## Witan Investment Trust plc ## Annual Report 2021 ## Collective ## Wisdom STRATEGIC REPORT ## Company overview ## Our investment policy STRATEGIC REPORT ## Witan invests primarily in listed companies across 01 Financial highlights ## global equity markets, using a multi-manager 02 Our investment approach ## approach. The Company’s actively managed 04 Key performance indicators 06 What we do ## portfoliocoolio covers a broad range of markets and sectors, 08 Chairman’s Statement 10 CEO’s review of the year ## offering a distinctive way for investors to access the 18 Responsible investment 26 Meet the managers ## opportunities created by global economic growth. 34 Forty largest investments 36 Classification of investments 37 Principal risks and uncertainties 40 Section 172: engaging with ourstakeholders ## Our purpose 42 Corporate and operationalstructure ## is to achieve significant growth in our investors’ 43 Costs ## wealth by investing in global equity markets, 44 Viability Statement ## usinga multi-manager approach. CORPORATE GOVERNANCE 46 Board of directors 48 Corporate Governance 57 Report of the Audit Committee ## Our objective 60 Directors’ Remuneration Report 72 Directors’ Report ## is to achieve an investment total return exceeding 76 Statement of Directors’ (1) ## that of the Company’s benchmark over the long Responsibilities ## term, together with growth in the dividend ahead FINANCIAL STATEMENTS ## of inflation. 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 ## Where to find us 90 Notes to the Financial Statements 112 Other Financial Information Our website has a full range of information about Witan (unaudited) and regular commentary about investment markets. 114 Additional Shareholder Information Find us online @ www.witan.com IBC Contacts (1) Witan’s benchmark is 85% Global (MSCI All Country World Index) and 15% UK (MSCI UK IMI Index). 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. ## Key data | 252.0p | 267.4p | | | --- | --- | --- | | SHARE PRICE 2021 | NAV PER ORDINARY | | | 2020: 230.5p | SHARE (DEBT AT FAIR VALUE) | (3) | 2020: 236.0p STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Financial | highlights | 5.8% | | 5.60p | | --- | --- | --- | --- | | | DISCOUNT (NAV INCLUDING | | DIVIDEND PER SHARE | | | INCOME, DEBT AT FAIR VALUE) | (3) | 2020: 5.45p | 2020: 2.4% ## Total return performance To read more about | our KPIs see pages 4 and 5 | | | 1 year | 5 years | 10 years | | --- | --- | --- | --- | --- | --- | | | | | % return | % return | % 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 (1) Source: Morningstar. MSCI ACWI INDEX (2) ## (2) Source: Morningstar. See also MSCI for conditions of use (www.msci.com). 20.1 83.3 270.6 (3) Alternative performance measure (see page 115). ## Percentage of total funds ## A high ## 38% 20% 17% 4% ## conviction yet NORTH AMERICA UNITED KINGDOM EUROPE OTHER ## 5% 3% 2% 11% ## well-diversified AS IA PACIFI C JAPAN UNQUOTED INVESTMENT EX JAPAN FUNDS COMPANIES ## portfolio SECTOR BREAKDOWN OF THE PORTFOLIO 14.6% Information Technology 13.2% Industrials 11.3% Investment Companies To read more about 10.7% Healthcare our diversified portfolio see pages 34-36 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 Source: BNP Paribas 1.1% Utilities as at 31 December 2021. 0.3% Real Estate (3) ## 79% ## Active share at end 2021 COMPANY SIZE BREAKDOWN OF THE PORTFOLIO 72.0% Large Cap We are active investors with a highly selective 11.0% Mid Cap 4.0% Small Cap approach to portfolio construction. This is 1.7% Unquoted Funds differentfrom a passive fund which 11.3% Investment Companies replicatesaparticularindex. Witan Investment Trust plc 01 Annual Report 2021 STRATEGIC REPORT ## Our investment approach | Talent | Experience | | --- | --- | | We search for the best fund managers | Founded in 1909, we have a long | | worldwide, choosing managers to | trackrecord of producing capital | | complement each other, not to cover | andincome growth. We have invested | | allstyles. Our managers are active | through challenging economic cycles, | | investors and construct high conviction | wars andpolitical crises, helping put | | portfolios focusing on their best ideas. | contemporary events into perspective. | ### Since the adoption of the current | This high level of conviction produces | multi-manager strategy in2004, | | --- | --- | | portfolios which are differentiated | shareholders have enjoyed a share | | fromtheir benchmarks which they | pricetotal return of 514% versus 396% | | aimtooutperform. | 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. 02 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Independence Adaptable ### Witan is an independent and self- Our multi-manager strategy allows ### managed investment company – ustorespond to changes in long-term ### dedicated to sustainable growth trends either by changing managers ### initsshareholders’ wealth. Witan’s and investment style or investing via ### employees are solely focused on the ourspecialist portfolio with managers ### success of theCompany. who have expert knowledge of particular ### sectors or regions. Using gearing and ### Our independence means we simply derivatives we can also adapt our ### seek, without pre-set constraints, to portfolio to short-term opportunities ### select the best managers available, orto manage risk. ### inthe interest of our shareholders. ### 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 03 Annual Report 2021 STRATEGIC REPORT ## Key performance indicators The financial key performance indicators ('KPI's') 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) The Company seeks at least 2% p.a. long-term outperformance in the share price total return TOTAL RETURN PERFORMANCE (%) ![img-0.jpeg](img-0.jpeg) ### NAV total return (1) The Company seeks at least 2% p.a. long-term outperformance in NAV total return, debt at fair value TOTAL RETURN PERFORMANCE (%) ![img-1.jpeg](img-1.jpeg) ### Dividend growth (1) The Company seeks to grow its dividend ahead of the rate of inflation DIVIDEND PER SHARE GROWTH (%) ![img-2.jpeg](img-2.jpeg) 04 Witton Investment Trust plc Annual Report 2021 KPI OUTCOME ## Net contribution from borrowings(1) Gearing to contribute to returns, after interest costs CONTRIBUTION FROM BORROWINGS (% OF NAV) ![img-3.jpeg](img-3.jpeg) In 2021, gearing contributed 1.8% to returns before interest costs and 1.8% including interest costs. Gearing was voiced around an average of 5.8% during the year, which amplified the benefits of rising markets. Interest costs were lower, benefiting from the replacement of single-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) Achieve a sustainable low discount or a premium to NAV, taking account of market conditions DISCOUNT/PREMIUM TO NAV PER SHARE ![img-4.jpeg](img-4.jpeg) In 2021, the year-end discount was 5.6%, compared with 3.4% at the end of 2020. 2021's average discount of 5.8% was wider than that in 2020 (8.3%). A widening trend in recent years is also evident in a number of sector years. Witan continued to buy back shares of 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 EIC (million uplift) offset the majority of the Company's ongoing charges during the year. -5.8% AT MARIEND ## Ongoing Charges Figure ('OCF')(1) Achieve an OCF as low as possible, consistent with choosing the best available managers ONGOING CHARGES AS % OF AVERAGE NET ASSETS ![img-5.jpeg](img-5.jpeg) In 2021, we achieved a significant reduction in the OCF, which was 0.7%, (2020: 0.74%) excluding performance fees and 0.75% (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 10. 0.71% IN 2021 (0.70% INCLUSIVE OF PERFORMANCE FEES) (1) Alternative Performance Measures The financial statements (on pages 8a to 9) 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 can be viewed as particularly relevant for investment trusts, which are summarised in the key performance indicators on pages 4 to 6. Definitions of the terms used are set out on page 10. 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 table 10 on page 10. Witan Investment Trust plc Annual Report 2021 05 EBITDAEC REPORT COMPLIANCE GOVERNANCE FINANCIAL STATEMENTS STRATEGIC REPORT ## What we do 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. ## Portfolio structure ### 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. ## Core portfolio Specialist portfolio (1) (1) ## 75% 25% Managers able to deliver superior ## Global UK growth through specialist regional or sectoral expertise. ## 65% 10% Direct holdings in collective funds. Actively managed with no fixed ### +/- 10% +/- 5% allocation. Managers employ a range of approaches to select Investments in Unquoted from abroad universe of high-quality companies Growthfunds throughout theworld. Provides exposure to specialist The core portfolio includes companies with enduring asset classes andother cash flows, underappreciated growth prospects or opportunities including Emerging undervalued, often cyclical businesses. Markets, Climate Change, Private Equity and Life Sciences. ## Meet the managers (1) Indicative allocation +/-10%. see pages 26 to 32 ## Underpinned by: ## Disciplined risk management see pages 37 to 39 06 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Choosing our managers Capital allocation Value creation ### We select third-party managers We seek to add We aim to generate ### from across the world. Our team toperformance by total returns which ### uses a variety of networks, varying the use of exceed the ### databases and comprehensive gearing and a range benchmark over ### duediligence to identify and ofadditional levers thelong term. ### interview potential managers. toadapt to different ### Shortlisted managers present to conditions. ### theBoard, which takes thefinal ### decision on appointment. ## What we look for from Capital allocation Outperformance ### ofbenchmark | our managers | framework | | | --- | --- | --- | | People Talented and accountable | The Company seeks | 6/10 | | investment leadership, committed | toset gearing at levels | | ### years to 31/12/2021 toserving their clients’ interests appropriate for market conditions, borrowing Process High-conviction portfolio more when markets are construction, using clear and simple attractively valued and ### NAV total return processes, with analysis taking less when returns are ### over past ten years account of secular change expected to be poorer. ## Portfolio Investments characterised 232.7% ### Witan uses derivatives ### by long-term growth in sustainable as transparent, cost- vs ### cash flows and the integration of effective tools for ### ESG principles efficient portfolio ## 210.2% ### management and ### Performance Potential for material for benchmark to ### to help control risk. ### outperformance over the long term, 31/12/2021 after fees ### Dividend growth ### over past ten years ## 8.8% ### p.a. For more information, For more information, see pages 26 to 32 see page 14 ## Commitment to responsible investment see pages 18 to 21 Witan Investment Trust plc 07 Annual Report 2021 STRATEGIC REPORT Chairman's Statement # Strong absolute returns from an incomplete 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 ![img-6.jpeg](img-6.jpeg) 08 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 fast 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. Witan Investment Trust plc Annual Report 2021 | such as natural resources and financials. | we and our managers are addressing the | make use of these retained earnings to | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | --- | --- | --- | --- | | However, the Russian invasion of Ukraine | regulatory and business risks associated | increase the dividend to shareholders | | | shifted the focus from hopes of a recovery | with corporate governance, changing | annually while cover is rebuilt. If | | | from COVID-19 to the uncertainties | social attitudes towards business and | necessary, realised capital reserves | | | created by an outbreak of war in Europe. | meeting the objectives set out in the | could also be used, as part of a defined | | | This has made the outlook much less | Paris Agreement on climate change. | path towards our dividends once again | | | predictable, with much depending upon | | being fully funded by revenue earnings. | | | the duration, scale and outcome of the | However, I would like to concentrate | | | | Russian aggression. Andrew Bell’s CEO | here on Witan’s attitude to Responsible | We have increased the dividend every | | | report covers these points as well as the | Investment and our intentions for the | year for the last 47 years. The latest | | | macroeconomic backdrop in more detail. | future. As an investment company, we | dividend is more than double that | | | | aim to make well-informed investment | paid in 2011 and well ahead of inflation | | | The other aspect that impacted returns | decisions that ensure that the pursuit | over the period, albeit that dividend | | | during the year was the widening of the | of prosperity for our shareholders is not | growth is likely to be slower in coming | | | discount. After a number of years during | achieved at the expense of the planet or | years as dividend cover is rebuilt. | | | which the shares traded close to asset | its people. Indeed, we believe companies | | | | value, Witan is suffering from a sector- | which disregard this will fail to deliver | BOARD COMPOSITION | | | wide phenomenon of widening discounts | sustainable returns to shareholders in the | | | The Board consists of eight directors, despite the continuation of our share long term. Far from there being a conflict seven of whom are non-executive, buyback programme. Your Board remains between good returns and responsible representing a broad diversity in committed to this because we believe it investing, managing your assets in line background, experience, ethnicity offers heightened market liquidity and with these principles is key to achieving and gender. This fulfils the primary NAV enhancement for long-term holders. good returns that are sustainable in terms need to have the right balance of of businesses’ strategies as well as the skills to oversee the Company’s affairs Taking a longer-term perspective, enterprises’ wider acceptance by society. while fully meeting formal corporate since Witan adopted a multi-manager governance guidelines on diversity. approach in 2004, we have beaten the We are therefore adopting a new target returns on our benchmark and raised to ensure that Witan is managed in line In terms of length of service on the the dividend well ahead of therate of with these beliefs. The target is that our Board,there is a balance to be struck inflation. Over the ten years to the end portfolio will consist entirely of sustainable between stability and change. Six of of 2021, Witan achieved a NAV total businesses (as defined on pages 20 and Witan’s seven non-executive directors return of 233% and a share price total 21) by 2030 or earlier. This is in addition to have been appointed within the past two return of 255%, both of which exceeded the portfolio carbon reduction targets to six years, while Suzy Neubert, our Senior the benchmark’s 210% return. which we will commit to as a signatory Independent Director has, exceptionally, to the NZAM. It is important to stress ten years’ service on the Board, providing RESPONSIBLE INVESTMENT that this does not impose blanket an essential element of continuity. All exclusions on our managers (other than We have built on 2020’s progress directors stand for re-election each year. a prohibition on ‘controversial weapons’) in formalising our engagement on as we believe that engagement with Environmental, Social and Governance AGM companies has a greater positive impact (‘ESG’) issues with our investment than divestment, as well as the potential We very much look forward to being able managers and continue to integrate for better returns for shareholders. We to meet shareholders in person at this ESG issues more deeply into our will, of course, continue working with year’s AGM, after two years when the AGM manager selection, investment analysis, our managers to ensure ESG issues are had to be conducted remotely. Our 114th risk management and the central accounted for, to hold them to account Annual General Meeting will be held on oversight of our investment portfolio. where necessary and if warranted make 5 May 2022, at the Merchant Taylors’ Hall. Managing these risks is, in our view, changes to the manager line-up. For those not able to attend in person, inextricably bound up with the delivery there will be the opportunity to attend of strong and sustainable returns for 2021 DIVIDEND themeeting virtually and put questions shareholders, not a separate activity. tothe Board. Details will be included in the A fourth interim dividend of 1.52 formal notice of the meeting which will be The Responsible Investment section pence was declared in February 2022, sent to shareholders at the end of March. of the report is on pages 18 to 25. This payable on 18 March 2022. As a result, highlights our activities in 2021 and the dividend for the year increased Andrew Ross shows the commitments your Board has by 2.8%to 5.60 pence per share (2020: Chairman made to the Net Zero Asset Managers 5.45 pence), ahead of the 2.6% average 15 March 2022 | initiative (‘NZAM’) and the UN Principles | rate of UK consumer price inflation | | --- | --- | | of Responsible Investment (‘UNPRI’). It is | during the year. This was partly funded | | notable that all our delegated external | using £14.6 million from our revenue | | managers are signatories to the UNPRI | reserves (in 2020 we used £19 million). | and four out of eight have also committed | to the NZAM in the past 12 months. These | The Board expects portfolio dividends to | | --- | --- | | initiatives provide a structured framework | recover further in coming years and it is | | for engagement and reporting on how | the Company’s intention to continue to | Witan Investment Trust plc 09 Annual Report 2021 STRATEGIC REPORT ## CEO’s review of the year Although the Russian war against Ukraine currently overshadows the outlook for Andrew Bell 2022, this report covers events in 2021. CEO 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, ## Recovery hopes 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 ## clouded by 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- ## Russian 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 ## aggression 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. 10 Witan Investment Trust plc Annual Report 2021 | Nonetheless, the developed world’s | A breakdown of the relative | The benefits of gearing and buybacks | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | --- | --- | --- | --- | | equity markets enjoyed a buoyant year, | performanceattribution in 2021 (based | aremeant to be the icing on the cake in | | | fuelled by abundant liquidity and sharply | onthe Company’s financial statements) | performance terms but in 2021 our cake | | | recovering earnings. Global equities | isshown in the table on page 12. | did not fully rise to the occasion. This was | | | finished the year up 20%, led by a 30% | | a disappointing relative outcome in the | | | rise in the US. The UK (+19%) and Europe | Witan benefited from maintaining a | short term. However, the portfolio is | | | (+18%) also delivered a strong recovery. | significant level of gearing during the year | positioned for a normalisation of | | | Emerging markets and Asia fared | (amplifying our portfolio gains) and from | economic activity as the pandemic | | | less well, owing to slower vaccination | taking advantage of the widening in our | becomes less acute, while paying | | | rates and lockdowns associated with | discount to buy back 8% of our shares, | closeattention to the new risks | | | successive pandemic waves. The Pacific | which generated an uplift in NAV of £10.7 | posedbyRussia’s invasion of | | | Basin fell 2%, Japan rose only 2% and | million (offsetting the majority of our | Ukraineinlate February. | | | Emerging Markets declined by 1%. | ongoing charges). In addition, the rise in | | | gilt yields reduced the fair value of our WITAN’S PERFORMANCE fixed-rate debt, benefiting the debt at fairvalue NAV. By contrast, our external Witan’s net asset value (‘NAV’) total managers collectively underperformed return in 2021 was +15.8%. This strong significantly during the year, so our absolute return was outstripped late overallreturns lagged our benchmark. 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. NAV BRIDGE Despite the uncertainties created 290.0 by Russia’s aggression in Ukraine, 280.0 | our managers believe that being | | | | | 1.4 | 1.8 | -2.2 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 4.6 | | | | -0.7 | -5.5 | | | positioned for a recovery from the | 270.0 | | 4.8 | | | | | | | 267.4 | | COVID-19 pandemic and the prospect | | 27.3 | | | | | | | | | 260.0 of a broadening economic recovery is appropriate, although the timing 250.0 has become less certain and the 240.0 risks have increased. Witan’s portfolio 236.0 Pence per share includes coreholdings of quality growth 230.0 companies offering compounding earnings growth, as well as exposure 220.0 to sectors expected to benefit from the 210.0 post-pandemic reopening of economies, from decarbonisation, and from the 200.0 growth in infrastructure spending. 190.0 | | End 2020 | Portfolio | Portfolio | Returns | Uplift | Change | Expenses | Finance | Dividends | End 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | PRINCIPAL PERFORMANCE DRIVERS | NAV | gains | income | from use | from | in value | (inc. tax) | costs | paid | NAV | | | | | | of gearing | buybacks | of debt | | | | | 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. Witan Investment Trust plc 11 Annual Report 2021 STRATEGIC REPORT # CEO's review of the year continued # 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 GQO 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 EIB million investment in Underwood, a fund managed by Greenacks 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) # 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 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 (GQO) 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 12% in 2021. There was also adverse sentiment towards several holdings such as London Stock Exchange (which completed a large acquisition in 2020) 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 GQO'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. 12 Witan Investment Trust plc Annual Report 2021 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 3 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 +9%, 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. Appe Global Alpha rose 23.9% and Princess Private Equity was up 21.6%. We trimmed the latter in December following a strong run. Electro 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 Electro itself (renamed 'Unbound') consisting of an online retail platform including the Hatter Shoes brand. Our holding in Schrader 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 Navi has risen, and the shared discount has narrowed. The BlackRock World Mining Trust delivered a return of 17.5% over the year. This made 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. INVESTMENT MANAGERS' PERFORMANCE | Investment manager | Mandate | Appointment date | Witan assets managed as at 31.12.21^{(1)} | | Performance in 2021 % | | Performance since appointment^{(2)} % | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | £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 | | Lindwell Train | Global | 31.12.19 | 335.6 | 14.7 | 4.0 | 20.1 | 8.6 | 16.5 | | Verliss | 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 | | | | | | | | | | OMO | Climate Change | 05.06.19 | 106.2 | 4.7 | 13.0 | 20.1 | 24.3 | 16.6 | | OJO | 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. Witan Investment Trust plc Annual Report 2021 13 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS STRATEGIC REPORT ## CEO’s review of the year continued On the downside, after a strong 2020, GEARING ACTIVITY DURING THE YEAR Syncona had a disappointing year in Gearing was varied according to share price terms but not before we opportunity during the year, ranging significantly pruned the position at from9.1% to 13.4%. The average of 10.7% elevated prices. 2021’s weak performance boosted returns by 1.8% in the year, or 1.6% was principally due to a reduction in its after taking account of the (mostly fixed) premium to NAV from over 30% at the start interest charges. Gearing has contributed of the year to an estimated 6% at the year positively to returns in eight out of the end. The NAV fell by 4% during the year, past ten years, as illustrated in the KPI owing to substantial declines in three chart on page 5. holdings listed on the Nasdaq market, where early-stage biotech stocks were Under its Articles of Association, the out of favour. The pandemic had delayed Company may borrow up to 100% of trials of their innovative drug treatments, theadjusted total of shareholders’ funds. but a number of results are expected However, the Board’s longstanding policy during 2022 which will determine future is not to allow gearing (as defined on progress. Towards the year end, Syncona page 115) to be more than 20%, other than agreed the sale of their largest holding, temporarily in exceptional circumstances. Gyroscope Therapeutics, to the Swiss Where appropriate, the Company may pharmaceutical company Novartis, for hold a net cash position. aprice which represented a 55% IRR on Syncona’s investment and resulted in At the end of 2020, net gearing (the total a16% uplift to its prevailing NAV. This value of borrowings less cash) was 12.3% continued the management team’s of net assets. At the end of 2021, gearing successful record of profitable exits from (on the same basis) was 11.3%. investments. Despite the price falls in its quoted holdings, which weighed on STRUCTURE OF BORROWINGS itsoverall 2021 NAV performance, we The Company has fixed-rate borrowings believe Syncona gives Witan access (including £2.6 million preference shares) toadifferentiated and successful of £158 million, consisting principally of: investment area that mainstream managers cannot offer. Secured Notes £21m 2035 3.29% The remaining holding of note, the NB Distressed Debt fund, which represents Secured Notes £54m under 0.4% of assets, is in run-off, awaiting 2045 3.47% the optimal opportunity to realise the Secured Notes £50m remaining investments. Its total return 2051 2.39% over the year was 4.4%. Secured Notes £30m The portfolio held 10.2% of assets at the 2054 2.74% start of the year and was 10.9% of the | investment portfolio at the end of 2021. | The Company has a £150 million one-year | | --- | --- | | Over the period since March 2010, it has | borrowing facility, providing additional | | delivered a compound annual return of | flexibility over the level of gearing, as well | | 12%, outperforming Witan’s benchmark | as enabling the Company to borrow in | | by1.9% p.a. Aside from performance, it | currencies other than sterling, if deemed | | gives Witan’s shareholders exposure to | appropriate. The drawn balance was | | specialist asset categories that our core | £98 million at the end of 2021 (2020: | | managers (and many shareholders | £109million). The average interest rate | | themselves) do not cover. | 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 ## Since March 2010, the the markets. The Company’s third-party managers are not permitted to borrow ## directholdings portfolio within their portfolios but may hold cash. ## hasdelivered a compound ## annual return of 12%, ## outperforming Witan’s ## benchmark by 1.9% p.a. 14 Witan Investment Trust plc Annual Report 2021 ## 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 5.80 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 5.80 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 (%) ![img-7.jpeg](img-7.jpeg) Witan Investment Trust plc Annual Report 2021 15 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS STRATEGIC REPORT ## CEO’s review of the year continued | The reopening in many economies | Central bank policy is turning. The Bank | Although equity market valuations are | | --- | --- | --- | | thatwas interrupted in 2021 seems likely | of England has raised rates twice and | high by historic standards, interest rates | | to resume in 2022, which will deliver | the US Federal Reserve is phasing out | remain exceptionally low. Rising interest | | significant recoveries in the service | its liquidity-boosting bond purchases | rates will shift the burden onto earnings | | sectors which have been most affected, | and signalling rate rises during 2022. | growth to offset potential PE derating, | | notably travel and hospitality. Supply | The resulting rise in bond yields has | acting as a headwind for equities, | | disruptions (caused by the speed of the | implications for equities as well as for | presumably more so where valuations | | bounce-back in growth during 2021, allied | relative returns within the markets. | have expanded the most speculatively. | | to the impact of COVID-19 on component | Rapidly growing companies (in many | With the exceptional liquidity injections | | factories, ports and transport logistics) | cases ‘pre-profit’) have been rerated in | of recent years now being withdrawn | | are moderating, allowing a recovery in key | recent years due to a lower discount rate | by central banks, amid rate increases | | manufacturing sectors, including autos. | being applied to the major proportion | aimed at tackling unexpectedly high | | | of their value represented by sales far | inflation, 2022 already looked like a year | | On top of this hoped-for cyclical | into the future. We have seen a reality | when a more selective, value-conscious | | rebound, there are two new drivers of | check for some of the most optimistically | approach to equities was called for, | | future growth, namely the interrelated | valued parts of the markets at a time of | while bond yields below prevailing | | areas of infrastructure and measures | improving dividend cheques from the | inflation rates appeared increasingly | | to combat global warming. Over | laggards. As investors in undervalued | hard to justify. Added to this, the actual | | coming decades, the power generation, | growth (rather than cheapness alone) | and potential ramifications of the | | heating and cooling of premises and | we have been surprised by the widening | Russian military aggression against | | transportation sectors are set to be | disparity in ratings within the markets. | Ukraine make the immediate outlook | | re-engineered to reduce dependence | | less predictable, calling for steady | | on coal and hydrocarbons. | We believe central banks will stop short | judgement, a long-term approach and | | | of aggressive rises as, given the debt | a focus on distinguishing substance | | This will create opportunities in | burden in major economies, high rates | from mirage in investment terms. | | the emergent industries as well as | would rapidly impact growth. This is | | | obsolescence risks for incumbents. | aside from the hard-to-forecast effect | Andrew Bell | | TheUSis also set to embark on a | of the Russian invasion on economic | Chief Executive Officer | | programme of repairing and renewing | confidence, particularly in Europe. | 15 March 2022 | | its ageing civil engineering infrastructure, | Furthermore, moderate inflation is an | | | while the EU has agreed a €750billion | effective way to reduce debt burdens, | | | Next Generation EU investment | particularly if (as in the decades after | | | programme to help support economies | the Second World War) it coincides | | | adversely affected by the pandemic. | with consistent economic growth. Both | | governments and central banks seem | Resurgent growth, damaged production | likely to seek (or condone) faster inflation | | --- | --- | | systems (due to COVID-19 effects) and | than the 2% norm of recent decades, | | an energy crisis caused by premature | while hoping that government bond | | disinvestment in oil and gas have | yields remain low. This policy, of financial | | caused inflation to surge in many | repression, depends upon buyers of | | economies. This has been exacerbated | government bonds either being surprised | | by the surge in energy prices following | by inflation or being under pressure to | | Russia’s military aggression in Ukraine. | hold them (e.g. requirements for banks to | | Whilst some of the inflation drivers may | hold gilts as liquidity, pension funds and | | be transient, others are potentially | insurers matching assets and liabilities). | 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. 16 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## 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 17 Annual Report 2021 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 GOVERNING OUR APPROACH capital effectively to businesses that Witan has embedded sustainable cangenerate long-term, outstanding considerations across our entire investment returns for the benefit of investment approach, not just in a limited ourshareholders. part of our portfolio. Blanket exclusions, with the exception of controversial Far from there being a conflict between weapons, run counter to this strategy. good returns and responsible investing, Theinvestment managers the owning well-managed businesses with Companyengages are required to attractive and undervalued growth investresponsibly, with the expectation prospects is key to achieving returns that its principles will be adopted by thatare sustainable. Well-run businesses thecompanies we invest in. incorporating resilient business practices with sustainable cash flows are likely The Board and the Investment Team to perform better than companies DEVELOPING OUR STRATEGY review and take ownership of this strategy. whichareat risk of disruption, litigation, Although Witan’s direct corporate Members of the Board and Investment regulation, or loss of business because footprint is small, the scale of our portfolio Team are responsible for the delivery ofpoor ESG practices. means we must consider its wider impact ofour strategy and the due diligence to ensure investee companies adopt andmonitoring of how our managers As an investment company, Witan aims to sustainable business models for the engageand consider sustainability- make well-informed investment decisions benefit of all stakeholders. related issues. to ensure our pursuit of prosperity for our shareholders is not detrimental to people Witan has developed a comprehensive and the planet. This entails integrating but targeted strategy that reflects Witan these considerations into our manager as a business, our role in the world and selection, investment analysis and what is most important to us. The strategy oversight of our investment portfolio. Our has been designed with consultation commitment to Net Zero Asset Managers andfull support from the Board. It is initiative (‘NZAM’) is core to this approach. embedded across all of Witan and isconveyed to the fund managers It is the role of Witan’s appointed weengage. 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 ## The pursuit of prosperity is line-up,if warranted. ## achieved by working in ## partnership with our fund ## managers to ensure Witan 18 Witan Investment Trust plc Annual Report 2021 ## invests in sustainable ## businesses STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ### 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. ## Drivers ## Climate change Change in societal expectations ## Responses ## Net zero transition Stewardship ## Our strategy is to ensure that our portfolio will entirely consist ## ofsustainable businesses by 2030. ## Our own responsibility Fund manager engagement We will identify and implement all the steps Witan ensures that ‘sustainable business’ thinking necessary to ensure that Witan is itself a ‘sustainable isembedded in our investment processes and that business’ by addressing our own carbon footprint these policies are integrated into the direction of our and ensuring we have experienced management, fund managers. Our commitment to NZAM is core to skilled employees and strong corporate governance this approach. We regularly engage with our fund with an inclusive and diverse culture. Our ownership managers to inform them of our expectations and structure ensures that we are aligned with toensure they are equipped with the insights and ourshareholders. toolstodrive sustainable progress in their portfolios. Managers who fail to meet these expectations will notbe appointed or retained. ## Industry advocacy Portfolio stewardship As a multi-manager investment fund, Witan will Witan works with our fund managers to engage advocate a sustainable approach, principally withthe companies we are invested in. Through this through our membership of industry initiatives engagement and using our votes as shareholders, andour network of asset managers. 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. Witan Investment Trust plc 19 Annual Report 2021 STRATEGIC REPORT ## Driving prosperity through responsible investment ## in sustainable businesses continued ## What this means to us ## Prosperity People ## What this means What this means ## to Witan to Witan Prosperity flows from the success of A company that has a strong and companies with sustainable cash flows, experienced management team (and exhibiting good corporate behaviour, Board) with an inclusive and diverse strong stakeholder engagement and culture that respects the well-being arespect for their shareholders. Such ofits customers and others within businesses have a long-term outlook, theorganisation, its value chain are adaptive to changes in the anditscommunity. sustainable economy and likely to provide better returns to shareholders over the longrun. ## What does this look like? What does this look like? > A robust purpose, vision and ambition > A committed management team based on a strong culture and values with deep and relevant experience > Businesses which are well positioned overseen by a strong and to benefit from long-term tailwinds, independent Board with a competitive advantage and > A diverse and inclusive work force high barriers to entry with a clear commitment to adopt > Companies which are growing and integrate ESG principles and butwhere growth prospects sustainable working practices areunder-appreciated > A focus on customer and client > Good corporate governance with service excellence strong policies and compliance > A remuneration policy which is > Regular and open engagement commensurate with responsibility, withstakeholders to ensure both fair by industry and regional internal and external risks and standards and which strikes a opportunities are identified balance between the interests of the employees and other stakeholders | We believe that every sustainable A sustainable business backs up its | | | | --- | --- | --- | | business is underpinned bya strong commitments with investment and | | | | culture and set of values that encourage action particularly in the area of | | | | the right behaviour. diversityand inclusion. | | | | | 20 | Witan Investment Trust plc | | Andrew Bell, CEO Andrew Ross, Chairman | | | Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ### 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 ## What this means to us 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. ## Planet Partnership | What this means | What this means | | --- | --- | | to Witan | to Witan | | A company with a clear strategy and | A company that is open to | | roadmap to minimise its environmental | collaboration, stakeholder | | impact and, wherever possible, to | engagement and participation in | | transition towards net zero by 2050 in | industry initiatives which promote | | line with global efforts to limit warming | goodpractice. A company that | | to 1.5°C. Additionally, a company which | istransparent in acknowledging | | is positioned to help accelerate the | mistakesand addressing issues | | energy transition and or carbon | wherethey arise, working to deliver | | reduction. | amore sustainable future. | ## What does this look like? What does this look like? > A strategic approach to assess, > Membership of key industry coalitions limitand, where possible, eliminate to address global and regional issues environmental impacts including > The implementation of multi- emissions stakeholder strategies to work > A commitment to follow Science inpartnerships, whether internal Based Targets, in its climate change orexternal approach > A clear position on the key corporate > A clear roadmap to minimise challenges, led by management environmental risk and capitalise onopportunity > Transparent disclosure around environmental impacts | Companies which are aligned with, The key thing is what companies are | | | | --- | --- | --- | | orhelpenable, the net zero transition doing rather than just saying. Political | | | | stand to benefit from measures to curb and ‘coalition’ engagement is a good | | | | ormitigate global warming while those start but has to translate into action. | | | | | Witan Investment Trust plc | 21 | that do not are at risk from obsolescence Jack Perry, Non-Executive Director Annual Report 2021 and financial or regulatory headwinds. James Hart, Investment Director STRATEGIC REPORT Driving prosperity through responsible investment in sustainable businesses continued # 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). ## PORTFOLIO CARBON INTENSITY (CO$_{2}$) ![img-8.jpeg](img-8.jpeg) ## CARBON RISK ![img-9.jpeg](img-9.jpeg) ## 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 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. 22 Witan Investment Trust plc Annual Report 2021 STEERING OUR PORTFOLIO VOTING SUMMARY CATEGORISATION OF VOTES STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS AGAINST MANAGEMENT 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 | 94.2% Votes with management | 27.4% Director related | | --- | --- | --- | | of being a ‘sustainable business’ and use | 5.1% Votes against management | 27.4% Compensation | | | 0.7% Votes abstain | 20.6% Capital management | engagement tools to promote changes. 9.2% Routine/Business This is the foundation for delivering good 7.7% Corporate returns for shareholders as well as 3.7% Social/Human rights asustainable economy. 2.5% Other 1.5% Health, safety, environmental The Witan Executive assesses each of the Company’s external managers’ portfolio Witan regularly reviews voting and OUR INDUSTRY ADVOCACY investments every year. engagement records of our fund As a multi-manager investment trust, managers. Through engagement and In 2021, five out of eight externally Witan expects the financial system to help voting strategies, Witan and our fund managed portfolios achieved a Low drive long-term sustainability objectives. managers use all the tools at our disposal Carbon Designation from Morningstar. Alongside our membership of UNPRI and to improve business culture and to support Inaggregate, 71.4% (2020: 73%) of Witan’s NZAM, we became a supporter of the our portfolio companies on their net zero portfolio was assessed as having a low Transition Pathway Initiative (‘TPI’) in 2021. and multi-stakeholder strategies. tonegligible carbon risk with less than Atthe core of the TPI sits a tool that helps 4%fossil fuel involvement. Only 1.6% of our us assess our portfolio’s preparedness for One of the primary engagement tools is portfolio carries a high carbon risk (2020: the transition to a low carbon economy. voting and, in 2021, Witan’s fund managers 1.5%). On all these indicators Witan This will enable us to identify further voted on over 97% of the proposals of our performs better than the MSCI All Country opportunities for engagement with portfolio companies. Of those votes, 94.2% World Index which in 2021 carried 2.5% high ourinvestments. was with management (2020: 93.4%) and and 71.2% low or negligible carbon risk with 5.1% against management (2020: 6.0%). 7.5% fossil fuelinvolvement. Ahead of COP26 in November 2021, we also supported The Investor Agenda’s We saw a big increase in votes Another measure of a portfolio’s 2021Global Investment Statement to againstmanagement around the issue of environmental performance is its carbon Governments on the Climate Crisis. Witan compensation: this accounted for 27.4% in intensity, expressed in metric tonnes of CO 2 joined more than 450 global investors, 2021 (2020: 19.2%). This was the issue most emitted per million US dollars of revenue. representing $41 trillion in assets, to call voted against, closely followed by capital Witan’s portfolio carbon intensity, as oncountries to commit to net zero and to management and director-related issues. calculated by Sustainalytics/Morningstar, bring in legislation on mandatory climate There were small increases in votes was 164 tCO 2 in 2021 (2020: 156 tCO 2 0), while reporting for companies. This is part against management on environmental the MSCI All Country World Index had a ofour overall engagement with the and social issues at 1.5% and 3.7% carbon intensity score of 174 tCO 2 (2020: 165 Institutional Investors Group on respectively in 2021 (2020: 2.7% and 5.2%). tCO 2 ). It is important to note that, whilst we ClimateChange (‘IIGCC’) in 2021. expect this figure to decline over time, in Witan joined the Net Zero Asset Managers line with our commitment to reach net Looking ahead to 2022, Witan is initiative (‘NZAM’) in 2021. The NZAM is an zeroby 2050, the progress towards that committed to continue its public international group of asset managers target may not be linear. Additionally, advocacy around sustainable committed to supporting investing wecontinue to focus on acompany’s businesses.We will work with our aligned with net zero emissions by 2050 contribution to long-term global carbon managers responding to what we orsooner. In 2021, 50% of our managers reduction rather than its own historic learnfrom our portfolio, such as in signed up to the NZAM (2020: 0%). carbon footprint. Provided, ofcourse, thecase studies onthe next page. thatthese companies are ‘best-in-class’ Looking ahead to 2022, Witan will define and on a clear path toreduce emissions our NZAM commitments in more detail, over time. 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. Witan Investment Trust plc 23 Annual Report 2021 STRATEGIC REPORT ## Driving prosperity through responsible investment ## in sustainable businesses continued ## Our engagement ## in practice ## Peloton Interactive: using ESG as proxy for good management A core aspect of responsible investment a voluntary (not mandatory) recall for Company Peloton Interactive is regularly engaging with a wide range theproduct, the manager decided of stakeholders, in order to enhance tosellthe position for our portfolio. Country company performance. A good Subsequent further reports of treadmill US | | example of the importance of | accidents led to the possibility of a | | --- | --- | --- | | Sector | stakeholder engagement was Peloton. | class-action suit being filed against | | Consumer Services | Peloton is the world’s largest interactive | Peloton. Swift and decisive action by | | | fitness platform. Founded in 2012, the | ourmanager enabled Witan to exit | | | company pioneered connected, | theposition above the purchase cost, | | | technology-enabled fitness and | avoiding the subsequent fall of 50% in | | | on-demand streaming of | the share price. | instructor-led classes. Witan and its managers are, as | Following a fatal accident involving | investors, important stakeholders in the | | --- | --- | | aPeloton treadmill in early 2021, our | listed equity companies we invest in, but | | manager held a call with the company’s | we also look at their overall stakeholder | | CFO to discuss product safety. Although | engagement for signals that they have | | the company emphasised that health | the culture and processes to act on | | and safety were of paramount concern, | feedback. Executives that approach | | our Manager was concerned with the | stakeholder engagement strategically | | apparent lack of urgency with which | and manage it systematically are in | | company leadership was addressing | ouropinion more future-focused and | | the issue. When the company issued | more likely to succeed longer term. | 24 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Diageo and Heineken The Manager engaged with Diageo Heineken has made progress with Company Diageo and Heineken andHeineken on their initiatives to environmental targets now integrated promote drinking in moderation. into their operating framework and Country Diageo’s strategy is focused on progress is being made on clean UK/Netherlands | | encouraging their customers to drink | energy adoption, although this is | | --- | --- | --- | | Sector | less and drink better, while Heineken | currently region-specific due to a | | Consumer staples | hashad tremendous success with its | shortage of clean energy in some | | | zero-alcohol beer brand. Heineken 0.0 | areas.Diageo are similarly stretching | | | isnow available in over 60 countries, | their ambitions. They are integrating ESG | | | making it the fastest scaling of a brand | metrics ever more strongly into business | | | in Heineken’s 150 year history. | performance and long-term share | rewards. Notable projects include a | Whilst healthier drinking is at the | newsolar farm for a Scottish distillery | | --- | --- | | forefront of Manager engagement with | and the opening of a carbon neutral | | these companies, environmental issues | bourbon distillery in Kentucky. Both | | are not being overlooked. The Manager | companies are also committed to | | engaged with Heineken and Diageo | asignificant reduction in water | | ontheir environmental policies and | consumption, supporting sustainable | | strategy. These, as well as social | agriculture in their supply chain and | | initiatives, are summed up in | social inclusion in their workforce and | | Heineken’s‘Brew a Better World’ | local communities. There is work to be | | andDiageo’s ‘Society 2030: Spirit | done for both companies, especially | | ofProgress’ initiatives. | toreach their Net Zero targets, but | thereis clear evidence of progress. Witan Investment Trust plc 25 Annual Report 2021 STRATEGIC REPORT ## Meet the managers ## Structuring our portfolio ## Drawing on our experience to deliver collective wisdom ### We act as a one-stop shop for global equity Some managers focus on large, well-known ### investment. We search for the best fund companies; while others might seek to profit ### managers internationally, so the portfolio is from pioneering businesses in specialist ### notreliant on the stock-picking skills of one sectors. However, investment opportunities ### individual. The multi-manager team-based evolve over time. When that happens, we can ### approach ensures that the portfolio embraces appoint or replace managers accordingly. ### many companies, sectors and geographies. ### However, the sheer variety of investment ### opportunities means that they are not always ### obvious or easy to reach. ### Our breadth of expertise adds value throughout the asset allocation process as follows: ### Making ### Selecting Engaging ### Identifying Monitoring changes ### the right with ### opportunities the portfolio where ### managers managers ### appropriate ## Witan’s investment team 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. Andrew Bell James Hart Chief Executive Officer, Investment Director, Witan Investment Trust Witan Investment Trust 26 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Identifying Selecting the ## opportunities right managers ### What sets Witan apart is our unique, We identify managers who can ### diversified but high-conviction portfolio demonstrateindependence of thought ### structure, consisting of two distinct but anda clear alignment of interest between ### complementary elements: core and themselves and their clients. They will ### specialist. This gives shareholders access haveaclearly articulated and repeatable ### to a range of investments with the aim investment process, a high degree ### ofproviding better returns over the long of intellectual rigour and sound judgement ### term while short-term performance to enable them to identify attractive ### maybe quite different from that companies and combine them into ### oftheCompany’s benchmark. concentrated, differentiated portfolios. ### All of our managers are signatories to the ## Core portfolio UNPRI and each is expected to demonstrate ### a clear commitment to incorporating ESG ### The core portfolio accounts for 75% factors into their investment process. 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. ## Monitoring and ## engaging with ## Specialist portfolio ## our managers The specialist portfolio accounts for 25% It provides exposure to a range of key investment themes best accessed through managers with specialist ### We meet with our managers regularly knowledge. Through our due diligence ### process, we identify long-term themes todiscuss investment and governance ### which offer the ability to deliver higher issues and we expect them to uphold returns and outperformance. Current ### thehighest fiduciary standards. As part investment themes include: ### ofour investment process, we can adjust > Climate change ### manager selection and allocations to > Emerging markets ### > Unquoted growth companies ensure we create a combined portfolio ### > Listed private equity which can deliver consistent long-term ### > Life sciences outperformance, while our multi-manager ### structure helps reduce the risks associated These are held either via segregated ### with a single management style. portfolios, or funds held within the directholdings portfolio. Witan Investment Trust plc 27 Annual Report 2021 STRATEGIC REPORT ## Meet the managers continued ## Core portfolio managers ### We have six portfolio managers in our core portfolio. ### 2021 performance JENNISON ASSOCIATES, 2021 performance LANSDOWNE PARTNERS LLC Founded in 1998, Lansdowne | Jennison | 10.1% | Mark Baribeau, Head of | Lansdowne | 17.5% | Partners has evolved to | | --- | --- | --- | --- | --- | --- | | Associates, LLC | | | Partners | | | | | | Global Equities at Jennison | | | become one of the UK’s | | | | Associates, seeks to invest in | | | pre-eminent investment | | MSCI ACWI | 20.1% | | MSCI ACWI | 20.1% | | | | | a portfolio of market-leading | | | management boutiques. | | | | companies with innovative | | | The Long Only Developed | | | | business models, positively | | | Markets Strategy, managed | | | | inflecting growth rates, | | | by Peter Davies and | | | | and long-term competitive | | | Jonathon Regis, combines | | 6.3% | | | 18.9% | | | | | | advantages. Mark, along | | | a detailed thematic | | Witan assets | | | Witan assets | | | | | | with co-portfolio manager | | | approach with rigorous | | 2020: 4.8% | | | 2020: 19.4% | | | | | | Tom Davis and a team | | | companyanalysis to | | | | of global sector analysts, | | | identify anadaptable | | | | employs a high-conviction, | | | portfolio positioned | | | | concentrated approach | | | forunderappreciated or | | | | thatis sector, region and | | | contrariantrends. The two | | | | country-agnostic. The | | | lead managers benefit | | | | team invests in a select | | | from the support provided | | Name: | | | Name: | | | | | | group of companies with | | | by a team of experienced | | Mark Baribeau | | | Peter Davies | | | | | | innovative and disruptive | | | and insightful analysts who | | Style: | | businesses that are driving | Style: | | tend to focus on key sectors | | Companies with exceptional | | structural shifts in their | Concentrated, benchmark- | | of interest to the team. | | growth prospects | | respective industries. They | independent investment in | | | | | | also look for companies | developed markets | | The high-conviction | | Benchmark: | | with defensible business | | | portfolio is the result of | | MSCI ACWI | | models and attractive | Benchmark: | | detailed company-specific | MSCI ACWI product offerings, supported research, allied with an Inception date: | | by secular demand trends. | | appreciation of global | | --- | --- | --- | --- | | 31/08/2020 | | Inception date: | | | | The portfolio typically has | | thematic developments. | 14/12/2012 between 35 and 45 holdings The team is willing to make UNPRI signatory: and securities must meet significant adjustments Yes UNPRI signatory: stringent standards in to the portfolio to reflect Yes order to remain or earn its view of the changing a place in the portfolio. investment landscape. 28 Witan Investment Trust plc Annual Report 2021 ## Core portfolio managers ### We have six portfolio managers in our core portfolio. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ### 2021 performance LINDSELL TRAIN 2021 performance VERITAS ASSET MANAGEMENT Lindsell Train, headed by Lindsell Train 4.0% Nick Train and Michael Veritas Asset 17.1% Andy Headley, Head of Management | | | Lindsell, is guided by four | | | Global Strategies at Veritas, | | --- | --- | --- | --- | --- | --- | | | | investment beliefs: investors | | | uses a number of research | | MSCI ACWI | 20.1% | | MSCI ACWI | 20.1% | | | | | undervalue durable, | | | methods to help identify | | | | cash-generative business | | | industries and companies | | | | franchises; concentration | | | that are well positioned to | | | | can reduce risk; transaction | | | benefit from medium-term | | | | costs are a ‘tax’ on returns; | | | growth, regardless of where | | 14.7% | | | 18.7% | | | | | | and dividends matter even | | | they are located. The aim is | | Witan assets | | more than you think. These | Witan assets | | to generate excellent real | | 2020: 13.6% | | tenets have led to the | 2020: 18.6% | | returns and minimise the risk | | | | creation of a high-conviction | | | of permanent capital loss. | | | | portfolio of approximately 20 | | | Potential investments are | | | | stocks which they describe | | | analysed from an absolute | | | | as “rare and beautiful | | | basis rather than relative | | | | assets” with a focus on | | | to any benchmark or index. | | | | those businesses with | | | This equity portfolio follows | | Name: | | | Name: | | | | | | truly sustainable business | | | a Global Focus strategy, | | Nick Train and Michael Lindsell | | | Andy Headley | | | | | | models and/or established | | | investing with a disciplined | | Style: | | resonant brands. In building | Style: | | approach to valuation | | Long-term growth from | | the portfolio they focus on | Real return objective from | | in ‘quality’ mid to large | | undervalued brands | | companies demonstrating | high-quality companies | | capitalisation companies. | | | | long-term durability in | | | It typically contains fewer | | Benchmark: | | cash and profit generation. | Benchmark: | | than 30 stocks, chosen | | MSCI ACWI | | Lindsell Train Limited is a | MSCI ACWI | | with a highly selective and | | | | small company with about | | | rigorous approach, and | | Inception date: | | | Inception date: | | | | | | 20 employees. This small size | | | is focused on a handful | (1) 01/09/2010 11/11/2010 allows the two founders and of investment themes. their team the freedom to UNPRI signatory: UNPRI signatory: concentrate on investment Yes Yes issues. The ownership (1) Lindsell Train managed a UK structure allows the partners portfolio from 01/09/10 until 31/12/19. 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. Witan Investment Trust plc 29 Annual Report 2021 STRATEGIC REPORT ## Meet the managers continued ## Core portfolio managers ### 2021 performance WCM INVESTMENT 2021 performance ARTEMIS MANAGEMENT Derek Stuart, manager | WCM | 16.9% | Based in Laguna Beach, | Artemis | 16.0% | ofArtemis’s UK Special | | --- | --- | --- | --- | --- | --- | | | | California, WCM is an | | | Situations strategy, aims | | | | independent asset | | | to achieve superior long- | | MSCI ACWI | 20.1% | | FTSE All-Share | 18.7% | | | | | management firm that | | | term growth by looking | | | | runs focused portfolios, | | | for unrecognised growth | | | | comprised of high-quality | | | potential in companies, | | | | businesses with growing | | | often those that are unloved | | | | economic moats, aligned | | | or out of favour. The strategy, | | 11.5% | | | 6.1% | | | | | | with strong, adaptable | | | which favours smaller and | Witan assets corporate cultures, and Witan assets medium-sized companies, 2020: 9.5% | supported by durable global | 2020: 6.4% | identifies hidden value within | | --- | --- | --- | | tailwinds. The portfolio is | | ‘problem investments’, which | | concentrated in 30-40 high- | | can be companies in need | | conviction investments with | | of new management or | | the objective of securing | | refinancing or are suffering | | long-term excess return | | from investor indifference. | and downside protection. Name: Name: As an active manager, WCM The focus on those Mike Trigg Derek Stuart believes that their investee companies which can Style: companies have meaningful Style: help themselves rather High-quality companies with structural advantages Recovery/special situations than relying on a change strong culture and increasing which, when allied with in the business climate competitive advantage a ‘buy and manage’ low Benchmark: aims to avoid ‘value traps’ turnover approach, will allow MSCI UK IMI and other risks associated Benchmark: long-term outperformance with a ‘special situations’ MSCI ACWI Inception date: of the relevant benchmark. strategy. The Artemis team 06/05/2008 places great emphasis Inception date: on personal knowledge of 31/08/2020 UNPRI signatory: management teams and Yes meets with them regularly. UNPRI signatory: This helps them understand Yes what can be achieved and how aligned management are with shareholders. The portfolio typically has fewer than 50 holdings. 30 Witan Investment Trust plc Annual Report 2021 ## Specialist portfolio managers ### Each of our specialist portfolio managers is an expert in one of our chosen themes. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | 2021 performance | | GMO | 2021 performance | | GQG PARTNERS | | --- | --- | --- | --- | --- | --- | | | | GMO was co-founded in | | | GQG Partners’ Emerging | | GMO | 13.0% | 1977by the well-known | GQG Partners | 0.2% | Markets Equity strategy | | | | investor and climate- | | | seeksto invest in high- | | | | focused philanthropist, | | | quality companies with | | MSCI ACWI | 20.1% | | MSCI Emerging | -1.3% | | | | | Jeremy Grantham. | | | attractively priced future | Markets growth prospects. Portfolio | | The investment process is | | manager Rajiv Jain focuses | | --- | --- | --- | --- | | | grounded in a long-term, | | primarily on high-quality, | | | valuation-based investment | | large-cap companies in | | 4.7% | | 6.5% | | | | philosophy – an approach | | emerging market economies | | Witan assets | | Witan assets | | | | which GMO believes | | and employs a fundamental | | 2020: 3.1% | | 2020: 6.2% | | | | provides the best risk- | | investment process to | | | adjusted returns. The | | evaluate each business. | | | Climate Change strategy | | Theresulting portfolio, | | | seeks to deliver high total | | whichis constructed without | | | return by investing primarily | | reference to benchmark | | | in equities of companies | | country weights, seeks to | | | that are positioned to | | limit downside risk while | | Name: | | Name: | | | | benefit, directly or indirectly, | | providing attractive returns | | Lucas White | | Rajiv Jain | | | | from efforts to curb or | | to long-term investors over | | Style: | mitigate the long-term | Style: | afull market cycle. GQG | | Companies positioned to | effects of global climate | High-quality companies | Partners’ portfolio aims to | | benefit from climate change | change, to address the | withattractively priced | participate in the growth | | mitigation/adaptation efforts | environmental challenges | growth prospects | that emerging economies | | | presented by global climate | | promise to deliver over the | | Benchmark: | change, or to improve the | Benchmark: | long term, while avoiding | | MSCI ACWI | | MSCI Emerging Markets | | | | efficiency of resource | | some of the risks that are | | | consumption. As climate | | often associated with | | Inception date: | | Inception date: | | | | change is among the most | | individual countries | | 05/06/2019 | | 16/02/2017 | | | | important investment issues | | andstocks within their | | | facing investors today, GMO | | investment universe. | | UNPRI signatory: | | UNPRI signatory: | | believes that there are Yes Yes exceptional opportunities forlong-term investors in a world mobilising to address climate change. Witan Investment Trust plc 31 Annual Report 2021 STRATEGIC REPORT ## Meet the managers continued ## Specialist portfolio managers ## 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. | 2021 performance | | | DIRECT HOLDINGS | Real estate | | --- | --- | --- | --- | --- | | | | | Private equity | Schroder Real Estate (1.1%) | | Direct Holdings | 18.8% | | | | | | | (1) | Apax Global Alpha (3.1%) | Fund of UK commercial | | Unquoted Growth | N/A | | | | realestate investments. Extensive portfolio of private Benchmark 19.9% equity investments in Clean Energy growing sectors. VH Global Sustainable Princess Private Equity (1.7%) Energy(1.0%) Portfolio of private equity Diversified energy ## 10.9% investments managed by infrastructure investments Direct Holdings Swiss-based Partners Group. focused on accelerating 2020: 10.2% theenergy transition. Electra (0.1%) Private equity fund Credit inrealisation mode. NB Distressed Debt (0.3%) (1) ## 1.7% Portfolio of distressed, Hostmore (0.9%) | Unquoted Growth | | | stressed and special | | --- | --- | --- | --- | | | (1) | Owner and operator | | | 2020: N/A | | | situations investments | ofTGIFriday’s UK casual inrealisation situations. dining franchise spun outofElectra. Name: UNQUOTED GROWTH Witan Life sciences Lansdowne Opportunities (0.9%) Style: Syncona (1.2%) Specialist collective funds Invests mostly in unquoted A healthcare investment companies capitalising on company focused on Benchmark: the intellectual property founding, building and Witan’s benchmark ofleading universities. funding global leaders in innovative life sciences. Inception date: Lindenwood (0.8%) 19/03/2010 Commodities Invests in unquoted, UNPRI signatory: BlackRock World Mining highgrowth companies, Yes seeking the next generation (1.5%) of technology leaders. Fund investing in mining and metal assets worldwide, principally via listed securities. (1) Invested during 2021 32 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc 33 Annual Report 2021 STRATEGIC REPORT ## Forty largest investments ## Top 40 investments: Market value of | | | holding | | | % of | | --- | --- | --- | --- | --- | --- | | Company | | | £m | portfolio | | | 1 GMO Climate Change | Specialist fund investing in companies which benefit from efforts | | 106.2 4.8 | | | tocurb or mitigate the effects of climate change 2 Apax Global Alpha Investment company offering exposure to private equity investments 68.3 3.1 inthe Technology, Services, Healthcare and Consumer sectors 3 Unilever Multi-national consumer goods company with food, home care 41.9 1.9 andpersonal care divisions 4 Alphabet The holding company for Google 40.3 1.8 5 Princess Private Equity Investment company providing exposure to a portfolio of private 38.2 1.7 equityinvestments 6 BlackRock World Mining Diversified fund investing in mining and metal assets worldwide 33.4 1.5 7 Taiwan Semiconductor The world's largest dedicated semiconductor foundry 32.8 1.5 Manufacturing 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 30.2 1.3 Guinness beer brand 10 Charter Communications US cable telecommunications company offering broadcasting, 28.2 1.3 internet, voice, entertainment and business services 11 Syncona Healthcare fund focused on founding, building and funding a portfolio 27.6 1.2 of innovative life science companies 12 Heineken The world's second largest brewer offering premium brand and 26.5 1.2 zero-alcohol beers 13 Schroder Real Estate An investment trust offering exposure to a diversified portfolio of UK 24.5 1.1 commercial real estate 14 CVS Health A US integrated pharmacy healthcare provider 23.8 1.1 15 BT Home, work and mobile telecoms services provider offering 22.7 1.0 broadband, TV and internet products and networked IT services 16 RELX Global provider of information and analytics for professional 21.9 1.0 andbusiness customers across industries 17 Nintendo Gaming console company which develops, manufactures and 21.8 1.0 sellsvideo game hardware and software 18 VH Global Sustainable Energy Fund of diversified energy infrastructure investments focused 21.8 1.0 onaccelerating the energy transition 19 Microsoft Operating systems, server applications, business and consumer 21.5 1.0 applications, software development tools and internet software 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. 34 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Top 40 investments: Market value of | | | holding | | | % of | | --- | --- | --- | --- | --- | --- | | Company | | | £m | portfolio | | | 21 Amazon.com | Online retailer and provider of on-demand cloud-computing | | 21.1 1.0 | | | platformservices 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 20.4 0.9 theintellectual property of leading UK universities 24 Thermo Fisher Scientific Offers medical products and services to the pharmaceutical and 20.0 0.9 biotech industry, hospitals and research & diagnostic organisations 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 19.0 0.9 andprovides indexing and financial data services | 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 | 18.1 0.8 | solutions to consumers and merchants 30 Canadian Pacific Railway Transcontinental railway providing freight and container services 17.9 0.8 across its network in Canada and the United States 31 Lindenwood Fund investing in unquoted, high growth companies, seeking the 17.4 0.8 nextgeneration of technology leaders 32 Baxter Develops, manufactures, and markets essential healthcare products 17.3 0.8 33 BAE Systems Manufactures military aircraft, surface ships, submarines, radar, 17.1 0.8 avionics, communications, electronics and guided weapon systems 34 Meta Social media company which operates under the Facebook, 16.9 0.8 Instagram, Messenger, WhatsApp, Oculus, Workplace, Portal and Novibrands 35 Shopify Global cloud-based e-commerce platform offering retailers and 16.8 0.8 brands a bespoke and customisable, multi-channel retail presence 36 Walt Disney Global entertainment company with operations in media networks, 16.6 0.7 theme parks, studio entertainment and direct-to-consumer networks and channels 37 Vinci Global leader in construction and concessions management with 16.2 0.7 expertise in building, civil, hydraulic and electrical engineering 38 LVMH Diversified luxury goods company, produces and sells wine, cognac, 16.1 0.7 perfumes, cosmetics, luggage, watches and jewellery 39 Safran Supplies aerospace and defence systems with a focus on aircraft 15.8 0.7 engines, propulsion systems and ancillary services 40 Catalent Healthcare company which supports pharmaceutical, biotech and 15.4 0.7 consumer health innovators with delivery technologies, development, drug manufacturing, biologics, gene therapies and consumer healthproducts Top 40 1,043.6 47.1 Witan Investment Trust plc 35 Annual Report 2021 STRATEGIC REPORT ## Classification of investments ### at 31 December 2021 Asia | | | North | | United | | Continental | | | | Pacific | | | | | Latin | | | | Total | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | America | | Kingdom | | | Europe | | (ex Japan) | | | Japan | | America | | | Other | (1) | 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 | | 0.4 1.7 | | | | | – | | | – – – – 2.1 | | | | | | | | | | Services | | Transportation | 1.9 0.9 | 1.3 | – – – - 4.1 | | --- | --- | --- | --- | --- | | | | 4.3 4.5 | 3.8 | 0.3 0.1 – 0.2 13.2 | | Consumer | Automobiles & Components | 0.7 – | 0.4 | – – – – 1.1 | Discretionary Consumer Durables & 0.6 0.1 2.0 0.1 – – – 2.8 Apparel | | 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 | 0.3 1.9 | 0.2 | – 1.1 – – 3.5 | Products 2.6 3.9 2.6 0.2 1.1 0.1 – 10.5 Healthcare Healthcare Equipment & 4.9 0.1 0.4 0.7 – – – 6.1 Services Pharmaceuticals, 3.1 0.8 – 0.4 0.2 – 0.1 4.6 Biotechnology & Life Sciences | | | 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 | Software & Services | 6.6 0.2 | 0.6 | – – – 0.6 8.0 | Technology Technology Hardware & 1.0 0.4 – 0.3 0.3 – – 2.0 Equipment Semiconductors & 2.4 – 0.6 1.5 0.1 – – 4.6 Semiconductor Equipment | | | | 10.0 0.6 | 1.2 | 1.8 0.4 – 0.6 14.6 | | --- | --- | --- | --- | --- | --- | | Communication | Telecommunications | | – 1.0 | – | – – – – 1.0 | | Services | Services | | | | | | | 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 | | (1) | – – | | – – – 13.0 13.0 | | | Investment Companies | | | – | | Companies | | – – | | – | – – – 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. 36 Witan Investment Trust plc Annual Report 2021 ## Principal risks and uncertainties The directors have carried Risks are inherent in investment and The guiding principles remain STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS corporate management. It is important watchfulness, proper analysis, prudence ### outarobust assessment of toidentify risks and ways to control or and a clear system of risk management. ### theemerging and principal avoid them. Witan Investment Services ### risksfacing the Company, Limited (‘WIS’) has a Risk Committee in Where appropriate, the Witan and WIS order to monitor compliance with its risk Boards meet jointly to cover matters of ### including those that would management and reporting obligations common interest. The WIS Board consists ### threaten itsbusiness model, as Witan’s Alternative Investment Fund of seven non-executive directors and one ### future performance, solvency, Manager (‘AIFM’). The Company maintains executive director who are also directors a framework of the key risks, with the of Witan, and one executive director who ### liquidity or reputation. These policies and processes devised to is a Company employee. ### risks, and the actions taken monitor, manage and mitigate them ### tomitigate them, are set where possible. Its detailed risk map The Board’s policy onrisk management ### outbelow. isreviewed regularly by the Audit has not materially changed during the Committee and the WIS Risk Committee, course of the reporting period and up which report on pertinent issues to their tothe date of thisreport. respective Boards. ReducedUnchangedIncreased ### The Company’s key risks fall broadly under the following categories: ## Market and investment portfolio RISK MITIGATION As an equity fund, a key risk of investing is a The Board seeks to manage these During the year, Andrew Bell (the Chief general fall in equity prices and investment risksthrough: Executive Officer (‘CEO’)) managed the income, which could be exacerbated by overall business and the investment  a broadly diversified equity benchmark; gearing and the risks associated with the portfolio in accordance with limits performance of its investment managers  appropriate asset allocation decisions; determined by the Board and its AIFM, and changes in Witan’s share price rating. onwhich the CEO reports at each Board  selecting competent managers and meeting. The Board also regularly reviews Other risks are the portfolio’s exposure to regularly monitoring their performance, investment strategy and performance, country, currency, industrial sector and awareness of emerging risks and the supported by comprehensive management stock-specific factors (including those robustness of their processes for taking information and analysis. relating to the sustainability of the business account of those risks; model taking account of environmental, social and governance factors). Political  paying attention to key economic andmacroeconomic topics such as Brexit, andpolitical events; pandemics (e.g. COVID-19), trade wars and  engagement with shareholders and military conflicts (e.g. the Russian invasion other stakeholders; ofUkraine) can all be expected to lead to market volatility.  active management of risk, whether topreserve capital or capitalise onopportunities;  the application of relevant policies ongearing and liquidity; and  share buybacks and issuance torespond to market supply anddemand. Witan Investment Trust plc 37 Annual Report 2021 STRATEGIC REPORT ## Principal risks and uncertainties continued ## Operational and cyber RISK MITIGATION | Many of the Company’s financial systems | The Witan and WIS Executive undertake | Details of the Board’s monitoring and | | --- | --- | --- | | are outsourced to third parties, principally | adetailed due diligence program, | controlprocesses are explained further | | BNP Paribas Securities Services (‘BNPSS’). | focusedupon the operational and | inthe Corporate Governance Statement | | Disruption to their accounting, payment | cyberarrangements of all the Company’s | onpages48 to 56. | | systems or custody records could prevent | suppliers. BNPSS, as the Company’s | | | the accurate reporting and monitoring of | Depositary, has a key responsibility for | | | the Company’s financial position. | monitoring such issues on behalf of the | | Company. The Board and AIFM monitor the Depositary as well as its other suppliers. ## Compliance and regulatory change RISK MITIGATION The Company breaches compliance/ The Board takes its regulatory Operational and regulatory risks are regulatory requirements or fails to responsibilities very seriously and regularly reviewed by Witan’s Audit assessthe impact. compliance issues and potential Committee and WIS’s Risk Committee. regulatorychanges are regularly WISissubject to its own operating rules and reviewedby the Boardand its AIFM. regulations and is regulated by theFinancial Conduct Authority (‘FCA’). The Company Details of the Company’s corporate hasestablished a modus operandi for the governance policies are set out in the effective coordination ofits responsibilities Corporate Governance Statement on and those of WIS, asitsAIFM. pages48 to 56. The Board conducts an annual assessment of the effectiveness Operationally, the multi-manager structure ofits governance processes. is robust, as the investment managers, thecustodian and the fund accountants There is also a three-yearly independent keep their own records which are regularly external review, the most recent of which reconciled. The depositary, the AIFM and was in 2021. See page 55 for further details. theBoard provide additional checks and Following the closure of the Company’s safeguards. Management monitors the savings plans, the risks associated with the activities of all third parties and reports holding of and accounting for client assets anysignificant issues to the Board. has been substantially reduced and will be eliminated in future. ## Accounting, taxation and legal RISK MITIGATION | The Company must comply with sections | The accounting requirements are monitored | | --- | --- | | 1158-59 of the Corporation Tax Act 2010 (‘CTA’). | by the CEO and AIFM and the Company | | A breach could result in the Company | carefully monitors compliance with the | | losinginvestment trust status and, as | applicable rules. | aconsequence, capital gains realised These requirements offer significant wouldbe subject to corporation tax. protection for shareholders. The Board | The Company must comply with the | receives reportsfrom the CEO, the AIFM, | | --- | --- | | provisions of the Companies Act 2006 | theCompany Secretary and the Company’s | | (‘Companies Act’) and with the UK Listing | professional advisers to enable it to ensure | | Authority’s Listing Rules and Disclosure Rules | compliance with all applicable rules. WIS is | | (‘UKLA Rules’). A breach of the Companies | authorised and regulated by the FCA to act | | Act could result in the Company and/or | as the AIFM forWitan. | 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. 38 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Liquidity RISK MITIGATION The Company’s portfolio of securities The Company’s portfolio consists mainly Most of the likely liquidity requirements are mightnot be realisable. ofreadily realisable securities. The foreseeable (for example, timetabled loan Companyand its AIFM regularly review payments and dividends) while others liquidity needs(for example, operational (suchas share buybacks) are subject to costs, loanservicing and repayment, theCompany’s discretion. The Board is shareholder dividends and share buybacks) satisfied that unexpected liquidity needs relative to the Company’s portfolio income arenot significant and could readily be and the value and tradability of the metwithout compromising normal Company’s assets. portfoliomanagement. ## COVID-19 – Global pandemic RISK MITIGATION | The COVID-19 pandemic has given rise to | The Board and the WIS Executive maintain | | --- | --- | | unprecedented challenges for businesses | close oversight of the Company’s portfolio | | across the globe and the Board has taken | and monitor the investment income flows | | into consideration the risks, both investment | from its investee companies. The Board | | and operational, posed to the Company by | monitors the effects of COVID-19 on the | | the crisis. | 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 Witan has a Responsible Investment policy engagement and voting activities. The risks arising from environmental, social and which was developed by the Board in Executive holds regular ESG review meetings governance issues may negatively impact consultation with Witan’s Executive team. with each of the managers where these investment returns, increase the potential Witan expects its external managers to activities, as well as evolving best practice forreputation risk to Witan and adversely integrate ESG factors into their investment and new Responsible Investment initiatives, affect the net asset value and/or price of processes. Witan requires managers to are discussed. The Executive presents its Witan’s shares. report on any ESG issues in a timely manner findings to the Board on a regular basis. 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 Witan Investment Trust plc 39 Annual Report 2021 STRATEGIC REPORT The following ‘Section 172’ disclosure, which is required ## Section 172: engaging with by the Companies Act 2006 and the AIC Code, as ## our stakeholders explained on page 52, describes how the directors have had regard to the views of the Company’s stakeholders in their decision making. ## Who? Why? How? What? Outcomes and actions STAKEHOLDER GROUP THE BENEFITS OF ENGAGEMENT HOW THE BOARD AND WIS EXECUTIVE WHAT WERE THE KEY TOPICS OF ENGAGEMENT? WHAT ACTIONS WERE TAKEN, INCLUDING WITH OURSTAKEHOLDERS ENGAGED WITH OUR STAKEHOLDERS PRINCIPAL DECISIONS? Investors Clear communication of our strategy and WIS, on behalf of the Board, completes a programme of investor Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs theCompany’s performance against our relations throughout the year. and objective, and the selection and monitoring of our external managers. objective can help the share price trade at Key mechanisms of engagement included: anarrower discount or a premium to its net  Ongoing impact of the COVID-19 pandemic on economies,  The WIS Executive held regular meetings with shareholders asset value, which benefits shareholders.  AGM markets and companies throughout the year and provided updates via the Company’s website and newsletters on performance of the Company as well New shares may be issued at a premium  The Company’s website which hosts reports, monthly as the usual financial reports and monthly factsheets toNAV to meet demand without dilution to factsheets, video interviews with the external managers, existing shareholders. Increasing the size of CEO,Investment Director and regular market commentary  Impact of dividend cuts on the Company’s revenues and the  See page 9 in the Chairman’s Statement and page 15 in the CEO’s the Company can benefit liquidity as well Company’s dividends Review for the Board’s comments on the dividend policy  Online newsletters asspread costs.  One-on-one meetings with professional investors with  Share price performance and the Company’s and wider  The Company maintained a high rate of share buybacks. See eitherthe CEO, Investment Director or Chairman investment trust sector discounts page 15 in the CEO’s Review  Group meetings with professional investors with  The integration of ESG into the Company’s investment processes  ESG included in presentations to investors, ad hoc updates ourexternalmanagers  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 As Witan has a multi-manager approach, The WIS Executive meets with the Company’s external managers Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and managers engagement with our managers is necessary throughout the year and receives monthly performance and business updates. to evaluate their performance against their compliance reporting. This provides the opportunity for both the stated strategy and benchmark and to manager and WIS Executive to explore and understand how and  The ongoing impact of COVID-19 on their business and strategy  All managers successfully implemented remote working in 2021 understand any risks or opportunities this why the relationship has performed and what may be expected with no adverse impact on service delivery maypresent to the Company. This also inthe future. Each manager also presents annually to the Board helpsensure that investment management ofdirectors, providing the opportunity for the manager and Board  The integration of ESG into each manager’s investment processes  See pages 22 and 23 in Responsible investment for a report on costs are closely monitored and remain to reinforce their mutual understanding of what is expected from manager activity in 2021 competitive. Witan ensures that all all parties. managersare paid in accordance withtheirterms of trade. | Service | Witan and WIS contract with third parties | The WIS Operations team engages regularly with all service |  Impact of COVID-19 and restrictions on service providers  All service providers successfully implemented remote working | | | --- | --- | --- | --- | --- | | providers | forother services including: custodian, | providers both in one-to-one meetings and via regular written | | in2021 with no adverse impact on service delivery | | | depositary, investment accounting | reporting. This regular interaction provides an environment | | | | | andadministration, company secretary. | wheretopics, issues and business development needs can | | | | | Ensuringthe third parties to whom we have | bedealt with efficiently and collegiately. | | | outsourced services complete their roles The Audit Committee reviews annually a summary of the diligently and correctly is necessary for contracts of all service providers to further reinforce the theCompany’s success. overviewof the Company’s service providers at the Witan pays all service providers in corporatelevel. accordance with their terms of business and is a signatory to the Prompt Payments Code. Employees Attract and retain talent to ensure the All employees of the Company sit in one open-plan office with the  COVID-19 restricted employees to working from home  Existing system functionality allowed all employees to move to Company has the resources to successfully CEO, facilitating interaction and engagement. During periods of remote working during lockdown restrictions without detriment implement its strategy and manage third- remote working, the WIS Executive holds regular video meetings to toproductivity or service to stakeholders party relationships. update and share information. As well as the CEO, the Investment Director, Director of Operations and Director of Marketing report to  Performance and compensation of employees is decided  See the Directors’ Remuneration Report on pages 60 to 71 the Board at each meeting. Given the small number of employees, bytheRemuneration Committee with the CEO engagement is at an individual level rather than as a group. Debt To communicate and demonstrate a strong The WIS Executive provides regular financial covenant  N/A  N/A holders financial position that supports the financing compliance validation and financial reports to the stakeholders. arrangements. 40 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Who? Why? How? What? Outcomes and actions STAKEHOLDER GROUP THE BENEFITS OF ENGAGEMENT HOW THE BOARD AND WIS EXECUTIVE WHAT WERE THE KEY TOPICS OF ENGAGEMENT? WHAT ACTIONS WERE TAKEN, INCLUDING WITH OURSTAKEHOLDERS ENGAGED WITH OUR STAKEHOLDERS PRINCIPAL DECISIONS? Investors Clear communication of our strategy and WIS, on behalf of the Board, completes a programme of investor Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs theCompany’s performance against our relations throughout the year. and objective, and the selection and monitoring of our external managers. objective can help the share price trade at Key mechanisms of engagement included: anarrower discount or a premium to its net  Ongoing impact of the COVID-19 pandemic on economies,  The WIS Executive held regular meetings with shareholders asset value, which benefits shareholders.  AGM markets and companies throughout the year and provided updates via the Company’s website and newsletters on performance of the Company as well New shares may be issued at a premium  The Company’s website which hosts reports, monthly as the usual financial reports and monthly factsheets toNAV to meet demand without dilution to factsheets, video interviews with the external managers, existing shareholders. Increasing the size of CEO,Investment Director and regular market commentary  Impact of dividend cuts on the Company’s revenues and the  See page 9 in the Chairman’s Statement and page 15 in the CEO’s the Company can benefit liquidity as well Company’s dividends Review for the Board’s comments on the dividend policy  Online newsletters asspread costs.  One-on-one meetings with professional investors with  Share price performance and the Company’s and wider  The Company maintained a high rate of share buybacks. See eitherthe CEO, Investment Director or Chairman investment trust sector discounts page 15 in the CEO’s Review  Group meetings with professional investors with  The integration of ESG into the Company’s investment processes  ESG included in presentations to investors, ad hoc updates ourexternalmanagers  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 As Witan has a multi-manager approach, The WIS Executive meets with the Company’s external managers Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and managers engagement with our managers is necessary throughout the year and receives monthly performance and business updates. to evaluate their performance against their compliance reporting. This provides the opportunity for both the stated strategy and benchmark and to manager and WIS Executive to explore and understand how and  The ongoing impact of COVID-19 on their business and strategy  All managers successfully implemented remote working in 2021 understand any risks or opportunities this why the relationship has performed and what may be expected with no adverse impact on service delivery maypresent to the Company. This also inthe future. Each manager also presents annually to the Board helpsensure that investment management ofdirectors, providing the opportunity for the manager and Board  The integration of ESG into each manager’s investment processes  See pages 22 and 23 in Responsible investment for a report on costs are closely monitored and remain to reinforce their mutual understanding of what is expected from manager activity in 2021 competitive. Witan ensures that all all parties. managersare paid in accordance withtheirterms of trade. | Service | Witan and WIS contract with third parties | The WIS Operations team engages regularly with all service |  Impact of COVID-19 and restrictions on service providers  All service providers successfully implemented remote working | | | --- | --- | --- | --- | --- | | providers | forother services including: custodian, | providers both in one-to-one meetings and via regular written | | in2021 with no adverse impact on service delivery | | | depositary, investment accounting | reporting. This regular interaction provides an environment | | | | | andadministration, company secretary. | wheretopics, issues and business development needs can | | | | | Ensuringthe third parties to whom we have | bedealt with efficiently and collegiately. | | | outsourced services complete their roles The Audit Committee reviews annually a summary of the diligently and correctly is necessary for contracts of all service providers to further reinforce the theCompany’s success. overviewof the Company’s service providers at the Witan pays all service providers in corporatelevel. accordance with their terms of business and is a signatory to the Prompt Payments Code. Employees Attract and retain talent to ensure the All employees of the Company sit in one open-plan office with the  COVID-19 restricted employees to working from home  Existing system functionality allowed all employees to move to Company has the resources to successfully CEO, facilitating interaction and engagement. During periods of remote working during lockdown restrictions without detriment implement its strategy and manage third- remote working, the WIS Executive holds regular video meetings to toproductivity or service to stakeholders party relationships. update and share information. As well as the CEO, the Investment Director, Director of Operations and Director of Marketing report to  Performance and compensation of employees is decided  See the Directors’ Remuneration Report on pages 60 to 71 the Board at each meeting. Given the small number of employees, bytheRemuneration Committee with the CEO engagement is at an individual level rather than as a group. Debt To communicate and demonstrate a strong The WIS Executive provides regular financial covenant  N/A  N/A holders financial position that supports the financing compliance validation and financial reports to the stakeholders. arrangements. Witan Investment Trust plc 41 Annual Report 2021 STRATEGIC REPORT ## Corporate and operational structure Witan is an investment trust with a STAFFING WITAN INVESTMENT SERVICES Premium Listing on the London Stock The Company’s policy towards its WIS is authorised and regulated by Exchange. It has a single, wholly employees is to attract and retain staff theFinancial Conduct Authority. It is owned subsidiary, Witan Investment with the skills and expertise required to authorised to act as Witan’s AIFM, Services Limited (‘WIS’) which acts manage the affairs of an investment toprovide marketing services and trust company. Details of the Company’s togiveinvestment advice to as the Company’s Alternative remuneration policies and required professionalinvestors. Investment Fund Manager (‘AIFM’). disclosures are set out in the Directors’ Remuneration Report on pages 60 to 71. WIS’s principal activities are acting The overwhelming majority of the Employees and those who seek to work asWitan’s AIFM, providing executive portfolio is in segregated accounts, | | at Witan are treated equally regardless | management services to the Board of | | --- | --- | --- | | held in custody by the Company’s | of age, gender, race, disability, marital | Witan and communicating information | | depositary. The operations of the | status, sexual orientation and religion. | about the Company to the market. | | custodian and the safeguarding | The Company has six direct employees, | | | ofthe Company’s assets are | three men and three women. The | WIS’s operational objectives for 2021 were: | | supervised by the depositary. | Board currently consists of seven non- | | > to fulfil its responsibilities as Witan’s executive directors (four men and three AIFM; and women) and the Chief Executive Officer, OPERATIONAL MANAGEMENT Andrew Bell, who is an employee. Given > to control the net operating costs ARRANGEMENTS its outsourced model and the small forWitan. In addition to the appointment of number of direct employees, the Group third-party investment managers, has no employment-related specific In 2021, WIS’s principal sources of Witanand WIS contract with third policies in respect of environmental or incomewere the fees (as AIFM or partiesfor other services, including: social and community affairs. However, Executive Manager and for marketing > BNP Paribas Securities Services as described elsewhere, an increased services) paid by Witan Investment Trust London Branch for depositary focus on environmental, social and plc. The main costs incurred were staff services, custody, investment governance issues has been formalised costs and professional advice to ensure accounting and administration; by the Company’s membership of the compliance with regulatory and Institutional Investors Group on Climate accounting obligations. > Frostrow Capital LLP for company Change since July 2019, a signatory secretarial services; to the UN-supported Principles for Responsible Investment from February > RepRisk and Sustainalytics for ESG 2020 and a commitment to Net Zero monitoring of its investment Asset Managers initiative in early 2022. 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. 42 Witan Investment Trust plc Annual Report 2021 ## Costs INVESTMENT MANAGEMENT FEES The OCF was 0.71% in 2021, 9% lower than value for money for shareholders, taking STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS the previous year (2020: 0.78%). When account of longer-term performance. Each of the third-party managers is performance fees due to third-party entitled to a management fee, based managers are included, the OCF was The UK version of the EU PRIIPS regulations, on the assets under management. 0.73% in 2021 (2020: 0.82%). The sole which are applicable to UK Investment The agreements can be terminated on manager with a performance fee Companies, mandate the preparation one to three months’ notice. The base structure significantly outperformed of a Key Information Document (‘KID’) fee rates for managers in place at the during 2020 and early 2021. This generated calculated on a formulaic basis, which end of 2021 ranged from 0.30% to 0.60% the payment of a performance fee for contains a different measure of costs per annum. The weighted average that manager (which has a lower base from the OCF, averaged over longer base fee was 0.51% as at 31 December fee than comparable managers). periods rather than specific to one year. 2021 (2020: 0.51%). One manager The other principal differences between (covering 6% of Witan’s portfolio), has The main cost headings within the the OCF and the KID measure are the a performance-related fee, which is OCF are set out below. The figures for inclusion of transaction costs, borrowing subject to capping in any particular year. transaction costs, borrowing costs costs and the underlying costs of and the pro rata ongoing charges of holdings in other collective investments. Witan takes care to ensure the underlying funds are also included in competitiveness of the fees it pays. Most the table, for easy reference. All the costs The Company’s investment of the fee structures incorporate a ‘taper’ measured showed an improvement performance is reported after whereby the average fee rate reduces on the previous year, either increasing allcosts, however measured. asthe portfolio grows. by less than the growth in net assets or declining in absolute terms. The Company’s investment managers may use services which are paid for, or The Company exercises strict scrutiny and provided by, various brokers. They may control over costs. The Board believes that place business, including transactions the OCF during the year represents good relating to the Company, with those brokers. Under the requirements of MiFID II, broker-provided services (other ANALYSIS OF COSTS than the execution of transactions) 2021 2020 must either be minor non-monetary | | | | | % of | | | % of | | --- | --- | --- | --- | --- | --- | --- | --- | | benefits or, for research received by | | 2021 | average | | 2020 | average | | | | Category of cost | £m | net assets | | £m | net assets | | investment managers and charged to the Company, separately accounted for. Investment management base fees (note 4, page 93) 9.33 0.47 8.70 0.51 ONGOING CHARGES AND COSTS Other expenses (excluding loan The Company’s established measure arrangement and one-off costs) 4.81 0.24 4.91 0.28 ofthe costs of operation is the Ongoing Less expenses relating to the Charges Figure (‘OCF’). This represents the subsidiary (those expenses not recurring costs of operating the business relating to the operation of the (principally the investment management investment company) (0.04) – (0.15) (0.01) fees paid to our external managers as Ongoing Charges Figure well as the Company’s fixed and variable (including investment management overhead costs), as a percentage of net base fees) 14.10 0.71 13.46 0.78 assets. This is calculated in accordance with the AIC’s guidelines and provides a Investment management consistent basis for the comparison of performance fees (note 4, page 93) 0.39 0.02 0.58 0.04 costs from one year to the next and Ongoing Charges Figure relative to other investment companies. (including performance fees) 14.49 0.73 14.04 0.82 Pro rata ongoing charges of (1) underlying funds 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 43 Annual Report 2021 STRATEGIC REPORT ## Viability Statement | In accordance with the UK | The Board has considered the | As well as considering the principal | | --- | --- | --- | | Corporate Governance Code, the | Company’sfinancial position and its | riskson pages 37 to 39 and the | | | ability to liquidate its portfolio and meet | financialposition of the Company, | Board has assessed the prospects its expenses as they fall due and notes theBoard has made the following of the Company over a longer thefollowing: assumptions in considering the period than the 12 months required Company’s longer-term viability: by the ‘going concern’ provision. > The portfolio consists of investments traded on major international stock > The Company’s remit of investing exchanges and there is a spread of inthe securities of global listed The Company’s current position investments. In normal conditions, the companies will continue to be andprospects are set out in the current portfolio could be liquidated anactivity to which investors Chairman’s and Chief Executive to the extent of more than 83% within willwishtohave exposure. Officer’s reports and the Strategic five trading days and there is no Report. The principal risks are set > Investors will continue to want expectation that the nature of the outon pages 37 to 39. toinvest in closed-ended investments held will be materially investmenttrusts. different in future. > The performance of the Company > The closed-ended nature of the willcontinue to be satisfactory. The Company means that, unlike an Board is able to replace any of the open-ended fund, it does not current investment managers when needtorealise investments when itconsiders it appropriate to do so. shareholders wish to sell their shares. > The Company will continue to > The Board has considered the haveaccess to adequate capital viabilityof the Company under when required. various scenarios, including periods | of acute stock market and economic | > The Company will continue to be | | | --- | --- | --- | | volatility such as experienced in 2020, | | ableto fund share buybacks when | | and concluded that it would expect to | | required. The Company bought | | be able to ensure the financial | | back63.7 million ordinary shares | | stability of the Company through the | | in2021 at a cost of£153.5 million and | | benefits of having a diversified | | experienced no problem with liquidity | | portfolio of listed and realisable | | in doing so. It had shareholders’ funds | | assets. As illustrated in note 14 to the | | in excess of £1.9 billionat the end | | accounts, the Board has considered | | of2021. | price sensitivity risk (the sensitivity of the profit after taxation for the year Based on the results of its review and and the value of the shareholders’ taking into account the long-term nature funds to changes in the fair value of of the Company and its financing, the the Group’s investments) and foreign Board has a reasonable expectation that currency sensitivity (thesensitivity to the Company will be able to continue changes in key exchange rates to its operations and meet its expenses which the portfoliois exposed). and liabilities as they fall due for the foreseeable future, taken to mean at > In addition to its cash balances, which least the next five years. The Board were £33 million at 31 December 2021 has chosen this period after reviewing (2020: £35 million), the Company has its investment policy and evaluating a short-term bank facility which can the investment cycle and the ability to beused to meet its liabilities, and deliver the Company’s objectives over fixed-rate financing in the form the short to medium term. Forecasting ofsecured notes and cumulative over longer periods is imprecise. The preference shares. With the exception Board has no information to suggest this of the short-term facility, this judgement will need to change in the financing will remain in place until at coming five years. The Board’s long- least 2035. Details of the Company’s term view of viability will, of course, be current and non-current liabilities are updated each year in the Annual Report. 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. 44 Witan Investment Trust plc Annual Report 2021 GOING CONCERN STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 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 45 Annual Report 2021 CORPORATE GOVERNANCE ## Board of directors ## 1. 2. 3. 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 ### 4. 5. 6. 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 ### 7. 8. 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 Key to membership ofBoard and Date of appointment Committees January 2017. Career & background Chairman of the Previously chief executive of Scottish Board or a Enterprise and a former Managing Committee. Partner and Regional Industry Members of the Audit Leader of Ernst & Young LLP. Served Committee which is on the boards of FTSE 250 and other chaired by Mr Perry. public and private companies Members of the and is a member of the Institute of Remuneration and Chartered Accountants of Scotland. Nomination Committee which Skills & expertise is chaired by Jack is chairman of two other listed Mr Yates. investment companies and has Director of Witan developed an understanding of Investment Services the needs of all stakeholders. His Limited. 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. 58 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | 2. Andrew Bell | 3. Rachel Beagles | 4. Gabrielle Boyle | 5. Suzy Neubert | | --- | --- | --- | --- | | CEO | NON-EXECUTIVE DIRECTOR | NON-EXECUTIVE DIRECTOR | SENIOR INDEPENDENT DIRECTOR | | Date of appointment | Date of appointment | Date of appointment | Date of appointment | | February 2010. | July 2020. | August 2019. | April 2012. | | Career & background | Career & background | Career & background | Career & background | | Previously Head of Research at | Previously a managing director | Senior Fund Manager and | Previously Global Head of | | Rensburg Sheppards and an | and co-head of pan-European | Head ofResearch at Troy Asset | Distribution at J O Hambro | | equity strategist and Co-Head | banks equity research and sales at | Management since 2011. She is the | Capital Management. Prior | | of the Investment Trusts team | Deutsche Bank. Since 2003 she has | Senior Fund Manager for the Trojan | to that, managing director of | | atBZW and CSFB. Prior to the | worked as a non-executive director | Global Equity Fund and the Electric | Equity Markets at Merrill Lynch | | City, he worked for Shell in Oman, | in the investment company, asset | & General Investment Fund. | Securities in London following | | leaving to take a Sloan Fellowship | management, charity and social | | roles in equity research and | | at the London Business School. | housing sectors. She was Chair | Skills & expertise | sales. She is a qualified barrister. | | | of the Association of Investment | Gabrielle has over 30 years’ | | | Skills & expertise | Companies from 2018 to 2021. | experience in fund management | Skills & expertise | | Andrew’s roles prior to joining Witan | | and has managed global equity | Suzy’s 32 years’ experience in | | have given him valuable experience | Skills & expertise | portfolios since 2001 and European | sales and marketing roles on | | of economic and geopolitical events | Rachel has extensive knowledge | portfolios since 1998. With this | both the sell and buy sides of | | and how they influence equity | and understanding of the equity | background she brings knowledge | financial services has given her a | | markets, along with considerable | markets from her experience | of investing through market cycles | thorough understanding of equity | | knowledge and experience of | in research and sales. She is | and understanding of the skills | markets. Her role at J O Hambro | | the investment trust sector. | an experienced non-executive | required of fund managers. | provided her with insight into the | | | director of investment trusts. | | distribution of funds to institutions | | External appointments | | External appointments | and private wealth managers. | | Chairman of The Diverse | External appointments | Investment director and Head of | | | Income Trust plc. | Non-executive director of | Research at Troy Asset Management. | External appointments | | | Gresham House plc and The | | Non-executive director | | | Mercantile Investment Trust plc | | at ISIO, Jupiter Fund | | | and Chair of the Investment | | Management plc and LV=. | Committee at Parkinson’s UK. | 7. Ben Rogoff | 8. Paul Yates | | --- | --- | | NON-EXECUTIVE DIRECTOR | NON-EXECUTIVE DIRECTOR | | Date of appointment | Date of appointment | | October 2016. | May 2018. | | Career & background | Career & background | | Lead manager of Polar Capital | Previously CEO of UBS Global Asset | | Technology Trust plc since 2006 and | Management (UK) Limited and | | a fund manager of Polar Capital | held a number of global roles | | Global Technology Fund and Polar | at UBS prior to retiring in 2007. | Capital Automation and Artificial Intelligence Fund. He has been a Skills & expertise technology specialist for 23 years. Paul‘s prior roles give him wide experience of the fund Skills & expertise management business including As a highly experienced listed equity management, marketing, equities fund manager, Ben has a people and business management. deep understanding of the analysis Paul also offers investment process required for investing in trust experience having sat public companies. His knowledge of on four other trust boards. the technology sector particularly | enables him to identify the risks from | External appointments | | --- | --- | | disruption not just to the sector but in | Chairman of the Advisory Board of | | general. Ben applies this knowledge | 33 St James’s Limited, non-executive | | to his questioning and monitoring | director of Fidelity European Trust | | of Witan’s external managers. | PLC and Capital Gearing Trust plc. | External appointments Director, Technology at Polar Capital. Witan Investment Trust plc 59 Annual Report 2021 CORPORATE GOVERNANCE ## 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 60 Witan Investment Trust plc Annual Report 2021 COMPLIANCE Board and director independence STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS The Board has considered the Principles and Provisions of the AIC At 31 December 2021 the Board was composed of seven Code. The AIC Code addresses the Principles and Provisions set independent non-executive directors and one executive director, out in the Corporate Governance Code, as well as setting out the CEO. The Board is therefore independent of the Company’s additional Provisions on issues that are of specific relevance executive management. All the directors are wholly independent tothe Company. of the Company’s various investment managers. In the opinion ofthe Board, each of the directors is independent in character The Board considers that reporting against the Principles and and judgement and there are no relationships or circumstances Provisions of the AIC Code, which has been endorsed by the FRC, relating to the Company that are likely to affect their judgement. provides more relevant information to shareholders. Two of the directors, Ms Neubert and Mr Bell, have been on the The Company has complied with the Principles and Provisions of Board for nine years or more. Mr Bell, who is the CEO of Witan, the AIC Code during the year ended 31 December 2021 except isan executive director but is independent of the Company’s asset out below: appointed fund managers and other service providers. His > The Corporate Governance Code (Provisions 25 and 26) longservice is beneficial to the Company. The Board considers includes provisions relating to the need for an internal audit that Ms Neubert is, and has been since her appointment, an function. The Company does not have an internal audit independent non-executive director. Those directors who function, for reasons that are explained on page 56. haveserved on the Board for more than nine years stand for re-election by the shareholders each year and will do so for The principles of the AIC Code aslong as they continue to serve on the Board. The Board is The AIC Code is made up of 17 principles supported by firmly ofthe view that length of service does not of itself impair 35Provisions. adirector’s ability to act independently; rather, a director’s longerperspective can add value to the deliberations of a Details of how the Company has applied the Principles and well-balanced investment trust company board. Independence Provisions are set on the following pages. stems from the willingness to make decisions that may conflict with the interests of management; this is a function of 1 BOARD LEADERSHIP AND PURPOSE 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. ## The role of the Board 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 ### The role of the Board is to promote and those of shareholders. ### the long-term sustainable success of the The non-executive directors, led by the SID, meet without the ### Company, generating value for shareholders Chairman present at least annually to appraise the Chairman’s ### and contributing to wider society. performance, and on other occasions as necessary. 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 Witan Investment Trust plc 61 Annual Report 2021 CORPORATE GOVERNANCE ## Corporate Governance continued Board commitments The Chairman When considering new appointments, the Board takes Mr Ross was appointed as Chairman of the Company in intoaccount other demands on directors’ time. Prior to April2020. appointment, new directors are asked to disclose any existing significant commitments with an indication of the time involved. The Chairman’s primary role is to provide leadership to the Additional external appointments require the prior approval of Board, assuming responsibility for its overall effectiveness in the Remuneration and Nomination Committee on behalf of the directing the Company. The Chairman is responsible for: Board, with the reasons for permitting significant appointments > taking the chair at general meetings and Board meetings, explained in the Annual Report. conducting meetings effectively and ensuring all directors are involved in discussions and decision making; Company’s purpose, values and strategy The Board assesses the basis on which the Company generates > setting the agenda for Board meetings and ensuring the and preserves value over the long term. The Strategic Report directors receive accurate, timely and clear information for describes how opportunities and risks to the future success decision making; ofthe business have been considered and addressed, the > taking a leading role in determining the Board’s composition sustainability of the Company’s business model and how and structure; itsgovernance contributes to the delivery of its strategy. TheCompany’s investment objective and investment > overseeing the induction of new directors and the policyaresetout on the inside front cover. development of the Board as a whole; > leading the annual Board evaluation process and assessing Culture the contribution of individual directors; The Board seeks to establish and maintain a corporate culture characterised by fairness in its treatment of employees and > supporting and also challenging the CEO and other suppliers service providers, whose efforts are collectively directed where necessary; towardsdelivering returns to shareholders in line with the > ensuring effective communications with shareholders and, Company’s purpose and objectives. It is the Board’s belief where appropriate, other stakeholders; and thatthis contributes to the greater success of the Company, | aswell as being an appropriate way to conduct relations | > engaging with shareholders to ensure that the Board has | | | --- | --- | --- | | between parties engaged in a common purpose. | | aclear understanding of shareholder views. | | 2 DIVISION OF RESPONSIBILITIES | Senior Independent Director | | | The Board | Ms Neubert was appointed as the Senior Independent Director | | (‘SID’) in April 2021 following the retirement of Mr Watson from The Board normally consists of eight directors, including the CEO, theBoard at the AGM in April 2021. The SID serves as a sounding which is considered to be an appropriate number. This ensures board for the Chairman and acts as an intermediary for other that no one individual or small group of individuals dominates directors and shareholders. The SID is responsible for: the Board’s decision making. Details of the directors are set out on pages 46-47. They demonstrate a broad range of skills and > working closely with and supporting the Chairman; experience, gained overseas as well as in the United Kingdom, which are relevant to the strategy of the Company. There are > leading the annual assessment of the performance of currently eight directors on the Board. The Board has typically theChairman; met eight to ten times a year. > 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). 62 Witan Investment Trust plc Annual Report 2021 Director responsibilities The Chief Executive Officer (‘CEO’) STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS The Board is responsible for determining the strategic direction The CEO is responsible to the Board and the AIFM for the of the Company and for promoting its success. At least one of overallmanagement of the Company including investment itsmeetings each year is devoted entirely to reviewing overall performance, business development, shareholder relations, strategy and progress is monitored throughout the year. marketing, investment trust industry matters, administration andunquoted investments. The duties of the CEO include leading The Chief Executive Officer and the AIFM monitor investment on investment strategy and asset allocation, on the selection performance and all associated matters. The Chief Executive and monitoring of the investment managers and their terms of Officer reports to each Board meeting, at which investment reference and on the use of derivatives. The Board, in conjunction performance, asset allocation, gearing, marketing and with the AIFM, sets limits on matters such as asset allocation, investorrelations are usually key agenda items. gearing and investment in derivatives, within which the CEO hasdiscretion. Matters specifically reserved for decision by the full Board havebeen defined. These include decisions relating to strategy The CEO reports to each meeting of the Board. His reports include and management; structure and capital; financial reporting confirmation that the Board’s investment limits and restrictions andcontrols; internal controls; contracts with third parties; and those which govern the Company’s tax status as an communication; Board membership and other appointments; investment trust, have been adhered to. Board and employee remuneration; delegations of authority; corporate governance matters; and Company policies. There The CEO and his team monitor the share price and the discount/ isan agreed procedure for directors, in the furtherance of their premium to net asset value on a daily basis and he reports to duties, to take independent professional advice, if necessary, every Board meeting on this subject. Where appropriate, the atthe Company’s expense. Board makes use of share buybacks (at a discount) and issuance (at a premium) to add to the net asset value per The directors have access to the advice and services of the shareand achieve a sustainable low discount (or a premium) Company’s Executive team, AIFM and the Company Secretary, tonet asset value. through its appointed representative, who are responsible to theBoard for ensuring that Board procedures are followed In addition to his responsibilities for the overall management of andthat applicable rules and regulations are complied with. the Company, the CEO manages the Direct Holdings portfolio. A maximum of 15% of the Company’s gross assets (at the time Board Committees ofpurchase) may be invested in specialist funds within this portfolio and there are restrictions on the number, size and The Board has established an Audit Committee and a typeof investments that may be made. Remuneration and Nomination Committee. The Board has chosen to combine the roles of remuneration and nomination The Board’s Remuneration and Nomination Committee reviews inone Committee. The memberships of the Audit Committee the performance of and the contractual arrangements with and the Remuneration and Nomination Committee are set out theCEO. The CEO is responsible to the Board for reviewing the on pages 46-47. The roles and responsibilities of the Committees performance and the contractual arrangements of his staff. are described in the Report of the Audit Committee on pages 57 TheBoard’s Remuneration and Nomination Committee to 59 and in the Directors’ Remuneration Report on pages 60-61. overseesthis process. 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. Witan Investment Trust plc 63 Annual Report 2021 CORPORATE GOVERNANCE ## Corporate Governance continued 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. Shareholder engagement The Chairman is responsible for ensuring that there is In the circumstances of the COVID-19 pandemic, the Company effectivecommunication with the Company’s shareholders. was unable to hold a physical AGM in 2021. The Board very He works closely with the CEO and there is regular liaison much hopes that it will be possible to hold a physical meeting withthe Company’s stockbroker. There is a process in place this year and the Notice of AGM has been prepared on that basis. foranalysing and monitoring the shareholder register and In addition, arrangements will be put in place for shareholders aprogramme for meeting or speaking with the institutional to attend the meeting virtually and put questions to the Board investors and with private client stockbrokers and advisers. if they cannot attend the AGM in person. Inaddition to the CEO, the Chairman, or the Senior Independent Director, expects to be available to meet the The directors may be contacted through the Company larger shareholders and the Chairman of the Remuneration Secretary at the address shown on the inside back cover. and Nomination Committee is available to discuss remuneration matters. While the CEO and his team expect to lead on preparing and effecting communications with investors, all major corporate In normal circumstances, the Company encourages issues are put to the Board or, if time is of the essence, to a attendance at its Annual General Meeting (‘AGM’) as a forum Committee thereof. for communication with individual shareholders. The Notice of the AGM and related papers are sent to shareholders at least The Board places importance on effective communication 20 working days before the meeting. The Chairman, the CEO, with investors and approves a marketing programme each the Chairman of the Audit Committee and the Chairman of year to enable this to be achieved. Copies of the Annual the Remuneration and Nomination Committee all expect Report and the Half Year Report are circulated to shareholders tobepresent at the AGM and to answer questions from and, where possible, to investors through other providers’ shareholders as appropriate. The CEO makes a presentation products and nominee companies (or written notification tothe meeting. issent when they are published online). In addition, the Company publishes a monthly factsheet and its net asset Details of the proxy votes received in respect of each value per share is released daily. All this information is readily resolution are made available to shareholders. In the event accessible on the Company’s website (www.witan.com). A Key ofa significant (defined as 20% or more) vote against any Information Document, prepared in accordance with the UK resolution proposed at the AGM, the Board would consult version of EU rules, is also published on the Company’s shareholders in order to understand the reasons for this website. The Company belongs to the Association of andconsider appropriate action to be taken, reporting Investment Companies which publishes information toshareholders within six months. toincrease investors’ understanding ofthe sector. 64 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Board meetings Remuneration ### The CEO (who is a director), other representatives and Audit Nomination ### of the Company’s Executive team and the AIFM Board Committee Committee ### and a representative of the Company Secretary Number of meetings 9 4 2 ### expect to be present at all meetings. (1) A J S Ross 9 4 2 The primary focus at Board meetings is a review of R A Beagles 9 4 - investment performance and associated matters such (1) (1) asgearing, asset allocation, attribution analysis, marketing A L C Bell 9 4 2 and investor relations, peer group information and industry G M Boyle 8 – – issues. The Board devotes two days each year to meetings with the Company’s investment managers and each S E G A Neubert 9 – 2 investment manager sends representatives at least once a J S Perry 9 4 – year. The Chairman seeks to encourage open debate within | the Board and a supportive and co-operative relationship | B C Rogoff 8 – – | | | | --- | --- | --- | --- | | with the Executive team and with the Company’s investment | | (2) | | | | A Watson | | 4/4 1/1 1/1 | managers, advisers and other service providers. P T Yates 9 4 2 The number of formal meetings during the year of the Board and its Committees, and the attendance of the individual (1) Not a member of the Committee but in attendance by invitation for all or part directors at those meetings, is shown in the table that follows. of the meetings. (2) Mr Watson retired from the board at the AGM in April 2021. 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. ## Example Board decision | What happened | Why | How | | --- | --- | --- | | Witan became a signatory to the Net | The Company believes that combating | The Board requires the Executive to | | Zero Asset Managers initiative (‘NZAM’) | climate change is one of the greatest | report regularly to them on all investment | | in February 2022. The NZAM is an | challenges facing the world today | matters, including ESG issues. The | | international group of asset managers | and a failure to adapt to it is one of the | Executive actively reviews developments | | committed to supporting the goal of | greatest risks to investment returns. As | related to responsible investing and | | net zero greenhouse gas emissions by | an allocator of capital, Witan has a role | engages with managers, industry bodies | | 2050 or sooner, in line with global efforts | to play in, and can benefit from, the | and ESG initiatives to remain abreast of | | to limit warming to 1.5 degrees Celsius; | transition to net zero by encouraging | evolving best practice. Witan’s responsible | | and to supporting investing aligned with | investee companies to adopt a clear | investment policy has evolved over | | net zero emissions by 2050 or sooner. | strategy to minimise environmental | several years and, in July 2021, net zero | | | damage, by avoiding companies which | alignment was a key focus of a Board | | | pose the greatest risk and by investing | Strategy Day at which the Executive | | | in companies which stand to benefit | recommended the Company become | | | from efforts to adapt to, curb or mitigate | a signatory to the NZAM. Before making | | | environmental degradation. Becoming | a decision, the Board considered how | | | a signatory to theNZAM reinforces this | becoming a signatory to the NZAM could | | | belief and enables us to engage more | benefit shareholders and would align with | | | effectively with portfolio companies via | the Company’s overall objectives. It also | | | our managers. | 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. Witan Investment Trust plc 65 Annual Report 2021 CORPORATE GOVERNANCE ## Corporate Governance continued Conflicts of interest 3 COMPOSITION, SUCCESSION AND EVALUATION The Board’s actions taken to identify and manage conflicts of Appointments to the Board interest are set out in the Directors’ Report. The Company has no The Board’s Remuneration and Nomination Committee significant shareholders. A number of nominee companies are overseesthe recruitment process. The Remuneration and the registered holders of significant numbers of shares, but these Nomination Committee reviews the length of service of each represent beneficial holdings by a very large number of retail director each year and makes recommendations to the Board investors who invest through the nominees’ platforms. when it considers that a new director should be recruited. All the independent non-executive directors are asked to contribute to Relationship with the AIFM and fund managers the process and to consider serving on the sub-committee The Company manages its own operations through the Board appointed to draw up the shortlist of candidates. The process and that of its AIFM. Each investment manager runs a discrete generally includes the use of a firm of non-executive director investment portfolio within the terms of their investment recruitment consultants or open advertising. The work of the management contract. Shares are held by the Company’s Remuneration and Nomination Committee during the year custodian/depositary. The CEO leads on the selection and issetout in the Committee’s report on pages 60 to 71. monitoring of the investment managers and their terms of reference, which are approved by the Board and the AIFM. New directors are appointed for an initial term ending three yearsfrom the date of their first annual general meeting after The individual investment managers are each appointed to appointment, with the expectation that they will serve a manage a discrete portfolio in accordance with guidelines minimum of two three-year terms. There is no absolute limit whichlimit, for example, the markets in which they can invest, tothe period for which a director may serve, although the themaximum size of each investment and the amount of cash continuation of directors’ appointments is contingent on that may be held in normal circumstances. They are not allowed satisfactory performance evaluation and re-election at annual to invest in unquoted securities, to gear the portfolio, to sell general meetings. Directors’ appointments are reviewed formally stocks short or to use derivatives. The investment managers by the Board ahead of their submission for re-election. None of takedecisions on individual investments and are responsible the non-executive directors has a contract of service and a foreffecting transactions on the best available terms. The non-executive director may resign by notice in writing to the Company and the AIFM receive monthly confirmation from Board at any time. The Board’s tenure and succession policy eachinvestment manager that it has carried out its duties seeks to ensure that the Board is well-balanced and refreshed inaccordance with its investment mandate. regularly by the appointment of new directors with the skills andexperience necessary, in particular, to replace those The Board scrutinises the performance of the investment lostbydirectors’ retirements. managers at each meeting and discusses their performance with each manager at least once a year. The directors consider Directors must be able to demonstrate their commitment to itappropriate for the full Board to do this rather than delegating theCompany, including in terms of time. The Board seeks to this to a committee as it is considered appropriate for all encompass past and current experience of areas relevant to the directors to be aware of the managers’ performance. The Company’s objective and operations, the most important being AuditCommittee reviews the contractual relationships with the investment management, finance, marketing, financial services, investment managers at least annually. Further information risk management, custody and settlement, and investment onthe investment managers’ fees is contained within the banking. Whilst the roles and contributions of longer-serving Strategic Report on page 43. directors are subject to rigorous review, the Board is strongly ofthe view that length of service is only one factor and that Relationship with other service providers shareholders benefit from having directors with a longer perspective of the Company’s history and its place in the The Board has delegated a wide range of activities to external savingsmarket. agents, in addition to the various investment managers. These services include global custody (which includes the Directors newly appointed to the Board are provided with an safeguarding of the assets), investment administration, introductory programme covering the Company’s strategy, management and financial accounting, Company Secretarial policies and operations, including those outsourced to third and certain other administrative requirements and registration parties. Thereafter, directors are given, on a regular and ongoing services. Each of these contracts was entered into after full and basis, key information on the Company’s investment portfolios, proper consideration by the Board of the quality and cost of the financial position, internal controls and details of the Company’s services offered, including the control systems in operation regulatory and statutory obligations (and changes thereto). The insofar as they relate to the affairs of the Company. Further directors are encouraged to attend industry and other seminars, information on the service providers is contained within the conferences and courses, if necessary at the Company’s Strategic Report on page 42. expense, and to participate generally in industry events. A log ofdirectors’ training is maintained and reviewed each year by The Board receives and considers reports and information both the Remuneration and Nomination Committee and the fromthese contractors as required. The CEO and the AIFM are Audit Committee. 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. 66 Witan Investment Trust plc Annual Report 2021 Board diversity STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS The Company supports the objectives of improving the ## performance of corporate boards by encouraging the Board evaluation 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 Board has established a process to ### TheCompany is committed to ensuring that its director search evaluate its performance annually. This processes actively seek men and women with the right ### process is based on open discussion and qualifications so that appointments can be made, on the basis ### seeks to assess the strengths and weaknesses of merit, against objective criteria from a diverse selection of ### candidates. The Board actively considers diversity during of the Board and its Committees. directorsearches. The Chairman leads on considered it more The Board consists of five men and three women. The Company’s applying the conclusions appropriate to defer employees, including the CEO, are three men and three women. of the evaluation. The an externally facilitated The Company is committed to facilitating equal opportunity Chairman reviews with evaluation until 2020 when andhas readily embraced flexible working arrangements for each director his or her Mr Ross had taken over existing staff. individual performance, as Chairman. The Board contribution and appointed Lintstock Ltd Election and re-election by shareholders commitment to the tocarry out an evaluation New directors stand for election by the shareholders at the Company. The SID leads programme in the autumn annual general meeting that follows their appointment. the annual evaluation of 2020 and again in the Thereafter all directors stand for re-election each year in of the Chairman and autumn of 2021. Lintstock accordance with the Corporate Governance Code. The reviews the conclusions did not have any other Company’s Articles of Association require directors to stand with him. The Board’s connection with the forre-election at least every three years, and those who have Remuneration and Company. The Board served for more than nine years to stand for re-election annually. Nomination Committee reviewed their report in oversees this process. The February 2022 and the The directors’ biographies on pages 46 to 47 and the notes to the Board is aware of Provision Chairman is leading notice of AGM set out the specific reasons why each director’s 26 of the AIC Code, which on implementing those contribution is, and continues to be, important to the Company’s states that evaluation changes recommended long-term sustainable success. of the Board of FTSE 350 by the report that the companies should be Board considered should Tenure of the Chairman externally-facilitated at be made. The report did The Board’s policy is that the Chairman should not normally least every three years, not identify any material remain in post beyond nine years from the date of his/her first and has complied with weaknesses or concerns. appointment to the Board. However, this period may be extended this provision every for a limited time to facilitate effective succession planning and three years since it was the development of a diverse board, particularly in those cases first introduced except where the Chairman was an existing non-executive director on in 2019 when the Board appointment as Chairman. The Board considers that the policy provides a balance between For details of our managers, the need for Board continuity as well as regular refreshment pages 26 to 32 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. Witan Investment Trust plc 67 Annual Report 2021 CORPORATE GOVERNANCE ## Corporate Governance continued Internal control The CEO makes regular reports to the Board on the performance of and activity within the Direct Holdings portfolio. In addition, the The Board has established an ongoing process for identifying, portfolio’s performance is independently measured, along with evaluating and managing the significant risks faced by the those of the third-party managers. Company. This process accords with the Corporate Governance Code guidance, is subject to regular review by the Audit The Company’s subsidiary, WIS, is authorised and regulated by Committee and was fully in place during the year under review the Financial Conduct Authority to provide investment products and up to the date of this Annual Report. The Board remains and services and was appointed as the Company’s AIFM from responsible for the Company’s system of internal control and has July 2014. The compliance structures required for these activities, charged the Audit Committee with conducting an annual review including a compliance manual and a compliance monitoring of the effectiveness of the system, covering all the controls, programme, have been put into place. including financial, operational and compliance controls and riskmanagement systems. This review takes into account points The Company has a formal policy for staff to raise in confidence raised during the year in the regular appraisal of specific areas any concerns about possible improprieties, whether in matters of risk. However, such a system is designed to manage rather offinancial reporting or otherwise, for appropriate independent than eliminate the risks of failure to achieve the Company’s investigation. Its staff comprises only six people (including the business objectives and can only provide reasonable and not CEO), who are well known to and have frequent formal and absolute assurance against material misstatement or loss. informal contact with the members of the Board. In accordance with Principle O and provision 34 of the AIC Code, The Company does not have an internal audit function. Through the Board reviews the Company’s business risks at least once a WIS, the AIFM, it delegates the management of its investments year. These are analysed and recorded in a risk map, which the and most of its other operations to third parties and employs Audit Committee reviews at each meeting. It is also reviewed only a small number of staff. The investment managers and and challenged regularly by the Board. Emerging risks are added certain other key contractors are subject to external regulation to the matrix as soon as identified together with any mitigating and most havecompliance and internal audit functions of their actions required. The key risks which pose the greatest potential own. The Company’s investments are held on its behalf by a risks to shareholders are set out on pages 37-39. The Company global custodian appointed by the depositary. A specialist firm receives from its main contractors formal reports which detail ofinvestment accountants and administrators is responsible for the steps taken to monitor the areas of risk and which report the investment administration, for maintaining accounting records details of any known internal control failures. The Committee and for preparing financial accounts, management accounts believes that these processes allow it to identify emerging and other management information. In addition, the Board riskson a timely basis. receives an annual report on the investment administrator’s internal controls, including a report from the investment As described elsewhere, the management of Witan’s portfolio is administrator’s auditor on the control policies and procedures outsourced to a number of third-party investment managers inoperation. The investment performance of the investment around the world. There are currently eight such investment managers, both individually and collectively, is measured for managers as well as the Direct Holdings portfolio which is Witan by a company that is independent of all the investment managed by the CEO. managers. The corporate Company Secretary has well- established experience in servicing investment trusts. The CEO has responsibility (under delegation from the Board and the AIFM) for a number of aspects of the management of the The appointment of these and other professional contractors portfolio, including asset allocation, gearing and investment in provides a clear separation of duties and a structure of internal derivatives. The Board has set guidelines in respect of each of controls that is balanced and robust. The Board and the AIFM these aspects within which he may operate. The CEO reports willcontinue to monitor its system of internal control in order to tothe Board regularly on each of these areas, as well as on provide assurance that it operates as intended and the directors theoverall performance of the Company and other matters will review at least annually whether a function equivalent to an ofsignificance. internal audit is needed. The in-house Executive management team of Witan and WIS 5 REMUNERATION isresponsible for managing and controlling the relationships with the third-party managers. The Directors’ Remuneration Report on pages 60 to 71 details the process for determining the directors’ remuneration and sets out The management team receives monthly reports on the amounts payable. It reports on the Company’s compliance investmentand compliance matters from each manager. with the provisions of the AIC Code relating to remuneration and During2021, theinvestment managers were asked to provide also a number of provisions from the UK Corporate Governance detailed information on their operational structures and Code that have not been included in the AIC Code, as most systems.Each year, the Board also receives reports on their investment trusts do not have executive directors. 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. Andrew Ross Chairman 15 March 2022 68 Witan Investment Trust plc Annual Report 2021 ## Report of the Audit Committee STATEMENT BY THE CHAIRMAN OF THE COMMITTEE COMPOSITION AND RESPONSIBILITIES OF THE COMMITTEE STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS The members of the Committee are appointed by the Board. ### As Chairman of the Audit Committee There are normally three members of the Committee. I was ### (the‘Committee’), I am pleased to present appointed as Chairman of the Committee in May 2018, ### theReportof the Committee for the year havingbeen a member of the Committee since February 2017. ### ended31 December 2021. 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 69 Annual Report 2021 CORPORATE GOVERNANCE ## Report of the Audit Committee continued In summary, the main matters arising in relation to 2021 were: RISK > Assessment of the controls to ensure the ownership, Management has identified (Strategic Report pages 37 to 39) valuation and liquidity of investments: this includes seven main areas of potential risk: market and investment assessing management reports on the controls and portfolio; operational and cyber; compliance and regulatory procedures of external managers and the external change; accounting, taxation and legal; liquidity; COVID-19; and custodian/administrator and the review of the audit ESG factors, and has set out the actions taken to evaluate and workperformed. No significant issues were identified. manage these risks. The Committee also monitors newly emerging risks that arise from time to time (e.g. Brexit from 2016 > As part of the Committee’s detailed review of the financial and the COVID-19 virus outbreak in 2020) to ensure that the statements, particular attention was paid to the key areas implications for the Company are properly assessed and ofthe existence and valuation of assets; recognition of mitigating controls introduced where necessary. revenue; determination of the fair value of own debt and the appropriateness of the discount rate used to assign a present The auditor has also detailed two key audit matters in value to that debt; and the reasonableness of the scenarios itsreport:valuation and existence of investments and the envisaged in developing the sensitivity analysis for each occurrence and completeness of investment income; and significant risk. hasset out the work it has performed to satisfy itself that > Interim and year-end reporting, in light of the requirements thesehave been properly reflected in the financial statements. of the Codes of Corporate Governance issued by the AIC andFinancial Reporting Council (‘FRC’) guidance to audit The Committee has monitored the controls designed to mitigate committees on key developments for annual reports and the risks associated with these matters during the year, including non-financial reporting. The Committee agreed the process, reviewing management’s risk report at each meeting and timing and responsibility for compliance. The Committee requiring amendments to both risks and mitigating actions as agreed to recommend to the Board that it should approve appropriate. The Committee considers that management has the Half Year and Annual Reports. carried out a robust assessment of the emerging and principal > Reviews were conducted on a variety of specific matters risks facing the Company and has taken appropriate action to including whistleblowing, anti-money laundering compliance, mitigate those risks. There were no significant areas of material data and IT systems security and business continuity. As judgement or unadjusted errors. explained elsewhere in this report (see page 42), the Company makes extensive use of third-party service providers, who GOING CONCERN AND VIABILITY areoverseen by the WIS Executive. TheCommittee approves The Committee has assessed the information, forecasts the programme of oversight and reviews the results. andassumptions underlying the Viability and Going Concern > In light of the relative simplicity of the operations and the Statements on pages 44 and 45 and recommended to the Board useof independent external consultants, who report directly that they are appropriate. This assessment included areview of to the Committee, to advise on regulatory compliance and the scenario analysis set out on page 44. adherence to internal procedures, it was concluded that nointernal audit function was required (see page 56). EXTERNAL AUDIT > The Committee has worked with the Risk Committee of WIS, Grant Thornton UK LLP (‘Grant Thornton’) was appointed the Company’s subsidiary, to ensure WIS’ compliance with asstatutory auditor in 2016. In accordance with the current Financial Conduct Authority (‘FCA’) regulations. legislation, the Company will need to re-tender for new auditors at least every ten years and has to change its auditor after > The Committee also monitored the work required to ensure 20years. The audit partner is Paul Flatley. The auditor is required the Company’s compliance with new legislation, including torotate the principal engagement partner every five years; the FRC’s guidance on reporting on the impact of COVID-19; thisis Mr Flatley’s first year as audit partner. Accordingly, the reports from the Financial Stability Board’s Task Force on Committee considers that the Company has complied with climate-related reporting (from which the Company, as an theprovisions of the Large Companies Market Investigation investment trust, is exempt); the requirements to produce the (Mandatory Use of Competitive Tender Processes and Audit Annual Report in the European Single Electronic Format; and Committee Responsibilities) Order 2014 during the financial year. the FRC report on the use of alternative performance measures. In particular: The Committee reviews the scope and effectiveness of the – The Committee reviewed the BEIS consultation paper auditprocess, including agreeing the auditor’s assessments onaudit and governance reform, ‘Restoring trust in audit ofmateriality, and monitors the auditor’s independence and corporate governance’ and I submitted a response andobjectivity. to BEIS on behalf of the Company. – The FRC published the key findings of its review of the The Committee has reviewed the FRC’s Audit Quality Review viability and going concern disclosures for a selection report for Grant Thornton and discussed the findings with the ofannual reports and accounts for Main Market and AIM audit partner. The Committee was satisfied that none of the listed companies, in which it provided useful guidance indicators in that report had particular relevance to this year’s forpreparers of annual accounts by identifying areas audit of the Company. 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. 70 Witan Investment Trust plc Annual Report 2021 The Committee discussed the audit plan. It challenged the EFFECTIVENESS OF THE COMMITTEE STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS auditor’s assessment of the key audit matters and was satisfied In assessing its own effectiveness, the Committee has reviewed that these had been adequately identified. The auditor was not the report produced by Lintstock as part of its review of the Board instructed to look at any additional specific areas. The final audit (see page 55) and will implement the recommendations from findings report was discussed and agreed with the auditor. The that report. The Committee considers that its approach is Committee is satisfied that it implemented sufficiently robust comprehensive and appropriate, that it focuses on the processes to deliver a high-quality audit. rightissues and is managed well. As part of their audit work, Grant Thornton carried out a review of APPROVAL the design and effectiveness of relevant controls in place at BNP This report was approved by the Committee on 15 March 2022 Paribas Securities Services related to specific line items such as and is signed on its behalf by: 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 Jack Perry report on client assets in accordance with the FCA’s CASS Chairman of the Audit Committee reportto the FCA in respect ofWIS, to be completed by 15 March 2022 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. Witan Investment Trust plc 71 Annual Report 2021 CORPORATE GOVERNANCE ## Directors' Remuneration Report ### CHAIRMAN'S STATEMENT I am pleased to present my report as Chairman of the Remuneration and Nomination Committee (the 'Committee') ![img-10.jpeg](img-10.jpeg) 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.wilan.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 46, 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 72 Witan Investment Trust plc Annual Report 2021 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, 5.0 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 £60. The criteria are set out in full in note 1(j) 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 | 38,000 | 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 £458,000 per annum. **Paul Yates** **Chairman of the Remuneration and Nomination Committee** 15 March 2022 STRATEGIC REPORT COMPOUNDS GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2021 73 ![img-11.jpeg](img-11.jpeg) CORPORATE GOVERNANCE ## 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 Taxable Total Fees Taxable Total £ (1) benefits (2) remuneration £ (1) benefits (2) 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. | | | | | | | Annual bonus | | | (3) | Long-Term | | Pension-related | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Base pay | | (1) | Benefits | | (2) | | benefits | | | Bonus | (3) | | 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. 74 Witan Investment Trust plc Annual Report 2021 Scheme interests awarded during the financial year Total shareholder return performance graph STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS No directors were awarded any interest over shares in the The Company is required to present a graph comparing the Company during the financial year ended 31 December 2021 Company’s share price with a single broad equity market index. (2020: nil). The Company has compared the share price total return against (i) a UK market index, namely the MSCI UK IMI Index (‘MSCI UK Payments to past directors Index’), because the Company’s shares are listed on the UK market, and also (ii) a global index, namely the MSCI All Country No payments were made to former directors of the Company World Index (‘MSCI ACWI’), because the Company invests across during the financial year ended 31 December 2021 (2020: £nil). a broad spread of global equity markets. The performance of theCompany’s benchmark is also shown. Payments for loss of office No loss of office payments were made to any person who has 400 previously served as a director of the Company at any time during the financial year ended 31 December 2021 (2020: £nil). 350 300 Statement of directors’ shareholdings (audited) 250 The interests of the CEO and the non-executive directors (including connected persons) in the Company’s ordinary 200 sharesare shown in the table below. No share options or other 150 share-based awards, with or without performance measures, were awarded to the CEO or to any non-executive director. There 100 are no requirements or guidelines for the non-executive directors 50 to own shares in the Company. The Committee expects the CEO 0 to maintain a shareholding in the Company equivalent to at least three times his salary. 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 31/12/2018 31/12/2019 31/12/2020 | | Ordinary shares | | Ordinary shares | | | | | --- | --- | --- | --- | --- | --- | --- | | | | held as at | | held as at | | Price Benchmark MSCI ACWI MSCI UK | | | 31December 2021 | | 31 December 2020 | | | | | A J S Ross 250,000 250,000 | | | | | The line graph above sets out the Company’s ten-year total | | shareholder return performance relative to the MSCI UK Index R A Beagles 42,073 42,073 and the MSCI ACWII (sterling adjusted). This line graph assumes A L C Bell 850,000 850,000 anotional investment of £100 into the indices on 31 December 2011 and the reinvestment of all income, excluding dealing expenses. G M Boyle 28,683 28,683 S E G A Neubert 53,996 52,793 CEO remuneration table J S Perry 82,498 79,760 Annual discretionary | B C Rogoff 43,950 42,740 | | | | | and One-year | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | CEO single | | Bonus payout | | | | Long-Term | | | P T Yates 25,245 25,245 | | figure of total | | | | against | | Bonus against | | | | | Year ended | remuneration | | | | maximum | | | maximum | | | | 31 December | | | £ | | | % | | | % | Since the year end, Ms Neubert has bought a further 287 shares. 2021 457,820 34.4 0.0 There have not been any other changes in the directors’ interests since the year end. 2020 447,219 31.2 0.0 2019 590,975 62.9 29.9 None of the directors had an interest in the Company’s preference shares. 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 75 Annual Report 2021 31/12/2021 CORPORATE GOVERNANCE ## 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 Taxable Annual Long-Term and fees benefits bonuses Bonus % % % % (1) | A J S Ross | 21.0 – n/a n/a | | | | | --- | --- | --- | --- | --- | | | (2) | | (5) | | | R A Beagles | | 100.0 n/a | | n/a n/a | G M Boyle 3.2 – n/a n/a (3) (5) S E G A Neubert 14.9 n/a n/a n/a J S Perry 3.4 (8.5) n/a n/a B C Rogoff 3.2 – n/a n/a (4) P T Yates 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 Annual bonuses (discretionary Salary Taxable and One-year Long-Term and fees benefits bonus) Bonus % % % % (1) A J S Ross 170.8 n/a n/a n/a (2) R A Beagles n/a n/a n/a n/a (3) G M Boyle 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 (4) P T Yates 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. 76 Witan Investment Trust plc Annual Report 2021 | Relative importance of spend on pay | | | | | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | --- | --- | --- | --- | --- | --- | | | 2021 | 2020 | Difference | | | | Spend | £’000 | £’000 | | £’000 | | Fees of non-executive directors 318 336 (18) Remuneration paid to or receivable by all employees of the Group (including the CEO) (1) inrespectofthe year 1,001 1,115 (114) Dividends paid to shareholders in respect of the year ended 31 December 2021 42,212 44,814 (2,602) (2) Share buybacks 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 table below sets out the members of the Committee whowere present during any consideration of the CEO’s The remuneration policy for the CEO, as detailed in the policy remuneration, and shows the number of meetings attended section of the report, was agreed by shareholders at the 2019 byeach non-executive director: AGM and implemented with effect from 1 January 2019. The fees for non-executive directors were last increased with effect from 1 April 2020. Number of meetings Name attended A revised remuneration policy will be put to shareholders for P T Yates 2 approval at the AGM to be held on 5 May 2022 and, if approved, will be implemented with effect from 1 January 2022. S E G A Neubert 2 A J S Ross 2 Consideration by the directors of matters relating to directors’ remuneration Statement of shareholder voting The Board as a whole sets the fees that are payable to the At the AGMs held on 28 April 2021 and 1 May 2019, respectively, non-executive directors and it has appointed the Committee to ordinary resolutions to approve the Directors’ Remuneration consider matters relating thereto. The Committee also considers Report for the year ended 31 December 2020 and to approve the remuneration of the CEO and makes a recommendation on theremuneration policy were passed on a show of hands. this to the Board for its approval. Theproxy votes in each case were as follows: The Committee was not provided with any external advice or Total votes cast services, during the financial year ended 31 December 2021, in (excluding votes respect of the fees payable to the non-executive directors or the Votes for Votes against Votes withheld withheld) remuneration payable to the CEO. Approval of Directors’ Remuneration Report 184,541,404 4,843,952 3,340,386 189,385,356 The Committee assesses the workload and responsibilities of thenon-executive directors and reviews, from time to time, 97.4% 2.6% – 100% thefees paid to non-executive directors of other investment (1) Approval of remuneration policy trustcompanies. 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 77 Annual Report 2021 CORPORATE GOVERNANCE ## 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 66-75. ### 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 £72,500 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. | 78 Witan Investment Trust plc^{}[] Annual Report 2021 Remuneration policy for the CEO (and any future executive directors) STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 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 | Operation and | Maximum | Performance | | --- | --- | --- | --- | --- | | | tostrategy | clawback | opportunity | measures | | Base salary Base salary is set at | | Base salary is reviewed | The CEO’s salary was | Not applicable | | | market-competitive | annually and fixed for | increased to £315,000 per | | | | levelsin order to recruit | 12months. | annum with effect from | | | | and retain an executive | | 1January 2022. | | director of a suitably highcalibre. Year-on-year salary increases for any | The level of pay reflects | executive director will not | | --- | --- | | anumber of factors | exceed 10% per annum | | including individual | other than in times of | | experience, expertise | abnormal inflation or | | andpay appropriate | other exceptional | | tothe position. | circumstances, in which | case the increase will notexceed 20%. Benefits-in- Offering market- An executive director The maximum benefit Not applicable kind competitive level of maybe eligible to receive a that can be offered or benefits-in-kind to range of benefits including paid to an executive helprecruit or retain some or all of: director is: anexecutive director of > private medical > private medical asuitably high calibre. insurance for the insurance provided executive director ona family basis; andtheir family; > death in service > death in service insurance of four insurance; and timesbase salary; and > business-related > business-related expenses. 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. | Pension Offering market- | | The CEO currently receives | The maximum cash | Not applicable | | --- | --- | --- | --- | --- | | | competitive levels | acash payment, equal to | payment in lieu of | | | | ofguaranteed cash | 10% of base salary, in lieu | pension contributions | | | | earnings to help recruit | ofpension contributions. | is10% of base salary, | | | | orretain an executive | | which is the same as the | | | | director of a suitably | | pension contribution rate | | | | highcalibre. | | applicable to other staff. | | Witan Investment Trust plc 79 Annual Report 2021 CORPORATE GOVERNANCE ## Directors’ Remuneration Report continued | | Purpose and link | Operation and | Maximum | Performance | | --- | --- | --- | --- | --- | | | tostrategy | clawback | opportunity | measures | | Discretionary | The purpose of the bonus | The CEO is eligible to | The maximum cash | Please see note 1 on | | bonus | arrangements is to | receivea discretionary | discretionary bonus | page 69 for details | | | incentivise the CEO to | bonus of upto 40% of | payable to any executive | ofthe performance | | | maximise the Company’s | basicannual salary. The | director is 40%of base | measures applicable | | | performance and its | Committee willreview the | salary. | to the CEO’s | | | return to shareholders. | CEO’s performance against | | discretionary bonus. | 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. | One-year Bonus The purpose of the | | The CEO is eligible to receive | The maximum cash | Please see note 1 on | | --- | --- | --- | --- | --- | | | bonusarrangements is | a bonus of up to 40% of | One-year bonus payable | page 69 for details | | | toincentivise the CEO to | base salary by reference | to any executive director | ofthe performance | | | maximise the Company’s | tothe performance of | is 40%of base salary. | measures applicable | | | performance and its | theCompany over the | | to the CEO’s One-year | | | return to shareholders. | previousfinancial year. | | Bonus. | 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. | Long-Term Bonus The purpose of the | | The CEO is eligible to receive | The maximum cash | Please see note 1 on | | --- | --- | --- | --- | --- | | | bonusarrangements is | a bonus of up to 90% of | Long-Term bonus | page 69 for details | | | toincentivise the CEO to | basesalary by reference | payable to any | ofthe performance | | | maximise the Company’s | tothe performance of the | executivedirector is | measures applicable | | | performance and its | Company over the previous | 90%of base salary. | to the CEO’s Long-Term | | | return to shareholders. | three financial years. | | Bonus. | 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. 80 Witan Investment Trust plc Annual Report 2021 Notes: payable on a deferred basis over the following three years, STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS inequal instalments on each anniversary of the First Bonus 1. Performance measures Payment Date. Mr Bell’s service agreement, as amended, provides that he iseligible to receive a bonus of up to 170% of his basic annual 2.2 Malus salary, two elements of which, totalling a maximum of 130% of Malus (where bonuses that have yet to be paid are forfeited) salary, are calculated by reference to the performance of the may be applied by the Remuneration and Nomination Company. The cash bonus arrangement consists of three Committee where: separate elements as set out below: (a) there has been material misstatement or error that causes (i) Discretionary bonus an award to vest at a higher level than would otherwise Each year Mr Bell is eligible to receive, at the absolute discretion havebeen the case; of the Committee, a cash bonus of up to 40% of his basic annual (b) there has been a material failure in risk management; or salary. The Committee has determined a number of criteria that (c) there has been serious misconduct that has resulted or it takes into account on which to judge his performance and couldresult in dismissal. based on which it agrees the amount of the discretionary bonus.These include the management and development of 2.3 Clawback theinvestment process; advising the Board on and evolving Any bonus will be subject to a clawback period of two years after thelong-term strategy of the Company; the commitment, it has been paid, whereby the CEO will be required to pay back development and presentation of the Company’s approach part or all of any bonus already received. Clawback may be toESG; performance against annual objectives; management applied by the Remuneration and Nomination Committee where: ofstaff; administration of the office; reporting to the Board andshareholders; and relationships with the Board and (a) there has been material misstatement or error that causes otherstakeholders. an award to vest at a higher level than would otherwise havebeen the case; (ii) One-year Bonus (b) there has been a material failure in risk management; or Each year Mr Bell is eligible to receive an additional cash (c) there has been serious misconduct that has resulted or bonusof up to 40% of his basic annual salary. The bonus will couldresult in dismissal. bedetermined by the Company’s net asset value per share totalreturn performance over the previous financial year (debt 3. Legacy plans at par,excluding the effect of share buybacks or issuance) The Committee reserves the right to make remuneration relative to its benchmark. Outperformance of the benchmark payments and payments for loss of office that are not in line with by3.0% ormore will generate a bonus of the full 40%. No bonus the policy set out above (i) where the terms of such a payment ispayable if performance is in line with or below that of the were agreed before the policy came into effect or at a time benchmark. Relative performance of between nil and 3.0% whenthe relevant individual was not a director of the Company willgenerate a pro rata bonus. and (ii)in the opinion of the Committee, such a payment is not inconsideration of the individual becoming a director of (iii) Long-Term Bonus theCompany. For these purposes, payments include the Mr Bell is eligible to receive a Long-Term Bonus each year Committeemaking awards of variable remuneration. ofupto90% of his basic annual salary by reference to the Company’s performance over the previous three financial 4. Differences in the Company’s remuneration policies years.The Long-Term Bonus will be determined by reference to fordirectors and employees the Company’s net asset value per share total return (debt at The remuneration policy for the executive director differs par, excluding the effect of share buybacks or issuance) relative principally from that for employees in that the executive toitsbenchmark, as set out in the Company’s audited annual director’s remuneration is more heavily weighted towards accounts for the applicable financial years. Compounded variable pay so that a greater proportion of his pay is average annual outperformance of the benchmark by 2.5% per relatedtothe Company’s performance and the value annum or more will generate a bonus of the full 90%. No bonus createdforshareholders. ispayable if performance is in line with or below that of the benchmark. Relative performance of between nil and 2.5% Principles and approach to recruitment and internal promotion perannum will generate a pro rata bonus. of directors The Long-Term Bonus will be halved if, despite outperformance Non-executive directors ofthe benchmark over the relevant three financial years, the (1) Remuneration of non-executive directors should reflect the Company’s net asset value total return per share is negative specific circumstances of the Company and the duties overthat period. andresponsibilities of the non-executive directors. It should provide appropriate compensation for the experience and 2. Deferral, malus and clawback time committed to the proper oversight of the affairs of 2.1 Deferral theCompany. (2) Non-executive directors are not eligible to receive bonuses, All bonuses are subject to deferral in terms of payment. 60% of pension benefits, share options or other benefits. any bonus will be paid in March following the performance year end (‘First Bonus Payment Date’). 40% of any bonuses will be Witan Investment Trust plc 81 Annual Report 2021 CORPORATE GOVERNANCE ## Directors’ Remuneration Report continued (3) The total remuneration of the non-executive directors is Illustration of application of remuneration policy determined by the provisions of the Company’s Articles The chart below shows an indication of the values of the CEO’s ofAssociation and by shareholder resolution. remuneration that would be received by the CEO, in accordance (4) The basic non-executive director’s fee will be paid to each with this remuneration policy, for the year ending 31 December non-executive director, with a higher fee per annum for the 2022 at three direct levels of performance: Chairman of the Company. An additional fee per annum willbe paid to the Chairman of each of the Audit and the > minimum performance, i.e. fixed salary, taxable benefits Remuneration and Nomination Committees and to the andpayment in lieu of pension contributions, with no Chairman of any other Committees that the Company bonuspayout; forms;and to the Senior Independent Director. > on-target performance, i.e. fixed pay plus bonus payments assuming a 50% payout of each of the discretionary, Executive directors One-year and Long-Term Bonuses; and (1) When hiring a new executive director, or promoting to > maximum performance, i.e. fixed pay plus bonus payments theBoard from within the Group, the Committee will offer assuming 100% payout of each of the discretionary, One-year apackage that is sufficient to retain and motivate and, if and Long-Term Bonuses. relevant, attract the right talent whilst paying no more than isnecessary. 1,000 (2) Ordinarily, remuneration for a new executive director will £915,554 beinline with the policy set out in the table. 800 31% (3) The maximum level of variable pay that may be awarded to £647,804 a new director on recruitment or on promotion to the Board 600 22% 14% shall be limited to 170% of base salary (calculated at the | | | | | 10% | 14% | | --- | --- | --- | --- | --- | --- | | | | 400 | £380,054 | | | | | dateof grant, excluding any buy-out awards – see below). | | | 10% | | | (4) The Committee may, where it considers it to be in the best | | | 100% | 58% 42% | | | | interests of the Company and shareholders, offer an | 200 | | | | additional cash payment to an executive director in order to 0 replace awards which would be foregone by the individual Minimum On-target Maximum on leaving his/her previous employment (i.e. buy-out performance performance performance arrangements) which will be intended to mirror forfeited Fixed pay Discretionary bonus awards as far as possible by reflecting the value, nature, timehorizons and performance measures. Letters of appointment/service contract Policy on payment for loss of office Non-executive directors’ letters of appointment Non-executive directors The non-executive directors all have letters of appointment, which may be inspected at the Company’s registered office. It is the Company’s policy not to enter into any arrangement None of the non-executive directors is subject to any notice withany of the non-executive directors to entitle any of the period. All continuing non-executive directors are required to non-executive directors to compensation for loss of office. stand for re-election by the shareholders at least every three years. The initial period of appointment is two terms of three CEO (and any future executive directors) years. All reasonably incurred expenses will be met. The Company’s policy is to agree a notice period for the CEOwhich would not exceed nine months. All the directors are proposed for re-election at the AGM in May2022. The Company may, in its absolute discretion and without anyobligation to do so, terminate the CEO’s employment CEO’s service contract immediately by giving him/her written notice together with The CEO’s service contract with the Company may be inspected apayment of such sum as would have been payable by the at the Company’s registered office. The CEO’s service agreement Company to the CEO as salary (excluding future bonus accrual) dated 3 February 2010, as amended, provided in 2021 for a salary in respect of his/her notice period. The Company may, at its of £308,424 (2020: £308,424) per annum. His salary has been discretion, make the termination payment in instalments over increased to £315,000 with effect from 1 January 2022. Mr Bell’s aperiod of no longer than six months from the termination appointment may be terminated by either party on the giving dateand on terms that any payment should be reduced to orreceiving of not less than nine months’ written notice. takeaccount of mitigation by the CEO. Please see ‘Policy on payment for loss of office’ below for If a new executive director is recruited, the Company’s policy furtherdetails of the CEO’s service contract. regarding payments for loss of office will be the same as for theCEO. 82 Witan Investment Trust plc Annual Report 2021 One-year Bonus Long-Term Bonus If the CEO ceases employment as a result of a ‘good leaver’ Statement of consideration of shareholder views STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS reason (i.e. death, ill-health, injury, disability, redundancy, The Company places great importance on communication retirement or due to any other circumstance that the Committee withits shareholders. The Company had frequent meetings with at its discretion permits), any bonus payment shall be pro-rated institutional shareholders and City analysts throughout the year for time and performance. The Committee may, however, taking ended 31 December 2021. Due to the COVID-19 pandemic, it was into account such factors as it considers appropriate, increase not possible to meet shareholders at the AGM held in 2021 in the the proportion of the relevant bonus that becomes payable. If usual way, but shareholders were invited to submit questions the CEO ceases employment other than as a ‘good leaver’, or tothe Board. The Company also responded to shareholder ifthe CEO gives or receives notice prior to the date that the enquiries during the year. The Board can confirm that it is not relevant bonus would otherwise have been paid, the CEO will aware of negative views being expressed by shareholders forfeit any right to receive the relevant bonus for nil consideration inrelation to its policy on directors’ remuneration. unless the Committee, in its absolute discretion, determines otherwise. Approval This report was approved by the Committee on 15 March2022 A change of control of the Company shall not affect the and is signed on its behalf by: 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 Paul Yates targets attached to the applicable bonuses have been satisfied Chairman of the Remuneration and Nomination Committee at that time. 15 March 2022 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. Witan Investment Trust plc 83 Annual Report 2021 CORPORATE GOVERNANCE # Directors' Report ## 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 38. 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 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 of 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. ## ASSETS At 31 December 2021 the total net assets of the Group were £1,992.0 million (2020: £1,925.2 million). At this date the net asset value per ordinary share was 263.10p (2020: 240.14p). ## REVENUE AND DIVIDEND The profit for the year was £263 million (2020: £46 million). A profit of £28 million 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 1.38p per ordinary share (paid on 18 June 2021) | 10,563 | | Second interim of 1.38p per ordinary share (paid on 18 September 2021) | 10,385 | | Third interim of 1.38p per ordinary share (paid on 17 December 2021) | 10,157 | | fourth interim of 1.53p 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 48 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. 84 Witan Investment Trust plc Annual Report 2021 ## DIRECTORS' INTERESTS The interests of the directors in the share capital of the Company are set out in the Directors' Remuneration Report on page 83. ## 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 11 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 282,378,133 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. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2021 85 ![img-12.jpeg](img-12.jpeg) CORPORATE GOVERNANCE ## Directors' Report continued 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 law 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 59. 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 authorize 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.aitian.com. The policy is reviewed regularly by the Audit Committee. 86 Aitian Investment Trust plc Annual Report 2021 #### 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.wifoin.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 (b)) 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 12 to 13. #### 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 2009 (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 STRATEGIC REPORT COMPOUNDS GOVERNANCE FINANCIAL STATEMENTS Wifoin Investment Trust plc Annual Report 2021 87 ![img-13.jpeg](img-13.jpeg) CORPORATE GOVERNANCE ## Statement of Directors’ Responsibilities ### in respect of the Annual Report, the Directors’ Remuneration Report ### and the financial statements The directors are responsible for preparing the Annual Report RESPONSIBILITY STATEMENT and the financial statements in accordance with applicable We confirm, to the best of our knowledge, that: lawand regulations. > the financial statements, prepared in accordance with Company law requires the directors to prepare financial UK-adopted International Accounting Standards, give a true statements for each financial year. Under that law the directors and fair view of the assets, liabilities, financial position and are required to prepare the Group financial statements in profit or loss of the Company and theundertakings included accordance with UK-adopted International Accounting in the consolidation taken as awhole; and Standards and with the requirements of the Companies Act 2006 > the Strategic Report includes a fair review of the as applicable to companies reporting under those standards development and performance of the business and the and have also chosen to prepare the parent company financial position of the Company and the undertakings included statements under UK-adopted International Accounting inthe consolidation taken as a whole, together with a Standards and with the requirements of the Companies Act 2006 description (on pages 37 to 39) of the principal risks as applicable to companies reporting under those standards. anduncertainties that they face. Under company law the directors must not approve the financial statements unless they are satisfied that they give atrue and fair We also confirm that the financial statements, taken as a view of the state of affairs of the Group and Company and of whole,are fair, balanced and understandable, and provide the theprofit or loss of the Group and Company for that period. information necessary for shareholders to assess the Company’s Inpreparing these financial statements, International position, performance, business model and strategy. AccountingStandard 1 requires that directors: > properly select and apply accounting policies; By order of the Board > present information, including accounting policies, in a manner that provides relevant, reliable, comparable and Andrew Ross Andrew Bell understandable information; Chairman Chief Executive Officer 15 March 2022 15 March 2022 > provide additional disclosures when compliance with thespecific requirements in UK-adopted International Note to those who access this document by electronic means: Accounting Standards is insufficient to enable users to understand the impact of particular transactions, other The Annual Report for the year ended 31 December 2021 has been events and conditions on the entity’s financial position approved by the Board of Witan Investment Trust plc. Copies of andfinancial performance; and the Annual Report and the Half Year Report are circulated to shareholders and, where possible, to investors through other > make an assessment of the Company’s ability to continue providers’ products and nominee companies (orwritten asa going concern. notification is sent when they are published online). Itis also made available in electronic format for the convenience of The directors are responsible for keeping adequate accounting readers. Printed copies are available from the Company’s records that are sufficient to show and explain the Company’s registered office in London. 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. 88 Witan Investment Trust plc Annual Report 2021 ## Independent Auditor’s Report to the members of ## Witan Investment Trust plc ### for the year ended 31 December 2021 OPINION obtained up to the date of our report. However, future events or STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS conditions may cause the Group or the parent company to Our opinion on the financial statements is unmodified cease to continue as a going concern. We have audited the financial statements of Witan Investment Trust plc (the ‘parent company’) and its subsidiaries (the ‘Group’) Our evaluation of the directors’ assessment of the Group’s and for the year ended 31 December 2021, which comprise the the parent company’s ability to continue to adopt the going Consolidated Statement of Comprehensive Income, the concern basis of accounting included: Consolidated and Individual Statements of Changes in Equity, the Consolidated and Individual Balance Sheets, the > determining the appropriateness of the Company’s Consolidated and Individual Company Cash Flow Statements goingconcern policy and procedures under the relevant and notes to the financial statements, including a summary accounting framework and the rationale for why no going ofsignificant accounting policies. The financial reporting concern issues are noted; framework that has been applied in the preparation of the > assessing the disclosures concerning the basis of Groupfinancial statements is applicable law and UK-adopted preparation of the financial statements and going concern; International Accounting Standards. The financial reporting and framework that has been applied in the preparation of theparent company financial statements is UK-adopted > inspecting management’s going concern assessment and International Accounting Standards as applied in accordance conclusions made. with the provisions of the Companies Act 2006. Specifically, we performed the following procedures as a result of In our opinion: the recent development of macro-economic uncertainties such as COVID-19 and their potential impact on going concern: > the financial statements give a true and fair view of the stateof the Group’s and of the parent company’s affairs as > evaluating the income forecasts prepared by management, at31 December 2021 and of the Group’s profit for the year including the assumptions used and level of headroom then ended; available, both in terms of cash resources and compliancewith loan covenants; > the Group financial statements have been properly preparedin accordance with UK-adopted International > obtaining support for the renewal of the revolving credit Accounting Standards; facility in November 2021 and obtaining an understanding ofthe liquidity position of the Group; > the parent company financial statements have been properly prepared in accordance with UK-adopted > considering the robustness of the forecasts to potential International Accounting Standards as applied in changes in underlying assumptions; accordance with the provisions of the Companies > obtaining an understanding of how management has Act2006;and assessed the impact of events/market conditions in > the financial statements have been prepared in accordance relationto COVID-19 in their forecasts; with the requirements of the Companies Act 2006. > assessing disclosures included in the financial statements inrelation to the impact of uncertainties such as COVID-19; BASIS FOR OPINION and We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our > identifying applicable subsequent events and discussing responsibilities under those standards are further described in the their implications with management. ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are independent of the Group and the In our evaluation of the directors’ conclusions, we considered parent company in accordance with the ethical requirements theinherent risks associated with the Group’s and the parent thatare relevant to our audit of the financial statements in the company’s business model including effects arising from UK,including the FRC’s Ethical Standard as applied to listed macro-economic uncertainties such as Brexit and COVID-19, publicinterest entities, and we have fulfilled our other ethical weassessed and challenged the reasonableness of estimates responsibilities in accordance with these requirements. We made by the directors and the related disclosures and analysed believethat the audit evidence we have obtained is sufficient how those risks might affect the Group’s and the parent andappropriate to provide a basis for our opinion. company’s financial resources or ability to continue operationsover the going concern period. CONCLUSIONS RELATING TO GOING CONCERN Based on the work we have performed, we have not identified We are responsible for concluding on the appropriateness any material uncertainties relating to events or conditions that, ofthedirectors’ use of the going concern basis of accounting individually or collectively, may cast significant doubt on the and,based on the audit evidence obtained, whether a material Group’s and the parent company’s ability to continue as a going uncertainty exists related to events or conditions that may cast concern for a period of at least 12 months from when the significant doubt on the Group’s and the parent company’s financial statements are authorised for issue. ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in In auditing the financial statements, we have concluded that the our report to the related disclosures in the financial statements directors’ use of the going concern basis of accounting in the or, if such disclosures are inadequate, to modify the auditor’s preparation of the financial statements is appropriate. opinion. Our conclusions are based on the audit evidence Witan Investment Trust plc 77 Annual Report 2021 FINANCIAL STATEMENTS ## 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 KEY AUDIT MATTERS onhow they have applied the UK Corporate Governance Code, Key audit matters are those matters that, in our professional we have nothing material to add or draw attention to in relation judgement, were of most significance in our audit of the tothe directors’ statement in the financial statements about financial statements of the current period and include the whether the directors considered it appropriate to adopt the most significant assessed risks of material misstatement going concern basis of accounting. (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall The responsibilities of the directors with respect to going concern audit strategy; the allocation of resources in the audit; and are described in the ‘Responsibilities of directors for the financial directing the efforts of the engagement team. These matters statements’ section of this report. 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. OUR APPROACH TO THE AUDIT Description Audit response KAM Key audit Materiality matters Disclosures Our results Scoping In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit. OVERVIEW OF OUR AUDIT APPROACH High Investments measured at fair Overall materiality: Management value through override of controls profit or loss Group: £19.9 million, which represents 1% of the Group’s netassets. Going concern Investment income Parent company: £17.9 million which represents 1% of the parent company’s net assets, capped at 90% of Group materiality. Management fees Performance Key audit matters were identified as: fees Directors’ remuneration > valuation and existence of investments measured at fairvalue through profit or loss (Same as previous year); Taxation Potential financial statement impact Low > occurrence and completeness of investment income Low Extent of management judgement High (Same as previous year); > our auditor’s report for the year ended 31 December 2020 Key audit matter included one key audit matter that has not been reported Significant risk as a key audit matter in our current year’s report. This Other risk 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. 78 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS How our scope addressed the matter – Group and parent Key Audit Matter – Group and parent company company Valuation and existence of investments measured at fair value In responding to the key audit matter, we performed the through profit or loss following audit procedures: We identified valuation and existence of investments measured > assessing whether the Group’s accounting policy for the at fair value through profit or loss as one of the most significant valuation of investments is in accordance with UK-adopted assessed risks of material misstatement due to error. The parent International Accounting Standards and the Statement of company’s investment objective is to provide long-term income and capital growth by investing in a diversified portfolio of Recommended Practice ‘Financial Statements of Investment globalequities. Trust Companies and Venture Capital Trusts’ (the ‘SORP’) and testing whether management have accounted for valuation The investment portfolio of £2.2 billion as at 31 December 2021 in accordance with that policy; (2020: £2.2 billion) is a significant material balance in the Consolidated Balance Sheet at year end and the main > independently pricing 100% of the listed equity and driverofthe Group’s performance. fundportfolio by obtaining the relevant bid prices and NetAsset Values (‘NAV’) from independent market Incorrect asset pricing or a failure to maintain proper legal title information providers; of the investments held by the Group could have an impact on the portfolio valuation and therefore, the return generated > recalculating the total investment valuation based on forshareholders. theGroup’s investment holdings, which was agreed to the holdings at the reporting date as reflected in the Group’s We identified the valuation and existence of investments accounting records; measured at fair value through profit or loss as a significant riskat risk of material misstatement due to error as a result > testing that investments were actively traded by extracting ofthelarge volume of transactions in the year, the magnitude areport of trading volumes in the week before and after the ofthe transactions being material in aggregate, as well as the year-end from an independent market information provider overall material value of the investments held at year end. 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 Our results Our testing did not identify any material misstatements in the > Financial statements: Note 1(h), Note 10 valuation of the Group’s investment portfolio as at the year-end The Group’s accounting policy on investments held at or any issues with regards to the existence of the underlying fairvalue through profit or loss is shown in note 1(h) to the investments at the year end. financial statements and related disclosures are included innote 10. Witan Investment Trust plc 79 Annual Report 2021 FINANCIAL STATEMENTS ## Independent Auditor’s Report to the members of ## Witan Investment Trust plc continued ### for the year ended 31 December 2021 How our scope addressed the matter – Group and parent Key Audit Matter – Group and parent company company Occurrence and completeness of investment income In responding to the key audit matter, we performed the following audit procedures: We identified occurrence and completeness of investment income as one of the most significant assessed risks of > assessing whether the Group’s accounting policy for materialmisstatement due to fraud or error. The parent recognition of investment income is in accordance with company measures performance on a total return basis and UK-adopted International Accounting Standards; investment income is one of the significant components of this performance measure. The investment income reported by the > obtaining an understanding of the Group’s business process Group for the year is £37.4 million (2020: £36.1 million) and is a for recognising such income in accordance with the Group’s significant material balance in the Consolidated Statement of stated accounting policy; Comprehensive Income. > testing that income transactions were recognised in The parent company is subject to Investment Trust Company accordance with the policy by selecting a sample of (ITC) regulations and as a result is required to allocate returns investments and agreeing the relevant investment between revenue and capital. There is a risk that income incomereceivable for those equities to the parent recognised in the year may be materially misstated through fraudulent transactions or error due to high volume of company’s records. For the selected investments we also transactions. This could also impact the level of obtained the respective dividend rate entitlements from distributionrequired under ITC regulations. 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 tobank statements; and > performing, on a sample basis, a search for special dividends on the equity investments held during the year todetermine 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 Our results Our testing did not identify any material misstatements in the > Financial statements: Note 1e, Note 2 amount of investment income recognised during the year. 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. 80 Witan Investment Trust plc Annual Report 2021 OUR APPLICATION OF MATERIALITY STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 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 We define materiality as the magnitude of misstatement in the financial statements asawhole 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 £17.9 million, which is 1% of the parent netassets. company’s net assets, capped at 90% ofGroup materiality. Significant judgements made by auditor In determining materiality, we made In determining materiality, we made in determining materiality thefollowing significant judgements: thefollowing significant judgements: Net assets, which primarily comprise Net assets, which primarily comprise the theGroup’s investment portfolio, are parent company’s investment portfolio, considered to be the key driver of the are considered to be the key driver of Group’s total return performance and theCompany’s total return performance form a part of the NAV calculation. and form a part of the net asset value calculation. In addition, 1% of NAV has been deemed reasonable based on the nature of the In addition, the parent company invests Group as it invests largely in listed largely in liquid investments and so by investments. benchmarking against other entities inthesame industry, 1% is considered Materiality for the current year is higher appropriate. than the level that we determined for the | year ended 31 December 2020 to reflect | Materiality for the current year is higher | | --- | --- | | the increase in net asset value in the | than the level that we determined for the | | yearfrom £1.92 billion to £1.99 billion. | 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 We set performance materiality at an amount less than materiality for the financial the extent of our testing 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 | | £13.4 million, which is 75% of financial | | --- | --- | --- | | | statementmateriality. | statementmateriality. | | Significant judgements made by auditor | In determining performance materiality, | In determining performance materiality, | | in determining performance materiality | we made the following significant | we made the following significant | | | judgements: | judgements: | | | A 75% performance materiality was | A 75% performance materiality was | | | determined based on no uncorrected | determined based on no uncorrected | | | misstatements from the prior year, low | misstatements from the prior year, low | | | levels of adjustments from previous years | levels of adjustments from previous years | | | and the high quality of the accounting | and the high quality of the accounting | | | records maintained by the client. | records maintained by the client. | | | We set a lower level of performance | We set a lower level of performance | | | materiality in the year ended 31 December | materiality in the year ended 31 December | | | 2020 due to the heightened risk of fraud | 2020 due to the heightened risk of fraud | | | across the market as a result of the | across the market as a result of the | | | COVID-19 pandemic. Since the | COVID-19 pandemic. Since the | | | performance has stabilised and the | performance has stabilised and the | | | Group has sufficient funds readily | parent company has sufficient funds | | | available to withstand a significant | readily available to withstand a | | | liquidity event, the risk of fraud is | significantliquidity event, the risk of | | | lowerand therefore a lower level of | fraudis lower and therefore a lower | | | performance materiality is no longer | levelof performance materiality is | | | deemed necessary. | nolonger deemed necessary. | Witan Investment Trust plc 81 Annual Report 2021 FINANCIAL STATEMENTS ## 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 We determined a lower level of specific materiality for the following areas: materiality for the following areas: Investment income, management fees Investment income, management fees and performance fees and performance fees Related party transactions and Related party transactions and directors’remuneration directors’remuneration Communication of misstatements to the We determine a threshold for reporting unadjusted differences to the Audit Committee. Audit Committee | Threshold for communication £1 million and misstatements below that | | £0.9 million and misstatements below | | --- | --- | --- | | | threshold that, in our view, warrant | thatthreshold that, in our view, warrant | | | reporting on qualitative grounds. | 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 | OVERALL MATERIALITY – PARENT COMPANY | | | --- | --- | --- | | Net assets £1.99bn | Net assets £1.99bn | | | FSM £19.9m, 1% | FSM £17.9m, 1%, capped at 90% | | | PM £14.9m, 75% | | ofGroup | | TFPUM £1m, 5% | 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. 82 Witan Investment Trust plc Annual Report 2021 Type of work to be performed on financial information of parent and other components (including how it addressed the key STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 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 83 Annual Report 2021 FINANCIAL STATEMENTS ## 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). 84 Witan Investment Trust plc Annual Report 2021 The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below: STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS > 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 85 Annual Report 2021 FINANCIAL STATEMENTS ## Consolidated Statement of Comprehensive Income ### for the year ended 31 December 2021 Year ended 31 December 2021 Year ended 31 December 2020 | | Revenue | | Capital | | Revenue | | Capital | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | return | return | Total | | return | return | Total | | Notes | | £’000 | £’000 | £’000 | | £’000 | £’000 | £’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. 86 Witan Investment Trust plc Annual Report 2021 ## Consolidated and Individual Statements of Changes in Equity ### for the year ended 31 December 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | Ordinary | | | Share | | Capital | Other | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | share | premium | | redemption | | capital | Revenue | | | | Group | | capital | account | | | reserve | reserve | reserve | | Total | | Year ended 31 December 2021 Notes | | £’000 | | £’000 | | £’000 | £’000 | | £’000 | £’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 | | Ordinary | | | Share | | Capital | Other | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | share | premium | | redemption | | capital | Revenue | | | | Company | | capital | account | | | reserve | reserve | reserve | | Total | | Year ended 31 December 2021 Notes | | £’000 | | £’000 | | £’000 | £’000 | | £’000 | £’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 | | | | | | | Share | | Capital | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Ordinary | | premium | | redemption | | Other capital | | Revenue | | | | Group | | share capital | | | account | | | reserve | | reserve | reserve | | Total | | Year ended 31 December 2020 | Notes | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | £’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 | | | | | | | Share | | Capital | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Ordinary | | premium | | redemption | | Other capital | | Revenue | | | | Company | | share capital | | | account | | | reserve | | reserve | reserve | | Total | | Year ended 31 December 2020 | Notes | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | £’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 87 Annual Report 2021 FINANCIAL STATEMENTS ## Consolidated and Individual Balance Sheets ### as at 31 December 2021 | | | Group | | Company | | | Group | | Company | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 31 December | | 31 December | | | 31 December | | 31 December | | | | | | 2021 | | | 2021 | | 2020 | | | 2020 | | Notes | | £’000 | | | £’000 | | £’000 | | | £’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. 88 Witan Investment Trust plc Annual Report 2021 ## Consolidated and Individual Company Cash Flow Statements ### for the year ended 31 December 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | Group | Company | | Group | Company | | | --- | --- | --- | --- | --- | --- | --- | | | 2021 | | 2021 | 2020 | | 2020 | | Notes | £’000 | | £’000 | £’000 | | £’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 89 Annual Report 2021 FINANCIAL STATEMENTS ## Notes to the Financial Statements ### for the year ended 31 December 2021 1 ACCOUNTING POLICIES The subsidiary of the Company was established for the sole purpose of operating or supporting the investment operations The financial statements of the Group and parent company have ofthe Company, and is not itself an investment entity. Therefore, been prepared in accordance with UK-adopted International under the principles of IFRS 10, the Company has consolidated its Accounting Standards (‘IASs’). subsidiary as it is a controlled entity that supports the investment activity of the investment entity. These financial statements are presented in pounds sterling because that is the currency of the primary economic Control is achieved where the Company is exposed, or has the environment in which the Group operates. right, to variable returns from its investment in the subsidiary and has the ability to affect those returns through its power to direct (a) Basis of preparation the relevant activities. Where necessary, adjustments are made The financial statements have been prepared on the to the financial statements of the subsidiary to bring the historicalcost basis, except for the revaluation of certain accounting policies used by it into line with those used by the financial instruments. The principal accounting policies adopted Group. All intra-group transactions, balances, income and are set out below. Where presentational guidance set out in the expenses are eliminated on consolidation. Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts (the (d) Presentation of the Statement of Comprehensive Income ‘SORP’) issued by the Association of Investment Companies In order to better reflect the activities of an investment trust (the‘AIC’) in April 2021 is consistent with the requirements of IASs, company, and in accordance with guidance issued by the AIC, thedirectors have sought to prepare the financial statements supplementary information which analyses the Statement of ona basis compliant with the recommendations of the SORP. Comprehensive Income between items of a revenue and capitalnature has been presented alongside the Statement Judgements and sources of estimation uncertainty ofComprehensive Income. Additionally, the net revenue is the In the application of the Group’s accounting policies, measure the directors believe appropriate in assessing the management is required to make judgements, estimates Group’s compliance with certain requirements set out in andassumptions about carrying values of assets and liabilities section1158 ofthe Corporation Tax Act 2010. that are not always readily apparent from other sources. The estimates and associated assumptions are based on historical (e) Income experience and other factors that are considered to be relevant. Dividends receivable on equity shares are recognised as revenue Actual results may vary from these estimates. for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end The directors do not consider that there are any significant aretreated as revenue for the year. Provision is made for any estimates or critical judgements in these financial statements. dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time (b) Going concern apportionment basis so as to reflect the effective yield on the The financial statements have been prepared on a going debt securities and shares. Interest receivable from cash and concern basis. The Group’s business activities, together with the short-term deposits is accrued to the end of the period. Stock factors likely to affect its future development and performance, lending fees and underwriting commission are recognised as are set out in the Strategic Report on pages 1 to 45. The financial earned. Any special dividends are looked at individually to position of the Group as at 31 December 2021 is shown on the ascertain the reason behind the payment. This will determine balance sheet on page 88. The cash flows of the Group for the whether they are treated as revenue or capital. Where the year ended 31 December 2021 are not untypical and are set out Grouphas elected to receive its dividends in the form of on page 89. additional shares rather than cash, the amount of cash dividendforegone is recognised as revenue. Any excess (c) Basis of consolidation inthevalue of shares received over the amount of cash The consolidated financial statements incorporate the financial dividendforegone is recognised as a gain in the statements of the Company and the entity controlled by the StatementofComprehensive Income. Company (its subsidiary) made up to 31 December each year. (f) Expenses In accordance with IFRS 10 the Company has been designated All expenses and interest payable are accounted for on asan investment entity on the basis that: anaccruals basis. Expenses are presented as capital where > it obtains funds from investors and provides those investors aconnection with the maintenance or enhancement of the with investment management services; valueof the investments can be demonstrated. In this respect the investment management fees and finance costs are > it commits to its investors that its business purpose is to allocated 25% to revenue and 75% to capital to reflect the invest solely for returns from capital appreciation and Board’sexpectations of long-term investment returns. Any investment income; and performance fees payable are allocated wholly to capital, reflecting the fact that, although they are calculated on > it measures and evaluates performance of substantially atotalreturn basis, they are expected to be attributable allof its investments on a fair value basis. largely,ifnot wholly, to capital performance. 90 Witan Investment Trust plc Annual Report 2021 (g) Taxation Investment assets are classified based on both the business STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS model, and the contractual cash flow characteristics of the The tax currently payable is based on the taxable profit for financial instruments. This approach determined that all theperiod. investments are classified and measured at fair value through Taxable profit differs from net profit as reported in the Statement profit or loss, which is either the bid price or the last traded price, of Comprehensive Income because it excludes items of income depending on the convention of the exchange on which the or expense that are taxable or deductible in other years and it investment is quoted. Investments in unit trusts or OEICs are further excludes items that are never taxable or deductible. The valued at the closing price, the bid price or the single price as Group’s liability for current tax is calculated using tax rates that appropriate, released by the relevant investment manager. were applicable at the balance sheet date. The Group derecognises a financial asset only when the In line with the recommendations of the SORP, the allocation contractual rights to the cash flows from the asset expire, or method used to calculate tax relief on expenses presented when it transfers the financial asset and substantially all the against capital returns in the supplementary information in risksand rewards of ownership of the asset to another entity. theStatement of Comprehensive Income is the ‘marginal basis’. Onderecognition of a financial asset, the difference between Under this basis, if taxable income is capable of being offset theasset’s carrying amount and the sum of the consideration entirely by expenses presented in the revenue return column received and receivable is recognised in profit or loss. ofthe Statement of Comprehensive Income then no tax relief istransferred to the capital return column. Fair values for unquoted investments, or for investments for which there is only an inactive market, are established by using Deferred tax is the tax expected to be payable or recoverable various valuation techniques. These may include recent arm’s ondifferences between the carrying amounts of assets and length market transactions, the current fair value of another liabilities in the financial statements and the corresponding instrument that is substantially the same, discounted cash flow taxbases used in the computation of taxable profit, and is analysis, option pricing models and reference to similar quoted accounted for using the balance sheet liability method. companies. Where there is a valuation technique commonly Deferredtax liabilities are recognised for all taxable temporary used by market participants to price the instrument and that differences and deferred tax assets are recognised to the extent technique has been demonstrated to provide reliable estimates that it is probable that taxable profits will be available against of prices obtained in actual market transactions, that technique which deductible temporary differences can be utilised. is utilised. Investment trusts which have approval as such under section 1158 of the Corporation Tax Act 2010 are not liable for taxation The subsidiary company, Witan Investment Services Limited, oncapital gains. Deferred tax liabilities and assets are not isheld at fair value in the Company balance sheet. This is recognised if they arise from the initial recognition of an asset considered to be the net asset value of the shareholder’s orliability which, at the time of the transaction, does not affect funds,as shown in its balance sheet. the accounting profit or taxable profit. (i) Cash and cash equivalents The carrying amount of deferred tax assets is reviewed at each Cash comprises cash in hand and on demand deposits. Cash balance sheet date and reduced to the extent that it is no longer equivalents are short-term, highly liquid investments that are probable that sufficient taxable profits will be available to allow readily convertible to known amounts of cash and that are all or part of the asset to be recovered. subject to an insignificant risk of changes in value. Deferred tax is calculated at the tax rates that are expected (j) Dividends payable 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 Interim dividends are recognised in the period in which they are Comprehensive Income, except when it relates to items charged paid. Final dividends are not recognised until approved by the or credited directly to equity, in which case the deferred tax is shareholders in general meeting. also dealt with in equity. (k) Fixed borrowings (h) Investments held at fair value through profit or loss All secured notes are initially recognised at cost, being the When a purchase or sale is made under a contract, the terms fairvalue of the consideration received, less issue costs where ofwhich require delivery within the timeframe of the relevant applicable. After initial recognition, all interest-bearing loans market, the investments concerned are recognised or andborrowings are subsequently measured atamortised cost derecognised on the trade date. using the effective interest method, with theinterest expense recognised on an effective yield basis. Theeffective interest All the Group’s investments are defined by IASs as investments held method is a method of calculating the amortised cost of a at fair value through profit or loss. All gains and losses are allocated financial liability and of allocating interest expense over the to the capital return within the Statement of Comprehensive relevant period. The effective interest rate is the rate that exactly Income as ‘Gains or losses on investments held at fair value discounts estimated future payments over the expected life of through profit or loss’. Also included within this heading are the financial liabilities, or, where appropriate, a shorter period, transaction costs in relation to the purchase or sale of investments. tothe net carrying amount on initial recognition. 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. Witan Investment Trust plc 91 Annual Report 2021 FINANCIAL STATEMENTS ## Notes to the Financial Statements continued ### for the year ended 31 December 2021 1 ACCOUNTING POLICIES CONTINUED The use of financial derivatives is governed by the Group’s policies as approved by the Board, which has set written (l) Foreign currency translation principles for the use of financial derivatives. Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Changes in the fair value of derivative financial instruments arerecognised in the Statement of Comprehensive Income as Foreign currency monetary assets and liabilities that are fair they arise. If capital in nature, the associated change in value valued and denominated in foreign currencies are re-translated ispresented as a capital item in the Statement of into sterling at the rate ruling on the balance sheet date. Foreign Comprehensive Income. exchange differences arising on translation are recognised in theStatement of Comprehensive Income and allocated to (o) Nature and purpose of reserves thecapital return. Ordinary share capital (m) Adoption of new and revised accounting standards The ordinary share capital on the balance sheet relates to the number of shares in issue and in treasury. Only when the shares Standards not affecting the reported results nor the are cancelled, either from treasury or directly, is a transfer made financialposition to the capital redemption reserve. The following new and revised Standards and Interpretations areapplicable in the current year. Their application has not Share premium account hadany significant impact on the amounts reported in The balance classified as share premium includes the premium thesefinancial statements. above nominal value from the proceeds on issue of any equity > IAS 39, IFRS 4, 7, 9 and 16 Amendments: Interest Rate share capital comprising ordinary shares of 5p. Benchmark Reform. Capital redemption reserve At the date of authorisation of these financial statements, the The capital redemption reserve is used to record the amount following Standards and Interpretations, which have not been equivalent to the nominal value of any of the Company’s own applied in these financial statements, were in issue but not shares purchased and cancelled in order to maintain the effective (and in some cases had not yet been adopted). Company’s capital. > IAS 1 Amendments: Classification of Liabilities as Current orNon Current; Other capital reserves Gains and losses on disposal of investments and changes in > IAS 1 Amendments: Disclosure of Accounting Policies; fairvalues of investments are transferred to the capital reserve. > IAS 8 Amendments: Definition of Accounting Estimates. The capital element of the management and performance fees and relevant finance costs are charged to this reserve. Any The directors do not expect that the adoption of the Standards associated tax relief is also credited to this reserve. Other capital listed above will have a material impact on the financial reserves also comprise treasury shares. Realised capital reserves statements of the Group in future periods. Beyond the are distributable by way of dividend. information above, it is not practical to provide a reasonable estimate of the effect of these Standards until a detailed Revenue reserve reviewhas been completed. This reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. (n) Derivative financial instruments Therevenue reserve is distributable by way of dividend. The Group’s activities expose it primarily to the financial risks of changes in market prices, foreign currency exchange rates and (p) Leases interest rates. Derivative transactions which the Company may A lease is identified at inception of a contract where it conveys enter into comprise forward exchange contracts (the purpose rights to control the use of an identified asset for a period of time ofwhich is to manage currency risks arising from the Company’s in exchange for consideration. At commencement, the Company investing activities), quoted options on shares held within the as a lessee recognises a right-of-use asset equal to the lease portfolio, or on indices appropriate to sections of the portfolio liability at inception plus any direct costs, and the lease liability (the purpose of which is to provide protection against falls in the ismeasured at the present value of the unpaid lease payments capital values of the holdings) and futures contracts appropriate discounted at the incremental borrowing rate of the Company. to sections of the portfolio (to provide additional market Subsequently, the Company as a lessee applies the cost model exposure or to provide protection against falls in the capital to the right-of-use asset which is depreciated over the useful values of the holdings). The Company may also write options lifeof the right-of-use asset, the lease liability is increased onshares represented in the portfolio where such options byinterest on the outstanding balance and reduced by lease arepriced attractively relative to the investment managers’ payments paid. A remeasurement of the right-of-use asset longer-term expectations for the relevant share prices. andthe lease liability occurs when there is a change to the TheGroupdoes not use derivative financial instruments leasecontract. forspeculative purposes. Hedge accounting is not used. The Company has elected not to separate any non-lease element from the lease payments. 92 Witan Investment Trust plc Annual Report 2021 | 2 INVESTMENT INCOME | | | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | --- | --- | --- | --- | | | 2021 | 2020 | | | | £’000 | £’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 2020 £’000 £’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 2020 £’000 £’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 Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’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 93 Annual Report 2021 FINANCIAL STATEMENTS ## 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 | | 2020 | | --- | --- | --- | --- | | Revenue | | Revenue | | | | £’000 | | £’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 (1) Other services : – 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 | | 2020 | | --- | --- | --- | --- | | Revenue | | Revenue | | | | £’000 | | £’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 (1) Total 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. 94 Witan Investment Trust plc Annual Report 2021 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 15% (2020: 15%) | – | – | – | – | – | – | | 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 | (108) | (2,276) | (3,438) | (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 | STRATEGIC REPORT COMPLIANCE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2021 95 ![img-14.jpeg](img-14.jpeg) FINANCIAL STATEMENTS # 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 | 264,683 | 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 | – | 610 | 610 | | 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 £72,00,000 (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. 96 Witian Investment Trust plc^{}[] Annual Report 2021 | 8 DIVIDENDS | | | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | --- | --- | --- | --- | | | 2021 | 2020 | | | | £’000 | £’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 2020 £’000 £’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 2020 £’000 £’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 97 Annual Report 2021 FINANCIAL STATEMENTS ## 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 Company Group Company £’000 £’000 £’000 £’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 | | | | | Investment | | | Valuation | | | Cost | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 31 December | | | | | | | gains/ | 31 December | | | 31 December | | | | | 2020 | Purchases | | Sales | | (losses) | | | 2021 | | 2021 | | | | £’000 | | £’000 | £’000 | | £’000 | | | £’000 | | £’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 2020 £’000 £’000 Gains on investments 248,107 52,921 Gains on derivatives – 4,892 248,107 57,813 10.4 Derivatives 2021 2020 £’000 £’000 Gains on futures – 4,892 Open futures contracts There were no open contracts as at 31 December 2021 or 31 December 2020. 98 Witan Investment Trust plc Annual Report 2021 ### 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 Electro 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 | STRATEGIC REPORT COMPLIANCE GOVERNANCE FINANCIAL STATEMENTS Witton Investment Trust plc Annual Report 2021 99 FINANCIAL STATEMENTS # 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 1' 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 1' on page 108) | 500 | 500 | 500 | 500 | | | 254,573 | 254,573 | 265,548 | 265,548 | At the year end, the Company had a £50,000,000 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 25% 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. 100 Witan Investment Trust plc Annual Report 2021 ![img-15.jpeg](img-15.jpeg) 14.2 Price risk STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 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 2020 £’000 £’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 | | Decrease in | | Increase in | | Decrease in | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | fair value | | fair value | | fair value | | | fair value | | | | £’000 | | £’000 | | £’000 | | | £’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 101 Annual Report 2021 FINANCIAL STATEMENTS # Notes to the Financial Statements continued for the year ended 31 December 2021 ## 14 FINANCIAL INSTRUMENTS CONTINUED | | US$ £'000 | Euro £'000 | Yen £'000 | Other £'000 | | --- | --- | --- | --- | --- | | **2021** | | | | | | 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** | | | | | | 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) | – | (4,331) | | Total foreign currency exposure on net monetary items | 5,564 | 1,968 | 155 | (181) | | Investments at fair value through profit or loss that are equities | 716,183 | 318,554 | 100,579 | 247,369 | | Total net foreign currency exposure | 787,377 | 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 | 138,732 | 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 | 102 Witton Investment Trust plc^{}[] Annual Report 2021 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) | (188) | (976) | (512) | (250) | | Capital return | (10,127) | (43,336) | (8,167) | (103,280) | (41,558) | (10,116) | | Change to the profit/loss after tax | (112,014) | (44,020) | (8,325) | (104,256) | (42,062) | (10,359) | | Change to the shareholders' funds | (112,014) | (44,020) | (8,325) | (104,256) | (42,062) | (10,359) | #### 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 £161 (2020: £161). 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 SCNIA or its foreign currency equivalent (2020: some); - 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 103 STRATEGIC REPORT COMPOSITE GOVERNANCE FINANCIAL STATEMENTS FINANCIAL STATEMENTS ## 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 | | | Between 1 | | More than | | | | Between 1 | | More than | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Within 1 year | | and 5 years | | | 5years | Within 1 year | | and 5 years | | | 5years | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | (1) Secured notes 4,582 18,327 257,869 4,582 18,327 262,739 (2) Preference shares 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. 104 Witan Investment Trust plc Annual Report 2021 Credit risk exposure STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS The table below summarises the credit risk exposure of the Group as at the year end. 2021 2020 £’000 £’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 | | | Balance | | | | Balance | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | sheet | | | | sheet | | Fair value | | amount | | Fair value | | amount | | | | £’000 | | £’000 | | £’000 | | £’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 105 Annual Report 2021 FINANCIAL STATEMENTS # 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 | | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | | --- | --- | --- | --- | --- | | At 31 December 2021 | | | | | | Equity investments | 2,072,010 | – | – | 2,072,010 | | Warrants | – | 1,481 | – | 1,481 | | Investments in other funds | – | 106,180 | 37,774 | 143,954 | | **Total** | **2,072,010** | **107,671** | **37,774** | **2,357,455** | | At 31 December 2020 | | | | | | 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(1). 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 Wulilangye Yibin and Kweichow Moutai (2020: Wulilangye 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 Underwood 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: £2,160,756,000) 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). 106 Witan Investment Trust plc Annual Report 2021 Gearing STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 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 2020 £’000 £’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 | | Group and | | | --- | --- | --- | --- | | Company | | Company | | | | 2021 | | 2020 | | | £’000 | | £’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 107 Annual Report 2021 FINANCIAL STATEMENTS ## 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 | | Group and | | | --- | --- | --- | --- | | Company | | Company | | | | 2021 | | 2020 | | | £’000 | | £’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. 108 Witan Investment Trust plc Annual Report 2021 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 2021 2020 | Debt at | | Debt at | | | --- | --- | --- | --- | | balance | Debt | balance | Debt | | sheet | at fair | sheet | at fair | | amount | value | amount | value | | £’000 | £’000 | £’000 | £’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 | | Short-term | | Lease | | Long-term | | Short-term | | Lease | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | debt | | debt | liability | Total | | debt | | debt | liability | Total | | | £’000 | | £’000 | £’000 | £’000 | | £’000 | | £’000 | £’000 | £’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 109 Annual Report 2021 FINANCIAL STATEMENTS ## 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) | (8) | | 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 | 289 | | 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 | 61 | | 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. 110 Witan Investment Trust plc^{}[] Annual Report 2021 23 RELATED PARTY TRANSACTIONS DISCLOSURES STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 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 | | Management | | | | Investment | | Management | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | trust | | services | | Total | | trust | | services | | Total | | | £’000 | | | £’000 | £’000 | | £’000 | | | £’000 | £’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 111 Annual Report 2021 FINANCIAL STATEMENTS ## Other Financial Information (unaudited) ### SECURITIES FINANCING TRANSACTIONS The Company engages in Securities Financing Transactions (as defined in Article 3 of Regulation (EU) 2015/2316), 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 | | --- | --- | --- | | £57,115,000 | 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 | 7,616 | | Intuitive Surgical Inc | 9,915 | | 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 | 112 Wilton Investment Trust plc^{}[] Annual Report 2021 ## 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 Panbas | France | Equity | Main Market Listing | CHF | Triparty | BNP Panbas | 1,368 | | | | Equity | Main Market Listing | EUR | Triparty | BNP Panbas | 2,096 | | | | Equity | Main Market Listing | JPY | Triparty | BNP Panbas | 7,515 | | | | Equity | Main Market Listing | USD | Triparty | BNP Panbas | 45,977 | | Citigroup | US | Government Bond | Investment Grade | EUR | Triparty | BNP Panbas | 30 | | | | Government Bond | Investment Grade | JPY | Triparty | BNP Panbas | 1,356 | | | | Government Bond | Investment Grade | USD | Triparty | BNP Panbas | 18 | | HSBC | Hong Kong | Equity | Main Market Listing | EUR | Triparty | BNP Panbas | 166 | | | | Equity | Main Market Listing | USD | Triparty | BNP Panbas | 33 | | | | Government Bond | Investment Grade | DKK | Triparty | BNP Panbas | 1 | | | | Government Bond | Investment Grade | EUR | Triparty | BNP Panbas | 806 | | | | Government Bond | Investment Grade | JPY | Triparty | BNP Panbas | 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% | STRATEGIC REPORT COMPLIANCE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2021 113 ![img-16.jpeg](img-16.jpeg) FINANCIAL STATEMENTS # Additional Shareholder Information # 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 2010/93/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 24 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 ('SEODL') code is 8LTRSD3. # Dividend A fourth interim dividend of 1.53p 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 2016 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 tax 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. 114 Witan Investment Trust plc Annual Report 2021 # DEFINITIONS OF ALTERNATIVE PERFORMANCE MEASURES Benchmark: The Company's equity benchmark is 85% Global (MSCI All Country World Index) and 15% UK (MSCI UK IM 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 | 238.0 | | Total dividend adjustment factor (1) (C) | 1.031565 | 1.038573 | | 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) | 1.023580 | 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 on the ex-dividend date. Witan Investment Trust plc Annual Report 2021 115 STRATEGIC REPORT COMPARATIVE GOVERNANCE FINANCIAL STATEMENTS FINANCIAL STATEMENTS ## Additional Shareholder Information continued HISTORICAL RECORD Debt at fair value Debt at par value | | | | Net asset | | | | Net asset | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Market price | | | value per | | Share price | | value per | | Share price | | Earnings per | | | Dividends | | | | per ordinary | | | ordinary | | (discount)/ | | ordinary | | (discount)/ | | | ordinary | | per ordinary | | | | | share in | | share in | | premium | | share in | | premium | | | share in | | | share in | | | | pence | (1) | pence | (1)(2) | | % (2) | pence | (1)(3} | | % (3) | | pence | (1) | | 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 (4) 31 December 2020 230.5 236.0 (2.4) 240.1 (4.2) 3.08 5.45 (4) 31 December 2021 252.0 267.4 (6.1) 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. 116 Witan Investment Trust plc Annual Report 2021 ## Contacts REGISTERED OFFICE OF THE COMPANY AND ITS SUBSIDIARY, AUDITOR WITAN INVESTMENT SERVICES LIMITED Grant Thornton UK LLP | 14 Queen Anne’s Gate | 30 Finsbury Square | | --- | --- | | London SW1H 9AA | London EC2A 1AG | | The Company is a public company limited by shares. | STOCKBROKER | J.P. Morgan Cazenove REGISTERED NUMBER 25 Bank Street | Registered as an investment company in England and Wales, | Canary Wharf | | --- | --- | | Number 101625. | London E14 5JP | | COMPANY SECRETARY | SOLICITORS | | Frostrow Capital LLP | Dickson Minto W.S. | | 25 Southampton Buildings | 16 Charlotte Square | | London WC2A 1AL | Edinburgh EH2 4DF | Telephone: 020 3008 4910 Herbert Smith Freehills LLP CUSTODIAN, INVESTMENT ADMINISTRATOR AND DEPOSITARY Exchange House Primrose Street BNP Paribas Securities Services London EC2A 2EG 10 Harewood Avenue London NW1 6AA The Company is a member of or signatory to: REGISTRAR Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ (1) Telephone: 0370 707 1408 (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. 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. Printed by Park Communications on FSC® certified paper. Park is an EMAS certified company and its Environmental Management System is certified to ISO14001. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled forfurther use and, on average, 99% of any waste associated with this production willberecycled. This document is printed on Arcoprint, sourced from well-managed, responsible, FSC®certified forests and other controlled sources. The pulp used in this product isbleached using an elemental chlorine free (‘ECF’) process. ## www.witan.com