Collective
Wisdom
Annual Report 2022
Witan Investment Trust plc Annual Report 2022
STRATEGIC REPORT
01 Financial highlights
02 Our investment approach
04 Key performance indicators
06 What we do
08 Chairman’s Statement
10 CEO’s review of the year
18 Responsible investment
26 Meet the managers
34 Forty largest investments
36 Classification of investments
37 Principal risks and uncertainties
40 Section 172: engaging with
ourstakeholders
42 Corporate and
operationalstructure
43 Costs
44 Viability Statement
CORPORATE GOVERNANCE
46 Board of directors
48 Corporate Governance
59 Report of the Audit & Risk
Committee
62 Directors’ Remuneration Report
75 Directors’ Report
79 Statement of Directors’
Responsibilities
FINANCIAL STATEMENTS
80 Independent Auditor’s Report to
the members of Witan Investment
Trust plc
89 Consolidated Statement
ofComprehensive Income
90 Consolidated and Individual
Statements of Changes in Equity
91 Consolidated and Individual
Balance Sheets
92 Consolidated and Individual
Cash Flow Statements
93 Notes to the Financial Statements
115 Other Financial Information
(unaudited)
117 Additional Shareholder
Information
120 Contacts
Company overview
Our investment
policy
Our purpose
is to achieve significant growth in our investors’
wealth by investing in global equity markets,
usinga multi-manager approach.
Our objective
is to achieve an investment total return exceeding
that of the Company’s benchmark
(1)
over the long
term, together with growth in the dividend ahead
of inflation.
Where to find us
Our website has a full range of information about Witan
and regular commentary about investment markets.
Find us online @ www.witan.com
The Annual Report is intended to help shareholders assess the Company’s strategy. It contains certain forward-looking statements. These are made by the directors in good faith based
on information available to them up to the time of their approval of this Report. Such statements should be treated with caution due to the inherent uncertainties, including economic
and business risks, underlying any such forward-looking information.
STRATEGIC REPORT
(1) Witan’s benchmark is 85% Global (MSCI All Country World Index) and 15% UK (MSCI UK IMI Index).
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
01
SECTOR BREAKDOWN OF THE PORTFOLIO
15.1% Industrials
11.6% Financials
11.6% Information Technology
11.6% Investment Companies
11.4% Consumer Staples
10.6% Healthcare
6.9% Consumer Discretionary
6.9% Materials
6.6% Communication Services
4.7% Energy
2.0% Unquoted Funds
0.7% Utilities
0.3% Real Estate
COMPANY SIZE BREAKDOWN OF THE PORTFOLIO
71.0% Large Cap
9.7% Mid Cap
5.7% Small Cap
2.0% Unquoted Funds
11.6% Investment Companies
Financial
highlights
A high
conviction yet
well-diversified
portfolio
(1) Source: Morningstar.
(2) Source: Morningstar. See also MSCI International for conditions of use (www.msci.com).
(3) Alternative performance measure (see page 5).
Key data
221.5p
SHARE PRICE 2022
2021: 252.0p
234.1p
NAV PER ORDINARY
SHARE (DEBT AT FAIR VALUE)
(3)
2021: 267.4p
5.4%
DISCOUNT (NAV INCLUDING
INCOME, DEBT AT FAIR VALUE)
(3)
2021: 5.8%
5.80p
DIVIDEND PER SHARE
2021: 5.60p
Total return performance
1 year
% return
5 years
% return
10 years
% return
SHARE PRICE TOTAL RETURN
(1)(3)
(9.8) 16.3 179.6
NAV TOTAL RETURN
(1)(3)
(10.3) 20.4 158.6
WITAN BENCHMARK
(1)
(6.2) 38.1 157.8
MSCI UK IMI INDEX
(2)
1.6 13.9 83.4
MSCI ALL COUNTRY WORLD INDEX
(2)
(7.6) 48.7 206.6
Percentage of total funds
36%
NORTH AMERICA
21%
EUROPE
20%
UK
12%
OTHER, INCLUDING
INVESTMENT
COMPANIES
4%
ASIA EX JAPAN
3%
JAPAN
2%
LATIN
AMERICA
2%
UNQ U OTED
FUNDS
To read more about
our diversified portfolio see pages 26 to 27
To read more about
our KPIs see pages 4 and 5
Source: BNP Paribas
as at 31 December 2022.
79%
Active share
(3)
at end 2022
We are active investors with a highly selective
approach to portfolio construction. This is
differentfrom a passive fund which
replicatesaparticularindex.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
02
Talent
We search for the best fund managers
worldwide, choosing managers to
complement each other, not to cover
allstyles. Our managers are active
investors and construct high conviction
portfolios focusing on their best ideas.
This high level of conviction produces
portfolios which are differentiated
fromthe benchmarks which they
aimtooutperform.
Experience
Founded in 1909, we have a long
trackrecord of producing capital
andincome growth. We have invested
through challenging economic cycles,
wars andpolitical crises, helping put
contemporary events into perspective.
Since the adoption of the current
multi-manager strategy in2004,
shareholders have enjoyed a share
pricetotal return
(1)
of 454.3% versus
365.1% forWitan’s benchmark and 231.7%
for theMSCIUKIndex.
Collective
Wisdom
A one-stop shop for global equity
investment, offering long-term
growth in capital and income.
Our investment approach
(1) Alternative performance measure, see page 118.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
03
Independence
Witan is an independent and self-
managed investment company,
dedicated to sustainable growth
initsshareholders’ wealth. Witan’s
employees are solely focused on the
success of theCompany.
Our independence means we simply
seek, without pre-set constraints, to
select the best managers available,
inthe interest of our shareholders.
Adaptable
Our multi-manager strategy allows
ustorespond to changes in long-term
trends either by changing managers
and investment style or investing via
ourspecialist portfolio with managers
who have expert knowledge of particular
sectors or regions. Using gearing and
derivatives, we can also adapt our
portfolio to short-term opportunities
orto manage risk.
We search for the best managers
aroundthe world to create a portfolio
thatisdiversified by region, investment
sectorand individual company level.
Thisprovides broad opportunities for
investors and reduces the risks arising
fromreliance on a single manager. In many
cases, these managers are either not
available to individual UK investors or
available only on less competitive terms.
Our highly experienced Board of directors
and Executive have many years’ collective
experience of managing assets, selecting
managers and delivering sound,
independent governance.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
04
Key performance
indicators
The financial key performance indicators (‘KPIs’) below are monitored
as significant measures of longer-term success. With respect to
non-financial measures, details of the Company’s policies and
compliance in relation to the UK Corporate Governance Code are set
out in the Corporate Governance Statement on pages 48 to 58.
KPI OUTCOME
Share price
total return
(1)
TOTAL RETURN PERFORMANCE (%)
The Company seeks at
least2%p.a. long-term
outperformance in the share
price total return
TOTAL RETURN PERFORMANCE (%)
2013
2022
-20
-10
0
+10
+20
+30
+40
Benchmark total returnPrice total return
The share price total return in 2022 was -9.8%,
compared with the benchmark’s return of -6.2%. Our
NAV total return was less than that of the benchmark
but was slightly offset by a narrower discount than at
the end of 2021. Over five years, the share price total
return was 16.3% compared with 38.1% for the
benchmark.
-9.8%
IN 2022
NAV total return
(1)
TOTAL RETURN PERFORMANCE (%)
The Company seeks at least2%p.a.
long-term outperformance in NAV
total return, debt at fair value
TOTAL RETURN PERFORMANCE (%)
2013
2022
-15
-10
-5
0
+10
+5
+15
+20
+25
+30
BenchmarkNet asset value
Witan’s NAV total return in the year was -10.3%, which
was an improved position compared with the AIC
Global sector (which declined by 20.4% on average)
but underperformed our benchmark which declined
-6.2%. Over the past five years, the NAV total return
was 20.4%, compared with 38.1% for the benchmark.
-10.3%
IN 2022
Dividend growth
(1)
DIVIDEND PER SHARE GROWTH (%)
The Company seeks to grow its
dividend ahead of the
rateofinflation
DIVIDEND PER SHARE GROWTH (%)
2012
2022
+2.0
+3.0
+4.0
+5.0
+6.0
74
111
148
185
222
Dividend (pence per share)
left hand axis right hand axis
CPI inflation %
The dividend rose by 3.6% in 2022, which was less
than the 10.5% increase in the UK Consumer Price
Index (‘CPI’) during the year. This was Witan’s 48th
consecutive year of dividend increases. Although
not matching the exceptional rate of inflation in
2022, over the past five years the dividend has risen
by 38.1%, compared with a 21.2% rise in the CPI.
+3.6%
IN 2022
Key performance
indicators
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
05
Net contribution from
borrowings
(1)
CONTRIBUTION FROM BORROWINGS (% OF NAV)
Gearing to contribute to returns,
after interest costs
Net contribution Cost
CONTRIBUTION FROM BORROWINGS (% of NAV)
2013
2022
-2.0
-1.5
-1.0
-0.5
0.0
+1.0
+0.5
+1.5
+2.0
In 2022, gearing detracted 1.0% from returns before
interest costs, principally during the first quarter of
the year, and 1.4% including interest costs. The use of
borrowings (or gearing) in investment can amplify
losses as well as gains but over the long term, as
shown in the chart, gearing has been a material
benefit to Witan’s returns, contributing positively in
seven out of the past ten years.
-1.4%
IN 2022
Discount/premium
to NAV
(1)
DISCOUNT/PREMIUM TO NAV PER SHARE
Achieve a sustainable low discount
or a premium to NAV,taking
account of marketconditions
DISCOUNT/PREMIUM TO NAV PER SHARE
2013
20
22
-8.0
-6.0
-7.0
-4 .0
-5.0
-2.0
-3.0
0.0
+1.0
-1. 0
+2.0
In 2022, the year-end discount was 5.4%, compared
with 5.8% at the end of 2021. Although narrower by the
year end, 2022’s average discount of 7.8% was wider
than that in 2021 (6.9%), along with those of many
sector peers. Witan continued to buy back shares at a
discount, which helps limit discount volatility and
boosts the NAV for continuing shareholders. In 2022,
we bought back 7.9% of our shares at an average
discount of 7.8%. The resulting £10.9million uplift offset
the majority of the Company’s ongoing charges
during the year.
-5.4%
AT YEAR END
Ongoing Charges
Figure (‘OCF’)
(1)
ONGOING CHARGES AS % OF AVERAGE NET ASSETS
Achieve an OCF as low aspossible,
consistent withchoosing the best
availablemanagers
ONGOING CHARGES AS % OF NET AVERAGE ASSETS
2013
2022
0.5
0.6
0.7
0.8
1.0
0.9
1.2
1.1
Including performance fees
Excluding performance fees
In 2022, our OCF was 0.77% (2021: 0.71%) excluding
performance fees and 0.77% (2021: 0.73%) including
them. Although there were reductions in investment
management fees, the OCF rise reflects the impact of
fixed costs on a lower asset base. Further details of
costs are set out on page 43.
0.77%
IN 2022
(0.77% INCLUSIVE OF PERFORMANCE FEES)
KPI OUTCOME
(1) Alternative Performance Measures
The financial statements (on pages 89 to 114) set out the required statutory reporting measures of the Company’s financial performance. In addition, the Board assesses the
Company’s performance against a range of criteria which are viewed as particularly relevant for investment trusts, which are summarised in the key performance indicators on
pages 4 to 5. Definitions of the terms used are set out on page 118. A reconciliation of the NAV per ordinary share (debt at par value) to the NAV per ordinary share (debt at fair value) is
shown in note 18 on page 112.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
06
Witan is an investment trust which aims to grow shareholders’
wealth and outperform its benchmark through active investment
in individual companies across a broad spread of global equity
markets.
What we do
Portfolio structure
Specialist portfolio
25%
(1)
Managers able to deliver superior
growth through specialist regional
or sectoral expertise.
Direct holdings in collective funds.
Actively managed with no fixed
allocation.
Investments in Unquoted
Growthfunds
Provides exposure to specialist
asset classes andother
opportunities including Emerging
Markets, Climate Change, Private
Equity and Life Sciences.
Witan’s portfolio consists of two primary components: core and specialist. The core
portfolio provides shareholders with access to a select but diversified group of managers
investing in high-quality, predominantly large and mid-sized global companies. The
specialist portfolio recognises that there are many attractive investment opportunities
which fall outside the remit of most mainstream fund managers due to their size,
domicile or their unlisted or specialist nature. The specialist portfolio aims to capture
thepotential for these themes to produce superior returns overthe long run. This
combination provides a one-stop shop for our shareholders tobenefit from a wide
variety of opportunities via a single investment in Witan.
Disciplined risk management
see pages 37 to 39
Underpinned by:
(1) Indicative allocation +/-10%.
Core portfolio
75%
(1)
Global UK
65% 10%
+/- 10% +/- 5%
Managers employ a range of approaches to select
from abroad universe of high-quality companies
throughout theworld.
The core portfolio includes companies with enduring
cash flows, underappreciated growth prospects or
undervalued, often cyclical businesses.
Meet the managers
see pages 26 to 32
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
07
Choosing our managers Capital allocation Value creation
We select third-party managers
from across the world. Our team
uses a variety of networks,
databases and comprehensive
duediligence to identify and
interview potential managers.
Shortlisted managers present to
theBoard, which takes thefinal
decision on appointment. We aim to
appoint managers for the long term.
What we look for from
our managers
People Talented and accountable
investment leadership, committed
toserving their clients’ interests
Process High-conviction portfolio
construction, using clear and simple
processes, with analysis taking
account of secular change
Portfolio Investments characterised
by long-term growth in sustainable
cash flows and the integration of
ESG (environmental, social and
governance) principles
Performance Potential for material
outperformance over the long term,
after fees
We seek to add
toperformance by
varying the use of
gearing and a range
ofadditional levers
toadapt to different
conditions.
Capital allocation
framework
The Company seeks
toset gearing at levels
appropriate for market
conditions, borrowing
more when markets are
attractively valued and
less when returns are
expected to be poorer.
Witan may on occasion
use derivatives as
transparent, cost-
effective tools for
efficient portfolio
management and
to help control risk.
We aim to generate
total returns which
exceed the
benchmark over
thelong term.
Outperformance
ofbenchmark
5/10
years to 31/12/2022
NAV total return
(1)
over past ten years
158.6%
vs
157.8%
for benchmark to
31/12/2022
Dividend growth
over past ten years
8.2%
p.a.
For more information,
see page 14
For more information,
see pages 26 to 32
Commitment to responsible investment
see pages 18 to 25
(1) Alternative performance measure,
see page 118.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
08
Chairman’s Statement
2022 was expected to be a year of
continuing recovery, as the world left
behind the earlier restrictions introduced
to control the pandemic. In the event,
positive reopening developments (other
than in China) were overwhelmed by a
surge in inflation, exacerbated by Russia’s
invasion of Ukraine, prompting central
banks worldwide to raise interest rates
sharply from the low levels that had
prevailed for many years. The
combination of increases in the price of
essentials (such as food and energy) and
rising borrowing costs reversed earlier
hopes for economic recovery, creating
near-recessionary conditions in many
economies, particularly those most
dependent on Russian energy and
Ukrainian food exports.
Aside from the direct economic
disappointments, 2022’s increase in
interest rates and the tightening of global
liquidity (as central banks turned from
quantitative easing to quantitative
tightening) led to a widespread derating
of investment markets. Amongst the most
extreme corrections occurred in the
government bond markets, where the
years of easy money had driven yields
near to zero and in some cases to
negative levels, offering little or no
absolute return or protection against
inflation. The bond bubble
comprehensively burst in 2022, along with
the over-optimistic valuations embedded
in many technology companies and the
more speculative markets such as crypto
tokens.
There is a healthy aspect to this, with cash
and bonds now offering tangible returns
and growth stocks now available on more
plausible ratings. Nonetheless the effect
on investors’ wealth of falls in almost all
assets, allied to the geopolitical and
inflationary headwinds, fuelled an
increasingly negative mood. As a
consequence, 2022 will go down as a
highly challenging year for investors, with
both equities and bonds (at least in the
US) falling in tandem for the first time for
30 years.
At the start of the year, our portfolio
reflected expectations of a broadening of
economic growth. The unforeseen onset
of war therefore had a negative impact
on Witan’s performance. Our NAV total
return in the first nine weeks of 2022 was
-15%, 6% behind the benchmark’s return.
During the rest of the year, Witan
recovered some of the lost ground,
2022 highlights
Full-year NAV total return of -10.3%. Share price total
return -9.8%
The benchmark returned -6.2% and the AIC Global
sector’s NAV total return was -20.4%
Ten-year NAV total return of 159%, compared with
benchmark’s 158%
Share price discount to NAV 5.4% at year-end (2021: 5.8%)
The NAV uplift from share buybacks offset the majority of
the Company’s ongoing charges during the year
Dividend increased by 3.6% to 5.8 pence, more than
double that paid in 2012 and an unbroken 48 year run of
increases
2023 NAV total return to 10 March +5.6%, 3.6% ahead of the
benchmark total return of 2.0%
Andrew Ross
Chairman
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
09
ending the year with a total return of
-10.3%, 4.1% behind the benchmark’s loss
of 6.2%. Whilst it is disappointing that we
underperformed this measure over the
year as a whole, we outperformed the AIC
Global sector after lagging it in recent
years. Shareholders can also take comfort
from the steady and improving
performance our managers delivered
after the initial shock, during an
exceptionally volatile period that was
beset by political instability, international
crises and inflation reaching levels not
seen in 40 years. Andrew Bell’s CEO report
covers these points, as well as the
macroeconomic backdrop, in more detail.
The improvement in performance has
accelerated during the early months of
2023, as our portfolio was positioned to
benefit from an improvement in
economic expectations, relative to the
unusually pessimistic investor mood at
the end of 2022. Whilst this is a short
period, Witan’s NAV total return to 10 March
2023 is 5.6%, 3.6% ahead of our
benchmark’s return of 2.0%.
Over the long term, since Witan adopted
a multi-manager approach in 2004, we
have beaten the returns on our
benchmark and raised the dividend well
ahead of the rate of inflation. Even after
the underperformance since 2020, over
the ten years to the end of 2022 Witan
achieved a NAV total return of 159% and a
share price total return of 180%, compared
with the benchmark’s 158% return and
(with inflation now back on investors’
radar) well ahead of the 30% rise in the UK
Consumer Price Index over the period.
RESPONSIBLE INVESTMENT
In last year’s Annual Report, we introduced
our updated responsible investment
strategy which, in addition to our
commitment to the Net Zero Asset
Managers initiative (‘NZAM’), set a target
to have a portfolio which consists entirely
of sustainable businesses by 2030. This
does not impose blanket exclusions on
our managers, as we believe that
engagement with companies often has a
greater positive impact than divestment.
However, if engagement has run its
course and ESG failings undermine the
investment rationale, they are able to exit,
or avoid, an investment in order to protect
our shareholders’ capital. This is one of
the most significant advantages of active
management , as passive (index tracking)
funds can find it difficult to reconcile their
commitments to responsible investment
initiatives with their inability to divest from
companies with poor governance
standards.
Ongoing ESG oversight, as part of the
investment process, remains one of the
key responsibilities of Witan’s Executive
team and of our managers. Our bespoke
approach to responsible investment
focuses on identifying companies’
progress and direction of travel, rather
than simply their sustainability credentials
at a point in time.
In 2022 we focused on two key projects to
support this approach. Firstly, formulating
our NZAM commitments, made in
shareholders’ long-term best interests
and, secondly, implementing our
“Sustainable by 2030” commitment. This
entailed assessing the current
characteristics of the portfolio (using our
own criteria and our managers’
knowledge of investee companies) and
identifying how to measure progress. The
Board asked James Hart, Witan’s
Investment Director, to lead on this
programme, which has provided us with
valuable insights into how our managers
and portfolio companies approach ESG
issues and created a baseline from which
our sustainability performance can be
measured. The responsible investment
section, which is on pages 18 to 25 of this
report, introduces the framework, sets out
its preliminary results and reports on
other progress made during the year.
2022 DIVIDEND
A fourth interim dividend of 1.60 pence
was declared in February 2023, payable
on 17 March 2023. As a result, the dividend
for the year increased by 3.6% to 5.80
pence per share (2021: 5.60 pence). This
year’s dividend was covered an improved
84% by 2022 revenue earnings (2021: 65%),
with a reduced call of £6.4 million on
our revenue reserves (in 2021 we used
£14.6 million).
The Board expects portfolio dividends to
recover further in coming years and it is
the Company’s intention to continue to
make use of retained earnings to increase
the dividend to shareholders annually
while full cover is restored.
We have increased the dividend every
year for the last 48 years and the latest
dividend is more than double that paid in
2012. Although 2022’s increase does not
match the exceptionally high rate of UK
inflation in 2022 (10.5% at the year-end),
Witan’s dividend has grown substantially
ahead of UK inflation over the past 5 and
10 years.
BOARD COMPOSITION
The Board currently consists of ten
directors, nine of whom are non-executive,
representing a broad diversity in
background, experience, ethnicity and
gender. Above all, the Board has the right
balance of skills to oversee the Company’s
affairs while fully meeting formal corporate
governance guidelines on diversity.
Suzy Neubert, our Senior Independent
Director, will be standing down at this
year’s AGM, after serving on the Board for
11 years. On behalf of shareholders, I would
like to thank Suzy for her valuable insights,
judgment and advice over this period.
She will be succeeded as Senior
Independent Director by Rachel Beagles,
who joined the Board in 2020.
As part of the Board’s succession
planning, two new Directors joined the
Board in February and will be standing for
election at this year’s AGM. Shauna Bevan
has particular experience in selecting
investment managers for the wealth
management sector, while Shefaly
Yogendra brings wider experience from
the corporate sector. Both have board
level experience in investment trusts and I
have pleasure in welcoming each of them
to Witan’s Board.
Following these changes, after the AGM the
Board will consist of eight non-executive
directors and one executive director, our
CEO Andrew Bell. All directors stand for
re-election each year.
AGM
We very much look forward to being able
to meet shareholders again at this year’s
Annual General Meeting (‘AGM’). Our 115th
AGM will be held on 4 May 2023, at the
Merchant Taylors’ Hall. For those not able
to attend in person, there will be the
opportunity to attend the meeting
virtually and put questions to the Board.
Details will be included in the formal
notice of the meeting which will be sent to
shareholders at the end of March.
Andrew Ross
Chairman
14 March 2023
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
10
The end of the
zero rates era
CEO’s review of the year
Andrew Bell
CEO
2022 may come to be seen as the end of
an era in economic policy terms. A
prolonged period of low interest rates had
fostered speculative conditions in a range
of investment markets, from government
bonds (widely considered to be
conservative investments) to the more
speculative realms of early-stage
technology companies, crypto markets
and “non-fungible tokens”. The Russian
war in Ukraine made tackling the
inflationary consequences of the
pandemic more urgent and harder to
manage, as inflation in many countries at
the end of 2022 was more than double the
rate expected a year earlier, reaching
levels not seen since the 1980s. The
resulting squeeze on consumers’
spending power created an increasing
headwind for economic growth.
Inflationary pressures were already
building in 2021, due to the pandemic’s
shocks to demand and to the world’s
ability to supply goods and services.
When economies reopened demand
surged, while supply chains remained
disrupted and the global workforce was
reduced by mortality, sickness, early
retirement and barriers to free movement.
Allied to this, years of underinvestment in
energy supply (linked to climate change
concerns) left the world short of oil and
gas, whose supply was further disrupted
by sanctions on Russian energy exports.
Although the level of interest rates
remains low by historic standards, the
pace of increase was unusually rapid,
particularly in the US. In addition, central
banks, having been major buyers of
government bonds in recent years,
stopped buying and began to reduce
their holdings. With less liquidity available,
on more expensive terms, the price of
financial investments fell across the
board, with the greatest declines in those
which had previously inflated the most.
One eye-catching statistic is that the
price of the longest dated UK index-linked
gilt (a security with a government
guarantee of inflation protection) fell by
more than the price of bitcoin (which
carries no guarantees of anything) – a
reminder that “safety” rests upon the
price paid, not simply the product
characteristics. There was almost no
place to hide, with the energy sector a
rare positive performer in a
predominantly negative environment.
As noted in the Chairman’s Statement,
even after the initial dramatic shock to
confidence caused by Russia’s invasion of
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
11
Ukraine, sentiment remained highly
changeable throughout the year, affected
by increased concerns over inflation, the
drag on growth from rising commodity
prices, fears of conflict in Taiwan,
attempted nuclear blackmail in Ukraine
and topsy-turvy politics at home in the UK.
Most global equity regions showed local
currency declines exceeding 10%,
although these were mitigated by
sterling’s weakness, particularly against
the US dollar. The UK was a standout
performer, with a marginal positive return,
helped by its exposure to the oil and
commodity sectors. However, the UK’s
mid-sized and smaller companies indices
both suffered falls of more than 16%.
Global equities finished the year with a
loss of 8% in sterling terms, with the US
(-8%) and emerging markets (-10%) at the
weaker end, Europe down 7% and Japan
(-4%) performing relatively well.
By the year end, there were signs that
inflation was peaking in the UK and
elsewhere, although interest rates
continue to rise to counter the risk that
2022’s inflationary surge might become
entrenched. Growth forecasts for the
coming year are subdued, with much
depending on whether slowing inflation
allows central banks to take their feet off
the brakes before a global recession
ensues. One bright spot is that China’s
abandonment of its zero-Covid policy
makes it likely that its economy will grow
more rapidly in 2023 than last year, acting
as a counterweight to slowdowns
elsewhere.
WITAN’S PERFORMANCE
Witan’s NAV total return in 2022 was -10.3%,
which was 4.1% behind the 6.2% decline in
our benchmark. This was more than
entirely suffered during the market’s
immediate reaction to the Russian
invasion of Ukraine, as the remaining ten
months of the year saw our portfolio
recover around one third of the initial
setback in both absolute and relative
terms.
The past three years have seen
unprecedented events affect financial
markets and it is personally frustrating
(professionally and as a shareholder) that
Witan’s longer-term record of
outperformance has been eroded by
underperformance since 2020,
concentrated in the first quarter of 2020,
with the advent of the pandemic, and the
period leading up to the Russian invasion
of Ukraine in February 2022.
A year ago, we stated that, despite the
uncertainties created by Russia’s
aggression, our managers believed that
being positioned for a recovery from the
Covid-19 pandemic and the prospect of a
broadening economic recovery remained
appropriate, although the timing had
become less certain and the risks had
increased. So far, this has been borne out
by the subsequent recovery in
performance. It is often hardest to stick to
a strategy when the markets have just
punished it with underperformance but
(while learning from experience) it makes
no more sense to invest using the
rear-view mirror than to drive a car
looking backwards.
Witan’s portfolio is invested via a
diversified group of mainstream and
specialist managers, with well-tested and
resourced investment approaches. It
includes core holdings of quality growth
companies offering compounding
earnings growth, as well as exposure to
sectors expected to benefit from
economic growth, from decarbonisation,
and from the growth in infrastructure
spending.
PRINCIPAL PERFORMANCE DRIVERS
The financial statements on pages 89 to
114 set out the required statutory reporting
measures of the Company’s financial
performance.
The chart below shows the contributions
(in pence per share) attributable to the
various components of investment
performance and costs, which together
constitute the decline from the 267.4
pence starting NAV to the year-end NAV of
234.1 pence, after the payment of
dividends to shareholders.
NAV BRIDGE
End 2021
NAV
Portfolio
losses
Portfolio
income
Returns
from use
of gearing
Uplift
from
buybacks
Change
in value
of debt
Expenses
(inc. tax)
End 2022
NAV
Dividends
paid
Finance
costs
267.4
Pence per share
236.0
-40.5
5.6
-1.7
1.6
9.7
-2.1
234.1
-0.9
-5.7
100.0
120.0
140.0
160.0
180.0
200.0
220.0
240.0
280.0
150.0
0.0
170.0
190.0
210.0
230.0
250.0
270.0
290.0
Portfolio Costs
Dividends
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
12
A breakdown of the relative performance
attribution in 2022 (based on the
Company’s financial statements) is
shown in the table to the right.
Our portfolio managers collectively
underperformed significantly during the
year, so our overall returns lagged our
benchmark. Gearing was a drag on
returns for the first half of the year (when
our NAV hit its low point) but this was
mitigated by a positive contribution
during the second half. As in 2021, Witan
benefited from taking advantage of the
widening in our discount to buy back 7.9%
of our shares, which generated an uplift in
NAV of £10.9 million, offsetting the majority
of our ongoing charges. In addition, the
rise in gilt yields, while weighing on equity
market performance, reduced the fair
value of our fixed-rate debt, thus
benefiting the NAV.
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 2022, although small
additions were made to Jennison
following weakness in the first half. Their
concentration on companies with
exceptional growth prospects is attractive
in the longer term, with the derating seen
in 2022 offering a better entry point for
what currently remains our smallest
global manager allocation.
We increased our allocation to the GMO
Climate Change fund in June, after a
period of market weakness, reflecting our
increasing conviction in this as a
long-term growth area. The fund has
delivered strong returns since purchase in
2019 and the price dip offered a good
chance to increase our exposure.
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 on page 13. Only
three of our external managers (GMO
Climate Change, Lansdowne and Lindsell
Train) outperformed their benchmarks
during the year. Over the longer term,
since inception the majority of the
managers have outperformed their
benchmarks. The exceptions are Jennison
and WCM, our two growth specialists
which were appointed in Q3 2020, with
their relatively low allocations reflecting
the elevated valuations in parts of the
growth company universe (which have
corrected during the markets falls of
2022). Lindsell Train’s global portfolio has
lagged overall since it was adopted in
2020, due to a poor year in 2021, but they
outperformed in 2022 and have materially
outperformed for Witan since their
original appointment in 2010, albeit
running a UK portfolio from 2010 to 2019.
The principal underperformer in 2022 was
Jennison, whose portfolio was exposed
more than most to some long-term
growth companies whose ratings had
risen sharply during the period of
abundant liquidity and which came
down to earth in 2022. Their 24%
underperformance was mostly incurred
during the first half. WCM, another growth
manager, also underperformed for similar
reasons. Artemis underperformed the
relatively strong UK market, owing to its
longstanding concentration on
overlooked “self-help” opportunities in the
mid-cap part of the market. The other
notable underperformer in 2022 was the
directly-held portfolio of investment
companies (discussed in the following
section).
As noted earlier, our NAV performance in
the second half of the year improved and
was ahead of our equity benchmark over
that period. We believe our diverse range
of managers is well-positioned for 2023
which, with a number of the principal risks
substantially factored into equity prices,
has a better chance of favourably
surprising expectations than was the case
in 2022.
DIRECTLY HELD INVESTMENTS
The return on the portfolio of directly
managed investment company holdings
was -15.0%, well behind the 6.2% fall in our
composite benchmark. The principal
detractors were the two residual holdings
inherited from our holding in Electra
Private Equity PLC, one a restaurant group
and the other a specialist retailer. Clearly,
economic conditions in 2022 did not
favour either sector. Added to this, the
Electra shareholder base had little
overlap with the natural holders of two UK
micro-cap companies, leading to an
overhang, with some legacy holders (not
including Witan) wishing to sell. The
CEO’s review of the year continued
BREAKDOWN OF THE PERFORMANCE ATTRIBUTION IN 2022 (%)
Net asset value
total return -10.3 Portfolio total return (before costs) -12.3
Benchmark
totalreturn -6.2 Benchmark total return -6.2
Relative investment performance -6.1
Investment management costs -0.4
Investment contribution -6.5
Gearing impact -1.0
Borrowing costs -0.4
Gearing contribution -1.4
Effect of change in fair value of own
debt 3.6
Share buybacks 0.5
Other contributors 4.1
Other operating costs and tax -0.3
-0.3
Relative
performance
(1)
-4.1 -4.1
(1) N.B. Figures may not sum due to rounding.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
13
INVESTMENT MANAGERS’ PERFORMANCE
Appointment
date
Witan assets
managed
as at 31.12.22
(1)
Performance in 2022 %
Performance since
appointment %
Investment manager Mandate £m % Manager Benchmark Manager Benchmark
Core
Jennison Global 31.08.20 108.3 6.0 (31.2) (7.6) (6.6) 8.4
Lansdowne Global 14.12.12 313.9 17.4 (6.2) (7.6) 13.0 11.8
Lindsell Train Global 31.12.19 300.7 16.7 (5.2) (7.6) 3.8 7.8
Veritas Global 11.11.10 316.2 17.5 (10.9) (7.6) 11.7 10.6
WCM Global 31.08.20 199.8 11.1 (21.5) (7.6) 1.7 8.4
Artemis UK 06.05.08 118.9 6.5 (9.7) 1.6 7.8 5.5
Specialist
GMO Climate Change 05.06.19 106.8 5.9 0.4 (7.6) 17.1 9.3
GQG Emerging Markets 16.02.17 101.4 5.6 (10.6) (9.6) 7.0 3.7
Unquoted Growth Specialist Funds 02.07.21 32.7 1.9 (6.5) (6.2) (7.8) 0.0
Witan Direct Holdings
Specialist Funds 19.03.10 204.1 11.3 (15.0) (6.2) 9.6 8.7
(1) Percentage of Witan’s investments managed, excluding centrally managed cash.
resulting fall in value accounted for the
majority of the decline in the direct
holdings’ value.
The other main detractor was Princess
Private Equity which (for reasons of
mismanagement and poor
communication) unexpectedly cancelled
its second dividend in 2022, the
consequent loss of investor confidence
contributing to a 36% fall in the share
price total return, despite the NAV being
little changed in sterling terms. This (in our
view avoidable) action was particularly
unwelcome for a company we have
backed since 2011 and we forcefully
communicated our views to the Board.
Even after this fall, the holding has
delivered returns close to 10% p.a. over 12
years and we anticipate a restoration of
dividends in 2023 and a recovery in
performance. Syncona’s NAV fell a
resilient 3% but the price moved from a 6%
premium to a 7% discount, affected by
adverse sentiment in the biotech sector.
Similarly, Schroder Real Estate delivered a
single digit decline in NAV total return but
also derated along with the rest of the
property sector. We reduced the holding
at materially higher prices in April and,
with the dividend having increased above
pre-pandemic levels, have taken
advantage of the subsequent setback
to add.
On the positive side, a notably good
performer was BlackRock World Mining
Trust, with a 26% total return, in addition to
which we sold a significant proportion of
the holding in early 2022 at higher prices.
VH Global Sustainable Energy, which was
2% down (despite an 8% return in NAV
terms) also proved resilient.
One unusual feature this year was that
the political turmoil in the UK gave us an
opportunity to make two profitable
investments in the Gilt market, with low
risk. Witan has £155 million of long-term
fixed rate debt issued at an average yield
of under 3%. When gilt yields went
through 5% in the wake of the Truss
administration’s “fiscal event”, we invested
£24 million in a gilt closely matching the
maturity of our debt, reasoning that if gilt
prices continued to fall we could hold to
maturity, having locked in an income gain
relative to the interest rate we were
paying. In the event, the distressed
conditions in the market reversed,
allowing us to register a rapid profit. A
similar opportunity arose two weeks later,
with the gains on the two investments
totalling c.£4.3 million. Although out of the
mainstream of what we invest in, it
demonstrates our investment flexibility.
The common factor in this year’s direct
holdings underperformance was a
widening in discounts, contrasting with
generally resilient or robust underlying
business performances. This gives us
confidence in the portfolio’s prospects for
2023 and beyond.
The direct portfolio was 10.9% of the
investment portfolio at the start of the
year and 11.3% at the end of 2022. Over the
period since March 2010, it has delivered a
compound annual return of 9.6%,
outperforming Witan’s benchmark by
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
14
Secured Notes £21m
2035 3.29%
Secured Notes £54m
2045 3.47%
Secured Notes £50m
2051 2.39%
Secured Notes £30m
2054 2.74%
The Company has a £125 million one-year
borrowing facility (expandable to £150
million), providing additional flexibility
over the level of gearing, as well as
enabling the Company to borrow in
currencies other than sterling, if deemed
appropriate. The drawn balance was
£96.5 million at the end of 2022 (2021:
£98.0 million). The average interest rate on
the Company’s fixed-rate borrowings is
3.0% (2021: 3.0%). The average interest rate,
including short-term borrowings, is
currently 3.5% (2021: 2.1%).
The rise in gilt yields means that the fair
value of the Company’s fixed-rate debt
(valued based on the relevant gilt yield
+1.4%) has declined during the year and
stands at a discount to its eventual
repayment value. As in previous years
(when the fair value shift often detracted
from returns), the Company continues to
follow AIC guidance that fair valuing both
assets and liabilities is the most
appropriate basis for calculating NAVs,
while continuing to release daily NAVs
calculated with debt at par value as well
as at fair value.
Witan will either invest its long-term
borrowings fully or neutralise their effect
with cash balances according to its
assessment of the markets. The
Company’s third-party managers are not
permitted to borrow within their portfolios
but may hold cash.
DERIVATIVES ACTIVITY
An investment of £12 million was made in
US equity index futures in September and
sold for a £1 million gain in November. This
enabled Witan to invest in the US market
when it was at a low index level, without
returns being eroded by the subsequent
recovery in sterling from its politically
depressed level at the end of September.
There were no derivatives positions
outstanding at the year end.
0.9% p.a. Aside from performance, it gives
Witan’s shareholders exposure to
specialist asset categories that our core
managers (and many shareholders
themselves) do not cover.
The two specialist Unquoted Growth funds
investing predominantly in unlisted assets
amount to 1.9% of assets. Lansdowne
Opportunities Fund (0.9% of assets)
declined in value by c.24% during the year,
principally owing to the fall in price of its
largest holding, Oxford Nanopore
Technologies, since its listing in October
2021. Greenoaks Lindenwood (1.0%)
experienced a 3% decline in sterling terms,
with the strength of the dollar against
sterling mitigating a 14% fall in the dollar
valuation of its assets. Regular reports
(monthly and quarterly respectively) are
received on the funds, whose valuation
policies follow private equity guidelines.
GEARING ACTIVITY DURING THE YEAR
Gearing ranged between 10% and 14%
during the year. Although it would have
been desirable, with the benefit of
hindsight, not to be geared before the
Russian invasion, once the markets had
fallen to reflect this shock we elected to
keep our existing gearing in place and to
increase it following the sharp market
decline in the early summer. The average
gearing level of 12.5% nonetheless cost 1%
in a year of falling markets, or 1.4% after
taking account of the (mostly fixed)
interest charges. Gearing has contributed
positively to returns in seven out of the
past ten years, as illustrated in the KPI
chart on page 5.
Under its Articles of Association, the
Company may borrow up to 100% of the
adjusted total of shareholders’ funds.
However, the Board’s longstanding policy
is not to allow gearing (as defined on
page 118) to be more than 20%, other than
temporarily in exceptional circumstances.
Where appropriate, the Company may
hold a net cash position.
At the end of 2021, net gearing (the total
value of borrowings less cash) was 11.3% of
net assets. At the end of 2022, gearing (on
the same basis) was 14.2%.
STRUCTURE OF BORROWINGS
The Company has fixed-rate borrowings
(including £2.6 million preference shares)
of £158 million, consisting principally of:
2022 saw discounts widen,
contrasting with resilient
business performances,
which gives us confidence in
the direct holdings’ prospects
for 2023 and beyond
CEO’s review of the year continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
15
DIVIDEND AND REVENUE PERFORMANCE
The Company has already paid three
quarterly dividends of 1.40 pence per
share in respect of 2022 which, together
with the fourth interim dividend of 1.60
pence per share, increases the total
distribution for the year to 5.80 pence
(2021: 5.60 pence). This marks the 48th
consecutive year of dividend growth. At
the end of 2021, retained revenue reserves
were £37.5 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 £6.4
million was used towards funding the
2022 dividend (2021: £14.6 million). Revenue
reserves were £31.3 million at the end of
2022, after allowing for the fourth interim
dividend payment.
Revenue earnings per share rose by 33%
to 4.78 pence per share in 2022. The
recovery in revenue earnings has
facilitated an increase in the dividend, an
increased level of dividend cover (from
65% to 84%) and a much lower call on
past revenue reserves.
The Board has reviewed the prospects for
portfolio dividend growth in 2023 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 in
coming years, alongside continued
annual dividend growth.
2023 DIVIDENDS
The first three quarterly payments for 2023
(in June, September and December) will,
in the absence of unforeseen
circumstances, be paid at a rate of 1.45
pence per share (2022: 1.40 pence), being
one quarter of the 5.80 pence per share
full-year payment for 2022. The fourth
payment (in March 2024) 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
£1.5 billion.
The Board has always paid attention to
discount-related issues and has, over
many years, made significant use of
share buybacks, when Witan’s shares
have stood at a discount, as well as being
prepared to issue shares at a premium to
NAV to meet demand from investors. Both
actions are accretive to NAV, provide
liquidity in the market and help to
moderate discount volatility.
WITAN INVESTMENT TRUST DISCOUNT
TREND
The discount trend during the past five
years is illustrated in the chart below.
Along with others in the sector, the
discount widened significantly for much
of 2022. 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 58.2 million shares
were bought back (7.9% of the total at the
start of the year), at an average 7.8%
discount to NAV, which resulted in an uplift
to NAV of £10.9 million, or 1.6 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 5.4%
(2021: 5.8%) and the average discount
during the year was 7.8% (2021: 6.9%).
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 recent years are
evidence of this continuing commitment.
OUTLOOK
2023 began with interest rates and
economies poised close to potential
turning points. In the case of rates, after a
flurry of increases in late 2022 we may be
near a peak, even if the shape is likely to
be more like Table Mountain than the
Matterhorn. After a decade or more of
zero or negative rates, central banks will
be keen to retain more normal levels of
interest rates, quite apart from continuing
to bear down on inflationary pressures,
which may be waning but have not
disappeared. In the case of economies,
stagnation or moderate recession is
widely forecast for part of 2023 but the
interesting question is when the
headwinds from energy prices wane and
the tailwind from China’s reopening
quickens, helping engender a cyclical
recovery.
China’s abandonment of its zero-Covid
policy and likely economic acceleration
this year is a significant offset to the
expected slowdown elsewhere. China’s
WITAN DISCOUNT TO NET ASSET VALUE (%)
Dec 2017
Dec 2018
Dec 2019
Dec 2020
Dec 2021
Dec 2022
-10
-8
-6
-4
-2
0
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
16
slowdown in 2022 fortuitously blunted the
inflationary impact from commodities
and gave supply chains time to normalise
but at the cost of a dramatic slowing in its
own growth rate. Pent-up demand, a
restoration of industrial production and
determined government efforts to end
the slump in China’s property sector are
likely to mean the world’s second largest
economy is the only major centre to pick
up speed in 2023, mitigating the
weakness elsewhere.
The past year has been dominated by the
effects of President Putin’s infliction of war
and destruction on Ukraine. Although
predicting how this conflict will evolve or
be solved is hazardous, developments
that could prove less negative than in
2022 seem as plausible as the opposite.
Concerns that relations between China
and Taiwan could descend into conflict
have reduced, possibly influenced by
Russia’s problems following its own
aggression, although relations between
the US and China remain tetchy.
Falling inflation in many economies has
moderated, though not eliminated, the
risk of over-aggressive monetary
tightening and increased the possibility of
either a soft landing for the world
economy or a period of relatively mild
recession. This should allow secular
boosts to growth to take over and
favourably alter the outcome for 2024 and
beyond. 2022’s geopolitical events will
lead to higher defence spending,
resilience investment (to reduce risks from
supply chain disruption) and reshoring of
capacity for strategically important
sectors such as semiconductors and rare
earths. The energy crisis seems likely to
accelerate efforts to reduce dependence
on unreliable producers of (ultimately
undesirable) fossil fuels. We anticipate
greater infrastructure investment in
sustainable energy sources, as well as a
shorter-term boost to investment in
producing the hydrocarbons needed until
sustainable sources can render them
redundant.
Inflation seems likely to be higher in the
coming decade than was the norm prior
to 2022. Although there will be little
tolerance for the destabilising inflation
rates of the past year, indebted
governments and their central banks will
be aware that moderate inflation is an
effective way to reduce debt burdens,
particularly when it coincides with
consistent economic growth. Current
debt levels appear intractable without
stronger economic growth so
governments and central banks are likely
to seek (or condone) faster inflation than
the 2% norm of recent decades, while
placing a high priority on economic
growth, partly justified by the secular
objectives noted earlier.
Setbacks in investment markets such as
those experienced in 2022 are rarely
welcomed by those whose savings are
impacted but they produce the platform
from which better longer-terms can be
achieved. In the wake of the falls, a wider
range of assets can be rationally invested
in once more, including cash, bonds and
growth opportunities whose attractions
were compromised by over-valuation.
With 2023 having begun at a time of
privation for many and widespread
pessimism about the future, there is a risk
that some of the longer-term positive
drivers for growth in coming years are
being overlooked.
Andrew Bell
Chief Executive Officer
14 March 2023
CEO’s review of the year continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
17
Stay
in touch
The Company maintains a website
(www.witan.com), to enable
investors to keep up to date with
developments at Witan and to
make informed decisions when
considering Witan shares for their
investment portfolios. The website is
regularly refreshed with new
information and includes Investor
Disclosure and Key Information
Documents. Any investor who would
like to be kept informed by email of
developments at Witan (including
factsheets and newsletters) can
register on the Company’s website
(www.witan.com) or by sending
their details to contact@witan.co.uk.
Witan Investment Trust plc
Annual Report 2022
18
STRATEGIC REPORT
Driving sustainable businesses through a strategic approach to
responsible investment
Our responsible
investment policy
As an investment trust, we aim to make well-informed investment decisions that ensure
that the pursuit of prosperity for our shareholders is not achieved at the expense of the
environment or the wellbeing of society. We believe companies which disregard this will
fail to deliver sustainable returns to shareholders. Far from there being a conflict
between good returns and responsible investment, managing assets in line with these
principles is key to achieving good returns.
The past year saw rising inflation and
interest rates, fuelled by the Russian
invasion of Ukraine and the ensuing
energy security crisis. This has, perhaps
inevitably, led to debate over the pace of
plans to phase out fossil fuels. We
contend that the events of 2022 reinforce,
rather than negate, the need for a
sustainable transition to cleaner energy
production which, for much of the world,
will also be more secure.
Whilst there has been considerable
market volatility recently, this does not
alter Witan’s approach to responsible
investment: owning well-managed
businesses with sustainable cash flows is
key to achieving durable returns. In
addition, such businesses often benefit,
directly or indirectly, from efforts to create
a less polluted, more stable world.
DRIVING SUSTAINABLE BUSINESSES
Our policy is to ensure that by 2030 our
portfolio consists entirely of sustainable
businesses. These are businesses that are
well-run, incorporate resilient business
practices and have sustainable cash
flows. We believe they are likely to perform
better than companies which are at risk
of disruption, litigation, regulation or loss
of business because of poor ESG
practices.
IMPLEMENTING OUR POLICY
The key to success is engaging our most
important partners, namely our external
fund managers, who manage 85% of our
portfolio. Not only is it their role to invest
our capital, but they must also identify
any issues at investee companies and
engage accordingly. In 2022, we
discussed our responsible investment
framework with them and asked for their
help in developing our baseline. All
managers participated in the project and,
as a result, we were able to assess all the
companies in our listed equity portfolio.
A small proportion of our portfolio is
invested in collective funds. Although
these funds are not initially covered by
this framework, we still take ESG
considerations into account. Indeed, one
of our largest positions is the VH Global
Sustainable Energy Opportunities Fund,
which invests in infrastructure focused on
accelerating the energy transition. The
responsibility for these investments, which
account for c.15% of Witan’s portfolio, lies
with our Investment Team.
GOVERNING RESPONSIBLE INVESTMENT
The Witan Board is responsible for the
overall policy. Members of the Board and
Investment Team are responsible for its
delivery and monitoring how our
managers engage and consider
ESG-related issues.
We have embedded responsible
investment considerations across our
entire investment approach, not just in a
limited part of our portfolio. To implement
our policy, we developed four areas of
action:
• Our own responsibility;
• Fund manager engagement;
• Portfolio stewardship; and
• Industry advocacy.
Our focus is particularly on where we can
have the biggest positive impact: the
characteristics of our investment portfolio
and our engagement with the companies
in it. Our approach is adaptable and
underpinned by the belief that capital
allocation and engagement have a more
positive long-term impact than an
exclusionary approach and that blanket
exclusions (except controversial weapons)
can be counterproductive.
Our policy is to ensure that
by 2030 our portfolio
consists entirely of
sustainable businesses
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
19
Our responsible investment policy
We believe that investing in well-managed ‘sustainable businesses’ is the foundation for
achieving good returns for our shareholders, as well as for a better future for the planet’s
ecosystems and for society. Our target is to ensure that by 2030, Witan’s listed equity
portfolio will entirely consist of such businesses. For us, these businesses have the
following characteristics:
Our own responsibility
We take all the steps necessary to ensure that Witan
is itself a ‘sustainable business’ by addressing our
own carbon footprint and ensuring we have
experienced management, skilled employees and
strong corporate governance with an inclusive and
diverse culture. Our ownership structure ensures that
we are aligned with our shareholders.
Portfolio stewardship
Through our voting rights as shareholders and direct
engagement with companies, Witan works with our
fund managers to maintain a dialogue with our
portfolio businesses. As part of our active
management strategy, our fund managers hold
investments to account when they fall short of the
criteria of being a ‘sustainable business’.
Fund manager engagement
Witan ensures that our responsible investment strategy
is embedded in our own investment processes and
that these policies are integrated into the direction of
our fund managers. We regularly engage with our fund
managers to discuss our expectations and to derive
comfort that they are equipped with the insights and
tools to drive progress in their portfolios.
Industry advocacy
As a multi-manager investment fund, Witan
advocates a responsible investment approach,
through our membership of industry initiatives and
our network of fund managers.
Prosperity
People
Planet
Partnership
Sustainable cash flows, exhibiting good corporate behaviour,
strong stakeholder engagement and a respect for their
shareholders.
A clear strategy and roadmap to minimise its environmental
impact and, wherever possible, to transition towards net zero
by 2050 in line with global efforts to limit warming to not
more than 2°C and preferably 1.5°C. This includes companies
positioned to help accelerate the energy transition or carbon
reduction.
A strong and experienced management team (and Board),
with an inclusive and diverse culture respecting the
well-being of its customers, employees, suppliers and the
community.
Openness to collaboration, stakeholder engagement and
participation in industry initiatives promoting good practice.
Transparency in acknowledging mistakes and addressing
issues where they arise, working to deliver a more
sustainable future.
Witan Investment Trust plc
Annual Report 2022
20
STRATEGIC REPORT
Portfolio review
Our focus in 2022 was to establish a framework and a baseline to assess our progress
towards attaining a sustainable portfolio by 2030. Our Investment Team engaged with
our fund managers to execute this assessment and we are pleased with the outcome
and the insights to date. This will help us to set the agenda for the years ahead.
DEVELOPING OUR BASELINE
A key target of our responsible investment
strategy is to ensure that by 2030 our
listed equity portfolio consists entirely of
sustainable businesses. Having set this
objective in early 2022, our Investment
Team engaged with our fund managers
to develop a baseline. The purpose was to
assess where we are currently positioned
relative to our objective.
Identifying our baseline involved Witan
and every fund manager rating each of
their portfolio holdings across the four
pillars of prosperity, people, planet and
partnership (see page 19) that
characterise a ‘sustainable business’.
Witan provided a detailed methodology,
identifying ten individual issues (grouped
under the four pillars), to assist fund
managers in assessing each company.
SCORING OUR PORTFOLIO
The assessments were converted into a
numerical score with each company
achieving a rating of 0-100. In total, nearly
300 companies across our core and
specialist portfolios were assessed.
The weighted average assessment of
sustainability was 80 out of a possible 100.
Note that this does not mean 80% of our
holdings are completely sustainable
businesses; it means that we see an
average alignment of 80% to sustainable
practices, where companies were judged
to have sufficiently adopted sustainable
policies.
Driving sustainable businesses through a strategic approach to
responsible investment continued
WITAN SUSTAINABILITY ASSESSMENT
(1)
AVERAGE SCORE PER ISSUE ACROSS FOUR PILLARS
Band 1, 40% Band 2, 27%
Band 3, 16%
Band 4, 7%
Band 5, 6%
Band 6, 3%
Band
7,
1%
Prosperity People Planet Partnership
0
10
20
30
40
50
60
70
80
90
100
Reporting
Collaboration
Disclosure
Carbon Target
Sustainablity
Remuneration
Diversity
Compliance
Board
Engagement
(1) Sustainability bands ranked 1 (highest) to 7 (lowest); see page 21.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
21
achieve alignment with an implied
temperature rise of no more than 2°C and
preferably 1.5°C. Currently, c.24% of our
portfolio is aligned with 1.5°C with a further
20% aligned with 2.0°C. Overall, the
portfolio is currently aligned with an
implied temperature rise of 2.5°C.
This is slightly better than the 2.7°C for our
equity benchmark. These are snapshots,
which underline the importance of
monitoring progress over time.
The bottom chart below shows that we
have c. 27% of our portfolio invested in
companies designated by Morningstar/
Sustainalytics as having negligible carbon
risk. This compares favourably with our
benchmark’s 20% exposure. A further 40%
is invested in low risk and 28% in medium
risk companies. The portfolio has
approximately 5% invested in high risk
(predominantly Oil & Gas) companies and
has 0% exposure to severe carbon risk
businesses.
Another measure of a portfolio’s
environmental performance is its weighted
average carbon intensity (‘WACI’),
expressed in metric tonnes of CO
2
emitted
per million US dollars of sales. Witan’s
portfolio Scope 1+2 WACI, was 169 tCO
2
in
2022 (2021: 164 tCO
2
), while the benchmark
had a carbon intensity score of 153 tCO
2
(2021: 174 tCO
2
). Despite the uptick in WACI
(due primarily to an increased exposure to
Oil & Gas companies), Morningstar/
Sustainalytics continues to award Witan’s
portfolio its Low Carbon Designation which
is an indication that companies within the
portfolio are ‘in general alignment with the
transition to a low-carbon economy’.
The key issue is that companies are
committed to this transition rather than
already aligned to net zero. Therefore this,
and the effect of portfolio changes, means
that progress towards that target may not,
as this year demonstrates, be linear.
Additionally, we continue to focus on a
company’s contribution to long-term
global carbon reduction rather than its
own historic carbon footprint.
The lowest scoring issue, with 57%
alignment, was Remuneration, where we
examined whether companies had a
policy which ties a proportion of executive
pay to improved ‘non-financial’
sustainability outcomes, in addition to the
more common financial performance
benchmarks. We discussed this issue with
our managers at our annual ESG review
meetings and will monitor progress on this
and other aspects in the years ahead.
There will be particular focus where
progress stagnates or persistently falls
short over multiple areas.
PROGRESSING TOWARDS NET ZERO
Following our commitment to the Net Zero
Asset Managers initiative (‘NZAM’), we are
committed to reducing the carbon impact
of our portfolio to zero by 2050 at the latest.
To be aligned with net zero and therefore
the aims of the Paris Agreement on
Climate Change, our portfolio should
The result of this assessment is shown in
the top chart on page 20. Each portfolio
company scored between 0 (failing to
meet any sustainability criteria) and 100
(meeting all criteria). The 0-100 assessment
of sustainability was sub-divided into
seven equal bands with Band 1 being the
highest rating and Band 7 the lowest. 40%
of companies in our portfolio scored
above 86 and therefore sit within
sustainability Band 1 (shown in dark green
on the chart) while 83% of our companies
sit within the top three bands. Whilst we
consider this to be an encouraging result,
it should be noted that progress in some
industries (and jurisdictions) where
responsible investment is less well
developed may be harder to achieve. So, it
is possible that progress between now and
2030 will not be linear.
Interestingly, although there was a degree
of qualitative assessment involved,
divergence between individual fund
managers was low and for equities held by
two or more fund managers, the
correlation between ratings was high. In
other words, whilst the assessment
framework is new, there appears to be a
generally agreed approach to assessment
by our managers.
Although external data providers have
differing approaches, it is interesting to
note that when analysed by MSCI, our
portfolio is judged to have a weighted
average rating of AA (one notch below the
best (AAA) rating). This corroborates the
relatively high initial rating using our own
system, despite differences in the
approach.
IDENTIFYING PORTFOLIO STRENGTHS
Looking at our portfolio in a different way,
we analysed each of the 10 issues
depicted in the bottom chart on page 20.
Our portfolio scored well across the board
with over 70% of companies being aligned
with nine out of the 10 separate issues. This
analysis suggests that, whilst all issues
require some attention, most are on a
positive sustainable trajectory.
2019
2021
2022
2020
MSCI ACWIPortfolio
100
120
140
160
180
200
220
Negligible
Severe
Low
Medium
High
0
5
10
15
25
20
30
35
45
40
50
MSCI ACWIPortfolio
PORTFOLIO CARBON INTENSITY
PORTFOLIO CLIMATE
RISK ASSESSMENT
Witan Investment Trust plc
Annual Report 2022
22
STRATEGIC REPORT
Our activity
in 2022
As part of our responsible investment policy, we continued to focus on positive impact
directly and indirectly. This year we completed our first carbon footprint assessment for
Witan, engaged our fund managers on the new policy, continued our engagement and
voting activity and set our interim targets as part of our commitment to NZAM.
ADDRESSING OUR OWN IMPACT
Our direct impact, as an investment fund
with fewer than ten employees, is minimal.
Nevertheless, we have taken steps to
manage, disclose and improve our ESG
impacts. We calculated our carbon
footprint for the first time in 2022.
Witan’s direct environmental impacts
consist of energy (including electricity
and gas) used in our offices as well as our
home offices, and the transport related to
our commuting and business travel. Our
total carbon footprint came to 12.4 tCO
2
.
Our Scope 1 and Scope 2 emissions were
3.7 tCO
2
with Scope 3 emissions
accounting for the remaining 8.7 tonnes.
Our Scope 3 emissions include business
travel as well as the impacts of home
working. Our carbon intensity of 2.1 tonnes
of CO
2
compares favourably to an
average London-based firm (source:
Witan/Carbon Footprint Ltd).
SELECTING AND ENGAGING OUR FUND
MANAGERS
In addition to the portfolio review outlined
on page 20, we assess our managers’ ESG
credentials and performance through
due diligence meetings together with
portfolio analysis carried out by
Morningstar/Sustainalytics and MSCI’s ESG
Platform.
All our fund managers are signatories to
the UN Principles for Responsible
Investment (PRI) while substantially all of
the funds in our specialist portfolio are
VOTING AND ENGAGEMENT
Witan regularly reviews the voting and
engagement records of our fund
managers. Through engagement and
voting strategies, Witan and our fund
managers can help influence corporate
behaviour and ensure that our voting and
engagement is targetted at improving
shareholder returns while being aligned
with our responsible investment strategy.
In 2022, Witan’s fund managers voted on
97% (2021: 97%) of the proposals put to the
AGMs of our portfolio companies. Of those
votes, 93% were cast in favour of
management (2021: 94.2%) and 7% (2021:
5.1%) against management (see charts at
the foot of the page). The only proposals
not voted on were those which would
have resulted in ‘share-blocking’. This is
where voting would have restricted our
managers ability to trade shares in
advance of the meeting.
managed by signatories to the PRI. Half of
our fund managers are also members of
the NZAM (2021: 50%).
Looking ahead to 2023, Witan will continue
to engage regularly with our external fund
managers on responsible investment
practices. Our focus in 2023 will be on
encouraging engagement with portfolio
holdings which have been identified as
laggards on key issues within our
sustainability framework.
In 2022, votes were cast on
97% of proposals of our
portfolio companies
Driving sustainable businesses through a strategic approach to
responsible investment continued
Capital Mgmt
Remuneration
Corporate
Directors
Routine
Environmental
and social
Misc
6.793.3
0.2
0.7
0.3
0.9
1.5
0.4
2.6
VOTING SUMMARY 2022
FOR MANAGEMENT AGAINST MANAGEMENT
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
23
PROMOTING SYSTEMIC CHANGE
As the allocator of capital to businesses,
capital markets can help accelerate the
transition to a more sustainable economy
and, ultimately, improve returns for
investors. For this reason, Witan has joined
several industry initiatives to share best
practice and help contribute to the
transition.
We are signatories to the UN PRI, a
supporter of the Transition Pathway
Initiative (TPI) and a member of the
Carbon Disclosure Project (CDP).
Underpinning these commitments is our
overall engagement with the Institutional
Investors Group on Climate Change
(IIGCC). In 2022, we signalled our
commitment to the Race to Zero
campaign by becoming a signatory to
the NZAM.
As part of our engagement with NZAM, we
committed to net zero for our own as well
as our portfolio’s emissions by 2050. In
2022, we started the process of
developing our interim targets, which
have now been set.
Looking ahead to 2023, Witan will define
our NZAM commitments in more detail,
focusing on how we reduce the carbon
risk and carbon intensity of our portfolio
over coming years. We intend to do this by
encouraging portfolio companies to
reduce or eliminate emissions where
possible, rather than by divestment from
companies that are net carbon emitters.
Over the summer of 2022 we introduced
our fund managers to the framework and
worked closely with them to ensure that
this bespoke analysis was coherent and
achievable. This was essential as the
strategy would only succeed with their full
engagement. We were delighted that
every manager assessed each of their
portfolio companies and submitted the
baseline assessment of their portfolio.
Feedback suggests that they had found
this bespoke assessment to be
informative and beneficial to their own
investment processes. We are confident
that this annual appraisal will be of
significant value to Witan’s shareholders.
Our main focus was to identify practical
steps that portfolio companies were
taking to ensure their operations were
more sustainable, with the likelihood that
cash flows become more predictable
over time. The framework is therefore
grounded in a ‘real-world’ approach
which all our stakeholders can
understand and ultimately benefit from.
This approach also aims to demystify an
opaque and jargon-heavy area, which
even some professional investors still find
difficult to grasp. The 100% engagement of
our fund managers during the first year,
especially against the volatile backdrop
of the market, has been particularly
welcome.”
LAUNCHING WITAN’S RESPONSIBLE
INVESTMENT FRAMEWORK
James Hart, Witan’s Investment Director,
led on the development and
implementation of Witan’s responsible
investment strategy. Here he tells us about
what he learnt during the process. “In 2021,
the Board asked me to develop our
approach to responsible investment.
Whilst we already had ESG considerations
in place – most notably our oversight of
managers’ ESG integration – we wanted
to strengthen our approach in this area,
while assessing what was working well
and not so well in the market.
During the development process we
sounded out our stakeholders, identified
key parameters and designed our
framework to ensure the strategy would
deliver on its objectives. It was a great
opportunity to start with a blank sheet of
paper to develop a framework which we
believe will be of considerable benefit to
our shareholders, our managers, our
investee companies and to society. We
announced these further steps with the
publication of our Annual Report in March
2022.
All our fund managers are
signatories to the UN
Principles for Responsible
Investment
Capital Mgmt
Remuneration
Corporate
Directors
Routine
Environmental
and social
Misc
6.793.3
0.2
0.7
0.3
0.9
1.5
0.4
2.6
WITAN IS SIGNATORY OF:
Witan Investment Trust plc
Annual Report 2022
24
STRATEGIC REPORT
Driving prosperity and sustainable business through
responsible investing continued
the need for a carbon reduction plan,
capital expenditure to support it and
pushing the company to be a leading
advocate for change in the industry.
The manager has found Arcelor to be a
willing participant in this agenda, as
exemplified by a €1bn investment to
create the world’s first full-scale
zero-carbon emissions steel plant.
Arcelor has also committed to a 25%
reduction in carbon intensity by 2030
and a net zero commitment by 2050.
These plans, which are highly credible,
will involve footprint, scrap and energy
transformation – including a transition
to green hydrogen as a fuel source.
As such, Arcelor’s decarbonisation
strategy is amongst the best in the
world and helps them to win business
by differentiating themselves from
less-scaled, less-responsible players.
Company
ArcelorMittal
Country
Luxembourg
Sector
Industrials
CASE STUDY: PROMOTING A DECARBONISATION PLAN
ArcelorMittal Steel (Arcelor) is the largest
contributor to our portfolio’s carbon
intensity. Addressing this pollution is a
significant priority for the company, but
Arcelor is also in a position to make a
positive contribution to the net zero
transition because its steel plays a key
role in renewable energy infrastructure
such as wind and solar power. In
addition, it is likely that corporates and
consumers will source more clean,
high-quality steel and be prepared to
pay a premium for it. What did our
manager focus on in their engagement
with the company?
ADVANCING NET ZERO COMMITMENTS
In such a complex and fast-changing
environment, it’s important that Arcelor
puts a well-constructed and
communicated plan in place. Our
manager has had multiple
engagements with Arcelor emphasising
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
25
In September 2021, our manager
discussed the appointment of a new
Head of Sustainability and observed
that whilst the company is well
advanced in its sustainability initiatives,
disclosure was limited. In early 2022, the
manager noted the recent publication
of their inaugural Sustainability Report.
They arranged a follow-up meeting with
the Head of Sustainability to understand
the work she had undertaken since
joining and the preparation of the
report.
Separately, they also met the chairman
to discuss progress and the potential
introduction of sustainability metrics
into management incentive schemes.
Progress on the sustainability agenda
featured again when they met the CEO
and CFO in September 2022. In this
meeting they discussed the use of
recycled materials in workwear
garments, water recycling and the use
of environmentally friendly detergents.
Our manager believes that JSG is
making good progress on sustainability
and voted in favour of all resolutions at
the AGM. Sustainability issues will
continue to feature heavily in ongoing
and regular discussions.
Company
Johnson Service Group
Country
United Kingdom
Sector
Industrials
CASE STUDY: DRIVING SUSTAINABILITY LEADERSHIP
Johnson Service Group (JSG) is an
industrial work wear rental and laundry
service business. It is a well-run,
well-invested business delivering
consistent sales and profit growth with
a good Return on Capital Employed
(‘ROCE’). Barriers to entry are high with
significant upfront capital investment
and the importance of local network
densities to deliver returns given low
individual order values. Their major
competitor in the UK is under-invested
and highly indebted. This gives JSG
pricing power and opportunities for
further market share gains.
ENGAGING TO DRIVE SUSTAINABILITY
JSG is, however, a priority for
engagement, given the heavy energy
and water intensity of the industrial
laundry business. Prior to our initial
investment in December 2018, a key
element of our manager’s research was
to ensure the company was well
invested, as up to date equipment
brings financial benefits through lower
energy and water usage, helping
explain above industry average
margins.
Witan Investment Trust plc
Annual Report 2022
26
STRATEGIC REPORT
Meet the managers
We act as a one-stop shop for global equity
investment. We search for the best fund
managers internationally, so the portfolio is
notreliant on the stock-picking skills of one
individual. The multi-manager team-based
approach ensures that the portfolio embraces
many companies, sectors and geographies.
However, the sheer variety of investment
opportunities means that they are not always
obvious or easy to reach.
Andrew Bell
Chief Executive Officer,
Witan Investment Trust
James Hart
Investment Director,
Witan Investment Trust
Andrew Bell and James Hart
manage Witan’s portfolio of
direct holdings in specialist
investment companies, as well
as having overall responsibility
for Witan’s investment portfolio,
under the direction of the Board.
Our breadth of expertise adds value throughout the asset allocation process as follows:
Structuring our portfolio
Witan’s investment team
Drawing on our experience to deliver collective wisdom
Some managers focus on large, well-known
companies; while others might seek to profit
from pioneering businesses in specialist
sectors. However, investment opportunities
evolve over time. When that happens, we can
appoint or replace managers accordingly.
Engaging
with
managers
Making
changes
where
appropriate
Selecting
the right
managers
Monitoring
the portfolio
Identifying
opportunities
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
27
We identify managers who can
demonstrateindependence of thought
anda clear alignment of interest between
themselves and their clients. They will
haveaclearly articulated and repeatable
investment process, a high degree
of intellectual rigour and sound judgement
to enable them to identify attractive
companies and combine them into
concentrated, differentiated portfolios.
We meet with our managers regularly
todiscuss investment and governance
issues and we expect them to uphold
thehighest fiduciary standards. As part
ofour investment process, we can adjust
manager selection and allocations to
ensure we create a combined portfolio
which can deliver consistent long-term
outperformance, while our multi-manager
structure helps reduce the risks associated
with a single management style.
The core portfolio accounts for 75%
It is predominantly invested in global,
large cap listed companies with strong
fundamentals generating enduring cash
flows or with underappreciated growth
prospects. Our core portfolio managers
tend to have concentrated, high-conviction
portfolios with low portfolio turnover.
The specialist portfolio accounts for 25%
It provides exposure to a range of
investment themes best accessed
through managers with specialist
knowledge. Through our due diligence
process, we identify long-term themes
which offer the ability to deliver higher
returns and outperformance. Current
investment themes include:
> Climate change;
> Emerging markets;
> Unquoted growth companies;
> Listed private equity; and
> Life sciences.
These are held either via segregated
portfolios, or funds held within the
directholdings portfolio.
Selecting the
right managers
Identifying
opportunities
Monitoring and
engaging with
our managers
Core portfolio
Specialist portfolio
What sets Witan apart is our unique,
diversified but high-conviction portfolio
structure, consisting of two distinct but
complementary elements: core and
specialist. This gives shareholders access
to a range of investments with the aim
ofproviding better returns over the long
term while short-term performance
maybe quite different from that
oftheCompany’s benchmark.
Witan Investment Trust plc
Annual Report 2022
28
STRATEGIC REPORT
JENNISON ASSOCIATES,
LLC
Mark Baribeau, Head of
Global Equities at Jennison
Associates, seeks to invest in
a portfolio of market-leading
companies with innovative
business models, positively
inflecting growth rates,
and long-term competitive
advantages. Mark, along
with co-portfolio manager
Tom Davis and a team
of global sector analysts,
employs a high-conviction,
concentrated approach
thatis sector, region and
country-agnostic. The
team invests in a select
group of companies with
innovative and disruptive
businesses that are driving
structural shifts in their
respective industries. They
also look for companies
with defensible business
models and attractive
product offerings, supported
by secular demand trends.
The portfolio typically has
between 35 and 45 holdings
and securities must meet
stringent standards in
order to remain or earn
a place in the portfolio.
Name:
Mark Baribeau
Style:
Companies with exceptional
growth prospects
Benchmark:
MSCI ACWI
Inception date:
31/08/2020
UNPRI signatory:
Yes
6.0%
Witan assets
2021: 6.3%
2022 performance
Jennison
Associates, LLC
(31.2)%
MSCI ACWI
(7.6)%
LANSDOWNE PARTNERS
Founded in 1998, Lansdowne
Partners has evolved to
become one of the UK’s
pre-eminent investment
management boutiques.
The Long Only Developed
Markets Strategy, managed
by Peter Davies and
Jonathon Regis, combines
a detailed thematic
approach with rigorous
companyanalysis to
identify anadaptable
portfolio positioned
forunderappreciated or
contrariantrends. The two
lead managers benefit
from the support provided
by a team of experienced
and insightful analysts who
tend to focus on key sectors
of interest to the team.
The high-conviction
portfolio is the result of
detailed company-specific
research, allied with an
appreciation of global
thematic developments.
The team is willing to make
significant adjustments
to the portfolio to reflect
its view of the changing
investment landscape.
Name:
Peter Davies
Style:
Concentrated, benchmark-
independent investment in
developed markets
Benchmark:
MSCI ACWI
Inception date:
14/12/2012
UNPRI signatory:
Yes
17.4%
Witan assets
2021: 18.9%
2022 performance
Lansdowne
Partners
(6.2)%
MSCI ACWI
(7.6)%
Core portfolio managers
We have six portfolio managers in our core portfolio.
Meet the managers continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
29
VERITAS ASSET
MANAGEMENT
Andy Headley, Head of
Global Strategies at Veritas,
uses a number of research
methods to help identify
industries and companies
that are well positioned to
benefit from medium-term
growth, regardless of where
they are located. The aim is
to generate excellent real
returns and minimise the risk
of permanent capital loss.
Potential investments are
analysed from an absolute
basis rather than relative
to any benchmark or index.
This equity portfolio follows
a Global Focus strategy,
investing with a disciplined
approach to valuation
in ‘quality’ mid to large
capitalisation companies.
It typically contains fewer
than 30 stocks, chosen
with a highly selective and
rigorous approach, and
is focused on a handful
of investment themes.
Name:
Andy Headley
Style:
Real return objective from
high-quality companies
Benchmark:
MSCI ACWI
Inception date:
11/11/2010
UNPRI signatory:
Yes
17.5%
Witan assets
2021: 18.7%
2022 performance
Veritas Asset
Management
(10.9)%
MSCI ACWI
(7.6)%
LINDSELL TRAIN
Lindsell Train, headed by
Nick Train and Michael
Lindsell, is guided by four
investment beliefs: investors
undervalue durable,
cash-generative business
franchises; concentration
can reduce risk; transaction
costs are a ‘tax’ on returns;
and dividends matter even
more than you think. These
tenets have led to the
creation of a high-conviction
portfolio of approximately 20
stocks which they describe
as “rare and beautiful
assets” with a focus on
those businesses with
truly sustainable business
models and/or established
resonant brands. In building
the portfolio they focus on
companies demonstrating
long-term durability in
cash and profit generation.
Lindsell Train Limited is a
small company with about
28 employees. This small size
allows the two founders and
their team the freedom to
concentrate on investment
issues. The ownership
structure allows the partners
to focus on long-term
performance rather than
short-term market ‘noise’.
This clear sense of purpose
and single-minded pursuit
of investment excellence is
a key distinguishing feature
of Lindsell Train’s approach.
Name:
Nick Train and Michael Lindsell
Style:
Long-term growth from
undervalued brands
Benchmark:
MSCI ACWI
Inception date:
01/09/2010
(1)
UNPRI signatory:
Yes
(1) Lindsell Train managed a UK
portfolio from 01/09/10 until 31/12/19.
16.7%
Witan assets
2021: 14.7%
2022 performance
Lindsell Train
(5.2)%
MSCI ACWI
(7.6)%
Core portfolio managers
We have six portfolio managers in our core portfolio.
Witan Investment Trust plc
Annual Report 2022
30
STRATEGIC REPORT
WCM INVESTMENT
MANAGEMENT
Based in Laguna Beach,
California, WCM is an
independent asset
management firm that
runs focused portfolios,
comprised of high-quality
businesses with growing
economic moats, aligned
with strong, adaptable
corporate cultures, and
supported by durable global
tailwinds. The portfolio is
concentrated in 30-40 high-
conviction investments with
the objective of securing
long-term excess return
and downside protection.
As an active manager, WCM
believes that their investee
companies have meaningful
structural advantages
which, when allied with
a ‘buy and manage’ low
turnover approach, will allow
long-term outperformance
of the relevant benchmark.
Name:
Mike Trigg
Style:
High-quality companies with
strong culture and increasing
competitive advantage
Benchmark:
MSCI ACWI
Inception date:
31/08/2020
UNPRI signatory:
Yes
11.1%
Witan assets
2021: 11.5%
2022 performance
WCM
(21.5)%
MSCI ACWI
(7.6)%
Core portfolio managers
ARTEMIS
Derek Stuart, Andy Gray and
Henry Flockhart co-manage
Artemis’s UK Special
Situations strategy. Their
aim is to achieve superior
long-term growth by looking
for unrecognised growth
potential in companies,
often those that are unloved
or out of favour. The strategy,
which favours smaller and
medium-sized companies,
identifies hidden value
within ‘problem investments’,
which can be companies in
need of new management
or refinancing or suffering
from investor indifference.
The focus on those
companies which can
help themselves rather
than relying on a change
in the business climate
aims to avoid ‘value traps’
and other risks associated
with a ‘special situations’
strategy. The Artemis team
places great emphasis
on personal knowledge of
management teams and
meets with them regularly.
This helps them understand
what can be achieved and
how aligned management
are with shareholders.
The portfolio typically has
fewer than 50 holdings.
Name:
Derek Stuart
Style:
Recovery/special situations
Benchmark:
MSCI UK IMI
Inception date:
06/05/2008
UNPRI signatory:
Yes
6.5%
Witan assets
2021: 6.1%
2022 performance
Artemis
(9.7)%
MSCI UK IMI
1.6%
Meet the managers continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
31
Specialist portfolio managers
Each of our specialist portfolio managers is an expert in one of our chosen themes.
GQG PARTNERS
GQG Partners’ Emerging
Markets Equity strategy
seeksto invest in high-
quality companies with
attractively priced future
growth prospects. The
portfolio management
team, led by Rajiv Jain,
focuses primarily on
high-quality, large-cap
companies in emerging
market economies and
employs a fundamental
investment process to
evaluate each business.
Theresulting portfolio,
whichis constructed without
reference to benchmark
country weights, seeks to
limit downside risk while
providing attractive returns
to long-term investors over
afull market cycle. GQG
Partners’ portfolio aims to
participate in the growth
that emerging economies
promise to deliver over the
long term, while avoiding
some of the risks that are
often associated with
individual countries
andstocks within their
investment universe.
GMO
GMO was co-founded in
1977by the well-known
investor and climate-
focused philanthropist,
Jeremy Grantham.
The investment process is
grounded in a long-term,
valuation-based investment
philosophy – an approach
which GMO believes
provides the best risk-
adjusted returns. The
Climate Change strategy
seeks to deliver high total
return by investing primarily
in equities of companies
that are positioned to
benefit, directly or indirectly,
from efforts to curb or
mitigate the long-term
effects of global climate
change, to address the
environmental challenges
presented by global climate
change, or to improve the
efficiency of resource
consumption. As climate
change is among the most
important investment issues
facing investors today, GMO
believes that there are
exceptional opportunities
forlong-term investors in a
world mobilising to address
climate change.
Name:
Rajiv Jain
Style:
High-quality companies
withattractively priced
growth prospects
Benchmark:
MSCI Emerging Markets
Inception date:
16/02/2017
UNPRI signatory:
Yes
Name:
Lucas White
Style:
Companies positioned to
benefit from climate change
mitigation/adaptation efforts
Benchmark:
MSCI ACWI
Inception date:
05/06/2019
UNPRI signatory:
Yes
5.6%
Witan assets
2021: 6.5%
5.9%
Witan assets
2021: 4.7%
2022 performance
GQG Partners
(10.6)%
MSCI Emerging
Markets
(9.6)%
2022 performance
GMO
0.4%
MSCI ACWI
(7.6)%
Witan Investment Trust plc
Annual Report 2022
32
STRATEGIC REPORT
Meet the managers continued
Specialist portfolio managers
Name:
Witan
Style:
Specialist collective funds
Benchmark:
Witan’s benchmark
Inception date:
19/03/2010
UNPRI signatory:
Yes
11.3%
2021: 10.9%
1.9%
2021: 1.7%
2022 performance
Direct Holdings
Unquoted Growth
(15.0)%
(6.5)%
Benchmark
(6.2)%
DIRECT HOLDINGS
Private equity
Apax Global Alpha (3.0%)
(1)
Extensive portfolio of private
equity investments in
growing sectors.
Princess Private Equity (1.8%)
(1)
Portfolio of private equity
investments managed by
Swiss-based Partners Group.
Unbound (0.04%)
(1)
Multi-brand retail platform
(formerly Electra Private
Equity).
Hostmore (0.1%)
(1)
Owner and operator
ofTGIFriday’s UK casual
dining franchise spun
outofElectra.
Life sciences
Syncona (1.4%)
(1)
A healthcare investment
company focused on
founding, building and
funding global leaders in
innovative life sciences.
S&P Biotech ETF (0.6%)
(1)
Seeks to replicate the
performance of the equal
weighted S&P Biotechnology
Select Index.
The Biotech Growth Trust
(0.2%)
(1)
Investment in the worldwide
biotechnology industry.
Commodities
BlackRock World Mining
(1.6%)
(1)
Fund investing in mining and
metal assets worldwide,
principally via listed
securities.
Real estate
Schroder Real Estate (0.9%)
(1)
Fund of UK commercial
realestate investments.
Clean Energy
VH Global Sustainable
Energy (1.6%)
(1)
Diversified energy
infrastructure investments
focused on accelerating
theenergy transition.
Credit
NB Distressed Debt (0.4%)
(1)
Portfolio of distressed,
stressed and special
situations investments
inrealisation situations.
UNQUOTED GROWTH
Lansdowne Opportunities
(0.9%)
(1)
Invests mostly in unquoted
companies capitalising on
the intellectual property
ofleading universities.
Lindenwood (1.0%)
(1)
Invests in unquoted,
highgrowth companies,
seeking the next generation
of technology leaders.
A selection of specialist collective funds investing in both
quoted and unquoted companies, with the overall objective
of outperforming Witan’s equity benchmark. These specialist
themes tend to be outside the scope of investment for most
equity investment managers.
(1) Percentage of Witan’s assets
(1)
(1)
Direct Holdings
Unquoted Growth
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
33
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
34
Top 40 investments as at 31 December 2022
Company
Market
value of
holding
£m
% of
portfolio
1 GMO Climate Change
Specialist fund investing in companies which benefit from efforts to
curb or mitigate the effects of climate change
106.8 6.1
2 Apax Global Alpha
Investment company offering exposure to private equity investments
in the Technology, Services, Healthcare and Consumer sectors
52.2 3.0
3 Unilever
Multi-national consumer goods company with food, home care and
personal care divisions
35.8 2.0
4 BP
UK-based global energy company 33.3 1.9
5 Princess Private Equity
Investment company providing exposure to a portfolio of private
equity investments
31.0 1.8
6 NatWest Group
A UK-based banking and financial services company 29.2 1.7
7 BlackRock World Mining
Diversified fund investing in mining and metal assets worldwide 28.5 1.6
8 VH Global Sustainable Energy
An infrastructure fund focused on the energy transition 27.9 1.6
9 Microsoft
Operating systems, server applications, business and consumer
applications, software development tools and internet software
26.1 1.5
10 Syncona
Healthcare fund focused on founding, building and funding a portfolio
of innovative life science companies
23.9 1.4
11 Thermo Fisher Scientific
Offers medical products and services to the pharmaceutical and
biotech industry, hospitals and research & diagnostic organisations
23.5 1.3
12 Diageo
UK-based global leader in spirits and liqueurs. Also owner of the
Guinness beer brand
22.9 1.3
13 Heineken
The world’s second largest brewer offering premium brand and
zero-alcohol beers
22.7 1.3
14 Canadian Pacific Railway
Transcontinental railway providing freight and container services
across its network in Canada and the United States
22.4 1.3
15 AIB
Irish bank offering commercial banking services to retail and
institutional customers
22.4 1.3
16 UnitedHealth
A leading US health insurer offering plans and services to group and
individual customers
22.2 1.3
17 Nintendo
Gaming console company which develops, manufactures and sells
video game hardware and software
21.1 1.2
18 Mastercard
A global leader in the provision of financial transaction processing
services
21.1 1.2
19 RELX
Global provider of information and analytics for professional and
business customers across industries
20.9 1.2
20 PepsiCo
A leading global beverage and convenience food company 20.8 1.2
Top 20 614.7 34.8
The top ten holdings represent 22.4% of the total portfolio (2021: 20.3%).
The full portfolio is not listed because it contains over 250 companies.
Figures may not sum due to rounding.
Forty largest investments
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
35
Top 40 investments:
Company
Market
value of
holding
£m
% of
portfolio
21 Mondelez
A food and beverage company which manufacturers world leading
snack foods and chocolate brands
20.6 1.2
22 London Stock Exchange
Operates international equity, bond and derivatives markets and
provides indexing and financial data services
19.6 1.1
23 Alphabet
The holding company for Google 19.1 1.1
24 Shell
A global integrated energy company 18.5 1.0
25 Safran
Supplies aerospace and defence systems with a focus on aircraft
engines, propulsion systems and ancillary services
18.1 1.0
26 Lindenwood
A fund investing in unquoted, high growth companies, seeking the
next generation of technology leaders
16.9 1.0
27 Intuit
Develops and markets business and financial software solutions 16.9 1.0
28 ArcelorMittal
A leading integrated steel production company 16.8 1.0
29 Lloyds Banking
UK bank offering banking and financial services to retail and
institutional customers
16.5 0.9
30 Vinci
A global leader in construction and concessions management with
expertise in building, civil, hydraulic and electrical engineering
16.1 0.9
31 Lansdowne Opportunities Fund
A fund investing mostly in unquoted companies capitalising on the
intellectual property of leading universities
15.8 0.9
32 World Wrestling Entertainment
A media and entertainment company operating as producer and
promoter of live wrestling events and associated merchandise
15.6 0.9
33 Charter Communications
US cable telecommunications company offering broadcasting,
internet, voice, entertainment and business services
15.3 0.9
34 Amazon.com
Online retailer and cloud-based platform provider 15.3 0.9
35 Schroder Real Estate
Fund of UK commercial real estate investments 15.2 0.9
36 Shiseido
Developer, producer and distributor of luxury cosmetics both in Japan
and globally
14.8 0.8
37 Bank of Ireland
Irish bank offering banking and financial services to retail and
institutional customers
14.4 0.8
38 Ryanair
Europe’s largest airline offering low fare passenger services to
destinations across Europe
13.7 0.8
39 Novo Nordisk
World-leading pharmaceutical company focusing on diabetes care 13.2 0.7
40 LVMH
Luxury goods company producing and selling wine, cognac,
perfumes, cosmetics, luggage, watches and jewellery
13.1 0.7
Top 40 940.2 53.4
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
36
Classification of investments
at 31 December 2022
North
America
%
United
Kingdom
%
Continental
Europe
%
Asia
(ex Japan)
%
Japan
%
Latin
America
%
Other
(1)
%
Total
2022
%
Energy Energy
0.4 1.9
1.6
0.4 – 0.4 – 4.7
0.4 1.9
1.6
0.4 – 0.4 – 4.7
Materials Materials
1.6 1.5
2.3
0.7 – 0.5 0.3 6.9
1.6 1.5
2.3
0.7 – 0.5 0.3 6.9
Industrials Capital Goods
1.7 1.8
4.8
0.1 0.1 – – 8.5
Commercial & Professional
Services
0.7 1.4
–
– – – – 2.1
Transportation
2.1 0.5
1.9
– – – – 4.5
4.5 3.7
6.7
0.1 0.1 – – 15.1
Consumer
Discretionary
Automobiles & Components
0.2 0.2
0.7
– – – – 1.1
Consumer Durables &
Apparel
0.1 0.2
2.0
0.1 – – – 2.4
Consumer Services
0.1 0.6
0.7
– – – – 1.4
Retailing
1.6 0.2
–
– – 0.2 – 2.0
2.0 1.2
3.4
0.1 – 0.2 – 6.9
Consumer Staples
Food & Staples Retailing
0.4 0.2
–
– – – – 0.6
Food, Beverages & Tobacco
2.8 1.5
2.5
0.4 – 0.1 – 7.3
Household & Personal
Products
– 2.0
0.2
– 1.3 – – 3.5
3.2 3.7 2.7 0.4 1.3 0.1 – 11.4
Healthcare
Healthcare Equipment &
Services
3.8 –
0.1
0.5 – – – 4.4
Pharmaceuticals,
Biotechnology & Life
Sciences
4.2 0.6
0.9
0.2 0.3 – – 6.2
8.0 0.6
1.0
0.7 0.3 – – 10.6
Financials Banks
– 3.1
2.1
1.3 – 0.4 – 6.9
Diversified Financial Services
1.6 2.0
–
0.1 0.2 0.1 – 4.0
Insurance
0.4 0.1
–
0.1 – – 0.1 0.7
2.0 5.2
2.1
1.5 0.2 0.5 0.1 11.6
Information
Technology
Software & Services
7.1 0.1
0.3
– – – – 7.5
Technology Hardware &
Equipment
0.9 0.6
–
– 0.2 – – 1.7
Semiconductors &
Semiconductor Equipment
1.7 –
0.4
0.2 0.1 – – 2.4
9.7 0.7
0.7
0.2 0.3 – – 11.6
Communication
Services
Communication Services
– 0.6
–
0.2 – 0.1 – 0.9
Media & Entertainment
4.2 0.3
–
– 1.2 – – 5.7
4.2 0.9
–
0.2 1.2 0.1 – 6.6
Utilities Utilities
0.1 0.1
0.2
0.1 – 0.2 – 0.7
0.1 0.1
0.2
0.1 – 0.2 – 0.7
Real Estate Real Estate
0.1 0.2
–
– – – – 0.3
0.1 0.2
–
– – – – 0.3
Investment Funds
(1)
Investment Companies
– –
–
– – – 11.6 11.6
Unquoted Funds
– – – – – – 2.0 2.0
– –
–
– – – 13.6 13.6
Total 2022
35.8 19.7
20.7
4.4 3.4 2.0 14.0 100.0
Total 2021
38.1 20.2
16.9
5.2 3.0 1.0 15.6 100.0
(1) Investment Funds are included under the heading of Other because the underlying geographic exposure is not readily identifiable.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
37
Principal risks and uncertainties
The directors have carried
outarobust assessment of
theemerging and principal
risksfacing the Company,
including those that would
threaten itsbusiness model,
future performance, solvency,
liquidity or reputation. These
risks, and the actions taken
tomitigate them, are set
outbelow.
Risks are inherent in investment and
corporate management. It is important
toidentify risks and ways to control or
avoid them. Witan Investment Services
Limited (‘WIS’) has a Risk Committee in
order to monitor compliance with its risk
management and reporting obligations
as Witan’s Alternative Investment Fund
Manager (‘AIFM’). The Company maintains
a framework of the key risks, with the
policies and processes devised to
monitor, manage and mitigate them
where possible. Its detailed risk map
isreviewed regularly by the Audit & Risk
Committee and the WIS Risk Committee,
which report on pertinent issues to their
respective Boards.
The guiding principles remain
watchfulness, proper analysis, prudence
and a clear system of risk management.
Where appropriate, the Witan and WIS
Boards meet jointly to cover matters of
common interest. The WIS Board consists
of five non-executive directors and one
executive director who are also directors
of Witan, and one executive director who
is a Company employee.
The Board’s policy onrisk management
has not materially changed during the
course of the reporting period and up
tothe date of thisreport.
The Company’s key risks fall broadly under the following categories:
ReducedUnchangedIncreased
Market and investment portfolio
RISK MITIGATION
As an equity fund, a key risk of investing is a
general fall in equity prices and investment
income, which could be exacerbated by
gearing and the risks associated with the
performance of its investment managers
and changes in Witan’s share price rating.
Other risks are the portfolio’s exposure to
country, currency, industrial sector and
stock-specific factors (including those
relating to the sustainability of the business
model taking account of environmental,
social and governance factors). Political
andmacroeconomic topics such as Brexit,
inflation, pandemics (e.g. Covid-19), trade
wars and military conflicts (e.g. the Russian
invasion ofUkraine) can all be expected to
lead to market volatility.
The Board seeks to manage these
risksthrough:
a broadly diversified equity benchmark;
appropriate asset allocation decisions;
selecting competent managers and
regularly monitoring their performance,
awareness of emerging risks and the
robustness of their processes for taking
account of those risks;
paying attention to key economic
andpolitical events;
engagement with shareholders and
other stakeholders;
active management of risk, whether
topreserve capital or capitalise
onopportunities;
the application of relevant policies
ongearing and liquidity; and
share buybacks and issuance
torespond to market supply
anddemand.
During the year, Andrew Bell, the CEO,
managed the overall business and the
investment portfolio in accordance with
limits determined by the Board and the AIFM,
onwhich the CEO reports at each Board
meeting. The Board also regularly reviews
investment strategy and performance,
supported by comprehensive management
information and analysis.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
38
The Company breaches compliance/
regulatory requirements or fails to
assessthe impact.
The Board takes its regulatory
responsibilities very seriously and
compliance issues and potential
regulatorychanges are regularly
reviewedby the Boardand its AIFM.
Details of the Company’s corporate
governance policies are set out in the
Corporate Governance Statement on
pages48 to 58. The Board conducts an
annual assessment of the effectiveness
ofits governance processes.
There is also a three-yearly independent
external review, the most recent of which
was in 2021. See page 57 for further details.
Following the closure of the Company’s
savings plans, the risks associated with the
holding of and accounting for client assets
has been substantially reduced and will be
eliminated in future.
Operational and regulatory risks are
regularly reviewed by Witan’s Audit & Risk
Committee and WIS’s Risk Committee.
WISissubject to its own operating rules and
regulations and is regulated by theFinancial
Conduct Authority (‘FCA’). The Company
hasestablished a modus operandi for the
effective coordination ofits responsibilities
and those of WIS, asitsAIFM.
Operationally, the multi-manager structure
is robust, as the investment managers,
thecustodian and the fund accountants
keep their own records which are regularly
reconciled. The depositary, the AIFM and
theBoard provide additional checks and
safeguards. Management monitors the
activities of all third parties and reports
anysignificant issues to the Board.
Compliance and regulatory change
RISK MITIGATION
Accounting, taxation and legal
RISK MITIGATION
The Company must comply with sections
1158-59 of the Corporation Tax Act 2010 (‘CTA’).
A breach could result in the Company
losinginvestment trust status and, as
aconsequence, capital gains realised
wouldbe subject to corporation tax.
The Company must comply with the
provisions of the Companies Act 2006
(‘Companies Act’) and with the UK Listing
Authority’s Listing Rules and Disclosure Rules
(‘UKLA Rules’). A breach of the Companies
Act could result in the Company and/or
thedirectors 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
theCTA.
The accounting requirements are monitored
by the CEO and AIFM and the Company
carefully monitors compliance with the
applicable rules.
These requirements offer significant
protection for shareholders. The Board
receives reportsfrom the CEO, the AIFM,
theCompany Secretary and the Company’s
professional advisers to enable it to ensure
compliance with all applicable rules. WIS is
authorised and regulated by the FCA to act
as the AIFM forWitan.
Operational and cyber
RISK MITIGATION
Many of the Company’s financial systems
are outsourced to third parties, principally
BNP Paribas London Branch (‘BNP Paribas’).
Disruption to their accounting, payment
systems or custody records could prevent
the accurate reporting and monitoring of
the Company’s financial position.
The Witan and WIS Executive undertake
adetailed due diligence programme,
focusedupon the operational and
cyberarrangements of all the Company’s
suppliers. BNP Paribas as the Company’s
depositary, has a key responsibility for
monitoring such issues on behalf of the
Company. The Board and AIFM monitor the
depositary as well as its other suppliers.
Details of the Board’s monitoring and
controlprocesses are explained further
inthe Corporate Governance Statement
onpages48 to 58.
Principal risks and uncertainties continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
39
Liquidity
RISK MITIGATION
The Company’s portfolio of securities
mightnot be realisable.
The Company’s portfolio consists mainly
ofreadily realisable securities. The
Companyand its AIFM regularly review
liquidity needs(for example, operational
costs, loanservicing and repayment,
shareholder dividends and share buybacks)
relative to the Company’s portfolio income
and the value and tradability of the
Company’s assets.
Most of the likely liquidity requirements are
foreseeable (for example, timetabled loan
payments and dividends) while others
(suchas share buybacks) are subject to
theCompany’s discretion. The Board is
satisfied that unexpected liquidity needs
arenot significant and could readily be
metwithout compromising normal
portfoliomanagement.
Environmental, social and governance factors
RISK MITIGATION
Failure to identify, understand or mitigate the
risks arising from ESG issues may negatively
impact investment returns, increase the
potential forreputation risk to Witan and
adversely affect the net asset value and/or
price of Witan’s shares.
Witan has a responsible investment policy
which was developed by the Board in
consultation with Witan’s Executive team.
This is discussed fully on pages 18 to 25 of
this Report. Witan expects its external
managers to integrate ESG factors into their
investment processes. Witan requires
managers to report on any ESG issues in a
timely manner and the Executive monitors
the portfolios using various third-party data
providers to ensure that such issues are
being identified. Managers are also
expected to report on engagement and
voting activities. The Executive holds regular
ESG review meetings with each of the
managers where these activities, as well as
evolving best practice and new responsible
investment initiatives, are discussed. The
Executive presents its findings to the Board
on a regular basis.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
40
Section 172: engaging with
our stakeholders
Who?
STAKEHOLDER GROUP
Why?
THE BENEFITS OF ENGAGEMENT
WITH OURSTAKEHOLDERS
How?
HOW THE BOARD AND WIS EXECUTIVE
ENGAGED WITH OUR STAKEHOLDERS
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
Outcomes and actions
WHAT ACTIONS WERE TAKEN, INCLUDING
PRINCIPAL DECISIONS?
Investors
Clear communication of our strategy and
theCompany’s performance against our
objective can help the share price trade at
anarrower discount or a premium to its net
asset value, which benefits shareholders.
New shares may be issued at a premium
toNAV to meet demand without dilution to
existing shareholders. Increasing the size of
the Company can benefit liquidity as well
asspread costs.
WIS, on behalf of the Board, completes a programme of investor
relations throughout the year.
Key mechanisms of engagement included:
AGM
The Company’s website which hosts reports, monthly
factsheets, video interviews with the external managers,
CEO,Investment Director and regular market commentary
Online newsletters
One-on-one meetings with professional investors with
eitherthe CEO, Investment Director or Chairman
Group meetings with professional investors with
ourexternalmanagers
Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs
and objective, and the selection and monitoring of our external managers.
Impact of dividend cuts on the Company’s revenues and the
Company’s dividends
See page 9 in the Chairman’s Statement and page 15 in the CEO’s
Review for the Board’s comments on the dividend policy
Share price performance and the Company’s and wider
investment trust sector discounts
The Company maintained a high rate of share buybacks. See
page 15 in the CEO’s Review
The integration of ESG into the Company’s investment processes ESG included in presentations to investors, ad hoc updates
Informing investors of their rights to attend and vote in the AGM Holders of shares via online platforms were written to, informing
them of how they could vote and view the Annual Report
Ongoing impact of Russia/Ukraine conflict on economies
and markets
The WIS Executive held regular meetings with shareholders
throughout the year and provided updates via the Company’s
website and newsletters on performance of the Company as well
as the usual financial reports and monthly factsheets
Ongoing impact of inflationary pressure on economies
and markets
The WIS Executive held regular meetings with shareholders
throughout the year and provided updates via the Company’s
website and newsletters on performance of the Company as well
as the usual financial reports and monthly factsheets
External
managers
As Witan has a multi-manager approach,
engagement with our managers is necessary
to evaluate their performance against their
stated strategy and benchmark and to
understand any risks or opportunities this
maypresent to the Company. This also
helpsensure that investment management
costs are closely monitored and remain
competitive. Witan ensures that all
managersare paid in accordance
withtheirterms of trade.
The WIS Executive meets with the Company’s external managers
throughout the year and receives monthly performance and
compliance reporting. This provides the opportunity for both the
manager and WIS Executive to explore and understand how and
why the relationship has performed and what may be expected
inthe future. Each manager also presents annually to the Board
ofdirectors, providing the opportunity for the manager and Board
to reinforce their mutual understanding of what is expected from
all parties.
Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and
business updates.
The integration of ESG into each manager’s investment processes See pages 22 to 25 in responsible investment for a report on
manager activity in 2022.
Engagement with managers to ensure third-party internal
control reporting is in place.
All service providers engaged and supplied requested
information for the due diligence exercise to be completed. In one
case, the manager committed to engage third-party internal
control reporting where this was not in place.
Service
providers
Witan and WIS contract with third parties
forother services including: custodian;
depositary; investment accounting
andadministration; and company secretarial.
Ensuringthe third parties to whom we have
outsourced services complete their roles
diligently and correctly is necessary for
theCompany’s success.
Witan pays all service providers in
accordance with their terms of business and
is a signatory to the Prompt Payments Code.
The WIS Operations team engages regularly with all service
providers both in one-to-one meetings, via regular written
reporting and an annual due diligence exercise. This regular
interaction provides an environment wheretopics, issues and
business development needs (including current inflationary
pressures and the impact of the cost of living crisis on their
service) can bedealt with efficiently and collegiately.
The Audit and Risk Committee reviews annually a summary of
significant contracts to further reinforce the overviewof the
Company’s service providers at the corporatelevel. Furthermore,
the Audit and Risk Committee review the annual due diligence
exercise that includes, where appropriate, service providers’
third-party internal control reports.
Annual due diligence exercise undertaken. All service providers engaged and supplied requested
information for the due diligence exercise to be completed.
Employees
Attract and retain talent to ensure the
Company has the resources to successfully
implement its strategy and manage third-
party relationships.
All employees of the Company sit in one open-plan office with the
CEO, facilitating interaction and engagement. There is a hybrid
working policy in place for employees to work remotely. As well as
the CEO, the Investment Director, Director of Operations and
Director of Marketing regularly report at Board meetings. Given the
small number of employees, engagement is at an individual level
rather than as a group. This includes an understanding of
inflationary pressures and the cost of living crisis through the
remuneration system.
Ongoing flexible hybrid working arrangements maintained Flexible hybrid working arrangements maintained without
detriment to productivity or service to stakeholders.
Performance and compensation of employees is reviewed
bytheRemuneration and Nomination Committee with the CEO
See the Directors’ Remuneration Report on pages 62 to 74.
Debt
holders
To communicate and demonstrate a strong
financial position that supports the financing
arrangements.
The WIS Executive provides regular financial covenant
compliance validation and financial reports to the stakeholders.
N/A N/A
The following ‘Section 172’ disclosure, which is required
by the Companies Act 2006 and the AIC Code, as
explained on page 52, describes how the directors
have had regard to the views of the Company’s
stakeholders in their decision making.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
41
Who?
STAKEHOLDER GROUP
Why?
THE BENEFITS OF ENGAGEMENT
WITH OURSTAKEHOLDERS
How?
HOW THE BOARD AND WIS EXECUTIVE
ENGAGED WITH OUR STAKEHOLDERS
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
Outcomes and actions
WHAT ACTIONS WERE TAKEN, INCLUDING
PRINCIPAL DECISIONS?
Investors
Clear communication of our strategy and
theCompany’s performance against our
objective can help the share price trade at
anarrower discount or a premium to its net
asset value, which benefits shareholders.
New shares may be issued at a premium
toNAV to meet demand without dilution to
existing shareholders. Increasing the size of
the Company can benefit liquidity as well
asspread costs.
WIS, on behalf of the Board, completes a programme of investor
relations throughout the year.
Key mechanisms of engagement included:
AGM
The Company’s website which hosts reports, monthly
factsheets, video interviews with the external managers,
CEO,Investment Director and regular market commentary
Online newsletters
One-on-one meetings with professional investors with
eitherthe CEO, Investment Director or Chairman
Group meetings with professional investors with
ourexternalmanagers
Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs
and objective, and the selection and monitoring of our external managers.
Impact of dividend cuts on the Company’s revenues and the
Company’s dividends
See page 9 in the Chairman’s Statement and page 15 in the CEO’s
Review for the Board’s comments on the dividend policy
Share price performance and the Company’s and wider
investment trust sector discounts
The Company maintained a high rate of share buybacks. See
page 15 in the CEO’s Review
The integration of ESG into the Company’s investment processes ESG included in presentations to investors, ad hoc updates
Informing investors of their rights to attend and vote in the AGM Holders of shares via online platforms were written to, informing
them of how they could vote and view the Annual Report
Ongoing impact of Russia/Ukraine conflict on economies
and markets
The WIS Executive held regular meetings with shareholders
throughout the year and provided updates via the Company’s
website and newsletters on performance of the Company as well
as the usual financial reports and monthly factsheets
Ongoing impact of inflationary pressure on economies
and markets
The WIS Executive held regular meetings with shareholders
throughout the year and provided updates via the Company’s
website and newsletters on performance of the Company as well
as the usual financial reports and monthly factsheets
External
managers
As Witan has a multi-manager approach,
engagement with our managers is necessary
to evaluate their performance against their
stated strategy and benchmark and to
understand any risks or opportunities this
maypresent to the Company. This also
helpsensure that investment management
costs are closely monitored and remain
competitive. Witan ensures that all
managersare paid in accordance
withtheirterms of trade.
The WIS Executive meets with the Company’s external managers
throughout the year and receives monthly performance and
compliance reporting. This provides the opportunity for both the
manager and WIS Executive to explore and understand how and
why the relationship has performed and what may be expected
inthe future. Each manager also presents annually to the Board
ofdirectors, providing the opportunity for the manager and Board
to reinforce their mutual understanding of what is expected from
all parties.
Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and
business updates.
The integration of ESG into each manager’s investment processes See pages 22 to 25 in responsible investment for a report on
manager activity in 2022.
Engagement with managers to ensure third-party internal
control reporting is in place.
All service providers engaged and supplied requested
information for the due diligence exercise to be completed. In one
case, the manager committed to engage third-party internal
control reporting where this was not in place.
Service
providers
Witan and WIS contract with third parties
forother services including: custodian;
depositary; investment accounting
andadministration; and company secretarial.
Ensuringthe third parties to whom we have
outsourced services complete their roles
diligently and correctly is necessary for
theCompany’s success.
Witan pays all service providers in
accordance with their terms of business and
is a signatory to the Prompt Payments Code.
The WIS Operations team engages regularly with all service
providers both in one-to-one meetings, via regular written
reporting and an annual due diligence exercise. This regular
interaction provides an environment wheretopics, issues and
business development needs (including current inflationary
pressures and the impact of the cost of living crisis on their
service) can bedealt with efficiently and collegiately.
The Audit and Risk Committee reviews annually a summary of
significant contracts to further reinforce the overviewof the
Company’s service providers at the corporatelevel. Furthermore,
the Audit and Risk Committee review the annual due diligence
exercise that includes, where appropriate, service providers’
third-party internal control reports.
Annual due diligence exercise undertaken. All service providers engaged and supplied requested
information for the due diligence exercise to be completed.
Employees
Attract and retain talent to ensure the
Company has the resources to successfully
implement its strategy and manage third-
party relationships.
All employees of the Company sit in one open-plan office with the
CEO, facilitating interaction and engagement. There is a hybrid
working policy in place for employees to work remotely. As well as
the CEO, the Investment Director, Director of Operations and
Director of Marketing regularly report at Board meetings. Given the
small number of employees, engagement is at an individual level
rather than as a group. This includes an understanding of
inflationary pressures and the cost of living crisis through the
remuneration system.
Ongoing flexible hybrid working arrangements maintained Flexible hybrid working arrangements maintained without
detriment to productivity or service to stakeholders.
Performance and compensation of employees is reviewed
bytheRemuneration and Nomination Committee with the CEO
See the Directors’ Remuneration Report on pages 62 to 74.
Debt
holders
To communicate and demonstrate a strong
financial position that supports the financing
arrangements.
The WIS Executive provides regular financial covenant
compliance validation and financial reports to the stakeholders.
N/A N/A
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
42
Corporate and operational structure
Witan is an investment trust with a
Premium Listing on the London Stock
Exchange. It has a single, wholly
owned subsidiary, Witan Investment
Services Limited (‘WIS’) which acts
as the Company’s Alternative
Investment Fund Manager (‘AIFM’).
The overwhelming majority of the
portfolio is in segregated accounts,
held in custody by the Company’s
depositary. The operations of the
custodian and the safeguarding
ofthe Company’s assets are
supervised by the depositary.
OPERATIONAL MANAGEMENT
ARRANGEMENTS
In addition to the appointment of
third-party investment managers,
Witanand WIS contract with third
partiesfor other services, including:
> BNP Paribas London Branch for
depositary services, custody,
investment accounting and
administration;
> Frostrow Capital LLP for company
secretarial services;
> MSCI, StyleAnalytics and Morningstar/
Sustainalytics for monitoring of its
investment holdings;and
> specialist advice on regulatory
compliance issues and, as required,
legal, investment consulting, financial
and tax advice.
The service quality and value received
from major service providers are
reviewed regularly by the Board.
The contracts governing the provision
of all services are formulated with legal
advice and stipulate clear objectives
and guidelines for the service required.
STAFFING
The Company’s policy towards its
employees is to attract and retain staff
with the skills and expertise required to
manage the affairs of an investment
trust company. Details of the Company’s
remuneration policies and required
disclosures are set out in the Directors’
Remuneration Report on pages 62 to
74. Employees and those who seek
to work at Witan are treated equally
regardless of age, gender, race, disability,
marital status, sexual orientation and
religion. The Company currently has six
direct employees, three men and three
women. The Board currently consists
of nine non-executive directors (four
men and five women) and the CEO,
Andrew Bell, who is an employee. Given
its outsourced model and the small
number of direct employees, the Group
has no employment-related specific
policies in respect of environmental or
social and community affairs. However,
as described elsewhere, an increased
focus on ESG issues has been formalised
by the Company’s commitments,
which are detailed in the section on
responsible investment on pages 18 to 25.
WITAN INVESTMENT SERVICES
WIS is authorised and regulated by
theFinancial Conduct Authority. It is
authorised to act as Witan’s AIFM and
toprovide marketing services.
WIS’s principal activities are acting
asWitan’s AIFM, providing executive
management services to the Board of
Witan and communicating information
about the Company to the market.
WIS’s operational objectives for 2022 were:
> to fulfil its responsibilities as Witan’s
AIFM; and
> to control the net operating costs
forWitan.
In 2022, WIS’s principal sources of
incomewere the fees (as AIFM or
Executive Manager and for marketing
services) paid by Witan Investment Trust
plc. The main costs incurred were staff
costs and professional advice to ensure
compliance with regulatory and
accounting obligations.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
43
Costs
INVESTMENT MANAGEMENT FEES
Each of the third-party managers is
entitled to a management fee, based
on the assets under management. The
agreements can be terminated on one to
three months’ notice. The base fee rates
for managers in place at the end of 2022
ranged from 0.28% to 0.65% per annum.
The weighted average base fee was
0.51% as at 31 December 2022 (2021: 0.51%).
One manager (covering 6% of Witan’s
portfolio), has a performance-related
fee, which has a high-water mark and is
subject to capping in any particular year.
Witan takes care to ensure the
competitiveness of the fees it pays. We
negotiated a 15% reduction in fee for
one of the incumbent managers during
the year and most of the fee structures
incorporate a ‘taper’ whereby the average
fee rate reduces as the portfolio grows.
The Company’s investment managers
may use services which are paid for, or
provided by, various brokers. They may
place business, including transactions
relating to the Company, with those
brokers. Under the requirements of
MiFID II, broker-provided services (other
than the execution of transactions)
must either be minor non-monetary
benefits or, for research received by
investment managers and charged to
the Company, separately accounted for.
ONGOING CHARGES AND COSTS
The Company’s established measure
of the costs of operation is the Ongoing
Charges Figure (‘OCF’). This represents the
recurring costs of operating the business
(principally the investment management
fees paid to our external managers as
well as the Company’s fixed and variable
overhead costs), as a percentage of net
assets. This is calculated in accordance
with the AIC’s guidelines and provides
a consistent basis for the comparison
of costs from one year to the next and
relative to other investment companies.
The OCF was 0.77% in 2022 (2021: 0.71%).
When performance fees due to third-
party managers are included, the OCF
was also 0.77% in 2022 (2021: 0.73%).
The main cost headings within the OCF
are set out in the table to the right. The
figures for transaction costs, borrowing
costs and the pro rata ongoing charges of
underlying funds are also included in the
table, for easy reference. In calculating
from the OCF, averaged over longer
periods rather than specific to one year.
The other principal differences between
the OCF and the KID measure are the
inclusion of transaction costs, borrowing
costs and the underlying costs of holdings
in other collective investments.
The Company’s investment performance is
reported after all costs, however measured.
a KPI, the Board does not consider it
relevant to consider the ongoing charges
of underlying investment companies
in which the Company invests, as the
Company is not a fund of funds and
to include ongoing charges of some
investee companies but not of others
would not be appropriate. For this reason,
although the AIC’s suggested approach
is to include such charges in the OCF,
the Company has chosen not to do
so as part of its KPIs, but has disclosed
below an estimate of this figure.
The Company exercises strict scrutiny and
control over costs. The Board believes that
the OCF during the year represents good
value for money for shareholders, taking
account of longer-term performance.
The UK version of the EU PRIIPS regulations,
which are applicable to UK Investment
Companies, mandates the preparation
of a Key Information Document (‘KID’)
calculated on a formulaic basis, which
contains a different measure of costs
ANALYSIS OF COSTS
Category of cost
2022
£m
2022
% of
average
net assets
2021
£m
2021
% of
average
net assets
Investment management base fees
(note 4, page 96) 7.67 0.45 9.33 0.47
Other expenses (excluding expenses
relating to the subsidiary
(1)
, loan
arrangement and one-off costs) 5.38 0.32 4.77 0.24
Ongoing Charges Figure
(including investment management
base fees) 13.05 0.77 14.10 0.71
Investment management
performance fees (note 4, page 96) – – 0.39 0.02
Ongoing Charges Figure
(including performance fees) 13.05 0.77 14.49 0.73
Pro rata ongoing charges of
underlying funds
(2)
3.90 0.23 4.37 0.22
OCF plus look through fund costs 16.95 1.00 18.86 0.95
Portfolio transaction costs 1.84 0.11 3.95 0.20
Interest costs 6.29 0.37 5.21 0.26
Total costs including transaction
costs, borrowing costs and
underlying fund costs 25.08 1.48 28.02 1.41
(1) Those expenses not relating to the operation of the investment company .
(2) This cost represents an estimate of the pro rata attributable fees charged by the managers of the external
specialist collective funds held within the portfolio. See page 32 for more details on these holdings.
N.B. Figures may not sum due to rounding.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT
44
Viability Statement
In accordance with the UK
Corporate Governance Code, the
Board has assessed the prospects
of the Company over a longer
period than the 12 months required
by the ‘going concern’ provision.
The Company’s current position
andprospects are set out in the
Chairman’s and Chief Executive
Officer’s reports and the Strategic
Report. The principal risks are set
outon pages 37 to 39.
The Board has considered the
Company’sfinancial position and its
ability to liquidate its portfolio and meet
its expenses as they fall due and notes
thefollowing:
> The portfolio consists of investments
traded on major international stock
exchanges and there is a spread of
investments. In normal conditions, the
current portfolio could be liquidated
to the extent of more than 85%
(source: Bloomberg) within five
trading days and there is no
expectation that the nature of the
investments held will be materially
different in future.
> The closed-ended nature of the
Company means that, unlike an
open-ended fund, it does not
needtorealise investments when
shareholders wish to sell their shares.
> The Board has considered the
viabilityof the Company under
various scenarios, including periods
of acute stock market and economic
volatility such as experienced in 2020,
and concluded that it would expect to
be able to ensure the financial
stability of the Company through the
benefits of having a diversified
portfolio of listed and realisable
assets. As illustrated in note 14 to the
accounts, the Board has considered
price sensitivity risk (the sensitivity of
the profit after taxation for the year
and the value of the shareholders’
funds to changes in the fair value of
the Group’s investments) and foreign
currency sensitivity (thesensitivity to
changes in key exchange rates to
which the portfoliois exposed).
> In addition to its cash balances which
were £35 million at 31 December 2022
(2021: £33 million), the Company has a
short-term bank facility (which is
renewable annually) which can
beused to meet its liabilities, and
fixed-rate financing in the form
ofsecured notes and cumulative
preference shares. With the exception
of the short-term facility, this
financing will remain in place until at
least 2035. Details of the Company’s
current and non-current liabilities are
set out in note 13 to the accounts.
> The expenses of the Company
arepredictable and modest in
comparison with the assets and
thereare no capital commitments
currently foreseen which would alter
that position.
As well as considering the principal
riskson pages 37 to 39 and the
financialposition of the Company,
theBoard has made the following
assumptions in considering the
Company’s longer-term viability:
> The Company’s remit of investing
inthe securities of global listed
companies will continue to be
anactivity to which investors
willwishtohave exposure.
> Investors will continue to want
toinvest in closed-ended
investmenttrusts.
> The performance of the Company
willcontinue to be satisfactory. The
Board is able to replace any of the
current investment managers when
itconsiders it appropriate to do so.
> The Company will continue to
haveaccess to adequate capital
when required.
> The Company will continue to be
ableto fund share buybacks when
required. The Company bought
back58 million ordinary shares in
2022 at a cost of £129 million and
experienced no problem with liquidity
in doing so. It had shareholders’ funds
in excess of £1.5 billion at the end of
2022.
Based on the results of its review and
taking into account the long-term nature
of the Company and its financing, the
Board has a reasonable expectation that
the Company will be able to continue
its operations and meet its expenses
and liabilities as they fall due for the
foreseeable future, taken to mean at
least the next five years. The Board
has chosen this period after reviewing
its investment policy and evaluating
the investment cycle and the ability to
deliver the Company’s objectives over
the short to medium term. Forecasting
over longer periods is imprecise. The
Board has no information to suggest this
judgement will need to change in the
coming five years. The Board’s long-
term view of viability will, of course, be
updated each year in the Annual Report.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
45
GOING CONCERN
In light of the conclusions drawn in the
foregoing statement on liquidity risk on
page 39 and the Viability Statement,
the directors believe that the Company
has adequate financial resources to
continue in operational existence for at
least the next 12 months from the date
of this Report. Therefore, the directors
believe that it is appropriate to continue
to adopt the going concern basis in
preparing the financial statements. In
reviewing the position as at the date of
this report, the Board has considered
the guidance on this matter issued
by the Financial Reporting Council.
APPROVAL
This report was approved by the Board
ofdirectors on 14 March 2023 and is
signed on its behalf by:
Andrew Ross Andrew Bell
Chairman Chief Executive Officer
14 March 2023
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
46
Board of directors
Key to membership
ofBoard and
Committees
Chairman of the
Board or a
Committee.
Members of the Audit
& Risk Committee
which is chaired by
Mr Perry.
Members of the
Remuneration and
Nomination
Committee which
is chaired by
Mr Yates.
Director of Witan
Investment Services
Limited.
1. Andrew Ross
CHAIRMAN
Date of appointment
May 2019.
Career & background
Previously chief executive of
Cazenove Capital Management
which, in 2013, was acquired
by Schroders, where he
became global head of Wealth
Management until 2019. Prior to
this, chief executive of HSBC Asset
Management (Europe) Limited
and managing director of James
Capel Investment Management.
Skills & expertise
Andrew has substantial experience
in senior leadership roles as CEO
and chairman of investment
management and wealth
management businesses. He
hasoverseen three different multi-
manager businesses and under
his tenure the businesses he led
significantly grew and prospered.
External appointments
Non-executive director at
Polar Capital Holdings plc
andCadogan Settled Estates.
6. Jack Perry
NON-EXECUTIVE DIRECTOR
Date of appointment
January 2017.
Career & background
Previously chief executive of Scottish
Enterprise and a former Managing
Partner and Regional Industry
Leader of Ernst & Young LLP. Served
on the boards of FTSE 250 and other
public and private companies
and is a member of the Institute of
Chartered Accountants of Scotland.
Skills & expertise
Jack is chairman of two other listed
investment companies and has
developed an understanding of
the needs of all stakeholders. His
experience as a senior audit partner
and subsequently in service on
numerous audit committees has
enabled him to be an effective
Audit & Risk Committee Chairman.
External appointments
Chairman of European Assets
Trust PLC and ICG-Longbow
Senior Secured UK Property
Debt Investments Limited.
8.
1.
4. 5.
7.
2. 3.
6.
9.
10.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
47
2. Andrew Bell
CEO
Date of appointment
February 2010.
Career & background
Previously Head of Research at
Rensburg Sheppards and an
equity strategist and Co-Head
of the Investment Trusts team
atBZW and CSFB. Prior to the
City, he worked for Shell in Oman,
leaving to take a Sloan Fellowship
at the London Business School.
Skills & expertise
Andrew’s roles prior to joining Witan
have given him valuable experience
of economic and geopolitical events
and how they influence equity
markets, along with considerable
knowledge and experience of
the investment trust sector.
External appointments
Chairman of The Diverse
Income Trust plc.
7. Ben Rogoff
NON-EXECUTIVE DIRECTOR
Date of appointment
October 2016.
Career & background
Lead manager of Polar Capital
Technology Trust plc since 2006 and
a fund manager of Polar Capital
Global Technology Fund and Polar
Capital Automation and Artificial
Intelligence Fund. He has been a
technology specialist for 27 years.
Skills & expertise
As a highly experienced listed
equities fund manager, Ben has
a deep understanding of the
analysis process required for
investing in public companies.
His knowledge of the technology
sector particularly enables him to
identify the risks from disruption
not just to the sector but in general.
Ben applies this knowledge to
his questioning and monitoring
of Witan’s external managers.
External appointments
Director, Technology at
Polar Capital.
3. Rachel Beagles
NON-EXECUTIVE DIRECTOR
Date of appointment
July 2020.
Career & background
Previously a managing director
and co-head of pan-European
banks equity research and sales at
Deutsche Bank. Since 2003 she has
worked as a non-executive director
in the investment company, asset
management, charity and social
housing sectors. She was Chair
of the Association of Investment
Companies from 2018 to 2021.
Skills & expertise
Rachel has extensive knowledge
and understanding of the equity
markets from her experience
in research and sales. She is
an experienced non-executive
director of investment trusts.
External appointments
Non-executive director of
Gresham House plc, The
Mercantile Investment Trust plc
and Cushon Group Limited.
8. Paul Yates
NON-EXECUTIVE DIRECTOR
Date of appointment
May 2018.
Career & background
Previously CEO of UBS Global Asset
Management (UK) Limited and
held a number of global roles
at UBS prior to retiring in 2007.
Skills & expertise
Paul‘s prior roles give him
wide experience of the fund
management business including
equity management, marketing,
people and business management.
Paul also offers investment
trust experience having sat
on four other trust boards.
External appointments
Chairman of the Advisory Board of
33 St James’s Limited, non-executive
director of Fidelity European Trust
PLC and Capital Gearing Trust plc.
4. Gabrielle Boyle
NON-EXECUTIVE DIRECTOR
Date of appointment
August 2019.
Career & background
Investment Director and Head
ofResearch at Troy Asset
Management since 2011. She is
the Senior Fund Manager for the
Trojan Global Equity Fund and the
Electric & General Investment Fund.
Skills & expertise
Gabrielle has over 30 years’
experience in fund management
and has managed global equity
portfolios since 2001 and European
portfolios since 1998. With this
background she brings knowledge
of investing through market cycles
and an understanding of the skills
required of fund managers.
External appointments
Investment director and
Head of Research at Troy
Asset Management.
5. Suzy Neubert
SENIOR INDEPENDENT DIRECTOR
Date of appointment
April 2012.
Career & background
Previously Global Head of
Distribution at J O Hambro
Capital Management. Prior
to that, managing director of
Equity Markets at Merrill Lynch
Securities in London following
roles in equity research and sales.
She is a qualified barrister.
Skills & expertise
Suzy’s 32 years’ experience in
sales and marketing roles on
both the sell and buy sides of
financial services has given her a
thorough understanding of equity
markets. Her role at J O Hambro
provided her with insight into the
distribution of funds to institutions
and private wealth managers.
External appointments
Non-executive director
at ISIO, Jupiter Fund
Management plc and LV=.
The following directors were appointed after the year end.
9. Shauna Bevan
NON-EXECUTIVE DIRECTOR
Date of appointment
February 2023.
Career & background
Head of Investment Advisory at
RiverPeak Wealth Limited where she
is responsible for fund selection
and portfolio construction. She was
previously Co-Head of Collectives
Research at Charles Stanley,
having started her career in wealth
management at Merrill Lynch.
Skills & expertise
Shauna has over twenty years
of investment experience across
multiple asset classes with
particular expertise in third party
fund research and meeting
the needs of retail investors.
External appointments
Head of Investment Advisory at
RiverPeak Wealth and a non-
executive director of CT Global
Managed Portfolio Trust PLC.
10. Shefaly Yogendra
NON-EXECUTIVE DIRECTOR
Date of appointment
February 2023.
Career & background
She has spent her career working
with technology investors and
start-ups. She previously worked
at Ditto AI and HCL Technologies,
and was a founder and a director
of Livyora, a fine jewellery venture.
Skills & expertise
Shefaly is a risk and decision-
making specialist and an
experienced non-executive
director of investment trusts.
External appointments
Non-executive director of Harmony
Energy Income Trust plc, JPMorgan
US Smaller Companies Investment
Trust PLC and Temple Bar Investment
Trust plc and an Independent
Governor of London Metropolitan
University.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
48
Corporate Governance
This statement forms part of the Directors’ Report on pages 75 to 78.
Effective
governance
CHAIRMAN’S INTRODUCTION
I am pleased to report 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 Association of Investment Companies (the ‘AIC’) has issued a
Code of Corporate Governance (the ‘AIC Code’), which 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
14 March 2023
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
49
The role of the Board
The role of the Board is to promote the
long-term sustainable success of the
Company, generating value for shareholders
and contributing to wider society.
The Board is collectively responsible for the success of the
Company. Its role is to provide leadership within a
framework of controls that enable risk to be assessed and
managed. The Board sets the Company’s strategic aims
(subject to the Company’s Articles of Association and to
such approval of the shareholders in general meeting as
may be required from time to time) and ensures that the
necessary resources are in place to enable the
Company’s objectives to be met.
The Board is responsible in particular for the overall
delivery of performance to shareholders through setting
an appropriate investment objective, ensuring that
proper resources are applied to the management of the
Company’s portfolio and the monitoring, control and
mitigation of the associated risks.
For details of our managers,
see pages 26 to 32
COMPLIANCE
The Board has considered the Principles and Provisions of the AIC
Code. The AIC Code addresses the Principles and Provisions set
out in the Corporate Governance Code, as well as setting out
additional Provisions on issues that are of specific relevance to
the Company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the FRC,
provides more relevant information to shareholders.
The Company has complied with the Principles and Provisions of
the AIC Code during the year ended 31 December 2022 except as
set out below:
> The Corporate Governance Code (Provisions 25 and 26)
includes provisions relating to the need for an internal audit
function. The Company does not have an internal audit
function, for reasons that are explained on page 58.
The principles of the AIC Code
The AIC Code is made up of 17 Principles supported by 42
Provisions.
Details of how the Company has applied the Principles and
Provisions are set on the following pages.
1 BOARD LEADERSHIP AND PURPOSE
Board and director independence
At 31 December 2022 the Board was composed of seven
independent non-executive directors and one executive director,
the CEO. The Board is therefore independent of the Company’s
executive management. All the directors are wholly independent
of the Company’s various investment managers. In the opinion of
the Board, each of the directors is independent in character and
judgement and there are no relationships or circumstances
relating to the Company that are likely to affect their judgement.
Two of the current directors, Ms Neubert and Mr Bell, have been
on the Board for nine years or more. Mr Bell, who is the CEO of
Witan, is an executive director but is independent of the
Company’s appointed fund managers and other service
providers. His long service is beneficial to the Company. The
Board considers that Ms Neubert is, and has been since her
appointment, an independent non-executive director. However,
she will not be seeking re-election at this year’s AGM.
All directors stand for election or re-election at the Company’s
AGM each year. The Board is firmly of the view that length of
service does not of itself impair a director’s ability to act
independently; rather, a director’s longer perspective can add
value to the deliberations of a well-balanced investment trust
company board. Independence stems from the willingness to
make decisions that may conflict with the interests of
management; this is a function of confidence, integrity and
judgement. The Board will continue to take account of length of
service in its succession planning, as one of a number of factors,
including the need to maintain a proper balance of diversity,
skills and experience.
Mr Ross, the Chairman of the Company, is considered to be
independent. He does not have any relationships that might
create a conflict of interest between the Chairman’s interests
and those of shareholders.
The non-executive directors, led by the Senior Independent
Director (‘SID’), meet without the Chairman present at least
annually to appraise the Chairman’s performance, and on other
occasions as necessary.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
50
Corporate Governance continued
Board commitments
When considering new appointments, the Board takes into
account other demands on directors’ time. Prior to appointment,
new directors are asked to disclose any existing significant
commitments with an indication of the time involved. Additional
external appointments require the prior approval of the
Remuneration and Nomination Committee on behalf of the
Board, with the reasons for permitting significant appointments
explained in the Annual Report.
Company’s purpose, values and strategy
The Board assesses the basis on which the Company generates
and preserves value over the long term. The Strategic Report
describes how opportunities and risks to the future success of
the business have been considered and addressed, the
sustainability of the Company’s business model and how its
governance contributes to the delivery of its strategy. The
Company’s investment objective and investment policy are set
out on the inside front cover.
Culture
The Board seeks to establish and maintain a corporate culture
characterised by fairness in its treatment of employees and
service providers, whose efforts are collectively directed towards
delivering returns to shareholders in line with the Company’s
purpose and objectives. It is the Board’s belief that this
contributes to the greater success of the Company, as well as
being an appropriate way to conduct relations between parties
engaged in a common purpose.
2 DIVISION OF RESPONSIBILITIES
The Board
The Board consists of ten directors, which will reduce to nine
following the AGM. This ensures that no one individual or small
group of individuals dominates the Board’s decision making.
Details of the directors are set out on pages 46 to 47. They
demonstrate a wide range of skills and experience, which are
relevant to the strategy of the Company. The Board has typically
met about eight times a year.
The Chairman
Mr Ross was appointed as Chairman of the Company in April
2020.
The Chairman’s primary role is to provide leadership to the
Board, assuming responsibility for its overall effectiveness in
directing the Company. The Chairman is responsible for:
> taking the chair at general meetings and Board meetings,
conducting meetings effectively and ensuring all directors
are involved in discussions and decision making;
> setting the agenda for Board meetings and ensuring the
directors receive accurate, timely and clear information for
decision making;
> taking a leading role in determining the Board’s composition
and structure;
> overseeing the induction of new directors and the
development of the Board as a whole;
> leading the annual Board evaluation process and assessing
the contribution of individual directors;
> supporting and also challenging the CEO and external
suppliers where necessary;
> ensuring effective communications with shareholders and,
where appropriate, other stakeholders; and
> engaging with shareholders to ensure that the Board has a
clear understanding of shareholder views.
Senior Independent Director (‘SID’)
Ms Neubert was appointed as the SID in April 2021. She will retire
at the conclusion of the Company’s next AGM in May 2023 and
Mrs Beagles will be appointed to the role. The SID serves as a
sounding board for the Chairman and acts as an intermediary
for other directors and shareholders. The SID is responsible for:
> working closely with and supporting the Chairman;
> leading the annual assessment of the performance of the
Chairman;
> holding meetings with the other directors without the
Chairman being present, on such occasions as necessary;
> carrying out succession planning for the Chairman’s role;
> working with the Chairman, other directors and shareholders
to resolve major issues; and
> being available to shareholders and other directors to
address any concerns or issues they feel have not been
adequately dealt with through the usual channels of
communication (i.e. through the Chairman or the CEO).
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
51
The Chief Executive Officer (‘CEO’)
The CEO is responsible to the Board and the AIFM for the overall
management of the Company including investment
performance, business development, shareholder relations,
marketing, investment trust industry matters, administration and
unquoted investments. The duties of the CEO include leading on
investment strategy and asset allocation, on the selection and
monitoring of the investment managers and their terms of
reference and on the use of derivatives. The Board, in conjunction
with the AIFM, sets limits on matters such as asset allocation,
gearing and investment in derivatives, within which the CEO has
discretion.
The CEO reports to each meeting of the Board. His reports include
confirmation that the Board’s investment limits and restrictions
and those which govern the Company’s tax status as an
investment trust, have been adhered to.
The CEO and his team monitor the share price and the discount/
premium to net asset value on a daily basis and he reports to
every Board meeting on this subject. Where appropriate, the
Board makes use of share buybacks (at a discount) and
issuance (at a premium) to add to the net asset value per share
and achieve a sustainable low discount (or a premium) to net
asset value.
In addition to his responsibilities for the overall management of
the Company, the CEO manages the Direct Holdings portfolio.
A maximum of 15% of the Company’s gross assets (at the time of
purchase) may be invested in specialist funds within this portfolio
and there are restrictions on the number, size and type of
investments that may be made.
The Board’s Remuneration and Nomination Committee reviews
the performance of and the contractual arrangements with the
CEO. The CEO is responsible to the Board for reviewing the
performance and the contractual arrangements of his staff. The
Board’s Remuneration and Nomination Committee oversees this
process.
Director responsibilities
The Board is responsible for determining the strategic direction
of the Company and for promoting its success. At least one of its
meetings each year is devoted entirely to reviewing overall
strategy and progress is monitored throughout the year.
The CEO and the AIFM monitor investment performance and all
associated matters. The CEO reports to each Board meeting, at
which investment performance, asset allocation, gearing,
marketing and investor relations are usually key agenda items.
Matters specifically reserved for decision by the full Board have
been defined. These include decisions relating to strategy and
management; structure and capital; financial reporting and
controls; internal controls; contracts with third parties;
communication; Board membership and other appointments;
Board and employee remuneration; delegations of authority;
corporate governance matters; and Company policies. There is
an agreed procedure for directors, in the furtherance of their
duties, to take independent professional advice, if necessary, at
the Company’s expense.
The directors have access to the advice and services of the
Company’s Executive team, AIFM and the Company Secretary,
through its appointed representative, who are responsible to the
Board for ensuring that Board procedures are followed and that
applicable rules and regulations are complied with.
Board Committees
The Board has established an Audit & Risk Committee and a
Remuneration and Nomination Committee. The Board has
chosen to combine the roles of remuneration and nomination in
one Committee. The memberships of the Audit & Risk Committee
and the Remuneration and Nomination Committee are set out
on pages 46 to 47. The roles and responsibilities of the
Committees are described in the Report of the Audit & Risk
Committee on pages 59 to 61 and in the Directors’ Remuneration
Report on pages 62 to 63.
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 54.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
52
Corporate Governance continued
Shareholder engagement
The Chairman is responsible for ensuring that there is effective
communication with the Company’s shareholders. He works
closely with the CEO and there is regular liaison with the
Company’s stockbroker. There is a process in place for
analysing and monitoring the shareholder register and a
programme for meeting or speaking with the institutional
investors and with private client stockbrokers and advisers. In
addition to the CEO, the Chairman, or the SID, expects to be
available to meet the Company’s larger shareholders and the
Chairman of the Remuneration and Nomination Committee is
available to discuss remuneration matters.
The Company encourages attendance at its Annual General
Meeting (‘AGM’) as a forum for communication with individual
shareholders. The Notice of the AGM and related papers are
sent to shareholders at least 20 working days before the
meeting. The Chairman, the CEO, the Chairman of the Audit &
Risk Committee and the Chairman of the Remuneration and
Nomination Committee all expect to be present at the AGM
and to answer questions from shareholders as appropriate.
The CEO makes a presentation to the meeting. In addition,
arrangements will be put in place for shareholders to view the
meeting virtually and put questions to the Board if they cannot
attend the AGM in person.
Details of the proxy votes received in respect of each
resolution are made available to shareholders. In the event of
a significant (defined as 20% or more) vote against any
resolution proposed at the AGM, the Board would consult
shareholders in order to understand the reasons for this and
consider appropriate action to be taken, reporting to
shareholders within six months.
The directors may be contacted through the Company
Secretary at the address shown on page 120.
While the CEO and his team expect to lead on preparing and
effecting communications with investors, all major corporate
issues are put to the Board or, if time is of the essence, to a
Committee thereof.
The Board places importance on effective communication
with investors and approves a marketing programme each
year to enable this to be achieved. Copies of the Annual
Report and the Half Year Report are circulated to shareholders
and, where possible, to investors through other providers’
products and nominee companies (or written notification is
sent when they are published online). In addition, the
Company publishes a monthly factsheet and its net asset
value per share is released daily. All this information is readily
accessible on the Company’s website (www.witan.com). A Key
Information Document, prepared in accordance with the UK
version of EU rules, is also published on the Company’s
website. The Company belongs to the Association of
Investment Companies which publishes information to
increase investors’ understanding of the sector.
Stakeholder engagement
The AIC Code requires directors to explain their statutory duties
as stated in sections 171–177 of the Companies Act 2006. Under
section 172, directors have a duty to promote the success of the
Company for the benefit of its members as a whole and in doing
so have regard to the consequences of any decisions in the long
term, as well as having regard to the Company’s stakeholders
amongst other considerations.
The Board’s report on its compliance with section 172 of the
Companies Act 2006 is contained within the Strategic Report on
pages 40 to 41.
The Board is responsible for ensuring that workforce policies and
practices are in line with the Company’s purpose and values and
support its culture. The Remuneration and Nomination
Committee advises the Board in respect of policies on
remuneration-related matters. Since the Company has only six
employees including the CEO, the Board considers that the CEO,
who is also a director, is best-placed to engage with the
workforce. In accordance with the Company’s whistleblowing
policy, members of staff who wish to discuss any matter with
someone other than the CEO are able to contact the Audit & Risk
Committee Chairman, or in his absence another member of the
Audit & Risk Committee.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Board meetings
The CEO (who is a director), other
representatives of the Company’s Executive team
and the AIFM and a representative of the
Company Secretary are expected to be present at
all meetings.
The primary focus at Board meetings is a review of
investment performance and associated matters such as
gearing, asset allocation, attribution analysis, marketing and
investor relations, peer group information and industry issues.
The Board devotes two days each year to meetings with the
Company’s investment managers and each investment
manager sends representatives at least once a year. The
Chairman seeks to encourage open debate within the Board
and a supportive and co-operative relationship with the
Executive team and the Company’s investment managers,
advisers and other service providers.
The number of meetings during the year of the Board and its
Committees, and the attendance of the individual directors
at those meetings, is shown in the table to the right.
The Board has typically met about eight times a year. All the
then directors attended the AGM in May 2022 and the Board’s
‘Strategy Day’ in June 2022.
What happened
In 2022, Witan adopted its “sustainable
by 2030” target, a commitment that by
2030 our portfolio will consist entirely of
sustainable businesses. Such businesses
should exhibit good corporate behaviour,
respect for shareholders, stakeholders
and society, a strategy to minimise
their environmental impact and be
open to engagement on such issues.
To reach this target we first had to
design and implement a framework
to assess our portfolio, in order to
set a baseline from which we can
measure what progress our companies
are making towards this target.
Why
We believe that investing in well-managed
‘sustainable businesses’ is the foundation
for achieving good returns for our
shareholders and a better future for the
planet’s ecosystems and for society. Our
approach is underpinned by the belief
that capital allocation and engagement
have a positive long-term impact
and that blanket exclusions can be
counterproductive. Therefore we focus
on identifying companies’ direction of
travel and monitoring their progress,
rather than simply their sustainability
credentials at a point in time.
How
Having set this objective in early 2022,
the Board directed our Investment Team
to engage with our fund managers to
develop this framework. We believe
that our managers are best placed to
assess whether the companies they have
invested in comply with our bespoke
sustainability criteria. Our managers
were introduced to this framework and
actively participated in this project. As
a result, we were able to assess all the
companies in our listed equity portfolio.
Each company was assessed on ten
different sustainability issues, with a score
being assigned to each. The resulting
data was used to create a baseline
figure for each of the ten sustainability
issues for each company, and for the
portfolio in aggregate. The results of
this work can be seen in the responsible
investment report on pages 18 to 23.
Board
Audit
& Risk
Committee
Remuneration
and
Nomination
Committee
Number of meetings 8 4 2
A J S Ross 8 4
(1)
2
R A Beagles 8 4 -
A L C Bell 8 4
(1)
2
(1)
G M Boyle 7 – –
S E G A Neubert 7 – 2
J S Perry 8 4 –
B C Rogoff 8 – –
P T Yates 8 4 2
(1) Not a member of the Committee but in attendance by invitation for all or part
of the meetings.
Example Board decision
53
Annual Report 2022
Witan Investment Trust plc
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
54
Corporate Governance continued
Conflicts of interest
The Board’s actions taken to identify and manage conflicts of
interest are set out in the Directors’ Report. The Company has no
significant shareholders. A number of nominee companies are
the registered holders of significant numbers of shares, but these
represent beneficial holdings by a very large number of retail
investors who invest through the nominees’ platforms.
Relationship with the AIFM and fund managers
The Company manages its own operations through the Board
and that of its AIFM. Each investment manager runs a discrete
investment portfolio within the terms of their investment
management contract. Shares are held by the Company’s
custodian/depositary. The CEO leads on the selection and
monitoring of the investment managers and their terms of
reference, which are approved by the Board and the AIFM.
The individual investment managers are each appointed to
manage a discrete portfolio in accordance with guidelines which
limit, for example, the markets in which they can invest, the
maximum size of each investment and the amount of cash that
may be held in normal circumstances. They are not allowed to
invest in unquoted securities or controversial weapons, to gear
the portfolio, to sell stocks short or to use derivatives. The
investment managers take decisions on individual investments
and are responsible for effecting transactions on the best
available terms. The Company and the AIFM receive monthly
confirmation from each investment manager that it has carried
out its duties in accordance with its investment mandate.
The Board scrutinises the performance of the investment
managers at each meeting and discusses their performance
with each manager at least once a year. The directors consider it
appropriate for the full Board to do this rather than delegating
this to a committee as it is considered appropriate for all
directors to be aware of the managers’ performance. The Audit &
Risk Committee reviews the contractual relationships with the
investment managers at least annually. Further information on
the investment managers’ fees is contained within the Strategic
Report on page 43.
Relationship with other service providers
The Board has delegated a wide range of activities to external
agents, in addition to the various investment managers. These
services include global custody (which includes the
safeguarding of the assets), investment administration,
management and financial accounting, company secretarial
and certain other administrative requirements and registration
services. Each of these contracts was entered into after full and
proper consideration by the Board of the quality and cost of the
services offered, including the control systems in operation in so
far as they relate to the affairs of the Company. Further
information on the service providers is contained within the
Strategic Report on page 42.
The Board receives and considers reports and information from
these contractors as required. The CEO and the AIFM are
responsible for monitoring and evaluating the performance of
the Company’s service providers. The Board’s Audit & Risk
Committee oversees this process together with the WIS Risk
Committee: they review the contractual relationships at least
annually.
3 COMPOSITION, SUCCESSION AND EVALUATION
Appointments to the Board
The Board’s Remuneration and Nomination Committee oversees
the recruitment process. The Remuneration and Nomination
Committee reviews the length of service of each director each
year and makes recommendations to the Board when it
considers that a new director should be recruited. All the
independent non-executive directors are asked to contribute to
the process and to consider serving on the sub-committee
appointed to draw up the shortlist of candidates. The process
generally includes the use of a firm of non-executive director
recruitment consultants or open advertising. The work of the
Remuneration and Nomination Committee during the year is set
out in the Committee’s report on pages 62 to 74.
As part of the process to appoint Ms Bevan and Dr Yogendra,
the Board engaged the services of specialist recruitment
consultants, Trust Associates Limited, who prepared a list of
potential candidates for consideration by the Board. A short list
was then arrived at, the candidates were interviewed, following
which a recommendation was made to the Board that both
Ms Bevan and Dr Yogendra be appointed, which the Board
approved.
The Directors have noted that Trust Associates is a signatory of
The Standard Voluntary Code of Conduct for Executive Search
Firms. The code of conduct lays out steps for search firms to
follow across the search process, from accepting a brief through
to induction. The key areas of focus include increasing the
proportion of women and broadening ethnic diversity. Trust
Associates Limited has no other connection with the Company or
the individual directors.
New directors are appointed for an initial term ending three years
from the date of their first annual general meeting after
appointment, with the expectation that they will serve a
minimum of two three-year terms. There is no absolute limit to
the period for which a director may serve, although the
continuation of directors’ appointments is contingent on
satisfactory performance evaluation and re-election at annual
general meetings. Directors’ appointments are reviewed formally
by the Board ahead of their submission for re-election. None of
the non-executive directors has a contract of service and a
non-executive director may resign by notice in writing to the
Board at any time. The Board’s tenure and succession policy
seeks to ensure that the Board is well-balanced and refreshed
regularly by the appointment of new directors with the skills and
experience necessary, in particular, to replace those lost by
directors’ retirements.
Directors must be able to demonstrate their commitment to the
Company, including in terms of time. The Board seeks to
encompass past and current experience of areas relevant to the
Company’s objective and operations, the most important being
investment management, finance, marketing, financial services,
risk management, custody and settlement, and investment
banking. Whilst the roles and contributions of longer-serving
directors are subject to rigorous review, the Board is strongly of
the view that length of service is only one factor and that
shareholders benefit from having directors with a longer
perspective of the Company’s history and its place in the savings
market.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
55
Directors newly appointed to the Board are provided with an
introductory programme covering the Company’s strategy,
policies and operations, including those outsourced to third
parties. Thereafter, directors are given, on a regular and ongoing
basis, key information on the Company’s investment portfolios,
financial position, internal controls and details of the Company’s
regulatory and statutory obligations (and changes thereto). The
directors are encouraged to attend industry and other seminars,
conferences and courses, if necessary at the Company’s
expense, and to participate generally in industry events. A log of
directors’ training is maintained and reviewed each year by both
the Remuneration and Nomination Committee and the Audit &
Risk Committee.
Board diversity
The Board supports the principle of boardroom diversity, of which
gender and ethnicity are two important aspects. The diversity
policy applies to the Board’s committees as well as the Board
itself.
The Company’s policy is that the Board should be comprised of
directors with a diverse range of skills, knowledge and experience
and that appointments to the Board should be made on merit,
against objective criteria, including diversity in its broadest
sense. The objective of the policy is to have a broad range of
approaches, backgrounds, skills, knowledge and experience
represented on the Board. To this end, achieving a diversity of
perspectives and backgrounds on the Board is a key
consideration in any director search process and the Board
encourages any recruitment agencies it engages to find a
diverse range of candidates that meet the criteria agreed for
each appointment.
The Board will not discriminate on the grounds of age, gender,
personal background, sexual orientation, disability or socio-
economic background in considering the appointment of
Directors. Specific professional qualifications may be required for
some appointments, e.g. the chair of the Audit & Risk Committee.
The Board considers candidates’ gender and ethnicity in the
context of the Listing Rules targets regarding those
characteristics.
The Board has noted the FCA’s new Listing Rules which encourage
greater diversity on listed company boards and require
companies to report against the following three diversity targets:
(i) At least 40% of individuals on the board are women;
(ii) At least one of the senior board positions (defined in the
Listing Rules as the chair, CEO, SID and CFO) is held by a
woman; and
(iii) At least one individual on the board is from a minority ethnic
background.
The new Rules apply with effect from accounting periods
commencing on or after 1 April 2022. The FCA is encouraging
companies to report on the targets for accounting periods which
begin before then and so the Board has provided the following
information in relation to its diversity as at the year end, although
it is not yet required to do so.
As at 31 December 2022, the Company complied with targets (ii)
and (iii) above but not target (i). The Company has continuously
met target (ii) since 2021 and target (iii) since 2012.
Since the year end, the Board has appointed two new non-
executive directors and the Company has now met (and will
continue to meet after the AGM) all three targets.
The Board has chosen to align its diversity reporting reference
date with the Company’s financial year end and proposes to
maintain this alignment for future reporting periods. As required
under LR 9.8.6R(10), further detail in respect of the three targets
outlined above as at 31 December 2022 is disclosed in the tables
on page 56.
The information was obtained by asking the Directors and
Executive Management to indicate, on an anonymous form, how
they should be categorised for the purposes of the Listing Rules
disclosures.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
56
Corporate Governance continued
Number of
Board Members
Percentage of
the Board
Number of Senior
Positions on the
Board
(1)
Number in
Executive
Management
(2)
Percentage of
Executive
Management
Men 5 62.5% 2 2 67%
Women 3 37.5% 1 1 33%
Other – – – – –
Not specified/prefer not to say – – – – –
Number of
Board Members
Percentage of
the Board
Number of Senior
Positions on the
Board
(1)
Number in
Executive
Management
(2)
Percentage of
Executive
Management
White British or other White (including
minority-white groups) 7 87.5% 2 3 100%
Mixed/Multiple Ethnic Groups 1 12.5% 1 – –
Asian/Asian British – – – – –
Black/African/Caribbean/Black British – – – - –
Other ethnic group, including Arab – – – - –
Not specified/prefer not to say – – – – –
The tables below reflect the changes in Board composition that have occurred between the reference date and the date on which
the Annual Report was approved.
Number of
Board Members
Percentage of
the Board
Number of Senior
Positions on the
Board
(1)
Number In
Executive
Management
(2)
Percentage of
Executive
Management
Men 5 50% 2 2 67%
Women 5 50% 1 1 33%
Other – – – – –
Not specified/prefer not to say – – – – –
Number of
Board Members
Percentage of
the Board
Number of Senior
Positions on the
Board
(1)
Number In
Executive
Management
(2)
Percentage of
Executive
Management
White British or other White (including
minority-white groups) 7 70% 2 3 100%
Mixed/Multiple Ethnic Groups 2 20% 1 – –
Asian/Asian British 1 10% – – –
Black/African/Caribbean/Black British – – – – –
Other ethnic group, including Arab – – – – –
Not specified/ prefer not to say – – – – –
(1) The format of the above tables is prescribed in the Listing Rules. However, as an investment trust, the Company has only a small executive management function, including the
role of CEO but not that of CFO. The Company has defined ‘senior positions on the Board’ as Chairman, CEO and Senior Independent Director.
(2) The CEO is a director and part of the executive management team: for the purposes of these tables he has been included as a member of the Board.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
57
For details of our
managers, see pages 26 to 32
The Chairman leads on
applying the conclusions
of the evaluation. The
Chairman reviews with
each director his or her
individual performance,
contribution and
commitment to the
Company. The SID leads
the annual evaluation
of the Chairman and
reviews the conclusions
with him. The Board’s
Remuneration and
Nomination Committee
oversees this process. The
Board is aware of Provision
26 of the AIC Code, which
states that evaluation
of the Board of FTSE 350
companies should be
externally facilitated at
least every three years.
The Board has complied
with this provision every
three years since it was
first introduced except
in 2019 when the Board
considered it more
appropriate to defer
an externally facilitated
evaluation until 2020
when Mr Ross had
taken over as Chairman
following the retirement of
Mr Henderson. The Board
appointed Lintstock Ltd to
carry out an evaluation
programme in the autumn
of 2020 and again in the
autumn of 2021. Lintstock
did not have any other
connection with the
Company. The Board
reviewed their report
in February 2022 and
the Chairman has led
on implementing those
changes recommended
by the report that the
Board considered should
be made. The report did
not identify any material
weaknesses or concerns.
This year, the evaluation
has been carried out
internally and the Board
has discussed the
matters raised. The Board
intends to appoint an
external organisation to
facilitate its evaluation
in 2025, if not before.
Board evaluation
The Board has established a process to
evaluate its performance annually. This
process is based on open discussion and
seeks to assess the strengths and
weaknesses of the Board and its
Committees.
Election and re-election by shareholders
New directors stand for election by the shareholders at the
annual general meeting that follows their appointment.
Thereafter all directors stand for re-election each year in
accordance with the Corporate Governance Code. The
Company’s Articles of Association require directors to stand for
re-election at least every three years, and those who have
served for more than nine years to stand for re-election annually.
The directors’ biographies on pages 46 to 47 and the notes to the
notice of AGM set out the specific reasons why each director’s
contribution is, and continues to be, important to the Company’s
long-term sustainable success.
Tenure of the Chairman
The Board’s policy is that the Chairman should not normally
remain in post beyond nine years from the date of his/her first
appointment to the Board. However, this period may be extended
for a limited time to facilitate effective succession planning and
the development of a diverse board, particularly in those cases
where the Chairman was an existing non-executive director on
appointment as Chairman.
The Board considers that the policy provides a balance between
the need for Board continuity as well as regular refreshment and
diversity.
4 REMUNERATION
The Directors’ Remuneration Report on pages 62 to 74 details the
process for determining the directors’ remuneration and sets out
the amounts payable. It reports on the Company’s compliance
with the provisions of the AIC Code relating to remuneration and
also a number of provisions from the UK Corporate Governance
Code that have not been included in the AIC Code, as most
investment trusts do not have executive directors.
5 AUDIT, RISK AND INTERNAL CONTROL
The statement of directors’ responsibilities on page 79 describes
the directors’ responsibility for preparing this Annual Report.
The work of the Audit & Risk Committee is set out in the
Committee’s report on pages 59 to 61.
The principal risks and details of how they are managed are set
out on pages 37 to 39.
Internal control
The Board has established an ongoing process for identifying,
evaluating and managing the significant risks faced by the
Company. This process accords with the Corporate Governance
Code guidance, is subject to regular review by the Audit & Risk
Committee and was fully in place during the year under review
and up to the date of this Annual Report. The Board remains
responsible for the Company’s system of internal control and has
charged the Audit & Risk Committee with conducting an annual
review of the effectiveness of the system, covering all the
controls, including financial, operational and compliance
controls and risk management systems. This review takes into
account points raised during the year in the regular appraisal of
specific areas of risk. However, such a system is designed to
manage rather than eliminate the risks of failure to achieve the
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
58
Company’s business objectives and can only provide reasonable
and not absolute assurance against material misstatement or
loss.
In accordance with Principle O and provision 34 of the AIC Code,
the Board reviews the Company’s business risks at least once a
year. These are analysed and recorded in a risk map, which the
Audit & Risk Committee reviews at each meeting. It is also
reviewed and challenged regularly by the Board. Emerging risks
are added to the matrix as soon as identified together with any
mitigating actions required. The key risks which pose the greatest
potential risks to shareholders are set out on pages 37 to 39. The
Company receives from its main contractors formal reports
which detail the steps taken to monitor the areas of risk and
which report the details of any known internal control failures.
The Committee believes that these processes allow it to identify
emerging risks on a timely basis.
As described elsewhere, the management of Witan’s portfolio is
outsourced to a number of third-party investment managers
around the world. There are currently eight such investment
managers as well as the Direct Holdings portfolio which is
managed by the CEO.
The CEO has responsibility (under delegation from the Board and
the AIFM) for a number of aspects of the management of the
portfolio, including asset allocation, gearing and investment in
derivatives. The Board has set guidelines in respect of each of
these aspects within which he may operate. The CEO reports to
the Board regularly on each of these areas, as well as on the
overall performance of the Company and other matters of
significance.
The in-house Executive team of Witan and WIS is responsible for
managing and controlling the relationships with the third-party
managers.
The Executive team receives monthly reports on investment and
compliance matters from each manager. During 2022, the
investment managers were asked to provide detailed
information on their operational structures and systems. Each
year, the Board also receives reports from its investment
managers on their internal controls; in most cases these include
a report from the relevant company’s auditors on the control
policies and procedures in operation.
The CEO makes regular reports to the Board on the performance
of and activity within the Direct Holdings portfolio. In addition, the
portfolio’s performance is independently measured, along with
those of the third-party managers.
The Company’s subsidiary, WIS, is authorised and regulated by
the Financial Conduct Authority to provide investment products
and services and was appointed as the Company’s AIFM from
July 2014. The compliance structures required for these activities,
including a compliance manual and a compliance monitoring
programme, have been put into place.
The Company has a formal policy for staff to raise in confidence
any concerns about possible improprieties, whether in matters of
financial reporting or otherwise, for appropriate independent
investigation. Its staff comprises only six people (including the
CEO), who are well known to and have frequent formal and
informal contact with the members of the Board.
The Company does not have an internal audit function. However,
the Company has independent external advisers covering
regulatory compliance matters and the effectiveness of internal
controls and processes. Through WIS, the AIFM, it delegates the
management of its investments and most of its other operations
to third parties and employs only a small number of staff. The
investment managers and certain other key contractors are
subject to external regulation and most have compliance and
internal audit functions of their own. The Company’s investments
are held on its behalf by a global custodian appointed by the
depositary. A specialist firm of investment accountants and
administrators is responsible for investment administration, for
maintaining accounting records and for preparing financial
accounts, management accounts and other management
information. In addition, the Board receives an annual report on
the investment administrator’s internal controls, including a
report from the investment administrator’s auditor on the control
policies and procedures in operation. The investment
performance of the investment managers, both individually and
collectively, is measured for Witan by a company that is
independent of all the investment managers. The corporate
Company Secretary has well-established experience in servicing
investment trusts.
The appointment of these and other professional contractors
provides a clear separation of duties and a structure of internal
controls that is balanced and robust. The Board and the AIFM will
continue to monitor the Company’s system of internal control in
order to provide assurance that it operates as intended. The
directors will review at least annually whether a function
equivalent to an internal audit is needed.
Andrew Ross
Chairman
14 March 2023
Corporate Governance continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
59
COMPOSITION AND RESPONSIBILITIES OF THE COMMITTEE
The members of the Committee are appointed by the Board.
There are three members of the Committee. I was appointed as
Chairman of the Committee in May 2018, having been a member
of the Committee since February 2017. Mrs Beagles and Mr Yates,
who were appointed to the Committee in 2020 and 2018,
respectively, were members of the Committee throughout the
year.
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.
Report of the Audit & Risk Committee
STATEMENT BY THE CHAIRMAN OF THE COMMITTEE
As Chairman of the Audit & Risk Committee (the
‘Committee’), I am pleased to present the Report
of the Committee for the year ended
31 December 2022.
The Board agreed during the year to change the
name of the Committee to the Audit & Risk
Committee, as a better reflection of the
Committee’s responsibilities.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
60
Report of the Audit & Risk Committee continued
MEETINGS OF THE COMMITTEE
The Committee held four meetings during 2022 and also met in
February 2023. 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.
In summary, the main matters arising in relation to 2022 were:
> Assessment of the controls to ensure the ownership,
valuation and liquidity of investments: this includes
assessing management reports on the controls and
procedures of external managers and the external
custodian/administrator and the review of the audit work
performed. No significant issues were identified.
> As part of the Committee’s detailed review of the financial
statements, particular attention was paid to the key areas of
the existence and valuation of assets; recognition of revenue;
determination of the fair value of own debt and the
appropriateness of the discount rate used to assign a
present value to that debt; and the reasonableness of the
scenarios envisaged in developing the sensitivity analysis for
each significant risk.
> The Committee examined and challenged management’s
judgement used in the calculation of the present value of
own debt by using a discount rate which reflects the yield on
a UK gilt of similar maturity plus a credit spread of 1.40%. The
Committee examined independent third-party evidence
and confirmed that management’s conclusions were sound
and the resulting fair value was reasonable in the
circumstances.
> Management’s judgement used in the determination of the
ratio of investment management fees and finance costs to
be allocated between revenue and capital was also
reviewed and challenged. Based on an analysis of actual
fees and costs, the Committee agreed that the allocation of
25% to revenue and 75% to capital was a fair representation
of the actual nature of the specific costs and reflected the
Board’s expectations of long-term investment returns.
> Interim and year-end reporting, in light of the requirements
of the Codes of Corporate Governance issued by the AIC and
Financial Reporting Council (‘FRC’) guidance to audit
committees on key developments for annual reports and
non-financial reporting. The Committee agreed the process,
timing and responsibility for compliance. The Committee
agreed to recommend to the Board that it should approve
the Half Year and Annual Reports.
> Reviews were conducted on a variety of specific matters
including whistleblowing, anti-money laundering
compliance, data and IT systems security and business
continuity. As explained elsewhere in this report (see
page42), the Company makes extensive use of third-party
service providers, who are overseen by the WIS Executive. The
Committee approves the programme of oversight and
reviews the results. The Executive carries out a
comprehensive due diligence exercise each year on all the
Company’s service providers, including the fund managers,
and reports the results of this to the Committee.
> As part of the oversight of service providers, I attended a due
diligence visit with the Executive to the depositary, BNP
Paribas Trust Corporation UK Limited.
> In light of the relative simplicity of the operations and the use
of independent external consultants, who report directly to
the Committee, to advise on regulatory compliance and
adherence to internal procedures, it was concluded that no
internal audit function was required (see page 58).
> The Committee has worked with the Risk Committee of WIS,
the Company’s subsidiary, to ensure WIS’ compliance with
Financial Conduct Authority (‘FCA’) regulations.
> The Committee also monitored the work required to ensure
the Company’s compliance with new legislation, including:
– regulations on climate-related disclosures for listed
companies (which do not currently apply to the
Company as an investment trust);
– new rules under the PRIIPs regime on the production of
Key Information Documents;
– the FCA’s Consumer Duty, which sets higher and clearer
standards of consumer protection across financial
services, and requires firms to put their customers’ needs
first. We have agreed our implementation plan and I
have been appointed as the Company’s “Consumer
Champion”;
– BEIS’s response to its consultation on audit and corporate
governance reform, which are likely to introduce a
number of significant changes to the corporate
governance and reporting landscape;
– A White Paper on the reform of Companies House;
– A discussion paper from the FCA on the structure of the
UK listing regime;
– FRC updated guidance on the Strategic Report; and
– FRC review of corporate reporting in 2021/22 and key
matters for 2022/23.
RISK
Management has identified (Strategic Report pages 37 to 39)
six main areas of potential risk: market and investment portfolio;
operational and cyber; compliance and regulatory change;
accounting, taxation and legal; liquidity; and ESG factors, and
has set out the actions taken to evaluate and manage these
risks. The Committee also monitors newly emerging risks that
arise from time to time (e.g. Brexit from 2016 and the Covid-19
virus outbreak in 2020) to ensure that the implications for the
Company are properly assessed and mitigating controls
introduced where necessary.
The auditor has also detailed two key audit matters in its report:
valuation of investments and the occurrence and completeness
of investment income; and has set out the work it has performed
to satisfy itself that these have been properly reflected in the
financial statements. There were no significant areas of material
judgement being exercised in either of these two key areas or
unadjusted errors arising in either 2021 or 2022.
The Committee has monitored the controls designed to mitigate
the risks associated with these matters during the year, including
reviewing management’s risk report at each meeting and
requiring amendments to both risks and mitigating actions as
appropriate. The Committee considers that management has
carried out a robust assessment of the emerging and principal
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
61
risks facing the Company and has taken appropriate action to
mitigate those risks. In order to ensure that our risk map is up to
date, the Committee has once again invited all directors to
determine their personal assessment of the current top five risks
for the Company and the Committee has ensured that the risk
map recognises these appropriately. This process is carried
out regularly.
The Committee reviewed a report on the cyber risks within the
business, including the controls in place over cyber risks
implemented by third-party providers and in particular BNP
Paribas. No significant issues have been identified to date, but
the Committee is mindful of the need to remain vigilant on
such risks.
GOING CONCERN AND VIABILITY
The Committee has assessed the information, forecasts and
assumptions underlying the Viability and Going Concern
Statements on pages 44 and 45 and recommended to the Board
that they are appropriate. This assessment included a review of
the scenario analysis set out on page 44.
EXTERNAL AUDIT
Grant Thornton UK LLP (‘Grant Thornton’) was appointed as
statutory auditor in 2016. In accordance with the current
legislation, the Company is required to re-tender for new
auditors at least every ten years and has to change its auditor
after 20 years. The audit partner is Paul Flatley. The auditor is
required to rotate the principal engagement partner every five
years; this is Mr Flatley’s second year as audit partner.
Accordingly, the Committee considers that the Company has
complied with the provisions of the Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit Committee Responsibilities) Order 2014 during the
financial year.
The Committee reviews the scope and effectiveness of the audit
process, including agreeing the auditor’s assessments of
materiality, and monitors the auditor’s independence and
objectivity.
The Committee has reviewed the FRC’s Audit Quality Review
report for Grant Thornton and discussed the findings with the
audit partner. The Committee was pleased to note that Grant
Thornton was awarded the highest quality grading for 100% of the
files reviewed by the FRC; the first firm to achieve this. The
Committee discussed the audit plan. It challenged the auditor’s
assessment of the key audit matters and was satisfied that these
had been adequately identified. The auditor was not instructed
to look at any additional specific areas. The final audit findings
report was discussed and agreed with the auditor. The
Committee is satisfied that the auditor implemented sufficiently
robust processes to deliver a high-quality audit.
As part of their audit work, Grant Thornton carried out a review of
the design and effectiveness of relevant controls in place at BNP
Paribas London Branch related to specific line items such as the
valuation of the portfolio and completeness of investment
income. They did not discover any significant issues. In addition,
Grant Thornton has been appointed to provide an assurance
report on client assets in accordance with the CASS report to the
FCA in respect of WIS, to be completed by the end of April 2023.
FINANCIAL STATEMENTS
The Board has asked 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:
> the comprehensive control framework around the
production of the Annual Report, including the verification
process in place to deal with the factual content;
> the detailed levels of review that were undertaken in the
planning and production process, by the Executive team,
Company Secretary and the Committee; and
> the Company’s internal control environment.
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 77:23. The Committee considered
that it was in the interests of the Company to appoint Grant
Thornton for this assurance work as it would not be cost-effective
to appoint another firm.
EFFECTIVENESS OF THE COMMITTEE
In assessing its own effectiveness, the Committee has reviewed
the report produced by Lintstock in 2022 as part of its review of
the Board (see page 57) and the Board’s internal review this year
and will implement any recommendations from those reviews.
The Committee considers that its approach is comprehensive
and appropriate, that it focuses on the right issues and is
managed well.
APPROVAL
This report was approved by the Committee on 14 March 2023
and is signed on its behalf by:
Jack Perry
Chairman of the Audit & Risk Committee
14 March 2023
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
62
Directors’ Remuneration Report
CHAIRMAN’S STATEMENT
I am pleased to present my report as Chairman
of the Remuneration and Nomination Committee
(the ‘Committee’)
The Committee deals with both nominations and remuneration-
related matters. Reports on both aspects of the Committee’s
work are covered below.
The Committee’s roles and responsibilities are set out in its terms
of reference, which are available on request from the Company
Secretary and can be found on the Company’s website
(www.witan.com).
NOMINATIONS
The Committee has responsibility for reviewing the effectiveness
and composition of the Board and for overseeing the recruitment
process for non-executive directors.
There have not been any appointments to or resignations from
the Board in 2022.
The resolution to re-elect Suzy Neubert at the AGM on 5 May 2022
was passed on a show of hands, although 39% of the votes cast
(by 8.7% of shareholders) were cast against the resolution. The
Board understands that the reason for the result was that some
shareholders deemed Ms Neubert not to be independent due to
her length of service (10 years) on the Board.
As stated on page 49, the Board shares the widely accepted view
that length of service does not of itself impair a director’s ability
to act independently (any more than a recent appointment
guarantees it); rather, a longer-serving director’s perspective can
add value to the deliberations of a well-balanced investment
trust company board. Independence stems from the willingness
to make decisions that are for the benefit of the Company, even if
they may conflict with the interests of management; this is a
function of confidence, integrity, and judgement. The Board
considers that Ms Neubert demonstrates such qualities, and that
it was therefore justified in deeming her to be independent,
along with the other non-executive directors.
The Chairman wrote to the Company’s large shareholders in
advance of the AGM to explain its reason for wishing Ms Neubert
to remain on the Board for a further year, which was to retain her
experience and knowledge of the Company as she was the only
non-executive director with more than six years’ experience on
the Board.
Following receipt of the proxy results, the Board reiterated to
shareholders present at the AGM on 5 May 2022 the commitment
that Ms Neubert would retire at the 2023 AGM and released a
statement to that effect in the post-AGM RNS announcement. The
Chairman also wrote to the large shareholders reiterating that
commitment.
During the year, the Committee reviewed the composition of the
Board and its Committees, using a skills matrix. The Committee
recommended to the Board, and the Board agreed, that a
director should be recruited to replace Ms Neubert on her
retirement in May 2023. Trust Associates were appointed to carry
out a search for a suitable candidate. Trust Associates have no
other recent connection with the Company. The Committee
identified two suitable candidates for appointment and the
Board agreed that the appointments should be made. Shauna
Bevan and Shefaly Yogendra have been appointed as non-
executive directors with effect from 1 February 2023 and will be
proposed for election by shareholders at the AGM to be held on
4 May 2023.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
63
Ms Neubert has been the Senior Independent Director since 2020.
The Board has agreed that, with effect from her retirement in May
2023, Mrs Beagles should be appointed as the SID.
A report on the Board’s evaluation of itself and its Committees is
set out on page 57.
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 2022.
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 2022
and other information required by the Regulations. It will be subject to
an advisory vote at the AGM on 4 May 2023.
The Company’s existing remuneration policy was subject to a
binding shareholder vote at the AGM in 2022 and took effect from
1 January 2022. No changes were made to the remuneration
policy existing at that time. The Committee is required to submit
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 in
2025 unless any changes to the policy are proposed before then.
The Committee has previously 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 has agreed that, in light of Mr Bell’s substantial holding
in the Company (worth £1.88 million at the end of 2022, six 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.
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 exercises
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.
Ms Neubert will retire from the Board at the AGM in May 2023 and
Mrs Boyle will be appointed as a member of the Committee with
effect from that date.
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 2023, in accordance
with the process described on page 69. The Committee’s
recommendation, to which the Board agreed, was that
non-executive directors’ fees should be increased by an average
of 3.7%. This is well below the rate of inflation and less than the
percentage increase in remuneration of the Company’s
employees. With effect from 1 April 2023, directors’ fees will be:
£
Chairman of the Company 76,000
Chairman of the Audit & Risk Committee 50,000
Chairman of the Remuneration and Nomination
Committee 45,500
Senior Independent Director 45,500
Other non-executive directors 39,500
Since 1 April 2022, the fees have been:
£
Chairman of the Company 73,500
Chairman of the Audit & Risk Committee 48,000
Chairman of the Remuneration and Nomination
Committee 44,000
Senior Independent Director 44,000
Other non-executive directors 38,000
With effect from 1 April 2023, the aggregate fees for the current
nine non-executive directors will amount to £414,500 per annum
(2022: seven directors; £323,500); this will reduce to £375,000 for
the eight continuing directors following the AGM.
The Company’s Articles of Association currently limit the aggregate
fees payable to the non-executive directors to £450,000 per annum.
Paul Yates
Chairman of the Remuneration
and Nomination Committee
14 March 2023
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
64
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 62 to 63) 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
2022. The information provided on pages 64 to 68 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
2022, together with the comparative figures for 2021:
31 December 2022 31 December 2021
Fees
(1)
£
Taxable
benefits
(2)
£
Total
remuneration
£
Fees
(1)
£
Taxable
benefits
(2)
£
Total
remuneration
£
A J S Ross 72,250 148 72,398 68,500 – 68,500
R A Beagles 37,500 62 37,562 36,000 79 36,079
G M Boyle 37,500 – 37,500 36,000 – 36,000
S E G A Neubert 43,500 415 43,915 40,115 450 40,565
J S Perry 47,250 5,464 52,714 45,000 1,613 46,613
B C Rogoff 37,500 – 37,500 36,000 – 36,000
P T Yates 43,500 – 43,500 42,000 – 42,000
A Watson (retired 28 April 2021) – – – 14,000 – 14,000
Total 319,000 6,089 325,089 317,615 2,142 319,757
(1) The non-executive directors are not entitled to any variable payments or benefits.
(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 2022 for the CEO, Mr Bell, together with the comparative figures for 2021. Aggregate emoluments are shown in the last
column of the table.
Base pay
(1)
£
Benefits
(2)
£
Annual bonus
(3)
benefits
£
Long-Term
Bonus
(3)
£
Pension-related
benefits
£
Total fixed pay
£
Total variable
pay
£
Total
(4)
£
2022 315,000 34,642 95,000 – 31,500 381,142 95,000 476,142
2021 308,424 33,554 85,000 - 30,842 372,820 85,000 457,820
(1) Mr Bell is entitled to hold outside appointments and to retain any fees payable, subject to receiving the Board’s permission. During 2022, in addition to
the base salary set out above, Mr Bell received £41,500 (2021: £39,528) in respect of his directorship of The Diverse Income Trust plc to which he was
appointed with effect from 1 January 2019.
(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 over the preceding year against the performance criteria, described on page 72, at its meeting in February 2023 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 30% (compared with the maximum of 40%) of his basic salary
(£95,000) in respect of the financial year ended 31 December 2022 (2021: 28%, £85,000).
(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 2022 (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 ending 31 December 2022 (2021: 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 the 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 2022 (net asset value debt at par, excluding the effect of share
buybacks) and therefore no Long-Term Bonus will be paid to Mr Bell (2021: underperformed, £nil).
(4) Employer’s national insurance contributions of £47,328 (2021: £46,722) were paid in respect of Mr Bell’s remuneration for the year.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
65
Payment of the discretionary bonus will be partly deferred in
accordance with the current policy, with 60% paid in March 2023
and the remaining 40% paid on a deferred basis in three equal
instalments in March 2024, 2025 and 2026, subject to continued
employment.
Scheme interests awarded during the financial year
No directors were awarded any interest over shares in the
Company during the financial year ended 31 December 2022
(2021: nil).
Payments to past directors
No payments were made to former directors of the Company
during the financial year ended 31 December 2022 (2021: £nil).
Payments for loss of office
No loss of office payments were made to any person who has
previously served as a director of the Company at any time
during the financial year ended 31 December 2022 (2021: £nil).
Statement of directors’ shareholdings (audited)
The interests of the CEO and the non-executive directors
(including connected persons) in the Company’s ordinary shares
are shown in the table below. No share options or other share
based awards, with or without performance measures, were
awarded to the CEO or to any non-executive director. There are
no requirements or guidelines for the CEO or the non-executive
directors to own shares in the Company.
Ordinary shares
held as at
31December 2022
Ordinary shares
held as at
31 December 2021
A J S Ross 300,000 250,000
R A Beagles 42,073 42,073
A L C Bell 850,000 850,000
G M Boyle 28,683 28,683
S E G A Neubert 55,369 53,996
J S Perry 82,498 82,498
B C Rogoff 44,974 43,950
P T Yates 25,245 25,245
Since the year end, Ms Neubert has bought a further 336 shares.
There have not been any other changes in the directors’ interests
since the year end.
Ms Bevan and Dr Yogendra, who were appointed to the Board on
1 February 2023, did not hold any shares in the Company at the
date of their appointment.
None of the directors has an interest in the Company’s
preference shares.
Total shareholder return performance graph
The Company is required to present a graph comparing the
Company’s share price with a single broad equity market index.
The Company has compared the share price total return against
(i) a UK market index, namely the MSCI UK IMI Index (‘MSCI UK
Index’), because the Company’s shares are listed on the UK
market, and also (ii) a global index, namely the MSCI All Country
World Index (‘MSCI ACWI’), because the Company invests across
a broad spread of global equity markets. The performance of the
Company’s benchmark is also shown.
Price Benchmark MSCI ACWI MSCI UK
31/12/2017
31/12/2018
31/12/2019
31/12/2020
31/12/2021
31/12/2022
150
100
200
250
300
350
50
0
31/12/2012
31/12/2013
31/12/2014
31/12/2015
31/12/2016
The line graph above sets out the Company’s ten-year total
shareholder return performance relative to the MSCI UK Index
and the MSCI ACWI (sterling adjusted). This line graph assumes a
notional investment of £100 into the indices on 31 December 2012
and the reinvestment of all income, excluding dealing expenses.
CEO remuneration table
Year ended
31 December
CEO single
figure of total
remuneration
£
Annual
discretionary
and One-year
Bonus payout
against
maximum
%
Long-Term
Bonus against
maximum
%
2022 476,142 37.7 0.0
2021 457,820 34.4 0.0
2020 447,219 31.2 0.0
2019 590,975 62.9 29.9
2018 497,881 50.0 12.4
2017 658,906 87.5 89.0
2016 493,811 40.0 54.4
2015 593,431 95.2 100.0
2014 544,514 76.2 100.0
2013 486,802 95.0 64.2
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
66
Directors’ Remuneration Report continued
Annual percentage change in remuneration of directors and employees for the year ended 31 December 2022
The table below shows how the percentage change in the directors’ salaries, benefits and bonuses between 2021 and 2022 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 2022 compared with remuneration for 2021.
Salary
and fees
%
Taxable
benefits
%
Annual
bonuses
%
Long-Term
Bonus
%
A J S Ross 5.5 n/a
(1)
n/a n/a
R A Beagles 4.2 (21.5) n/a n/a
G M Boyle 4.2 – n/a n/a
S E G A Neubert 8.4 (7.8) n/a n/a
J S Perry 5.0 238.7 n/a n/a
B C Rogoff 4.2 – n/a n/a
P T Yates 3.6 – n/a n/a
A L C Bell 2.1 3.2 11.8 0.0
Average pay of employees 5.8 (9.1) 21.3 n/a
(1) Percentage increase cannot be calculated since the value in the previous year was £nil.
The increase in the CEO’s annual bonus in 2022 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 2022. There was no increase in their fees in 2021.
Percentage increase/(decrease) in remuneration for 2021 compared with remuneration for 2020.
Salary
and fees
%
Taxable
benefits
%
Annual
bonuses
(discretionary
and One-year
bonus)
%
Long-Term
Bonus
%
A J S Ross
(1)
21.0 – n/a n/a
R A Beagles
(2)
100.0 n/a
(5)
n/a n/a
G M Boyle 3.2 – n/a n/a
S E G A Neubert
(3)
14.9 n/a
(5)
n/a n/a
J S Perry 3.4 (8.5) n/a n/a
B C Rogoff 3.2 – n/a n/a
P T Yates
(4)
8.0 – n/a n/a
A L C Bell 0.0 8.8 10.2 0.0
Average pay of employees (0.1) 8.4 35.3 n/a
(1) Appointed as Chairman with effect from 29 April 2020.
(2) Appointed as a director on 1 July 2020.
(3) Appointed 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 bonus 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.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
67
Percentage increase/(decrease) in remuneration for 2020 compared with remuneration for 2019.
Salary
and fees
%
Taxable
benefits
%
Annual
bonuses
(discretionary
and One-year
bonus)
%
Long-Term
Bonus
%
A J S Ross
(1)
170.8 n/a n/a n/a
R A Beagles n/a
(2)
n/a n/a n/a
G M Boyle
(3)
195.8 n/a n/a n/a
S E G A Neubert 10.8 (100.0) n/a n/a
J S Perry 11.5 (68.4) n/a n/a
B C Rogoff 10.8 n/a n/a n/a
A Watson 11.2 (72.2) n/a n/a
P T Yates
(4)
23.5 n/a n/a n/a
A L C Bell 2.5 11.2 (49.1) (100.0)
Average pay of employees 1.2 1.9 (10.7) n/a
(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.
Relative importance of spend on pay
Spend
2022
£’000
2021
£’000
Difference
£’000
Fees of non-executive directors (see table on page 64) 319 318 1
Remuneration paid to or receivable by all employees of the Group (including the CEO)
in respect of the year 1,122 1,001 121
Dividends paid to shareholders in respect of the year 40,112 42,212 (2,100)
Share buybacks
(1)
129,269 153,511 (24,242)
Total payments to shareholders 169,381 195,723 (26,342)
Net assets (debt at fair value)
(2)
1,541,809 1,992,041 (450,232)
(1) Share buybacks were at a high level, reflecting the level of the discount during the year (see also comments on page 15).
(2) The Committee considers that this table should include the net assets (debt at fair value) as this would assist shareholders to understand the relative importance of spend on pay.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
68
Directors’ Remuneration Report continued
Statement of implementation of remuneration policy
The remuneration policy for the CEO, as detailed in the policy
section of the Report, was agreed by shareholders at the 2022
AGM and implemented with effect from 1 January 2022. The fees
for non-executive directors were increased with effect from 1 April
2022.
As detailed on page 63, the fees will be increased with effect
from 1 April 2023.
Consideration by the directors of matters relating to directors’
remuneration
The Board as a whole sets the fees that are payable to the
non-executive directors and it has appointed the Committee to
consider matters relating thereto. The Committee also considers
the remuneration of the CEO and makes a recommendation on
this to the Board for its approval.
The Committee was not provided with any external advice or
services, during the financial year ended 31 December 2022, in
respect of the fees payable to the non-executive directors or the
remuneration payable to the CEO, other than obtaining a report
from a third-party provider on the remuneration of employees in
broadly comparable roles in other companies in order to assess
the CEO’s remuneration.
The Committee assesses the workload and responsibilities of the
non-executive directors and reviews, from time to time, the fees
paid to non-executive directors of other investment trust
companies.
The table below sets out the members of the Committee who
were present during any consideration of the CEO’s
remuneration, and shows the number of meetings attended by
each non-executive director:
Name
Number of
meetings
attended
P T Yates 2
S E G A Neubert 2
A J S Ross 2
Statement of shareholder voting
At the AGM held on 5 May 2022, ordinary resolutions to approve
the Directors’ Remuneration Report for the year ended
31 December 2021 and to approve the remuneration policy were
passed on a show of hands. The proxy votes in each case were
as follows:
Votes for Votes against Votes withheld
Total votes cast
(excluding votes
withheld)
Approval of Directors’ Remuneration Report
154,037,318 6,967,231 796,666 161,004,549
95.7% 4.3% – 100%
Approval of remuneration policy
140,867,953 19,066,966 866,296 159,934,919
88.1% 11.9% – 100%
The Company is committed to ongoing shareholder dialogue
and takes an active interest in voting outcomes. Where there are
substantial votes against resolutions in relation to directors’
remuneration, the reasons for any such vote will be sought and
any actions in response will be detailed in future Directors’
Remuneration Reports. There were no substantial shareholder
votes against these resolutions at the AGM in 2022.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
69
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 5 May 2022 and passed by the members. This policy took effect from 1 January 2022. No changes were made
to the policy. The policy will apply for three years until the AGM in 2025, when it will next be voted on by shareholders, unless any
changes are required prior to that date. The policy is set out on pages 69 to 74.
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 2023, the Chairman’s fee is £76,000 and
each non-executive director’s annual base fee is £39,500.
Additional fees are payable as follows:
> Chairman of Audit & Risk Committee £10,500.
> Chairman of Remuneration and Nomination Committee
£6,000.
> Senior Independent Director £6,000.
The maximum amount of fees, in aggregate, that may be paid to
non-executive directors in any financial year is £450,000.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
70
Directors’ Remuneration Report continued
Remuneration policy for the CEO (and any future executive directors)
Currently, the Company operates with one executive director, the CEO. This policy applies to the CEO, but would also be applied to any
other executive director appointed by the Company. Executive director remuneration is set at market-competitive levels, with the
majority of any variable pay (bonus amounts) contingent on the attainment of audited outperformance of the Company’s benchmark,
in accordance with the Company’s objective. Any discretionary bonus is dependent on annual appraisal by the Remuneration and
Nomination Committee and Board against a range of financial and corporate governance criteria.
Purpose and link
tostrategy
Operation and
clawback
Maximum
opportunity
Performance
measures
Base salary Base salary is set at
market-competitive levels
in order to recruit and
retain an executive
director of a suitably high
calibre.
The level of pay reflects a
number of factors
including individual
experience, expertise and
pay appropriate to the
position.
Base salary is reviewed
annually and fixed for 12
months.
The CEO’s salary was
increased to £330,000 per
annum with effect from
1 January 2023.
Year-on-year salary
increases for any
executive director will not
exceed 10% per annum
other than in times of
abnormal inflation or
other exceptional
circumstances, in which
case the increase will not
exceed 20%.
Not applicable
Benefits-in-
kind
Offering market-
competitive levels of
benefits-in-kind to
helprecruit or retain
anexecutive director of
asuitably high calibre.
An executive director may
be eligible to receive a
range of benefits including
some or all of:
> private medical
insurance for the
executive director and
their family;
> death in service
insurance; and
> business-related
expenses.
Where benefits are sourced
through third-party
providers, the expense will
reflect the cost of the
provision of the benefits
from time to time but will be
kept under review by the
Committee.
The maximum benefit
that can be offered or
paid to an executive
director is:
> private medical
insurance provided on
a family basis;
> death in service
insurance of four times
base salary; and
> business-related
expenses.
Not applicable
Pension Offering market-
competitive levels of
guaranteed cash
earnings to help recruit or
retain an executive
director of a suitably
highcalibre.
The CEO currently receives a
cash payment, equal to 10%
of base salary, in lieu of
pension contributions.
The maximum cash
payment in lieu of
pension contributions is
10% of base salary, which
is the same as the
pension contribution rate
applicable to other staff.
Not applicable
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
71
Purpose and link
tostrategy
Operation and
clawback
Maximum
opportunity
Performance
measures
Discretionary
bonus
The purpose of the bonus
arrangements is to
incentivise the CEO to
maximise the Company’s
performance and its
return to shareholders.
The CEO is eligible to receive
a discretionary bonus of up
to 40% of basic annual
salary. The Committee will
review the CEO’s
performance against the
performance criteria to
determine the appropriate
level of bonus payable in
respect of the preceding
year.
The Committee may
change the terms of this
bonus or reduce any bonus
payment that would
otherwise be payable in
order to comply with any
relevant current or future
regulations, including the
FCA Remuneration Code.
See note 2 on page 72 for
the operation of deferral,
malus and clawback.
The maximum cash
discretionary bonus
payable to any executive
director is 40% of base
salary.
Please see note 1 on
page 72 for details of
the performance
measures applicable
to the CEO’s
discretionary bonus.
One-year Bonus The purpose of the bonus
arrangements is to
incentivise the CEO to
maximise the Company’s
performance and its
return to shareholders.
The CEO is eligible to receive
a bonus of up to 40% of
base salary by reference to
the performance of the
Company over the previous
financial year.
The Committee may
change the terms of this
bonus or reduce any bonus
payment that would
otherwise be payable in
order to comply with any
relevant current or future
regulations, including the
FCA Remuneration Code.
See note 2 on page 72 for
the operation of deferral,
malus and clawback.
The maximum cash
One-year bonus payable
to any executive director
is 40% of base salary.
Please see note 1 on
page 72 for details of
the performance
measures applicable
to the CEO’s One-year
Bonus.
Long-Term Bonus The purpose of the bonus
arrangements is to
incentivise the CEO to
maximise the Company’s
performance and its
return to shareholders.
The CEO is eligible to receive
a bonus of up to 90% of base
salary by reference to the
performance of the
Company over the previous
three financial years.
The Committee may, with
shareholder approval as
appropriate, change the
terms of this bonus or
reduce any bonus payment
that would otherwise be
payable in order to comply
with any relevant current or
future regulations, including
the FCA Remuneration Code.
See note 2 on page 72 for
the operation of deferral,
malus and clawback.
The maximum cash
Long-Term bonus
payable to any executive
director is 90% of base
salary.
Please see note 1 on
page 72 for details of
the performance
measures applicable
to the CEO’s Long-Term
Bonus.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
72
Directors’ Remuneration Report continued
Notes:
1. Performance measures
Mr Bell’s service agreement, as amended, provides that he is
eligible to receive a bonus of up to 170% of his basic annual
salary, two elements of which, totalling a maximum of 130% of
salary, are calculated by reference to the performance of the
Company. The cash bonus arrangement consists of three
separate elements as set out below:
(i) Discretionary bonus
Each year Mr Bell is eligible to receive, at the absolute discretion
of the Committee, a cash bonus of up to 40% of his basic annual
salary. The Committee has determined a number of criteria that
it takes into account on which to judge his performance and
based on which it agrees the amount of the discretionary bonus.
These include the management and development of the
investment process; advising the Board on and evolving the
long-term strategy of the Company; the commitment,
development and presentation of the Company’s approach to
ESG; performance against annual objectives; management of
staff; administration of the office; reporting to the Board and
shareholders; and relationships with the Board and other
stakeholders.
(ii) One-year Bonus
Each year Mr Bell is eligible to receive an additional cash bonus
of up to 40% of his basic annual salary. The bonus will be
determined by the Company’s net asset value per share total
return performance over the previous financial year (debt at par,
excluding the effect of share buybacks or issuance) relative to its
benchmark. Outperformance of the benchmark by 3.0% or more
will generate a bonus of the full 40%. No bonus is payable if
performance is in line with or below that of the benchmark.
Relative performance of between nil and 3.0% will generate a pro
rata bonus.
(iii) Long-Term Bonus
Mr Bell is eligible to receive a Long-Term Bonus each year of up to
90% of his basic annual salary by reference to the Company’s
performance over the previous three financial years. The
Long-Term Bonus will be determined by reference to the
Company’s net asset value per share total return (debt at par,
excluding the effect of share buybacks or issuance) relative to its
benchmark, as set out in the Company’s audited annual
accounts for the applicable financial years. Compounded
average annual outperformance of the benchmark by 2.5% per
annum or more will generate a bonus of the full 90%. No bonus is
payable if performance is in line with or below that of the
benchmark. Relative performance of between nil and 2.5% per
annum will generate a pro rata bonus.
The Long-Term Bonus will be halved if, despite outperformance of
the benchmark over the relevant three financial years, the
Company’s net asset value total return per share is negative over
that period.
2. Deferral, malus and clawback
2.1 Deferral
All bonuses are subject to deferral in terms of payment. 60% of
any bonus will be paid in March following the performance year
end (‘First Bonus Payment Date’). 40% of any bonuses will be
payable on a deferred basis over the following three years, in
equal instalments on each anniversary of the First Bonus
Payment Date.
2.2 Malus
Malus (where bonuses that have yet to be paid are forfeited)
may be applied by the Remuneration and Nomination
Committee where:
(a) there has been material misstatement or error that causes
an award to vest at a higher level than would otherwise have
been the case;
(b) there has been a material failure in risk management; or
(c) there has been serious misconduct that has resulted or could
result in dismissal.
2.3 Clawback
Any bonus will be subject to a clawback period of two years after
it has been paid, whereby the CEO will be required to pay back
part or all of any bonus already received. Clawback may be
applied by the Remuneration and Nomination Committee where:
(a) there has been material misstatement or error that causes
an award to vest at a higher level than would otherwise have
been the case;
(b) there has been a material failure in risk management; or
(c) there has been serious misconduct that has resulted or could
result in dismissal.
3. Legacy plans
The Committee reserves the right to make remuneration
payments and payments for loss of office that are not in line with
the policy set out above (i) where the terms of such a payment
were agreed before the policy came into effect or at a time when
the relevant individual was not a director of the Company and (ii)
in the opinion of the Committee, such a payment is not in
consideration of the individual becoming a director of the
Company. For these purposes, payments include the Committee
making awards of variable remuneration.
4. Differences in the Company’s remuneration policies for
directors and employees
The remuneration policy for the executive director differs
principally from that for employees in that the executive
director’s remuneration is more heavily weighted towards
variable pay so that a greater proportion of his pay is related to
the Company’s performance and the value created for
shareholders.
Principles and approach to recruitment and internal promotion
of directors
Non-executive directors
(1) Remuneration of non-executive directors should reflect the
specific circumstances of the Company and the duties and
responsibilities of the non-executive directors. It should
provide appropriate compensation for the experience and
time committed to the proper oversight of the affairs of the
Company.
(2) Non-executive directors are not eligible to receive bonuses,
pension benefits, share options or other benefits, other than
the reimbursement of reasonably incurred expenses which
are regarded by HMRC as taxable benefits-in-kind.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
73
(3) The total remuneration of the non-executive directors is
determined by the provisions of the Company’s Articles of
Association and by shareholder resolution.
(4) The basic non-executive director’s fee will be paid to each
non-executive director, with a higher fee per annum for the
Chairman of the Company. An additional fee per annum will
be paid to the Chairman of each of the Audit & Risk and the
Remuneration and Nomination Committees and to the
Chairman of any other Committees that the Company forms;
and to the Senior Independent Director.
Executive directors
(1) When hiring a new executive director, or promoting to the
Board from within the Group, the Committee will offer a
package that is sufficient to retain and motivate and, if
relevant, attract the right talent whilst paying no more than is
necessary.
(2) Ordinarily, remuneration for a new executive director will be in
line with the policy set out in the table.
(3) The maximum level of variable pay that may be awarded to
a new director on recruitment or on promotion to the Board
shall be limited to 170% of base salary (calculated at the date
of grant, excluding any buy-out awards – see below).
(4) The Committee may, where it considers it to be in the best
interests of the Company and shareholders, offer an
additional cash payment to an executive director in order to
replace awards which would be foregone by the individual
on leaving his/her previous employment (i.e. buy-out
arrangements) which will be intended to mirror forfeited
awards as far as possible by reflecting the value, nature, time
horizons and performance measures.
Letters of appointment/service contract
Non-executive directors’ letters of appointment
The non-executive directors all have letters of appointment,
which may be inspected at the Company’s registered office.
None of the non-executive directors is subject to any notice
period. All continuing non-executive directors are required to
stand for re-election by the shareholders at least every three
years. The initial period of appointment is two terms of three
years. All reasonably incurred expenses will be met.
All the directors are proposed for election or re-election at the
AGM in May 2023 with the exception of Ms Neubert, who will retire
at the conclusion of the AGM.
CEO’s service contract
The CEO’s service contract with the Company may be inspected
at the Company’s registered office. The CEO’s service agreement
dated 3 February 2010, as amended, provided in 2022 for a salary
of £315,000 (2021: £308,424) per annum. His salary has been
increased to £330,000 with effect from 1 January 2023. Mr Bell’s
appointment may be terminated by either party on the giving or
receiving of not less than nine months’ written notice.
Please see ‘Policy on payment for loss of office’ below for further
details of the CEO’s service contract.
Illustration of application of remuneration policy
The chart below shows an indication of the values of the CEO’s
remuneration that would be received by the CEO, in accordance
with this remuneration policy, for the year ending 31 December
2023 at three direct levels of performance:
> minimum performance, i.e. fixed salary, taxable benefits and
payment in lieu of pension contributions, with no bonus
payout;
> on-target performance, i.e. fixed pay plus bonus payments
assuming a 50% payout of each of the discretionary,
One-year and Long-Term Bonuses; and
> maximum performance, i.e. fixed pay plus bonus payments
assuming 100% payout of each of the discretionary, One-year
and Long-Term Bonuses.
0
400
200
600
800
£397,642
Minimum
performance
On-target
performance
Maximum
performance
100%
£678,142
22%
10%
10%
58% 41%
£958,642
14%
14%
31%
1,000
Fixed pay Discretionary bonus
One-year Bonus Long-Term Bonus
Policy on payment for loss of office
Non-executive directors
It is the Company’s policy not to enter into any arrangement with
any of the non-executive directors to entitle any of the non-
executive directors to compensation for loss of office.
CEO (and any future executive directors)
The Company’s policy is to agree a notice period for the CEO
which would not exceed nine months.
The Company may, in its absolute discretion and without any
obligation to do so, terminate the CEO’s employment
immediately by giving him/her written notice together with a
payment of such sum as would have been payable by the
Company to the CEO as salary (excluding future bonus accrual)
in respect of his/her notice period. The Company may, at its
discretion, make the termination payment in instalments over a
period of no longer than six months from the termination date
and on terms that any payment should be reduced to take
account of mitigation by the CEO.
If a new executive director is recruited, the Company’s policy
regarding payments for loss of office will be the same as for the
CEO.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
74
If the CEO ceases employment as a result of a ‘good leaver’
reason (i.e. death, ill-health, injury, disability, redundancy,
retirement or due to any other circumstance that the Committee
at its discretion permits), any bonus payment shall be pro-rated
for time and performance. The Committee may, however, taking
into account such factors as it considers appropriate, increase
the proportion of the relevant bonus that becomes payable. If
the CEO ceases employment other than as a ‘good leaver’, or if
the CEO gives or receives notice prior to the date that the
relevant bonus would otherwise have been paid, the CEO will
forfeit any right to receive the relevant bonus for nil consideration
unless the Committee, in its absolute discretion, determines
otherwise.
A change of control of the Company shall not affect the amount
of any bonus or the date on which it becomes payable unless
the Committee determines otherwise, in which case the
Committee shall determine whether the pro-rated performance
targets attached to the applicable bonuses have been satisfied
at that time.
If the Committee determines that the pro-rated performance
targets have not been satisfied on the change of control, the
applicable bonus shall immediately lapse unless the Committee
determines otherwise. To the extent that the Committee
determines that the pro-rated performance targets have been
satisfied on the change of control, if the CEO ceases to be
employed by the Company prior to the date that the applicable
bonus would otherwise have been paid to the CEO other than as
a result of:
> a reason which would have justified his/her summary
dismissal;
> his/her cessation of employment without the giving or
receiving of notice; or
> his/her resignation,
the applicable bonus shall become payable to the extent
determined at the time of the change of control on, or as soon as
practicable after, the CEO’s cessation of employment.
Statement of consideration of conditions elsewhere
intheCompany
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 2022. The ratio of the CEO’s
remuneration to the median of the other employees was 3:1.
We have not reported in any greater detail on this point in order
to protect the privacy of individuals.
Statement of consideration of shareholder views
The Company places great importance on communication with
its shareholders. The Company had frequent meetings with
institutional shareholders and City analysts throughout the year
ended 31 December 2022. The Board was pleased to welcome
shareholders to the AGM held in May 2022 both in person and
online, and shareholders were able to submit questions to the
Board whether they attended in person or virtually. The Company
also responded to shareholder enquiries during the year. The
Board can confirm that it is not aware of negative views being
expressed by shareholders in relation to its policy on directors’
remuneration.
Approval
This report was approved by the Committee on 14 March 2023
and is signed on its behalf by:
Paul Yates
Chairman of the Remuneration and Nomination Committee
14 March 2023
Directors’ Remuneration Report continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
75
STATUTORY INFORMATION
The directors present the Annual Report of the Group for the year
ended 31 December 2022.
ACTIVITIES AND BUSINESS REVIEW
A review of the business is given in the Strategic Report on
pages1 to 45 including the Chairman’s Statement and CEO’s
review on pages 8 to 16. The directors are required by the
Companies Act to prepare a Strategic Report for each financial
year, which contains a fair review of the business of the Group
during the financial year and of the position of the Group at the
end of the year, future developments and a description of the
principal risks and uncertainties facing the Group. This
information can be found within the Strategic Report on pages 37
to 39.
The Corporate Governance Statement on pages 48 to 58 forms
part of this Directors’ Report.
INVESTMENT POLICY
The Company’s investment policy is set out on the inside front
cover.
STATUS
in the United Kingdom . It is an investment company as defined in
section 833 of the Companies Act 2006 and operates as an
investment trust in accordance with section 1158 of the
Corporation Tax Act 2010. The Company has received
confirmation from HM Revenue and Customs that it has been
accepted as an approved investment trust with effect from
1 January 2012, provided it continues to meet the eligibility
conditions of section 1158 and the ongoing requirements for
approved companies in the Investment Trust (Approved
Company) (Tax) Regulations 2011.
SUBSIDIARY COMPANY
The Company has one subsidiary company, Witan Investment
Services Limited, which provides marketing services to the
Company. Witan Investment Services Limited is authorised and
regulated by the Financial Conduct Authority to act as the
Company’s AIFM.
ISA
s
The Company intends to continue to manage its affairs so that
its shares fully qualify for the stocks and shares component of an
ISA and a Junior ISA.
SUBSTANTIAL SHARE INTERESTS
As at 31 December 2022, the Company had not been notified of
any substantial interests in the Company’s voting rights.
There have not been any new holdings notified between the year
end and the date of this Report.
Directors’ Report
ASSETS
At 31 December 2022 the total net assets of the Group were
£1,541.8 million (2021: £1,992.0 million). At this date the net asset
value per ordinary share was 226.80p (2021: 263.93p).
REVENUE AND DIVIDEND
The loss for the year was £280 million (2021: profit £263 million).
A profit of £34 million is attributable to revenue (2021: £28 million).
The profit for the year attributable to revenue has been applied
as follows:
£’000
Distributed as dividends:
First interim of 1.40p per ordinary share (paid on 10
June 2022) 10,003
Second interim of 1.40p per ordinary share (paid on
16 September 2022) 9,779
Third interim of 1.40p per ordinary share (paid on 16
December 2022) 9,584
Fourth interim of 1.60p per ordinary share (payable
on 17 March 2023) 10,746
Utilisation of the Company’s revenue reserve (6,371)
Company revenue profit available for distribution 33,741
The directors have declared a fourth interim dividend instead of
a final dividend in order to ensure that, as in previous years, the
distribution is made to shareholders before 5 April.
DIRECTORS
The current directors of the Company are shown on pages 46 to 47.
Shauna Bevan and Shefaly Yogendra were appointed as directors
on 1 February 2023. 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 election or re-election by shareholders, with the exception of
Ms Neubert who will not seek re-election at the upcoming AGM due
to her retirement from the Board.
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 & Risk Committee
comprised Mr Perry (Chairman), Mrs Beagles, and Mr Yates. During
the year the membership of the Remuneration and Nomination
Committee comprised Mr Yates (Chairman), Ms Neubert and
Mr Ross.
No director was a party to, or had an interest in, any contract or
arrangement with the Company at any time during the year or to
the date of this report. With the exception of Mr Bell, no director has
or had a service contract with the Company.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
76
DIRECTORS’ INTERESTS
The interests of the directors in the share capital of the Company
are set out in the Directors’ Remuneration Report on page 65.
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 29 April 2020, 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 62 to 74. The
Company’s Articles of Association currently limit the aggregate
fees payable to the non-executive directors to £450,000 per
annum.
INVESTMENT MANAGERS
It is the opinion of the directors that the continuing appointment
of the investment managers listed on page 13 is in the interests of
the Company’s shareholders as a whole and that the terms of
engagement negotiated with them are competitive and
appropriate to the investment mandates. The Board and the
Company’s AIFM review the appointments of the investment
managers on a regular basis and make changes as appropriate.
SHARE CAPITAL
The Company’s share capital comprises:
(a) ordinary shares of 5p nominal value each (‘shares’)
At 31 December 2022, there were 1,000,355,000 (2021:
1,000,355,000) ordinary shares of 5p each in issue.
During the year, 58,152,696 shares were bought back and are
held in treasury and at 31 December 2022 there were 320,531,829
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 679,823,171 on a poll. Since the year end, a further
11,031,856 shares have been bought back and at 13 March 2023
there were 1,000,355,000 shares in issue of which 331,563,685
were held in treasury. The voting rights of the shares on a poll are
one vote for every share held.
Directors’ Report continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
77
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 5 May 2022 a
special resolution was passed giving the Company authority,
until the conclusion of the AGM in 2023, to make market
purchases to be held in treasury of the Company’s ordinary
shares up to a maximum of 107,549,133 shares, being 14.99% of the
issued ordinary share capital as at 5 May 2022. The Company
has bought back 48,681,225 shares between the date of the last
AGM and 13 March 2023.
The Board is seeking to renew its powers at the forthcoming AGM
to buy shares into treasury, for possible reissuance when the
shares trade at a premium. The Company makes use of share
buybacks, purchasing shares to be held in treasury with the
objective of achieving a sustainable low discount (or a premium)
to net asset value. Shares are not bought back unless the result is
an increase in the net asset value per ordinary share. Shares will
only be re-sold from treasury at, or at a premium to, the net asset
value per ordinary share.
The Company is also seeking to renew shareholder approval to
issue shares, up to 10% of the starting total, provided that such
shares are issued at, or at a premium to, net asset value.
(b) 2.7% preference shares of £1 nominal value each
(‘2.7% preference shares’)
The 2.7% preference shareholders have no rights to attend
and vote at general meetings. At 31 December 2022 there
were 500,000 2.7% preference shares in issue. Further details
on the preference shares are given in note 17 on page 111.
(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 2022 there
were 2,055,000 3.4% preference shares in issue. Further details
on the preference shares are given in note 17 on page 111.
At the AGM in 2022 a special resolution was passed giving the
Company authority, until the conclusion of the AGM in 2023, 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 2022 the Company had valid
authority, outstanding until the conclusion of the AGM in 2023, 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. The directors intend to seek a fresh
authority at the AGM in 2023.
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 & Risk Committee to determine
their remuneration will be proposed at the forthcoming AGM.
Further details are included in the Report of the Audit & Risk
Committee on pages 59 to 61.
DIRECTORS’ STATEMENT AS TO THE DISCLOSURE
OFINFORMATION 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 72. The directors confirm that
there are no other disclosures to be made in respect of Rule 9.8.4.
ANTI-BRIBERY AND CORRUPTION POLICY
The Board has a zero-tolerance approach to instances of bribery
and corruption. Accordingly, it expressly prohibits any director or
associated persons when acting on behalf of the Company, from
accepting, soliciting, paying, offering or promising to pay or
authorise any payment, public or private in the UK or abroad to
secure any improper benefit for themselves or for the Company.
The Board applies the same standards to its service providers in
their activities for the Company. A copy of the Company’s
Anti-Bribery and Corruption Policy can be found on its website at
www.witan.com. The policy is reviewed regularly by the Audit &
Risk Committee.
PREVENTION OF THE FACILITATION OF TAX EVASION
During the year and in response to the implementation of the
Criminal Finances Act 2017, the Board has adopted a zero-
tolerance approach to the criminal facilitation of tax evasion. A
copy of the Company’s policy on preventing the facilitation of tax
evasion can be found on the Company’s website www.witan.
com. The policy is reviewed annually by the Audit & Risk
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.
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
78
MODERN SLAVERY ACT 2015
As an investment vehicle, the Company does not provide goods
or services in the normal course of business and does not have
customers. Accordingly, the directors consider that the Company
is not required to make any anti-slavery or human trafficking
statement under the Modern Slavery Act 2015.
SECURITIES FINANCING TRANSACTIONS
As the Company undertakes securities lending, it is required to
report on Securities Financing Transactions (as defined in Article
3 of Regulation (EU) 2015/2365, securities financing transactions
include repurchase transactions, securities or commodities
lending and securities or commodities borrowing, buy-sell back
transactions or sell-buy back transactions and margin lending
transactions). In accordance with Article 13 of the Regulation, the
Company’s involvement in and exposures related to securities
lending as at 31 December 2022 are detailed on pages 115 to 116.
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 kilowatt-hours
of energy in the United Kingdom during the year), nor does it
have responsibility for any other emission producing sources
under the Companies Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013, including those within its underlying
investment portfolio. We do, however, voluntarily disclose our
operational and portfolio CO
2
emissions on page 22 of this Report.
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 4 May 2023 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
14 March 2023
Directors’ Report continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
79
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
lawand regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
are required to prepare the Group financial statements in
accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006
as applicable to companies reporting under those standards
and have also chosen to prepare the parent company financial
statements under UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006
as applicable to companies reporting under those standards.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give atrue and fair
view of the state of affairs of the Group and Company and of
theprofit or loss of the Group and Company for that period.
In preparing these financial statements, the directors are
required to:
> select suitable accounting policies and then apply them
consistently;
> make judgements and accounting estimates that are
reasonable and prudent;
> state whether UK-adopted International Accounting
Standards have been followed, subject to any material
departures disclosed and explained in the financial
statements; and
> prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any
timethe financial position of the Company and enable them
toensure that the financial statements comply with the
Companies Act 2006.
They are also responsible for safeguarding the assets of
theCompany and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Statement of Directors’ Responsibilities
in respect of the Annual Report, the Directors’ Remuneration Report
and the financial statements
RESPONSIBILITY STATEMENT
We confirm, to the best of our knowledge, that:
> the financial statements, prepared in accordance with
UK-adopted International Accounting Standards, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Company and theundertakings included
in the consolidation taken as awhole; and
> the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included
inthe consolidation taken as a whole, together with a
description (on pages 37 to 39) of the principal risks
anduncertainties that they face.
We also confirm that the financial statements, taken as a
whole,are fair, balanced and understandable, and provide the
information necessary for shareholders to assess the Company’s
position, performance, business model and strategy.
By order of the Board
Andrew Ross Andrew Bell
Chairman Chief Executive Officer
14 March 2023 14 March 2023
Note to those who access this document by electronic means:
The Annual Report for the year ended 31 December 2022 has
been approved by the Board of Witan Investment Trust plc.
Copies of the Annual Report and the Half Year Report are
circulated to shareholders and, where possible, to investors
through other providers’ products and nominee companies
(orwritten notification is sent when they are published online).
Itis also made available in electronic format for the convenience
of readers. Printed copies are available from the Company’s
registered office in London.
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
80
Independent Auditor’s Report to the members of
Witan Investment Trust plc
for the year ended 31 December 2022
OPINION
Our opinion on the financial statements is unmodified
We have audited the financial statements of Witan Investment
Trust plc (the ‘parent company’) and its subsidiary (the ‘Group’)
for the year ended 31 December 2022, which comprise the
Consolidated Statement of Comprehensive Income, the
Consolidated and Individual Statements of Changes in Equity,
the Consolidated and Individual Balance Sheets, and
Consolidated and Individual Company Cash Flow Statements
and notes to the financial statements, including a summary of
significant accounting policies. The financial reporting
framework that has been applied in the preparation of the Group
financial statements is applicable law and UK-adopted
International Accounting Standards. The financial reporting
framework that has been applied in the preparation of the
parent company financial statements is UK-adopted
International Accounting Standards as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion:
> the financial statements give a true and fair view of the state
of the Group’s and of the parent company’s affairs as at
31 December 2022 and of the Group’s profit for the year then
ended;
> the Group financial statements have been properly prepared
in accordance with UK-adopted International Accounting
Standards;
> the parent company financial statements have been
properly prepared in accordance with UK-adopted
International Accounting Standards as applied in
accordance with the provisions of the Companies Act 2006;
and
> the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
‘Auditor’s responsibilities for the audit of the financial statements’
section of our report. We are independent of the Group and the
parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We are responsible for concluding on the appropriateness of the
directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s and the parent company’s
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify the auditor’s
opinion. Our conclusions are based on the audit evidence
obtained up to the date of our report. However, future events or
conditions may cause the group or the parent company to
cease to continue as a going concern.
Our evaluation of the directors’ assessment of the Group’s and
the parent company’s ability to continue to adopt the going
concern basis of accounting included:
> Determining the appropriateness of the Group and parent
company’s going concern policy and procedures under the
relevant accounting framework and the rationale for why no
material uncertainty was noted;
> Assessing the disclosures concerning the basis of
preparation of the financial statements and going concern;
> Inspecting management’s going concern assessment and
conclusions made;
> Evaluating the income forecasts prepared by management,
including the assumptions used and level of headroom
available, both in terms of cash resources and compliance
with loan covenants;
> Obtaining support for the renewal of the revolving credit
facility, which was renewed on 29 November 2022 and
obtaining an understanding of the liquidity position of the
group;
> Considering the robustness of the forecasts to potential
changes in underlying assumptions;
> Obtaining an understanding of how management has
assessed the impact of events/market conditions in relation
to rising inflation in their forecasts;
> Assessing disclosures included in the financial statements in
relation to the impact of macroeconomic uncertainties such
as the impact of the Russian invasion of Ukraine and rising
inflation; and
> Identifying applicable subsequent events and discussing
their implications with management.
In our evaluation of the directors’ conclusions, we considered the
inherent risks associated with the Group’s and the parent
company’s business model including effects arising from
macro-economic uncertainties such as rising inflation and the
impact of the Russian invasion of Ukraine, we assessed and
challenged the reasonableness of estimates made by the
directors and the related disclosures and analysed how those
risks might affect the Group’s and the parent company’s
financial resources or ability to continue operations over the
going concern period.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s and the parent company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the Group’s and the parent company’s reporting on
how they have applied the UK Corporate Governance Code, we
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
81
have nothing material to add or draw attention to in relation to
the directors’ statement in the financial statements about
whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.
OUR APPROACH TO THE AUDIT
Key audit
matters
Scoping
Materiality
OVERVIEW OF OUR AUDIT APPROACH
Overall materiality:
Group: £15.5m which represented approximately 1% of the
Group’s net assets at the planning stage of the audit.
Parent company: £14.7m which represents 1% of the parent
company’s net assets, capped at 95% of Group materiality. .
Key audit matters were identified as:
> Valuation of investments held at fair value through profit
or loss (same as previous year); and
> Occurrence and completeness of investment income
(same as previous year).
Our auditor’s report for the year ended 31 December 2021
included one key audit matter that has not been reported as a
key audit matter in our current year’s report. This relates to
existence of investments measured at fair value through profit
or loss. The majority of investments are held in listed entities,
with the value of the unquoted investments being immaterial.
Also there have been no historic issues with existence of the
investments held and therefore, 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 an audit
of the financial information of the component using
component materiality (full scope audit) on both components.
KEY AUDIT MATTERS (‘KAM’)
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters
included those that had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Description Audit response
Disclosures Our results
KAM
In the graph below, we have presented the key audit matters,
significant risks and other risks relevant to the audit.
Extent of management judgement
Potential financial statement impact
Low
Low
High
High
Investment
income
Management
fees
Performance
fees
Investments
held at fair value
through profit
or loss
Going concern
Management
override of controls
Taxation
Directors’ remuneration
Key audit matter
Significant risk
Other risk
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
82
Key Audit Matter – Group and parent company
How our scope addressed the matter – Group and parent
company
Valuation of investments measured at fair value through profit
or loss
We identified valuation of investments measured at fair value
through profit or loss as one of the most significant assessed
risks of material misstatement due to error. The parent
company’s investment objective is to provide long-term income
and capital growth by investing in a diversified portfolio of global
equities.
The investment portfolio of £1.8 billion as at 31 December 2022
(2021: £2.2 billion) is a significant material balance in the
Consolidated Balance Sheet at year end and the main driver of
the Group’s performance.
Incorrect asset pricing or a failure to maintain proper legal title
of the investments held by the Group could have an impact on
the portfolio valuation and therefore, the return generated for
shareholders.
We identified the valuation of investments measured at fair
value through profit or loss as a significant risk at risk of material
misstatement due to error as a result of the large volume of
transactions in the year, the magnitude of the transactions
being material in aggregate, as well as the overall material value
of the investments held at year end.
In responding to the key audit matter, we performed the
following audit procedures:
> assessing whether the Group’s accounting policy for the
valuation of investments is in accordance with UK-adopted
International Accounting Standards and the Statement of
Recommended Practice ‘Financial Statements of Investment
Trust Companies and Venture Capital Trusts’ (the ‘SORP’) and
testing whether management have accounted for valuation
in accordance with that policy;
> independently pricing 100% of the listed equity and fund
portfolio by obtaining the relevant bid prices and Net Asset
Values (‘NAV’) from independent market information
providers;
> recalculating the total investment valuation based on the
Group’s investment holdings, which was agreed to the
holdings at the reporting date as reflected in the Group’s
accounting records; and
> testing that investments were actively traded by extracting a
report of trading volumes in the week before and after the
year-end from an independent market information provider
for the equity investments held.
Relevant disclosures in the Annual Report and Accounts 2022
> Financial statements: Note 1(h), Note 10
The Group’s accounting policy on investments held at fair
value through profit or loss is shown in note 1(h) to the
financial statements and related disclosures are included in
note 10.
Our results
Our testing did not identify any material misstatements in the
valuation of the Group’s investment portfolio as at the year-end.
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
83
Key Audit Matter – Group and parent company
How our scope addressed the matter – Group and parent
company
Occurrence and completeness of investment income
We identified occurrence and completeness of investment
income as one of the most significant assessed risks of material
misstatement due to fraud and error. The parent company
measures performance on a total return basis and investment
income is one of the significant components of this performance
measure. The investment income reported by the Group for the
year is £43.6 million (2021: £37.4 million) and is a significant
material balance in the Consolidated Statement of
Comprehensive Income.
The parent company is subject to Investment Trust Company
(‘ITC’) regulations and as a result is required to allocate returns
between revenue and capital. There is a risk that income
recognised in the year may be materially misstated through
fraudulent transactions and error due to high volume of
transactions. This could also impact the level of distribution
required under ITC regulations.
In responding to the key audit matter, we performed the
following audit procedures:
> assessing whether the Group’s accounting policy for
recognition of investment income is in accordance with
UK-adopted International Accounting Standards;
> obtaining an understanding of the Group’s business process
for recognising such income in accordance with the Group’s
stated accounting policy;
> testing that income transactions were recognised in
accordance with the policy by selecting a sample of
investments and agreeing the relevant investment income
receivable for those equities to the parent company’s
records. For the selected investments we also obtained the
respective dividend rate entitlements from independent
market information providers and agreed to the amounts
recorded in the Group’s accounting records. In addition, we
agreed the receipt of the dividend income 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 2022
> Financial statements: Note (1e), Note 2
The Group’s accounting policy on income, including
investment income, is shown in note 1(e) to the financial
statements and related disclosures are included in note 2.
Our results
Our testing did not identify any material misstatements in the
amount of investment income recognised during the year.
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
84
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements
on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure Group Parent company
Materiality for financial statements
asawhole
We define materiality as the magnitude of misstatement in the financial statements
that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of these financial statements. We use materiality in
determining the nature, timing and extent of our audit work.
Materiality threshold £15.5m which was approximately 1% of the
Group’s net assets at the planning stage
of the audit.
£14.7m which is approximately 1% of the
parent company’s net assets, capped at
95% of Group materiality.
Significant judgements made by auditor
in determining materiality
In determining materiality, we made the
following significant judgements:
Net assets, which primarily comprise the
Group’s investment portfolio, are
considered to be the key driver of the
Group’s total return performance and
form a part of the NAV calculation.
In addition, 1% of NAV has been deemed
reasonable based on the nature of the
Group as it invests largely in listed
investments.
Materiality for the current year is lower
than the level that we determined for the
year ended 31 December 2021 to reflect
the decrease in net asset value in the year
from £1.99bn to £1.54bn.
In determining materiality, we made the
following significant judgements:
Net assets, which primarily comprise the
parent company’s investment portfolio,
are considered to be the key driver of the
Company’s total return performance and
form a part of the net asset value
calculation.
In addition, the parent company invests
largely in liquid investments and so by
benchmarking against other entities in
the same industry, 1% is considered
appropriate.
Materiality for the current year is lower
than the level that we determined for the
year ended 31 December 2021 to reflect
the decrease in net asset value in the year
from £1.99bn to £1.54bn.
Performance materiality used to drive
the extent of our testing
We set performance materiality at an amount less than materiality for the financial
statements as a whole to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality for the
financial statements as a whole.
Performance materiality threshold £11.6m which is 75% of financial statement
materiality.
£11.0m which is 75% of financial statement
materiality.
Significant judgements made by auditor
in determining performance materiality
In determining performance materiality,
we made the following significant
judgements:
A 75% performance materiality was
determined based on no uncorrected
misstatements from the prior year, low
levels of adjustments from previous years
and the high quality of the accounting
records maintained by the client.
In determining performance materiality,
we made the following significant
judgements:
A 75% performance materiality was
determined based on no uncorrected
misstatements from the prior year, low
levels of adjustments from previous years
and the high quality of the accounting
records maintained by the client.
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
85
Materiality measure Group Parent company
Specific materiality
We determine specific materiality for one or more particular classes of transactions,
account balances or disclosures for which misstatements of lesser amounts than
materiality for the financial statements as a whole could reasonably be expected to
influence the economic decisions of users taken on the basis of the financial
statements.
Specific materiality threshold We determined a lower level of specific
materiality for the following areas:
Investment income, management fees
and performance fees
Related party transactions and directors’
remuneration
We determined a lower level of specific
materiality for the following areas:
Investment income, management fees
and performance fees
Related party transactions and directors’
remuneration
Communication of misstatements to the
Audit & Risk Committee
We determine a threshold for reporting unadjusted differences to the Audit & Risk
Committee.
Threshold for communication £0.8m and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£0.8m and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
OVERALL MATERIALITY – GROUP
Net assets £1.54bn
FSM £15.5m, 1%
PM £11.6m, 75%
TFPUM £0.7m, 5%
OVERALL MATERIALITY – PARENT COMPANY
Net assets £1.54bn
FSM £14.7m, 1%, capped at
95% ofGroup
PM £11.0m, 75%
TFPUM £0.7m, 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 custodian and administrator.
Identifying significant components
The Group audit team evaluated the identified components to assess their significance and determined the planned audit response
based on a measure of materiality. Significance was determined, as a percentage of the Group’s total assets, total income and profit
before taxation.
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
86
Type of work to be performed on financial information of parent and other components (including how it addressed the key audit
matters)
> For each component of the audit, (the parent company and the subsidiary, Witan Investment Services Limited), we performed
full-scope audit procedures. This ensured all key audit matters were addressed.
Changes in approach from previous period
> There has been one change in scope of the current year audit from the scope of that of the prior year. Existence of investments
held at fair value, is no longer considered a key audit matter since the majority of investments are held in listed entities, with the
value of the unquoted investments being immaterial. Also there have been no historic issues with existence of the investments
held. In addition, 100% of listed investments are agreed to the confirmation received directly and independently from the custodian.
OTHER INFORMATION
The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the Annual Report. 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.
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 themselves. 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.
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
87
CORPORATE GOVERNANCE STATEMENT
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified for our
review by the Listing Rules.
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 with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 45;
> the directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate set out on page 45;
> the directors’ statement on whether they have a reasonable expectation that the Group will be able to continue in operation and
meet its liabilities set out on pages 44 and 45;
> the directors’ statement on fair, balanced and understandable set out on page 79;
> the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 37 to 39;
> the section of the Annual Report that describes the review of the effectiveness of risk management and internal control systems
set out on page 59; and
> the section describing the work of the Audit & Risk Committee set out on page 59.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Statement of Directors’ Responsibilities set out on page 79, 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 aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are
capable of detecting irregularities, including fraud, is detailed below:
> We obtained an understanding of the legal and regulatory frameworks applicable to the Group and parent 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 Group and parent company are 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 Board and Audit & Risk Committee meetings;
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
88
> We assessed the susceptibility of the Group and parent 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 operates
– understanding of the legal and regulatory frameworks applicable to the Company.
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.
OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
We were appointed by the Audit & Risk Committee of Witan Investment Trust plc on 18 October 2022 to audit the financial statements
for the year ended 31 December 2022. Our total uninterrupted period of engagement is seven years covering the years ended
31 December 2016 to 31 December 2022.
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 & Risk 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
14 March 2023
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
89
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2022
Year ended 31 December 2022 Year ended 31 December 2021
Notes
Revenue
return
£’000
C
apital
return
£’000
Total
£’000
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Investment income 2 43,605 – 43,605 3 7, 4 4 3 – 3 7, 4 4 3
Other income 3 601 – 601 129 – 129
(Losses)/gains on investments held at
fair value through profit or loss 10 – (303,607 ) (303,607 ) – 24 8 , 1 07 24 8 ,1 07
Foreign exchange gains/(losses) on
cash and cash equivalents – 87 87 – (1 , 1 7 8 ) (1 , 1 7 8 )
Total income 44, 206 (303,520 ) (259,314 ) 3 7, 5 7 2 24 6 ,9 29 284 , 501
Expenses
Management and performance fees 4 (1 , 9 1 8 ) (5 , 7 5 4 ) (7, 6 7 2 ) (2 , 3 3 1 ) (7, 3 8 3 ) (9 , 7 1 4 )
Other expenses 5 (5,384 ) (1 0 1 ) (5 , 4 8 5 ) (4 , 8 1 5 ) (1 0 1 ) (4 , 9 1 6 )
Profit/(loss) before finance costs and
taxation 36,9 04 (309,375 ) (2 7 2 , 4 7 1 ) 3 0, 426 239, 44 5 269 , 87 1
Finance costs 6 (1 , 6 37 ) (4 , 6 5 7 ) (6 , 2 9 4 ) (1 , 3 6 6 ) (3 , 8 4 2 ) (5 , 2 0 8 )
Profit/(loss) before taxation 35, 267 (3 1 4 , 0 3 2 ) (278,765 ) 29 ,0 60 235 ,60 3 264,663
Taxation 7 (1 , 4 5 1 ) (3 3 8 ) (1 , 7 8 9 ) (1 , 4 3 2 ) (4 8 8 ) (1 , 9 2 0 )
Profit/(loss) attributable to equity
shareholders of the parent company 3 3,816 (3 1 4 , 3 7 0 ) (2 8 0 , 5 5 4 ) 2 7, 6 2 8 235,115 262, 7 43
Earnings per ordinary share 9 4.78 p (4 4 . 4 3 )p (39.65 )p 3 . 59 p 30.53 p 34 .12 p
The total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance with IFRSs.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the
Association of Investment Companies.
The Group does not have any other comprehensive income and hence the total profit/(loss), as disclosed above, is the same as the
Group’s total comprehensive income.
All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of Witan Investment Trust plc, the parent company. There are no non-controlling
interests.
The notes on pages 93 to 114 form part of these financial statements.
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
90
Consolidated and Individual Statements of Changes in Equity
for the year ended 31 December 2022
Group
Year ended 31 December 2022 N
otes
Ordinary
share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2021 50, 018 99 , 251 4 6,49 8 1 , 74 7, 3 7 9 48, 895 1 ,9 92 ,0 41
Total comprehensive income:
(Loss)/profit for the year – – – (3 1 4 , 3 7 0 ) 33 ,816 (280,554 )
Transactions with owners, recorded
directly toequity:
Ordinary dividends paid 8 – – – – (40,409 ) (40,409 )
Buybacks of ordinary shares
(held in treasury) 15 – – – (129, 269 ) – (129,269 )
Total equity at 31 December 2022 50,018 9 9, 251 46 ,498 1,303,740 42 ,302 1,5 41,8 09
Company
Year ended 31 December 2022 N
otes
Ordinary
share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other
capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2021 50,018 99,251 46,498 1,747,595 48,679 1,992,041
Total comprehensive income:
(Loss)/profit for the year – – – (314,295) 33,741 (280,554)
Transactions with owners, recorded
directly toequity:
Ordinary dividends paid 8 – – – – (40,409) (40,409)
Buybacks of ordinary shares
(held in treasury) 15 – – – (129,269) – (129,269)
Total equity at 31 December 2022 50,018 99,251 46,498 1,304,031 42,011 1,541,809
Group
Year ended 31 December 2021
Notes
Ordinary
share capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2020 50, 018 99 , 251 4 6,49 8 1,665 ,775 63,666 1, 925, 208
Total comprehensive income:
Profit for the year – – – 235,115 2 7, 6 2 8 26 2,7 43
Transactions with owners, recorded
directly toequity:
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 4 6,49 8 1 , 74 7, 3 7 9 48, 895 1 ,9 92 ,0 41
Company
Year ended 31 December 2021
Notes
Ordinary
share capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2020 50,018 99,251 46,498 1,666,030 63,411 1,925,208
Total comprehensive income:
Profit for the year – – – 235,076 27,667 262,743
Transactions with owners, recorded
directly toequity:
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
The notes on pages 93 to 114 form part of these financial statements.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
91
Consolidated and Individual Balance Sheets
as at 31 December 2022
Notes
Group
31 December
2
022
£’000
C
ompany
31 December
2
022
£’000
Group
31 December
20
21
£’000
C
ompany
31 December
20
21
£’000
Non current assets
Investments at fair value through profit or loss 10 1,760,824 1,762,015 2 , 2 1 7, 4 5 5 2,218,571
Right-of-use asset: property 21 196 196 249 249
Current assets
Other receivables 11 4 ,661 4,885 5 ,840 5,782
Cash and cash equivalents 36,352 34,888 34 , 59 0 33,491
Total current assets 41,01 3 39,773 40,430 39,273
Total assets 1,802 ,033 1,801,984 2 , 258 ,13 4 2,258,093
Current liabilities
Other payables 12 (6 , 2 4 2 ) (6,193) (1 0 , 3 4 7 ) (10,306)
Bank loans 13 (9 6 , 5 0 0 ) (96,500) (98,000 ) (98,000)
Total current liabilities (1 0 2 , 74 2 ) (102,693) (1 0 8 , 3 4 7 ) (108,306)
Total assets less current liabilities 1,69 9, 291 1,699,291 2, 149 ,787 2,149,787
Non current liabilities
Other payables 12 (218 ) (218) (28 7 ) (287)
Deferred tax liability on Indian capital gains 7 (6 6 7 ) (667) (8 8 6 ) (886)
Borrowings:
Secured debt 13 (154,042 ) (154,042) (1 5 4 , 0 1 8 ) (154,018)
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 5 7, 4 8 2 ) (157,482) (1 5 7, 74 6 ) (157,746)
Net assets 1,5 41,809 1,541,809 1, 992 , 041 1,992,041
Equity attributable to equity holders
Ordinary share capital 15 50,018 50,018 50, 018 50,018
Share premium account 99, 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 1,303,740 1,304,031 1 , 74 7, 3 7 9 1,747,595
Revenue reserve 42, 302 42,011 48 , 895 48,679
Total equity 1,5 41,809 1,541,809 1, 992 , 041 1,992,041
Net asset value per ordinary share 18 2 26.80 p 226.80p 269.93 p 269.93p
The financial statements of Witan Investment Trust plc (registered number 101625) were approved by directors and authorised for issue
on 14 March 2023 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 loss of the
Company dealt with in the accounts of the Group amounted to £280,554,000 (2021: profit of £262,743,000).
The notes on pages 93 to 114 form part of theses financial statements.
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
92
Consolidated and Individual Company Cash Flow Statements
for the year ended 31 December 2022
Notes
Group
2022
£’000
Company
2022
£’000
Group
2021
£’000
Company
2021
£’000
Cash flows from operating activities
Dividend income received 42 ,739 42,739 3 7, 9 8 6 37,986
Interest received 299 291 149 149
Other income received 646 216 361 141
Operating expenses paid (1 4 , 0 9 5 ) (14,022) (1 5 , 4 3 0 ) (15,316)
Taxation on overseas income (1,870 ) (1,870) (3 ,794 ) (3,794)
Taxation recovered 2 ,640 2,640 81 81
Net cash inflow from operating activities 30,3 59 29,994 19, 353 19,247
Cash flows from investing activities
Purchases of investments (797 ,777 ) (797,777) (1,004,934 ) (1,004,934)
Sale of investments 948,91 1 948,911 1 , 19 4,7 79 1,194,779
Overseas capital gains tax on sales (5 1 8 ) (518) – –
Settlement of futures contracts 1,00 1 1,001 – –
Net cash inflow from investing activities 151,6 17 151,617 189, 845 189,845
Cash flow from financing activities
Equity dividends paid 8 (40,409 ) (40,409) (42, 399 ) (42,399)
Buybacks of ordinary shares (1 3 2 , 2 8 1 ) (132,281) (150, 942 ) (150,942)
Interest paid (6,04 4 ) (6,044) (5 , 1 6 7 ) (5,167)
Repayment of lease liability 21 (6 7 ) (67) (6 7 ) (67)
Drawdown of bank loans 19 195,000 195,000 1 76 , 25 0 176,250
Repayment of bank loans 19 (1 9 6 , 5 0 0 ) (196,500) (1 8 7, 2 5 0 ) (187,250)
Net cash outflow from financing activities (1 8 0 , 3 0 1 ) (180,301) (2 0 9 , 5 7 5 ) (209,575)
Increase/(decrease) in cash and cash equivalents 1, 675 1,310 (3 7 7 ) (483)
Cash and cash equivalents at the start of the period 34,59 0 33,491 36 ,145 35,152
Effect of foreign exchange rate changes 87 87 (1 , 1 7 8 ) (1,178)
Cash and cash equivalents at the end of the period 36,352 34,888 34 , 59 0 33,491
The notes on pages 93 to 114 form part of these financial statements.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
93
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
94
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
95
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
96
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
97
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
98
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
99
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
100
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
101
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
102
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
103
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
104
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
105
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
106
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
107
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
108
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
109
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
110
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
111
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
112
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
113
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
114
Notes to the Financial Statements continued
for the year ended 31 December 2022
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
115
SECURITIES FINANCING TRANSACTIONS
The Company engages in Securities Financing Transactions (as defined in Article 3 of Regulation (EU) 2015/2365. Securities financing
transactions include repurchase transactions, securities or commodities lending and securities or commodities borrowing, buy-sell
back transactions or sell-buy back transactions and margin lending transactions). In accordance with Article 13 of the Regulation, the
Company’s involvement in and exposures related to securities lending as at 31 December 2022 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 2022 is
disclosed below:
Stock lending
Market value of securities on loan
% of
lendable
assets % of AUM
£35,830,000 2.03 2.03
CONCENTRATION DATA
The largest collateral issuers across all the securities financing transactions as at 31 December 2022 are disclosed below:
Issuer
Market
value of
collateral
received
£’000
Salesforce Inc 36,447
Japanese Treasury Discount Bill 12-06-2023 1,528
Aena SME SA 307
38,282
The top counterparties of each type of securities financing transactions as at 31 December 2022 are disclosed below:
Counterparty
Market
value of
securities
on loan
£’000
BNP Paribas 34,277
Citigroup 1,265
HSBC 288
35,830
Other Financial Information (unaudited)
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
116
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 2022:
Counterparty
Counterparty
location Type Quality
Collateral
currency
Settlement
basis Custodian
Market
value of
collateral
received
£’000
BNP Paribas France Equity Main Market Listing USD Triparty BNP Paribas 36,447
Citigroup US Equity Main Market Listing EUR Triparty BNP Paribas 307
HSBC Hong Kong Government Bond Investment Grade JPY Triparty BNP Paribas 1,528
38,282
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
securitieslending income
Direct and indirect costs
and fees deducted by
securitieslending agent
% return of the securities
lendingagent
Net securities lending
income retained by
theCompany % return of the Company
£296,000 £74,000 25% £222,000 75%
Other Financial Information (unaudited) continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
117
ALTERNATIVE INVESTMENT FUND MANAGERS’ DIRECTIVE
Witan Investment Trust plc is an ‘alternative investment fund’ (‘AIF’) for the purposes of the UK version of the EU Alternative Investment
Fund Managers’ Directive (Directive 2011/61/EU) (the ‘AIFMD’) as transposed into UK Law on the UK’s exit from the EU. The Company has
appointed its subsidiary, Witan Investment Services Limited (‘WIS’), toact as its AIFM. WIS is authorised and regulated by the
UnitedKingdom 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
arerequired 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
sinceitwas last updated in March 2022.
The Company and AIFM also wish to make the following disclosures to investors:
> the investment strategy, geographic and sector investment focus and principal stock exposures are included in the Strategic
Report. A list of the top 40 portfolio holdings is included on pages 34 to 35;
> none of the Company’s assets is subject to special arrangements arising from their illiquid nature;
> the Strategic Report and note 14 to the accounts set out the risk profile and risk management systems in place. There have been
nochanges to the risk management systems in place in the period under review and no breaches of any of the risk limits set,
withno 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
oftheAIFM’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 ontheWitanwebsite
(www.witan.com). The London Stock Exchange Daily Official List (‘SEDOL’) code is BJTRSD3.
Dividend
A fourth interim dividend of 1.60p per share has been declared, payable on 17 March 2023. The record date for the dividend was
24 February 2023 and the ex-dividend date for the dividend was 23 February 2023 (see page 9 and note 8 on page 100).
Dividend Tax Allowance
Under current UK tax rules, individuals have an annual tax-free dividend income allowance. The amount is subject to change by
Parliament; the allowances applicable to particular years are disclosed on HMRC’s website. 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 thisshould be included with any other dividend
income received when calculating and reporting total dividend income received. Itisthe 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
yourpersonal tax position, you are recommended to contact your professional adviser.
Please note that tax assumptions may change if the law changes, and the value of tax relief (if any) will depend upon your individual
circumstances. Investors should consult their own tax advisers in order to understand any applicable tax consequences.
Beneficial Owners of Shares – Information Rights
Beneficial owners of shares who have been nominated by the registered holder of those shares to receive information rights under
section 146 of the Companies Act 2006 should direct all communications to the registered holder of their shares rather thantothe
Company’s Registrar, Computershare, or to the Company directly.
Additional Shareholder Information
Witan Investment Trust plc
Annual Report 2022
FINANCIAL STATEMENTS
118
DEFINITIONS OF ALTERNATIVE PERFORMANCE MEASURES
Benchmark: The Company’s equity benchmark is 85% Global (MSCI All Country World Index) and 15% UK (MSCI UK IMI Index). From
1 January 2017 to 31 December 2019 the benchmark was 30% UK, 25% North America, 20% Asia Pacific, 20% Europe (ex UK) and 5%
Emerging Markets. From 1 October 2007 to 31 December 2016 the benchmark was 40% UK, 20% North America, 20% Europe (ex UK)
and20% Asia Pacific. With effect from August 2020, the source for the benchmark index changed to MSCI International, replacing
theprevious 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 110.
Net asset value and net asset value per share (debt at par and debt at fair value): Net asset value is the value of total assets less all
liabilities of the Company. TheNetAsset 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). See note 18 on pages 111 to 112 for further details.
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
alldividends 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 2022
Year ended
31 December 2021
Opening cum income NAV per share (pence) (A) 267.4 236.0
Closing cum income NAV per share (pence) (B) 234.1 267.4
Total dividend adjustment factor
(1)
(C) 1.024030 1.021565
Adjusted closing cum income NAV per share (B x C = D) 239.8 273.2
Net asset value total return (D/A - 1) (10.3)% 15.8%
(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,
asapercentage 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. See page 43 for an explanation of the calculation.
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 2022
Year ended
31 December 2021
Opening share price (pence) (A) 252.0 230.5
Closing share price (pence) (B) 221.5 252.0
Total dividend adjustment factor
(1)
(C) 1.026240 1.023980
Adjusted closing share price (B x C = D) 227.3 258.0
Share price total return (D/A – 1) (9.8)% 11.9%
(1) The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the shares of the Company at the last traded
price quoted at the ex-dividend date.
The Association of Investment Companies (‘AIC’) has produced a guide providing more information about Investment Companies:
“Investment Companies – Democratising capital, funding growth and meeting investors’ needs November 2022”, which may be
accessed via the following link: https://www.theaic.co.uk/sites/default/files/documents/AICInvestmentCompaniesReport22.pdf
Source data: All equity and index performance data in this Annual Report is sourced from Morningstar as is all Witan performance
data for periods exceeding one year. Manager performance data is sourced from BNP Paribas.
Additional Shareholder Information continued
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
119
HISTORICAL RECORD
Debt at fair value Debt at par value
Market price
per ordinary
share in
pence
(1)
Net asset
value per
ordinary
share in
pence
(1)(2)
Share price
(discount)/
premium
%
(2)
Net asset
value per
ordinary
share in
pence
(1)(3}
Share price
(discount)/
premium
%
(3)
Earnings per
ordinary
share in
pence
(1)
Dividends
per ordinary
share in
pence
(1)
31 December 2012 100.6 113.8 (11.6) 116.4 (13.5) 2.90 2.64
31 December 2013 133.8 143.5 (6.8) 145.0 (7.7) 3.10 2.88
31 December 2014 150.7 149.8 0.6 152.1 (0.9) 3.20 3.08
31 December 2015 156.0 156.2 (0.2) 157.7 (1.1) 3.70 3.40
31 December 2016 180.4 187.8 (4.0) 190.6 (5.3) 4.40 3.80
31 December 2017 215.8 219.2 (1.6) 222.0 (2.8) 4.80 4.20
31 December 2018 194.2 196.7 (1.3) 199.0 (2.5) 5.20 4.70
31 December 2019 231.5 233.1 (0.7) 236.9 (2.3) 6.01 5.35
31 December 2020 230.5 236.0 (2.4) 240.1 (4.2) 3.08 5.45
31 December 2021 252.0 267.4 (5.8)
(4)
269.9 (6.6) 3.59 5.60
31 December 2022 221.5 234.1 (5.4)
(4)
226.8 (2.4) 4.78 5.80
(1) Comparative figures for the years 2012 - 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 2022 was 7.8% (2021: 6.9%). (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
wishto purchase Witan shares for their clients can do so via a number of online platforms, includingSeven Investment Management,
Raymond James Investment Services, Strawberry Invest (formerly FundsDirect or Ascentric), Transact, Nucleus, Fidelity Adviser
Solutions and others. Further information can be found at https://www.witan.com/investing-in-witan/how-to-invest/online-platforms.
The Company conducts its affairs so that its shares can be recommended by independent financial advisers (‘IFAs’) to private retail
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.
Witan Investment Trust plc
Annual Report 2022
120
Contacts
REGISTERED OFFICE OF THE COMPANY AND ITS SUBSIDIARY,
WITAN INVESTMENT SERVICES LIMITED
The Company is a public company limited by shares .
REGISTERED NUMBER
Registered as an investment company in England and Wales,
Number 101625.
COMPANY SECRETARY
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
Telephone: 020 3008 4910
CUSTODIAN, INVESTMENT ADMINISTRATOR
BNP Paribas London Branch
10 Harewood Avenue
London NW1 6AA
DEPOSITARY
BNP Paribas Trust Corporation UK Limited
10 Harewood Avenue
London NW1 6AA
REGISTRAR
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0370 707 1408
(1)
(1)
Calls cost no more than calls to geographic numbers (01 or 02) and must be
included in inclusive minutes and discount schemes in the same way. Calls from
landlines are typically charged up to 9p per minute; calls from mobiles typically
cost between 3p and 55p per minute. Calls from landlines and mobiles are included
in free call packages.
AUDITOR
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
STOCKBROKER
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
SOLICITORS
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London EC2A 2EG
The Company is a member of:
DISABILITY ACT
Copies of this Annual Report and other documents issued by Witan Investment Trust plc are available from the Company Secretary.
Ifneeded, 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
themwhat 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
oroffers of free company reports.
Please note that it is very unlikely that either the Company or the Company’s Registrar, Computershare Investor Services PLC,
wouldmake 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
tocall 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 ISO14001.
100% of the inks used are vegetable oil based, 95% of press chemicals are recycled forfurther use and,
on average, 99% of any waste associated with this production willberecycled.
This document is printed on Arcoprint, sourced from well-managed, responsible, FSC®certified forests
and other controlled sources. The pulp used in this product isbleached using an elemental chlorine
free (‘ECF’) process.
Park Communications 48774
www.witan.com
Witan Investment Trust plc Annual Report 2022