### Witan Investment Trust plc Annual Report 2022 ## Witan Investment Trust plc ## Annual Report 2022 ## Collective ## Wisdom STRATEGIC REPORT ## Company overview ## Our investment ## policy STRATEGIC REPORT ## Witan invests primarily in listed companies across 01 Financial highlights ## global equity markets, using a multi-manager 02 Our investment approach ## approach. The Company’s actively managed 04 Key performance indicators 06 What we do ## portfolio covers a broad range of markets and sectors, 08 Chairman’s Statement 10 CEO’s review of the year ## offering a distinctive way for investors to access the 18 Responsible investment 26 Meet the managers ## opportunities created by global economic growth. 34 Forty largest investments 36 Classification of investments 37 Principal risks and uncertainties 40 Section 172: engaging with ourstakeholders ## Our purpose 42 Corporate and operationalstructure ## is to achieve significant growth in our investors’ 43 Costs 44 Viability Statement ## wealth by investing in global equity markets, ## usinga multi-manager approach. CORPORATE GOVERNANCE 46 Board of directors 48 Corporate Governance 59 Report of the Audit & Risk ## Our objective Committee 62 Directors’ Remuneration Report ## is to achieve an investment total return exceeding 75 Directors’ Report (1) ## that of the Company’s benchmark over the long 79 Statement of Directors’ Responsibilities ## term, together with growth in the dividend ahead FINANCIAL STATEMENTS ## of inflation. 80 Independent Auditor’s Report to the members of Witan Investment Trust plc 89 Consolidated Statement ofComprehensive Income 90 Consolidated and Individual Statements of Changes in Equity 91 Consolidated and Individual Balance Sheets 92 Consolidated and Individual ## Where to find us Cash Flow Statements 93 Notes to the Financial Statements Our website has a full range of information about Witan 115 Other Financial Information and regular commentary about investment markets. (unaudited) 117 Additional Shareholder Find us online @ www.witan.com Information 120 Contacts (1) Witan’s benchmark is 85% Global (MSCI All Country World Index) and 15% UK (MSCI UK IMI Index). The Annual Report is intended to help shareholders assess the Company’s strategy. It contains certain forward-looking statements. These are made by the directors in good faith based on information available to them up to the time of their approval of this Report. Such statements should be treated with caution due to the inherent uncertainties, including economic and business risks, underlying any such forward-looking information. ## Key data | 221.5p | 234.1p | | | --- | --- | --- | | SHARE PRICE 2022 | NAV PER ORDINARY | | | 2021: 252.0p | SHARE (DEBT AT FAIR VALUE) | (3) | 2021: 267.4p STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Financial | highlights | 5.4% | | 5.80p | | --- | --- | --- | --- | | | DISCOUNT (NAV INCLUDING | | DIVIDEND PER SHARE | | | INCOME, DEBT AT FAIR VALUE) | (3) | 2021: 5.60p | 2021: 5.8% ## Total return performance To read more about | our KPIs see pages 4 and 5 | | | 1 year | 5 years | 10 years | | --- | --- | --- | --- | --- | --- | | | | | % return | % return | % return | | | SHARE PRICE TOTAL RETURN | (1)(3) | | | | ### (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 (1) Source: Morningstar. MSCI ALL COUNTRY WORLD INDEX (2) ### (2) Source: Morningstar. See also MSCI International for conditions of use (www.msci.com). (7.6) 48.7 206.6 (3) Alternative performance measure (see page 5). ## Percentage of total funds ## A high | | 36% | 21% | 20% | 12% | | --- | --- | --- | --- | --- | | | NORTH AMERICA | EUROPE | UK | OTHER, INCLUDING | | conviction yet | | | | INVESTMENT | COMPANIES ## 4% 3% 2% 2% ## well-diversified ASIA EX JAPAN JAPAN LATIN UNQ U OTED AMERICA FUNDS ## portfolio SECTOR BREAKDOWN OF THE PORTFOLIO 15.1% Industrials 11.6% Financials 11.6% Information Technology To read more about 11.6% Investment Companies our diversified portfolio see pages 26 to 27 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 Source: BNP Paribas 0.7% Utilities as at 31 December 2022. 0.3% Real Estate ## 79% (3) ## Active share at end 2022 COMPANY SIZE BREAKDOWN OF THE PORTFOLIO 71.0% Large Cap We are active investors with a highly selective 9.7% Mid Cap 5.7% Small Cap approach to portfolio construction. This is 2.0% Unquoted Funds 11.6% Investment Companies differentfrom a passive fund which replicatesaparticularindex. Witan Investment Trust plc 01 Annual Report 2022 STRATEGIC REPORT ## Our investment approach | Talent | Experience | | --- | --- | | We search for the best fund managers | Founded in 1909, we have a long | | worldwide, choosing managers to | trackrecord of producing capital | | complement each other, not to cover | andincome growth. We have invested | | allstyles. Our managers are active | through challenging economic cycles, | | investors and construct high conviction | wars andpolitical crises, helping put | | portfolios focusing on their best ideas. | contemporary events into perspective. | ### Since the adoption of the current ### This high level of conviction produces multi-manager strategy in2004, ### portfolios which are differentiated shareholders have enjoyed a share (1) ### fromthe benchmarks which they pricetotal return of 454.3% versus ### aimtooutperform. 365.1% forWitan’s benchmark and 231.7% ### for theMSCIUKIndex. (1) Alternative performance measure, see page 118. ## Collective ## Wisdom ## A one-stop shop for global equity ## investment, offering long-term ## growth in capital and income. 02 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Independence Adaptable ### Witan is an independent and self- Our multi-manager strategy allows ### managed investment company, ustorespond to changes in long-term ### dedicated to sustainable growth trends either by changing managers ### initsshareholders’ wealth. Witan’s and investment style or investing via ### employees are solely focused on the ourspecialist portfolio with managers ### success of theCompany. who have expert knowledge of particular ### sectors or regions. Using gearing and ### Our independence means we simply derivatives, we can also adapt our ### seek, without pre-set constraints, to portfolio to short-term opportunities ### select the best managers available, orto manage risk. ### inthe interest of our shareholders. ### We search for the best managers ### aroundthe world to create a portfolio ### thatisdiversified by region, investment ### sectorand individual company level. ### Thisprovides broad opportunities for ### investors and reduces the risks arising ### fromreliance on a single manager. 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 03 Annual Report 2022 STRATEGIC REPORT ### The financial key performance indicators (‘KPIs’) below are monitored ## Key performance Key performance ### as significant measures of longer-term success. With respect to ## indicators indicators ### 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 TOTAL RETURN PERFORMANCE (%) ## Share price (1) ## total return The Company seeks at The share price total return in 2022 was -9.8%, +40 compared with the benchmark’s return of -6.2%. Our least2%p.a. long-term NAV total return was less than that of the benchmark +30 outperformance in the share but was slightly offset by a narrower discount than at price total return +20 the end of 2021. Over five years, the share price total return was 16.3% compared with 38.1% for the +10 benchmark. 0 -10 -20 ## 2013 2022 -9.8% IN 2022 (1) TOTAL RETURN PERFORMANCE (%) ## NAV total return The Company seeks at least2%p.a. Witan’s NAV total return in the year was -10.3%, which +30 was an improved position compared with the AIC long-term outperformance in NAV +25 Global sector (which declined by 20.4% on average) total return, debt at fair value +20 but underperformed our benchmark which declined +15 -6.2%. Over the past five years, the NAV total return +10 was 20.4%, compared with 38.1% for the benchmark. +5 0 -5 -10 -15 ## 2013 2022 -10.3% IN 2022 (1) DIVIDEND PER SHARE GROWTH (%) ## Dividend growth The Company seeks to grow its +6.0 222 The dividend rose by 3.6% in 2022, which was less than the 10.5% increase in the UK Consumer Price dividend ahead of the Index (‘CPI’) during the year. This was Witan’s 48th +5.0 185 rateofinflation consecutive year of dividend increases. Although not matching the exceptional rate of inflation in +4.0 148 2022, over the past five years the dividend has risen by 38.1%, compared with a 21.2% rise in the CPI. | +3.0 | | | 111 | | --- | --- | --- | --- | | +2.0 | | | 74 | | | 2012 | 2022 | | ## +3.6% Dividend (pence per share) CPI inflation % IN 2022 DIVIDEND PER SHARE GROWTH (%) TOTAL RETURN PERFORMANCE (%) TOTAL RETURN PERFORMANCE (%) 04 Witan Investment Trust plc Annual Report 2022 left hand axis right hand axis BenchmarkNet asset value Benchmark total returnPrice total return KPI OUTCOME CONTRIBUTION FROM BORROWINGS (% OF NAV) ## Net contribution from (1) ## borrowings +2.0 Gearing to contribute to returns, In 2022, gearing detracted 1.0% from returns before +1.5 interest costs, principally during the first quarter of after interest costs STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS +1.0 the year, and 1.4% including interest costs. The use of +0.5 borrowings (or gearing) in investment can amplify losses as well as gains but over the long term, as 0.0 shown in the chart, gearing has been a material -0.5 benefit to Witan’s returns, contributing positively in -1.0 seven out of the past ten years. -1.5 -2.0 2013 2022 ## -1.4% IN 2022 DISCOUNT/PREMIUM TO NAV PER SHARE ## Discount/premium (1) ## to NAV Achieve a sustainable low discount In 2022, the year-end discount was 5.4%, compared +2.0 with 5.8% at the end of 2021. Although narrower by the or a premium to NAV,taking +1.0 year end, 2022’s average discount of 7.8% was wider account of marketconditions 0.0 than that in 2021 (6.9%), along with those of many -1. 0 sector peers. Witan continued to buy back shares at a -2.0 discount, which helps limit discount volatility and -3.0 | -4 .0 | | | boosts the NAV for continuing shareholders. In 2022, | | --- | --- | --- | --- | | -5.0 | | | we bought back 7.9% of our shares at an average | | -6.0 | | | discount of 7.8%. The resulting £10.9million uplift offset | | -7.0 | | | the majority of the Company’s ongoing charges | | -8.0 | | | during the year. | | | 2013 | 20 | | ## -5.4% AT YEAR END ONGOING CHARGES AS % OF AVERAGE NET ASSETS ## Ongoing Charges (1) ## Figure (‘OCF’) 1.2 In 2022, our OCF was 0.77% (2021: 0.71%) excluding Achieve an OCF as low aspossible, 1.1 performance fees and 0.77% (2021: 0.73%) including consistent withchoosing the best them. Although there were reductions in investment availablemanagers 1.0 management fees, the OCF rise reflects the impact of 0.9 fixed costs on a lower asset base. Further details of costs are set out on page 43. 0.8 0.7 0.6 0.5 ## 0.77% 2013 2022 IN 2022 Excluding performance fees (0.77% INCLUSIVE OF PERFORMANCE FEES) ONGOING CHARGES AS % OF NET AVERAGE ASSETS CONTRIBUTION FROM BORROWINGS (% of NAV) DISCOUNT/PREMIUM TO NAV PER SHARE (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 05 Annual Report 2022 Including performance fees 22 Net contribution Cost STRATEGIC REPORT ### Witan is an investment trust which aims to grow shareholders’ ## What we do ### wealth and outperform its benchmark through active investment ### in individual companies across a broad spread of global equity ### markets. ## Portfolio structure ### Witan’s portfolio consists of two primary components: core and specialist. The core ### portfolio provides shareholders with access to a select but diversified group of managers ### investing in high-quality, predominantly large and mid-sized global companies. The ### specialist portfolio recognises that there are many attractive investment opportunities ### which fall outside the remit of most mainstream fund managers due to their size, ### domicile or their unlisted or specialist nature. The specialist portfolio aims to capture ### thepotential for these themes to produce superior returns overthe long run. This ### combination provides a one-stop shop for our shareholders tobenefit from a wide ### variety of opportunities via a single investment in Witan. ## Core portfolio Specialist portfolio (1) (1) ## 75% 25% Managers able to deliver superior ## Global UK growth through specialist regional or sectoral expertise. ## 65% 10% Direct holdings in collective funds. Actively managed with no fixed ### +/- 10% +/- 5% allocation. Managers employ a range of approaches to select Investments in Unquoted from abroad universe of high-quality companies Growthfunds throughout theworld. Provides exposure to specialist The core portfolio includes companies with enduring asset classes andother cash flows, underappreciated growth prospects or opportunities including Emerging undervalued, often cyclical businesses. Markets, Climate Change, Private Equity and Life Sciences. ## Meet the managers (1) Indicative allocation +/-10%. see pages 26 to 32 ## Underpinned by: ## Disciplined risk management see pages 37 to 39 06 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Choosing our managers Capital allocation Value creation ### We select third-party managers We seek to add We aim to generate ### from across the world. Our team toperformance by total returns which ### uses a variety of networks, varying the use of exceed the ### databases and comprehensive gearing and a range benchmark over ### duediligence to identify and ofadditional levers thelong term. ### interview potential managers. toadapt to different ### Shortlisted managers present to conditions. ### theBoard, which takes thefinal ### decision on appointment. We aim to ### appoint managers for the long term. ### Outperformance ## What we look for from Capital allocation ### ofbenchmark | our managers | framework | | | --- | --- | --- | | People Talented and accountable | The Company seeks | 5/10 | | investment leadership, committed | toset gearing at levels | | ### years to 31/12/2022 toserving their clients’ interests appropriate for market conditions, borrowing Process High-conviction portfolio more when markets are construction, using clear and simple attractively valued and (1) ### NAV total return processes, with analysis taking less when returns are ### over past ten years account of secular change expected to be poorer. ## Portfolio Investments characterised 158.6% ### Witan may on occasion ### by long-term growth in sustainable use derivatives as vs ### cash flows and the integration of transparent, cost- ### ESG (environmental, social and effective tools for ## 157.8% ### governance) principles efficient portfolio ### for benchmark to ### management and ### Performance Potential for material 31/12/2022 ### to help control risk. outperformance over the long term, after fees ### Dividend growth ### over past ten years ## 8.2% ### p.a. For more information, For more information, (1) Alternative performance measure, see pages 26 to 32 see page 14 see page 118. ## Commitment to responsible investment see pages 18 to 25 Witan Investment Trust plc 07 Annual Report 2022 STRATEGIC REPORT # Chairman's Statement # 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 ![img-0.jpeg](img-0.jpeg) 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, 08 Witan Investment Trust plc Annual Report 2022 | ending the year with a total return of | commitments to responsible investment | match the exceptionally high rate of UK | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | --- | --- | --- | --- | | -10.3%, 4.1% behind the benchmark’s loss | initiatives with their inability to divest from | inflation in 2022 (10.5% at the year-end), | | | of 6.2%. Whilst it is disappointing that we | companies with poor governance | Witan’s dividend has grown substantially | | | underperformed this measure over the | standards. | ahead of UK inflation over the past 5 and | | | year as a whole, we outperformed the AIC | | 10 years. | | | Global sector after lagging it in recent | Ongoing ESG oversight, as part of the | | | | years. Shareholders can also take comfort | investment process, remains one of the | BOARD COMPOSITION | | | from the steady and improving | key responsibilities of Witan’s Executive | | | The Board currently consists of ten performance our managers delivered team and of our managers. Our bespoke directors, nine of whom are non-executive, after the initial shock, during an approach to responsible investment representing a broad diversity in exceptionally volatile period that was focuses on identifying companies’ background, experience, ethnicity and beset by political instability, international progress and direction of travel, rather gender. Above all, the Board has the right crises and inflation reaching levels not than simply their sustainability credentials balance of skills to oversee the Company’s seen in 40 years. Andrew Bell’s CEO report at a point in time. affairs while fully meeting formal corporate covers these points, as well as the governance guidelines on diversity. macroeconomic backdrop, in more detail. In 2022 we focused on two key projects to support this approach. Firstly, formulating Suzy Neubert, our Senior Independent The improvement in performance has our NZAM commitments, made in Director, will be standing down at this accelerated during the early months of shareholders’ long-term best interests year’s AGM, after serving on the Board for 2023, as our portfolio was positioned to and, secondly, implementing our 11 years. On behalf of shareholders, I would benefit from an improvement in “Sustainable by 2030” commitment. This like to thank Suzy for her valuable insights, economic expectations, relative to the entailed assessing the current judgment and advice over this period. unusually pessimistic investor mood at characteristics of the portfolio (using our She will be succeeded as Senior the end of 2022. Whilst this is a short own criteria and our managers’ Independent Director by Rachel Beagles, period, Witan’s NAV total return to 10 March knowledge of investee companies) and who joined the Board in 2020. 2023 is 5.6%, 3.6% ahead of our identifying how to measure progress. The benchmark’s return of 2.0%. Board asked James Hart, Witan’s As part of the Board’s succession Investment Director, to lead on this planning, two new Directors joined the Over the long term, since Witan adopted programme, which has provided us with Board in February and will be standing for a multi-manager approach in 2004, we valuable insights into how our managers election at this year’s AGM. Shauna Bevan have beaten the returns on our and portfolio companies approach ESG has particular experience in selecting benchmark and raised the dividend well issues and created a baseline from which investment managers for the wealth ahead of the rate of inflation. Even after our sustainability performance can be management sector, while Shefaly the underperformance since 2020, over measured. The responsible investment Yogendra brings wider experience from the ten years to the end of 2022 Witan section, which is on pages 18 to 25 of this the corporate sector. Both have board achieved a NAV total return of 159% and a report, introduces the framework, sets out level experience in investment trusts and I share price total return of 180%, compared its preliminary results and reports on have pleasure in welcoming each of them with the benchmark’s 158% return and other progress made during the year. to Witan’s Board. (with inflation now back on investors’ radar) well ahead of the 30% rise in the UK 2022 DIVIDEND Following these changes, after the AGM the Consumer Price Index over the period. A fourth interim dividend of 1.60 pence Board will consist of eight non-executive was declared in February 2023, payable directors and one executive director, our RESPONSIBLE INVESTMENT | | on 17 March 2023. As a result, the dividend | CEO Andrew Bell. All directors stand for | | --- | --- | --- | | In last year’s Annual Report, we introduced | for the year increased by 3.6% to 5.80 | re-election each year. | | our updated responsible investment | pence per share (2021: 5.60 pence). This | | | strategy which, in addition to our | year’s dividend was covered an improved | AGM | | commitment to the Net Zero Asset | 84% by 2022 revenue earnings (2021: 65%), | | We very much look forward to being able Managers initiative (‘NZAM’), set a target with a reduced call of £6.4 million on to meet shareholders again at this year’s to have a portfolio which consists entirely our revenue reserves (in 2021 we used Annual General Meeting (‘AGM’). Our 115th of sustainable businesses by 2030. This £14.6 million). AGM will be held on 4 May 2023, at the does not impose blanket exclusions on Merchant Taylors’ Hall. For those not able our managers, as we believe that The Board expects portfolio dividends to to attend in person, there will be the engagement with companies often has a recover further in coming years and it is opportunity to attend the meeting greater positive impact than divestment. the Company’s intention to continue to virtually and put questions to the Board. However, if engagement has run its make use of retained earnings to increase Details will be included in the formal course and ESG failings undermine the the dividend to shareholders annually notice of the meeting which will be sent to investment rationale, they are able to exit, while full cover is restored. shareholders at the end of March. or avoid, an investment in order to protect our shareholders’ capital. This is one of We have increased the dividend every Andrew Ross the most significant advantages of active year for the last 48 years and the latest Chairman management , as passive (index tracking) dividend is more than double that paid in 14 March 2023 funds can find it difficult to reconcile their 2012. Although 2022’s increase does not Witan Investment Trust plc 09 Annual Report 2022 STRATEGIC REPORT ## CEO’s review of the year 2022 may come to be seen as the end of an era in economic policy terms. A Andrew Bell prolonged period of low interest rates had CEO 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 ## The end of the disrupted and the global workforce was reduced by mortality, sickness, early retirement and barriers to free movement. Allied to this, years of underinvestment in ## zero rates era 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 10 Witan Investment Trust plc Annual Report 2022 | Ukraine, sentiment remained highly | A year ago, we stated that, despite the | includes core holdings of quality growth | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | --- | --- | --- | --- | | changeable throughout the year, affected | uncertainties created by Russia’s | companies offering compounding | | | by increased concerns over inflation, the | aggression, our managers believed that | earnings growth, as well as exposure to | | | drag on growth from rising commodity | being positioned for a recovery from the | sectors expected to benefit from | | | prices, fears of conflict in Taiwan, | Covid-19 pandemic and the prospect of a | economic growth, from decarbonisation, | | | attempted nuclear blackmail in Ukraine | broadening economic recovery remained | and from the growth in infrastructure | | | and topsy-turvy politics at home in the UK. | appropriate, although the timing had | spending. | | | Most global equity regions showed local | become less certain and the risks had | | | | currency declines exceeding 10%, | increased. So far, this has been borne out | PRINCIPAL PERFORMANCE DRIVERS | | | although these were mitigated by | by the subsequent recovery in | | | The financial statements on pages 89 to sterling’s weakness, particularly against performance. It is often hardest to stick to 114 set out the required statutory reporting the US dollar. The UK was a standout a strategy when the markets have just measures of the Company’s financial performer, with a marginal positive return, punished it with underperformance but performance. helped by its exposure to the oil and (while learning from experience) it makes commodity sectors. However, the UK’s no more sense to invest using the The chart below shows the contributions mid-sized and smaller companies indices rear-view mirror than to drive a car (in pence per share) attributable to the both suffered falls of more than 16%. looking backwards. various components of investment Global equities finished the year with a performance and costs, which together loss of 8% in sterling terms, with the US Witan’s portfolio is invested via a constitute the decline from the 267.4 (-8%) and emerging markets (-10%) at the diversified group of mainstream and pence starting NAV to the year-end NAV of weaker end, Europe down 7% and Japan specialist managers, with well-tested and 234.1 pence, after the payment of (-4%) performing relatively well. resourced investment approaches. It dividends to shareholders. By the year end, there were signs that inflation was peaking in the UK and NAV BRIDGE elsewhere, although interest rates 290.0 continue to rise to counter the risk that 2022’s inflationary surge might become 267.4 270.0 entrenched. Growth forecasts for the coming year are subdued, with much depending on whether slowing inflation 250.0 236.0 allows central banks to take their feet off 234.1 | | | | | | | | -2.1 | -0.9 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | the brakes before a global recession | 230.0 | | | | | | | | | | | | | | -1.7 | 1.6 | 9.7 | | | -5.7 | | ensues. One bright spot is that China’s | | -40.5 | 5.6 | | | | | | | | abandonment of its zero-Covid policy | Pence per share | | | | | | | | | 210.0 makes it likely that its economy will grow more rapidly in 2023 than last year, acting 190.0 as a counterweight to slowdowns elsewhere. 170.0 WITAN’S PERFORMANCE 150.0 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 0.0 | entirely suffered during the market’s | End 2021 | Portfolio | Portfolio | Returns | Uplift | Change | Expenses | Finance | Dividends | End 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | immediate reaction to the Russian | NAV | losses | income | from use | from | in value | (inc. tax) | costs | paid | | NAV | | | | | | of gearing | buybacks | of debt | | | | | | invasion of Ukraine, as the remaining ten months of the year saw our portfolio Portfolio Costs Dividends recover around one third of the initial setback in both absolute and relative terms. 280.0 The past three years have seen unprecedented events affect financial markets and it is personally frustrating 240.0 (professionally and as a shareholder) that 220.0 Witan’s longer-term record of outperformance has been eroded by 200.0 underperformance since 2020, concentrated in the first quarter of 2020, 180.0 with the advent of the pandemic, and the period leading up to the Russian invasion 160.0 of Ukraine in February 2022. 140.0 120.0 Witan Investment Trust plc 11 Annual Report 2022 100.0 STRATEGIC REPORT ## CEO's review of the year continued 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 79% 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 ### BREAKDOWN OF THE PERFORMANCE ATTRIBUTION IN 2022 (%) | Net asset value total return | **-10.3** | Portfolio total return (before costs) | **-12.3** | | --- | --- | --- | --- | | Benchmark total return | **-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. 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 12 Witan Investment Trust plc^{}[] Annual Report 2022 | resulting fall in value accounted for the | also derated along with the rest of the | maturity of our debt, reasoning that if gilt | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | --- | --- | --- | --- | | majority of the decline in the direct | property sector. We reduced the holding | prices continued to fall we could hold to | | | holdings’ value. | at materially higher prices in April and, | maturity, having locked in an income gain | | | | with the dividend having increased above | relative to the interest rate we were | | | The other main detractor was Princess | pre-pandemic levels, have taken | paying. In the event, the distressed | | | Private Equity which (for reasons of | advantage of the subsequent setback | conditions in the market reversed, | | | mismanagement and poor | to add. | allowing us to register a rapid profit. A | | | communication) unexpectedly cancelled | | similar opportunity arose two weeks later, | | | its second dividend in 2022, the | On the positive side, a notably good | with the gains on the two investments | | | consequent loss of investor confidence | performer was BlackRock World Mining | totalling c.£4.3 million. Although out of the | | | contributing to a 36% fall in the share | Trust, with a 26% total return, in addition to | mainstream of what we invest in, it | | | price total return, despite the NAV being | which we sold a significant proportion of | demonstrates our investment flexibility. | | | little changed in sterling terms. This (in our | the holding in early 2022 at higher prices. | | | | view avoidable) action was particularly | VH Global Sustainable Energy, which was | The common factor in this year’s direct | | | unwelcome for a company we have | 2% down (despite an 8% return in NAV | holdings underperformance was a | | | backed since 2011 and we forcefully | terms) also proved resilient. | widening in discounts, contrasting with | | | communicated our views to the Board. | | generally resilient or robust underlying | | | Even after this fall, the holding has | One unusual feature this year was that | business performances. This gives us | | | delivered returns close to 10% p.a. over 12 | the political turmoil in the UK gave us an | confidence in the portfolio’s prospects for | | | years and we anticipate a restoration of | opportunity to make two profitable | 2023 and beyond. | | | dividends in 2023 and a recovery in | investments in the Gilt market, with low | | | | performance. Syncona’s NAV fell a | risk. Witan has £155 million of long-term | The direct portfolio was 10.9% of the | | | resilient 3% but the price moved from a 6% | fixed rate debt issued at an average yield | investment portfolio at the start of the | | | premium to a 7% discount, affected by | of under 3%. When gilt yields went | year and 11.3% at the end of 2022. Over the | | | adverse sentiment in the biotech sector. | through 5% in the wake of the Truss | period since March 2010, it has delivered a | | | Similarly, Schroder Real Estate delivered a | administration’s “fiscal event”, we invested | compound annual return of 9.6%, | | | single digit decline in NAV total return but | £24 million in a gilt closely matching the | outperforming Witan’s benchmark by | | INVESTMENT MANAGERS’ PERFORMANCE Witan assets managed Performance since as at 31.12.22 (1) Performance in 2022 % appointment % Appointment Investment manager Mandate £m % Manager Benchmark Manager Benchmark date 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. Witan Investment Trust plc 13 Annual Report 2022 STRATEGIC REPORT ## CEO’s review of the year continued 0.9% p.a. Aside from performance, it gives Secured Notes £21m Witan’s shareholders exposure to specialist asset categories that our core 2035 3.29% managers (and many shareholders Secured Notes £54m themselves) do not cover. 2045 3.47% The two specialist Unquoted Growth funds Secured Notes £50m investing predominantly in unlisted assets 2051 2.39% amount to 1.9% of assets. Lansdowne Opportunities Fund (0.9% of assets) Secured Notes £30m declined in value by c.24% during the year, 2054 2.74% principally owing to the fall in price of its largest holding, Oxford Nanopore | Technologies, since its listing in October | The Company has a £125 million one-year | | --- | --- | | 2021. Greenoaks Lindenwood (1.0%) | borrowing facility (expandable to £150 | | experienced a 3% decline in sterling terms, | million), providing additional flexibility | | with the strength of the dollar against | over the level of gearing, as well as | | sterling mitigating a 14% fall in the dollar | enabling the Company to borrow in | | valuation of its assets. Regular reports | currencies other than sterling, if deemed | | (monthly and quarterly respectively) are | appropriate. The drawn balance was | | received on the funds, whose valuation | £96.5 million at the end of 2022 (2021: | | policies follow private equity guidelines. | £98.0 million). The average interest rate on | the Company’s fixed-rate borrowings is GEARING ACTIVITY DURING THE YEAR 3.0% (2021: 3.0%). The average interest rate, including short-term borrowings, is Gearing ranged between 10% and 14% currently 3.5% (2021: 2.1%). during the year. Although it would have been desirable, with the benefit of The rise in gilt yields means that the fair hindsight, not to be geared before the value of the Company’s fixed-rate debt Russian invasion, once the markets had (valued based on the relevant gilt yield fallen to reflect this shock we elected to +1.4%) has declined during the year and keep our existing gearing in place and to stands at a discount to its eventual increase it following the sharp market repayment value. As in previous years decline in the early summer. The average (when the fair value shift often detracted gearing level of 12.5% nonetheless cost 1% from returns), the Company continues to in a year of falling markets, or 1.4% after follow AIC guidance that fair valuing both taking account of the (mostly fixed) assets and liabilities is the most interest charges. Gearing has contributed appropriate basis for calculating NAVs, positively to returns in seven out of the while continuing to release daily NAVs past ten years, as illustrated in the KPI calculated with debt at par value as well chart on page 5. as at fair value. Under its Articles of Association, the Witan will either invest its long-term Company may borrow up to 100% of the borrowings fully or neutralise their effect adjusted total of shareholders’ funds. with cash balances according to its However, the Board’s longstanding policy assessment of the markets. The is not to allow gearing (as defined on Company’s third-party managers are not page 118) to be more than 20%, other than permitted to borrow within their portfolios temporarily in exceptional circumstances. but may hold cash. Where appropriate, the Company may hold a net cash position. DERIVATIVES ACTIVITY | At the end of 2021, net gearing (the total | An investment of £12 million was made in | | --- | --- | | value of borrowings less cash) was 11.3% of | US equity index futures in September and | | net assets. At the end of 2022, gearing (on | sold for a £1 million gain in November. This | | the same basis) was 14.2%. | enabled Witan to invest in the US market | when it was at a low index level, without STRUCTURE OF BORROWINGS returns being eroded by the subsequent recovery in sterling from its politically The Company has fixed-rate borrowings ## 2022 saw discounts widen, depressed level at the end of September. (including £2.6 million preference shares) ## contrasting with resilient There were no derivatives positions of £158 million, consisting principally of: outstanding at the year end. ## business performances, ## which gives us confidence in ## the direct holdings’ prospects ## for 2023 and beyond 14 Witan Investment Trust plc Annual Report 2022 DIVIDEND AND REVENUE PERFORMANCE The Board has always paid attention to it is in shareholders’ interests (taking STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS discount-related issues and has, over account of market conditions), the The Company has already paid three many years, made significant use of Company remains prepared to buy back quarterly dividends of 1.40 pence per share buybacks, when Witan’s shares shares at a discount to NAV or to issue share in respect of 2022 which, together have stood at a discount, as well as being shares (though only at a premium). It with the fourth interim dividend of 1.60 prepared to issue shares at a premium to remains a long-term objective to create pence per share, increases the total NAV to meet demand from investors. Both sustainable liquidity in Witan’s shares at distribution for the year to 5.80 pence actions are accretive to NAV, provide or near to asset value and the robust (2021: 5.60 pence). This marks the 48th liquidity in the market and help to actions taken over recent years are consecutive year of dividend growth. At moderate discount volatility. evidence of this continuing commitment. the end of 2021, retained revenue reserves were £37.5 million (after deducting the WITAN INVESTMENT TRUST DISCOUNT OUTLOOK fourth interim dividend payment). The TREND | purpose of such reserves is to enable | | 2023 began with interest rates and | | --- | --- | --- | | income payments to shareholders to be | The discount trend during the past five | economies poised close to potential | | supported during leaner times, and £6.4 | years is illustrated in the chart below. | turning points. In the case of rates, after a | | million was used towards funding the | Along with others in the sector, the | flurry of increases in late 2022 we may be | | 2022 dividend (2021: £14.6 million). Revenue | discount widened significantly for much | near a peak, even if the shape is likely to | | reserves were £31.3 million at the end of | of 2022. Witan was active in buying back | be more like Table Mountain than the | | 2022, after allowing for the fourth interim | shares, helping to moderate the level of | Matterhorn. After a decade or more of | | dividend payment. | the discount, as well as delivering an uplift | zero or negative rates, central banks will | | | to NAV. During the year 58.2 million shares | be keen to retain more normal levels of | | Revenue earnings per share rose by 33% | were bought back (7.9% of the total at the | interest rates, quite apart from continuing | | to 4.78 pence per share in 2022. The | start of the year), at an average 7.8% | to bear down on inflationary pressures, | | recovery in revenue earnings has | discount to NAV, which resulted in an uplift | which may be waning but have not | | facilitated an increase in the dividend, an | to NAV of £10.9 million, or 1.6 pence per | disappeared. In the case of economies, | | increased level of dividend cover (from | share. For perspective, this sum exceeds | stagnation or moderate recession is | | 65% to 84%) and a much lower call on | the investment management fees paid to | widely forecast for part of 2023 but the | | past revenue reserves. | our external managers, offsetting the | interesting question is when the | | | majority of the Company’s ongoing | headwinds from energy prices wane and | | The Board has reviewed the prospects for | charges. | the tailwind from China’s reopening | | portfolio dividend growth in 2023 and | | quickens, helping engender a cyclical | | future years and, recognising the | The discount finished the year at 5.4% | recovery. | | importance for many shareholders of a | (2021: 5.8%) and the average discount | | | reliable and growing income, intends to | during the year was 7.8% (2021: 6.9%). | China’s abandonment of its zero-Covid | | use revenue reserves to bridge what is | | policy and likely economic acceleration | | expected to be a narrowing gap between | Discounts are affected by many factors | this year is a significant offset to the | | portfolio revenue earnings and the | outside the Company’s control but where | expected slowdown elsewhere. China’s | 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 0 (in June, September and December) will, in the absence of unforeseen circumstances, be paid at a rate of 1.45 -2 pence per share (2022: 1.40 pence), being WITAN DISCOUNT TO NET ASSET VALUE (%) one quarter of the 5.80 pence per share full-year payment for 2022. The fourth payment (in March 2024) will be a -4 balancing amount, reflecting the difference between the three quarterly dividends already paid and the payment -6 decided for the full year. WITAN’S SHARES IN THE MARKET – LIQUIDITY AND DISCOUNTS -8 Witan is a member of the FTSE 250 Index, with a market capitalisation of over £1.5 billion. Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021 Dec 2022 Witan Investment Trust plc 15 Annual Report 2022 -10 STRATEGIC REPORT ## CEO’s review of the year continued | slowdown in 2022 fortuitously blunted the | Inflation seems likely to be higher in the | | --- | --- | | inflationary impact from commodities | coming decade than was the norm prior | | and gave supply chains time to normalise | to 2022. Although there will be little | | but at the cost of a dramatic slowing in its | tolerance for the destabilising inflation | | own growth rate. Pent-up demand, a | rates of the past year, indebted | | restoration of industrial production and | governments and their central banks will | | determined government efforts to end | be aware that moderate inflation is an | | the slump in China’s property sector are | effective way to reduce debt burdens, | | likely to mean the world’s second largest | particularly when it coincides with | | economy is the only major centre to pick | consistent economic growth. Current | | up speed in 2023, mitigating the | debt levels appear intractable without | | weakness elsewhere. | stronger economic growth so | governments and central banks are likely | The past year has been dominated by the | to seek (or condone) faster inflation than | | --- | --- | | effects of President Putin’s infliction of war | the 2% norm of recent decades, while | | and destruction on Ukraine. Although | placing a high priority on economic | | predicting how this conflict will evolve or | growth, partly justified by the secular | | be solved is hazardous, developments | objectives noted earlier. | that could prove less negative than in | 2022 seem as plausible as the opposite. | Setbacks in investment markets such as | | --- | --- | | Concerns that relations between China | those experienced in 2022 are rarely | | and Taiwan could descend into conflict | welcomed by those whose savings are | | have reduced, possibly influenced by | impacted but they produce the platform | | Russia’s problems following its own | from which better longer-terms can be | | aggression, although relations between | achieved. In the wake of the falls, a wider | | the US and China remain tetchy. | range of assets can be rationally invested | in once more, including cash, bonds and | Falling inflation in many economies has | growth opportunities whose attractions | | --- | --- | | moderated, though not eliminated, the | were compromised by over-valuation. | | risk of over-aggressive monetary | With 2023 having begun at a time of | | tightening and increased the possibility of | privation for many and widespread | | either a soft landing for the world | pessimism about the future, there is a risk | | economy or a period of relatively mild | that some of the longer-term positive | | recession. This should allow secular | drivers for growth in coming years are | | boosts to growth to take over and | being overlooked. | favourably alter the outcome for 2024 and | beyond. 2022’s geopolitical events will | Andrew Bell | | --- | --- | | lead to higher defence spending, | Chief Executive Officer | | resilience investment (to reduce risks from | 14 March 2023 | 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. 16 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Stay ## in touch  The Company maintains a website (www.witan.com), to enable investors to keep up to date with developments at Witan and to make informed decisions when considering Witan shares for their investment portfolios. The website is regularly refreshed with new information and includes Investor Disclosure and Key Information Documents. Any investor who would like to be kept informed by email of developments at Witan (including factsheets and newsletters) can register on the Company’s website (www.witan.com) or by sending their details to contact@witan.co.uk. Witan Investment Trust plc 17 Annual Report 2022 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 IMPLEMENTING OUR POLICY interest rates, fuelled by the Russian The key to success is engaging our most invasion of Ukraine and the ensuing important partners, namely our external energy security crisis. This has, perhaps fund managers, who manage 85% of our inevitably, led to debate over the pace of portfolio. Not only is it their role to invest plans to phase out fossil fuels. We our capital, but they must also identify contend that the events of 2022 reinforce, any issues at investee companies and rather than negate, the need for a engage accordingly. In 2022, we sustainable transition to cleaner energy discussed our responsible investment production which, for much of the world, framework with them and asked for their will also be more secure. help in developing our baseline. All managers participated in the project and, Whilst there has been considerable We have embedded responsible as a result, we were able to assess all the market volatility recently, this does not investment considerations across our companies in our listed equity portfolio. alter Witan’s approach to responsible entire investment approach, not just in a investment: owning well-managed limited part of our portfolio. To implement A small proportion of our portfolio is businesses with sustainable cash flows is our policy, we developed four areas of invested in collective funds. Although key to achieving durable returns. In action: these funds are not initially covered by addition, such businesses often benefit, this framework, we still take ESG directly or indirectly, from efforts to create • Our own responsibility; considerations into account. Indeed, one a less polluted, more stable world. • Fund manager engagement; of our largest positions is the VH Global • Portfolio stewardship; and Sustainable Energy Opportunities Fund, DRIVING SUSTAINABLE BUSINESSES • Industry advocacy. which invests in infrastructure focused on Our policy is to ensure that by 2030 our accelerating the energy transition. The Our focus is particularly on where we can portfolio consists entirely of sustainable responsibility for these investments, which have the biggest positive impact: the businesses. These are businesses that are account for c.15% of Witan’s portfolio, lies characteristics of our investment portfolio well-run, incorporate resilient business with our Investment Team. and our engagement with the companies practices and have sustainable cash in it. Our approach is adaptable and flows. We believe they are likely to perform GOVERNING RESPONSIBLE INVESTMENT underpinned by the belief that capital better than companies which are at risk The Witan Board is responsible for the allocation and engagement have a more of disruption, litigation, regulation or loss overall policy. Members of the Board and positive long-term impact than an of business because of poor ESG Investment Team are responsible for its exclusionary approach and that blanket practices. delivery and monitoring how our exclusions (except controversial weapons) managers engage and consider can be counterproductive. ESG-related issues. ## Our policy is to ensure that ## by 2030 our portfolio 18 Witan Investment Trust plc ## consists entirely of Annual Report 2022 ## sustainable businesses ## Our responsible investment policy STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ### 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: ## Prosperity People Sustainable cash flows, exhibiting good corporate behaviour, A strong and experienced management team (and Board), strong stakeholder engagement and a respect for their with an inclusive and diverse culture respecting the shareholders. well-being of its customers, employees, suppliers and the community. ## Planet Partnership A clear strategy and roadmap to minimise its environmental Openness to collaboration, stakeholder engagement and impact and, wherever possible, to transition towards net zero participation in industry initiatives promoting good practice. by 2050 in line with global efforts to limit warming to not Transparency in acknowledging mistakes and addressing more than 2°C and preferably 1.5°C. This includes companies issues where they arise, working to deliver a more positioned to help accelerate the energy transition or carbon sustainable future. reduction. ## Our own responsibility Fund manager engagement We take all the steps necessary to ensure that Witan Witan ensures that our responsible investment strategy is itself a ‘sustainable business’ by addressing our is embedded in our own investment processes and own carbon footprint and ensuring we have that these policies are integrated into the direction of experienced management, skilled employees and our fund managers. We regularly engage with our fund strong corporate governance with an inclusive and managers to discuss our expectations and to derive diverse culture. Our ownership structure ensures that comfort that they are equipped with the insights and we are aligned with our shareholders. tools to drive progress in their portfolios. ## Industry advocacy Portfolio stewardship As a multi-manager investment fund, Witan Through our voting rights as shareholders and direct advocates a responsible investment approach, engagement with companies, Witan works with our through our membership of industry initiatives and fund managers to maintain a dialogue with our our network of fund managers. 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’. Witan Investment Trust plc 19 Annual Report 2022 STRATEGIC REPORT ## Driving sustainable businesses through a strategic approach to ## responsible investment continued ## 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 (1) ### WITAN SUSTAINABILITY ASSESSMENT 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 Band 3, 16% relative to our objective. Identifying our baseline involved Witan and every fund manager rating each of Band 5, 6% their portfolio holdings across the four pillars of prosperity, people, planet and Band 7, partnership (see page 19) that Band 1, 40% Band 2, 27% Band 4, 7% Band 6, 3% 1% characterise a ‘sustainable business’. Witan provided a detailed methodology, ### AVERAGE SCORE PER ISSUE ACROSS FOUR PILLARS identifying ten individual issues (grouped under the four pillars), to assist fund 100 managers in assessing each company. 90 80 SCORING OUR PORTFOLIO 70 The assessments were converted into a 60 numerical score with each company 50 achieving a rating of 0-100. In total, nearly 40 300 companies across our core and 30 specialist portfolios were assessed. 20 The weighted average assessment of 10 sustainability was 80 out of a possible 100. Note that this does not mean 80% of our 0 holdings are completely sustainable Board | businesses; it means that we see an | | | Diversity | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Disclosure | | Reporting | | | Engagement | Compliance | | | Sustainablity | | | | | average alignment of 80% to sustainable | | | | Remuneration | | | Collaboration | | Carbon Target practices, where companies were judged Prosperity People Planet Partnership to have sufficiently adopted sustainable policies. (1) Sustainability bands ranked 1 (highest) to 7 (lowest); see page 21. 20 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | The result of this assessment is shown in | The lowest scoring issue, with 57% | achieve alignment with an implied | | --- | --- | --- | | the top chart on page 20. Each portfolio | alignment, was Remuneration, where we | temperature rise of no more than 2°C and | | company scored between 0 (failing to | examined whether companies had a | preferably 1.5°C. Currently, c.24% of our | | meet any sustainability criteria) and 100 | policy which ties a proportion of executive | portfolio is aligned with 1.5°C with a further | | (meeting all criteria). The 0-100 assessment | pay to improved ‘non-financial’ | 20% aligned with 2.0°C. Overall, the | | of sustainability was sub-divided into | sustainability outcomes, in addition to the | portfolio is currently aligned with an | | seven equal bands with Band 1 being the | more common financial performance | implied temperature rise of 2.5°C. | | highest rating and Band 7 the lowest. 40% | benchmarks. We discussed this issue with | This is slightly better than the 2.7°C for our | | of companies in our portfolio scored | our managers at our annual ESG review | equity benchmark. These are snapshots, | | above 86 and therefore sit within | meetings and will monitor progress on this | which underline the importance of | | sustainability Band 1 (shown in dark green | and other aspects in the years ahead. | monitoring progress over time. | | on the chart) while 83% of our companies | There will be particular focus where | | | sit within the top three bands. Whilst we | progress stagnates or persistently falls | The bottom chart below shows that we | | consider this to be an encouraging result, | short over multiple areas. | have c. 27% of our portfolio invested in | | it should be noted that progress in some | | companies designated by Morningstar/ | | industries (and jurisdictions) where | PROGRESSING TOWARDS NET ZERO | Sustainalytics as having negligible carbon | | responsible investment is less well | | risk. This compares favourably with our | Following our commitment to the Net Zero developed may be harder to achieve. So, it benchmark’s 20% exposure. A further 40% Asset Managers initiative (‘NZAM’), we are is possible that progress between now and is invested in low risk and 28% in medium committed to reducing the carbon impact 2030 will not be linear. risk companies. The portfolio has of our portfolio to zero by 2050 at the latest. approximately 5% invested in high risk To be aligned with net zero and therefore Interestingly, although there was a degree (predominantly Oil & Gas) companies and the aims of the Paris Agreement on of qualitative assessment involved, has 0% exposure to severe carbon risk Climate Change, our portfolio should divergence between individual fund businesses. managers was low and for equities held by ### PORTFOLIO CARBON INTENSITY | two or more fund managers, the | | Another measure of a portfolio’s | | | | --- | --- | --- | --- | --- | | correlation between ratings was high. In | | environmental performance is its weighted | | | | other words, whilst the assessment | | average carbon intensity (‘WACI’), | | | | framework is new, there appears to be a | | expressed in metric tonnes of CO | 2 emitted | | | generally agreed approach to assessment | 180 | per million US dollars of sales. Witan’s | | | | by our managers. | | portfolio Scope 1+2 WACI, was 169 tCO | | 2 in | 160 2022 (2021: 164 tCO 2 ), while the benchmark 140 | Although external data providers have | | had a carbon intensity score of 153 tCO | | 2 | | --- | --- | --- | --- | --- | | differing approaches, it is interesting to | 120 | (2021: 174 tCO | 2 ). Despite the uptick in WACI | | | note that when analysed by MSCI, our | | (due primarily to an increased exposure to | | | 100 | portfolio is judged to have a weighted | | | | Oil & Gas companies), Morningstar/ | | --- | --- | --- | --- | --- | | | 2019 | 2020 | 2021 | | | average rating of AA (one notch below the | | | | Sustainalytics continues to award Witan’s | MSCI ACWIPortfolio best (AAA) rating). This corroborates the portfolio its Low Carbon Designation which relatively high initial rating using our own is an indication that companies within the system, despite differences in the portfolio are ‘in general alignment with the ### PORTFOLIO CLIMATE approach. transition to a low-carbon economy’. ### RISK ASSESSMENT IDENTIFYING PORTFOLIO STRENGTHS The key issue is that companies are committed to this transition rather than Looking at our portfolio in a different way, already aligned to net zero. Therefore this, we analysed each of the 10 issues and the effect of portfolio changes, means depicted in the bottom chart on page 20. that progress towards that target may not, Our portfolio scored well across the board as this year demonstrates, be linear. with over 70% of companies being aligned Additionally, we continue to focus on a with nine out of the 10 separate issues. This 15 company’s contribution to long-term analysis suggests that, whilst all issues 10 5 global carbon reduction rather than its require some attention, most are on a | 50 | | 0 | | | | | own historic carbon footprint. | | --- | --- | --- | --- | --- | --- | --- | --- | | 220 | positive sustainable trajectory. | | | | | | | | | | Negligible | Low | Medium | High | Severe | | 45 200 40 MSCI ACWIPortfolio 35 30 25 20 Witan Investment Trust plc 21 Annual Report 2022 2022 STRATEGIC REPORT ## Driving sustainable businesses through a strategic approach to ## responsible investment continued ## 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 | VOTING AND ENGAGEMENT | | --- | --- | | Our direct impact, as an investment fund | Witan regularly reviews the voting and | | with fewer than ten employees, is minimal. | engagement records of our fund | | Nevertheless, we have taken steps to | managers. Through engagement and | | manage, disclose and improve our ESG | voting strategies, Witan and our fund | | impacts. We calculated our carbon | managers can help influence corporate | | footprint for the first time in 2022. | behaviour and ensure that our voting and | engagement is targetted at improving Witan’s direct environmental impacts shareholder returns while being aligned consist of energy (including electricity with our responsible investment strategy. and gas) used in our offices as well as our | home offices, and the transport related to | | | managed by signatories to the PRI. Half of | In 2022, Witan’s fund managers voted on | | --- | --- | --- | --- | --- | | our commuting and business travel. Our | | | our fund managers are also members of | 97% (2021: 97%) of the proposals put to the | | total carbon footprint came to 12.4 tCO | | 2 . | the NZAM (2021: 50%). | AGMs of our portfolio companies. Of those | | Our Scope 1 and Scope 2 emissions were | | | | votes, 93% were cast in favour of | | 3.7 tCO | 2 with Scope 3 emissions | | Looking ahead to 2023, Witan will continue | management (2021: 94.2%) and 7% (2021: | | accounting for the remaining 8.7 tonnes. | | | to engage regularly with our external fund | 5.1%) against management (see charts at | | Our Scope 3 emissions include business | | | managers on responsible investment | the foot of the page). The only proposals | | travel as well as the impacts of home | | | practices. Our focus in 2023 will be on | not voted on were those which would | | working. Our carbon intensity of 2.1 tonnes | | | encouraging engagement with portfolio | have resulted in ‘share-blocking’. This is | | of CO | 2 compares favourably to an | | holdings which have been identified as | where voting would have restricted our | | average London-based firm (source: | | | laggards on key issues within our | managers ability to trade shares in | | Witan/Carbon Footprint Ltd). | | | sustainability framework. | advance of the meeting. | SELECTING AND ENGAGING OUR FUND MANAGERS In addition to the portfolio review outlined ### on page 20, we assess our managers’ ESG VOTING SUMMARY 2022 credentials and performance through ### due diligence meetings together with FOR MANAGEMENT AGAINST MANAGEMENT portfolio analysis carried out by Morningstar/Sustainalytics and MSCI’s ESG Platform. 2.6 0.2 Capital Mgmt Remuneration 0.7 | All our fund managers are signatories to | | Corporate | | --- | --- | --- | | the UN Principles for Responsible | | Directors | | | 0.3 | Routine | Investment (PRI) while substantially all of 6.793.3 the funds in our specialist portfolio are Environmental and social 0.9 Misc 0.4 1.5 ## In 2022, votes were cast on 22 Witan Investment Trust plc ## 97% of proposals of our Annual Report 2022 ## portfolio companies STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | PROMOTING SYSTEMIC CHANGE | Over the summer of 2022 we introduced | | --- | --- | | As the allocator of capital to businesses, | our fund managers to the framework and | | capital markets can help accelerate the | worked closely with them to ensure that | | transition to a more sustainable economy | this bespoke analysis was coherent and | | and, ultimately, improve returns for | achievable. This was essential as the | | investors. For this reason, Witan has joined | strategy would only succeed with their full | | several industry initiatives to share best | engagement. We were delighted that | | practice and help contribute to the | every manager assessed each of their | | transition. | portfolio companies and submitted the | baseline assessment of their portfolio. We are signatories to the UN PRI, a Feedback suggests that they had found supporter of the Transition Pathway this bespoke assessment to be LAUNCHING WITAN’S RESPONSIBLE Initiative (TPI) and a member of the informative and beneficial to their own INVESTMENT FRAMEWORK Carbon Disclosure Project (CDP). investment processes. We are confident James Hart, Witan’s Investment Director, Underpinning these commitments is our that this annual appraisal will be of led on the development and overall engagement with the Institutional significant value to Witan’s shareholders. implementation of Witan’s responsible Investors Group on Climate Change Our main focus was to identify practical investment strategy. Here he tells us about (IIGCC). In 2022, we signalled our steps that portfolio companies were what he learnt during the process. “In 2021, commitment to the Race to Zero taking to ensure their operations were the Board asked me to develop our campaign by becoming a signatory to more sustainable, with the likelihood that approach to responsible investment. the NZAM. cash flows become more predictable Whilst we already had ESG considerations over time. The framework is therefore in place – most notably our oversight of As part of our engagement with NZAM, we grounded in a ‘real-world’ approach managers’ ESG integration – we wanted committed to net zero for our own as well which all our stakeholders can to strengthen our approach in this area, as our portfolio’s emissions by 2050. In understand and ultimately benefit from. while assessing what was working well 2022, we started the process of This approach also aims to demystify an and not so well in the market. developing our interim targets, which opaque and jargon-heavy area, which have now been set. even some professional investors still find During the development process we difficult to grasp. The 100% engagement of sounded out our stakeholders, identified Looking ahead to 2023, Witan will define our fund managers during the first year, key parameters and designed our our NZAM commitments in more detail, especially against the volatile backdrop framework to ensure the strategy would focusing on how we reduce the carbon of the market, has been particularly deliver on its objectives. It was a great risk and carbon intensity of our portfolio welcome.” opportunity to start with a blank sheet of over coming years. We intend to do this by paper to develop a framework which we encouraging portfolio companies to believe will be of considerable benefit to reduce or eliminate emissions where our shareholders, our managers, our WITAN IS SIGNATORY OF: possible, rather than by divestment from investee companies and to society. We companies that are net carbon emitters. announced these further steps with the publication of our Annual Report in March 2022. 2.6 0.2 Capital Mgmt Remuneration 0.7 Corporate Directors 0.3 Routine 6.793.3 ## Environmental All our fund managers are and social ## Misc signatories to the UN 0.9 Witan Investment Trust plc 23 0.4 ## Principles for Responsible Annual Report 2022 ## Investment 1.5 STRATEGIC REPORT ## Driving prosperity and sustainable business through ## responsible investing continued ## CASE STUDY: PROMOTING A DECARBONISATION PLAN ArcelorMittal Steel (Arcelor) is the largest the need for a carbon reduction plan, Company ArcelorMittal contributor to our portfolio’s carbon capital expenditure to support it and intensity. Addressing this pollution is a pushing the company to be a leading Country significant priority for the company, but advocate for change in the industry. Luxembourg Arcelor is also in a position to make a | Sector | positive contribution to the net zero | The manager has found Arcelor to be a | | --- | --- | --- | | Industrials | transition because its steel plays a key | willing participant in this agenda, as | | | role in renewable energy infrastructure | exemplified by a €1bn investment to | | | such as wind and solar power. In | create the world’s first full-scale | | | addition, it is likely that corporates and | zero-carbon emissions steel plant. | | | consumers will source more clean, | Arcelor has also committed to a 25% | | | high-quality steel and be prepared to | reduction in carbon intensity by 2030 | | | pay a premium for it. What did our | and a net zero commitment by 2050. | | | manager focus on in their engagement | These plans, which are highly credible, | | | with the company? | will involve footprint, scrap and energy | transformation – including a transition ADVANCING NET ZERO COMMITMENTS to green hydrogen as a fuel source. In such a complex and fast-changing As such, Arcelor’s decarbonisation environment, it’s important that Arcelor strategy is amongst the best in the puts a well-constructed and world and helps them to win business communicated plan in place. Our by differentiating themselves from manager has had multiple less-scaled, less-responsible players. engagements with Arcelor emphasising 24 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## CASE STUDY: DRIVING SUSTAINABILITY LEADERSHIP Johnson Service Group (JSG) is an In September 2021, our manager Company Johnson Service Group industrial work wear rental and laundry discussed the appointment of a new service business. It is a well-run, Head of Sustainability and observed Country well-invested business delivering that whilst the company is well United Kingdom | | consistent sales and profit growth with | advanced in its sustainability initiatives, | | --- | --- | --- | | Sector | a good Return on Capital Employed | disclosure was limited. In early 2022, the | | Industrials | (‘ROCE’). Barriers to entry are high with | manager noted the recent publication | | | significant upfront capital investment | of their inaugural Sustainability Report. | | | and the importance of local network | They arranged a follow-up meeting with | | | densities to deliver returns given low | the Head of Sustainability to understand | | | individual order values. Their major | the work she had undertaken since | | | competitor in the UK is under-invested | joining and the preparation of the | | | and highly indebted. This gives JSG | report. | pricing power and opportunities for further market share gains. Separately, they also met the chairman to discuss progress and the potential ENGAGING TO DRIVE SUSTAINABILITY introduction of sustainability metrics into management incentive schemes. JSG is, however, a priority for Progress on the sustainability agenda engagement, given the heavy energy featured again when they met the CEO and water intensity of the industrial and CFO in September 2022. In this laundry business. Prior to our initial meeting they discussed the use of investment in December 2018, a key recycled materials in workwear element of our manager’s research was garments, water recycling and the use to ensure the company was well of environmentally friendly detergents. invested, as up to date equipment brings financial benefits through lower Our manager believes that JSG is energy and water usage, helping making good progress on sustainability explain above industry average and voted in favour of all resolutions at margins. the AGM. Sustainability issues will continue to feature heavily in ongoing and regular discussions. Witan Investment Trust plc 25 Annual Report 2022 STRATEGIC REPORT ## Meet the managers ## Structuring our portfolio ## Drawing on our experience to deliver collective wisdom ### We act as a one-stop shop for global equity Some managers focus on large, well-known ### investment. We search for the best fund companies; while others might seek to profit ### managers internationally, so the portfolio is from pioneering businesses in specialist ### notreliant on the stock-picking skills of one sectors. However, investment opportunities ### individual. The multi-manager team-based evolve over time. When that happens, we can ### approach ensures that the portfolio embraces appoint or replace managers accordingly. ### many companies, sectors and geographies. ### However, the sheer variety of investment ### opportunities means that they are not always ### obvious or easy to reach. ### Our breadth of expertise adds value throughout the asset allocation process as follows: ### Making ### Selecting Engaging ### Identifying Monitoring changes ### the right with ### opportunities the portfolio where ### managers managers ### appropriate ## Witan’s investment team Andrew Bell and James Hart manage Witan’s portfolio of direct holdings in specialist investment companies, as well as having overall responsibility for Witan’s investment portfolio, under the direction of the Board. Andrew Bell James Hart Chief Executive Officer, Investment Director, Witan Investment Trust Witan Investment Trust 26 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Identifying Selecting the ## opportunities right managers ### What sets Witan apart is our unique, We identify managers who can ### diversified but high-conviction portfolio demonstrateindependence of thought ### structure, consisting of two distinct but anda clear alignment of interest between ### complementary elements: core and themselves and their clients. They will ### specialist. This gives shareholders access haveaclearly articulated and repeatable ### to a range of investments with the aim investment process, a high degree ### ofproviding better returns over the long of intellectual rigour and sound judgement ### term while short-term performance to enable them to identify attractive ### maybe quite different from that companies and combine them into ### oftheCompany’s benchmark. concentrated, differentiated portfolios. ## Core portfolio 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. ## Monitoring and ## engaging with ## Specialist portfolio ## our managers The specialist portfolio accounts for 25% It provides exposure to a range of investment themes best accessed through managers with specialist ### We meet with our managers regularly knowledge. Through our due diligence ### todiscuss investment and governance process, we identify long-term themes ### which offer the ability to deliver higher issues and we expect them to uphold returns and outperformance. Current ### thehighest fiduciary standards. As part investment themes include: ### ofour investment process, we can adjust > Climate change; ### manager selection and allocations to > Emerging markets; ### > Unquoted growth companies; ensure we create a combined portfolio ### > Listed private equity; and which can deliver consistent long-term ### > Life sciences. outperformance, while our multi-manager ### structure helps reduce the risks associated These are held either via segregated ### with a single management style. portfolios, or funds held within the directholdings portfolio. Witan Investment Trust plc 27 Annual Report 2022 STRATEGIC REPORT ## Meet the managers continued ## Core portfolio managers ### We have six portfolio managers in our core portfolio. JENNISON ASSOCIATES, LANSDOWNE PARTNERS ### 2022 performance 2022 performance LLC Founded in 1998, Lansdowne | Jennison | (31.2)% | Mark Baribeau, Head of | Lansdowne | (6.2)% | Partners has evolved to | | --- | --- | --- | --- | --- | --- | | Associates, LLC | | | Partners | | | | | | Global Equities at Jennison | | | become one of the UK’s | | | | Associates, seeks to invest in | | | pre-eminent investment | | MSCI ACWI | (7.6)% | | MSCI ACWI | (7.6)% | | | | | a portfolio of market-leading | | | management boutiques. | | | | companies with innovative | | | The Long Only Developed | | | | business models, positively | | | Markets Strategy, managed | | | | inflecting growth rates, | | | by Peter Davies and | | | | and long-term competitive | | | Jonathon Regis, combines | | 6.0% | | | 17.4% | | | | | | advantages. Mark, along | | | a detailed thematic | | Witan assets | | | Witan assets | | | | | | with co-portfolio manager | | | approach with rigorous | | 2021: 6.3% | | | 2021: 18.9% | | | | | | Tom Davis and a team | | | companyanalysis to | | | | of global sector analysts, | | | identify anadaptable | | | | employs a high-conviction, | | | portfolio positioned | | | | concentrated approach | | | forunderappreciated or | | | | thatis sector, region and | | | contrariantrends. The two | | | | country-agnostic. The | | | lead managers benefit | | | | team invests in a select | | | from the support provided | | Name: | | | Name: | | | | | | group of companies with | | | by a team of experienced | | Mark Baribeau | | | Peter Davies | | | | | | innovative and disruptive | | | and insightful analysts who | | | | businesses that are driving | | | tend to focus on key sectors | | Style: | | | Style: | | | | Companies with exceptional | | structural shifts in their | Concentrated, benchmark- | | of interest to the team. | | growth prospects | | respective industries. They | independent investment in | | | | | | also look for companies | developed markets | | The high-conviction | | Benchmark: | | with defensible business | | | portfolio is the result of | | MSCI ACWI | | models and attractive | Benchmark: | | detailed company-specific | MSCI ACWI product offerings, supported research, allied with an Inception date: | | by secular demand trends. | | appreciation of global | | --- | --- | --- | --- | | 31/08/2020 | | Inception date: | | | | The portfolio typically has | | thematic developments. | 14/12/2012 between 35 and 45 holdings The team is willing to make UNPRI signatory: and securities must meet significant adjustments Yes UNPRI signatory: stringent standards in to the portfolio to reflect Yes order to remain or earn its view of the changing a place in the portfolio. investment landscape. 28 Witan Investment Trust plc Annual Report 2022 ## Core portfolio managers ### We have six portfolio managers in our core portfolio. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ### 2022 performance LINDSELL TRAIN 2022 performance VERITAS ASSET MANAGEMENT Lindsell Train, headed by Lindsell Train (5.2)% Nick Train and Michael Veritas Asset (10.9)% Andy Headley, Head of Management | | | Lindsell, is guided by four | | | Global Strategies at Veritas, | | --- | --- | --- | --- | --- | --- | | | | investment beliefs: investors | | | uses a number of research | | MSCI ACWI | (7.6)% | | MSCI ACWI | (7.6)% | | | | | undervalue durable, | | | methods to help identify | | | | cash-generative business | | | industries and companies | | | | franchises; concentration | | | that are well positioned to | | | | can reduce risk; transaction | | | benefit from medium-term | | | | costs are a ‘tax’ on returns; | | | growth, regardless of where | | 16.7% | | | 17.5% | | | | | | and dividends matter even | | | they are located. The aim is | | Witan assets | | more than you think. These | Witan assets | | to generate excellent real | | 2021: 14.7% | | tenets have led to the | 2021: 18.7% | | returns and minimise the risk | | | | creation of a high-conviction | | | of permanent capital loss. | | | | portfolio of approximately 20 | | | Potential investments are | | | | stocks which they describe | | | analysed from an absolute | | | | as “rare and beautiful | | | basis rather than relative | | | | assets” with a focus on | | | to any benchmark or index. | | | | those businesses with | | | This equity portfolio follows | | Name: | | | Name: | | | | | | truly sustainable business | | | a Global Focus strategy, | | Nick Train and Michael Lindsell | | | Andy Headley | | | | | | models and/or established | | | investing with a disciplined | | Style: | | resonant brands. In building | Style: | | approach to valuation | | Long-term growth from | | the portfolio they focus on | Real return objective from | | in ‘quality’ mid to large | | undervalued brands | | companies demonstrating | high-quality companies | | capitalisation companies. | | | | long-term durability in | | | It typically contains fewer | | Benchmark: | | cash and profit generation. | Benchmark: | | than 30 stocks, chosen | | MSCI ACWI | | Lindsell Train Limited is a | MSCI ACWI | | with a highly selective and | | | | small company with about | | | rigorous approach, and | | Inception date: | | | Inception date: | | | | | | 28 employees. This small size | | | is focused on a handful | (1) 01/09/2010 11/11/2010 allows the two founders and of investment themes. their team the freedom to UNPRI signatory: UNPRI signatory: concentrate on investment Yes Yes issues. The ownership (1) Lindsell Train managed a UK structure allows the partners portfolio from 01/09/10 until 31/12/19. to focus on long-term performance rather than short-term market ‘noise’. This clear sense of purpose and single-minded pursuit of investment excellence is a key distinguishing feature of Lindsell Train’s approach. Witan Investment Trust plc 29 Annual Report 2022 STRATEGIC REPORT ## Meet the managers continued ## Core portfolio managers ### 2022 performance WCM INVESTMENT 2022 performance ARTEMIS MANAGEMENT Derek Stuart, Andy Gray and | WCM | (21.5)% | Based in Laguna Beach, | Artemis | (9.7)% | Henry Flockhart co-manage | | --- | --- | --- | --- | --- | --- | | | | California, WCM is an | | | Artemis’s UK Special | | | | independent asset | | | Situations strategy. Their | | MSCI ACWI | (7.6)% | | MSCI UK IMI | 1.6% | | | | | management firm that | | | aim is to achieve superior | | | | runs focused portfolios, | | | long-term growth by looking | | | | comprised of high-quality | | | for unrecognised growth | | | | businesses with growing | | | potential in companies, | | | | economic moats, aligned | | | often those that are unloved | | 11.1% | | | 6.5% | | | | | | with strong, adaptable | | | or out of favour. The strategy, | Witan assets corporate cultures, and Witan assets which favours smaller and 2021: 11.5% | | supported by durable global | 2021: 6.1% | medium-sized companies, | | --- | --- | --- | --- | | | tailwinds. The portfolio is | | identifies hidden value | | | concentrated in 30-40 high- | | within ‘problem investments’, | | | conviction investments with | | which can be companies in | | | the objective of securing | | need of new management | | | long-term excess return | | or refinancing or suffering | | | and downside protection. | | from investor indifference. | | Name: | | Name: | | As an active manager, WCM Mike Trigg Derek Stuart believes that their investee The focus on those Style: companies have meaningful Style: companies which can High-quality companies with structural advantages Recovery/special situations help themselves rather strong culture and increasing which, when allied with than relying on a change competitive advantage a ‘buy and manage’ low Benchmark: in the business climate turnover approach, will allow MSCI UK IMI aims to avoid ‘value traps’ Benchmark: long-term outperformance and other risks associated MSCI ACWI Inception date: of the relevant benchmark. with a ‘special situations’ 06/05/2008 strategy. The Artemis team Inception date: places great emphasis 31/08/2020 UNPRI signatory: on personal knowledge of Yes management teams and UNPRI signatory: meets with them regularly. Yes This helps them understand what can be achieved and how aligned management are with shareholders. The portfolio typically has fewer than 50 holdings. 30 Witan Investment Trust plc Annual Report 2022 ## Specialist portfolio managers ### Each of our specialist portfolio managers is an expert in one of our chosen themes. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | 2022 performance | | GMO | 2022 performance | | GQG PARTNERS | | --- | --- | --- | --- | --- | --- | | | | GMO was co-founded in | | | GQG Partners’ Emerging | | GMO | 0.4% | 1977by the well-known | GQG Partners | (10.6)% | Markets Equity strategy | | | | investor and climate- | | | seeksto invest in high- | | | | focused philanthropist, | | | quality companies with | | MSCI ACWI | (7.6)% | | MSCI Emerging | (9.6)% | | | | | Jeremy Grantham. | | | attractively priced future | Markets growth prospects. The | | The investment process is | | portfolio management | | --- | --- | --- | --- | | | grounded in a long-term, | | team, led by Rajiv Jain, | | | valuation-based investment | | focuses primarily on | | 5.9% | | 5.6% | | | | philosophy – an approach | | high-quality, large-cap | | Witan assets | | Witan assets | | | | which GMO believes | | companies in emerging | | 2021: 4.7% | | 2021: 6.5% | | | | provides the best risk- | | market economies and | | | adjusted returns. The | | employs a fundamental | | | Climate Change strategy | | investment process to | | | seeks to deliver high total | | evaluate each business. | | | return by investing primarily | | Theresulting portfolio, | | | in equities of companies | | whichis constructed without | | | that are positioned to | | reference to benchmark | | Name: | | Name: | | | | benefit, directly or indirectly, | | country weights, seeks to | | Lucas White | | Rajiv Jain | | | | from efforts to curb or | | limit downside risk while | | Style: | mitigate the long-term | Style: | providing attractive returns | | Companies positioned to | effects of global climate | High-quality companies | to long-term investors over | | benefit from climate change | change, to address the | withattractively priced | afull market cycle. GQG | | mitigation/adaptation efforts | environmental challenges | growth prospects | Partners’ portfolio aims to | | | presented by global climate | | participate in the growth | | Benchmark: | change, or to improve the | Benchmark: | that emerging economies | | MSCI ACWI | | MSCI Emerging Markets | | | | efficiency of resource | | promise to deliver over the | | | consumption. As climate | | long term, while avoiding | | Inception date: | | Inception date: | | | | change is among the most | | some of the risks that are | | 05/06/2019 | | 16/02/2017 | | | | important investment issues | | often associated with | | | facing investors today, GMO | | individual countries | | UNPRI signatory: | | UNPRI signatory: | | | | believes that there are | | andstocks within their | | Yes | | Yes | | | | exceptional opportunities | | investment universe. | forlong-term investors in a world mobilising to address climate change. Witan Investment Trust plc 31 Annual Report 2022 STRATEGIC REPORT ## Meet the managers continued ## Specialist portfolio managers ## A selection of specialist collective funds investing in both ## quoted and unquoted companies, with the overall objective ## of outperforming Witan’s equity benchmark. These specialist ## themes tend to be outside the scope of investment for most ## equity investment managers. | 2022 performance | | DIRECT HOLDINGS | | Commodities | | | --- | --- | --- | --- | --- | --- | | | | Private equity | | BlackRock World Mining | | | Direct Holdings | (15.0)% | | | | (1) | | | | | (1) | (1.6%) | | Apax Global Alpha (3.0%) Unquoted Growth (6.5)% Fund investing in mining and Extensive portfolio of private metal assets worldwide, Benchmark (6.2)% equity investments in principally via listed growing sectors. Direct Holdings securities. ### (1) (1) Princess Private Equity (1.8%) Real estate Portfolio of private equity (1) Schroder Real Estate (0.9%) investments managed by ## 11.3% Swiss-based Partners Group. Fund of UK commercial 2021: 10.9% realestate investments. (1) Unbound (0.04%) Unquoted Growth Clean Energy Multi-brand retail platform ### (1) (formerly Electra Private VH Global Sustainable (1) Equity). Energy (1.6%) Diversified energy ## 1.9% (1) Hostmore (0.1%) infrastructure investments 2021: 1.7% Owner and operator focused on accelerating ofTGIFriday’s UK casual theenergy transition. dining franchise spun Name: outofElectra. Witan Credit (1) NB Distressed Debt (0.4%) Life sciences Style: (1) Portfolio of distressed, Specialist collective funds Syncona (1.4%) stressed and special A healthcare investment situations investments Benchmark: company focused on Witan’s benchmark inrealisation situations. founding, building and funding global leaders in Inception date: UNQUOTED GROWTH innovative life sciences. 19/03/2010 Lansdowne Opportunities (1) (1) S&P Biotech ETF (0.6%) (0.9%) UNPRI signatory: Yes Invests mostly in unquoted Seeks to replicate the performance of the equal companies capitalising on weighted S&P Biotechnology the intellectual property Select Index. ofleading universities. The Biotech Growth Trust (1) Lindenwood (1.0%) (1) Percentage of Witan’s assets (1) (0.2%) Invests in unquoted, Investment in the worldwide highgrowth companies, biotechnology industry. seeking the next generation of technology leaders. 32 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc 33 Annual Report 2022 STRATEGIC REPORT ## Forty largest investments ## Top 40 investments as at 31 December 2022 Market value of | | | holding | | | % of | | --- | --- | --- | --- | --- | --- | | Company | | | £m | portfolio | | | 1 GMO Climate Change | Specialist fund investing in companies which benefit from efforts to | 106.8 6.1 | | | | curb or mitigate the effects of climate change 2 Apax Global Alpha Investment company offering exposure to private equity investments 52.2 3.0 in the Technology, Services, Healthcare and Consumer sectors 3 Unilever Multi-national consumer goods company with food, home care and 35.8 2.0 personal care divisions 4 BP UK-based global energy company 33.3 1.9 5 Princess Private Equity Investment company providing exposure to a portfolio of private 31.0 1.8 equity investments 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 26.1 1.5 applications, software development tools and internet software 10 Syncona Healthcare fund focused on founding, building and funding a portfolio 23.9 1.4 of innovative life science companies 11 Thermo Fisher Scientific Offers medical products and services to the pharmaceutical and 23.5 1.3 biotech industry, hospitals and research & diagnostic organisations 12 Diageo UK-based global leader in spirits and liqueurs. Also owner of the 22.9 1.3 Guinness beer brand 13 Heineken The world’s second largest brewer offering premium brand and 22.7 1.3 zero-alcohol beers 14 Canadian Pacific Railway Transcontinental railway providing freight and container services 22.4 1.3 across its network in Canada and the United States 15 AIB Irish bank offering commercial banking services to retail and 22.4 1.3 institutional customers 16 UnitedHealth A leading US health insurer offering plans and services to group and 22.2 1.3 individual customers 17 Nintendo Gaming console company which develops, manufactures and sells 21.1 1.2 video game hardware and software 18 Mastercard A global leader in the provision of financial transaction processing 21.1 1.2 services 19 RELX Global provider of information and analytics for professional and 20.9 1.2 business customers across industries 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. 34 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Top 40 investments: Market value of | | | holding | | | % of | | --- | --- | --- | --- | --- | --- | | Company | | | £m | portfolio | | | 21 Mondelez | A food and beverage company which manufacturers world leading | | 20.6 1.2 | | | snack foods and chocolate brands 22 London Stock Exchange Operates international equity, bond and derivatives markets and 19.6 1.1 provides indexing and financial data services | 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 | 18.1 1.0 | engines, propulsion systems and ancillary services 26 Lindenwood A fund investing in unquoted, high growth companies, seeking the 16.9 1.0 next generation of technology leaders 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 16.5 0.9 institutional customers 30 Vinci A global leader in construction and concessions management with 16.1 0.9 expertise in building, civil, hydraulic and electrical engineering 31 Lansdowne Opportunities Fund A fund investing mostly in unquoted companies capitalising on the 15.8 0.9 intellectual property of leading universities 32 World Wrestling Entertainment A media and entertainment company operating as producer and 15.6 0.9 promoter of live wrestling events and associated merchandise 33 Charter Communications US cable telecommunications company offering broadcasting, 15.3 0.9 internet, voice, entertainment and business services | 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 | 14.8 0.8 | and globally 37 Bank of Ireland Irish bank offering banking and financial services to retail and 14.4 0.8 institutional customers 38 Ryanair Europe’s largest airline offering low fare passenger services to 13.7 0.8 destinations across Europe 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, 13.1 0.7 perfumes, cosmetics, luggage, watches and jewellery Top 40 940.2 53.4 Witan Investment Trust plc 35 Annual Report 2022 STRATEGIC REPORT ## Classification of investments ### at 31 December 2022 | | | | North | | | United | | Continental | | | | Asia | | | | | Latin | | | | Total | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | America | | | | | | | | | | | | | | | | | | (1) | | | | | | | | | Kingdom | | | | Europe | | (ex Japan) | | | Japan | | America | | | Other | | 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 | | | 0.7 1.4 | | | | | | – | | | – – – – 2.1 | | | | | | | | | | Services | | Transportation | 2.1 0.5 | 1.9 | – – – – 4.5 | | --- | --- | --- | --- | --- | | | | 4.5 3.7 | 6.7 | 0.1 0.1 – – 15.1 | | Consumer | Automobiles & Components | 0.2 0.2 | 0.7 | – – – – 1.1 | Discretionary Consumer Durables & 0.1 0.2 2.0 0.1 – – – 2.4 Apparel | | 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 | – 2.0 | 0.2 | – 1.3 – – 3.5 | Products 3.2 3.7 2.7 0.4 1.3 0.1 – 11.4 Healthcare Healthcare Equipment & 3.8 – 0.1 0.5 – – – 4.4 Services Pharmaceuticals, 4.2 0.6 0.9 0.2 0.3 – – 6.2 Biotechnology & Life Sciences | | | 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 | Software & Services | 7.1 0.1 | 0.3 | – – – – 7.5 | Technology Technology Hardware & 0.9 0.6 – – 0.2 – – 1.7 Equipment Semiconductors & 1.7 – 0.4 0.2 0.1 – – 2.4 Semiconductor Equipment 9.7 0.7 0.7 0.2 0.3 – – 11.6 Communication Communication Services – 0.6 – 0.2 – 0.1 – 0.9 Services | | 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 | (1) | Investment Funds | 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. 36 Witan Investment Trust plc Annual Report 2022 ## Principal risks and uncertainties The directors have carried Risks are inherent in investment and The guiding principles remain STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS corporate management. It is important watchfulness, proper analysis, prudence ### outarobust assessment of toidentify risks and ways to control or and a clear system of risk management. ### theemerging and principal avoid them. Witan Investment Services ### risksfacing the Company, Limited (‘WIS’) has a Risk Committee in Where appropriate, the Witan and WIS order to monitor compliance with its risk Boards meet jointly to cover matters of ### including those that would management and reporting obligations common interest. The WIS Board consists ### threaten itsbusiness model, as Witan’s Alternative Investment Fund of five non-executive directors and one ### future performance, solvency, Manager (‘AIFM’). The Company maintains executive director who are also directors a framework of the key risks, with the of Witan, and one executive director who ### liquidity or reputation. These policies and processes devised to is a Company employee. ### risks, and the actions taken monitor, manage and mitigate them ### tomitigate them, are set where possible. Its detailed risk map The Board’s policy onrisk management ### outbelow. isreviewed regularly by the Audit & Risk has not materially changed during the Committee and the WIS Risk Committee, course of the reporting period and up which report on pertinent issues to their tothe date of thisreport. respective Boards. ReducedUnchangedIncreased ### The Company’s key risks fall broadly under the following categories: ## Market and investment portfolio RISK MITIGATION As an equity fund, a key risk of investing is a The Board seeks to manage these During the year, Andrew Bell, the CEO, general fall in equity prices and investment risksthrough: managed the overall business and the income, which could be exacerbated by investment portfolio in accordance with  a broadly diversified equity benchmark; gearing and the risks associated with the limits determined by the Board and the AIFM, performance of its investment managers  appropriate asset allocation decisions; onwhich the CEO reports at each Board and changes in Witan’s share price rating. meeting. The Board also regularly reviews  selecting competent managers and investment strategy and performance, Other risks are the portfolio’s exposure to regularly monitoring their performance, supported by comprehensive management country, currency, industrial sector and awareness of emerging risks and the information and analysis. stock-specific factors (including those robustness of their processes for taking relating to the sustainability of the business account of those risks; model taking account of environmental, social and governance factors). Political  paying attention to key economic andmacroeconomic topics such as Brexit, andpolitical events; inflation, pandemics (e.g. Covid-19), trade  engagement with shareholders and wars and military conflicts (e.g. the Russian other stakeholders; invasion ofUkraine) can all be expected to lead to market volatility.  active management of risk, whether topreserve capital or capitalise onopportunities;  the application of relevant policies ongearing and liquidity; and  share buybacks and issuance torespond to market supply anddemand. Witan Investment Trust plc 37 Annual Report 2022 STRATEGIC REPORT ## Principal risks and uncertainties continued ## Operational and cyber RISK MITIGATION | Many of the Company’s financial systems | The Witan and WIS Executive undertake | Details of the Board’s monitoring and | | --- | --- | --- | | are outsourced to third parties, principally | adetailed due diligence programme, | controlprocesses are explained further | | BNP Paribas London Branch (‘BNP Paribas’). | focusedupon the operational and | inthe Corporate Governance Statement | | Disruption to their accounting, payment | cyberarrangements of all the Company’s | onpages48 to 58. | | systems or custody records could prevent | suppliers. BNP Paribas as the Company’s | | | the accurate reporting and monitoring of | depositary, has a key responsibility for | | | the Company’s financial position. | monitoring such issues on behalf of the | | Company. The Board and AIFM monitor the depositary as well as its other suppliers. ## Compliance and regulatory change RISK MITIGATION The Company breaches compliance/ The Board takes its regulatory Operational and regulatory risks are regulatory requirements or fails to responsibilities very seriously and regularly reviewed by Witan’s Audit & Risk assessthe impact. compliance issues and potential Committee and WIS’s Risk Committee. regulatorychanges are regularly WISissubject to its own operating rules and reviewedby the Boardand its AIFM. regulations and is regulated by theFinancial Conduct Authority (‘FCA’). The Company Details of the Company’s corporate hasestablished a modus operandi for the governance policies are set out in the effective coordination ofits responsibilities Corporate Governance Statement on and those of WIS, asitsAIFM. pages48 to 58. The Board conducts an annual assessment of the effectiveness Operationally, the multi-manager structure ofits governance processes. is robust, as the investment managers, thecustodian and the fund accountants There is also a three-yearly independent keep their own records which are regularly external review, the most recent of which reconciled. The depositary, the AIFM and was in 2021. See page 57 for further details. theBoard provide additional checks and Following the closure of the Company’s safeguards. Management monitors the savings plans, the risks associated with the activities of all third parties and reports holding of and accounting for client assets anysignificant issues to the Board. has been substantially reduced and will be eliminated in future. ## Accounting, taxation and legal RISK MITIGATION | The Company must comply with sections | The accounting requirements are monitored | | --- | --- | | 1158-59 of the Corporation Tax Act 2010 (‘CTA’). | by the CEO and AIFM and the Company | | A breach could result in the Company | carefully monitors compliance with the | | losinginvestment trust status and, as | applicable rules. | aconsequence, capital gains realised These requirements offer significant wouldbe subject to corporation tax. protection for shareholders. The Board | The Company must comply with the | receives reportsfrom the CEO, the AIFM, | | --- | --- | | provisions of the Companies Act 2006 | theCompany Secretary and the Company’s | | (‘Companies Act’) and with the UK Listing | professional advisers to enable it to ensure | | Authority’s Listing Rules and Disclosure Rules | compliance with all applicable rules. WIS is | | (‘UKLA Rules’). A breach of the Companies | authorised and regulated by the FCA to act | | Act could result in the Company and/or | as the AIFM forWitan. | thedirectors being fined or becoming the subject of criminal proceedings. Breach of the UKLA Rules could result in the suspension of the Company’s shares which would itself constitute a breach of the provisions of theCTA. 38 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Liquidity RISK MITIGATION The Company’s portfolio of securities The Company’s portfolio consists mainly Most of the likely liquidity requirements are mightnot be realisable. ofreadily realisable securities. The foreseeable (for example, timetabled loan Companyand its AIFM regularly review payments and dividends) while others liquidity needs(for example, operational (suchas share buybacks) are subject to costs, loanservicing and repayment, theCompany’s discretion. The Board is shareholder dividends and share buybacks) satisfied that unexpected liquidity needs relative to the Company’s portfolio income arenot significant and could readily be and the value and tradability of the metwithout compromising normal Company’s assets. portfoliomanagement. ## Environmental, social and governance factors RISK MITIGATION | Failure to identify, understand or mitigate the | Witan has a responsible investment policy | being identified. Managers are also | | --- | --- | --- | | risks arising from ESG issues may negatively | which was developed by the Board in | expected to report on engagement and | | impact investment returns, increase the | consultation with Witan’s Executive team. | voting activities. The Executive holds regular | | potential forreputation risk to Witan and | This is discussed fully on pages 18 to 25 of | ESG review meetings with each of the | | adversely affect the net asset value and/or | this Report. Witan expects its external | managers where these activities, as well as | | price of Witan’s shares. | managers to integrate ESG factors into their | evolving best practice and new responsible | | | investment processes. Witan requires | investment initiatives, are discussed. The | | | managers to report on any ESG issues in a | Executive presents its findings to the Board | | | timely manner and the Executive monitors | on a regular basis. | the portfolios using various third-party data providers to ensure that such issues are Witan Investment Trust plc 39 Annual Report 2022 STRATEGIC REPORT The following ‘Section 172’ disclosure, which is required ## Section 172: engaging with by the Companies Act 2006 and the AIC Code, as ## our stakeholders explained on page 52, describes how the directors have had regard to the views of the Company’s stakeholders in their decision making. ## Who? Why? How? What? Outcomes and actions STAKEHOLDER GROUP THE BENEFITS OF ENGAGEMENT HOW THE BOARD AND WIS EXECUTIVE WHAT WERE THE KEY TOPICS OF ENGAGEMENT? WHAT ACTIONS WERE TAKEN, INCLUDING WITH OURSTAKEHOLDERS ENGAGED WITH OUR STAKEHOLDERS PRINCIPAL DECISIONS? Investors Clear communication of our strategy and WIS, on behalf of the Board, completes a programme of investor Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs theCompany’s performance against our relations throughout the year. and objective, and the selection and monitoring of our external managers. objective can help the share price trade at anarrower discount or a premium to its net Key mechanisms of engagement included:  Impact of dividend cuts on the Company’s revenues and the  See page 9 in the Chairman’s Statement and page 15 in the CEO’s asset value, which benefits shareholders.  AGM Company’s dividends Review for the Board’s comments on the dividend policy New shares may be issued at a premium  The Company’s website which hosts reports, monthly toNAV to meet demand without dilution to  Share price performance and the Company’s and wider  The Company maintained a high rate of share buybacks. See factsheets, video interviews with the external managers, existing shareholders. Increasing the size of investment trust sector discounts page 15 in the CEO’s Review CEO,Investment Director and regular market commentary the Company can benefit liquidity as well asspread costs.  Online newsletters  The integration of ESG into the Company’s investment processes  ESG included in presentations to investors, ad hoc updates  One-on-one meetings with professional investors with eitherthe CEO, Investment Director or Chairman  Informing investors of their rights to attend and vote in the AGM  Holders of shares via online platforms were written to, informing  Group meetings with professional investors with them of how they could vote and view the Annual Report ourexternalmanagers  Ongoing impact of Russia/Ukraine conflict on economies  The WIS Executive held regular meetings with shareholders and markets 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  The WIS Executive held regular meetings with shareholders and markets 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 As Witan has a multi-manager approach, The WIS Executive meets with the Company’s external managers Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and managers engagement with our managers is necessary throughout the year and receives monthly performance and business updates. to evaluate their performance against their compliance reporting. This provides the opportunity for both the stated strategy and benchmark and to manager and WIS Executive to explore and understand how and  The integration of ESG into each manager’s investment processes  See pages 22 to 25 in responsible investment for a report on understand any risks or opportunities this why the relationship has performed and what may be expected manager activity in 2022. maypresent to the Company. This also inthe future. Each manager also presents annually to the Board helpsensure that investment management ofdirectors, providing the opportunity for the manager and Board  Engagement with managers to ensure third-party internal  All service providers engaged and supplied requested costs are closely monitored and remain to reinforce their mutual understanding of what is expected from control reporting is in place. information for the due diligence exercise to be completed. In one competitive. Witan ensures that all all parties. case, the manager committed to engage third-party internal managersare paid in accordance control reporting where this was not in place. withtheirterms of trade. Service Witan and WIS contract with third parties The WIS Operations team engages regularly with all service  Annual due diligence exercise undertaken.  All service providers engaged and supplied requested providers forother services including: custodian; providers both in one-to-one meetings, via regular written information for the due diligence exercise to be completed. depositary; investment accounting reporting and an annual due diligence exercise. This regular andadministration; and company secretarial. interaction provides an environment wheretopics, issues and Ensuringthe third parties to whom we have business development needs (including current inflationary outsourced services complete their roles pressures and the impact of the cost of living crisis on their diligently and correctly is necessary for service) can bedealt with efficiently and collegiately. theCompany’s success. The Audit and Risk Committee reviews annually a summary of Witan pays all service providers in significant contracts to further reinforce the overviewof the accordance with their terms of business and Company’s service providers at the corporatelevel. Furthermore, is a signatory to the Prompt Payments Code. the Audit and Risk Committee review the annual due diligence exercise that includes, where appropriate, service providers’ third-party internal control reports. Employees Attract and retain talent to ensure the All employees of the Company sit in one open-plan office with the  Ongoing flexible hybrid working arrangements maintained  Flexible hybrid working arrangements maintained without Company has the resources to successfully CEO, facilitating interaction and engagement. There is a hybrid detriment to productivity or service to stakeholders. implement its strategy and manage third- working policy in place for employees to work remotely. As well as party relationships. the CEO, the Investment Director, Director of Operations and  Performance and compensation of employees is reviewed  See the Directors’ Remuneration Report on pages 62 to 74. Director of Marketing regularly report at Board meetings. Given the bytheRemuneration and Nomination Committee with the CEO 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. Debt To communicate and demonstrate a strong The WIS Executive provides regular financial covenant  N/A  N/A holders financial position that supports the financing compliance validation and financial reports to the stakeholders. arrangements. 40 Witan Investment Trust plc Annual Report 2022 ## Who? Why? How? What? Outcomes and actions STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS STAKEHOLDER GROUP THE BENEFITS OF ENGAGEMENT HOW THE BOARD AND WIS EXECUTIVE WHAT WERE THE KEY TOPICS OF ENGAGEMENT? WHAT ACTIONS WERE TAKEN, INCLUDING WITH OURSTAKEHOLDERS ENGAGED WITH OUR STAKEHOLDERS PRINCIPAL DECISIONS? Investors Clear communication of our strategy and WIS, on behalf of the Board, completes a programme of investor Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs theCompany’s performance against our relations throughout the year. and objective, and the selection and monitoring of our external managers. objective can help the share price trade at anarrower discount or a premium to its net Key mechanisms of engagement included:  Impact of dividend cuts on the Company’s revenues and the  See page 9 in the Chairman’s Statement and page 15 in the CEO’s asset value, which benefits shareholders.  AGM Company’s dividends Review for the Board’s comments on the dividend policy New shares may be issued at a premium  The Company’s website which hosts reports, monthly toNAV to meet demand without dilution to  Share price performance and the Company’s and wider  The Company maintained a high rate of share buybacks. See factsheets, video interviews with the external managers, existing shareholders. Increasing the size of investment trust sector discounts page 15 in the CEO’s Review CEO,Investment Director and regular market commentary the Company can benefit liquidity as well asspread costs.  Online newsletters  The integration of ESG into the Company’s investment processes  ESG included in presentations to investors, ad hoc updates  One-on-one meetings with professional investors with eitherthe CEO, Investment Director or Chairman  Informing investors of their rights to attend and vote in the AGM  Holders of shares via online platforms were written to, informing  Group meetings with professional investors with them of how they could vote and view the Annual Report ourexternalmanagers  Ongoing impact of Russia/Ukraine conflict on economies  The WIS Executive held regular meetings with shareholders and markets 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  The WIS Executive held regular meetings with shareholders and markets 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 As Witan has a multi-manager approach, The WIS Executive meets with the Company’s external managers Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and managers engagement with our managers is necessary throughout the year and receives monthly performance and business updates. to evaluate their performance against their compliance reporting. This provides the opportunity for both the stated strategy and benchmark and to manager and WIS Executive to explore and understand how and  The integration of ESG into each manager’s investment processes  See pages 22 to 25 in responsible investment for a report on understand any risks or opportunities this why the relationship has performed and what may be expected manager activity in 2022. maypresent to the Company. This also inthe future. Each manager also presents annually to the Board helpsensure that investment management ofdirectors, providing the opportunity for the manager and Board  Engagement with managers to ensure third-party internal  All service providers engaged and supplied requested costs are closely monitored and remain to reinforce their mutual understanding of what is expected from control reporting is in place. information for the due diligence exercise to be completed. In one competitive. Witan ensures that all all parties. case, the manager committed to engage third-party internal managersare paid in accordance control reporting where this was not in place. withtheirterms of trade. Service Witan and WIS contract with third parties The WIS Operations team engages regularly with all service  Annual due diligence exercise undertaken.  All service providers engaged and supplied requested providers forother services including: custodian; providers both in one-to-one meetings, via regular written information for the due diligence exercise to be completed. depositary; investment accounting reporting and an annual due diligence exercise. This regular andadministration; and company secretarial. interaction provides an environment wheretopics, issues and Ensuringthe third parties to whom we have business development needs (including current inflationary outsourced services complete their roles pressures and the impact of the cost of living crisis on their diligently and correctly is necessary for service) can bedealt with efficiently and collegiately. theCompany’s success. The Audit and Risk Committee reviews annually a summary of Witan pays all service providers in significant contracts to further reinforce the overviewof the accordance with their terms of business and Company’s service providers at the corporatelevel. Furthermore, is a signatory to the Prompt Payments Code. the Audit and Risk Committee review the annual due diligence exercise that includes, where appropriate, service providers’ third-party internal control reports. Employees Attract and retain talent to ensure the All employees of the Company sit in one open-plan office with the  Ongoing flexible hybrid working arrangements maintained  Flexible hybrid working arrangements maintained without Company has the resources to successfully CEO, facilitating interaction and engagement. There is a hybrid detriment to productivity or service to stakeholders. implement its strategy and manage third- working policy in place for employees to work remotely. As well as party relationships. the CEO, the Investment Director, Director of Operations and  Performance and compensation of employees is reviewed  See the Directors’ Remuneration Report on pages 62 to 74. Director of Marketing regularly report at Board meetings. Given the bytheRemuneration and Nomination Committee with the CEO 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. Debt To communicate and demonstrate a strong The WIS Executive provides regular financial covenant  N/A  N/A holders financial position that supports the financing compliance validation and financial reports to the stakeholders. arrangements. Witan Investment Trust plc 41 Annual Report 2022 STRATEGIC REPORT ## Corporate and operational structure Witan is an investment trust with a STAFFING WITAN INVESTMENT SERVICES Premium Listing on the London Stock The Company’s policy towards its WIS is authorised and regulated by Exchange. It has a single, wholly employees is to attract and retain staff theFinancial Conduct Authority. It is owned subsidiary, Witan Investment with the skills and expertise required to authorised to act as Witan’s AIFM and manage the affairs of an investment toprovide marketing services. Services Limited (‘WIS’) which acts trust company. Details of the Company’s as the Company’s Alternative remuneration policies and required WIS’s principal activities are acting Investment Fund Manager (‘AIFM’). disclosures are set out in the Directors’ asWitan’s AIFM, providing executive Remuneration Report on pages 62 to management services to the Board of The overwhelming majority of the 74. Employees and those who seek Witan and communicating information portfolio is in segregated accounts, | | to work at Witan are treated equally | about the Company to the market. | | --- | --- | --- | | held in custody by the Company’s | regardless of age, gender, race, disability, | | | depositary. The operations of the | marital status, sexual orientation and | WIS’s operational objectives for 2022 were: | | custodian and the safeguarding | religion. The Company currently has six | | > to fulfil its responsibilities as Witan’s ofthe Company’s assets are direct employees, three men and three AIFM; and women. The Board currently consists supervised by the depositary. of nine non-executive directors (four > to control the net operating costs men and five women) and the CEO, forWitan. OPERATIONAL MANAGEMENT Andrew Bell, who is an employee. Given ARRANGEMENTS its outsourced model and the small In 2022, WIS’s principal sources of In addition to the appointment of number of direct employees, the Group incomewere the fees (as AIFM or third-party investment managers, has no employment-related specific Executive Manager and for marketing Witanand WIS contract with third policies in respect of environmental or services) paid by Witan Investment Trust partiesfor other services, including: social and community affairs. However, plc. The main costs incurred were staff > BNP Paribas London Branch for as described elsewhere, an increased costs and professional advice to ensure depositary services, custody, focus on ESG issues has been formalised compliance with regulatory and investment accounting and by the Company’s commitments, accounting obligations. administration; which are detailed in the section on responsible investment on pages 18 to 25. > 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. 42 Witan Investment Trust plc Annual Report 2022 ## Costs INVESTMENT MANAGEMENT FEES a KPI, the Board does not consider it from the OCF, averaged over longer STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS relevant to consider the ongoing charges periods rather than specific to one year. Each of the third-party managers is of underlying investment companies The other principal differences between entitled to a management fee, based in which the Company invests, as the the OCF and the KID measure are the on the assets under management. The Company is not a fund of funds and inclusion of transaction costs, borrowing agreements can be terminated on one to to include ongoing charges of some costs and the underlying costs of holdings three months’ notice. The base fee rates investee companies but not of others in other collective investments. for managers in place at the end of 2022 would not be appropriate. For this reason, ranged from 0.28% to 0.65% per annum. although the AIC’s suggested approach The Company’s investment performance is The weighted average base fee was is to include such charges in the OCF, reported after all costs, however measured. 0.51% as at 31 December 2022 (2021: 0.51%). the Company has chosen not to do One manager (covering 6% of Witan’s so as part of its KPIs, but has disclosed portfolio), has a performance-related below an estimate of this figure. fee, which has a high-water mark and is subject to capping in any particular year. The Company exercises strict scrutiny and control over costs. The Board believes that Witan takes care to ensure the the OCF during the year represents good competitiveness of the fees it pays. We value for money for shareholders, taking negotiated a 15% reduction in fee for account of longer-term performance. one of the incumbent managers during the year and most of the fee structures The UK version of the EU PRIIPS regulations, incorporate a ‘taper’ whereby the average which are applicable to UK Investment fee rate reduces as the portfolio grows. Companies, mandates the preparation of a Key Information Document (‘KID’) The Company’s investment managers calculated on a formulaic basis, which may use services which are paid for, or contains a different measure of costs provided by, various brokers. They may place business, including transactions relating to the Company, with those ANALYSIS OF COSTS brokers. Under the requirements of 2022 2021 MiFID II, broker-provided services (other | | | | | % of | | | % of | | --- | --- | --- | --- | --- | --- | --- | --- | | than the execution of transactions) | | 2022 | average | | 2021 | average | | | | Category of cost | £m | net assets | | £m | net assets | | must either be minor non-monetary benefits or, for research received by Investment management base fees investment managers and charged to (note 4, page 96) 7.67 0.45 9.33 0.47 the Company, separately accounted for. Other expenses (excluding expenses (1) relating to the subsidiary , loan ONGOING CHARGES AND COSTS arrangement and one-off costs) 5.38 0.32 4.77 0.24 The Company’s established measure Ongoing Charges Figure of the costs of operation is the Ongoing (including investment management Charges Figure (‘OCF’). This represents the base fees) 13.05 0.77 14.10 0.71 recurring costs of operating the business Investment management (principally the investment management performance fees (note 4, page 96) – – 0.39 0.02 fees paid to our external managers as well as the Company’s fixed and variable Ongoing Charges Figure overhead costs), as a percentage of net (including performance fees) 13.05 0.77 14.49 0.73 assets. This is calculated in accordance Pro rata ongoing charges of with the AIC’s guidelines and provides (2) underlying funds 3.90 0.23 4.37 0.22 a consistent basis for the comparison OCF plus look through fund costs 16.95 1.00 18.86 0.95 of costs from one year to the next and relative to other investment companies. Portfolio transaction costs 1.84 0.11 3.95 0.20 Interest costs 6.29 0.37 5.21 0.26 The OCF was 0.77% in 2022 (2021: 0.71%). | When performance fees due to third- | Total costs including transaction | | --- | --- | | party managers are included, the OCF | costs, borrowing costs and | | was also 0.77% in 2022 (2021: 0.73%). | underlying fund costs 25.08 1.48 28.02 1.41 | (1) Those expenses not relating to the operation of the investment company . The main cost headings within the OCF (2) This cost represents an estimate of the pro rata attributable fees charged by the managers of the external are set out in the table to the right. The 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. 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 Witan Investment Trust plc 43 Annual Report 2022 STRATEGIC REPORT ## Viability Statement In accordance with the UK The Board has considered the As well as considering the principal Company’sfinancial position and its riskson pages 37 to 39 and the Corporate Governance Code, the ability to liquidate its portfolio and meet financialposition of the Company, Board has assessed the prospects its expenses as they fall due and notes theBoard has made the following of the Company over a longer thefollowing: assumptions in considering the period than the 12 months required Company’s longer-term viability: by the ‘going concern’ provision. > The portfolio consists of investments traded on major international stock > The Company’s remit of investing exchanges and there is a spread of inthe securities of global listed The Company’s current position investments. In normal conditions, the companies will continue to be andprospects are set out in the current portfolio could be liquidated anactivity to which investors Chairman’s and Chief Executive to the extent of more than 85% willwishtohave exposure. Officer’s reports and the Strategic (source: Bloomberg) within five Report. The principal risks are set > Investors will continue to want trading days and there is no outon pages 37 to 39. toinvest in closed-ended expectation that the nature of the investmenttrusts. investments held will be materially different in future. > The performance of the Company willcontinue to be satisfactory. The > The closed-ended nature of the Board is able to replace any of the Company means that, unlike an current investment managers when open-ended fund, it does not itconsiders it appropriate to do so. needtorealise investments when shareholders wish to sell their shares. > The Company will continue to haveaccess to adequate capital > The Board has considered the when required. viabilityof the Company under | various scenarios, including periods | > The Company will continue to be | | | --- | --- | --- | | of acute stock market and economic | | ableto fund share buybacks when | | volatility such as experienced in 2020, | | required. The Company bought | | and concluded that it would expect to | | back58 million ordinary shares in | | be able to ensure the financial | | 2022 at a cost of £129 million and | | stability of the Company through the | | experienced no problem with liquidity | | benefits of having a diversified | | in doing so. It had shareholders’ funds | | portfolio of listed and realisable | | in excess of £1.5 billion at the end of | | assets. As illustrated in note 14 to the | | 2022. | accounts, the Board has considered price sensitivity risk (the sensitivity of Based on the results of its review and the profit after taxation for the year taking into account the long-term nature and the value of the shareholders’ of the Company and its financing, the funds to changes in the fair value of Board has a reasonable expectation that the Group’s investments) and foreign the Company will be able to continue currency sensitivity (thesensitivity to its operations and meet its expenses changes in key exchange rates to and liabilities as they fall due for the which the portfoliois exposed). foreseeable future, taken to mean at least the next five years. The Board > In addition to its cash balances which has chosen this period after reviewing were £35 million at 31 December 2022 its investment policy and evaluating (2021: £33 million), the Company has a the investment cycle and the ability to short-term bank facility (which is deliver the Company’s objectives over renewable annually) which can the short to medium term. Forecasting beused to meet its liabilities, and over longer periods is imprecise. The fixed-rate financing in the form Board has no information to suggest this ofsecured notes and cumulative judgement will need to change in the preference shares. With the exception coming five years. The Board’s long- of the short-term facility, this term view of viability will, of course, be financing will remain in place until at updated each year in the Annual Report. least 2035. Details of the Company’s current and non-current liabilities are set out in note 13 to the accounts. > The expenses of the Company arepredictable and modest in comparison with the assets and thereare no capital commitments currently foreseen which would alter that position. 44 Witan Investment Trust plc Annual Report 2022 GOING CONCERN STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS In light of the conclusions drawn in the foregoing statement on liquidity risk on page 39 and the Viability Statement, the directors believe that the Company has adequate financial resources to continue in operational existence for at least the next 12 months from the date of this Report. Therefore, the directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. In reviewing the position as at the date of this report, the Board has considered the guidance on this matter issued by the Financial Reporting Council. APPROVAL This report was approved by the Board ofdirectors on 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 45 Annual Report 2022 CORPORATE GOVERNANCE ## Board of directors ## 1. 2. 3. 1. Andrew Ross CHAIRMAN Date of appointment May 2019. Career & background Previously chief executive of Cazenove Capital Management which, in 2013, was acquired by Schroders, where he became global head of Wealth Management until 2019. Prior to ### 4. 5. 6. this, chief executive of HSBC Asset Management (Europe) Limited and managing director of James Capel Investment Management. Skills & expertise Andrew has substantial experience in senior leadership roles as CEO and chairman of investment management and wealth management businesses. He hasoverseen three different multi- manager businesses and under ### 7. 8. 9. his tenure the businesses he led significantly grew and prospered. External appointments Non-executive director at Polar Capital Holdings plc andCadogan Settled Estates. ## 6. Jack Perry NON-EXECUTIVE DIRECTOR Key to membership ### 10. ofBoard and Date of appointment Committees January 2017. Career & background Chairman of the Previously chief executive of Scottish Board or a Enterprise and a former Managing Committee. Partner and Regional Industry Members of the Audit Leader of Ernst & Young LLP. Served & Risk Committee on the boards of FTSE 250 and other which is chaired by public and private companies Mr Perry. and is a member of the Institute of Members of the Chartered Accountants of Scotland. Remuneration and Nomination Skills & expertise Committee which Jack is chairman of two other listed is chaired by investment companies and has Mr Yates. developed an understanding of Director of Witan the needs of all stakeholders. His Investment Services experience as a senior audit partner Limited. 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. 46 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## 2. Andrew Bell 3. Rachel Beagles 4. Gabrielle Boyle 5. Suzy Neubert CEO NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR SENIOR INDEPENDENT DIRECTOR | Date of appointment | Date of appointment | Date of appointment | Date of appointment | | --- | --- | --- | --- | | February 2010. | July 2020. | August 2019. | April 2012. | | Career & background | Career & background | Career & background | Career & background | | Previously Head of Research at | Previously a managing director | Investment Director and Head | Previously Global Head of | | Rensburg Sheppards and an | and co-head of pan-European | ofResearch at Troy Asset | Distribution at J O Hambro | | equity strategist and Co-Head | banks equity research and sales at | Management since 2011. She is | Capital Management. Prior | | of the Investment Trusts team | Deutsche Bank. Since 2003 she has | the Senior Fund Manager for the | to that, managing director of | | atBZW and CSFB. Prior to the | worked as a non-executive director | Trojan Global Equity Fund and the | Equity Markets at Merrill Lynch | | City, he worked for Shell in Oman, | in the investment company, asset | Electric & General Investment Fund. | Securities in London following | | leaving to take a Sloan Fellowship | management, charity and social | | roles in equity research and sales. | | at the London Business School. | housing sectors. She was Chair | Skills & expertise | She is a qualified barrister. | | | of the Association of Investment | Gabrielle has over 30 years’ | | | Skills & expertise | Companies from 2018 to 2021. | experience in fund management | Skills & expertise | | Andrew’s roles prior to joining Witan | | and has managed global equity | Suzy’s 32 years’ experience in | | have given him valuable experience | Skills & expertise | portfolios since 2001 and European | sales and marketing roles on | | of economic and geopolitical events | Rachel has extensive knowledge | portfolios since 1998. With this | both the sell and buy sides of | | and how they influence equity | and understanding of the equity | background she brings knowledge | financial services has given her a | | markets, along with considerable | markets from her experience | of investing through market cycles | thorough understanding of equity | | knowledge and experience of | in research and sales. She is | and an understanding of the skills | markets. Her role at J O Hambro | | the investment trust sector. | an experienced non-executive | required of fund managers. | provided her with insight into the | | | director of investment trusts. | | distribution of funds to institutions | | External appointments | | External appointments | and private wealth managers. | | Chairman of The Diverse | External appointments | Investment director and | | | Income Trust plc. | Non-executive director of | Head of Research at Troy | External appointments | | | Gresham House plc, The | Asset Management. | Non-executive director | | | Mercantile Investment Trust plc | | at ISIO, Jupiter Fund | | | and Cushon Group Limited. | | Management plc and LV=. | The following directors were appointed after the year end. | 7. Ben Rogoff | 8. Paul Yates | | | | --- | --- | --- | --- | | NON-EXECUTIVE DIRECTOR | NON-EXECUTIVE DIRECTOR | | | | | | 9. Shauna Bevan | 10. Shefaly Yogendra | | | | NON-EXECUTIVE DIRECTOR | NON-EXECUTIVE DIRECTOR | | Date of appointment | Date of appointment | | | | October 2016. | May 2018. | | | | | | Date of appointment | Date of appointment | | Career & background | Career & background | February 2023. | February 2023. | | Lead manager of Polar Capital | Previously CEO of UBS Global Asset | | | | Technology Trust plc since 2006 and | Management (UK) Limited and | Career & background | Career & background | | a fund manager of Polar Capital | held a number of global roles | Head of Investment Advisory at | She has spent her career working | | Global Technology Fund and Polar | at UBS prior to retiring in 2007. | RiverPeak Wealth Limited where she | with technology investors and | | Capital Automation and Artificial | | is responsible for fund selection | start-ups. She previously worked | | Intelligence Fund. He has been a | Skills & expertise | and portfolio construction. She was | at Ditto AI and HCL Technologies, | | technology specialist for 27 years. | Paul‘s prior roles give him | previously Co-Head of Collectives | and was a founder and a director | | | wide experience of the fund | Research at Charles Stanley, | of Livyora, a fine jewellery venture. | | Skills & expertise | management business including | having started her career in wealth | | | As a highly experienced listed | equity management, marketing, | management at Merrill Lynch. | Skills & expertise | | equities fund manager, Ben has | people and business management. | | Shefaly is a risk and decision- | | a deep understanding of the | Paul also offers investment | Skills & expertise | making specialist and an | | analysis process required for | trust experience having sat | Shauna has over twenty years | experienced non-executive | | investing in public companies. | on four other trust boards. | of investment experience across | director of investment trusts. | | His knowledge of the technology | | multiple asset classes with | | | sector particularly enables him to | External appointments | particular expertise in third party | External appointments | | identify the risks from disruption | Chairman of the Advisory Board of | fund research and meeting | Non-executive director of Harmony | | not just to the sector but in general. | 33 St James’s Limited, non-executive | the needs of retail investors. | Energy Income Trust plc, JPMorgan | | Ben applies this knowledge to | director of Fidelity European Trust | | US Smaller Companies Investment | | his questioning and monitoring | PLC and Capital Gearing Trust plc. | External appointments | Trust PLC and Temple Bar Investment | | of Witan’s external managers. | | Head of Investment Advisory at | Trust plc and an Independent | | | | RiverPeak Wealth and a non- | Governor of London Metropolitan | | External appointments | | executive director of CT Global | University. | | Director, Technology at | | Managed Portfolio Trust PLC. | | Polar Capital. Witan Investment Trust plc 47 Annual Report 2022 CORPORATE GOVERNANCE ## 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 48 Witan Investment Trust plc Annual Report 2022 COMPLIANCE 1 BOARD LEADERSHIP AND PURPOSE STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS The Board has considered the Principles and Provisions of the AIC Board and director independence Code. The AIC Code addresses the Principles and Provisions set At 31 December 2022 the Board was composed of seven out in the Corporate Governance Code, as well as setting out independent non-executive directors and one executive director, additional Provisions on issues that are of specific relevance to the CEO. The Board is therefore independent of the Company’s the Company. executive management. All the directors are wholly independent of the Company’s various investment managers. In the opinion of The Board considers that reporting against the Principles and the Board, each of the directors is independent in character and Provisions of the AIC Code, which has been endorsed by the FRC, judgement and there are no relationships or circumstances provides more relevant information to shareholders. relating to the Company that are likely to affect their judgement. The Company has complied with the Principles and Provisions of Two of the current directors, Ms Neubert and Mr Bell, have been the AIC Code during the year ended 31 December 2022 except as on the Board for nine years or more. Mr Bell, who is the CEO of set out below: Witan, is an executive director but is independent of the Company’s appointed fund managers and other service > The Corporate Governance Code (Provisions 25 and 26) providers. His long service is beneficial to the Company. The includes provisions relating to the need for an internal audit Board considers that Ms Neubert is, and has been since her function. The Company does not have an internal audit appointment, an independent non-executive director. However, function, for reasons that are explained on page 58. she will not be seeking re-election at this year’s AGM. The principles of the AIC Code All directors stand for election or re-election at the Company’s The AIC Code is made up of 17 Principles supported by 42 AGM each year. The Board is firmly of the view that length of Provisions. service does not of itself impair a director’s ability to act independently; rather, a director’s longer perspective can add Details of how the Company has applied the Principles and value to the deliberations of a well-balanced investment trust Provisions are set on the following pages. 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, ## The role of the Board including the need to maintain a proper balance of diversity, skills and experience. Mr Ross, the Chairman of the Company, is considered to be ### The role of the Board is to promote the independent. He does not have any relationships that might create a conflict of interest between the Chairman’s interests ### long-term sustainable success of the and those of shareholders. ### Company, generating value for shareholders ### and contributing to wider society. 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 The Board is collectively responsible for the success of the occasions as necessary. 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 Witan Investment Trust plc 49 Annual Report 2022 CORPORATE GOVERNANCE ## Corporate Governance continued Board commitments The Chairman When considering new appointments, the Board takes into Mr Ross was appointed as Chairman of the Company in April account other demands on directors’ time. Prior to appointment, 2020. new directors are asked to disclose any existing significant commitments with an indication of the time involved. Additional The Chairman’s primary role is to provide leadership to the external appointments require the prior approval of the Board, assuming responsibility for its overall effectiveness in Remuneration and Nomination Committee on behalf of the directing the Company. The Chairman is responsible for: Board, with the reasons for permitting significant appointments > taking the chair at general meetings and Board meetings, explained in the Annual Report. conducting meetings effectively and ensuring all directors are involved in discussions and decision making; Company’s purpose, values and strategy The Board assesses the basis on which the Company generates > setting the agenda for Board meetings and ensuring the and preserves value over the long term. The Strategic Report directors receive accurate, timely and clear information for describes how opportunities and risks to the future success of decision making; the business have been considered and addressed, the > taking a leading role in determining the Board’s composition sustainability of the Company’s business model and how its and structure; governance contributes to the delivery of its strategy. The Company’s investment objective and investment policy are set > overseeing the induction of new directors and the out on the inside front cover. development of the Board as a whole; > leading the annual Board evaluation process and assessing Culture the contribution of individual directors; The Board seeks to establish and maintain a corporate culture characterised by fairness in its treatment of employees and > supporting and also challenging the CEO and external service providers, whose efforts are collectively directed towards suppliers where necessary; delivering returns to shareholders in line with the Company’s > ensuring effective communications with shareholders and, purpose and objectives. It is the Board’s belief that this where appropriate, other stakeholders; and contributes to the greater success of the Company, as well as being an appropriate way to conduct relations between parties > engaging with shareholders to ensure that the Board has a | engaged in a common purpose. | | clear understanding of shareholder views. | | --- | --- | --- | | 2 DIVISION OF RESPONSIBILITIES | Senior Independent Director (‘SID’) | | | The Board | 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 The Board consists of ten directors, which will reduce to nine Mrs Beagles will be appointed to the role. The SID serves as a following the AGM. This ensures that no one individual or small sounding board for the Chairman and acts as an intermediary group of individuals dominates the Board’s decision making. for other directors and shareholders. The SID is responsible for: Details of the directors are set out on pages 46 to 47. They demonstrate a wide range of skills and experience, which are > working closely with and supporting the Chairman; relevant to the strategy of the Company. The Board has typically met about eight times a year. > 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). 50 Witan Investment Trust plc Annual Report 2022 The Chief Executive Officer (‘CEO’) Director responsibilities STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS The CEO is responsible to the Board and the AIFM for the overall The Board is responsible for determining the strategic direction management of the Company including investment of the Company and for promoting its success. At least one of its performance, business development, shareholder relations, meetings each year is devoted entirely to reviewing overall marketing, investment trust industry matters, administration and strategy and progress is monitored throughout the year. unquoted investments. The duties of the CEO include leading on investment strategy and asset allocation, on the selection and The CEO and the AIFM monitor investment performance and all monitoring of the investment managers and their terms of associated matters. The CEO reports to each Board meeting, at reference and on the use of derivatives. The Board, in conjunction which investment performance, asset allocation, gearing, with the AIFM, sets limits on matters such as asset allocation, marketing and investor relations are usually key agenda items. gearing and investment in derivatives, within which the CEO has discretion. Matters specifically reserved for decision by the full Board have been defined. These include decisions relating to strategy and The CEO reports to each meeting of the Board. His reports include management; structure and capital; financial reporting and confirmation that the Board’s investment limits and restrictions controls; internal controls; contracts with third parties; and those which govern the Company’s tax status as an communication; Board membership and other appointments; investment trust, have been adhered to. Board and employee remuneration; delegations of authority; corporate governance matters; and Company policies. There is The CEO and his team monitor the share price and the discount/ an agreed procedure for directors, in the furtherance of their premium to net asset value on a daily basis and he reports to duties, to take independent professional advice, if necessary, at every Board meeting on this subject. Where appropriate, the the Company’s expense. Board makes use of share buybacks (at a discount) and issuance (at a premium) to add to the net asset value per share The directors have access to the advice and services of the and achieve a sustainable low discount (or a premium) to net Company’s Executive team, AIFM and the Company Secretary, asset value. through its appointed representative, who are responsible to the Board for ensuring that Board procedures are followed and that In addition to his responsibilities for the overall management of applicable rules and regulations are complied with. the Company, the CEO manages the Direct Holdings portfolio. A maximum of 15% of the Company’s gross assets (at the time of Board Committees purchase) may be invested in specialist funds within this portfolio The Board has established an Audit & Risk Committee and a and there are restrictions on the number, size and type of Remuneration and Nomination Committee. The Board has investments that may be made. chosen to combine the roles of remuneration and nomination in one Committee. The memberships of the Audit & Risk Committee The Board’s Remuneration and Nomination Committee reviews and the Remuneration and Nomination Committee are set out the performance of and the contractual arrangements with the on pages 46 to 47. The roles and responsibilities of the CEO. The CEO is responsible to the Board for reviewing the Committees are described in the Report of the Audit & Risk performance and the contractual arrangements of his staff. The Committee on pages 59 to 61 and in the Directors’ Remuneration Board’s Remuneration and Nomination Committee oversees this Report on pages 62 to 63. process. Every year the Board reviews its composition and the composition of its two Committees. The Board’s Remuneration and Nomination Committee oversees this process. Further details are given on page 54. Witan Investment Trust plc 51 Annual Report 2022 CORPORATE GOVERNANCE ## Corporate Governance continued Stakeholder engagement The AIC Code requires directors to explain their statutory duties as stated in sections 171–177 of the Companies Act 2006. Under section 172, directors have a duty to promote the success of the Company for the benefit of its members as a whole and in doing so have regard to the consequences of any decisions in the long term, as well as having regard to the Company’s stakeholders amongst other considerations. The Board’s report on its compliance with section 172 of the Companies Act 2006 is contained within the Strategic Report on pages 40 to 41. The Board is responsible for ensuring that workforce policies and practices are in line with the Company’s purpose and values and support its culture. The Remuneration and Nomination Committee advises the Board in respect of policies on remuneration-related matters. Since the Company has only six employees including the CEO, the Board considers that the CEO, who is also a director, is best-placed to engage with the workforce. In accordance with the Company’s whistleblowing policy, members of staff who wish to discuss any matter with someone other than the CEO are able to contact the Audit & Risk Committee Chairman, or in his absence another member of the Audit & Risk Committee. Shareholder engagement resolution proposed at the AGM, the Board would consult shareholders in order to understand the reasons for this and The Chairman is responsible for ensuring that there is effective consider appropriate action to be taken, reporting to communication with the Company’s shareholders. He works shareholders within six months. closely with the CEO and there is regular liaison with the Company’s stockbroker. There is a process in place for The directors may be contacted through the Company analysing and monitoring the shareholder register and a Secretary at the address shown on page 120. programme for meeting or speaking with the institutional investors and with private client stockbrokers and advisers. In While the CEO and his team expect to lead on preparing and addition to the CEO, the Chairman, or the SID, expects to be effecting communications with investors, all major corporate available to meet the Company’s larger shareholders and the issues are put to the Board or, if time is of the essence, to a Chairman of the Remuneration and Nomination Committee is Committee thereof. available to discuss remuneration matters. The Board places importance on effective communication The Company encourages attendance at its Annual General with investors and approves a marketing programme each Meeting (‘AGM’) as a forum for communication with individual year to enable this to be achieved. Copies of the Annual shareholders. The Notice of the AGM and related papers are Report and the Half Year Report are circulated to shareholders sent to shareholders at least 20 working days before the and, where possible, to investors through other providers’ meeting. The Chairman, the CEO, the Chairman of the Audit & products and nominee companies (or written notification is Risk Committee and the Chairman of the Remuneration and sent when they are published online). In addition, the Nomination Committee all expect to be present at the AGM Company publishes a monthly factsheet and its net asset and to answer questions from shareholders as appropriate. value per share is released daily. All this information is readily The CEO makes a presentation to the meeting. In addition, accessible on the Company’s website (www.witan.com). A Key arrangements will be put in place for shareholders to view the Information Document, prepared in accordance with the UK meeting virtually and put questions to the Board if they cannot version of EU rules, is also published on the Company’s attend the AGM in person. website. The Company belongs to the Association of Investment Companies which publishes information to Details of the proxy votes received in respect of each increase investors’ understanding of the sector. resolution are made available to shareholders. In the event of a significant (defined as 20% or more) vote against any 52 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS ## Board meetings Remuneration ### The CEO (who is a director), other Audit and & Risk Nomination ### representatives of the Company’s Executive team Board Committee Committee ### and the AIFM and a representative of the Number of meetings 8 4 2 ### Company Secretary are expected to be present at (1) A J S Ross 8 4 2 ### all meetings. R A Beagles 8 4 - The primary focus at Board meetings is a review of (1) (1) A L C Bell 8 4 2 investment performance and associated matters such as gearing, asset allocation, attribution analysis, marketing and G M Boyle 7 – – investor relations, peer group information and industry issues. S E G A Neubert 7 – 2 The Board devotes two days each year to meetings with the Company’s investment managers and each investment J S Perry 8 4 – manager sends representatives at least once a year. The B C Rogoff 8 – – Chairman seeks to encourage open debate within the Board and a supportive and co-operative relationship with the P T Yates 8 4 2 Executive team and the Company’s investment managers, advisers and other service providers. (1) Not a member of the Committee but in attendance by invitation for all or part of the meetings. 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. ## Example Board decision | What happened | Why | How | | --- | --- | --- | | In 2022, Witan adopted its “sustainable | We believe that investing in well-managed | Having set this objective in early 2022, | | by 2030” target, a commitment that by | ‘sustainable businesses’ is the foundation | the Board directed our Investment Team | | 2030 our portfolio will consist entirely of | for achieving good returns for our | to engage with our fund managers to | | sustainable businesses. Such businesses | shareholders and a better future for the | develop this framework. We believe | | should exhibit good corporate behaviour, | planet’s ecosystems and for society. Our | that our managers are best placed to | | respect for shareholders, stakeholders | approach is underpinned by the belief | assess whether the companies they have | | and society, a strategy to minimise | that capital allocation and engagement | invested in comply with our bespoke | | their environmental impact and be | have a positive long-term impact | sustainability criteria. Our managers | | open to engagement on such issues. | and that blanket exclusions can be | were introduced to this framework and | | To reach this target we first had to | counterproductive. Therefore we focus | actively participated in this project. As | | design and implement a framework | on identifying companies’ direction of | a result, we were able to assess all the | | to assess our portfolio, in order to | travel and monitoring their progress, | companies in our listed equity portfolio. | | set a baseline from which we can | rather than simply their sustainability | Each company was assessed on ten | | measure what progress our companies | credentials at a point in time. | different sustainability issues, with a score | | are making towards this target. | | 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. Witan Investment Trust plc 53 Annual Report 2022 CORPORATE GOVERNANCE ## Corporate Governance continued Conflicts of interest 3 COMPOSITION, SUCCESSION AND EVALUATION The Board’s actions taken to identify and manage conflicts of interest are set out in the Directors’ Report. The Company has no Appointments to the Board significant shareholders. A number of nominee companies are The Board’s Remuneration and Nomination Committee oversees the registered holders of significant numbers of shares, but these the recruitment process. The Remuneration and Nomination represent beneficial holdings by a very large number of retail Committee reviews the length of service of each director each investors who invest through the nominees’ platforms. year and makes recommendations to the Board when it considers that a new director should be recruited. All the Relationship with the AIFM and fund managers independent non-executive directors are asked to contribute to The Company manages its own operations through the Board the process and to consider serving on the sub-committee and that of its AIFM. Each investment manager runs a discrete appointed to draw up the shortlist of candidates. The process investment portfolio within the terms of their investment generally includes the use of a firm of non-executive director management contract. Shares are held by the Company’s recruitment consultants or open advertising. The work of the custodian/depositary. The CEO leads on the selection and Remuneration and Nomination Committee during the year is set monitoring of the investment managers and their terms of out in the Committee’s report on pages 62 to 74. reference, which are approved by the Board and the AIFM. As part of the process to appoint Ms Bevan and Dr Yogendra, The individual investment managers are each appointed to the Board engaged the services of specialist recruitment manage a discrete portfolio in accordance with guidelines which consultants, Trust Associates Limited, who prepared a list of limit, for example, the markets in which they can invest, the potential candidates for consideration by the Board. A short list maximum size of each investment and the amount of cash that was then arrived at, the candidates were interviewed, following may be held in normal circumstances. They are not allowed to which a recommendation was made to the Board that both invest in unquoted securities or controversial weapons, to gear Ms Bevan and Dr Yogendra be appointed, which the Board the portfolio, to sell stocks short or to use derivatives. The approved. investment managers take decisions on individual investments and are responsible for effecting transactions on the best The Directors have noted that Trust Associates is a signatory of available terms. The Company and the AIFM receive monthly The Standard Voluntary Code of Conduct for Executive Search confirmation from each investment manager that it has carried Firms. The code of conduct lays out steps for search firms to out its duties in accordance with its investment mandate. follow across the search process, from accepting a brief through to induction. The key areas of focus include increasing the The Board scrutinises the performance of the investment proportion of women and broadening ethnic diversity. Trust managers at each meeting and discusses their performance Associates Limited has no other connection with the Company or with each manager at least once a year. The directors consider it the individual directors. appropriate for the full Board to do this rather than delegating this to a committee as it is considered appropriate for all New directors are appointed for an initial term ending three years directors to be aware of the managers’ performance. The Audit & from the date of their first annual general meeting after Risk Committee reviews the contractual relationships with the appointment, with the expectation that they will serve a investment managers at least annually. Further information on minimum of two three-year terms. There is no absolute limit to the investment managers’ fees is contained within the Strategic the period for which a director may serve, although the Report on page 43. continuation of directors’ appointments is contingent on satisfactory performance evaluation and re-election at annual Relationship with other service providers general meetings. Directors’ appointments are reviewed formally by the Board ahead of their submission for re-election. None of The Board has delegated a wide range of activities to external the non-executive directors has a contract of service and a agents, in addition to the various investment managers. These non-executive director may resign by notice in writing to the services include global custody (which includes the Board at any time. The Board’s tenure and succession policy safeguarding of the assets), investment administration, seeks to ensure that the Board is well-balanced and refreshed management and financial accounting, company secretarial regularly by the appointment of new directors with the skills and and certain other administrative requirements and registration experience necessary, in particular, to replace those lost by services. Each of these contracts was entered into after full and directors’ retirements. proper consideration by the Board of the quality and cost of the services offered, including the control systems in operation in so Directors must be able to demonstrate their commitment to the far as they relate to the affairs of the Company. Further Company, including in terms of time. The Board seeks to information on the service providers is contained within the encompass past and current experience of areas relevant to the Strategic Report on page 42. Company’s objective and operations, the most important being investment management, finance, marketing, financial services, The Board receives and considers reports and information from risk management, custody and settlement, and investment these contractors as required. The CEO and the AIFM are banking. Whilst the roles and contributions of longer-serving responsible for monitoring and evaluating the performance of directors are subject to rigorous review, the Board is strongly of the Company’s service providers. The Board’s Audit & Risk the view that length of service is only one factor and that Committee oversees this process together with the WIS Risk shareholders benefit from having directors with a longer Committee: they review the contractual relationships at least perspective of the Company’s history and its place in the savings annually. market. 54 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Directors newly appointed to the Board are provided with an The Board has noted the FCA’s new Listing Rules which encourage introductory programme covering the Company’s strategy, greater diversity on listed company boards and require policies and operations, including those outsourced to third companies to report against the following three diversity targets: parties. Thereafter, directors are given, on a regular and ongoing basis, key information on the Company’s investment portfolios, (i) At least 40% of individuals on the board are women; financial position, internal controls and details of the Company’s (ii) At least one of the senior board positions (defined in the regulatory and statutory obligations (and changes thereto). The Listing Rules as the chair, CEO, SID and CFO) is held by a directors are encouraged to attend industry and other seminars, woman; and conferences and courses, if necessary at the Company’s (iii) At least one individual on the board is from a minority ethnic expense, and to participate generally in industry events. A log of background. directors’ training is maintained and reviewed each year by both the Remuneration and Nomination Committee and the Audit & The new Rules apply with effect from accounting periods Risk Committee. commencing on or after 1 April 2022. The FCA is encouraging companies to report on the targets for accounting periods which Board diversity begin before then and so the Board has provided the following The Board supports the principle of boardroom diversity, of which information in relation to its diversity as at the year end, although gender and ethnicity are two important aspects. The diversity it is not yet required to do so. policy applies to the Board’s committees as well as the Board itself. As at 31 December 2022, the Company complied with targets (ii) and (iii) above but not target (i). The Company has continuously The Company’s policy is that the Board should be comprised of met target (ii) since 2021 and target (iii) since 2012. directors with a diverse range of skills, knowledge and experience Since the year end, the Board has appointed two new non- and that appointments to the Board should be made on merit, executive directors and the Company has now met (and will against objective criteria, including diversity in its broadest continue to meet after the AGM) all three targets. sense. The objective of the policy is to have a broad range of approaches, backgrounds, skills, knowledge and experience The Board has chosen to align its diversity reporting reference represented on the Board. To this end, achieving a diversity of date with the Company’s financial year end and proposes to perspectives and backgrounds on the Board is a key maintain this alignment for future reporting periods. As required consideration in any director search process and the Board under LR 9.8.6R(10), further detail in respect of the three targets encourages any recruitment agencies it engages to find a outlined above as at 31 December 2022 is disclosed in the tables diverse range of candidates that meet the criteria agreed for on page 56. each appointment. The information was obtained by asking the Directors and The Board will not discriminate on the grounds of age, gender, Executive Management to indicate, on an anonymous form, how personal background, sexual orientation, disability or socio- they should be categorised for the purposes of the Listing Rules economic background in considering the appointment of disclosures. 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. Witan Investment Trust plc 55 Annual Report 2022 CORPORATE GOVERNANCE ## Corporate Governance continued | | | | | Number of Senior | | | | Number in | | Percentage of | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Number of | Percentage of | | Positions on the | | | | Executive | | | Executive | | Board Members | | | the Board | | | (1) | | | (2) | | | | | | | | | Board | | Management | | | Management | | Men 5 62.5% 2 2 67% Women 3 37.5% 1 1 33% Other – – – – – Not specified/prefer not to say – – – – – | | | | | Number of Senior | | | | Number in | | Percentage of | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Number of | Percentage of | | Positions on the | | | | Executive | | | Executive | | Board Members | | | the Board | | | (1) | | | (2) | | | | | | | | | Board | | Management | | | 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 Senior | | | | Number In | | Percentage of | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Number of | Percentage of | | Positions on the | | | | Executive | | | Executive | | Board Members | | | the Board | | | (1) | | | (2) | | | | | | | | | Board | | Management | | | Management | | Men 5 50% 2 2 67% Women 5 50% 1 1 33% Other – – – – – Not specified/prefer not to say – – – – – | | | | | Number of Senior | | | | Number In | | Percentage of | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Number of | Percentage of | | Positions on the | | | | Executive | | | Executive | | Board Members | | | the Board | | | (1) | | | (2) | | | | | | | | | Board | | Management | | | 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. 56 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Election and re-election by shareholders New directors stand for election by the shareholders at the ## Board evaluation 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 ### The Board has established a process to re-election at least every three years, and those who have ### served for more than nine years to stand for re-election annually. evaluate its performance annually. This ### process is based on open discussion and The directors’ biographies on pages 46 to 47 and the notes to the ### seeks to assess the strengths and notice of AGM set out the specific reasons why each director’s ### contribution is, and continues to be, important to the Company’s weaknesses of the Board and its ### long-term sustainable success. Committees. Tenure of the Chairman The Chairman leads on when Mr Ross had applying the conclusions taken over as Chairman The Board’s policy is that the Chairman should not normally of the evaluation. The following the retirement of remain in post beyond nine years from the date of his/her first Chairman reviews with Mr Henderson. The Board appointment to the Board. However, this period may be extended each director his or her appointed Lintstock Ltd to for a limited time to facilitate effective succession planning and individual performance, carry out an evaluation the development of a diverse board, particularly in those cases contribution and programme in the autumn where the Chairman was an existing non-executive director on commitment to the of 2020 and again in the appointment as Chairman. Company. The SID leads autumn of 2021. Lintstock the annual evaluation did not have any other The Board considers that the policy provides a balance between of the Chairman and connection with the the need for Board continuity as well as regular refreshment and reviews the conclusions Company. The Board diversity. with him. The Board’s reviewed their report Remuneration and in February 2022 and 4 REMUNERATION Nomination Committee the Chairman has led The Directors’ Remuneration Report on pages 62 to 74 details the oversees this process. The on implementing those process for determining the directors’ remuneration and sets out Board is aware of Provision changes recommended the amounts payable. It reports on the Company’s compliance 26 of the AIC Code, which by the report that the with the provisions of the AIC Code relating to remuneration and states that evaluation Board considered should also a number of provisions from the UK Corporate Governance of the Board of FTSE 350 be made. The report did Code that have not been included in the AIC Code, as most companies should be not identify any material investment trusts do not have executive directors. externally facilitated at weaknesses or concerns. least every three years. 5 AUDIT, RISK AND INTERNAL CONTROL | | The Board has complied | This year, the evaluation | | --- | --- | --- | | The statement of directors’ responsibilities on page 79 describes | with this provision every | has been carried out | | the directors’ responsibility for preparing this Annual Report. | three years since it was | internally and the Board | | | first introduced except | has discussed the | | The work of the Audit & Risk Committee is set out in the | in 2019 when the Board | matters raised. The Board | | Committee’s report on pages 59 to 61. | considered it more | intends to appoint an | | | appropriate to defer | external organisation to | | The principal risks and details of how they are managed are set | an externally facilitated | facilitate its evaluation | | out on pages 37 to 39. | evaluation until 2020 | in 2025, if not before. | Internal control For details of our managers, see pages 26 to 32 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 57 Annual Report 2022 CORPORATE GOVERNANCE ## Corporate Governance continued Company’s business objectives and can only provide reasonable The Company does not have an internal audit function. However, and not absolute assurance against material misstatement or the Company has independent external advisers covering loss. regulatory compliance matters and the effectiveness of internal controls and processes. Through WIS, the AIFM, it delegates the In accordance with Principle O and provision 34 of the AIC Code, management of its investments and most of its other operations the Board reviews the Company’s business risks at least once a to third parties and employs only a small number of staff. The year. These are analysed and recorded in a risk map, which the investment managers and certain other key contractors are Audit & Risk Committee reviews at each meeting. It is also subject to external regulation and most have compliance and reviewed and challenged regularly by the Board. Emerging risks internal audit functions of their own. The Company’s investments are added to the matrix as soon as identified together with any are held on its behalf by a global custodian appointed by the mitigating actions required. The key risks which pose the greatest depositary. A specialist firm of investment accountants and potential risks to shareholders are set out on pages 37 to 39. The administrators is responsible for investment administration, for Company receives from its main contractors formal reports maintaining accounting records and for preparing financial which detail the steps taken to monitor the areas of risk and accounts, management accounts and other management which report the details of any known internal control failures. information. In addition, the Board receives an annual report on The Committee believes that these processes allow it to identify the investment administrator’s internal controls, including a emerging risks on a timely basis. report from the investment administrator’s auditor on the control policies and procedures in operation. The investment As described elsewhere, the management of Witan’s portfolio is performance of the investment managers, both individually and outsourced to a number of third-party investment managers collectively, is measured for Witan by a company that is around the world. There are currently eight such investment independent of all the investment managers. The corporate managers as well as the Direct Holdings portfolio which is Company Secretary has well-established experience in servicing managed by the CEO. investment trusts. The CEO has responsibility (under delegation from the Board and The appointment of these and other professional contractors the AIFM) for a number of aspects of the management of the provides a clear separation of duties and a structure of internal portfolio, including asset allocation, gearing and investment in controls that is balanced and robust. The Board and the AIFM will derivatives. The Board has set guidelines in respect of each of continue to monitor the Company’s system of internal control in these aspects within which he may operate. The CEO reports to order to provide assurance that it operates as intended. The the Board regularly on each of these areas, as well as on the directors will review at least annually whether a function overall performance of the Company and other matters of equivalent to an internal audit is needed. significance. Andrew Ross The in-house Executive team of Witan and WIS is responsible for Chairman managing and controlling the relationships with the third-party 14 March 2023 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. 58 Witan Investment Trust plc Annual Report 2022 ## Report of the Audit & Risk Committee STATEMENT BY THE CHAIRMAN OF THE COMMITTEE STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS COMPOSITION AND RESPONSIBILITIES OF THE COMMITTEE The members of the Committee are appointed by the Board. ### As Chairman of the Audit & Risk Committee (the There are three members of the Committee. I was appointed as ### ‘Committee’), I am pleased to present the Report Chairman of the Committee in May 2018, having been a member ### of the Committee for the year ended of the Committee since February 2017. Mrs Beagles and Mr Yates, who were appointed to the Committee in 2020 and 2018, ### 31 December 2022. respectively, were members of the Committee throughout the year. ### The Board agreed during the year to change the ### name of the Committee to the Audit & Risk The Board has taken note of the requirements that the Committee as a whole should have competence relevant to the ### Committee, as a better reflection of the sector in which the Company operates and that at least one ### Committee’s responsibilities. 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. Witan Investment Trust plc 59 Annual Report 2022 CORPORATE GOVERNANCE # 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 page 42), the Company makes extensive use of third-party service providers, who are overseen by the WIS Executive. The Committee approves the programme of oversight and reviews the results. 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 60 Witton Investment Trust plc Annual Report 2022 risks facing the Company and has taken appropriate action to mitigate these 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 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witton Investment Trust plc Annual Report 2022 61 CORPORATE GOVERNANCE ## Directors’ Remuneration Report CHAIRMAN’S STATEMENT The Committee deals with both nominations and remuneration- related matters. Reports on both aspects of the Committee’s ### I am pleased to present my report as Chairman work are covered below. ### of the Remuneration and Nomination Committee ### (the ‘Committee’) 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. 62 Witan Investment Trust plc Annual Report 2022 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 (or '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 Bayle 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 Witton Investment Trust plc Annual Report 2022 63 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS CORPORATE GOVERNANCE ## Directors’ Remuneration Report continued ANNUAL REPORT ON REMUNERATION An ordinary resolution for the approval of this section of the report (together with the Chairman’s Statement on pages 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 | | | Taxable | | | Total | | | | Taxable | | | Total | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | (1) | | (2) | | | | | (1) | | (2) | | | | | Fees | | benefits | | remuneration | | | Fees | | benefits | | 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. | | | | | | | Annual bonus | | | (3) | Long-Term | | | Pension-related | | | | | Total variable | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Base pay | | (1) | Benefits | | (2) | | benefits | | | Bonus | | (3) | | benefits | | Total fixed pay | | | 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. 64 Witan Investment Trust plc Annual Report 2022 Payment of the discretionary bonus will be partly deferred in Total shareholder return performance graph STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS accordance with the current policy, with 60% paid in March 2023 The Company is required to present a graph comparing the and the remaining 40% paid on a deferred basis in three equal Company’s share price with a single broad equity market index. instalments in March 2024, 2025 and 2026, subject to continued The Company has compared the share price total return against employment. (i) a UK market index, namely the MSCI UK IMI Index (‘MSCI UK Index’), because the Company’s shares are listed on the UK Scheme interests awarded during the financial year market, and also (ii) a global index, namely the MSCI All Country No directors were awarded any interest over shares in the World Index (‘MSCI ACWI’), because the Company invests across Company during the financial year ended 31 December 2022 a broad spread of global equity markets. The performance of the (2021: nil). Company’s benchmark is also shown. Payments to past directors 350 No payments were made to former directors of the Company 300 during the financial year ended 31 December 2022 (2021: £nil). 250 Payments for loss of office 200 No loss of office payments were made to any person who has 150 previously served as a director of the Company at any time 100 during the financial year ended 31 December 2022 (2021: £nil). 50 Statement of directors’ shareholdings (audited) 0 The interests of the CEO and the non-executive directors (including connected persons) in the Company’s ordinary shares 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 31/12/2018 31/12/2019 31/12/2020 31/12/2021 are shown in the table below. No share options or other share based awards, with or without performance measures, were Price Benchmark MSCI ACWI MSCI UK 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. The line graph above sets out the Company’s ten-year total shareholder return performance relative to the MSCI UK Index | Ordinary shares | | Ordinary shares | | | | --- | --- | --- | --- | --- | | | held as at | | held as at | and the MSCI ACWI (sterling adjusted). This line graph assumes a | | 31December 2022 | | 31 December 2021 | | | notional investment of £100 into the indices on 31 December 2012 and the reinvestment of all income, excluding dealing expenses. A J S Ross 300,000 250,000 R A Beagles 42,073 42,073 CEO remuneration table A L C Bell 850,000 850,000 Annual discretionary G M Boyle 28,683 28,683 and One-year CEO single Bonus payout Long-Term S E G A Neubert 55,369 53,996 | | | figure of total | | against | | Bonus against | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Year ended | remuneration | | maximum | | | maximum | | | J S Perry 82,498 82,498 | 31 December | | £ | | % | | | % | | B C Rogoff 44,974 43,950 | 2022 476,142 37.7 0.0 | | | | | | | | | P T Yates 25,245 25,245 | 2021 457,820 34.4 0.0 | | | | | | | | 2020 447,219 31.2 0.0 Since the year end, Ms Neubert has bought a further 336 shares. There have not been any other changes in the directors’ interests 2019 590,975 62.9 29.9 since the year end. 2018 497,881 50.0 12.4 Ms Bevan and Dr Yogendra, who were appointed to the Board on 2017 658,906 87.5 89.0 1 February 2023, did not hold any shares in the Company at the 2016 493,811 40.0 54.4 date of their appointment. 2015 593,431 95.2 100.0 None of the directors has an interest in the Company’s 2014 544,514 76.2 100.0 preference shares. 2013 486,802 95.0 64.2 Witan Investment Trust plc 65 Annual Report 2022 31/12/2022 CORPORATE GOVERNANCE ## 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 Taxable Annual Long-Term and fees benefits bonuses Bonus % % % % (1) A J S Ross 5.5 n/a 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. Annual bonuses (discretionary Salary Taxable and One-year Long-Term and fees benefits bonus) Bonus % % % % (1) | A J S Ross | 21.0 – n/a n/a | | | | | --- | --- | --- | --- | --- | | | (2) | | (5) | | | R A Beagles | | 100.0 n/a | | n/a n/a | G M Boyle 3.2 – n/a n/a (3) (5) S E G A Neubert 14.9 n/a n/a n/a J S Perry 3.4 (8.5) n/a n/a B C Rogoff 3.2 – n/a n/a (4) P T Yates 8.0 – n/a n/a A L C Bell 0.0 8.8 10.2 0.0 Average pay of employees (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. 66 Witan Investment Trust plc Annual Report 2022 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 O 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 £nd. (3) Appointed as a director on 15 August 2019. (4) Fee increase reflects his appointment as Chairman of the Remuneration and Nominations Committee with effect from 28 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. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2022 67 CORPORATE GOVERNANCE ## Directors’ Remuneration Report continued Statement of implementation of remuneration policy Statement of shareholder voting The remuneration policy for the CEO, as detailed in the policy At the AGM held on 5 May 2022, ordinary resolutions to approve section of the Report, was agreed by shareholders at the 2022 the Directors’ Remuneration Report for the year ended AGM and implemented with effect from 1 January 2022. The fees 31 December 2021 and to approve the remuneration policy were for non-executive directors were increased with effect from 1 April passed on a show of hands. The proxy votes in each case were 2022. as follows: As detailed on page 63, the fees will be increased with effect Total votes cast | from 1 April 2023. | | (excluding votes | | | --- | --- | --- | --- | | | Votes for Votes against Votes withheld | | withheld) | | Consideration by the directors of matters relating to directors’ | Approval of Directors’ Remuneration Report | | | remuneration 154,037,318 6,967,231 796,666 161,004,549 The Board as a whole sets the fees that are payable to the 95.7% 4.3% – 100% non-executive directors and it has appointed the Committee to consider matters relating thereto. The Committee also considers Approval of remuneration policy the remuneration of the CEO and makes a recommendation on 140,867,953 19,066,966 866,296 159,934,919 this to the Board for its approval. 88.1% 11.9% – 100% The Committee was not provided with any external advice or services, during the financial year ended 31 December 2022, in The Company is committed to ongoing shareholder dialogue respect of the fees payable to the non-executive directors or the and takes an active interest in voting outcomes. Where there are remuneration payable to the CEO, other than obtaining a report substantial votes against resolutions in relation to directors’ from a third-party provider on the remuneration of employees in remuneration, the reasons for any such vote will be sought and broadly comparable roles in other companies in order to assess any actions in response will be detailed in future Directors’ the CEO’s remuneration. Remuneration Reports. There were no substantial shareholder votes against these resolutions at the AGM in 2022. 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: Number of meetings Name attended P T Yates 2 S E G A Neubert 2 A J S Ross 2 68 Witan Investment Trust plc Annual Report 2022 ## 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. | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2022 69 CORPORATE GOVERNANCE ## 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 | Operation and | Maximum | Performance | | --- | --- | --- | --- | --- | | | tostrategy | clawback | opportunity | measures | | Base salary Base salary is set at | | Base salary is reviewed | The CEO’s salary was | Not applicable | | | market-competitive levels | annually and fixed for 12 | increased to £330,000 per | | | | in order to recruit and | months. | annum with effect from | | | | retain an executive | | 1 January 2023. | | director of a suitably high calibre. Year-on-year salary increases for any | The level of pay reflects a | executive director will not | | --- | --- | | number of factors | exceed 10% per annum | | including individual | other than in times of | | experience, expertise and | abnormal inflation or | | pay appropriate to the | other exceptional | | position. | circumstances, in which | case the increase will not exceed 20%. Benefits-in- Offering market- An executive director may The maximum benefit Not applicable kind competitive levels of be eligible to receive a that can be offered or benefits-in-kind to range of benefits including paid to an executive helprecruit or retain some or all of: director is: anexecutive director of > private medical > private medical asuitably high calibre. insurance for the insurance provided on executive director and a family basis; their family; > death in service > death in service insurance of four times insurance; and base salary; and > business-related > business-related expenses. expenses. Where benefits are sourced through third-party providers, the expense will reflect the cost of the provision of the benefits from time to time but will be kept under review by the Committee. | Pension Offering market- | | The CEO currently receives a | The maximum cash | Not applicable | | --- | --- | --- | --- | --- | | | competitive levels of | cash payment, equal to 10% | payment in lieu of | | | | guaranteed cash | of base salary, in lieu of | pension contributions is | | | | earnings to help recruit or | pension contributions. | 10% of base salary, which | | | | retain an executive | | is the same as the | | | | director of a suitably | | pension contribution rate | | | | highcalibre. | | applicable to other staff. | | 70 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | Purpose and link | Operation and | Maximum | Performance | | --- | --- | --- | --- | --- | | | tostrategy | clawback | opportunity | measures | | Discretionary | The purpose of the bonus | The CEO is eligible to receive | The maximum cash | Please see note 1 on | | bonus | arrangements is to | a discretionary bonus of up | discretionary bonus | page 72 for details of | | | incentivise the CEO to | to 40% of basic annual | payable to any executive | the performance | | | maximise the Company’s | salary. The Committee will | director is 40% of base | measures applicable | | | performance and its | review the CEO’s | salary. | to the CEO’s | | | return to shareholders. | performance against the | | discretionary bonus. | 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. | One-year Bonus The purpose of the bonus | | The CEO is eligible to receive | The maximum cash | Please see note 1 on | | --- | --- | --- | --- | --- | | | arrangements is to | a bonus of up to 40% of | One-year bonus payable | page 72 for details of | | | incentivise the CEO to | base salary by reference to | to any executive director | the performance | | | maximise the Company’s | the performance of the | is 40% of base salary. | measures applicable | | | performance and its | Company over the previous | | to the CEO’s One-year | | | return to shareholders. | financial year. | | Bonus. | The Committee may change the terms of this bonus or reduce any bonus payment that would otherwise be payable in order to comply with any relevant current or future regulations, including the FCA Remuneration Code. See note 2 on page 72 for the operation of deferral, malus and clawback. | Long-Term Bonus The purpose of the bonus | | The CEO is eligible to receive | The maximum cash | Please see note 1 on | | --- | --- | --- | --- | --- | | | arrangements is to | a bonus of up to 90% of base | Long-Term bonus | page 72 for details of | | | incentivise the CEO to | salary by reference to the | payable to any executive | the performance | | | maximise the Company’s | performance of the | director is 90% of base | measures applicable | | | performance and its | Company over the previous | salary. | to the CEO’s Long-Term | | | return to shareholders. | three financial years. | | Bonus. | The Committee may, with shareholder approval as appropriate, change the terms of this bonus or reduce any bonus payment that would otherwise be payable in order to comply with any relevant current or future regulations, including the FCA Remuneration Code. See note 2 on page 72 for the operation of deferral, malus and clawback. Witan Investment Trust plc 71 Annual Report 2022 CORPORATE GOVERNANCE ## Directors’ Remuneration Report continued Notes: payable on a deferred basis over the following three years, in equal instalments on each anniversary of the First Bonus 1. Performance measures Payment Date. Mr Bell’s service agreement, as amended, provides that he is eligible to receive a bonus of up to 170% of his basic annual 2.2 Malus salary, two elements of which, totalling a maximum of 130% of Malus (where bonuses that have yet to be paid are forfeited) salary, are calculated by reference to the performance of the may be applied by the Remuneration and Nomination Company. The cash bonus arrangement consists of three Committee where: separate elements as set out below: (a) there has been material misstatement or error that causes (i) Discretionary bonus an award to vest at a higher level than would otherwise have Each year Mr Bell is eligible to receive, at the absolute discretion been the case; of the Committee, a cash bonus of up to 40% of his basic annual (b) there has been a material failure in risk management; or salary. The Committee has determined a number of criteria that (c) there has been serious misconduct that has resulted or could it takes into account on which to judge his performance and result in dismissal. based on which it agrees the amount of the discretionary bonus. These include the management and development of the 2.3 Clawback investment process; advising the Board on and evolving the Any bonus will be subject to a clawback period of two years after long-term strategy of the Company; the commitment, it has been paid, whereby the CEO will be required to pay back development and presentation of the Company’s approach to part or all of any bonus already received. Clawback may be ESG; performance against annual objectives; management of applied by the Remuneration and Nomination Committee where: staff; administration of the office; reporting to the Board and shareholders; and relationships with the Board and other (a) there has been material misstatement or error that causes stakeholders. an award to vest at a higher level than would otherwise have been the case; (ii) One-year Bonus (b) there has been a material failure in risk management; or Each year Mr Bell is eligible to receive an additional cash bonus (c) there has been serious misconduct that has resulted or could of up to 40% of his basic annual salary. The bonus will be result in dismissal. determined by the Company’s net asset value per share total return performance over the previous financial year (debt at par, 3. Legacy plans excluding the effect of share buybacks or issuance) relative to its The Committee reserves the right to make remuneration benchmark. Outperformance of the benchmark by 3.0% or more payments and payments for loss of office that are not in line with will generate a bonus of the full 40%. No bonus is payable if the policy set out above (i) where the terms of such a payment performance is in line with or below that of the benchmark. were agreed before the policy came into effect or at a time when Relative performance of between nil and 3.0% will generate a pro the relevant individual was not a director of the Company and (ii) rata bonus. in the opinion of the Committee, such a payment is not in consideration of the individual becoming a director of the (iii) Long-Term Bonus Company. For these purposes, payments include the Committee Mr Bell is eligible to receive a Long-Term Bonus each year of up to making awards of variable remuneration. 90% of his basic annual salary by reference to the Company’s performance over the previous three financial years. The 4. Differences in the Company’s remuneration policies for Long-Term Bonus will be determined by reference to the directors and employees Company’s net asset value per share total return (debt at par, The remuneration policy for the executive director differs excluding the effect of share buybacks or issuance) relative to its principally from that for employees in that the executive benchmark, as set out in the Company’s audited annual director’s remuneration is more heavily weighted towards accounts for the applicable financial years. Compounded variable pay so that a greater proportion of his pay is related to average annual outperformance of the benchmark by 2.5% per the Company’s performance and the value created for annum or more will generate a bonus of the full 90%. No bonus is shareholders. payable if performance is in line with or below that of the benchmark. Relative performance of between nil and 2.5% per Principles and approach to recruitment and internal promotion annum will generate a pro rata bonus. of directors The Long-Term Bonus will be halved if, despite outperformance of Non-executive directors the benchmark over the relevant three financial years, the (1) Remuneration of non-executive directors should reflect the Company’s net asset value total return per share is negative over specific circumstances of the Company and the duties and that period. responsibilities of the non-executive directors. It should provide appropriate compensation for the experience and 2. Deferral, malus and clawback time committed to the proper oversight of the affairs of the 2.1 Deferral Company. (2) Non-executive directors are not eligible to receive bonuses, All bonuses are subject to deferral in terms of payment. 60% of pension benefits, share options or other benefits, other than any bonus will be paid in March following the performance year the reimbursement of reasonably incurred expenses which end (‘First Bonus Payment Date’). 40% of any bonuses will be are regarded by HMRC as taxable benefits-in-kind. 72 Witan Investment Trust plc Annual Report 2022 (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. ![img-1.jpeg](img-1.jpeg) Fixed pay One-year Bonus Discretionary 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. Witton Investment Trust plc Annual Report 2022 73 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS CORPORATE GOVERNANCE ## Directors’ Remuneration Report continued If the CEO ceases employment as a result of a ‘good leaver’ Statement of consideration of shareholder views reason (i.e. death, ill-health, injury, disability, redundancy, The Company places great importance on communication with retirement or due to any other circumstance that the Committee its shareholders. The Company had frequent meetings with at its discretion permits), any bonus payment shall be pro-rated institutional shareholders and City analysts throughout the year for time and performance. The Committee may, however, taking ended 31 December 2022. The Board was pleased to welcome into account such factors as it considers appropriate, increase shareholders to the AGM held in May 2022 both in person and the proportion of the relevant bonus that becomes payable. If online, and shareholders were able to submit questions to the the CEO ceases employment other than as a ‘good leaver’, or if Board whether they attended in person or virtually. The Company the CEO gives or receives notice prior to the date that the also responded to shareholder enquiries during the year. The relevant bonus would otherwise have been paid, the CEO will Board can confirm that it is not aware of negative views being forfeit any right to receive the relevant bonus for nil consideration expressed by shareholders in relation to its policy on directors’ unless the Committee, in its absolute discretion, determines remuneration. otherwise. Approval A change of control of the Company shall not affect the amount This report was approved by the Committee on 14 March 2023 of any bonus or the date on which it becomes payable unless and is signed on its behalf by: 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 Paul Yates at that time. Chairman of the Remuneration and Nomination Committee 14 March 2023 If the Committee determines that the pro-rated performance targets have not been satisfied on the change of control, the applicable bonus shall immediately lapse unless the Committee determines otherwise. To the extent that the Committee determines that the pro-rated performance targets have been satisfied on the change of control, if the CEO ceases to be employed by the Company prior to the date that the applicable bonus would otherwise have been paid to the CEO other than as a result of: > a reason which would have justified his/her summary dismissal; > his/her cessation of employment without the giving or receiving of notice; or > his/her resignation, the applicable bonus shall become payable to the extent determined at the time of the change of control on, or as soon as practicable after, the CEO’s cessation of employment. Statement of consideration of conditions elsewhere intheCompany The Committee considers the employment conditions, including salary increases, of employees other than the CEO when setting the CEO’s remuneration. The Company did not consult with employees when drawing up the remuneration policy. Where possible, the Committee benchmarks the remuneration of the employees and the CEO by obtaining details of remuneration paid to employees in comparable roles in other companies. Witan had six employees during 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. 74 Witan Investment Trust plc Annual Report 2022 # Directors' Report ## 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 pages 1 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 Witan Investment Trust plc (the 'Company') is incorporated in the United Kingdom, registered in England and Wales and domiciled in the United Kingdom. It is an investment company as defined in section 833 of the Companies Act 2006 and operates as an investment trust in accordance with section 1159 of the Corporation Tax Act 2010. The Company has received confirmation from HM Revenue and Customs that it has been accepted as an approved investment trust with effect from 1 January 2012, provided it continues to meet the eligibility conditions of section 1158 and the ongoing requirements for approved companies in the Investment Trust (Approved Company) (Tax) Regulations 2011. ## SUBSIDIARY COMPANY The Company has one subsidiary company, Witan Investment Services Limited, which provides marketing services to the Company. Witan Investment Services Limited is authorised and regulated by the Financial Conduct Authority to act as the Company's AIFM. ## ISA The Company intends to continue to manage its affairs so that its shares fully qualify for the stocks and shares component of an ISA and a Junior ISA. ## SUBSTANTIAL SHARE INTERESTS As 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. ## 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. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2022 75 CORPORATE GOVERNANCE # Directors' Report continued # 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 28 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. 76 Wilton Investment Trust plc Annual Report 2022 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 48,881,225 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 11. (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 11. 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 OF INFORMATION TO THE AUDITOR Each of the directors at the date of approval of this report confirms that: (1) so far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware; and (2) the director has taken all the steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 41B 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. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2022 77 CORPORATE GOVERNANCE ## Directors' Report continued ### 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 78 Witton Investment Trust plc Annual Report 2022 ## Statement of Directors’ Responsibilities ### in respect of the Annual Report, the Directors’ Remuneration Report ### and the financial statements The directors are responsible for preparing the Annual Report RESPONSIBILITY STATEMENT STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS and the financial statements in accordance with applicable We confirm, to the best of our knowledge, that: lawand regulations. > the financial statements, prepared in accordance with Company law requires the directors to prepare financial UK-adopted International Accounting Standards, give a true statements for each financial year. Under that law the directors and fair view of the assets, liabilities, financial position and are required to prepare the Group financial statements in profit or loss of the Company and theundertakings included accordance with UK-adopted International Accounting in the consolidation taken as awhole; and Standards and with the requirements of the Companies Act 2006 > the Strategic Report includes a fair review of the as applicable to companies reporting under those standards development and performance of the business and the and have also chosen to prepare the parent company financial position of the Company and the undertakings included statements under UK-adopted International Accounting inthe consolidation taken as a whole, together with a Standards and with the requirements of the Companies Act 2006 description (on pages 37 to 39) of the principal risks as applicable to companies reporting under those standards. anduncertainties that they face. Under company law the directors must not approve the financial statements unless they are satisfied that they give atrue and fair We also confirm that the financial statements, taken as a view of the state of affairs of the Group and Company and of whole,are fair, balanced and understandable, and provide the theprofit or loss of the Group and Company for that period. information necessary for shareholders to assess the Company’s position, performance, business model and strategy. In preparing these financial statements, the directors are required to: By order of the Board > select suitable accounting policies and then apply them consistently; Andrew Ross Andrew Bell > make judgements and accounting estimates that are Chairman Chief Executive Officer reasonable and prudent; 14 March 2023 14 March 2023 > state whether UK-adopted International Accounting Note to those who access this document by electronic means: Standards have been followed, subject to any material departures disclosed and explained in the financial The Annual Report for the year ended 31 December 2022 has statements; and been approved by the Board of Witan Investment Trust plc. Copies of the Annual Report and the Half Year Report are > prepare the financial statements on the going concern basis circulated to shareholders and, where possible, to investors unless it is inappropriate to presume that the Company will through other providers’ products and nominee companies continue in business. (orwritten notification is sent when they are published online). Itis also made available in electronic format for the convenience The directors are responsible for keeping adequate accounting of readers. Printed copies are available from the Company’s records that are sufficient to show and explain the Company’s registered office in London. transactions and disclose with reasonable accuracy at any timethe financial position of the Company and enable them toensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of theCompany and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Witan Investment Trust plc 79 Annual Report 2022 FINANCIAL STATEMENTS ## Independent Auditor’s Report to the members of ## Witan Investment Trust plc ### for the year ended 31 December 2022 OPINION obtained up to the date of our report. However, future events or conditions may cause the group or the parent company to Our opinion on the financial statements is unmodified cease to continue as a going concern. We have audited the financial statements of Witan Investment Trust plc (the ‘parent company’) and its subsidiary (the ‘Group’) Our evaluation of the directors’ assessment of the Group’s and for the year ended 31 December 2022, which comprise the the parent company’s ability to continue to adopt the going Consolidated Statement of Comprehensive Income, the concern basis of accounting included: Consolidated and Individual Statements of Changes in Equity, the Consolidated and Individual Balance Sheets, and > Determining the appropriateness of the Group and parent Consolidated and Individual Company Cash Flow Statements company’s going concern policy and procedures under the and notes to the financial statements, including a summary of relevant accounting framework and the rationale for why no significant accounting policies. The financial reporting material uncertainty was noted; framework that has been applied in the preparation of the Group > Assessing the disclosures concerning the basis of financial statements is applicable law and UK-adopted preparation of the financial statements and going concern; International Accounting Standards. The financial reporting framework that has been applied in the preparation of the > Inspecting management’s going concern assessment and parent company financial statements is UK-adopted conclusions made; International Accounting Standards as applied in accordance > Evaluating the income forecasts prepared by management, with the provisions of the Companies Act 2006. including the assumptions used and level of headroom available, both in terms of cash resources and compliance In our opinion: with loan covenants; > the financial statements give a true and fair view of the state > Obtaining support for the renewal of the revolving credit of the Group’s and of the parent company’s affairs as at facility, which was renewed on 29 November 2022 and 31 December 2022 and of the Group’s profit for the year then obtaining an understanding of the liquidity position of the ended; group; > the Group financial statements have been properly prepared > Considering the robustness of the forecasts to potential in accordance with UK-adopted International Accounting changes in underlying assumptions; Standards; > Obtaining an understanding of how management has > the parent company financial statements have been assessed the impact of events/market conditions in relation properly prepared in accordance with UK-adopted to rising inflation in their forecasts; International Accounting Standards as applied in accordance with the provisions of the Companies Act 2006; > Assessing disclosures included in the financial statements in and relation to the impact of macroeconomic uncertainties such as the impact of the Russian invasion of Ukraine and rising > the financial statements have been prepared in accordance inflation; and with the requirements of the Companies Act 2006. > Identifying applicable subsequent events and discussing BASIS FOR OPINION their implications with management. We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our In our evaluation of the directors’ conclusions, we considered the responsibilities under those standards are further described in the inherent risks associated with the Group’s and the parent ‘Auditor’s responsibilities for the audit of the financial statements’ company’s business model including effects arising from section of our report. We are independent of the Group and the macro-economic uncertainties such as rising inflation and the parent company in accordance with the ethical requirements that impact of the Russian invasion of Ukraine, we assessed and are relevant to our audit of the financial statements in the UK, challenged the reasonableness of estimates made by the including the FRC’s Ethical Standard as applied to listed public directors and the related disclosures and analysed how those interest entities, and we have fulfilled our other ethical risks might affect the Group’s and the parent company’s responsibilities in accordance with these requirements. We believe financial resources or ability to continue operations over the that the audit evidence we have obtained is sufficient and going concern period. appropriate to provide a basis for our opinion. In auditing the financial statements, we have concluded that the CONCLUSIONS RELATING TO GOING CONCERN directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, Based on the work we have performed, we have not identified based on the audit evidence obtained, whether a material any material uncertainties relating to events or conditions that, uncertainty exists related to events or conditions that may cast individually or collectively, may cast significant doubt on the significant doubt on the Group’s and the parent company’s Group’s and the parent company’s ability to continue as a going ability to continue as a going concern. If we conclude that a concern for a period of at least twelve months from when the material uncertainty exists, we are required to draw attention in financial statements are authorised for issue. our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s In relation to the Group’s and the parent company’s reporting on opinion. Our conclusions are based on the audit evidence how they have applied the UK Corporate Governance Code, we 80 Witan Investment Trust plc Annual Report 2022 have nothing material to add or draw attention to in relation to STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS KEY AUDIT MATTERS (‘KAM’) the directors’ statement in the financial statements about Key audit matters are those matters that, in our professional whether the directors considered it appropriate to adopt the judgement, were of most significance in our audit of the going concern basis of accounting. financial statements of the current period and include the most significant assessed risks of material misstatement Our responsibilities and the responsibilities of the directors with (whether or not due to fraud) that we identified. These matters respect to going concern are described in the relevant sections included those that had the greatest effect on: the overall of this report. audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters OUR APPROACH TO THE AUDIT 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 Key audit Materiality KAM matters Disclosures Our results Scoping In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit. OVERVIEW OF OUR AUDIT APPROACH Overall materiality: High Investments Group: £15.5m which represented approximately 1% of the held at fair value Group’s net assets at the planning stage of the audit. Management through profit override of controls or loss Parent company: £14.7m which represents 1% of the parent Going concern company’s net assets, capped at 95% of Group materiality. . Investment income Key audit matters were identified as: Management fees > Valuation of investments held at fair value through profit Performance fees or loss (same as previous year); and Directors’ remuneration > Occurrence and completeness of investment income Taxation (same as previous year). Potential financial statement impact Low Low Extent of management judgement High 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 key audit matter in our current year’s report. This relates to Significant risk existence of investments measured at fair value through profit Other risk 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. Witan Investment Trust plc 81 Annual Report 2022 FINANCIAL STATEMENTS ## Independent Auditor’s Report to the members of ## Witan Investment Trust plc continued ### for the year ended 31 December 2022 How our scope addressed the matter – Group and parent Key Audit Matter – Group and parent company company Valuation of investments measured at fair value through profit In responding to the key audit matter, we performed the or loss following audit procedures: We identified valuation of investments measured at fair value > assessing whether the Group’s accounting policy for the through profit or loss as one of the most significant assessed valuation of investments is in accordance with UK-adopted risks of material misstatement due to error. The parent International Accounting Standards and the Statement of company’s investment objective is to provide long-term income Recommended Practice ‘Financial Statements of Investment and capital growth by investing in a diversified portfolio of global equities. Trust Companies and Venture Capital Trusts’ (the ‘SORP’) and testing whether management have accounted for valuation The investment portfolio of £1.8 billion as at 31 December 2022 in accordance with that policy; (2021: £2.2 billion) is a significant material balance in the Consolidated Balance Sheet at year end and the main driver of > independently pricing 100% of the listed equity and fund the Group’s performance. portfolio by obtaining the relevant bid prices and Net Asset Values (‘NAV’) from independent market information Incorrect asset pricing or a failure to maintain proper legal title providers; of the investments held by the Group could have an impact on the portfolio valuation and therefore, the return generated for > recalculating the total investment valuation based on the shareholders. Group’s investment holdings, which was agreed to the holdings at the reporting date as reflected in the Group’s We identified the valuation of investments measured at fair accounting records; and 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 > testing that investments were actively traded by extracting a transactions in the year, the magnitude of the transactions report of trading volumes in the week before and after the being material in aggregate, as well as the overall material value year-end from an independent market information provider of the investments held at year end. for the equity investments held. Relevant disclosures in the Annual Report and Accounts 2022 Our results Our testing did not identify any material misstatements in the > Financial statements: Note 1(h), Note 10 valuation of the Group’s investment portfolio as at the year-end. The Group’s accounting policy on investments held at fair value through profit or loss is shown in note 1(h) to the financial statements and related disclosures are included in note 10. 82 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS How our scope addressed the matter – Group and parent Key Audit Matter – Group and parent company company Occurrence and completeness of investment income In responding to the key audit matter, we performed the following audit procedures: We identified occurrence and completeness of investment income as one of the most significant assessed risks of material > assessing whether the Group’s accounting policy for misstatement due to fraud and error. The parent company recognition of investment income is in accordance with measures performance on a total return basis and investment UK-adopted International Accounting Standards; income is one of the significant components of this performance measure. The investment income reported by the Group for the > obtaining an understanding of the Group’s business process year is £43.6 million (2021: £37.4 million) and is a significant for recognising such income in accordance with the Group’s material balance in the Consolidated Statement of stated accounting policy; Comprehensive Income. > testing that income transactions were recognised in The parent company is subject to Investment Trust Company accordance with the policy by selecting a sample of (‘ITC’) regulations and as a result is required to allocate returns investments and agreeing the relevant investment income between revenue and capital. There is a risk that income receivable for those equities to the parent company’s recognised in the year may be materially misstated through fraudulent transactions and error due to high volume of records. For the selected investments we also obtained the transactions. This could also impact the level of distribution respective dividend rate entitlements from independent required under ITC regulations. 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 Our results Our testing did not identify any material misstatements in the > Financial statements: Note (1e), Note 2 amount of investment income recognised during the year. The Group’s accounting policy on income, including investment income, is shown in note 1(e) to the financial statements and related disclosures are included in note 2. Witan Investment Trust plc 83 Annual Report 2022 FINANCIAL STATEMENTS ## Independent Auditor’s Report to the members of ## Witan Investment Trust plc continued ### for the year ended 31 December 2022 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 We define materiality as the magnitude of misstatement in the financial statements asawhole that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of these financial statements. We use materiality in determining the nature, timing and extent of our audit work. | Materiality threshold £15.5m which was approximately 1% of the | | £14.7m which is approximately 1% of the | | --- | --- | --- | | | Group’s net assets at the planning stage | parent company’s net assets, capped at | | | of the audit. | 95% of Group materiality. | | Significant judgements made by auditor | In determining materiality, we made the | In determining materiality, we made the | | in determining materiality | following significant judgements: | following significant judgements: | | | Net assets, which primarily comprise the | Net assets, which primarily comprise the | | | Group’s investment portfolio, are | parent company’s investment portfolio, | | | considered to be the key driver of the | are considered to be the key driver of the | | | Group’s total return performance and | Company’s total return performance and | | | form a part of the NAV calculation. | form a part of the net asset value | calculation. In addition, 1% of NAV has been deemed reasonable based on the nature of the In addition, the parent company invests Group as it invests largely in listed largely in liquid investments and so by investments. benchmarking against other entities in the same industry, 1% is considered Materiality for the current year is lower appropriate. than the level that we determined for the | year ended 31 December 2021 to reflect | Materiality for the current year is lower | | --- | --- | | the decrease in net asset value in the year | than the level that we determined for the | | from £1.99bn to £1.54bn. | 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 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 the extent of our testing 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 | | £11.0m which is 75% of financial statement | | --- | --- | --- | | | materiality. | materiality. | | Significant judgements made by auditor | In determining performance materiality, | In determining performance materiality, | | in determining performance materiality | we made the following significant | we made the following significant | | | judgements: | judgements: | | | A 75% performance materiality was | A 75% performance materiality was | | | determined based on no uncorrected | determined based on no uncorrected | | | misstatements from the prior year, low | misstatements from the prior year, low | | | levels of adjustments from previous years | levels of adjustments from previous years | | | and the high quality of the accounting | and the high quality of the accounting | | | records maintained by the client. | records maintained by the client. | 84 Witan Investment Trust plc Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Materiality measure Group Parent company Specific materiality We determine specific materiality for one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Specific materiality threshold We determined a lower level of specific We determined a lower level of specific materiality for the following areas: materiality for the following areas: Investment income, management fees Investment income, management fees and performance fees and performance fees Related party transactions and directors’ Related party transactions and directors’ remuneration remuneration | Communication of misstatements to the | We determine a threshold for reporting unadjusted differences to the Audit & Risk | | | --- | --- | --- | | Audit & Risk Committee | Committee. | | | Threshold for communication £0.8m and misstatements below that | | £0.8m and misstatements below that | | | threshold that, in our view, warrant | threshold that, in our view, warrant | | | reporting on qualitative grounds. | reporting on qualitative grounds. | The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements. | OVERALL MATERIALITY – GROUP | OVERALL MATERIALITY – PARENT COMPANY | | | --- | --- | --- | | Net assets £1.54bn | Net assets £1.54bn | | | FSM £15.5m, 1% | FSM £14.7m, 1%, capped at | | | PM £11.6m, 75% | | 95% ofGroup | | TFPUM £0.7m, 5% | 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 85 Annual Report 2022 FINANCIAL STATEMENTS ## Independent Auditor’s Report to the members of ## Witan Investment Trust plc continued ### for the year ended 31 December 2022 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. 86 Witan Investment Trust plc Annual Report 2022 CORPORATE GOVERNANCE STATEMENT STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 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 87 Annual Report 2022 FINANCIAL STATEMENTS ## Independent Auditor’s Report to the members of ## Witan Investment Trust plc continued ### for the year ended 31 December 2022 > 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 88 Witan Investment Trust plc Annual Report 2022 ## Consolidated Statement of Comprehensive Income ### for the year ended 31 December 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Year ended 31 December 2022 Year ended 31 December 2021 | | Revenue | | C apital | | Revenue | | Capital | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | return | return | Total | | return | return | Total | | Notes | | £’000 | £’000 | £’000 | | £’000 | £’000 | £’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 4.78p (4 4 . 4 3)p (39.65)p 3 . 59p 30.53p 34 .12p 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 89 Annual Report 2022 FINANCIAL STATEMENTS ## Consolidated and Individual Statements of Changes in Equity ### for the year ended 31 December 2022 | | | Ordinary | | | Share | | Capital | Other | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | share | premium | | redemption | | capital | Revenue | | | | Group | | | capital | account | | | reserve | reserve | reserve | | Total | | Year ended 31 December 2022 N | otes | | £’000 | | £’000 | | £’000 | £’000 | | £’000 | £’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 toequity: 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 | | | Ordinary | | | Share | | Capital | Other | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | share | premium | | redemption | | capital | Revenue | | | | Company | | | capital | account | | | reserve | reserve | reserve | | Total | | Year ended 31 December 2022 N | otes | | £’000 | | £’000 | | £’000 | £’000 | | £’000 | £’000 | Total equity at 31 December 2021 50,018 99,251 46,498 1,747,595 48,679 1,992,041 Total comprehensive income: (Loss)/profit for the year – – – (314,295) 33,741 (280,554) Transactions with owners, recorded directly toequity: Ordinary dividends paid 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 | | | | | | | Share | | Capital | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Ordinary | | premium | | redemption | | Other capital | | Revenue | | | | Group | | share capital | | | account | | | reserve | | reserve | reserve | | Total | | Year ended 31 December 2021 | Notes | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | Total equity at 31 December 2020 50, 018 99 , 251 4 6,49 8 1,665 ,775 63,666 1, 925, 208 Total comprehensive income: Profit for the year – – – 235,115 2 7, 6 2 8 26 2,7 43 Transactions with owners, recorded directly toequity: Ordinary dividends paid 8 – – – – (42, 399) (42,399) Buybacks of ordinary shares (held in treasury) 15 – – – (153,511) – (153 ,511) Total equity at 31 December 2021 50, 018 99 , 251 4 6,49 8 1 , 74 7, 3 7 9 48, 895 1 ,9 92 ,0 41 | | | | | | | Share | | Capital | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Ordinary | | premium | | redemption | | Other capital | | Revenue | | | | Company | | share capital | | | account | | | reserve | | reserve | reserve | | Total | | Year ended 31 December 2021 | Notes | | | £’000 | | £’000 | | £’000 | | £’000 | | £’000 | £’000 | Total equity at 31 December 2020 50,018 99,251 46,498 1,666,030 63,411 1,925,208 Total comprehensive income: Profit for the year – – – 235,076 27,667 262,743 Transactions with owners, recorded directly toequity: Ordinary dividends paid 8 – – – – (42,399) (42,399) Buybacks of ordinary shares (held in treasury) 15 – – – (153,511) – (153,511) Total equity at 31 December 2021 50,018 99,251 46,498 1,747,595 48,679 1,992,041 The notes on pages 93 to 114 form part of these financial statements. 90 Witan Investment Trust plc Annual Report 2022 ## Consolidated and Individual Balance Sheets ### as at 31 December 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS | | | Group | | | C ompany | | | Group | | | C ompany | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 31 December | | | 31 December | | | 31 December | | | 31 December | | | | | | | | 2 022 | | | 2 022 | | | 20 21 | | | 20 | 21 | | Notes | | £’000 | | | | £’000 | | £’000 | | | | £’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 1,7 61,020 1,762,211 2 , 2 1 7, 7 0 4 2,218,820 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 26.80p 226.80p 269.93p 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 91 Annual Report 2022 FINANCIAL STATEMENTS ## Consolidated and Individual Company Cash Flow Statements ### for the year ended 31 December 2022 | | Group | Company | | Group | Company | | | --- | --- | --- | --- | --- | --- | --- | | | 2022 | | 2022 | 2021 | | 2021 | | Notes | £’000 | | £’000 | £’000 | | £’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. 92 Witan Investment Trust plc Annual Report 2022 ## Notes to the Financial Statements ### for the year ended 31 December 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc 93 Annual Report 2022 1 ACCOUNTING POLICIES The financial statements of the Group and parent company have been prepared in accordance with UK-adopted International Accounting Standards (‘IASs’). These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates. (a) Basis of preparation The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (the ‘SORP’) issued by the Association of Investment Companies (the ‘AIC’) in July 2022 is consistent with the requirements of IASs, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. Judgements and sources of estimation uncertainty In the application of the Group’s accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not always readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may vary from these estimates. The Directors do not consider that there are any significant estimates or critical judgements in these financial statements. (b) Going concern The financial statements have been prepared on a going concern basis. The Group’s business activities, together with the factors likely to affect its future development and performance, are set out in the Strategic Report on pages 1 to 45. The financial position of the Group as at 31 December 2022 is shown on the balance sheet on page 91. The cash flows of the Group for the year ended 31 December 2022 are not untypical and are set out on page 92. (c) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and the entity controlled by the Company (its subsidiary) made up to 31 December each year. In accordance with IFRS 10 the Company has been designated as an investment entity on the basis that: > It obtains funds from investors and provides those investors with investment management services; > It commits to its investors that its business purpose is to invest solely for returns from capital appreciation and investment income; and > It measures and evaluates performance of substantially all of its investments on a fair value basis. The subsidiary of the Company was established for the sole purpose of operating or supporting the investment operations of the Company, and is not itself an investment entity. Therefore, under the principles of IFRS 10, the Company has consolidated its subsidiary as it is a controlled entity that supports the investment activity of the investment entity. Control is achieved where the Company is exposed, or has the right, to variable returns from its investment in the subsidiary and has the ability to affect those returns through its power to direct the relevant activities. Where necessary, adjustments are made to the financial statements of the subsidiary to bring the accounting policies used by it into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. (d) Presentation of the Statement of Comprehensive Income In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. Additionally, the net revenue is the measure the directors believe appropriate in assessing the Group’s compliance with certain requirements set out in section 1158 of the Corporation Tax Act 2010. (e) Income Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities and shares. Interest receivable from cash and short-term deposits is accrued to the end of the period. Stock lending fees and underwriting commission are recognised as earned. Any special dividends are looked at individually to ascertain the reason behind the payment. This will determine whether they are treated as revenue or capital. Where the Group has elected to receive its dividends in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised as revenue. Any excess in the value of shares received over the amount of cash dividend foregone is recognised as a gain in the Statement of Comprehensive Income. (f) Expenses All expenses and interest payable are accounted for on an accruals basis. Expenses are presented as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fees and finance costs are allocated 25% to revenue and 75% to capital to reflect the Board’s expectations of long-term investment returns. Any performance fees payable are allocated wholly to capital, reflecting the fact that, although they are calculated on a total return basis, they are expected to be attributable largely, if not wholly, to capital performance. FINANCIAL STATEMENTS ## Notes to the Financial Statements continued ### for the year ended 31 December 2022 94 Witan Investment Trust plc Annual Report 2022 1 ACCOUNTING POLICIES CONTINUED (g) Taxation The tax currently payable is based on the taxable profit for the period. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that were applicable at the balance sheet date. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive Income is the ‘marginal basis’. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Statement of Comprehensive Income then no tax relief is transferred to the capital return column. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment trusts which have approval as such under section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains. Deferred tax liabilities and assets are not recognised if they arise from the initial recognition of an asset or liability which, at the time of the transaction, does not affect the accounting profit or taxable profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on rates enacted or substantively enacted by the reporting date. Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. (h) Investments held at fair value through profit or loss When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date. All the Group’s investments are defined by IASs as investments held at fair value through profit or loss. All gains and losses are allocated to the capital return within the Statement of Comprehensive Income as ‘Gains or losses on investments held at fair value through profit or loss’. Also included within this heading are transaction costs in relation to the purchase or sale of investments. The classification and measurement criteria determine if financial instruments are measured at amortised cost, fair value through other comprehensive income, or fair value through profit or loss. Investment assets are classified based on both the business model, and the contractual cash flow characteristics of the financial instruments. This approach determined that all investments are classified and measured at fair value through profit or loss, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or OEICs are valued at the closing price, the bid price or the single price as appropriate, released by the relevant investment manager. The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. Fair values for unquoted investments, or for investments for which there is only an inactive market, are established by using various valuation techniques. These may include recent arm’s length market transactions, the current fair value of another instrument that is substantially the same, discounted cash flow analysis, option pricing models and reference to similar quoted companies. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised. The subsidiary company, Witan Investment Services Limited, is held at fair value in the Company balance sheet. This is considered to be the net asset value of the shareholder’s funds, as shown in its balance sheet. (i) Cash and cash equivalents Cash comprises cash in hand and on demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. (j) Dividends payable Interim dividends are recognised in the period in which they are paid. Final dividends are not recognised until approved by the shareholders in general meeting. (k) Fixed borrowings All secured notes are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method, with the interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future payments over the expected life of STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc 95 Annual Report 2022 the financial liabilities, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. (l) Foreign currency translation Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities that are fair valued and denominated in foreign currencies are re-translated into sterling at the rate ruling on the balance sheet date. Foreign exchange differences arising on translation are recognised in profit and loss in the Statement of Comprehensive Income and allocated to the capital return. (m) Adoption of new and revised accounting standards Standards not affecting the reported results nor the financial position There were no new or revised Standards that were applicable to the Company in the current year. At the date of authorisation of these financial statements, the following Standards, which have not been applied in these financial statements, were in issue but not effective (and in some cases had not yet been adopted for use in the UK). > IAS 1 Amendments - Classification of Liabilities as Current or Non-Current (effective from 1 January 2024) > IAS 1 Amendments - Disclosure of Accounting Policies (effective from 1 January 2023) > IAS 1 Amendments - Non-current Liabilities with Covenants (effective from 1 January 2023) > IAS 8 Amendments - Definition of Accounting Estimates (effective from 1 January 2023) > IAS 12 Amendments - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective from 1 January 2023) The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods. Beyond the information above, it is not practical to provide a reasonable estimate of the effect of these Standards until a detailed review has been completed. (n) Derivative financial instruments The Group’s activities expose it primarily to the financial risks of changes in market prices, foreign currency exchange rates and interest rates. Derivative transactions which the Company may enter into comprise forward exchange contracts (the purpose of which is to manage currency risks arising from the Company’s investing activities), quoted options on shares held within the portfolio, or on indices appropriate to sections of the portfolio (the purpose of which is to provide protection against falls in the capital values of the holdings) and futures contracts appropriate to sections of the portfolio (to provide additional market exposure or to provide protection against falls in the capital values of the holdings). The Company may also write options on shares represented in the portfolio where such options are priced attractively relative to the investment managers’ longer-term expectations for the relevant share prices. The Group does not use derivative financial instruments for speculative purposes. Hedge accounting is not used. The use of financial derivatives is governed by the Group’s policies as approved by the Board, which has set written principles for the use of financial derivatives. Changes in the fair value of derivative financial instruments are recognised in the Statement of Comprehensive Income as they arise. If capital in nature, the associated change in value is presented as a capital item in the Statement of Comprehensive Income. (o) Nature and purpose of reserves Ordinary share capital The ordinary share capital on the balance sheet relates to the number of shares in issue and in treasury. Only when the shares are cancelled, either from treasury or directly, is a transfer made to the capital redemption reserve. Share premium account The balance classified as share premium includes the premium above nominal value from the proceeds on issue of any equity share capital comprising ordinary shares of 5p. Capital redemption reserve The capital redemption reserve is used to record the amount equivalent to the nominal value of any of the Company’s own shares purchased and cancelled in order to maintain the Company’s capital. Other capital reserves Gains and losses on disposal of investments and changes in fair values of investments are transferred to the capital reserve. The capital element of the management and performance fees and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve. Other capital reserves also comprise treasury reserves. Realised capital reserves are distributable by way of dividend. Revenue reserve This reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income. The revenue reserve represents the amount of the Company’s reserves distributable by way of dividend. (p) Leases A lease is identified at inception of a contract where it conveys rights to control the use of an identified asset for a period of time in exchange for consideration. At commencement, the Company as a lessee recognises a right-of-use asset equal to the lease liability at inception plus any direct costs, and the lease liability is measured at the present value of the unpaid lease payments discounted at the incremental borrowing rate of the Company. Subsequently, the Company as a lessee applies the cost model to the right-of-use asset which is depreciated over the useful life of the right-of-use asset, the lease liability is increased by interest on the outstanding balance and reduced by lease payments paid. A remeasurement of the right-of-use asset and the lease liability occurs when there is a change to the lease contract. The Company has elected not to separate any non-lease element from the lease payments. FINANCIAL STATEMENTS # Notes to the Financial Statements continued for the year ended 31 December 2022 ## 2 INVESTMENT INCOME | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | UK dividends from listed investments | 11,869 | 11,693 | | UK special dividends from listed investments | 1,589 | 455 | | UK stock dividends from listed investments | 772 | 170 | | **Total UK dividends** | **14,230** | **12,318** | | Overseas dividends from listed investments | 28,522 | 24,502 | | Overseas special dividends from listed investments | 832 | 623 | | Fixed Interest | 21 | – | | **Total investment income** | **43,605** | **37,443** | | | 2022 £'000 | 2021 £'000 | | Analysis of investment income by geographical segment: | | | | United Kingdom | 14,251 | 12,318 | | North America | 5,009 | 4,407 | | Continental Europe | 5,906 | 5,614 | | Japan | 1,517 | 1,450 | | Asia (ex Japan) | 2,156 | 2,709 | | Latin America | 5,735 | 2,147 | | Other | 9,031 | 8,798 | | **Total investment income** | **43,605** | **37,443** | ## 3 OTHER INCOME | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Deposit interest | 379 | 3 | | Stock lending income | 222 | 126 | | **Total other income** | **601** | **129** | At 31 December 2022 the total value of securities on loan by the Company for stock lending purposes was £35,830,000 (2021: £57,111,000). The maximum aggregate value of securities on loan at any time during the year ended 31 December 2022 was £122,950,000 (2021: £188,480,000). Collateral, revalued on a daily basis at a level equivalent to at least 105% (2021: 105%) of the market value of the securities lent, was provided against all loans. ## 4 MANAGEMENT AND PERFORMANCE FEES | | Year ended 31 December 2022 | | | Year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Management fees paid to third-party managers | 1,918 | 5,754 | 7,672 | 2,331 | 6,994 | 9,325 | | Performance fees paid to third-party managers | – | – | – | – | 389 | 389 | | Total management and performance fees | 1,918 | 5,754 | 7,672 | 2,331 | 7,383 | 9,714 | A summary of the terms of the management agreements is given on page 43 in the Strategic Report. 96 Witan Investment Trust plc^{}[] Annual Report 2022 ## 5 OTHER EXPENSES ### Auditor's remuneration The analysis of the auditor's remuneration is as follows: | | 2022 Revenue £'000 | 2021 Revenue £'000 | | --- | --- | --- | | Fees payable to the Company's auditor and its associates for the audit of the Company's annual accounts | 72 | 66 | | Fees payable to the Company's auditor and its associates for other services to the Group: | | | | – the audit of the Company's subsidiary | 12 | 10 | | Total audit fees | 84 | 76 | | Other services^{(1)}: | | | | – audit-related services | 25 | 25 | | Total non-audit fees | 25 | 25 | | **Total fees paid** | **109** | **101** | (1) These fees relate to the Client Assets Sourcebook audit for the year ended 31 December 2022 (£25,000). The fees for this work were specifically approved by the Audit & Risk Committee (see page 11). | | 2022 Revenue £'000 | 2021 Revenue £'000 | | --- | --- | --- | | Auditor's remuneration (see above) | 109 | 101 | | Tax advisory services | 44 | 80 | | Directors' fees (see the Directors' Remuneration Report on pages 62 to 74) | 319 | 318 | | Employers' national insurance contributions on the directors' fees | 36 | 35 | | Employee costs (including executive director's remuneration): | | | | – salaries and bonuses | 1,122 | 1,001 | | – employers' national insurance contributions | 166 | 144 | | – pension contributions (or payments in lieu thereof) | 83 | 82 | | Total employee costs | 1,371 | 1,227 | | Advisory, consultancy and legal fees | 253 | 232 | | Investment accounting fees | 241 | 330 | | Company secretarial fees | 162 | 158 | | Insurances | 139 | 128 | | Office costs | 48 | 68 | | Depreciation on right-of-use asset; property | 76 | 66 | | Bank charges and safe custody fees | 343 | 513 | | Depository fees | 127 | 134 | | Marketing expenses | 1,170 | 676 | | Other expenses | 840 | 642 | | Irrecoverable VAT | 106 | 107 | | **Total^{(2)}** | **5,384** | **4,815** | (1) The total includes costs of £100,000 (2021: £476,000) incurred by the subsidiary company which are offset (2021: offset) by the subsidiary company's income. The analysis relates to the revenue return column only. Expenses included in the capital return column for 2022 were £101,000 (2021: £101,000). These related to investment advisory costs. Witan Investment Trust plc Annual Report 2022 97 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS FINANCIAL STATEMENTS # Notes to the Financial Statements continued for the year ended 31 December 2022 ## 5 OTHER EXPENSES CONTINUED The average number of staff employed by the Group and Company during the year: | | 2022 | 2021 | | --- | --- | --- | | Management, marketing and operation of Witan Investment Trust and Witan Investment Services | 6 | 6 | ## 6 FINANCE COSTS | | Year ended 31 December 2022 | | | Year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Interest payable on overdrafts and loans repayable within one year | 404 | 1,211 | 1,615 | 127 | 380 | 507 | | Interest payable on secured bonds and notes repayable in more than five years | 1,149 | 3,446 | 4,595 | 1,154 | 3,462 | 4,816 | | Preference share dividends | 83 | – | 83 | 83 | – | 83 | | Interest payable on lease liability | 1 | – | 1 | 2 | – | 2 | | **Total** | **1,637** | **4,657** | **6,294** | **1,366** | **3,842** | **5,208** | ## 7 TAXATION ### 7.1 Analysis of tax charge for the year | | Year ended 31 December 2022 | | | Year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | UK corporation tax at 19% (2021: 19%) | – | – | – | – | – | – | | Foreign tax suffered | 2,102 | 558 | 2,660 | 1,672 | 2,279 | 3,951 | | Recovery of prior years' withholding tax | (347) | – | (347) | (81) | – | (81) | | Foreign tax recoverable | (304) | – | (304) | (158) | (2,279) | (2,438) | | Movement in deferred tax liability on Indian capital gains | – | (220) | (220) | – | 488 | 488 | | **Total current tax for the year (see note 7.2)** | **1,451** | **338** | **1,789** | **1,432** | **488** | **1,920** | 98 Witan Investment Trust plc^{}[] Annual Report 2022 ## 7.2 Factors affecting the current tax charge for the year The UK corporation tax rate is 19% for the year (2021: 19%). The tax assessed for the year differs from that that resulting from applying the effective standard rate of corporation tax in the UK. The difference is explained below. | | Year ended 31 December 2022 | | | Year ended 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | | Profit/(loss) before taxation | 35,267 | (314,032) | (278,765) | 29,060 | 235,603 | 264,663 | | Corporation tax at 19% (2021: 19%) | 6,701 | (59,666) | (52,965) | 5,521 | 44,765 | 50,286 | | Effects of: | | | | | | | | Non-taxable UK dividends | (2,704) | – | (2,704) | (2,340) | – | (2,340) | | Non-taxable overseas dividends | (5,581) | – | (5,581) | (4,774) | – | (4,774) | | Withholding tax suffered | 1,451 | – | 1,451 | 1,432 | – | 1,432 | | Non-taxable gains on investments held at fair value through profit or loss | – | 57,685 | 57,685 | – | (47,140) | (47,140) | | Currency (gains)/losses not taxable | – | (17) | (17) | – | 224 | 224 | | Excess management expenses not utilised in year | 1,568 | 2,556 | 4,124 | 1,577 | 2,151 | 3,728 | | Movement in deferred tax liability on Indian capital gains | – | (220) | (220) | – | 488 | 488 | | Preference dividends not deductible in determining taxable profit | 16 | – | 16 | 16 | – | 16 | | **Current tax charge** | **1,451** | **338** | **1,789** | **1,432** | **488** | **1,920** | ## 7.3 Deferred tax The Company is liable to Indian capital gains tax under Section 115 AD of the Indian Income Tax Act 1961. On 1 April 2018, the Indian Government withdrew an exemption from capital gains tax on investments held for 12 months or longer. The Company has recognised a deferred tax liability of £667,000 (2021: £886,000) on capital gains which may arise if Indian investments are sold. Due to the Company's status as an investment trust, and the intention to continue meeting the conditions required to maintain that status in the foreseeable future, the Company has not provided for any other deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. No provision has been made for deferred tax on income outstanding at the end of the year as this will be covered by unrelieved business charges and eligible unrelieved foreign tax (2021: £nil). ## 7.4 Factors that may affect future tax charges At 31 December 2022, the Company has excess expenses of £301,830,000 (2021: £288,379,000) carried forward. This sum has arisen due to cumulative deductible expenses having exceeded income over the life of the Company. It is considered too uncertain that there will be sufficient taxable profits against which these expenses can be offset and, therefore, in accordance with IAS 12, a deferred tax asset of £75,458,000 (2021: £72,120,000) in respect of unrelieved loan relationship deficit and unrelieved management expenses based on a prospective corporation tax rate of 25% (2021: 25%) has not been recognised. The increase in the standard rate of corporation tax will be effective from 1 April 2023. Provided the Company continues to maintain its current investment profile, it is unlikely that the expenses will be utilised and that the Company will obtain any benefit from this contingent asset. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2022 99 FINANCIAL STATEMENTS ## Notes to the Financial Statements continued ### 8 DIVIDENDS | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | **Amounts recognised as distributions to equity holders in the year:** | | | | Fourth interim dividend for the year ended 31 December 2021 of 1.52p (2020: 1.43p) per ordinary share | 11,107 | 11,294 | | First interim dividend for the year ended 31 December 2022 of 1.40p (2021: 1.36p) per ordinary share | 10,003 | 10,563 | | Second interim dividend for the year ended 31 December 2022 of 1.40p (2021: 1.36p) per ordinary share | 9,779 | 10,385 | | Third interim dividend for the year ended 31 December 2022 of 1.40p (2021: 1.36p) per ordinary share | 9,584 | 10,157 | | Refund of unclaimed dividends | (64) | – | | | 40,409 | 42,399 | | Fourth interim dividend for the year ended 31 December 2022 of 1.60p (2021: 1.52p) per ordinary share | 10,746 | 11,107 | #### Total in respect of the year: Set out below is the total dividend to be paid in respect of the year. This is the basis on which the minimum distribution requirements of section 1158 of the Corporation Tax Act 2010 are considered. | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Revenue profits available for distribution (Company only) | 33,741 | 27,667 | | First interim dividend for the year ended 31 December 2022 of 1.40p (2021: 1.36p) per ordinary share | (10,003) | (10,563) | | Second interim dividend for the year ended 31 December 2022 of 1.40p (2021: 1.36p) per ordinary share | (9,779) | (10,385) | | Third interim dividend for the year ended 31 December 2022 of 1.40p (2021: 1.36p) per ordinary share | (9,584) | (10,157) | | Fourth interim dividend for the year ended 31 December 2022 of 1.60p (2021: 1.52p) per ordinary share | (10,746) | (11,107) | | Revenue reserves utilised in the year (Company only) | (6,371) | (14,545) | ### 9 EARNINGS PER ORDINARY SHARE The earnings per ordinary share figure is based on the net loss for the year of £280,554,000 (2021: profit of £262,743,000) and on 707,617,951 ordinary shares (2021: 770,137,797), being the weighted average number of ordinary shares in issue during the year. The earnings per ordinary share figure detailed above can be further analysed between revenue and capital, as below. The Company has no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted earnings per ordinary share are the same. | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Net revenue profit | 33,816 | 27,628 | | Net capital (loss)/profit | (314,370) | 235,115 | | Net total (loss)/profit | (280,554) | 262,743 | | Weighted average number of ordinary shares in issue during the year | 707,617,951 | 770,137,797 | | | Pence | Pence | | Revenue earnings per ordinary share | 4.78 | 3.59 | | Capital (loss)/earnings per ordinary share | (44.43) | 30.53 | | Total (loss)/earnings per ordinary share | (39.65) | 34.12 | 100 Witton Investment Trust plc^{}[] Annual Report 2022 ## 10 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS ### 10.1 Analysis of investments held at fair value through profit or loss | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Group £'000 | Company £'000 | Group £'000 | Company £'000 | | Investments in the United Kingdom | 343,414 | 343,414 | 447,597 | 447,597 | | Overseas investments | 1,417,410 | 1,417,410 | 1,769,858 | 1,769,858 | | Investment in subsidiary undertaking | – | 1,191 | – | 1,116 | | | **1,760,824** | **1,762,015** | 2,217,455 | 2,218,571 | ### 10.2 Group changes in investments held at fair value through profit or loss | | Valuation 31 December 2021 £'000 | Purchase £'000 | Sales £'000 | Investment gains/ (losses) £'000 | Valuation 31 December 2022 £'000 | Cost 31 December 2022 £'000 | | --- | --- | --- | --- | --- | --- | --- | | United Kingdom | 447,597 | 163,041 | 237,293 | (29,931) | 343,414 | 320,265 | | North America | 844,352 | 294,971 | 348,134 | (161,699) | 629,490 | 604,492 | | Continental Europe | 375,612 | 176,500 | 165,633 | (19,703) | 366,776 | 308,158 | | Japan | 67,545 | 2,860 | 5,609 | (3,949) | 60,847 | 65,826 | | Asia (ex Japan) | 114,354 | 101,738 | 149,055 | 11,591 | 78,628 | 24,118 | | Latin America | 23,092 | 23,531 | 11,010 | (1,709) | 33,904 | 31,435 | | Other | 344,903 | 35,027 | 32,957 | (99,208) | 247,765 | 275,074 | | | **2,217,455** | **797,668** | **949,691** | **(304,608)** | **1,760,824** | **1,629,368** | The above figures do not include any gains/losses on futures positions (see note 10.4). Total transaction costs included in gains or losses on investments at fair value through profit or loss include purchase costs of £1,315,000 (2021: £3,246,000) and sales costs of £524,000 (2021: £706,000). These comprise mainly stamp duty and commission. The Group received £949,691,000 (2021: £1,187,811,000) from investments sold in the period. The book cost of these investments when they were purchased was £931,175,000 (2021: £965,319,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments. ### 10.3 (Losses)/gains in investments held at fair value through profit or loss | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | (Losses)/gains on investments | **(304,608)** | 248,107 | | Gains on derivatives | **1,001** | – | | | **(303,607)** | 248,107 | ### 10.4 Derivatives | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Gains on futures | **1,001** | – | ### Open futures contracts There were no open contracts as at 31 December 2022 or 31 December 2021. Witan Investment Trust plc Annual Report 2022 101 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS FINANCIAL STATEMENTS ## Notes to the Financial Statements continued ### 10 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS CONTINUED #### 10.5 Substantial share interests The Company has notified interests in 3% or more of the voting rights of six of the investee companies, the first four of which are closed-ended investment funds. Hostmore is the owner and operator of TGI Friday's UK casual dining franchise. Unbound Group is a multi-brand retail platform. It is the Company's stated policy to invest no more than 15% of its gross assets in other listed investment companies (including listed investment trusts). | Stock | % holding of shares in issue | Investment held at fair value through profit or loss £'000 | | --- | --- | --- | | Princess Private Equity Limited | 6.02 | 31,003 | | VH Global Sustainable Energy Opportunities plc | 6.54 | 27,927 | | Schroders Real Estate Investment Trust Limited | 7.43 | 15,188 | | NB Distressed Debt Investment Fund Limited | 12.21 | 7,570 | | Hostmore plc | 13.21 | 2,182 | | Unbound Group plc | 15.82 | 772 | #### 11 OTHER RECEIVABLES | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Group £'000 | Company £'000 | Group £'000 | Company £'000 | | Sales for future settlement | 780 | 780 | – | – | | Taxation recoverable | 1,304 | 1,304 | 3,548 | 3,548 | | Amounts due from subsidiary | – | 704 | – | 278 | | Prepayments and accrued income | 2,401 | 1,921 | 2,120 | 1,784 | | Other debtors | 176 | 176 | 172 | 172 | | | 4,661 | 4,885 | 5,840 | 5,782 | #### 12 OTHER PAYABLES – CURRENT LIABILITIES | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Group £'000 | Company £'000 | Group £'000 | Company £'000 | | Purchases for future settlement | 667 | 667 | 1,569 | 1,569 | | Preference dividends | 39 | 39 | 39 | 39 | | Outstanding buybacks of ordinary shares | 1,674 | 1,674 | 4,686 | 4,686 | | Lease liability | 77 | 77 | 76 | 76 | | Accruals | 3,785 | 3,736 | 3,977 | 3,936 | | | 6,242 | 6,193 | 10,347 | 10,306 | #### Other payables – non current liabilities | | Group £'000 | Company £'000 | Group £'000 | Company £'000 | | --- | --- | --- | --- | --- | | Bonuses payable in more than one year | 83 | 83 | 101 | 101 | | Lease liability payable in more than one year | 135 | 135 | 186 | 186 | | | 218 | 218 | 287 | 287 | 102 Witan Investment Trust plc^{}[] Annual Report 2022 ## 13 BORROWINGS | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Group £'000 | Company £'000 | Group £'000 | Company £'000 | | Financial instruments redeemable other than in instalments are as follows: | | | | | | **Amounts falling due within one year:** | | | | | | Bank loans | 96,500 | 96,500 | 98,000 | 98,000 | | **Amounts falling due after more than one year:** | | | | | | Secured debt: | | | | | | 3.29 per cent. secured notes due 2035 | 20,898 | 20,898 | 20,891 | 20,891 | | 3.47 per cent. secured notes due 2045 | 53,684 | 53,684 | 53,677 | 53,677 | | 2.39 per cent. secured notes due 2051 | 49,692 | 49,692 | 49,686 | 49,686 | | 2.74 per cent. secured notes due 2054 | 29,768 | 29,768 | 29,764 | 29,764 | | | **154,042** | **154,042** | 154,018 | 154,018 | | 2,055,000 3.4 per cent. cumulative preference shares of £1 each (see note 17 on page III) | 2,055 | 2,055 | 2,055 | 2,055 | | 500,000 2.7 per cent. cumulative preference shares of £1 each (see note 17 on page III) | 500 | 500 | 500 | 500 | | | **253,097** | **253,097** | 254,573 | 254,573 | At the year end, the Company had a £125,000,000 secured and committed multi-currency borrowing facility with BNP Paribas, London Branch (expiring 1 December 2023). The terms of this loan facility contain covenants that total net borrowings do not exceed 20% of the NAV. The facility has an accordion facility enabling it to be increased to £150,000,000 on the same terms. During 2015 the Company issued £21,000,000 (nominal) 3.29 per cent. secured notes due 2035 and £54,000,000 (nominal) 3.47 per cent. secured notes due 2045 net of issue costs totalling approximately £528,000. These costs will be written back over the life of the secured notes. During 2017 the Company issued £30,000,000 (nominal) 2.74 per cent. secured notes due 2054 net of issue costs totalling approximately £252,000. These costs will be written back over the life of the secured notes. During 2019 the Company issued £50,000,000 (nominal) 2.39 per cent. secured notes due 2051 net of issue costs totalling approximately £315,000. These costs will be written back over the life of the secured notes. The secured bonds and the secured notes are secured by floating charges over all the undertakings and assets of the Company. The security of the charges applies pari passu to the issues. The terms of each of the four secured notes contain covenants that the NAV should at no time be less than £575,000,000 and that total net borrowings do not exceed 25% of the NAV at any time. ## 14 FINANCIAL INSTRUMENTS ### Risk management policies and procedures As an investment company, Witan invests in equities and other investments for the long term so as to secure its investment objective as stated on the inside front cover. In pursuing its investment objective, the Group is exposed to a variety of risks that could result in either a reduction in the Group's net assets or a reduction in the profits available for distribution by way of dividends. These risks, market risk (comprising price risk, currency risk and interest rate risk), liquidity risk and credit risk, and the directors' approach to the management of them, are set out below. The objectives, policies and processes for managing the risks and the methods used to manage the risks, as set out below, have not changed from the previous accounting period, although in some instances additional resources have been allocated to some areas. ### 14.1 Market risk The fair value of a financial instrument held by the Group may fluctuate due to changes in market prices. This market risk comprises: price risk (see note 14.2), currency risk (see note 14.3) and interest rate risk (see note 14.4). The Board reviews and agrees policies for managing these risks, which have remained substantially unchanged from those applying in the year ended 31 December 2021. The investment managers assess the exposure to market risk when making each investment decision and monitor the overall level of market risk on the whole of their investment portfolios on an ongoing basis. Witan Investment Trust plc Annual Report 2022 103 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL INSTRUMENTS FINANCIAL STATEMENTS ## Notes to the Financial Statements continued for the year ended 31 December 2022 ### 14 FINANCIAL INSTRUMENTS CONTINUED #### 14.2 Price risk Price risks (i.e. changes in market prices other than those arising from interest rate risk or currency risk) may affect the value of the quoted and the unquoted investments. #### Management of the risk The Board manages the risks inherent in the investment portfolios by regularly reviewing relevant information from the investment managers. The Board meets regularly and at each meeting reviews investment performance. The Board monitors the managers' compliance with their mandates and also whether each mandate and asset allocation is compatible with the Company's objective. When appropriate, the Company has the ability to manage its exposure to risk through the controlled use of derivatives. The Group's exposure to other changes in market prices at 31 December on its quoted equity investments and other investments was as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Investments held at fair value through profit or loss | 1,760,824 | 2,217,455 | #### Concentration of exposure to price risks An analysis of the Group's investment portfolio is shown on page 38. This shows that the greater geographical weighting is to North American companies, with significant exposure also to the UK, Asia and Continental Europe. Accordingly, there is a concentration of exposure to those regions, although an investment's country of domicile or of listing does not necessarily equate to its exposure to the economic conditions in that country. #### Price risk sensitivity The following table illustrates the sensitivity of the profit/(loss) after taxation for the year and the value of the shareholders' funds to an increase or decrease of 15% in the fair values of the Group's equity investments (including exposure through futures contracts). This level of change is considered to be reasonably possible based on observation of market conditions and historical trends. The sensitivity analysis is based on the Group's equities and equity exposure through options and futures at each balance sheet date, with all other variables held constant. The results of these example calculations are significant but not unreasonable, given that most of the Group's assets are equity investments. | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Increase in fair value £'000 | Decrease in fair value £'000 | Increase in fair value £'000 | Decrease in fair value £'000 | | Changes to the Consolidated Statement of Comprehensive Income | | | | | | Revenue return | - | - | - | - | | Capital return - investments | 264,124 | (264,124) | 332,618 | (332,618) | | | 264,124 | (264,124) | 332,618 | (332,618) | #### 14.3 Currency risk A proportion of the Company's assets, liabilities and income is denominated in currencies other than sterling (the Group's functional currency in which it reports its results). As a consequence, movements in exchange rates affect the sterling value of those items. #### Management of the risk The investment managers monitor their exposure to currencies as part of their normal investment processes. The Board receives a monthly report on the currency exposures of the entire fund. Income denominated in foreign currencies is converted into sterling on receipt. The Group does not normally use financial instruments to mitigate the currency exposure in the period between the time that income is included in the financial statements and its receipt. #### Foreign currency exposure The fair values of the Group's monetary items that have foreign currency exposure at 31 December are shown on page 105. Where the Group's equity investments (which are not monetary items) are denominated in a foreign currency, they have been included separately in the analysis so as to show the overall level of exposure. 104 Witton Investment Trust plc^{}[] Annual Report 2022 | | US$ £'000 | Euro £'000 | Yen £'000 | Other £'000 | | --- | --- | --- | --- | --- | | **2022** | | | | | | Receivables (due from brokers, dividends and other income receivable) | 776 | 777 | 263 | 1,155 | | Cash at bank and on deposit | 8,730 | 125 | – | 71 | | Payables (due to brokers, accruals and other creditors) | (796) | – | – | (1,088) | | Total foreign currency exposure on net monetary items | 8,710 | 902 | 263 | 138 | | Investments at fair value through profit or loss that are equities | 618,175 | 322,058 | 56,021 | 118,398 | | Total net foreign currency exposure | 626,885 | 322,960 | 56,284 | 118,536 | | **2021** | | | | | | Receivables (due from brokers, dividends and other income receivable) | 454 | 2,817 | 170 | 912 | | Cash at bank and on deposit | 9,938 | (34) | – | 454 | | Payables (due to brokers, accruals and other creditors) | (1,386) | – | – | (1,847) | | Total foreign currency exposure on net monetary items | 9,016 | 2,783 | 170 | (481) | | Investments at fair value through profit or loss that are equities | 851,973 | 330,707 | 62,535 | 175,324 | | Total net foreign currency exposure | 860,989 | 333,490 | 62,705 | 174,843 | The above amounts are not necessarily representative of the exposure to risk during the year as levels of foreign currency exposure change significantly throughout the year. #### Foreign currency sensitivity The following table illustrates the sensitivity of the profit/loss after tax for the year and the Group's equity in regard to the Group's monetary financial assets and financial liabilities and the exchange rates for the £/US dollar, £/Euro and £/Japanese yen. The results of these example calculations are significant but not unreasonable in the context of the majority of the Group's assets being invested overseas. It assumes the following changes in exchange rates: £/US dollar +/- 15% (2021: 15%) £/Euro +/- 15% (2021: 15%) £/Japanese yen +/- 15% (2021: 15%) The sensitivity analysis is based on the Group's foreign currency financial instruments held at the balance sheet date and takes account of any forward foreign exchange contracts that offset the effects of changes in currency exchange. If sterling had depreciated against the currencies shown, this would have the following effect: | | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | US$ £'000 | Euro £'000 | Yen £'000 | US$ £'000 | Euro £'000 | Yen £'000 | | Changes to the Consolidated Statement of Comprehensive Income | | | | | | | | Revenue return | 1,626 | 913 | 225 | 1,200 | 1,195 | 228 | | Capital return | 109,090 | 56,834 | 9,886 | 150,348 | 58,360 | 11,036 | | Change to the profit/loss after tax | 110,716 | 57,747 | 10,111 | 151,548 | 59,555 | 11,264 | | Change to the shareholders' funds | 110,716 | 57,747 | 10,111 | 151,548 | 59,555 | 11,264 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2022 105 FINANCIAL STATEMENTS # Notes to the Financial Statements continued for the year ended 31 December 2022 ## 14 FINANCIAL INSTRUMENTS CONTINUED If sterling had appreciated against the currencies shown, this would have the following effect: | | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | US$ £'000 | Euro £'000 | Yen £'000 | US$ £'000 | Euro £'000 | Yen £'000 | | Changes to the Consolidated Statement of Comprehensive Income | | | | | | | | Revenue return | (1,202) | (675) | (166) | (887) | (884) | (168) | | Capital return | (80,632) | (42,008) | (7,307) | (11,127) | (43,136) | (8,157) | | Change to the profit/loss after tax | (81,834) | (42,683) | (7,473) | (12,014) | (44,020) | (8,325) | | Change to the shareholders' funds | (81,834) | (42,683) | (7,473) | (12,014) | (44,020) | (8,325) | ### 14.4 Interest rate risk Interest rate movements may affect the level of income receivable from fixed interest securities and cash at bank and on deposit. #### Management of the risk The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions. The Group holds cash balances, partly to meet payments as they fall due but also when appropriate to offset the long-term borrowings that it has in place. The Group finances part of its activities through preference shares that do not have redemption dates and through secured notes that were issued as part of the Company's planned gearing. #### Interest rate exposure The exposure at 31 December 2022 of financial assets and financial liabilities to interest rate risk is shown by reference to: - floating interest rates: when the interest rate is due to be re-set; and - fixed interest rates: when the financial instrument is due to be repaid. The Group's exposure to floating interest rates on assets/liabilities is £60,148,000 (2021: £63,410,000). This represents cash holdings minus variable rate borrowing. The Group's exposure to fixed interest rates on assets is £nil (2021: £nil). The Group's exposure to fixed interest rates on liabilities is £156,597,000 (2021: £156,573,000). This represents fixed rate borrowing. Interest receivable and finance costs are at the following rates: - interest received on cash balances, or paid on bank overdrafts and loans, is at margin under/over SONIA (the Bank of England's benchmark risk-free overnight interest rate) or its foreign currency equivalent (2021: same); - the finance charge on the preference shares is at a weighted average interest rate of 3.3% (2021: 3.3%); and - the finance charge on the secured notes is at a weighted average interest rate of 2.96% for an average period of 25.0 years (2021: 2.96% for an average period of 26.0 years). The above year-end amounts are not representative of the exposure to interest rates during the year, as the level of exposure changes as investments are made in fixed interest securities, long-term debt is partially redeemed and as the level of cash balances varies during the year. In the context of the Group's balance sheet, the exposure to interest rate risk is not considered to be material. #### Interest rate sensitivity Based on the Group's monetary financial instruments at each balance sheet date, an increase or decrease of 200 basis points in interest rates would decrease or increase revenue after tax by £244,000 (2021: £202,000), capital return after tax by £1,447,000 (2021: £1,470,000), and total profit after tax and shareholders' funds by £1,203,000 (2021: £1,288,000). This level of change is considered to be reasonably possible based on observation of current market conditions. This is not representative of the year as a whole, since the exposure changes as investments are made. In the context of the Group's balance sheet, the outcome is not considered to be material. 106 Witton Investment Trust plc Annual Report 2022 #### 14.5 Liquidity risk This is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities. ##### Management of the risk Liquidity risk is not significant as the majority of the Group's assets are investments in quoted equities and other quoted securities that are readily realisable. During 2015, the Group issued 3.47 per cent. and 3.28 per cent. secured notes for £54,000,000 and £21,000,000 respectively. During 2017, the Group issued 2.74 per cent. secured notes for £30,000,000. During 2019, the Group issued 2.39 per cent. secured notes for £50,000,000. The Group is able to draw short-term borrowings of up to the sterling equivalent of £125,000,000 from its secured and committed multi-currency borrowing facility with BNP Paribas, London Branch (expiring 1 December 2023). The facility has an accordion facility enabling it to be increased to £150,000,000 on the same terms. £96,500,000 was drawn down under the facility at 31 December 2022. ##### Liquidity risk exposure | | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Within 1 year £'000 | Between 1 and 5 years £'000 | More than 5 years £'000 | Within 1 year £'000 | Between 1 and 5 years £'000 | More than 5 years £'000 | | Secured notes^{(1)} | 4,582 | 18,327 | 253,000 | 4,582 | 18,327 | 257,869 | | Preference shares^{(2)} | 83 | 332 | 2,555 | 83 | 332 | 2,555 | | Other creditors and accruals | 5,436 | 750 | – | 9,547 | 1,173 | – | | Bank loan and interest payable | 96,827 | – | – | 98,045 | – | – | | | 106,928 | 19,409 | 255,555 | 112,257 | 19,832 | 260,424 | (1) The above figures show interest payable over the remaining terms of each instrument. The figures also include the capital to be repaid. (2) The figures in the 'More than 5 years' columns do not include the ongoing annual finance cost of £83,000. The Board gives guidance to the investment managers as to the maximum amount of the Company's resources that should be invested in any one company. The investment managers may hold cash from time to time but the Group's overall equity exposure is unlikely to fall below 80% in normal conditions. #### 14.6 Credit risk The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Group suffering a loss. ##### Management of the risk The risk is managed as follows: - cash at bank is held only with reputable banks with high quality external credit ratings; - transactions involving derivatives are entered into only with investment banks, the credit rating of which is taken into account so as to minimise the risk to the Group of default; - investment transactions are carried out with a large number of brokers, whose credit standard is reviewed periodically by the investment managers, and limits are set on the amount that may be due from any one broker; and - stock lending transactions are carried out with a number of approved counterparties, the credit ratings of which are reviewed periodically, and limits are set on the amount that may be sent to any one counterparty. Other than stock lending, none of the Company's financial assets or liabilities is secured by collateral or other credit enhancements. None of the Group's financial assets is past its due date or impaired. Witan Investment Trust plc Annual Report 2022 107 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS FINANCIAL STATEMENTS ## Notes to the Financial Statements continued for the year ended 31 December 2022 ### 14 FINANCIAL INSTRUMENTS CONTINUED #### Credit risk exposure The table below summarises the credit risk exposure of the Group as at the year end. | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Cash | 36,352 | 34,590 | | Receivables: | | | | Sales for future settlement | 780 | - | | Accrued income | 2,401 | 2,120 | | Other debtors | 176 | 172 | | | 39,709 | 36,882 | #### 14.7 Fair values of financial assets and financial liabilities Except for those financial liabilities measured at amortised cost that are shown below, the financial assets and financial liabilities are either carried in the balance sheet at their fair value (investments and derivatives) or the balance sheet amount is a reasonable approximation of fair value (amounts due from brokers, dividends and interest receivable, amounts due to brokers, accruals, cash at bank and bank loans). #### Financial liabilities | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Fair value £'000 | Balance sheet amount £'000 | Fair value £'000 | Balance sheet amount £'000 | | Financial liabilities measured at amortised cost: | | | | | | Non current liabilities: | | | | | | Preference shares | 1,354 | 2,555 | 1,354 | 2,555 | | Secured notes | 105,630 | 154,042 | 173,961 | 154,018 | | | 106,984 | 156,597 | 175,315 | 156,573 | The fair values shown above are derived from the offer price at which the securities are quoted on the London Stock Exchange or, in the case of the secured notes, calculating a present value by using a discount rate which reflects the yield on a UK gilt of similar maturity plus a credit spread of 1.40% (2021: 1.20%). #### Level 1 Financial liabilities The Company's preference shares are actively traded on a recognised stock exchange. Their fair value has therefore been deemed Level 1. The carrying values are disclosed in note 13. #### Level 3 Financial liabilities The Company's secured notes are not traded on a recognised stock exchange and so the fair value is calculated by using a discount rate which reflects the yield on a UK gilt of similar maturity plus a credit spread of 1.40% (2021: 1.20%). Their fair value has therefore been deemed Level 3. The carrying values are disclosed in note 13. #### Fair value hierarchy disclosures The table on the following page sets out fair value measurements using the IFRS 13 fair value hierarchy. 108 Witton Investment Trust plc Annual Report 2022 #### Financial assets and financial liabilities at fair value through profit or loss | At 31 December 2022 | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | | --- | --- | --- | --- | --- | | Equity investments | 1,621,300 | – | – | 1,621,300 | | Investments in other funds | – | 106,796 | 32,728 | 139,524 | | **Total** | **1,621,300** | **106,796** | **32,728** | **1,760,824** | | At 31 December 2021 | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | | Equity investments | 2,072,010 | – | – | 2,072,010 | | Warrants | – | 1,481 | – | 1,481 | | Investments in other funds | – | 106,180 | 37,774 | 143,954 | | **Total** | **2,072,010** | **107,671** | **37,774** | **2,217,455** | Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows: Level 1 – valued using quoted prices in an active market for identical assets. Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices within Level 1. Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data. The valuation techniques used by the Group are explained in the accounting policies in note 1(h). There were no transfers during the year between Level 1 and Level 2. #### Level 2 Financial assets Level 2 Financial assets refer to investments in GMO Climate Change Fund (2021: GMO Climate Change Fund and warrant holdings in Wulllangye Yibin and Kweichow Moutai). #### Level 3 A reconciliation of fair value movements within Level 3 is set out below: | Level 3 investments at fair value through profit or loss | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Opening balance | 37,774 | – | | Acquisitions | – | 38,138 | | Total losses included in the Statement of Comprehensive Income – on assets held at year end | (5,046) | (364) | | **Closing balance** | **32,728** | **37,774** | The key inputs to unquoted investments (i.e. the holdings in Unquoted Growth Funds with Lindenwood and Lansdowne) included within Level 3 are net asset value statements provided by investee entities, which represent fair value (2021: same). #### Capital management The Group's capital management objectives are: - to ensure that it will be able to continue as a going concern; and - to maximise the income and capital return to its equity shareholders through an appropriate balance of equity capital and debt. The Group's total capital employed at 31 December 2022 was £1,784,906,000 (2021: £2,246,814,000) comprising £253,097,000 of debt (2021: £254,573,000) and £1,541,809,000 of equity share capital and other reserves (2021: £1,992,041,000). STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2022 109 FINANCIAL STATEMENTS # Notes to the Financial Statements continued for the year ended 31 December 2022 # 14 FINANCIAL INSTRUMENTS CONTINUED # Gearing The Group's policy is to manage the effective gearing in the portfolio to be below 20%, other than temporarily in exceptional circumstances. Effective gearing is defined as the difference between shareholders' funds and the total market value of the investments expressed as a percentage of shareholders' funds. At 31 December 2022 effective gearing was 14.2% (2021: 11.3%); the calculation is set out below: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Value of investments per the balance sheet | 1,760,824 | 2,217,455 | | Shareholders' funds per the balance sheet (A) | 1,541,809 | 1,992,041 | | Excess of gross value of investments over shareholders' funds (B) | 219,015 | 225,414 | | Effective gearing (B as a percentage of A) | 14.2% | 11.3% | The Board monitors and reviews the broad structure of the Group's capital on an ongoing basis. This review includes: - the planned level of gearing, which takes into account the CEO's view on the market; - the opportunity to buy back equity shares, which takes account of the difference between the net asset value per share and the share price (i.e. the level of share price discount or premium); and - the extent to which revenue in excess of that which is required to be distributed should be retained. The Group's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. The Company is subject to several externally imposed capital requirements: - the terms of issue of the Company's secured notes require the aggregate amount outstanding in respect of borrowings, measured in accordance with the policies used to prepare the annual financial statements, not to exceed a sum equal to the Company's capital and reserves at any time (see also note 13 on page 103 for details of other covenants); - as a public company, the Company has a minimum issued share capital of £50,000; and - in order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by company law. These requirements are unchanged since the previous year end and the Company has complied with them. # 15 CALLED UP SHARE CAPITAL | | Group and Company 2022 £'000 | Group and Company 2021 £'000 | | --- | --- | --- | | Called up and issued: 679,823,171 ordinary shares of 5p each (2021: 737,975,867) | 33,991 | 36,899 | | Held in treasury: 320,531,829 ordinary shares of 5p each (2021: 262,379,133) | 16,027 | 13,119 | | Total 1,000,355,000 shares (2021: 1,000,355,000) | 50,018 | 50,018 | During the year, 58,152,696 ordinary shares were bought back at a cost of £129,269,000 (2021: 63,737,420 shares bought back at a cost of £153,511,000). All of the shares were placed in treasury. Shares held in treasury do not carry a right to receive a dividend. In the event of a poll at a general meeting of the Company, an ordinary shareholder who is present in person or by proxy has one vote for every £0.05 nominal value of shares registered in their name. Accordingly, on a poll, each ordinary shareholder has one vote for every one share held. 110 Witton Investment Trust plc Annual Report 2022 ## 16 RESERVES Other capital reserves of £1,303,740,000 (2021: £1,747,379,000) comprise capital reserve arising on investments sold of £1,172,284,000 (2021: £1,292,799,000) and capital reserve arising on revaluation of investments held of £131,456,000 (2021: £454,580,000), inclusive of a provision of £667,000 (2021: £886,000) for Indian capital gains tax. ## 17 PREFERENCE SHARES Included in non current liabilities is £2,555,000 in respect of issued preference shares as follows: | | Group and Company 2022 £'000 | Group and Company 2021 £'000 | | --- | --- | --- | | 2,055,000 3.4 per cent. cumulative preference shares of £1 each | 2,055 | 2,055 | | 500,000 2.7 per cent. cumulative preference shares of £1 each | 500 | 500 | | | 2,555 | 2,555 | The 3.4 per cent. and 2.7 per cent. cumulative preference shares constitute a single class and confer the right, in priority to any other class of shares: - (i) to receive a fixed cumulative preferential dividend at the respective rates (exclusive of tax credit thereon for payments made prior to 6 April 2018) of 3.4 per cent. and 2.7 per cent. per annum, such dividend being payable half-yearly on 15 January and 15 July in each year, in respect of the 3.4 per cent. cumulative preference shares, and on 1 February and 1 August in each year in respect of the 2.7 per cent. cumulative preference shares; and - (ii) to receive repayment of capital at par in a winding up of the Company (but do not confer any further right to participate in profits or assets). The preference shareholders are entitled to receive notices of general meetings of the Company but are not entitled to attend or vote thereat, except on a resolution for the voluntary liquidation of the Company or for any alteration to the objects of the Company set out in its Articles of Association. In the event of a poll at a general meeting of the Company, every member of the Company who is present in person or by proxy and who is entitled to vote thereat, whether an ordinary shareholder or, in the circumstances outlined above, a preference shareholder, has one vote for every £0.05 nominal value of shares registered in their name. Accordingly, on a poll each preference shareholder has 20 votes for every one share held. ## 18 NET ASSET VALUE PER ORDINARY SHARE The net asset value per ordinary share of 226.80p (2021: 269.93p) is based on the net assets attributable to the ordinary shares of £1,541,809,000 (2021: £1,992,041,000) and on the 679,823,171 ordinary shares in issue at 31 December 2022 (2021: 737,975,867). The movements during the year of the net assets attributable to the ordinary shares were as follows: | | £'000 | | --- | --- | | Total net assets at 1 January 2022 | 1,992,041 | | Total loss for the year | (280,554) | | Dividends paid in the year on the ordinary shares (see note 8) | (40,409) | | Share buybacks | (129,269) | | **Net assets attributable to the ordinary shares at 31 December 2022** | **1,541,809** | An alternative net asset value per ordinary share can be calculated by deducting from the total assets less current liabilities of the Company, the bonus and leases payable in more than one year, the preference shares and the secured bonds and notes at their market (or fair) values rather than at their par (or book) values. Details of the alternative values are set out in note 14.7. The net asset value per ordinary share at 31 December 2022 calculated on this basis is 234.09p (2021: 267.39p) as set out on page 112. Witan Investment Trust plc Annual Report 2022 111 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS FINANCIAL STATEMENTS # Notes to the Financial Statements continued for the year ended 31 December 2022 ## 18 NET ASSET VALUE PER ORDINARY SHARE CONTINUED | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Debt at balance sheet amount £'000 | Debt at fair value £'000 | Debt at balance sheet amount £'000 | Debt at fair value £'000 | | Total assets less current liabilities per balance sheet | 1,699,291 | 1,699,291 | 2,149,787 | 2,149,787 | | Liabilities at balance sheet value/fair value | (157,482) | (107,869) | (157,746) | (176,488) | | | 1,541,809 | 1,591,422 | 1,992,041 | 1,973,299 | | Ordinary shares in issue at 31 December | 679,823,171 | 679,823,171 | 737,975,867 | 737,975,867 | | NAV per share | 226.80p | 234.09p | 269.93p | 267.39p | ## 19 RECONCILIATION OF GROUP LIABILITIES ARISING FROM FINANCING ACTIVITIES | | 2022 | | | | 2021 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Long-term debt £'000 | Short-term debt £'000 | Lease liability £'000 | Total £'000 | Long-term debt £'000 | Short-term debt £'000 | Lease liability £'000 | Total £'000 | | **Opening liabilities from financing activities** | 156,573 | 98,000 | 262 | 254,835 | 156,548 | 109,000 | 330 | 266,878 | | **Cash flows:** | | | | | | | | | | Drawdown of bank loans | – | 195,000 | – | 195,000 | – | 176,250 | – | 176,250 | | Repayment of bank loans | – | (196,500) | – | (196,500) | – | (187,250) | – | (187,250) | | Repayment of lease finance | – | – | (51) | (51) | – | – | (70) | (70) | | **Non-cash:** | | | | | | | | | | Effective interest | 24 | – | – | 24 | 25 | – | – | 25 | | Interest on lease liability | – | – | 1 | 1 | – | – | 2 | 2 | | **Closing liabilities from financing activities** | 156,597 | 96,500 | 212 | 253,309 | 156,573 | 98,000 | 262 | 254,835 | ## 20 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES At 31 December 2022 and 31 December 2021 there were no capital commitments in respect of securities not fully paid up and no underwriting liabilities. 112 Witan Investment Trust plc^{}[] Annual Report 2022 ## 21 LEASE ARRANGEMENTS ### 21.1 Right-of-use asset: property | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Opening balance | 249 | 315 | | Depreciation through profit and loss | (53) | (66) | | Closing balance | 196 | 249 | ### 21.2 Lease liabilities At the balance sheet date, the Group and Company had outstanding commitments for the future minimum lease payments under non-cancellable operating leases, which fall due as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Within one year | 77 | 78 | | In the second to fifth years inclusive | 135 | 207 | | After the fifth year | – | – | | Total undiscounted lease payments at the end of the period | 212 | 285 | At the balance sheet date, the Group and Company had a discounted lease liability as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Current | 77 | 76 | | Non current | 135 | 186 | | Total lease liability | 212 | 262 | ### 21.3 Amounts recognised in the profit/(loss) for the year | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Depreciation on right-of-use asset | 53 | 66 | | Interest on lease liability | 1 | 2 | ### 21.4 Outflows recognised in the cash flow statement for the year | Financing | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Repayment of lease finance | 67 | 67 | ### 21.5 Other leasing information The lease payments represent rentals payable by the Group and Company for the office property. ## 22 SUBSIDIARY UNDERTAKING The Company has an investment in the issued ordinary share capital of its wholly-owned subsidiary undertaking, Witan Investment Services Limited, which was incorporated on 28 October 2004, is registered in England and Wales and operates in the United Kingdom. Its registered office is shown on page 120. STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2022 113 FINANCIAL STATEMENTS ## Notes to the Financial Statements continued for the year ended 31 December 2022 ### 23 RELATED PARTY TRANSACTIONS DISCLOSURES Balances and transactions between the Company and its subsidiary, which are related parties, amounting to £440,000 have been eliminated on consolidation and are not disclosed in this note. #### Remuneration of key management personnel The remuneration of the directors, who are the key management personnel of the Company for each of the relevant categories specified in IAS 24 Related Party Disclosures is provided in the audited part of the Directors' Remuneration Report on pages 64 to 68. #### Directors' transactions Dividends totalling £81,000 (2021: £77,000) were paid in the year in respect of ordinary shares held by the Company's directors. ### 24 SEGMENT REPORTING Operating segments are determined based on internal management reporting of the Group that is reviewed regularly by the 'Chief Operating Decision Maker' (who is the CEO) and used to allocate resources and assess their performance. #### Geographical information The Group operates in one geographic area, the UK, and primarily invests in companies listed in the UK and other recognised overseas exchanges. #### Operating segments The Group has two reportable segments: (i) its activity as an investment trust, which is the business of the parent company, Witan Investment Trust plc, and recorded in the accounts of that company; and (ii) the provision of alternative investment fund manager, executive and marketing management services which is the business of the subsidiary company, Witan Investment Services Limited, and recorded in the accounts of that company. Each segment is managed separately as they have different objectives. Performance is measured based on segment profit or loss included in the internal management reports that are reviewed by the CEO. Transactions between reportable segments include activities from the provision of alternative investment fund manager, executive and marketing management services. Segment information is measured on the same basis as that used in the preparation of the Group financial statements. | | 31 December 2022 | | | 31 December 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Investment trust £'000 | Management services £'000 | Total £'000 | Investment trust £'000 | Management services £'000 | Total £'000 | | External revenue | 44,206 | – | 44,206 | 37,572 | – | 37,572 | | Other revenue | (303,520) | – | (303,520) | 246,929 | – | 246,929 | | Segment expense | | | | | | | | Management expense | (7,672) | – | (7,672) | (9,714) | – | (9,714) | | Other expense | (4,971) | (514) | (5,485) | (4,437) | (479) | (4,916) | | Finance costs | (6,294) | – | (6,294) | (5,208) | – | (5,208) | | Segment (loss)/profit before taxation | (278,251) | (514) | (278,765) | 265,142 | (479) | 264,663 | | Segment net assets | 1,540,618 | 1,191 | 1,541,809 | 1,990,925 | 1,116 | 1,992,041 | The non current assets are located in the United Kingdom. ### 25 SUBSEQUENT EVENTS Since the year end, the Board has declared a fourth interim dividend in respect of the year ended 31 December 2022 of 1.60 pence per ordinary share (see also page 9 and note 8 on page 100). From 1 January to 13 March 2023, 11,031,856 ordinary shares of 5p were bought back for £25,307,000. 114 Witan Investment Trust plc Annual Report 2022 ## Other Financial Information (unaudited) ### 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 | STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS Witan Investment Trust plc Annual Report 2022 115 FINANCIAL STATEMENTS ## Other Financial Information (unaudited) continued 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: Market value of collateral Counterparty Collateral Settlement received Counterparty location Type Quality currency basis Custodian £’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: Direct and indirect costs Net securities lending Total gross amount of and fees deducted by % return of the securities income retained by securitieslending income securitieslending agent lendingagent theCompany % return of the Company £296,000 £74,000 25% £222,000 75% 116 Witan Investment Trust plc Annual Report 2022 ## Additional Shareholder Information ALTERNATIVE INVESTMENT FUND MANAGERS’ DIRECTIVE STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS 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’), toact as its AIFM. WIS is authorised and regulated by the UnitedKingdom Financial Conduct Authority as a ‘full scope UK AIFM’. The Company is required to make certain disclosures available to investors in accordance with the AIFMD. Those disclosures that arerequired to be made pre-investment are included within the Investor Disclosure Document (‘IDD’) which can be found on the Company’s website (www.witan.com). There have not been any material changes to the disclosures contained within the IDD sinceitwas last updated in March 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 nochanges to the risk management systems in place in the period under review and no breaches of any of the risk limits set, withno breach expected; > there are no new arrangements for managing the liquidity of the Company or any material changes to the liquidity management systems and procedures employed by the Company; > all authorised Alternative Investment Fund Managers are required to comply with the AIFMD Remuneration Code in respect oftheAIFM’s remuneration. The relevant disclosures required are contained within the IDD; and > information in relation to the Company’s leverage is contained within the IDD. SHAREHOLDER INFORMATION Points of reference Shareholders can follow the progress of their investment through the newspapers. Witan’s share price appears daily in the national press stock exchange listings under ‘Investment Trusts’ or ‘Investment Companies’ and is also included ontheWitanwebsite (www.witan.com). The London Stock Exchange Daily Official List (‘SEDOL’) code is BJTRSD3. Dividend A fourth interim dividend of 1.60p 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 thisshould be included with any other dividend income received when calculating and reporting total dividend income received. Itisthe shareholder’s responsibility to include all dividend income when calculating any tax liability. Capital Gains Tax The calculation of the tax on chargeable gains will depend on your personal circumstances. If you are in any doubt about yourpersonal tax position, you are recommended to contact your professional adviser. Please note that tax assumptions may change if the law changes, and the value of tax relief (if any) will depend upon your individual circumstances. Investors should consult their own tax advisers in order to understand any applicable tax consequences. Beneficial Owners of Shares – Information Rights Beneficial owners of shares who have been nominated by the registered holder of those shares to receive information rights under section 146 of the Companies Act 2006 should direct all communications to the registered holder of their shares rather thantothe Company’s Registrar, Computershare, or to the Company directly. Witan Investment Trust plc 117 Annual Report 2022 FINANCIAL STATEMENTS ## Additional Shareholder Information continued ### DEFINITIONS OF ALTERNATIVE PERFORMANCE MEASURES **Benchmark:** The Company's equity benchmark is 85% Global (MSCI All Country World Index) and 15% UK (MSCI UK IMI Index). From 1 January 2017 to 31 December 2019 the benchmark was 30% UK, 25% North America, 20% Asia Pacific, 20% Europe (ex UK) and 5% Emerging Markets. From 1 October 2007 to 31 December 2016 the benchmark was 40% UK, 20% North America, 20% Europe (ex UK) and 20% Asia Pacific. With effect from August 2020, the source for the benchmark index changed to MSCI International, replacing the previous FTSE source. **Gearing:** The difference between shareholders' funds and the total market value of the investments (including the face value of futures positions) expressed as a percentage of shareholders' funds. See page 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. The Net Asset Value, or NAV, per ordinary share is calculated by dividing this amount by the total number of ordinary shares in issue (excluding those shares held in treasury). 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 all dividends paid out by the Company were reinvested, without transaction costs, into the shares of the Company at the NAV per share at the time the shares were quoted ex-dividend. | Total return calculation | Year ended 31 December 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, as a percentage of NAV. **Ongoing charge:** The ongoing charge reflects those expenses of a type which are likely to recur in the foreseeable future, whether charged to capital or revenue as a collective fund, excluding the costs of acquisition and disposal, finance costs and gains or losses arising on investments. 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)** | **(5.8)%** | **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. 118 Witan Investment Trust plc^{}[] Annual Report 2022 STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS HISTORICAL RECORD Debt at fair value Debt at par value | | | | Net asset | | | | Net asset | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Market price | | | value per | | Share price | | value per | | Share price | | Earnings per | | | | Dividends | | | | per ordinary | | | ordinary | | (discount)/ | | ordinary | | (discount)/ | | | ordinary | | per ordinary | | | | | | share in | | share in | | premium | | share in | | premium | | | share in | | | | share in | | | | | (1) | | (1)(2) | | (2) | | (1)(3} | | (3) | | | (1) | | | | (1) | | | pence | | pence | | | % | pence | | | % | | pence | | | | pence | | 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 (4) 31 December 2021 252.0 267.4 (5.8) 269.9 (6.6) 3.59 5.60 (4) 31 December 2022 221.5 234.1 (5.4) 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 wishto purchase Witan shares for their clients can do so via a number of online platforms, includingSeven 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 119 Annual Report 2022 ## Contacts REGISTERED OFFICE OF THE COMPANY AND ITS SUBSIDIARY, AUDITOR WITAN INVESTMENT SERVICES LIMITED Grant Thornton UK LLP | 14 Queen Anne’s Gate | 30 Finsbury Square | | --- | --- | | London SW1H 9AA | London EC2A 1AG | | The Company is a public company limited by shares. | STOCKBROKER | J.P. Morgan Cazenove REGISTERED NUMBER 25 Bank Street | Registered as an investment company in England and Wales, | Canary Wharf | | --- | --- | | Number 101625. | London E14 5JP | | COMPANY SECRETARY | SOLICITORS | | Frostrow Capital LLP | Dickson Minto W.S. | | 25 Southampton Buildings | 16 Charlotte Square | | London WC2A 1AL | Edinburgh EH2 4DF | Telephone: 020 3008 4910 Herbert Smith Freehills LLP CUSTODIAN, INVESTMENT ADMINISTRATOR Exchange House Primrose Street BNP Paribas London Branch London EC2A 2EG 10 Harewood Avenue London NW1 6AA The Company is a member of: 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 (1) Telephone: 0370 707 1408 (1) Calls cost no more than calls to geographic numbers (01 or 02) and must be included in inclusive minutes and discount schemes in the same way. Calls from landlines are typically charged up to 9p per minute; calls from mobiles typically cost between 3p and 55p per minute. Calls from landlines and mobiles are included in free call packages. DISABILITY ACT Copies of this Annual Report and other documents issued by Witan Investment Trust plc are available from the Company Secretary. Ifneeded, copies can be made available in a variety of formats, including Braille, audio tape or larger type as appropriate. You can contact our Registrar, Computershare Investor Services PLC, which has installed textphones to allow speech and hearing impaired people who have their own telephone to contact them directly, without the need for an intermediate operator, by dialling 0370 702 0005. Specially trained operators are available during normal business hours to answer queries via this service. Alternatively, if you prefer to go through a ‘typetalk’ operator (provided by The Royal National Institute for Deaf People), you should dial 18001 followed by the number you wish to dial. UNSOLICITED APPROACHES FOR SHARES: WARNING TO SHAREHOLDERS Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders offering to sell themwhat often turn out to be worthless or high-risk shares in US or UK investments. They can be very persistent and extremely persuasive. Shareholders are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount oroffers of free company reports. Please note that it is very unlikely that either the Company or the Company’s Registrar, Computershare Investor Services PLC, wouldmake unsolicited telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to shareholders and never in respect of investment ‘advice’. Shareholders who suspect they may have been approached by fraudsters should advise the Financial Conduct Authority (‘FCA’) using the share fraud report form at www.fca.org.uk/scams or call the FCA Customer Helpline on 0800 111 6768. You may also wish tocall either the Company Secretary or the Registrar at the numbers provided above. 120 Witan Investment Trust plc Annual Report 2022 Printed by Park Communications on FSC® certified paper. Park is an EMAS certified company and its Environmental Management System is certified to ISO14001. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled forfurther use and, on average, 99% of any waste associated with this production willberecycled. This document is printed on Arcoprint, sourced from well-managed, responsible, FSC®certified forests and other controlled sources. The pulp used in this product isbleached using an elemental chlorine free (‘ECF’) process. Park Communications 48774 ### Witan Investment Trust plc Annual Report 2022 ## www.witan.com