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
115
DEFINITIONS OF ALTERNATIVE PERFORMANCE MEASURES
Benchmark: The Company’s equity benchmark is 85% Global (MSCI All Country World Index) and 15% UK (MSCI UK IMI Index). From
1 January 2017 to 31 December 2019 the benchmark was 30% UK, 25% North America, 20% Asia Pacific, 20% Europe (ex UK) and 5%
Emerging Markets. From 1 October 2007 to 31 December 2016 the benchmark was 40% UK, 20% North America, 20% Europe (ex UK)
and20% Asia Pacific. With effect from August 2020, the source for the benchmark index changed to MSCI International, replacing
theprevious FTSE source.
Gearing: The difference between shareholders’ funds and the total market value of the investments (including the face value of
futures positions) expressed as a percentage of shareholders’ funds. See page 107.
Net asset value per share (debt at par and debt at fair value): This is the value of total assets less all liabilities of the Company.
TheNetAsset Value, or NAV, per ordinary share is calculated by dividing this amount by the total number of ordinary shares in
issue(excluding those shares held in treasury). Please refer to note 18 on page 108.
Net asset value total return: Total return on net asset value (‘NAV’), on a debt at fair value to debt at fair value basis, assuming that
alldividends paid out by the Company were reinvested, without transaction costs, into the shares of the Company at the NAV per
share at the time the shares were quoted ex-dividend.
Total return calculation
Year ended
31 December 2021
Year ended
31 December 2020
Opening cum income NAV per share (pence) (A) 236.0 233.1
Closing cum income NAV per share (pence) (B) 267.4 236.0
Total dividend adjustment factor
(1)
(C) 1.021565 1.028573
Adjusted closing cum income NAV per share (B x C = D) 273.2 242.8
Net asset value total return (D/A - 1) 15.8% 4.2%
(1) The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the shares of the Company at the cum income
NAV at the ex-dividend date.
Net contribution from borrowing: The estimated percentage contribution to NAV attributable to gearing, net of the cost of gearing,
asapercentage of NAV.
Ongoing charge: The ongoing charge reflects those expenses of a type which are likely to recur in the foreseeable future, whether
charged to capital or revenue as a collective fund, excluding the costs of acquisition and disposal, finance costs and gains or losses
arising on investments. The calculation is performed in accordance with the guidelines issued by the AIC. Please refer to page 43.
Premium/discount: The amount by which the market price per share is either higher (premium) or lower (discount) than the net asset
value per share expressed as a percentage of the net asset value per share.
Share price total return: on a last traded price to last traded price basis, assuming that all dividends received were reinvested, without
transaction costs, into the shares of the Company at the time the shares were quoted ex-dividend.
Total return calculation
Year ended
31 December 2021
Year ended
31 December 2020
Opening share price (pence) (A) 230.5 231.5
Closing share price (pence) (B) 252.0 230.5
Total dividend adjustment factor
(1)
(C) 1.023980 1.03100
Adjusted closing share price (B x C = D) 258.0 237.7
Share price total return (D/A – 1) 11.9% 2.7%
(1) The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the shares of the Company at the last traded
price quoted at the ex-dividend date.
Witan Investment Trust plc
Annual Report 2021
FINANCIAL STATEMENTS
116
HISTORICAL RECORD
Debt at fair value Debt at par value
Market price
per ordinary
share in
pence
(1)
Net asset
value per
ordinary
share in
pence
(1)(2)
Share price
(discount)/
premium
%
(2)
Net asset
value per
ordinary
share in
pence
(1)(3}
Share price
(discount)/
premium
%
(3)
Earnings per
ordinary
share in
pence
(1)
Dividends
per ordinary
share in
pence
(1)
31 December 2011 90.0 100.7 (10.7) 103.4 (12.9) 2.70 2.40
31 December 2012 100.6 113.8 (11.6) 116.4 (13.5) 2.90 2.60
31 December 2013 133.8 143.5 (6.8) 145.0 (7.7) 3.10 2.90
31 December 2014 150.7 149.8 0.6 152.1 (0.9) 3.20 3.10
31 December 2015 156.0 156.2 (0.2) 157.7 (1.1) 3.70 3.40
31 December 2016 180.4 187.8 (4.0) 190.6 (5.3) 4.40 3.80
31 December 2017 215.8 219.2 (1.6) 222.0 (2.8) 4.80 4.20
31 December 2018 194.2 196.7 (1.3) 199.0 (2.5) 5.20 4.70
31 December 2019 231.5 233.1 (0.7) 236.9 (2.3) 6.01 5.35
31 December 2020 230.5 236.0 (2.4)
(4)
240.1 (4.2) 3.08 5.45
31 December 2021 252.0 267.4 (6.1)
(4)
269.9 (7.1) 3.59 5.60
(1) Comparative figures for the years 2011–2018 have been restated due to the sub-division of each ordinary share of 25p into five ordinary shares of 5p each on 28 May 2019.
(2) The net asset value per ordinary share is calculated by deducting from the total assets less liabilities of the Group the fixed borrowings at their fair (or market) values.
Theshareprice discount/premium reflects this calculation.
(3) The net asset value per ordinary share is calculated by deducting from the total assets less liabilities of the Group the fixed borrowings at their par (not their market) values.
Theshare price discount/premium reflects this calculation.
(4) The average discount to the net asset value, including income, with debt at fair value, in 2021 was 6.9% (2020: 6.0%) (source: Datastream).
HOW TO INVEST
There are various ways to invest in Witan Investment Trust plc. Witan’s shares can be traded through any UK stockbroker and most
share dealing services and platforms that offer investment trusts (including Hargreaves Lansdown, Barclays Smart Investors, Fidelity,
Halifax Share Dealing Limited, Interactive Investor and A J Bell), as well as Computershare, the Company’s Registrars. Advisers who
wishto purchase Witan shares for their clients can do so via a stockbroker or via a growing number of dedicated platforms
(includingSeven Investment Management, Transact and Fidelity Funds Network).
The Company conducts its affairs so that its shares can be recommended by independent financial advisers (‘IFAs’) to retail private
investors. The shares are excluded from the Financial Conduct Authority’s restrictions which apply to non-mainstream pooled
investment products because they are shares in a UK-listed investment trust.
Additional Shareholder Information continued
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Contacts
REGISTERED OFFICE OF THE COMPANY AND ITS SUBSIDIARY,
WITAN INVESTMENT SERVICES LIMITED
14 Queen Anne’s Gate
London SW1H 9AA
The Company is a public company limited by shares.
REGISTERED NUMBER
Registered as an investment company in England and Wales,
Number 101625.
COMPANY SECRETARY
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
Telephone: 020 3008 4910
CUSTODIAN, INVESTMENT ADMINISTRATOR AND DEPOSITARY
BNP Paribas Securities Services
10 Harewood Avenue
London NW1 6AA
REGISTRAR
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0370 707 1408
(1)
(1)
Calls cost no more than calls to geographic numbers (01 or 02) and must be
included in inclusive minutes and discount schemes in the same way. Calls from
landlines are typically charged up to 9p per minute; calls from mobiles typically
cost between 3p and 55p per minute. Calls from landlines and mobiles are included
in free call packages.
AUDITOR
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
STOCKBROKER
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
SOLICITORS
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London EC2A 2EG
The Company is a member of or signatory to:
DISABILITY ACT
Copies of this Annual Report and other documents issued by Witan Investment Trust plc are available from the Company Secretary.
Ifneeded, copies can be made available in a variety of formats, including Braille, audio tape or larger type as appropriate.
You can contact our Registrar, Computershare Investor Services PLC, which has installed textphones to allow speech and hearing
impaired people who have their own telephone to contact them directly, without the need for an intermediate operator, by dialling
0370 702 0005. Specially trained operators are available during normal business hours to answer queries via this service. Alternatively,
if you prefer to go through a ‘typetalk’ operator (provided by The Royal National Institute for Deaf People), you should dial 18001 followed
by the number you wish to dial.
UNSOLICITED APPROACHES FOR SHARES: WARNING TO SHAREHOLDERS
Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence
concerning investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders offering to sell
themwhat often turn out to be worthless or high-risk shares in US or UK investments. They can be very persistent and extremely
persuasive. Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount
oroffers of free company reports.
Please note that it is very unlikely that either the Company or the Company’s Registrar, Computershare Investor Services PLC,
wouldmake unsolicited telephone calls to shareholders and that any such calls would relate only to official documentation
already circulated to shareholders and never in respect of investment ‘advice’.
Shareholders who suspect they may have been approached by fraudsters should advise the Financial Conduct Authority (‘FCA’)
using the share fraud report form at www.fca.org.uk/scams or call the FCA Customer Helpline on 0800 111 6768. You may also wish
tocall either the Company Secretary or the Registrar at the numbers provided above.
www.witan.com