Job No: 51462 Proof Event: 29 Black Line Level: 3 Park Communications Ltd Alpine Way London E6 6LA
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Witan Investment Trust plc Annual Report 2023
Annual Report 2023
Job No: 51462 Proof Event: 29 Black Line Level: 3 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
STRATEGIC REPORT
01 Financial highlights
02 Our investment approach
04 Key performance indicators
06 What we do
08 Chairman’s Statement
10 CEO’s review of the year
16 Responsible investment
24 Meet the managers
32 Forty largest investments
34 Classification of investments
35 Principal risks and uncertainties
38 Section 172: engaging with
ourstakeholders
40 Corporate and operationalstructure
41 Costs
42 Viability Statement
CORPORATE GOVERNANCE
44 Board of directors
46 Corporate Governance
57 Report of the Audit & Risk Committee
60 Directors’ Remuneration Report
73 Directors’ Report
77 Statement of Directors’
Responsibilities
FINANCIAL STATEMENTS
78 Independent Auditor’s Report to the
members of Witan Investment Trust
plc
87 Consolidated Statement
ofComprehensive Income
88 Consolidated and Individual Company
Statements of Changes in Equity
89 Consolidated and Individual Company
Balance Sheets
90 Consolidated and Individual Company
Cash Flow Statements
91 Notes to the Financial Statements
113 Other Financial Information
(unaudited)
115 Additional Shareholder Information
118 Contacts
Company overview
Our investment policy
Our purpose
is to achieve significant growth in our investors’ wealth by
investing in global equity markets.
Our objective
is to achieve an investment total return exceeding that of
the Company’s benchmark
(1)
over the long term, together
with growth in the dividend ahead of inflation.
Where to find us
Our website has a full range of information about Witan and regular
commentary about investment markets.
Find us online @ www.witan.com
The Annual Report is intended to help shareholders assess the Company’s strategy. It contains certain forward-looking statements. These are made by the directors in good faith
based on information available to them up to the time of their approval of this Report. Such statements should be treated with caution due to the inherent uncertainties,
including economic and business risks, underlying any such forward-looking information.
STRATEGIC REPORT
(1) Witan’s benchmark is 85% Global (MSCI All Country World Index) and 15% UK (MSCI UK IMI Index).
Witan Investment Trust plc
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SECTOR BREAKDOWN OF THE PORTFOLIO
(4)
17% Industrials
16% Financials
13% Information Technology
11% Investment Companies
9% Consumer Staples
9% Healthcare
8% Consumer Discretionary
7% Materials
6% Communication Services
3% Energy
1% Utilities
COMPANY SIZE BREAKDOWN OF THE PORTFOLIO
(4)
73% Large Cap
11% Mid Cap
11% Investment Companies
5% Small Cap
Financial
highlights
A high
conviction yet
well-diversified
portfolio
(1) Source: Witan/Morningstar.
(2) Source: Morningstar. See also MSCI International for conditions of use (www.msci.com).
(3) Alternative performance measure (see page 5).
(4) Funds and ETFs included on a “lookthrough” basis
Key data
237.5p
SHARE PRICE
2022: 221.5p
257.6p
NAV PER ORDINARY
SHARE (DEBT AT FAIR VALUE)
(3)
2022: 234.1p
7.8%
DISCOUNT (NAV INCLUDING
INCOME, DEBT AT FAIR VALUE)
(3)
2022 : 5. 4 %
6.04p
DIVIDEND PER SHARE
2022: 5.80p
Total return performance
1 year
% return
5 years
% return
10 years
% return
SHARE PRICE TOTAL RETURN
(1)(3)
10.1 39.3 125.0
NAV TOTAL RETURN
(1)(3)
12.7 48.0 125.1
WITAN BENCHMARK
(1 )
14.7 69.6 144.2
MSCI UK IMI INDEX
(2)
8.0 36.3 64.3
MSCI ALL COUNTRY WORLD INDEX
(2 )
15.9 78.2 193.2
UK CPI
4.0 23.4 32.8
Percentage of total funds
(4)
41%
NORTH AMERICA
21%
EUROPE
17%
UK
11%
INVESTMENT
COMPANIES
5%
ASIA EX JAPAN
3%
JAPAN
2%
OTHER
To read more about
our diversified portfolio see pages 25 to 26
To read more about
our KPIs see pages 4 and 5
Source: BNP Paribas
as at 31 December 2023.
79%
Active share
(3)
at end 2023
We are active investors with a highly selective approach to
portfolio construction. This is differentfrom a passive fund
which replicatesaparticularindex.
Other financial data
2023 2022
REVENUE EARNINGS PER SHARE
(3)
4.84p 4.78p
TOTAL EARNINGS PER SHARE
27.86p (39.65)p
NET ASSETS (£’000)
1,561,665 1,541,809
Witan Investment Trust plc
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Talent
We search for the best fund managers
worldwide, choosing managers to complement
each other, not to cover allstyles. Our
managers are active investors and construct
high conviction portfolios focusing on their
best ideas.
This high level of conviction produces
portfolios which are differentiated fromthe
benchmarks which they aimtooutperform.
Experience
Founded in 1909, we have a long trackrecord
of producing capital andincome growth. We
have invested through challenging economic
cycles, wars andpolitical crises, helping put
contemporary events into perspective. Since
the adoption of the current multi-manager
strategy in2004, shareholders have enjoyed a
share pricetotal return
(1)
of 510.0% versus
433.4% forWitan’s benchmark and 258.2% for
theMSCIUKIndex.
Collective
Wisdom
A multi-manager for global equity
investment, offering long-term
growth in capital and income.
Our investment approach
(1) Alternative performance measure, see page 116.
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Independence
Witan is an independent and self-managed
investment company, dedicated to sustainable
growth initsshareholders’ wealth. Witan’s
employees are solely focused on the success
of theCompany.
Our independence means we simply seek,
without pre-set constraints, to select the best
managers available, inthe interest of our
shareholders.
Adaptable
Our multi-manager strategy allows
ustorespond to changes in long-term trends
either by changing managers and investment
style or investing via ourspecialist portfolio
with managers who have expert knowledge of
particular sectors or regions. Using gearing
and derivatives, we can also adapt our
portfolio to short-term opportunities orto
manage risk.
We search for the best managers aroundthe
world to create a portfolio thatisdiversified by
region, investment sectorand individual company
level. Thisprovides broad opportunities for
investors and reduces the risks arising
fromreliance on a single manager. In many cases,
these managers are either not available to
individual UK investors or available only on less
competitive terms.
Our highly experienced Board of directors and
Executive have many years’ collective experience
of managing assets, selecting managers and
delivering sound, independent governance.
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Key performance
indicators
The financial key performance indicators (‘KPIs’) below are monitored as
significant measures of longer-term success. With respect to non-financial
measures, details of the Company’s policies and compliance in relation to the UK
Corporate Governance Code are set out in the Corporate Governance
Statement on pages 46 to 56.
KPI OUTCOME
Share price
total return
(1)
TOTAL RETURN PERFORMANCE (%)
The Company seeks at least2%p.a.
long-term outperformance in the share
price total return
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
TOTAL RETURN PERFORMANCE (%)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Benchmark total return CPIShare price total return
The share price total return in 2023 was 10.1%, compared
with the benchmark’s return of 14.7% and the 4.0% increase
in the UK Consumer Price Index (‘CPI’). Over five years, the
share price total return was 39.3% compared with 69.6% for
the benchmark and CPI inflation of 23.4%.
10.1%
IN 2023
NAV total return
(1)
TOTAL RETURN PERFORMANCE (%)
The Company seeks at least2%p.a.
long-term outperformance in NAV total
return, debt at fair value
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
TOTAL RETURN PERFORMANCE (%)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Benchmark total return CPINAV total return
Witan’s NAV total return in the year was 12.7%, which was
below the 14.7% return on our benchmark but well ahead of
CPI inflation of 4.0%. Over the past five years, the NAV total
return was 48.0%, lagging the benchmark’s 69.6% return but
more than twice the 23.4% rise in the UK CPI index during
the period.
12.7%
IN 2023
Dividend growth
(1)
DIVIDEND PER SHARE GROWTH (%)
The Company seeks to grow its
dividend ahead of the rateofinflation
DIVIDEND PER SHARE GROWTH (%)
2.5
3.5
4.5
5.5
6.5
86
123
160
197
Dividend (pence per share)
left hand axis right hand axis
CPI inflation %
2014
2013
2.88
3.08
3.40
3.80
4.20
4.70
5.35
5.45
5.60
5.80
6.04
2015
2016
2017
2018
2019
2020
2021
2022
2023
The dividend rose by 4.1% in 2023, slightly ahead of the
4.0% rate of CPI inflation during the year. This was Witan’s
49th consecutive year of dividend increases. Over the past
five years the dividend has risen by 28.5%, compared with a
23.4% rise in the CPI.
4.1%
IN 2023
Key performance
indicators
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Net contribution from
borrowings
(1)
CONTRIBUTION FROM BORROWINGS (% OF NAV)
Gearing to contribute to returns, after
interest costs
Net contribution Cost
CONTRIBUTION FROM BORROWINGS (% of NAV)
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
+1.0%
+0.5%
+1.5%
+2.0%
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
In 2023, gearing added 1.6% to returns before interest costs
and 1.0% after deducting interest costs. Although the use of
borrowings (or gearing) in investment can amplify losses as
well as gains, over the long term, as shown in the chart,
gearing has been a material benefit to Witan’s returns,
contributing positively in seven out of the past ten years.
+1.0%
IN 2023
Discount/premium
to NAV
(1)
DISCOUNT/PREMIUM TO NAV PER SHARE
Achieve a sustainable low discount or a
premium to NAV,taking account of
marketconditions
DISCOUNT/PREMIUM TO NAV PER SHARE
2014
2015
2016
2017
2018
2019
2020
202 1
2022
2023
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
+2.0
In 2023, the year-end discount was 7.8%, compared with
5.4% at the end of 2022. With pressure on discounts across
the whole sector, 2023’s average discount of 9.0% was
wider than that in 2022 (7.8%). Witan continued to buy back
shares at a discount, which helps limit discount volatility and
boosts the NAV for continuing shareholders. In 2023, we
bought back 8.0% of our shares at an average discount of
8.6%. The resulting £11.5million uplift offset the majority of
the Company’s ongoing charges during the year.
-7.8%
AT YEAR END
Ongoing Charges
Figure (‘OCF’)
(1)
ONGOING CHARGES AS % OF AVERAGE NET ASSETS
Achieve an OCF as low aspossible,
consistent withchoosing the best
availablemanagers
ONGOING CHARGES AS % OF NET AVERAGE ASSETS
0.50
0.60
0.70
0.80
1.00
0.90
1.10
Including performance fees
Excluding performance fees
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
In 2023, our OCF was 0.76% (2022: 0.77%). Although there
were reductions in investment management fees, these
were partly offset by the impact of fixed costs on a lower
average asset base. Further details of costs are set out on
page 41.
0.76%
IN 2023
(0.76% INCLUSIVE OF PERFORMANCE FEES)
KPI OUTCOME
(1) Alternative Performance Measures
The financial statements (on pages 87 to 112) 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 KPIs on pages 4 to 5. Definitions of the terms used are set out on page 116. 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 110.
Witan Investment Trust plc
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Witan is an investment trust which aims to grow shareholders’ wealth and
outperform its benchmark through active investment in individual
companies across a broad spread of global equity markets.
What we do
Portfolio structure
Specialist portfolio
25%
(1)
Managers able to deliver superior
growth through specialist regional or
sectoral expertise.
Direct holdings in collective funds.
Actively managed with no fixed
allocation.
Investments in Unquoted Growthfunds
Provides exposure to specialist asset
classes andother opportunities
including Emerging Markets, Climate
Change, Private Equity and Life
Sciences.
Witan’s portfolio consists of two primary components: core and specialist. The core portfolio provides
shareholders with access to a select but diversified group of managers investing in high-quality,
predominantly large and mid-sized global companies. The specialist portfolio recognises that there are
many attractive investment opportunities which fall outside the remit of most mainstream fund
managers due to their size, domicile or their unlisted or specialist nature. The specialist portfolio aims to
capture thepotential for these themes to produce superior returns overthe long run. This combination
provides a one-stop shop for our shareholders tobenefit from a wide variety of opportunities via a
single investment in Witan.
Disciplined risk management
see pages 35 to 37
Underpinned by:
(1) Indicative allocation +/-10%.
Core portfolio
75%
(1)
Global UK
65%
(1)
10%
(1)
Managers employ a range of approaches to select from
abroad universe of high-quality companies throughout
theworld.
The core portfolio includes companies with enduring cash
flows, underappreciated growth prospects or undervalued,
often cyclical, businesses.
Meet the managers
see pages 24 to 30
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Choosing our managers Capital allocation Value creation
We select third-party managers from
across the world. Our team uses a variety
of networks, databases and
comprehensive duediligence to identify
and interview potential managers.
Shortlisted managers present to
theBoard, which takes thefinal decision
on appointment. We aim to appoint
managers for the long term.
What we look for from
our managers
People Talented and accountable
investment leadership, committed
toserving their clients’ interests
Process High-conviction portfolio
construction, using clear and simple
processes, with analysis taking account of
secular change
Portfolio Investments characterised by
long-term growth in sustainable cash flows
and the integration of
ESG (environmental, social and
governance) principles
Performance Potential for material
outperformance over the long term,
after fees
We seek to add
toperformance by varying
the use of gearing and a
range ofadditional levers
toadapt to different
conditions.
Capital allocation
framework
The Company seeks toset
gearing at levels appropriate
for market conditions,
borrowing more when
markets are attractively
valued and less when
returns are expected to be
poorer.
Witan may on occasion use
derivatives as transparent,
cost-effective tools for
efficient portfolio
management and
to help control risk.
We aim to generate
total returns which
exceed the benchmark
over thelong term.
Share price total
return
(1)
over past ten
years
125.0%
vs
144.2%
for benchmark to
31/12/2023
Dividend growth over
past ten years
7.7%
p.a.
For more information,
see page 13
For more information,
see pages 24 to 30
Commitment to responsible investment
see pages 16 to 23
(1) Alternative performance measure, see
page 116.
Witan Investment Trust plc
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Chairman’s Statement
A VOLATILE BUT ULTIMATELY POSITIVE
YEAR FOR EQUITIES
At the start of the year, our portfolio benefited
materially from a broad equity rally, as fears of
recession led to hopes of a turn in the monetary
cycle, encouraging investment in lower-rated
companies and those with cyclical exposure.
However, continued central bank hawkishness
chilled these hopes over the summer, with rising
bond yields exerting downward pressure on
equity valuations, such that a relative
performance lead for Witan of over 3% by the
end of Aprilreversed into a similar level of
underperformance by late October.
Accumulating evidence of declining inflation
then led to a softer message from central banks,
kindling hopes that the next move in rates
would be down, even if not imminently. This
ushered in a two-month rally similar in character
to that at the start of the year, with a wider range
of companies and sectors participating, during
which we recovered much of the lost relative
ground, ending at the highs of the year in total
return terms. Our NAV total return in the year
was 12.7%, compared with our benchmark’s total
return of 14.7%. The share price total return was
10.1%.
Two features of 2023’s equity returns are worth
noting. The first was the extent to which global
equity indices were dominated by a small
number of US-based technology stocks. After a
poor 2022, the technology leaders were
spurred on by strong earnings growth and
enthusiasm for the rapidly growing field of
generative Artificial Intelligence (‘AI’). 60% of the
US market’s total return of 19.2% in sterling
terms was delivered by seven leading
technology companies, with the remaining 493
stocks in the index delivering under half of the
market’s return between them. Of the 14.7%
return from Witan’s benchmark, 46%, or 6.7
percentage points was driven by these seven
US stocks, which represented 14% of our
benchmark and 6% of our portfolio. This was a
difficult backdrop for fund managers to navigate
without over concentrating their portfolios. The
second point to note is that, despite the
headwind presented by the narrow base of
market returns, our core managers in aggregate
outperformed. Our lagging of the benchmark
was entirely attributed to weakness from the
GMO Climate Change Investment Fund and
Witan’s holdings in investment companies,
which have both been strong areas for
shareholders in the past. We see prospects for
both to recover in 2024.
Andrew Bell’s CEO report covers these points,
as well as the macroeconomic backdrop, in
more detail.
2023 highlights
Full-year NAV total return of +12.7%. Share price total return +10.1%
The benchmark returned +14.7%, the AIC Global sector’s NAV total
return was +12.8% and UK CPI rose 4.0%
Share price discount to NAV 7.8% at year-end (2022: 5.4%)
The NAV uplift from share buybacks again offset the majority of the
Company’s ongoing charges during the year
Dividend increased by 4.1% to 6.04 pence, more than double that
paid in 2013 and an unbroken 49 year run of increases
2024 NAV total return to 13 March 5.9%
Our CEO, Andrew Bell, has recently informed the Board that he plans
to retire from Witan during the coming year. The Company has
decided to undertake a review of its future investment management
arrangements and (in a separate announcement) to invite proposals
for the future management of the Company’s portfolio.
Andrew Ross
Chairman
Witan Investment Trust plc
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Over the long term, since Witan adopted a
multi-manager approach in 2004, our NAV total
return of 428% has broadly matched the 433%
total return on our benchmark, while the share
price total return (510%) has been well ahead
and we have raised the dividend above the rate
of inflation over the period. Although our
managers have at times struggled in the volatile
and polarised investment environments since
2020, we anticipate a convergence in
performance between the narrow range of
companies that has driven market performance
in recent years and the broader swathe of more
modestly rated companies which have been out
of favour during this period of heightened
risk-aversion and uncertainty about economic
growth.
The evidence has begun to favour the
conclusion that the US economy may
experience a soft landing, regaining control of
inflation without a recession, while weak
economic conditions in the UK and Europe
seem to have bottomed out, better than earlier
fears. The biggest economic disappointment
has been the mediocre economic rebound in
China, following the ending of its Covid
restrictions. Whilst the financial sector impact of
its housing downturn appears largely a local
issue, a range of sectors (luxury goods,
industrials, and commodities) suffered from
weak demand in China, spreading the effects to
other markets.
To date in 2024, in continued positive market
conditions, Witan’s NAV total return rose by
5.9%, slightly ahead of the return on the
Company’s benchmark, which was 5.8%.
RESPONSIBLE INVESTMENT
We have developed a robust process to monitor
our managers’ approach to investing
responsibly, with a focus on how our investment
policy can help deliver prosperity for our
shareholders as well as better outcomes for our
investee companies, their stakeholders and
wider society. A key part of this is our
‘Sustainable by 2030’ commitment, which
involves detailed engagement with our
third-party managers and an assessment of
their portfolio companies, using the bespoke
responsible investment framework we
introduced in 2022. This year our managers
assessed over 300 of the companies in which
they invest on our behalf, on the ten different
sustainability issues we specify.
The results of these assessments are shown in
the responsible investment section, which is on
pages 16 to 23 of this Report.
Last year we reported that we had committed to
the Net Zero Asset Managers Initiative (‘NZAM’).
As part of this commitment, we set
decarbonisation targets (known as the Initial
Target Disclosure) in line with the NZAM
guidelines. Our target, which was set early in
2023, is to deliver (by 2030) a 50% reduction in
our core portfolio’s Weighted Average Carbon
Intensity (‘WACI’), compared with the 2019
baseline year. We (i.e. the companies within our
core portfolio) are well on the way to achieving
this aim, as our portfolio’s WACI is currently 43%
below the 2019 baseline level. It is important to
note that this commitment does not impose
blanket exclusions on our managers, as we
believe that engagement with companies often
has a greater positive impact than divestment.
We expect the lion’s share of progress towards
our commitment to be made by companies
improving their carbon intensity, not simply by
our managers selecting companies with low
emissions, leaving other (possibly less attentive)
investors to press for change in the heavier
emitters.
2023 DIVIDEND
A fourth interim dividend of 1.69 pence was
declared in February 2024, payable on 15 March
2024. As a result, the dividend for the year
increased by 4.1% to 6.04 pence per share
(2022: 5.80 pence). This year’s dividend was
covered 82% by 2023 revenue earnings (2022:
84%), with a call of £7.0 million on our revenue
reserves (in 2022 we used £6.4 million).
The Board expects portfolio dividends to
recover further in the coming years and it is the
Company’s intention to continue to make use of
retained earnings to increase the dividend to
shareholders annually until full cover is restored.
We have increased the dividend every year for
the last 49 years and the latest dividend is more
than double that paid in 2013. 2023’s increase is
ahead of the rate of UK inflation (4.0% at the
year-end) and Witan’s dividend has grown
substantially ahead of UK inflation over the past
5 and 10 years.
BOARD COMPOSITION AND SUCCESSION
The Board currently consists of nine directors,
eight of whom are non-executive, representing a
broad diversity in background, experience,
ethnicity, and gender. The Board fully meets
formal corporate governance guidelines on
diversity but, above all, it has the right balance of
skills to oversee the Company’s affairs. All
directors stand for re-election each year.
Our CEO, Andrew Bell, has informed the Board
that he plans to retire from Witan during the
coming year. The Board has taken the
opportunity to review the Company’s future
management arrangements and (in a separate
announcement) to invite proposals for the future
investment management of the Company’s
portfolio.
The process of considering proposals will take
place over the coming months and a further
announcement will be made when a preferred
option has been chosen. In the meanwhile,
Witan will continue to be managed by Andrew
Bell and the rest of the Executive Team, in
accordance with the current investment
approach.
AGM
Witan was founded in 1909 but 2024 marks the
100th anniversary of our listing on the London
Stock Exchange. The ensuing years have been
eventful and transformative in many ways and
the pace of change shows no sign of abating as
we progress through our second century.
We welcome hearing shareholders’ views at any
time but, in particular, very much look forward to
being able to meet shareholders again at this
year’s Annual General Meeting (‘AGM’). Our
116th AGM will be held on 1 May 2024, at the
Merchant Taylors’ Hall. For those not able to
attend in person, there will be the opportunity
to attend the meeting virtually and put
questions to the Board. Details will be included
in the formal notice of the meeting which will be
sent to shareholders in early April.
Andrew Ross
Chairman
15 March 2024
FINANCIAL STATEMENTS
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Moving on from
inflation
CEO’s review of the year
Andrew Bell
CEO
Inflation, volatile interest rates, East-West
tensions, and war in the Middle East. For those
longer in the tooth, there is a sense of 1970s
déjà-vu in the conjunction of circumstances that
faced investors in 2023.
In many developed economies, inflation
reached levels not seen for several decades.
Having misjudged the balance between
transitory factors driven by supply disruptions
and those driven by fiscal largesse, central
banks adopted and sustained a hawkish bias for
much of 2023, until the dying months when they
began to declare advantage, if not victory. A
year ago, we characterised the peak of interest
rates as likely to resemble Table Mountain
rather than the Matterhorn (a metaphor which
has since been plagiarised by two central
bankers!) and we have been on the Table-top
now for many months. Whilst inflation currently
remains above official targets, it seems probable
that rates will start to fall before 2% inflation is
reached – it is easier to be patient about the
pace of convergence when the direction is
clear.
At the start of the year, there was a concern that
most of the world was heading for a recession,
engineered by the central banks to reduce
inflation. The one exception was China,
confidently expected to rebound as it ended its
Covid-suppression restrictions. Although the UK
and Europe have tiptoed near the shallows of
recession, the US has grown robustly, while
China’s recovery, in the year of the Rabbit,
lacked the staying power of the Duracell Bunny.
Forecasts for 2024 are for insipid growth but not
recession. If inflation has subsided without a
widespread economic shakeout, this would
suggest economies are working better than in
past inflationary bouts, which may be worth
something in terms of stock market valuations.
Perhaps surprisingly, despite the conflicts in the
Middle East and in Ukraine, energy costs, which
surged in 2022, fell in 2023. Record US oil
production, the availability of alternatives to
Russian gas and subdued growth worldwide
have taken the edge off this driver of inflation,
albeit presenting a headwind for developers of
non-fossil energy sources. So far, the world has
found a way to work around the economic
consequences of global conflicts, but they
constitute highly unpredictable “known
unknowns”.
If confirmed, the (so far) relatively painless
re-establishment of “normal” levels of interest
rates (i.e. something close to the growth rate of
an economy aiming for 2% growth and 2%
inflation) would be a significant achievement by
central banks. Economies need a base level for
determining the cost of capital and how to
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
allocate it within the economy. Aside from the
long-term unsustainability of maintaining high
real interest rates in economies with so much
debt, a recession would risk another round-trip
towards zero interest rates, losing the benefit of
having restored a market-based cost of capital.
This seems another reason for policy rates to
decline earlier than expected, but much more
gradually than they rose.
Despite the uncertainties associated with
geopolitics and the adjustment to a rapidly
rising level of interest rates, 2023 was
(eventually) a benign year for equity returns. In
sterling terms, the MSCI All Country World Index
(“ACWI”) rose by 16%, led (again) by the US +19%
with Europe +16% and Japan +13% in silver and
bronze medal positions. The UK and Emerging
Markets brought up the rear with returns of 8%
and 4% respectively.
WITAN’S PERFORMANCE
Witan’s NAV total return in 2023 was 12.7%,
which was 2.0% short of the 14.7% return from
our benchmark. We entered 2023 expecting a
stronger relative performance, as 2022 had
seemed to be passing the performance baton
from the rapidly growing but highly rated
technology sector to a wider range of lower-
rated but modestly growing businesses. The
early months of the year bore this hope out, with
a strong relative and absolute performance.
However, for a year which generated such
healthily positive equity returns, sentiment was
unusually fickle. The periods of weakest growth
momentum (the first and last quarters) saw
broad-based equity rallies which included many
cyclical companies, while the intervening
months when the US was ostensibly booming
saw weak returns, disproportionately favouring
highly rated growth stocks which would usually
have come under pressure from rising bond
yields. In other words, investor sentiment has
been driven more by the perception of interest
rate moves than by economic growth.
The magic ingredient for equity markets was
excitement over the prospects for companies
directly exposed to the accelerating
development of generative AI. This requires
intensive use of specialist semiconductor
processors (as produced by the US tech giant
Nvidia), to help the software models being
developed by other US tech giants (such as
Alphabet, Meta, and Microsoft) to “learn”, or
refine themselves to a level of interactive
understanding able to be applied usefully
across a wide range of sectors. The double-
dose of immediate capital investment and
ultimate hopes of boosting productivity (a
missing element of growth over the past 15
years) caught investors’ imagination, albeit
initially through the narrow lens of seven
technology companies.
Our managers owned many of the “Magnificent
Seven” but insufficiently in aggregate to sustain
returns when the market could focus on nothing
else. Our more broadly diversified portfolios
prospered better when the market mood shifted
towards the year end to consider hopes of
falling interest rates and the potential of an
upswing in the economic cycle.
Witan’s portfolio is invested via a diversified
group of mainstream and specialist managers,
with well-tested and resourced investment
approaches. It includes core holdings of quality
growth companies offering compounding
earnings growth, technology specialists and
exposure to sectors expected to benefit from
economic growth, from decarbonisation, and
from the growth in infrastructure spending.
PRINCIPAL PERFORMANCE DRIVERS
The financial statements on pages 87 to 112 set
out the required statutory reporting measures of
the Company’s financial performance.
The chart below shows the contributions (in
pence per share) attributable to the various
components of investment performance and
costs, which together constitute the rise from
the 234.1 pence starting NAV to the year-end
NAV of 257.6 pence, after the payment of
dividends to shareholders.
A breakdown of the relative performance
attribution in 2023 (based on the Company’s
financial statements) is shown in the table on
page 12.
NAV BRIDGE
End 2022
NAV
Portfolio
Gains
Portfolio
income
Returns
from use
of gearing
Uplift
from
buybacks
Change
in value
of debt
Expenses
(inc. tax)
End 2023
NAV
Dividends
paid
Finance
costs
234.1
Pence per share
21.2
5.7
4.8
1.8
0.1
-2.3
257.6
-1.5
-6.0
100.0
120.0
140.0
160.0
180.0
200.0
220.0
240.0
280.0
150.0
0.0
170.0
190.0
210.0
230.0
250.0
270.0
290.0
Portfolio Costs
Dividends
Figures may not sum due to roundings.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT
12
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Our core portfolio managers collectively
outperformed during the year, but their
contribution was outweighed by weak
performance from the GMO Climate Change
Investment Fund and by Witan’s direct
investments in specialist investment companies.
As a result, our overall portfolio returns lagged
our benchmark. Gearing was a significant
positive contributor during the year, even
allowing for additional interest costs on the
short-term portion of our borrowings. As in
2022, Witan benefited from taking advantage of
the widening in our discount, buying 8.0% of our
shares into treasury, which generated an uplift
in NAV of £11.5 million and offset the majority of
our ongoing charges.
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 2023, although allocations were
adjusted during the year, to take account of
early outperformance in the UK and to provide
resources for share buybacks.
We increased our allocation to the GMO Climate
Change fund in November, after several months
of notably weak performance by climate change
and alternative energy portfolios. Despite a
subsequent sharp recovery, the fund was our
weakest performer in 2023, with the 11.7% fall
contrasting with the 15.9% rise in its MSCI ACWI
benchmark. Although this was a strong
performance relative to many others in its
sector, it was unable to shrug off the market’s
concerns about the effect of rising interest rates,
delayed projects and falling inventories in the
renewable energy sector. Prior to 2023, the
fund had delivered strong relative and absolute
returns since purchase in 2019. We believe the
long-term trend towards sustainable energy and
other climate change mitigation or adaptation
measures will prove more enduring than 2023’s
mixture of profit-taking and hesitancy over the
pace of the energy transition.
Our third-party managers implement mandates
set by the Company. The managers’ mandates,
benchmarks, investment styles and dates of
appointment are shown on pages 26 to 30. Their
returns during the year and since appointment
are set out in the table on page 13. Four of our
six core external managers outperformed their
benchmarks. Artemis was ahead of the UK
market by 7% and Jennison ahead of the MSCI
ACWI by 19%, while Veritas and WCM also
outperformed their global benchmark by 0.4%
and 4.7% respectively. GQG particularly
excelled, with its 25% return 21% ahead of its
emerging market benchmark and 9% ahead of
the global equity index. Lansdowne’s portfolio
followed the fortunes of the “broad versus
narrow” equity path during 2023, outperforming
strongly during the early months, falling back
over the summer, and ending the year with a
gain of 14.6%, just 1.3% behind its benchmark.
Lindsell Train’s “buy and hold” portfolio of
enduring brands and other themes suffered
from neither being on growth investors’ buy
lists, nor sought out by those seeking cyclical
recovery. A positive return of 8.0% was
nonetheless 7.9% behind the global benchmark.
The other notable underperformer in 2023 was
the directly held portfolio of investment
companies (discussed in the following section).
This, together with the GMO Climate Change
mandate, offset positive contributions from the
core managers, from gearing and from share
buybacks, which is why Witan’s returns for the
year, while strongly positive and well ahead of
inflation, were behind the return from our
composite benchmark.
We believe our diverse range of managers
remains well-positioned for 2024 when, with a
turn in the interest rate cycle and unusually wide
valuation spreads within the markets, we expect
to see share returns more evenly spread than in
the unusually concentrated markets of 2023.
DIRECTLY HELD INVESTMENTS
The return on the portfolio of directly managed
investment company holdings was -2.9%, well
behind the 14.7% rise in our composite
benchmark. The overriding factor here was the
widening of discounts in the investment trust
sector, which was at its sharpest amongst the
more specialist trusts.
The principal detractors were Syncona (-31.8%)
and VH Global Sustainable Energy Opportunities
(-18.6%), both notable victims of widening
discounts in asset categories that were out of
favour, as the former’s net asset value total return
was a small decline of -2.3% and the latter’s a rise
of over 13%. We took advantage of the extreme
discounts in the private equity sector to add a
new holding, in HarbourVest Private Equity Ltd,
on a near 50% discount. The position had gained
10% by year end, principally from discount
narrowing following its introduction of a share
buyback programme.
BlackRock World Mining Trust, which was
further reduced early in the year, declined 10.4%
as disappointing economic news from China
weighed on sentiment towards commodities.
Positive returns were enjoyed by Princess
Private Equity (+29.1%), which reinstated
dividend payments after a hedging misstep in
2022, and Schroder Real Estate Investment
Trust (+13.3%), both benefiting from narrower
discounts after price falls in 2022.
CEO’s review of the year continued
BREAKDOWN OF THE PERFORMANCE ATTRIBUTION IN 2023 (%)
Net asset value
total return +12.7 Portfolio total return (before costs) +11.7
Benchmark
totalreturn +14.7 Benchmark total return +14.7
Relative investment performance -3.0
Investment management costs -0.4
Investment contribution -3.4
Gearing impact +1.6
Borrowing costs -0.6
Gearing contribution +1.0
Effect of changed fair value of debt +0.1
Share buybacks +0.7
Other contributors +0.8
Other operating costs and tax -0.3
-0.3
Relative
performance
(1)
-2.0 -2.0
(1) N.B. Figures may not sum due to rounding.
Witan Investment Trust plc
Annual Report 2023
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ASSETS UNDER MANAGEMENT AND INVESTMENT PERFORMANCE AS AT 31 DECEMBER 2023
Appointment
date
Witan assets managed
as at 31.12.23
Performance in 2023 %
Performance since
appointment
(2)
%
Investment manager Mandate £m %
(1)
Manager Benchmark Manager Benchmark
Core
Jennison Global 31.08.20 137.2 7.6 34.5 15.9 4.2 10.6
Lansdowne Global 14.12.12 328.8 18 .1 14.6 15.9 13.2 12.2
Lindsell Train Global 31.12.19 290.6 16.1 8.0 15.9 4.8 9.8
Veritas Global 11.11.10 313.7 17.3 16.3 15.9 12.0 11.0
WCM Global 31.08.20 211.4 11.7 20.6 15.9 7.1 10.6
Artemis UK 06.05.08 61.2 3.4 14.8 8.0 8.2 5.7
Specialist
GMO Climate Change 05.06.19 115.5 6.4 (11.7 ) 15.9 10.1 10.7
GQG Emerging Markets 16.02.17 91.4 5.0 25.3 4.0 9.5 3.8
Unquoted Growth Specialist Funds 02.07.21 27.9 1.6 (14.7) 14.7 (12.5) 5.8
Witan Direct Holdings
Specialist Funds 19.03.10 202.8 11. 2 (2.9) 14.7 8.7 9.1
(1) Percentage of Witan’s investments managed, excluding centrally managed cash. In addition a holding in a FTSE 250 ETF was purchased during the second half of the year as a liquid means of
increasing tactical exposure to UK mid-cap companies. This represented 1.7% of assets at the year end.
(2) Percentages are annualised where the date of appointment was more than one year ago.
(3) Source: BNP Paribas.
The direct portfolio was 11.3% of the investment
portfolio at the start of the year and 11.2% at the
end of 2023. From inception in March 2010 to
the end of 2022, it delivered a compound
annual return of 9.6%, outperforming Witan’s
benchmark by 0.9% p.a. Following the
underperformance in 2023, the returns are now
+8.7% p.a., which is behind the 9.1% p.a.
benchmark return. Whilst it is disappointing to
see a portfolio that had historically performed
strongly for Witan experience a second poor
year, the cyclical factors pertaining to the asset
classes held look set for better times, as interest
rates peak, while the structural factors hindering
institutional demand for investment companies
(and other UK equities) are receiving greater
political and regulatory attention and look to be
past their worst.
The two specialist Unquoted Growth funds
investing predominantly in unlisted assets
amount to 1.6% of assets. Lansdowne
Opportunities Fund (0.9% of assets) declined in
value by c 1.3% during the year, with the fall in
price of its holding in Oxford Nanopore
Technologies offsetting other, net positive,
moves. Lindenwood (0.7%), managed by
Greenoaks Capital, experienced a 27% decline
in sterling terms, reflecting financing and
valuation trends in the unlisted technology
sector and a decline in the dollar against
sterling. Regular reports (monthly and quarterly
respectively) are received on these funds,
whose valuation policies follow private equity
industry guidelines.
GEARING ACTIVITY DURING THE YEAR
Gearing ranged between 13% and 16% during
the year. The average gearing level of 14.5%
was towards the upper end of the range Witan
employs, reflecting our positive view on equity
markets. The widespread rises in markets meant
that the use of gearing was a positive influence,
contributing 1.6% to returns, or 1.0% after interest
charges. Gearing has contributed positively to
returns in seven out of the past ten years, as
illustrated in the KPI chart on page 5.
Under its Articles of Association, the Company
may borrow up to 100% of the adjusted total of
shareholders’ funds. However, the Board’s
longstanding policy is not to allow gearing (as
defined on page 116) to be more than 20%, other
than temporarily in exceptional circumstances.
At the end of 2022, net gearing (the total value
of borrowings less cash) was 14.2% of net
assets. At the end of 2023, gearing (on the
same basis) was 14.2%.
STRUCTURE OF BORROWINGS
The Company has fixed-rate borrowings
(including £2.6 million preference shares) of
£158 million, consisting principally of:
Secured Notes £21m
2035 3.29%
Secured Notes £54m
2045 3.47%
Secured Notes £50m
2051 2.39%
Secured Notes £30m
2054 2.74%
These borrowings were taken out in 2015-19,
when interest rates were low, providing Witan
shareholders with low-cost borrowing at an
average fixed rate of 3.0%, for the next 24 years.
The Company also has a £125 million one-year
facility (expandable to £150 million), providing
additional flexibility, as well as enabling the
Company to borrow in currencies other than
sterling, if deemed appropriate. The drawn
balance was £83.0 million at the end of 2023
(2022: £96.5 million). The weighted average
interest rate on the Company’s fixed-rate
borrowings is 3.0% (2022: 3.0%). The average
interest rate, including short-term borrowings, is
currently 4.0% (2022: 3.5%).
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT
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necessary, capital reserves) to bridge what is
expected to be a narrowing gap between
portfolio revenue earnings and the dividends
paid to shareholders.
2024 DIVIDENDS
The first three quarterly payments for 2024 (in
June, September, and December) will, in the
absence of unforeseen circumstances, be paid
at a rate of 1.51 pence per share (2023: 1.45
pence), being one quarter of the 6.04 pence per
share full-year payment for 2023. The fourth
payment (in March 2025) will be a balancing
amount, reflecting the difference between the
three quarterly dividends already paid and the
payment decided for the full year.
WITAN’S SHARES IN THE MARKET –
LIQUIDITY AND DISCOUNTS
Witan is a member of the FTSE 250 Index, with
a market capitalisation of £1.5 billion.
The Board has always paid attention to
discount-related issues and has, over many
years, made significant use of share buybacks,
when Witan’s shares have stood at a discount as
well as being prepared to issue shares at a
premium to NAV to meet demand from
investors. Both actions are accretive to NAV,
provide liquidity in the market and help to
moderate discount volatility.
It remains a long-term objective to create
sustainable liquidity in Witan’s shares at or near
to asset value and the robust actions taken over
recent years are evidence of this continuing
commitment.
WITAN INVESTMENT TRUST DISCOUNT
TREND
The discount trend during the past five years is
illustrated in a chart on page 15. Along with most
others in the sector, the discount widened
significantly for much of 2023, with the average
discount in the investment company sector
reaching an extreme level similar to that seen in
the financial crisis of 2008. In part, this reflected
the substantial number of companies launched
in the past decade to invest in illiquid assets,
where investor sentiment has become more
sceptical. Another influence was the effect of
regulatory and other changes on the propensity
of UK institutional investors and wealth
managers to hold investment companies, a
topic attracting political and regulatory attention
as concern has grown about the relative decline
of the UK stock market.
During the year, Witan was active in buying
back shares. 54.1 million shares were bought
back (8.0% of the total at the start of the year), at
The fair value of the Company’s fixed-rate debt
(valued based on the relevant gilt yield +1.4%)
was little changed, after a sharp rise in gilt
yields during the first half of the year almost
exactly reversed in the second. The debt stands
at a discount to its eventual repayment value,
reflecting the low fixed interest rates. As in
previous years, the Company continues to
follow AIC guidance that fair valuing both assets
and liabilities is the appropriate basis for
calculating NAVs.
Witan will either invest its long-term borrowings
fully or neutralise their effect with cash balances
according to its assessment of the markets. The
Company’s third-party managers are not
permitted to borrow within their portfolios but
may hold cash.
DERIVATIVES ACTIVITY
A position in Japan equity index futures with a
face value of £18.8 million (1.2% of assets) was
bought in January 2023 and sold later in the
month for a gain of £0.7 million.
DIVIDEND AND REVENUE PERFORMANCE
The Company has already paid three quarterly
dividends of 1.45 pence per share in respect of
2023 which, together with the fourth interim
dividend of 1.69 pence per share, increases the
total distribution for the year to 6.04 pence
(2022: 5.80 pence). This marks the 49th
consecutive year of dividend growth. At the end
of 2022, retained revenue reserves were £31.3
million (after deducting the fourth interim
dividend payment). The purpose of such
reserves is to enable income payments to
shareholders to be supported during leaner
times, and £7.0 million was used towards
funding the 2023 dividend (2022: £6.4 million).
Revenue reserves were £24.2 million at the end
of 2023, after allowing for the fourth interim
dividend payment.
Revenue earnings per share were 1.3% higher in
2023 at 4.84 pence per share (2022: 4.78 pence).
Although revenue earnings rose by 16% in the
first half, our caveat that this flattered the
underlying position was borne out in the second
half, when a number of large exceptional
dividends in the mining sector paid in 2022 were
not repeated in 2023. As a result, current year
income cover for the increased dividend
declined from 84% in 2022 to 82% in 2023, albeit
still well up from the 65% cover in 2021.
The Board anticipates dividend cover improving
further in coming years, alongside continued
annual dividend growth. Recognising the
importance for many shareholders of a reliable
and growing income, the Board intends to
continue to use revenue reserves (and, if
The 2023 dividend per share
rose by 4.1%, ahead of inflation
and marking the 49th
consecutive annual increase
CEO’s review of the year continued
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
15
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
an average 8.6% discount to NAV, which
resulted in an uplift to NAV of £11.5 million, or
1.8 pence per share. For perspective, this sum
exceeds the investment management fees paid
to our external managers, offsetting the vast
majority of the Company’s ongoing charges.
After the payment of dividends and the
substantial commitment to share buybacks,
Witan’s net assets grew from £1,541.8 million at
the end of 2022 to £1,561.7 million at the end
of 2023, with a total earnings per share for the
year of 27.86 pence (2022: loss per share
39.65 pence). The movement in total assets
during the year is shown in note 18 on page 110.
The discount finished the year at 7.8% (2022:
5.4%) and the average discount during the year
was 9.0% (2022: 7.8%).
Discounts are affected by many factors outside
the Company’s control but where it is in
shareholders’ interests (taking account of market
conditions), the Company remains prepared to
buy back shares at a discount to NAV or to issue
shares (though only at a premium).
OUTLOOK
The world economy could be described as either
reaching the end of one economic cycle or
entering the beginning of another. A surge in
inflation, associated with measures enacted to
offset the pandemic and exacerbated by the
supply disruptions caused by the same
pandemic, appears to be over. Stimulating
demand at a time when supply was under
pressure has not proved to be a winning formula.
However understandable at the time, it has
required some cleaning up by the central banks.
Signs of improving inflation performance have
been sufficient for central banks (and markets)
to conclude that interest rates are high enough
to control and curtail the inflation overrun but
there is disagreement whether they have simply
reached a plateau or will soon need to be cut.
Some point to fiscal largesse (in the US) and to
the fixing of loans at low rates by companies
and mortgagors as reasons why the impact of
the rapid rise in rates has simply been delayed
and will hit home hard in 2024. If so, rate cuts
might be brought forward in order to offset
economic weakness. Others suggest that
retained pandemic savings and improving real
incomes as inflation falls will sustain purchasing
power, allowing moderate economic growth to
resume as inflation itself moderates. If so, rates
need not be cut urgently but could be reduced
to prevent real rates from increasing as inflation
declines – a gently downward-sloping plateau,
to extend the geographical metaphor
mentioned earlier in the report!
Either way, the likely conclusion is that global
policy rates will decline during 2024, which is a
fundamentally different investing environment
from 2022-23. Rather than speculating about
how high discount rates will go and how much
collateral damage will be sustained by asset
prices and those who took on too much leverage
at low rates, investors will be more inclined to
look through current conditions towards an
economic upswing in 2024-25, when financing
costs and demand conditions may well be better
than at present. Rather than worrying about how
economic growth rates might slow in 2024,
necessitating a defensive approach, time is on
investors’ side if the future is seen as brighter
and the cost of waiting reduces.
With the nature of growth in the coming decade
shifting towards more resource-intensive areas
(infrastructure renewal, new energy investment,
defence) inflation seems likely to be higher in
coming years than in recent decades. Indebted
governments will also have more of a bias to
growth (and slightly higher inflation) as the most
plausible way to reduce their debt burdens,
avoiding explicit default. Consequently, a return
to the recent anomaly of zero (or negative)
interest rates appears unlikely, as markets price
in the risk of a structurally higher inflation rate
than the 0-2% which has characterised much of
the century so far.
Two notable “disruption” themes seem relevant.
One is that the mantra of a few years ago to
stress test portfolios for the risks and
opportunities from technological change has
evolved into a need (temporarily forgotten in
2023) to find the winners and avoid the losers
from the energy transition and related moves to
decarbonise economies. Lower conventional
energy costs and political argument over who
should pay the costs of moving to initially less
efficient (but ultimately more sustainable) energy
sources led to heavy losses in the “new energy
economy” sector in 2023. Nonetheless, the trend
to “phase down” fossil fuels is likely to prove
inexorable. Secondly, AI, with the potential to
transform productivity in many service sectors,
as well as manufacturing, must now be added to
the list of risks for specific companies, even while
it holds out promise as a spur to non-inflationary
growth at the whole economy level. With the
development of the internet, initially the focus
was on a small number of technology companies,
then on the wider universe of companies whose
businesses were transformed (for better or
worse). Although comparisons can be invidious,
a similar broadening is likely with the application
of AI models.
Event risk is always an issue, however hard to
evaluate. 2024 sees a record proportion of the
world’s population taking part in elections of
various kinds. Some might produce changes in
a given country (e.g. Argentina in 2023), others
might have ramifications elsewhere (e.g. the US)
or prompt reactions from other countries (e.g.
Taiwan). Given unresolved global conflicts and a
lack of sure-footed and secure political
leadership to handle them, there is no shortage
of potential geopolitical shocks. The fact that
the days lengthen from December to June does
not guarantee trouble-free weather on the way.
Consequently, alongside a generally positive
view of the world’s medium-term prospects, a
heavy dose of watchfulness is warranted.
Andrew Bell
Chief Executive Officer
15 March 2024
WITAN DISCOUNT TO NET ASSET VALUE (%)
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
+2.0
Dec 2013 Dec 2015 Dec 2017 Dec 2019 Dec 2021 Dec 2023
Witan AIC Global Sector (equal weighted)
Witan Investment Trust plc
Annual Report 2023
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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 these dual objectives.
2023 proved to be a difficult year for investors in
climate strategies, as higher interest rates
impacted the short-term outlook for investment
in renewable energy projects as well as the
value that investors ascribe to the long-duration
earnings of companies enabling the energy
transition. Despite this setback, we remain
convinced that the long-term trend towards a
greener energy mix will provide a tailwind for
earnings in the years ahead. As such, Witan now
has nearly 10% of its assets invested in funds
which we believe will benefit directly from the
world’s efforts to mitigate or adapt to climate
change.
It is crucial to understand, however, that our
responsible investment policy, whilst
complementary to our climate change
investments, covers our entire listed-equity
portfolio. It is implemented in the belief that
owning well-managed businesses with
sustainable cash flows is key to achieving
durable returns for our shareholders. This
applies to companies in multiple sectors and
often requires a significant amount of work to
encourage them to operate in a more
sustainable manner, be it environmentally or
socially.
ENCOURAGING SUSTAINABLE BUSINESS
Our policy is to ensure that by 2030 our
portfolio consists entirely of sustainable
businesses. These are businesses that are
well-run, incorporate resilient business
practices and have sustainable cash flows. We
believe they are likely to perform better than
companies which are at risk of disruption,
litigation, regulation or loss of business because
of poor ESG practices and thus achieve superior
valuations.
we devised our responsible investment
framework which was implemented with the
help of our managers and applied to the
portfolio to develop our baseline assessment.
We repeated the process in 2023, with the
results being shown on pages 18 to 19 of this
Annual Report. We recognise the additional
work required by our managers to complete this
task and are grateful for their diligent support.
A small proportion of the portfolio is invested in
collective funds, primarily within an investment
company structure. Although these funds are
not covered by the same framework as our
equity portfolio, we still take ESG considerations
into account. The responsibility for these
investments, which account for up to 15% of
Witan’s assets, lies with our Investment Team,
which reports annually to the Board on
stewardship activity. Each of these listed
investment companies has its own investment
manager and, crucially, an independent board
which gives us the ability to influence
governance where it is found wanting.
GOVERNING RESPONSIBLE INVESTMENT
The Witan Board is responsible for the overall
policy. Members of the Board and Investment
Team are responsible for its delivery and
monitoring how our managers engage and
consider ESG-related issues.
We have embedded responsible investment
considerations across our listed equity portfolio,
not just in a limited part of it. To implement our
policy, we have developed four areas of action:
• Our own businesses practices;
• Fund manager engagement;
• Portfolio stewardship; and
• Industry advocacy.
Our focus is particularly on where we can have
the biggest positive impact: the characteristics
of our investment portfolio and our engagement
with the companies in it. Our approach is
adaptable and underpinned by the belief that
capital allocation and engagement have a more
positive long-term impact than an exclusionary
approach and that blanket exclusions (except
controversial weapons) can be
counterproductive.
IMPLEMENTING OUR POLICY
The key to success is full alignment with our
external fund managers, who manage more
than 85% of the portfolio. Not only is it their role
to invest our shareholders’ capital, but they
must also identify any issues at investee
companies and engage accordingly. In 2022,
Our policy is to ensure that by
2030 our portfolio consists
entirely of sustainable
businesses
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Our responsible investment policy
We believe that investing in well-managed, ‘sustainable businesses’ is the foundation for achieving good
returns for our shareholders, as well as a better future for the planet’s ecosystems and for society. Our
target is to ensure that by 2030, Witan’s listed equity portfolio will entirely consist of such businesses. For
us, these businesses have the following characteristics:
Our own responsibility
We take all the steps necessary to ensure that Witan is itself
a ‘sustainable business’ by addressing our own carbon
footprint and ensuring we have experienced management,
skilled employees and strong corporate governance with an
inclusive and diverse culture. Our ownership structure
ensures that we are aligned with our shareholders.
Portfolio stewardship
Through our voting rights as shareholders and direct
engagement with companies, Witan works with our fund
managers to maintain a dialogue with underlying portfolio
businesses. As part of our active management strategy, our
fund managers hold investee companies to account if they
fall short of the standards expected of them.
Fund manager engagement
Witan ensures that our responsible investment strategy is
embedded in our own investment processes and that these
policies are integrated into the direction of our fund managers.
We regularly engage with our fund managers to discuss our
expectations and to derive comfort that they are equipped with
the insights and tools to drive progress in their portfolios.
Industry advocacy
As a multi-manager investment fund, Witan advocates a
responsible investment approach through our membership
of industry initiatives and our network of fund managers.
Prosperity
People
Planet
Partnership
Exhibiting sustainable cash flows, good corporate behaviour, strong
stakeholder engagement and respect for their shareholders.
A clear strategy and roadmap to minimise its environmental impact
and, wherever possible, to transition towards net zero by 2050 in line
with global efforts to limit warming to not more than 2°C and
preferably 1.5°C. This includes companies positioned to help
accelerate the energy transition or carbon reduction.
A strong and experienced management team (and Board) with an
inclusive and diverse culture, respecting the well-being of customers,
employees, suppliers and the community.
Openness to collaboration, stakeholder engagement and
participation in industry initiatives promoting good practice.
Transparency in acknowledging mistakes and addressing issues
where they arise, working to deliver a more sustainable future.
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Portfolio review
In 2023, we set decarbonisation targets (known
as the Initial Target Disclosure) in line with the
Net Zero Asset Managers initiative (‘NZAM’)
guidelines. We also engaged with our
third-party managers to learn from the 2022
baseline assessment of the portfolio using the
responsible investment framework. Working
with our managers, we identified areas for
engagement and, where necessary, escalation.
The exercise was repeated in 2023 when over
300 companies were assessed.
BUILDING ON OUR FOUNDATIONS
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 our baseline in 2022, we
once again engaged with our managers to see
what progress had been made by portfolio
companies over the subsequent 12 months. The
purpose was to assess where we were
positioned relative to our sustainability
objectives.
As before, the assessment involved Witan and
every fund manager rating each of their
portfolio holdings across the four pillars of
prosperity, people, planet and partnership (see
page 17) that we believe characterise a
‘sustainable business’. Witan provided a
detailed methodology, identifying ten individual
issues (grouped under the four pillars), to assist
fund managers in assessing each company. In
short, over 90% of portfolio companies were
judged to be either fully or partially aligned with
eight out of the ten categories, while over 75%
were similarly in compliance with the other two
categories (namely Diversity and Remuneration).
WITAN SUSTAINABILITY ASSESSMENT
(1)
AVERAGE SCORE PER ISSUE
(2)
ACROSS FOUR PILLARS
Prosperity People Planet Partnership
Reporting
Collaboration
Disclosure
Carbon Target
Sustainability
Remuneration
Diversity
Compliance
Board
Engagement
0
10
20
30
40
50
60
70
80
90
100
(1) Sustainability bands ranked 1 (highest) to 7 (lowest); see page 19.
(2) See explanation of each issue on page 117.
Our focus in 2023 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.
42%
Band 1
29%
Band 2
16%
Band 3
Band 6
1%
Band 7
1%
3%
Band 5
8%
Band 4
Driving sustainable businesses through a strategic approach to responsible
investment continued
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Annual Report 2023
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SCORING OUR PORTFOLIO
These assessments were converted into a
numerical score with each company achieving a
rating of 0-100. In total, over 300 companies
across our core and specialist portfolios were
assessed.
In 2023, the weighted average assessment of
sustainability was 81 (2022: 80) out of a possible
100. As noted last year, our portfolio is on a
journey towards greater sustainability, and we
expect progress to be incremental and not
necessarily linear. It is therefore pleasing to
make positive progress this year. The results of
the assessment are shown in the charts
opposite and below.
Each portfolio company scored between 0
(failing to meet any sustainability criteria) and
100 (meeting all criteria). The 0-100 assessment
of sustainability was sub-divided into seven
equal bands with Band 1 being the highest
rating and Band 7 the lowest. 42% (2022: 40%)
of companies in the portfolio sit within
sustainability Band 1 (shown in dark green on
the chart) while 87% (2022: 83%) sit within the
top three bands. We consider this to be an
encouraging result, especially as this year’s
assessment included an additional 50+
companies, many of which are smaller, often
emerging market companies, where responsible
investment practices are less well developed
and a higher sustainability assessment may be
harder to achieve.
Just 18 companies (equal to less than 5% of the
portfolio) sat in the lowest three bands (5 to 7)
where a lack of disclosure, rather than poor
practices per se, were the primary cause of a
low rating. Of these, seven were Chinese
companies (ironically, all seven provide
products or services which contribute to
improving environmental and / or social
outcomes), two were Japanese and five were
high-growth technology or biotechnology
companies, with little or no direct carbon
footprint. Subsequent to the year-end, both
companies which were judged to be in Band 7
(the lowest band) were sold, albeit for
investment reasons, by their respective
managers.
Whilst our approach primarily involves an
assessment of clearly defined policy and
identifiable initiatives, there is also a degree of
2019
2022
2023
BenchmarkPortfolio
100
120
140
160
180
200
220
2030 Target
CORE PORTFOLIO WEIGHTED
AVERAGE CARBON INTENSITY
qualitative assessment involved. It is therefore
encouraging to note that there continues to be a
high degree of correlation between ratings
applied to companies which were owned by
more than one manager. This shows that our
framework is being applied consistently across
our whole portfolio, irrespective of which
manager is carrying out the analysis.
PROGRESSING TOWARDS NET ZERO
Following our commitment to NZAM, we were
required to set decarbonisation targets (known
as the Initial Target Disclosure) in line with the
NZAM initiative. These involved identifying what
proportion of the portfolio would be covered by
our commitment and what our interim (2030)
target for decarbonisation would be. In setting
our initial targets we considered what could be
measured as well as what could be achieved.
Therefore, our NZAM commitment covers our
core portfolio of primarily developed market,
large and mid-cap companies, equating to 75%
of our total assets under management. Our
decarbonisation target for this part of the
portfolio is a 50% reduction in Scope 1+2 WACI
between 2019 (the baseline year) and 2030.
Witan subscribes to MSCI for ESG research to
supplement our own responsible investment
framework and we use their data to analyse the
portfolio. We focus on two key measures when
considering our progress towards net zero. The
first is the WACI of our NZAM aligned assets (i.e.
the core portfolio) which was 125.4 tCO
2
e/$M
sales (2022: 134.9). This is already close to our
2030 target of 109.50 tCO
2
e/$M sales and is
broadly in line with the benchmark’s WACI of
122.9 tCO
2
e/$M sales. The second measure,
which is forward looking, is the implied
temperature rise of the core portfolio. To be
aligned with net zero and therefore the aims of
the Paris Agreement on Climate Change, the
portfolio should achieve alignment with an
implied temperature rise of no more than 2°C
and preferably 1.5°C. Currently, 76% of the
portfolio is aligned with 2.0°C, with 49% also
being aligned with 1.5°C. Overall, the core
portfolio is currently aligned with an implied
temperature rise of 2.0°C. This is materially
better than the 2.4°C for our equity benchmark.
These, of course, are snapshots which could
change due to company behaviour or portfolio
turnover so it is important to continue to monitor
progress over time. We expect that much, if not
all, of this progress will be achieved by
operating improvements within portfolio
companies (via reduced energy consumption,
better use of technology or a combination of
both). We do not, at least for the foreseeable
future, favour divestment to achieve portfolio
decarbonisation.
1.5°C Aligned
27%
19%
5%
49%
2.0°C Aligned
Misaligned Strongly Misaligned
CORE PORTFOLIO IMPLIED
TEMPERATURE RISE
DISTRIBUTION
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Our activity
in 2023
As part of our responsible investment policy, we
continued to focus on the direct and indirect
impact of Witan’s operations. We want our
managers to invest in businesses with the
potential for long-term growth in sustainable
cash flows. Our activity is therefore focused on
engaging with our managers and ensuring they
do everything in their power to help investee
companies maximise their returns while limiting
the financial risk associated with poor ESG
practices.
ADDRESSING OUR OWN IMPACT
Our direct impact, as an investment fund with
fewer than ten employees, is minimal.
Nevertheless, we have taken steps to manage,
disclose and improve our ESG impacts. We
calculated our carbon footprint for the first time
in 2022 and repeated the process in 2023.
Witan’s direct environmental impact consists of
energy (including electricity and gas) used in
our serviced offices as well as our home offices,
and the transport related to our commuting and
business travel. In 2023, our total carbon
footprint came to 11.2 tCO
2
(2022: 12.4). Our
Scope 1 and Scope 2 emissions were 4.1 tCO
2
with Scope 3 emissions accounting for the
remaining 7.1 tonnes (2022: 8.7). Our Scope 3
emissions include business travel as well as the
impact of home working. Our carbon intensity of
1.9 tCO
2
/employee compares favourably with an
average office-based firm (source: Witan/
Carbon Footprint Ltd).
ENGAGING OUR FUND MANAGERS
In addition to the portfolio’s ‘Sustainable by
2030’ review outlined on page 16, we assess
our managers’ ESG credentials and
performance through regular ESG-focused
meetings. This engagement is an integral part of
our overall due diligence process and provides
invaluable insight into their investment
philosophy and company engagement activity.
This qualitative assessment is supplemented by
data collected from third-party providers
including MSCI, the Transition Pathway Initiative
and Bloomberg, each of which can serve as a
Looking ahead to 2024, Witan will continue to
engage regularly with our external fund
managers on responsible investment practices.
We will focus on identifying the most material
impacts and on where operational or disclosure
improvements can be made at the portfolio
company level. In addition, we will review our
‘Sustainable by 2030’ framework to see what
can be learned from the first two years of its
operation.
ENGAGEMENT AND VOTING
Whilst it is essential that our managers have
robust engagement and voting policies, voting
in favour of (or against) management should not
necessarily be seen as a sign of ESG weakness
(or strength). Witan’s managers run concentrated,
high-conviction portfolios, where investments
are chosen on their own merits, rather than
according to their weight in an index or other
passive methodologies. As such, significant due
diligence is carried out before an investment is
made, as well as throughout the holding period.
Interaction is often at the highest (‘C-suite’) level
and is typically two-way, where investee
‘flag’ to alert us to potential ESG incidents or
significant discrepancies between industry
sources and our own analysis. Our managers
were enthusiastic supporters of our framework
and our engagement with them revealed a
highly developed set of polices which were
implemented effectively.
All our fund managers are signatories to the UN
Principles for Responsible Investment (‘PRI’)
while substantially all of the funds in our
specialist portfolio are managed by signatories
to the PRI. Half of our fund managers are also
members of the NZAM (2022: 50%).
Engagement with companies
has a greater positive impact
than divestment
93%
5%
2%
For Management Against Management Abstain
VOTING SUMMARY 2023
Driving prosperity and sustainable business through
responsible investing continued
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A multi-decade investment
opportunity in enabling the
energy transition
WITAN IS SIGNATORY OF:
companies benefit from an open, frank and
mutually respectful dialogue, where advice is
given to and often sought by, some of the
world’s leading captains of industry.
Indeed, as our managers have typically
selected these investments because they are
well managed, high-quality businesses,
resorting to voicing their concerns at the ballot
box is rarely necessary. However, even the best
companies sometimes require external input
when standards are found wanting or where
management are judged to be working at odds
with shareholder interests. This is where our
experienced managers can draw on their
collective wisdom to promote better practices.
Witan regularly reviews the voting and
engagement records of our fund managers.
Through engagement and voting strategies,
Witan and our fund managers can help influence
corporate behaviour and ensure that our voting
and engagement is targeted at improving
shareholder returns while being aligned with
our responsible investment strategy.
In 2023, Witan’s fund managers voted on well
over 4,000 different proposals put to the
shareholders of investee companies at more
than 400 separate shareholder meetings. Of
those votes, 93% were cast in favour of
management (2022: 93%) and 5% (2022: 7%)
against management (see chart at the foot of
page 20).
WEIGHTED AVERAGE GREEN REVENUE
EXPOSURE
As stated earlier, we believe that there is a
multi-decade investment opportunity in
companies which are enabling the energy
transition. One way to measure a portfolio’s
exposure to this transition is the Weighted
Average Green Revenue exposure (‘WAGR’).
This is the portfolio’s weighted average of
revenue exposure to alternative energy, energy
efficiency, green building, pollution prevention,
sustainable water and sustainable agriculture.
Whilst the analysis of such revenues is imperfect
(and at an early stage of development) there are
tools available to us to help quantify our
exposure to this theme. The listed equity
portfolio (representing c. 85% of Witan’s assets)
had a WAGR exposure of 5.8% (2022: 4.4%). In
addition to this, we estimate that funds in our
Direct Holdings portfolio contribute a further
2-3% to the total portfolio WAGR of c. 8%,
compared with the benchmark exposure of
5.6%.
DIVERSITY AND INCLUSION
Whilst we do not specifically target diversity and
inclusion targets at the portfolio level, we are
encouraged to see our managers promoting
ESG best practices and, in many cases,
supporting a broader, more diverse workplace
within investee companies. That way,
shareholders and other stakeholders can
benefit from the different perspectives that
broader cognitive diversity brings. Collectively,
our managers are supporters of various
initiatives including Girls are Investors, 10,000
Interns Foundation, Arrival Education, Diversity
Project, the CFA’s Diversity, Equity & Inclusion
Code and UpReach. We believe that this is
important, not only because it provides a
helping hand to those who might not otherwise
have had an opportunity to further their careers,
but because companies and shareholders,
including Witan, will benefit from exceptional,
but often unrecognised, talent.
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believes that the company remains well
placed to both reduce carbon emissions and
structurally improve its returns over the
medium term.
During the year, the company reached
agreements with a number of governments
across Europe in relation to providing financial
support for green transformation projects
across its portfolio. This includes a $2 billion
agreement with the French Government for
decarbonisation projects at its Dunkirk Steel
plant, which will help reduce the country’s
industrial emissions by 6%, and a $1 billion
funding package with the Spanish
government to create the world’s first full
scale zero emission steel plant. Further
investments were made into renewable
energy projects while development of lower
carbon products and solutions continued to
progress, with customers showing increasing
interest, translating into tangible sales.
A fatal explosion at the company’s Kostenko
coal mine in Kazakhstan in October resulted
in the death of 46 ArcelorMittal employees.
Our manager had a number of engagements
with the company in order to gain a better
understanding of the event, potential
repercussions and become more informed
about the independent review as a result,
while also detailing the manager’s view as to
how the company should address the issues
arising from this. Whilst undoubtedly tragic,
Company
ArcelorMittal
Country
Luxembourg
Sector
Industrials
ENGAGEMENT CASE STUDY
ArcelorMittal continued to make good
progress on its decarbonisation journey
during the year. The company’s strategy
and near-term pathway became more
refined as did the technological solutions
required to facilitate the transition.
However, tragic events at the company’s
Kazakhstan coal mine dominated headlines
towards the end of the year. Engagement
with the company remained high as our
investment manager continued to monitor
and track key decarbonisation milestones
and to ensure that the company was being
held to account for the Kazakhstan incident.
ArcelorMittal remains one of the portfolio’s
largest contributors to carbon intensity. The
company remains committed to taking an
industry leading approach to reducing such
emissions, targeting a 25% reduction by
2030 (-35% in Europe) and to aiming to run
a net zero operation by 2050. Through
scale, geographic reach, asset mix, sector
leading innovation and an improving
competitive environment, our manager
Driving prosperity and sustainable business through
responsible investing continued
the company believes the accident is not
representative of its wider health and safety
record which has shown a consistent
improvement in other regions around the
world in recent years.
Arcelor had been in discussions with potential
acquirers of the mine before the incident,
reflecting the company’s desire to both
actively manage its portfolio of assets in order
to reach its carbon reduction goals and
manage the wider capital needs of the group.
Following the incident the company has now
reached an agreement to divest the asset.
Taking into account the significant future
capital requirements of the asset, to both
improve its green credentials and upgrade
the facility, the fund manager estimates that
the transaction will be cash flow positive for
Arcelor.
Whilst we would always favour engagement
leading to operational improvement rather
than divestment, there are times when a
company (or investment manager) must take
difficult decisions regarding its operations (or
investment) and assess the financial interests
of shareholders compared with the optimal
environmental outcome. The Kostenko mine is
an example of such a situation, where it would
have been financially over-burdensome on
shareholders to retain and improve the asset,
which was, therefore, divested.
Driving prosperity and sustainable business through
responsible investing continued
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On a separate matter Witan engaged with the
manager regarding WCN’s carbon
performance. WCN has a relatively high
emissions intensity because, as a solid waste
management service provider, the bulk of its
emissions stem from gasses liberated from
landfills. The manager has discussed this
issue with WCN which says that “For every
metric ton of carbon generated through the
management of our customers’ waste and
recyclables, our operations lead to the
avoidance of 4.2 metric tons of carbon,
primarily through recycling, energy
production, and carbon sequestration.” It is
clearly difficult for waste management
companies to commit to carbon neutrality in
the near term. In the meantime, in terms of the
Paris-aligned targets, WCN has prioritized
greenhouse gas mitigation and carbon
sequestration throughout its operations.
Company
Waste Connections Inc
Country
Canada/USA
Sector
Industrials
ENGAGEMENT CASE STUDY
Over subsequent months, the manager
engaged multiple times with WCN meeting
executives, attending industry expos and
interviewing employees, to understand the
impact that centralisation was having on staff
retention and to emphasise their concern,
should the situation be allowed to deteriorate
further. Lower employee turnover is
particularly relevant to WCN because labour
is its largest cost, so controlling costs will not
only improve margins but create more
capacity for WCN to re-invest into its business
– supporting its customer service and annual
price increases. Separately, WCN’s CEO
attended our manager’s CEO Sandbox: a
‘culture share-and-learn event’. This is a new
initiative to help investee companies learn
from each other’s business practices in a
forum for open discussion. This was followed
by the manager presenting to a group of
WCN’s top c. 1,000 business leaders at WCN’s
annual leadership event. This presentation
allowed him to share how the manager’s initial
assessment of WCN’s strong, well-aligned
culture had been called into question by poor
management decisions. Ultimately, however,
the manager was able to conclude that their
engagement had been successful, with
WCN’s culture directionally improving,
supporting the thesis that WCN is in an
investment sweet spot: positive inflecting
culture to drive better financial performance.
The manager will continue to monitor WCN’s
employee turnover metrics and engage with
management regarding succession plans.
Waste Connections Inc (‘WCN’) is the third
largest solid waste company in North
America, targeting secondary and rural
markets, where it owns both the local
landfill and collection assets. To support
this strategy and empower local leaders,
WCN embraces a decentralised structure
and ‘servant leadership’. Our manager’s
original (2019) investment thesis was based
on an assessment of WCN’s financial
metrics, supported by a sustainable
competitive advantage and strong culture.
In 2022, the manager’s culture analysis
identified that WCN management had
become more centralised under a new
CEO. In early 2023, despite the
reappointment of the founder as CEO, it
became clear that WCN had been slow to
adapt to elevated employee turnover, a
negative consequence of becoming more
centralised, so the manager began
re-examining the investment thesis.
STRATEGIC REPORT
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Customer: WITAN Project Title: ANNUAL REPORT 2022 T: 0207 055 6500 F: 020 7055 6600
Meet the managers
We act as a one-stop shop for global equity
investment. We search for the best fund managers
internationally, so the portfolio is notreliant on the
stock-picking skills of one individual. The multi-
manager team-based approach ensures that the
portfolio embraces many companies, sectors and
geographies.
However, the sheer variety of investment
opportunities means that they are not always obvious
or easy to reach.
Andrew Bell
Chief Executive Officer,
Witan Investment Trust
James Hart
Investment Director,
Witan Investment Trust
Andrew Bell and James Hart manage
Witan’s portfolio of direct holdings in
specialist investment companies, as
well as having overall responsibility
for Witan’s investment portfolio, under
the direction of the Board.
Our breadth of expertise adds value throughout the asset allocation process as follows:
Structuring our portfolio
Witan’s investment team
Drawing on our experience to deliver collective wisdom
Some managers focus on large, well-known
companies; while others might seek to profit from
pioneering businesses in specialist sectors. However,
investment opportunities evolve over time. When that
happens, we can appoint or replace managers
accordingly.
Engaging
with
managers
Making
changes
where
appropriate
Selecting
the right
managers
Monitoring
the portfolio
Identifying
opportunities
Witan Investment Trust plc
Annual Report 2023
24
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Witan Investment Trust plc
Annual Report 2023
25
Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
We identify managers who can demonstrate
independence of thought anda clear alignment of
interest between themselves and their clients.
They will haveaclearly articulated and repeatable
investment process, a high degree of intellectual
rigour and sound judgement to enable them to
identify attractive companies and combine them
into concentrated, differentiated portfolios.
We meet with our managers regularly todiscuss
investment and governance issues and we expect
them to uphold thehighest fiduciary standards. As
part ofour investment process, we can adjust
manager selection and allocations to ensure we
create a combined portfolio which can deliver
consistent long-term outperformance, while our
multi-manager structure helps reduce the risks
associated with a single management style.
The core portfolio accounts for 75%
It is predominantly invested in global,
large cap listed companies with strong fundamentals
generating enduring cash flows or with
underappreciated growth prospects. Our core
portfolio managers tend to have concentrated,
high-conviction portfolios with low portfolio
turnover.
The specialist portfolio accounts for 25%
It provides exposure to a range of investment
themes best accessed through managers with
specialist knowledge. Through our due
diligence process, we identify long-term themes
which offer the ability to deliver higher returns
and outperformance. Current investment
themes include:
> Climate change;
> Emerging markets;
> Unquoted growth companies;
> Listed private equity; and
> Life sciences.
These are held either via segregated portfolios,
or funds held within the directholdings portfolio.
Selecting the
right managers
Identifying
opportunities
Monitoring and
engaging with
our managers
Core portfolio
Specialist portfolio
What sets Witan apart is our unique, diversified
but high-conviction portfolio structure,
consisting of two distinct but complementary
elements: core and specialist. This gives
shareholders access to a range of investments
with the aim ofproviding better returns over the
long term while short-term performance maybe
quite different from that oftheCompany’s
benchmark.
Witan Investment Trust plc
Annual Report 2023
25
Meet the managers continued
STRATEGIC REPORT
Job No: 48774 Proof Event: 3 Black Line Level: 0 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2022 T: 0207 055 6500 F: 020 7055 6600
JENNISON ASSOCIATES, LLC
Mark Baribeau, Head of Global
Equities at Jennison Associates,
and co-Portfolio Managers
Tom Davis and Rebecca Irwin
seek to invest in a portfolio of
market-leading companies with
innovative business models,
positively inflecting growth
rates, and long-term competitive
advantages. Mark, Tom and
Rebecca work closely alongside
a highly experienced team of
research analysts to employ a
high-conviction, fundamental
bottom-up approach that is
sector, region and country-
agnostic. The team invests in
a select group of companies
with innovative and disruptive
businesses that are driving
structural shifts in their
respective industries. They
also look for companies with
defensible business models
and attractive product offerings,
supported by secular demand
trends. The portfolio typically has
between 35 and 45 holdings and
securities must meet stringent
standards in order to remain or
earn a place in the portfolio.
Name:
Mark Baribeau
Style:
Companies with exceptional
growth prospects
Benchmark:
MSCI ACWI
Inception date:
31/08/2020
UNPRI signatory:
Yes
7.6%
Witan assets
2022: 6.0%
2023 performance
Jennison
Associates, LLC
34.5%
MSCI ACWI 15.9%
LANSDOWNE PARTNERS
Founded in 1998, Lansdowne
Partners has evolved to become
one of the UK’s pre-eminent
investment management
boutiques. The Long Only
Developed Markets Strategy,
managed by Peter Davies and
Jonathon Regis, combines a
detailed thematic approach with
rigorous companyanalysis to
identify anadaptable portfolio
positioned forunderappreciated
or contrariantrends. The
two lead managers benefit
from the support provided
by a team of experienced
and insightful analysts who
tend to focus on key sectors
of interest to the team.
The high-conviction portfolio is
the result of detailed company-
specific research, allied with an
appreciation of global thematic
developments. The team is
willing to make significant
adjustments to the portfolio to
reflect its view of the changing
investment landscape.
Name:
Peter Davies
Style:
Concentrated, benchmark-
independent investment in
developed markets
Benchmark:
MSCI ACWI
Inception date:
14/12/2012
UNPRI signatory:
Yes
18.1%
Witan assets
2022: 17.4%
2023 performance
Lansdowne
Partners
14.6%
MSCI ACWI 15.9%
Core portfolio managers
We have six managers in our core portfolio.
Witan Investment Trust plc26
Annual Report 2023
Witan Investment Trust plc
Annual Report 2023
27
STRATEGIC REPORT
Job No: 48774 Proof Event: 3 Black Line Level: 0 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2022 T: 0207 055 6500 F: 020 7055 6600
VERITAS ASSET
MANAGEMENT
Andy Headley, Head of Global
Strategies at Veritas, uses a
number of research methods
to help identify industries
and companies that are well
positioned to benefit from
medium-term growth, regardless
of where they are located. The
aim is to generate excellent
real returns and minimise the
risk of permanent capital loss.
Potential investments are
analysed from an absolute
basis rather than relative to
any benchmark or index. This
equity portfolio follows a Global
Focus strategy, investing
with a disciplined approach
to valuation in ‘quality’ mid to
large capitalisation companies.
It typically contains fewer
than 30 stocks, chosen with a
highly selective and rigorous
approach, and is focused on a
handful of investment themes.
Name:
Andy Headley
Style:
Real return objective from
high-quality companies
Benchmark:
MSCI ACWI
Inception date:
11/11/2010
UNPRI signatory:
Yes
17.3%
Witan assets
2022: 17.5%
2023 performance
Veritas Asset
Management
16.3%
MSCI ACWI 15.9%
LINDSELL TRAIN
Lindsell Train has over 20 years
of heritage managing high-
conviction (20-35 companies),
long-only equity portfolios
on behalf of clients globally.
Underpinning its investment
focus is Lindsell Train’s simple
organisational structure with a
small team of 26 professionals.
Being majority employee
owned empowers Lindsell Train
to employ a genuinely long-
term approach, resulting in
exceptionally low turnover, which
is a key differentiating quality.
Lindsell Train’s investment
universe is comprised of quoted
companies that it determines
to be “exceptional”, by which
it means companies that
possess deep economic moats
that enable the companies to
maintain growth and pricing
power, sustain above average
real rates of return over
the long term, and weather
different market environments.
The investment philosophy
is premised on the belief
that the market persistently
undervalues the significant value
creation from the compounding
effects of cash flows and
dividends of such exceptionally
durable businesses.
Name:
Michael Lindsell and Nick Train
Style:
Long-term growth from
undervalued brands
Benchmark:
MSCI ACWI
Inception date:
01/09/2010
(1)
UNPRI signatory:
Yes
(1) Lindsell Train managed a UK portfolio
from 01/09/10 until 31/12/19.
16.1%
Witan assets
2022: 16.7%
2023 performance
Lindsell Train 8.0%
MSCI ACWI 15.9%
Witan Investment Trust plc
Annual Report 2023
27
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
STRATEGIC REPORT
Meet the managers continued
Job No: 48774 Proof Event: 3 Black Line Level: 0 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2022 T: 0207 055 6500 F: 020 7055 6600
WCM INVESTMENT
MANAGEMENT
Based in Laguna Beach,
California, WCM is an
independent asset management
firm that runs focused portfolios,
comprised of high-quality
businesses with growing
economic moats, aligned with
strong, adaptable corporate
cultures, and supported by
durable global tailwinds. The
portfolio is concentrated in 30-
40 high-conviction investments
with the objective of securing
long-term excess return and
downside protection. As an
active manager, WCM believes
that their investee companies
have meaningful structural
advantages which, when allied
with a ‘buy and manage’ low
turnover approach, will allow
long-term outperformance
of the relevant benchmark.
Name:
Mike Trigg
Style:
High-quality companies with
strong culture and increasing
competitive advantage
Benchmark:
MSCI ACWI
Inception date:
31/08/2020
UNPRI signatory:
Yes
11.7%
Witan assets
2022: 11.1%
2023 performance
WCM 20.6%
MSCI ACWI 15.9%
Core portfolio managers
ARTEMIS
Andy Gray and Henry Flockhart
co-manage Artemis’s UK
Special Situations strategy.
Their aim is to achieve superior
long-term growth by looking for
unrecognised growth potential
in companies, often those that
are unloved or out of favour. The
strategy, which favours smaller
and medium-sized companies,
identifies hidden value
within ‘problem investments’,
which can be companies in
need of new management
or refinancing or suffering
from investor indifference.
The focus on those companies
which can help themselves
rather than relying on a change
in the business climate aims to
avoid ‘value traps’ and other
risks associated with a ‘special
situations’ strategy. The Artemis
team places great emphasis
on personal knowledge of
management teams and
meets with them regularly.
This helps them understand
what can be achieved and
how aligned management
are with shareholders.
The portfolio typically has
fewer than 50 holdings.
Name:
Andy Gray
Style:
Recovery/special situations
Benchmark:
MSCI UK IMI
Inception date:
06/05/2008
UNPRI signatory:
Yes
3.4%
Witan assets
2022: 6.5%
2023 performance
Artemis 14.8%
MSCI UK IMI 8.0%
Witan Investment Trust plc
Annual Report 2023
28
Witan Investment Trust plc
Annual Report 2023
29
Job No: 48774 Proof Event: 3 Black Line Level: 0 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2022 T: 0207 055 6500 F: 020 7055 6600
Specialist portfolio managers
Each of our specialist portfolio managers is an expert in one of our chosen themes.
GQG PARTNERS
The GQG Partners Emerging
Markets Equity strategy seeks
long-term capital appreciation.
GQG Partners seeks to invest in
high-quality, attractively priced
companies exhibiting
competitive advantages. GQG’s
investment process aims to
evaluate each business with a
focus on financial strength,
sustainability of earnings growth,
and quality of management. The
resulting portfolio seeks to
manage the downside risk of
equity investments while
providing attractive returns to
long-term investors over a full
market cycle.
GMO
GMO was co-founded in 1977by
the well-known investor and
climate-focused philanthropist,
Jeremy Grantham.
The investment process is
grounded in a long-term,
valuation-based investment
philosophy – an approach which
GMO believes provides the best
risk-adjusted returns. The
Climate Change strategy seeks
to deliver high total return by
investing primarily in equities of
companies that are positioned to
benefit, directly or indirectly,
from efforts to curb or mitigate
the long-term effects of global
climate change, to address the
environmental challenges
presented by global climate
change, or to improve the
efficiency of resource
consumption. As climate change
is among the most important
investment issues facing
investors today, GMO believes
that there are exceptional
opportunities forlong-term
investors in a world mobilising to
address climate change.
Name:
Rajiv Jain
Style:
High-quality companies
withattractively priced growth
prospects
Benchmark:
MSCI Emerging Markets
Inception date:
16/02/2017
UNPRI signatory:
Yes
Name:
Lucas White
Style:
Companies positioned to benefit
from climate change mitigation/
adaptation efforts
Benchmark:
MSCI ACWI
Inception date:
05/06/2019
UNPRI signatory:
Yes
5.0%
Witan assets
2022: 5.6%
6.4%
Witan assets
2022: 5.9%
2023 performance
GQG Partners 25.3%
MSCI Emerging
Markets
4.0%
2023 performance
GMO (11.7)%
MSCI ACWI 15.9%
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Witan Investment Trust plc
Annual Report 2023
29
Job No: 48774 Proof Event: 3 Black Line Level: 0 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2022 T: 0207 055 6500 F: 020 7055 6600
Specialist portfolio managers
Name:
Witan
Style:
Specialist collective funds
Benchmark:
Witan’s benchmark
Inception date:
19/03/2010
UNPRI signatory:
Yes
2023 performance
Direct Holdings
Unquoted Growth
Benchmark
(2.9)%
(14.7)%
14.7%
DIRECT HOLDINGS
Private equity
Apax Global Alpha (2.5%)
(1)
Extensive portfolio of private
equity investments in growing
sectors.
Princess Private Equity (1.6%)
(1)
Portfolio of private equity
investments managed by
Swiss-based Partners Group.
HarbourVest Global Private
Equity (0.9%)
Portfolio of private company
investments via funds managed
by HarbourVest Partners.
Hostmore (0.2%)
(1)
Owner and operator
ofTGIFriday’s UK casual dining
franchise spun outofElectra.
Life sciences
Syncona (1.0%)
(1)
A healthcare investment company
focused on founding, building
and funding global leaders in
innovative life sciences.
S&P Biotech ETF (0.6%)
(1)
Seeks to replicate the
performance of the equal
weighted S&P Biotechnology
Select Index.
The Biotech Growth Trust (0.2%)
(1)
Investment in the worldwide
biotechnology industry.
Commodities
BlackRock World Mining (0.5%)
(1)
Fund investing in mining and
metal assets worldwide,
principally via listed securities.
Real estate
Schroder Real Estate (1.0%)
(1)
Fund of UK commercial
realestate investments.
Clean Energy
VH Global Sustainable Energy
(2.4%)
(1)
Diversified energy infrastructure
investments focused on
accelerating theenergy
transition.
Credit
NB Distressed Debt (0.4%)
(1)
Portfolio of distressed, stressed
and special situations
investments inrealisation
situations.
UNQUOTED GROWTH
Lansdowne Opportunities
(0.9%)
(1)
Invests mostly in unquoted
companies capitalising on the
intellectual property ofleading
universities.
Lindenwood (0.7%)
(1)
Invests in unquoted, highgrowth
companies, seeking the next
generation of technology
leaders.
FTSE 250 ETF (1.7%)
(1)
This investment has been
purchased to increase tactical
exposure to the mid-cap UK
FTSE 250 index (including
investment companies).
A selection of specialist collective funds investing in both quoted and
unquoted companies, with the overall objective of outperforming
Witan’s equity benchmark. These specialist themes tend to be outside
the scope of investment for most equity investment managers.
(1) Percentage of Witan’s assets
11.2%
2022: 11.3%
(1)
Direct Holdings
1.6%
2022: 1.9%
(1)
Unquoted Growth
Witan Investment Trust plc
Annual Report 2023
30
STRATEGIC REPORT
Meet the managers continued
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Witan Investment Trust plc
Annual Report 2023
31
Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Stay
in touch
The Company maintains a website 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 or by sending their details to
contact@witan.co.uk.
witan.com
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT
32
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Top 40 investments as at 31 December 2023
Company
Market
value of
holding
£m
% of
portfolio
1 GMO Climate Change Specialist fund investing in companies which benefit from efforts to curb or
mitigate the effects of climate change
115.5 6.5
2 Apax Global Alpha Investment company offering exposure to private equity investments in the
Technology, Services, Healthcare and Consumer sectors
44.7 2.5
3 VH Global Sustainable Energy An infrastructure fund focused on the energy transition 42 .1 2.4
4 Amazon.com Online retailer and cloud-based platform provider 38.1 2.1
5 Diageo UK-based global leader in spirits and liqueurs. Also owner of the Guinness beer
brand
31.9 1.8
6 Vanguard FTSE 250 UCITS ETF An exchange-traded fund providing exposure to the mid-cap UK FTSE 250 index
(including investment companies)
30.0 1.7
7 Princess Private Equity Investment company providing exposure to a portfolio of private equity
investments
29.3 1.6
8 Unilever Multi-national consumer goods company with food, home care and personal care
divisions
26.5 1.5
9 Microsoft Operating systems, server applications, business and consumer applications,
software development tools and internet software
26.2 1.5
10 RELX Global provider of information and analytics for professional and business
customers across industries
25.6 1.4
11 Nintendo Gaming console company which develops, manufactures and sells video game
hardware and software
24.7 1.4
12 London Stock Exchange Operates international equity, bond and derivatives markets and provides
indexing and financial data services
24.4 1.4
13 FICO Fair Isaac Corporation provides analytics software, solutions and services to
corporate and government clients
23.4 1.3
14 Canadian Pacific Kansas City Transcontinental railway providing freight and container services across its
network in Canada and the US
23.0 1.3
15 Lloyds Banking UK bank offering banking and financial services to retail and institutional
customers
22.5 1.3
16 NatWest A UK-based banking and financial services company 22.0 1.2
17 Intuit Develops and markets business and financial software solutions 21.0 1.2
18 Taiwan Semiconductor Manufacturing The world’s largest dedicated semiconductor foundry 20.8 1.2
19 Mastercard A global leader in the provision of financial transaction processing services 20.4 1.1
20 Alphabet The holding company for Google 20.3 1.1
Top 20 632.4 35.4
The top ten holdings represent 23.0% of the total portfolio (2022: 22.4%).
The full portfolio is not listed because it contains over 200 companies.
Figures may not sum due to rounding.
Forty largest investments
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
33
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Top 40 investments:
Company
Market
value of
holding
£m
% of
portfolio
21 AIB Irish bank offering commercial banking services to retail and institutional
customers
20.1 1.1
22 Ryanair Europe’s largest airline offering low fare passenger services to destinations
across Europe
19.2 1.1
23 Thermo Fisher Scientific Offers medical products and services to the pharmaceutical and biotech
industry, hospitals and research & diagnostic organisations
18.8 1.1
24 Compagnie de St Gobain A global supplier of glass products and construction materials 18.7 1.0
25 UnitedHealth A leading US health insurer offering plans and services to group and individual
customers
18.6 1.0
26 Schroder Real Estate UK commercial real estate investment trust seeking to harness the ‘green
premium’ for consistent income and capital growth
18.2 1.0
27 Airbus Manufacturers and maintains commercial aircraft and military equipment 18.1 1.0
28 Mondelez A food and beverage company which manufacturers world leading snack foods
and chocolate brands
18.0 1.0
29 Nvidia Designs, develops and markets three dimensional (3D) graphics processors and
related software
17.8 1.0
30 Syncona Healthcare fund focused on founding, building and funding a portfolio of
innovative life science companies
17.7 1.0
31 PepsiCo A leading global beverage and convenience food company 17.0 0.9
32 Vinci A global leader in construction and concessions management with expertise in
building, civil, hydraulic and electrical engineering
16.9 1.0
33 ArcelorMittal A leading integrated steel production company 16.7 0.9
34 Heineken The world’s second largest brewer offering premium brand and zero-alcohol
beers
16.4 0.9
35 CRH Manufactures and distributes architectural, infrastructure and construction
products for infrastructure, housing, and commercial projects
16.1 0.9
36 HarbourVest Global Private Equity An investment company investing in private companies globally through funds
managed by HarbourVest Partners
16.0 0.9
37 TKO Group Holdings A premium sports and entertainment company comprising the Ultimate Fight
Club and World Wrestling Entertainment brands
16.0 0.9
38 TotalEnergies Produces, transports and supplies crude oil, natural gas, gasoline and low
carbon electricity, as well as refines petrochemical products
15.8 0.9
39 Lansdowne Opportunities Fund A fund investing mostly in unquoted companies capitalising on the intellectual
property of leading universities
15.6 0.9
40 Bank of Ireland Irish bank offering banking and financial services to retail and institutional
customers
15.0 0.8
Top 40 979.1 54.9
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT
34
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Classification of investments
at 31 December 2023
North
America
%
United
Kingdom
%
Continental
Europe
%
Asia
(ex Japan)
%
Japan
%
Latin
America
%
Other
(1)
%
Total
2023
%
Energy Energy
0.4 0.6
1.1
0.2 – 0.5 – 2.8
0.4 0.6
1.1
0.2 – 0.5 – 2.8
Materials Materials
1.8
1.1 2.0 0.2 – 0.2 0.1 5.4
1.8
1.1 2.0 0.2 – 0.2 0.1 5.4
Industrials Capital Goods
1.8
1.3 4.6 0.2 – 0.1 0.1 8.1
Commercial & Professional
Services
1.4
1.5 – – – – – 2.9
Transportation
1.8
0.2 2.5 0.1 – – – 4.6
5.0
3.0 7.1 0.3 – 0.1 0.1 15.6
Consumer
Discretionary
Automobiles & Components
0.3 0.1 0.5 – – – – 0.9
Consumer Durables & Apparel 0.1 0.1 1.8 0.2 – – – 2.2
Consumer Services 0.1 0.6 0.2 – – – – 0.9
Retailing 2.9 0.3 – 0.1 – 0.4 – 3.7
3.4 1.1 2.5 0.3 – 0.4 – 7.7
Consumer Staples
Food & Staples Retailing
0.3 – – – – – – 0.3
Food, Beverages & Tobacco 2.3 1.9 1.2 0.5 – 0.1 – 6.0
Household & Personal Products – 1.5 0.3 – 0.9 – – 2.7
2.6 3.4 1.5 0.5 0.9 0.1 – 9.0
Healthcare Healthcare Equipment &
Services
3.5 – – 0.4 – – – 3.9
Pharmaceuticals, Biotechnology
& Life Sciences
2.9 0.4 0.8 0.1 0.2 – – 4.4
6.4 0.4 0.8 0.5 0.2 – – 8.3
Financials Banks – 2.8 2.0 0.8 – 0.4 – 6.0
Diversified Financial Services 1.6 2.4 – – – 0.1 – 4.1
Financial Services 2.7 – 0.4 – – – – 3.1
Insurance 0.4 – – – – – – 0.4
4.7 5.2 2.4 0.8 – 0.5 – 13.6
Information
Technology
Software & Services
6.3 0.1 – – – – – 6.4
Technology Hardware &
Equipment
0.9 0.2 – 0.1 0.1 – – 1.3
Semiconductors &
Semiconductor Equipment
4.3 – 2.1 1.6 0.3 – – 8.3
11.5 0.3 2 .1 1.7 0.4 – – 16.0
Communication
Services
Communication Services
– 0.6 – – – – – 0.6
Media & Entertainment 3.8 – 0.2 – 1.4 – – 5.4
3.8 0.6 0.2 – 1.4 – – 6.0
Utilities Utilities – – – 0.4 – 0.2 – 0.6
– – –
0.4
– 0.2 – 0.6
Real Estate Real Estate – 0.3 – – – – – 0.3
– 0.3 – – – – – 0.3
Investment
Companies
Exchange – Traded Fund
– – – – – – 1.7 1.7
Investment Companies
(1)
– – – – – – 13.0 13.0
– – – – – – 14.7
14.7
Total 2023
39.6 16.0 19.7 4.9 2.9 2.0 14.9 100.0
Total 2022 35.8
19.7
20.7
4.4 3.4 2.0 14.0
100.0
(1) Investment Companies are included under the heading of Other because the underlying geographic exposure is not readily identifiable.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
35
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Principal risks and uncertainties
The directors have carried
outarobust assessment of
theprincipal and emerging
risksfacing the Company, including
those that would threaten
itsbusiness model, future
performance, solvency, liquidity or
reputation. These risks, and the
actions taken tomitigate them, are
set outbelow.
Risks are inherent in investment and corporate
management. It is important toidentify risks and
ways to control or avoid them. Witan Investment
Services Limited (‘WIS’) has a Risk Committee in
order to monitor compliance with its risk
management and reporting obligations as
Witan’s Alternative Investment Fund Manager
(‘AIFM’). The Company maintains a framework of
the key risks, with the policies and processes
devised to monitor, manage and mitigate them
where possible. Its detailed risk map
isreviewed regularly by the Audit & Risk
Committee and the WIS Risk Committee, which
report on pertinent issues to their respective
Boards.
The guiding principles remain watchfulness,
proper analysis, prudence and a clear system of
risk management.
Where appropriate, the Witan and WIS Boards
meet jointly to cover matters of common
interest. The WIS Board consists of six
non-executive directors and one executive
director who are also directors of Witan, and
one executive director who is a Company
employee.
The Board’s policy onrisk management has not
materially changed during the course of the
reporting period and up tothe date of
thisreport.
The Company’s key risks fall broadly under the following categories:
ReducedUnchangedIncreased
Market and investment portfolio
RISK MITIGATION
For an equity fund, a key risk of investing is a
general fall in equity prices and investment
income, which could be exacerbated by gearing
and the risks associated with the performance of
its investment managers and changes in Witan’s
share price rating.
Other risks are the portfolio’s exposure to country,
currency, industrial sector and stock-specific
factors (including those relating to the
sustainability of the business model taking
account of environmental, social and governance
factors). Political andmacroeconomic topics such
as Brexit, inflation, pandemics (e.g. Covid-19), trade
wars and military conflicts (e.g. the Russian
invasion ofUkraine and the Middle East) can all be
expected to lead to market volatility.
The Board seeks to manage these risksthrough:
a broadly diversified equity benchmark;
appropriate asset allocation decisions;
selecting competent managers and regularly
monitoring their performance, awareness of
emerging risks and the robustness of their
processes for taking account of those risks;
paying attention to key economic
andpolitical events;
engagement with shareholders and other
stakeholders;
active management of risk, whether
topreserve capital or capitalise
onopportunities;
the application of relevant policies
ongearing and liquidity; and
share buybacks and issuance torespond to
market supply anddemand.
During the year, Andrew Bell, the CEO, managed
the overall business and the investment portfolio
in accordance with limits determined by the Board
and the AIFM, onwhich the CEO reports at each
Board meeting. The Board also regularly reviews
investment strategy and performance, supported
by comprehensive management information and
analysis.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT
36
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
The Company breaches compliance/regulatory
requirements or fails to assessthe impact.
The Board takes its regulatory responsibilities very
seriously and compliance issues and potential
regulatorychanges are regularly reviewedby the
Boardand its AIFM.
Details of the Company’s corporate governance
policies are set out in the Corporate Governance
Statement on pages46 to 56. The Board conducts
an annual assessment of the effectiveness ofits
governance processes.
There is also a three-yearly independent external
review, the most recent of which was in 2021. See
page 55 for further details.
Operational and regulatory risks are regularly
reviewed by Witan’s Audit & Risk Committee and
WIS’s Risk Committee. WISissubject to its own
operating rules and regulations and is regulated by
theFinancial Conduct Authority (‘FCA’). The
Company hasestablished a modus operandi for
the effective coordination ofits responsibilities
and those of WIS, asitsAIFM.
Operationally, the multi-manager structure is
robust, as the investment managers, thecustodian
and the fund accountants keep their own records
which are regularly reconciled. The depositary, the
AIFM and theBoard provide additional checks and
safeguards. Management monitors the activities of
all third parties and reports anysignificant issues
to the Board.
Compliance and regulatory change
RISK MITIGATION
Accounting, taxation and legal
RISK MITIGATION
The Company must comply with sections 1158-59
of the Corporation Tax Act 2010 (‘CTA’).
A breach could result in the Company
losinginvestment trust status and, as
aconsequence, capital gains realised wouldbe
subject to corporation tax.
The Company must comply with the provisions of
the Companies Act 2006 (‘Companies Act’) and
with the UK Listing Authority’s Listing Rules and
Disclosure Rules (‘UKLA Rules’). A breach of the
Companies Act could result in the Company and/or
thedirectors being fined or becoming the subject
of criminal proceedings. Breach of the UKLA Rules
could result in the suspension of the Company’s
shares which would itself constitute a breach of
the provisions of theCTA.
The accounting requirements are monitored by the
CEO and AIFM and the Company carefully
monitors compliance with the applicable rules.
These requirements offer significant protection for
shareholders. The Board receives reportsfrom the
CEO, the AIFM, theCompany Secretary and the
Company’s professional advisers to enable it to
ensure compliance with all applicable rules. WIS is
authorised and regulated by the FCA to act as the
AIFM forWitan.
Operational and cyber
RISK MITIGATION
Many of the Company’s financial systems are
outsourced to third parties, principally BNP
Paribas. Disruption to their accounting, payment
systems or custody records could prevent the
accurate reporting and monitoring of the
Company’s financial position. The potential impact
of generative AI has been identified as an
emerging risk this year.
The Witan and WIS Executive undertake adetailed
due diligence programme, focusedupon the
operational and cyberarrangements, including
developments in AI, of all the Company’s suppliers.
BNP Paribas as the Company’s depositary, has a
key responsibility for monitoring such issues on
behalf of the Company. The Board and AIFM
monitor the depositary as well as its other
suppliers.
Details of the Board’s monitoring and
controlprocesses are explained further inthe
Corporate Governance Statement onpages46 to
56.
Principal risks and uncertainties continued
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
37
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Liquidity
RISK MITIGATION
The Company’s portfolio of securities mightnot be
realisable.
The Company’s portfolio consists mainly ofreadily
realisable securities. The Companyand its AIFM
regularly review liquidity needs(for example,
operational costs, loanservicing and repayment,
shareholder dividends and share buybacks)
relative to the Company’s portfolio income and the
value and tradability of the Company’s assets.
Most of the likely liquidity requirements are
foreseeable (for example, timetabled loan
payments and dividends) while others (suchas
share buybacks) are subject to theCompany’s
discretion. The Board is satisfied that unexpected
liquidity needs arenot significant and could readily
be metwithout compromising normal
portfoliomanagement.
Environmental, social and governance factors
RISK MITIGATION
Failure to identify, understand or mitigate the risks
arising from ESG issues may negatively impact
investment returns, increase the potential
forreputation risk to Witan and adversely affect
the net asset value and/or price of Witan’s shares.
Witan has a responsible investment policy which
was developed by the Board in consultation with
Witan’s Executive team. This is discussed fully on
pages 16 to 23 of this Report. Witan expects its
external managers to integrate ESG factors into
their investment processes. Witan requires
managers to report on any ESG issues in a timely
manner and the Executive monitors the portfolios
using various third-party data providers to ensure
that such issues are being identified. Managers are
also expected to report on engagement and voting
activities. The Executive holds regular ESG review
meetings with each of the managers where these
activities, as well as evolving best practice and
new responsible investment initiatives, are
discussed. The Executive presents its findings to
the Board on a regular basis.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT
38
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Section 172: engaging with our
stakeholders
Who?
STAKEHOLDER
GROUP
Why?
THE BENEFITS OF ENGAGEMENT
WITH OURSTAKEHOLDERS
How?
HOW THE BOARD AND WIS EXECUTIVE
ENGAGED WITH OUR STAKEHOLDERS
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
Actions and outcomes
WHAT ACTIONS WERE TAKEN, INCLUDING
PRINCIPAL DECISIONS?
Investors
Clear communication of our strategy and
theCompany’s performance against our objective is
important in itself and can help the share price trade
at anarrower discount or a premium to its net asset
value, which benefits shareholders.
New shares may be issued at a premium toNAV to
meet demand without dilution to existing
shareholders. Increasing the size of the Company
can benefit liquidity as well asspread costs.
WIS, on behalf of the Board, completes a programme of investor relations
throughout the year.
Key mechanisms of engagement included:
AGM
The Company’s website which hosts reports, monthly factsheets,
video interviews with the external managers, CEO,Investment Director
and regular market commentary
Online newsletters
One-on-one meetings with professional investors with eitherthe CEO,
Investment Director or Chairman
Group meetings with professional investors
Engagement with major shareholders on governance issues,
particularly in advance of the AGM
Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs and objective, and
the selection and monitoring of our external managers.
The impact of portfolio dividend trends on the Company’s revenues and
dividend payments.
See page 9 in the Chairman’s Statement and page 14 in the CEO’s Review
for the Board’s comments on the dividend policy.
Share price performance and the Company’s and wider investment trust
sector discounts.
The Company maintained a high rate of share buybacks, which have been
accretive to shareholders. See page 14 in the CEO’s Review.
The integration of ESG into the Company’s investment processes. ESG included in presentations to investors, ad hoc updates.
Informing investors of their rights to attend and vote at the AGM. Holders of shares via online platforms were written to, informing them of
how they could vote and view the Annual Report.
Ongoing impact of global conflicts on economies and markets and the
inflationary pressure on economies and markets.
The WIS Executive held regular meetings with shareholders throughout the
year and provided updates via the Company’s website and newsletters on
performance of the Company as well as the usual financial reports and
monthly factsheets.
Terms of the Company’s Remuneration Policy. A number of changes to practice were agreed, in particular in relation to the
deferred element of any bonus. See page 61 for more details.
External
managers
As Witan has a multi-manager approach,
engagement with our managers is necessary to
evaluate their performance against their stated
strategy and benchmark and to understand any risks
or opportunities this maypresent to the Company.
This also helpsensure that investment management
costs are closely monitored and remain competitive.
Witan ensures that all managersare paid in
accordance withtheirterms of trade.
The WIS Executive meets with the Company’s external managers
throughout the year and receives monthly performance and compliance
reporting. This provides the opportunity for both the manager and WIS
Executive to explore and understand how and why the relationship has
performed and what may be expected inthe future. Each manager also
presents annually to the Board ofdirectors, providing the opportunity for
the manager and Board to reinforce their mutual understanding of what is
expected from all parties.
Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and business
updates.
The integration of ESG into each manager’s investment processes. See pages 20 to 21 in responsible investment for a report on manager
activity in 2023.
Engagement with managers to ensure third-party internal control
reporting is in place.
All service providers engaged and supplied requested information for the
due diligence exercise to be completed. In one case, the manager
committed to engage third-party internal control reporting where this was
not in place.
Service
providers
Witan and WIS contract with third parties forother
services including: custodian; depositary; investment
accounting andadministration; and company
secretarial. Ensuringthe third parties to whom we
have outsourced services complete their roles
diligently and correctly is necessary for
theCompany’s success.
Witan pays all service providers in accordance with
their terms of business and is a signatory to the
Prompt Payments Code.
The WIS Operations team engages regularly with all service providers both
in one-to-one meetings, via regular written reporting and an annual due
diligence exercise. This regular interaction provides an environment
wheretopics, issues and business development needs (including current
inflationary pressures and the impact of the cost of living crisis on their
service) can bedealt with efficiently and collegiately.
The Audit and Risk Committee reviews annually a summary of significant
contracts to further reinforce the overviewof the Company’s service
providers at the corporatelevel. Furthermore, the Audit and Risk
Committee review the annual due diligence exercise that includes, where
appropriate, service providers’ third-party internal control reports.
Annual due diligence exercise undertaken. All service providers engaged and supplied requested information for the
due diligence exercise to be completed.
Employees
Attract and retain talent to ensure the Company has
the resources to successfully implement its strategy
and manage third-party relationships.
All employees of the Company sit in one open-plan office with the CEO,
facilitating interaction and engagement. There is a hybrid working policy in
place for employees to work remotely. As well as the CEO, the Investment
Director, Director of Operations and Director of Marketing regularly report at
Board meetings. Given the small number of employees, engagement is at an
individual level rather than as a group.
Ongoing flexible hybrid working arrangements maintained. Flexible hybrid working arrangements maintained without detriment to
productivity or service to stakeholders.
Performance and compensation of employees is reviewed
bytheRemuneration and Nomination Committee with the CEO.
See the Directors’ Remuneration Report on pages 60 to 72.
Debt
holders
To communicate and demonstrate a strong financial
position that supports the financing arrangements.
The WIS Executive provides regular financial covenant compliance
validation and financial reports to the stakeholders.
N/A. All financial covenants related to borrowings have been complied with.
The following ‘Section 172’ disclosure, which is required by
theCompanies Act 2006 and the AIC Code, as explained on
page50, describes how the directors have had regard to the
views of the Company’s stakeholders in their decision-making.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
39
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Who?
STAKEHOLDER
GROUP
Why?
THE BENEFITS OF ENGAGEMENT
WITH OURSTAKEHOLDERS
How?
HOW THE BOARD AND WIS EXECUTIVE
ENGAGED WITH OUR STAKEHOLDERS
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
Actions and outcomes
WHAT ACTIONS WERE TAKEN, INCLUDING
PRINCIPAL DECISIONS?
Investors
Clear communication of our strategy and
theCompany’s performance against our objective is
important in itself and can help the share price trade
at anarrower discount or a premium to its net asset
value, which benefits shareholders.
New shares may be issued at a premium toNAV to
meet demand without dilution to existing
shareholders. Increasing the size of the Company
can benefit liquidity as well asspread costs.
WIS, on behalf of the Board, completes a programme of investor relations
throughout the year.
Key mechanisms of engagement included:
AGM
The Company’s website which hosts reports, monthly factsheets,
video interviews with the external managers, CEO,Investment Director
and regular market commentary
Online newsletters
One-on-one meetings with professional investors with eitherthe CEO,
Investment Director or Chairman
Group meetings with professional investors
Engagement with major shareholders on governance issues,
particularly in advance of the AGM
Key topics of engagement with investors on an ongoing basis are the strategy of the Company, performance versus our KPIs and objective, and
the selection and monitoring of our external managers.
The impact of portfolio dividend trends on the Company’s revenues and
dividend payments.
See page 9 in the Chairman’s Statement and page 14 in the CEO’s Review
for the Board’s comments on the dividend policy.
Share price performance and the Company’s and wider investment trust
sector discounts.
The Company maintained a high rate of share buybacks, which have been
accretive to shareholders. See page 14 in the CEO’s Review.
The integration of ESG into the Company’s investment processes. ESG included in presentations to investors, ad hoc updates.
Informing investors of their rights to attend and vote at the AGM. Holders of shares via online platforms were written to, informing them of
how they could vote and view the Annual Report.
Ongoing impact of global conflicts on economies and markets and the
inflationary pressure on economies and markets.
The WIS Executive held regular meetings with shareholders throughout the
year and provided updates via the Company’s website and newsletters on
performance of the Company as well as the usual financial reports and
monthly factsheets.
Terms of the Company’s Remuneration Policy. A number of changes to practice were agreed, in particular in relation to the
deferred element of any bonus. See page 61 for more details.
External
managers
As Witan has a multi-manager approach,
engagement with our managers is necessary to
evaluate their performance against their stated
strategy and benchmark and to understand any risks
or opportunities this maypresent to the Company.
This also helpsensure that investment management
costs are closely monitored and remain competitive.
Witan ensures that all managersare paid in
accordance withtheirterms of trade.
The WIS Executive meets with the Company’s external managers
throughout the year and receives monthly performance and compliance
reporting. This provides the opportunity for both the manager and WIS
Executive to explore and understand how and why the relationship has
performed and what may be expected inthe future. Each manager also
presents annually to the Board ofdirectors, providing the opportunity for
the manager and Board to reinforce their mutual understanding of what is
expected from all parties.
Key topics of engagement with the external managers on an ongoing basis are portfolio composition, performance, outlook and business
updates.
The integration of ESG into each manager’s investment processes. See pages 20 to 21 in responsible investment for a report on manager
activity in 2023.
Engagement with managers to ensure third-party internal control
reporting is in place.
All service providers engaged and supplied requested information for the
due diligence exercise to be completed. In one case, the manager
committed to engage third-party internal control reporting where this was
not in place.
Service
providers
Witan and WIS contract with third parties forother
services including: custodian; depositary; investment
accounting andadministration; and company
secretarial. Ensuringthe third parties to whom we
have outsourced services complete their roles
diligently and correctly is necessary for
theCompany’s success.
Witan pays all service providers in accordance with
their terms of business and is a signatory to the
Prompt Payments Code.
The WIS Operations team engages regularly with all service providers both
in one-to-one meetings, via regular written reporting and an annual due
diligence exercise. This regular interaction provides an environment
wheretopics, issues and business development needs (including current
inflationary pressures and the impact of the cost of living crisis on their
service) can bedealt with efficiently and collegiately.
The Audit and Risk Committee reviews annually a summary of significant
contracts to further reinforce the overviewof the Company’s service
providers at the corporatelevel. Furthermore, the Audit and Risk
Committee review the annual due diligence exercise that includes, where
appropriate, service providers’ third-party internal control reports.
Annual due diligence exercise undertaken. All service providers engaged and supplied requested information for the
due diligence exercise to be completed.
Employees
Attract and retain talent to ensure the Company has
the resources to successfully implement its strategy
and manage third-party relationships.
All employees of the Company sit in one open-plan office with the CEO,
facilitating interaction and engagement. There is a hybrid working policy in
place for employees to work remotely. As well as the CEO, the Investment
Director, Director of Operations and Director of Marketing regularly report at
Board meetings. Given the small number of employees, engagement is at an
individual level rather than as a group.
Ongoing flexible hybrid working arrangements maintained. Flexible hybrid working arrangements maintained without detriment to
productivity or service to stakeholders.
Performance and compensation of employees is reviewed
bytheRemuneration and Nomination Committee with the CEO.
See the Directors’ Remuneration Report on pages 60 to 72.
Debt
holders
To communicate and demonstrate a strong financial
position that supports the financing arrangements.
The WIS Executive provides regular financial covenant compliance
validation and financial reports to the stakeholders.
N/A. All financial covenants related to borrowings have been complied with.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT
40
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Corporate and operational structure
Witan is an investment trust with a
Premium Listing on the London Stock
Exchange. It has a single, wholly owned
subsidiary, Witan Investment Services
Limited (‘WIS’) which acts as the
Company’s Alternative Investment Fund
Manager (‘AIFM’).
The overwhelming majority of the
portfolio is in segregated accounts, held
in custody by the Company’s depositary.
The operations of the custodian and the
safeguarding ofthe Company’s assets
are supervised by the depositary.
The Company’s investment managers
may use services which are paid for, or
provided by, various brokers. They may
place business, including transactions
relating to the Company, with those
brokers. Under the requirements of MiFID
II, broker-provided services (other than
the execution of transactions) must either
be minor non-monetary benefits or, for
research received by investment
managers and charged to the Company,
separately accounted for.
OPERATIONAL MANAGEMENT
ARRANGEMENTS
In addition to the appointment of third-party
investment managers, Witanand WIS contract
with third partiesfor other services, including:
> BNP Paribas for depositary services,
custody, investment accounting and
administration;
> Frostrow Capital LLP for company
secretarial services;
> MSCI, StyleAnalytics and Morningstar/
Sustainalytics for monitoring of its
investment holdings;and
> specialist advice on regulatory compliance
issues and, as required, legal, investment
consulting, financial and tax advice.
The service quality and value received
from major service providers are
reviewed regularly by the Board.
The contracts governing the provision
of all services are formulated with legal
advice and stipulate clear objectives and
guidelines for the service required.
STAFFING
The Company’s policy towards its employees
is to attract and retain staff with the skills and
expertise required to manage the affairs of
an investment trust company. Details of the
Company’s remuneration policies and required
disclosures are set out in the Directors’
Remuneration Report on pages 60 to 72.
Employees and those who seek to work at
Witan are treated equally regardless of age,
gender, race, disability, marital status, sexual
orientation and religion. The Company currently
has six direct employees, three men and three
women. The Board currently consists of eight
non-executive directors (four men and four
women) and the CEO, Andrew Bell, who is an
employee. Given its outsourced model and
the small number of direct employees, the
Group has no employment-related specific
policies in respect of environmental or social
and community affairs. However, as described
elsewhere, an increased focus on ESG issues
has been formalised by the Company’s
commitments, which are detailed in the section
on responsible investment on pages 16 to 23.
WITAN INVESTMENT SERVICES
WIS is authorised and regulated by theFinancial
Conduct Authority. It is authorised to act as
Witan’s AIFM and toprovide marketing services.
WIS’s principal activities are acting asWitan’s
AIFM, providing executive management
services to the Board of Witan and
communicating information about the Company
to the market.
WIS’s operational objectives for 2023 were:
> to fulfil its responsibilities as Witan’s AIFM;
and
> to control the net operating costs forWitan.
In 2023, WIS’s sources of incomewere the fees
(as AIFM or Executive Manager and for
marketing services) paid by Witan Investment
Trust plc. The main costs incurred were staff
costs and professional advice to ensure
compliance with regulatory and accounting
obligations.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
41
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Costs
INVESTMENT MANAGEMENT FEES
Each of the third-party managers is entitled
to a management fee, based on the assets
under management. The agreements can be
terminated on one to three months’ notice. The
base fee rates for managers in place at the
end of 2023 ranged from 0.30% to 0.65% per
annum. The weighted average base fee was
0.49% as at 31 December 2023 (2022: 0.51%).
Witan takes care to ensure the competitiveness
of the fees it pays. Many of the fee structures
incorporate a ‘taper’ whereby the average
fee rate reduces as the portfolio grows.
ONGOING CHARGES AND COSTS
The Company’s established measure of the
costs of operation is the Ongoing Charges
Figure (‘OCF’). This represents the recurring
costs of operating the business (principally
the investment management fees paid to our
external managers as well as the Company’s
fixed and variable overhead costs), as a
percentage of net assets. This is calculated
in accordance with the AIC’s guidelines and
provides a consistent basis for the comparison
of costs from one year to the next and relative
to other investment companies. The OCF was
marginally lower in 2023 at 0.76% (2022: 0.77%).
The main cost headings within the OCF are
set out in the table alongside. The figures
for transaction costs, borrowing costs and
the pro rata ongoing charges of underlying
funds are also included in the table, for easy
reference. In calculating the OCF, the Board
does not consider it relevant to consider the
ongoing charges of investment companies in
which the Company invests, as the Company
is not a fund of funds and to include ongoing
charges of some investee companies but
not of others would not be appropriate. For
this reason, the Company has chosen not to
include these costs as part of its OCF but has
disclosed below an estimate of this figure.
The Company exercises strict scrutiny and
control over costs. The Board believes that
the OCF during the year represents good
value for money for shareholders, taking into
account the benefits of manager style and
portfolio diversification in addition to active and
engaged management over the longer term.
The UK version of the EU PRIIPS regulations,
which are applicable to UK Investment
Companies, mandates the preparation of a
Key Information Document (‘KID’) calculated
on a formulaic basis, which contains a
different measure of costs from the OCF,
averaged over longer periods rather than
specific to one year. The other principal
differences between the OCF and the KID
measure are the inclusion of transaction costs,
borrowing costs, and the underlying costs of
holdings in other collective investments.
The Company’s investment performance is
reported after all costs.
ANALYSIS OF COSTS
Category of cost
2023
£m
2023
% of
average
net assets
2022
£m
2022
% of
average
net assets
Investment management base fees (note
4, page 94) 6.85 0.43 7.67 0.45
Other expenses (excluding those
expenses relating to the operation of the
subsidiary
(1)
, loan arrangement and one-off
costs) 5.41 0.33 5.38 0.32
Ongoing Charges Figure 12.26 0.76 13.05 0.77
Pro rata ongoing charges of underlying
funds
(2)
3.21 0.20 3.90 0.23
OCF plus look through fund costs 15.47 0.96 16.95 1.00
Portfolio transaction costs 1.28 0.08 1.84 0.11
Interest costs 9.86 0.61 6.29 0.37
Total costs including transaction costs,
borrowing costs and underlying fund costs 26.61 1.65 25.08 1.48
(1) Those expenses not relating to the operation of the investment company.
(2) This cost represents an estimate of the pro rata attributable fees charged by the managers of the external specialist
collective funds held within the portfolio.
N.B. Figures may not sum due to rounding.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT
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Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Viability Statement
In accordance with the UK Corporate
Governance Code, the Board has
assessed the prospects of the Company
over a longer period than the 12 months
required by the ‘going concern’ provision.
The Company’s current position and
prospects are set out in the Chairman’s
and Chief Executive Officer’s reports and
the Strategic Report. The principal risks
are set outon pages 35 to 37.
The Board has considered the Company’s
financial position and its ability to liquidate its
portfolio and meet its expenses as they fall due
and notes thefollowing:
> The portfolio consists of investments
traded on major international stock
exchanges and there is a spread of
investments. In normal conditions, the
current portfolio could be liquidated to the
extent of c. 85% (source: Bloomberg) within
five trading days and there is no
expectation that the nature of the
investments held will be materially different
in future.
> The closed-ended nature of the Company
means that, unlike an open-ended fund, it
does not needtorealise investments when
shareholders wish to sell their shares.
> The Board has considered the viabilityof
the Company under various scenarios,
including periods of acute stock market
and economic volatility such as
experienced in 2020, and concluded that it
would expect to be able to ensure the
financial stability of the Company through
the benefits of having a diversified portfolio
of listed and realisable assets. As
illustrated in note 14 to the accounts, the
Board has considered price sensitivity risk
(the sensitivity of the profit after taxation for
the year and the value of the shareholders’
funds to changes in the fair value of the
Group’s investments) and foreign currency
sensitivity (thesensitivity to changes in key
exchange rates to which the portfoliois
exposed).
> In addition to its cash balances which were
£22 million at 31 December 2023 (2022:
£35 million), the Company has a short-term
bank facility (which is renewable annually)
which can beused to meet its liabilities,
and fixed-rate financing in the form
ofsecured notes and cumulative
preference shares. With the exception of
the short-term facility, this financing will
remain in place until at least 2035. Details
of the Company’s current and non-current
liabilities are set out in note 13 to the
accounts.
> The expenses of the Company
arepredictable and modest in comparison
with the assets and thereare no capital
commitments currently foreseen which
would alter that position.
As well as considering the principal riskson
pages 35 to 37 and the financialposition of the
Company, theBoard has made the following
assumptions in considering the Company’s
longer-term viability:
> The Company’s remit of investing inthe
securities of global listed companies will
continue to be anactivity to which
investors willwishtohave exposure.
> Investors will continue to want toinvest in
closed-ended investmenttrusts.
> The performance of the Company
willcontinue to be satisfactory. The Board
is able to replace any of the current
investment managers when itconsiders it
appropriate to do so.
> The Company will continue to haveaccess
to adequate capital when required.
> The Company will continue to be ableto
fund share buybacks when required. The
Company bought back54 million ordinary
shares in 2023 at a cost of £123 million and
experienced no problem with liquidity in
doing so. It had shareholders’ funds of
£1.5 billion at the end of 2023.
Based on the results of its review and taking
into account the long-term nature of the
Company and its financing, the Board has a
reasonable expectation that the Company will
be able to continue its operations and meet
its expenses and liabilities as they fall due for
the foreseeable future, taken to mean at least
the next five years. The Board has chosen this
period after reviewing its investment policy
and evaluating the investment cycle and the
ability to deliver the Company’s objectives over
the short to medium term. Forecasting over
longer periods is imprecise. The Board has no
information to suggest this judgement will need
to change in the coming five years. The Board’s
long-term view of viability will, of course, be
updated each year in the Annual Report.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
43
Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
GOING CONCERN
In light of the conclusions drawn in the
foregoing statement on liquidity risk on page37
and the Viability Statement, the directors
believe that the Company has adequate
financial resources to continue in operational
existence for at least the next 12 months from
the date of this Report. Therefore, the directors
believe that it is appropriate to continue to
adopt the going concern basis in preparing
the financial statements. In reviewing the
position as at the date of this report, the Board
has considered the guidance on this matter
issued by the Financial Reporting Council.
APPROVAL
This Report was approved by the Board
ofdirectors on 15 March 2024 and is signed on
its behalf by:
Andrew Ross Andrew Bell
Chairman Chief Executive Officer
15 March 2024
Witan Investment Trust plc
Annual Report 2022
CORPORATE GOVERNANCE
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Job No: 48774 Proof Event: 15 Black Line Level: 1 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2022 T: 0207 055 6500 F: 020 7055 6600
Board of directors
Key to membership
ofBoard and Committees
Chairman of the Board
or a Committee.
Members of the Audit &
Risk Committee which is
chaired by Mr Perry.
Members of the
Remuneration and
Nomination Committee
which
is chaired by
Mr Yates.
Director of Witan
Investment Services
Limited.
1. Andrew Ross
CHAIRMAN
Date of appointment
May 2019.
Career & background
Previously chief executive of Cazenove
Capital Management which, in 2013,
was acquired by Schroders, where
he became global head of Wealth
Management until 2019. Prior to this, chief
executive of HSBC Asset Management
(Europe) Limited and managing director
of James Capel Investment Management.
Skills & expertise
Andrew has substantial experience in
senior leadership roles as CEO and
chairman of investment management
and wealth management businesses.
He hasoverseen three different
multi-manager businesses and under
his tenure the businesses he led
significantly grew and prospered.
External appointments
Non-executive director at
Polar Capital Holdings plc
andCadogan Settled Estates.
6. Jack Perry
NON-EXECUTIVE DIRECTOR
Date of appointment
January 2017.
Career & background
Previously chief executive of Scottish
Enterprise and a former Managing
Partner and Regional Industry
Leader of Ernst & Young LLP. Served
on the boards of FTSE 250 and
other public and private companies
and is a member of the Institute of
Chartered Accountants of Scotland.
Skills & expertise
Jack is chairman of two other listed
investment companies and has
developed an understanding of
the needs of all stakeholders. His
experience as a senior audit partner
and subsequently in service on
numerous audit committees has
enabled him to be an effective Audit
& Risk Committee Chairman.
External appointments
Chairman of European Assets Trust PLC
and ICG-Longbow Senior Secured UK
Property Debt Investments Limited.
8.
1.
5.
7.
2. 3.
6.4.
9.
Witan Investment Trust plc
Annual Report 2022
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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Job No: 48774 Proof Event: 15 Black Line Level: 1 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2022 T: 0207 055 6500 F: 020 7055 6600
2. Andrew Bell
CEO
Date of appointment
February 2010.
Career & background
Previously Head of Research at Rensburg
Sheppards and an equity strategist
and Co-Head of the Investment Trusts
team atBZW and CSFB. Prior to the
City, he worked for Shell in Oman,
leaving to take a Sloan Fellowship
at the London Business School.
Skills & expertise
Andrew’s roles prior to joining Witan
have given him valuable experience
of economic and geopolitical events
and how they influence equity markets,
along with considerable knowledge and
experience of the investment trust sector.
External appointments
Chairman of The Diverse
Income Trust plc.
7. Ben Rogoff
NON-EXECUTIVE DIRECTOR
Date of appointment
October 2016.
Career & background
Lead manager of Polar Capital
Technology Trust plc since 2006
and a fund manager of Polar Capital
Global Technology Fund and Polar
Capital Automation and Artificial
Intelligence Fund. He has been a
technology specialist for 27 years.
Skills & expertise
As a highly experienced listed
equities fund manager, Ben has a
deep understanding of the analysis
process required for investing in
public companies. His knowledge
of the technology sector particularly
enables him to identify the risks from
disruption not just to the sector but in
general. Ben applies this knowledge
to his questioning and monitoring
of Witan’s external managers.
External appointments
Director, Technology at
Polar Capital.
3. Rachel Beagles
SENIOR INDEPENDENT DIRECTOR
Date of appointment
July 2020.
Career & background
Previously a managing director and
co-head of pan-European banks equity
research and sales at Deutsche Bank.
Since 2003 she has worked as a non-
executive director in the investment
company, asset management, charity
and social housing sectors. She was
Chair of the Association of Investment
Companies from 2018 to 2021.
Skills & expertise
Rachel has extensive knowledge and
understanding of the equity markets
from her experience in research and
sales. She is an experienced non-
executive director of investment trusts.
External appointments
Non-executive director of The
Mercantile Investment Trust plc.
8. Paul Yates
NON-EXECUTIVE DIRECTOR
Date of appointment
May 2018.
Career & background
Previously CEO of UBS Global
Asset Management (UK) Limited
and held a number of global roles
at UBS prior to retiring in 2007.
Skills & expertise
Paul‘s prior roles give him wide
experience of the fund management
business including equity management,
marketing, people and business
management. Paul also offers
investment trust experience having
sat on four other trust boards.
External appointments
Chairman of the Advisory Board of
33 St James’s Limited, non-executive
director of Fidelity European Trust
PLC and Capital Gearing Trust plc.
4. Shauna Bevan
NON-EXECUTIVE DIRECTOR
Date of appointment
February 2023.
Career & background
Head of Investment Advisory at
RiverPeak Wealth Limited where
she is responsible for fund selection
and portfolio construction. She was
previously Co-Head of Collectives
Research at Charles Stanley,
having started her career in wealth
management at Merrill Lynch.
Skills & expertise
Shauna has over 20 years of investment
experience across multiple asset
classes with particular expertise in
third-party fund research and meeting
the needs of retail investors.
External appointments
Head of Investment Advisory at
RiverPeak Wealth and a non-executive
director of CT Global Managed Portfolio
Trust PLC .
5. Gabrielle Boyle
NON-EXECUTIVE DIRECTOR
Date of appointment
August 2019.
Career & background
Investment Director and Head
ofResearch at Troy Asset Management
since 2011. She is the Senior Fund
Manager for the Trojan Global
Equity Fund and the Electric &
General Investment Fund.
Skills & expertise
Gabrielle has over 30 years’ experience
in fund management and has managed
global equity portfolios since 2001
and European portfolios since 1998.
With this background she brings
knowledge of investing through market
cycles and an understanding of the
skills required of fund managers.
External appointments
Investment director and Head of
Research at Troy Asset Management.
9. Shefaly Yogendra
NON-EXECUTIVE DIRECTOR
Date of appointment
February 2023.
Career & background
She has spent her career working
with technology investors and
start-ups. She previously worked
at Ditto AI and HCL Technologies,
and was a founder and a director of
Livyora, a fine jewellery venture.
Skills & expertise
Shefaly is a risk and decision-making
specialist and an experienced non-
executive director of investment trusts.
External appointments
Non-executive director of Harmony
Energy Income Trust plc, JPMorgan US
Smaller Companies Investment Trust PLC
and Temple Bar Investment Trust plc.
Witan Investment Trust plc
Annual Report 2023
CORPORATE GOVERNANCE
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Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Corporate Governance
This statement forms part of the Directors’ Report on pages 73 to 76.
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 on the FRC’s
website 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.
In January 2024, the FRC published a revised version of the UK Corporate
Governance Code and associated Corporate Governance Code Guidance.
The scope of the changes in the revised version has been significantly
scaled back from the proposals on which the FRC originally consulted in
2023.
The most significant changes in this version of the Corporate Governance
Code are to the reporting requirements in relation to internal controls in
section 4, though changes are being made throughout, including in
section 1 on outcomes-based reporting; section 3 on diversity, inclusion
and equality of opportunity; and to the provisions on remuneration in
section 5.
The revised Corporate Governance Code will apply to financial years
beginning on or after 1 January 2025. However, companies will have an
extra year to comply with the new disclosure requirements in relation to
internal controls, with the revised Provision 29 applying to financial years
beginning on or after 1 January 2026.
The Board will review the changes to the Corporate Governance Code
and any corresponding changes to the AIC Code (which have not yet been
published) during 2024 with a view to ensuring that it can report on its
compliance with effect from 1 January 2025 or explain any areas of
non-compliance.
Andrew Ross
Chairman
15 March 2024
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
The role of the Board
The role of the Board is to promote the long-
term sustainable success of the Company,
generating value for shareholders and
contributing to wider society.
The Board is collectively responsible for the success of the
Company. Its role is to provide leadership within a framework of
controls that enable risk to be assessed and managed. The Board
sets the Company’s strategic aims (subject to the Company’s
Articles of Association and to such approval of the shareholders
in general meeting as may be required from time to time) and
ensures that the necessary resources are in place to enable the
Company’s objectives to be met.
The Board is responsible in particular for the overall delivery of
performance to shareholders through setting an appropriate
investment objective, ensuring that proper resources are applied
to the management of the Company’s portfolio and the
monitoring, control and mitigation of the associated risks.
For details of our managers,
see pages 24 to 30
COMPLIANCE
The Board has considered the Principles and Provisions of the AIC Code.
The AIC Code addresses the Principles and Provisions set out in the
Corporate Governance Code, as well as setting out additional Provisions
on issues that are of specific relevance to the Company.
The Board considers that reporting against the Principles and Provisions
of the AIC Code, which has been endorsed by the FRC, provides more
relevant information to shareholders.
The Company has complied with the Principles and Provisions of the AIC
Code during the year ended 31 December 2023 except as set out below:
> The Corporate Governance Code (Provisions 25 and 26) includes
provisions relating to the need for an internal audit function. The
Company does not have an internal audit function, for reasons that are
explained on page 56.
The principles of the AIC Code
The AIC Code is made up of 18 Principles supported by 42 Provisions.
Details of how the Company has applied the Principles and Provisions are
set on the following pages.
1 BOARD LEADERSHIP AND PURPOSE
Board and director independence
At 31 December 2023 the Board was composed of eight independent
non-executive directors and one executive director, the CEO. The Board is
therefore independent of the Company’s executive management. All the
directors are wholly independent of the Company’s various investment
managers. In the opinion of the Board, each of the directors is
independent in character and judgement and there are no relationships or
circumstances relating to the Company that are likely to affect their
judgement.
Mr Bell has been on the Board for more than nine years. Mr Bell, who is the
CEO of Witan, is an executive director but is independent of the Company’s
appointed fund managers and other service providers. His long service is
beneficial to the Company.
All directors stand for election or re-election at the Company’s AGM each
year. The Board is firmly of the view that length of service does not of itself
impair a director’s ability to act independently; rather, a director’s longer
perspective can add value to the deliberations of a well-balanced
investment trust company board. Independence stems from the
willingness to make decisions that may conflict with the interests of
management; this is a function of confidence, integrity and judgement.
The Board will continue to take account of length of service in its
succession planning, as one of a number of factors, including the need to
maintain a proper balance of diversity, skills and experience.
Mr Ross, the Chairman of the Company, is considered to be independent.
He does not have any relationships that might create a conflict of interest
between the Chairman’s interests and those of shareholders.
The non-executive directors, led by the Senior Independent Director
(‘SID’), meet without the Chairman present at least annually to appraise the
Chairman’s performance, and on other occasions as necessary.
Witan Investment Trust plc
Annual Report 2023
CORPORATE GOVERNANCE
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Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Corporate Governance continued
Board commitments
When considering new appointments, the Board takes into account other
demands on directors’ time. Prior to appointment, new directors are asked
to disclose any existing significant commitments with an indication of the
time involved. Additional external appointments require the prior approval
of the Remuneration and Nomination Committee on behalf of the Board,
with the reasons for permitting significant appointments explained in the
Annual Report.
The Remuneration and Nomination Committee reviews directors’ external
appointments, including those relating to private companies and charities,
every year and considers whether any director is “overboarded”. The
Committee concluded in February 2024 that there was no overboarding.
Further detail is given in the Report of the Remuneration and Nomination
Committee on page 60.
Company’s purpose, values and strategy
The Board assesses the basis on which the Company generates and
preserves value over the long term. The Strategic Report describes how
opportunities and risks to the future success of the business have been
considered and addressed, the sustainability of the Company’s business
model and how its governance contributes to the delivery of its strategy.
The Company’s investment objective and investment policy are set out on
the inside front cover.
Culture
The Board seeks to establish and maintain a corporate culture
characterised by fairness in its treatment of employees and service
providers, whose efforts are collectively directed towards delivering
returns to shareholders in line with the Company’s purpose and
objectives. It is the Board’s belief that this contributes to the greater
success of the Company, as well as being an appropriate way to conduct
relations between parties engaged in a common purpose.
2 DIVISION OF RESPONSIBILITIES
The Board
The Board consists of nine directors, including the CEO. This ensures that
no one individual or small group of individuals dominates the Board’s
decision making. Details of the directors are set out on pages 44 to 45.
They demonstrate a wide range of skills and experience, which are
relevant to the strategy of the Company. The Board has typically met
about eight times a year.
The Chairman
Mr Ross was appointed as Chairman of the Company in April 2020.
The Chairman’s primary role is to provide leadership to the Board,
assuming responsibility for its overall effectiveness in directing the
Company. The Chairman is responsible for:
> taking the chair at general meetings and Board meetings, conducting
meetings effectively and ensuring all directors are involved in
discussions and decision making;
> setting the agenda for Board meetings and ensuring the directors
receive accurate, timely and clear information for decision making;
> taking a leading role in determining the Board’s composition and
structure;
> overseeing the induction of new directors and the development of the
Board as a whole;
> leading the annual Board evaluation process and assessing the
contribution of individual directors;
> supporting and also challenging the CEO and external suppliers
where necessary;
> ensuring effective communications with shareholders and, where
appropriate, other stakeholders; and
> engaging with shareholders to ensure that the Board has a clear
understanding of shareholder views.
Senior Independent Director (‘SID’)
Mrs Beagles was appointed as the SID in May 2023 following the
retirement from the Board of Ms Neubert who was the previous SID.
TheSID serves as a sounding board for the Chairman and acts as an
intermediary for other directors and shareholders.
The SID is responsible for:
> working closely with and supporting the Chairman;
> leading the annual assessment of the performance of the Chairman;
> holding meetings with the other directors without the Chairman being
present, on such occasions as necessary;
> carrying out succession planning for the Chairman’s role;
> working with the Chairman, other directors and shareholders to
resolve major issues; and
> being available to shareholders and other directors to address any
concerns or issues they feel have not been adequately dealt with
through the usual channels of communication (i.e. through the
Chairman or the CEO).
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
The Chief Executive Officer (‘CEO’)
The CEO is responsible to the Board and the AIFM for the overall
management of the Company including investment performance, business
development, shareholder relations, marketing, investment trust industry
matters, administration and unquoted investments. The duties of the CEO
include leading on investment strategy and asset allocation, on the
selection and monitoring of the investment managers and their terms of
reference and on the use of derivatives. The Board, in conjunction with the
AIFM, sets limits on matters such as asset allocation, gearing and
investment in derivatives, within which the CEO has discretion.
The CEO reports to each meeting of the Board. His reports include
confirmation that the Board’s investment limits and restrictions and those
which govern the Company’s tax status as an investment trust, have been
adhered to.
The CEO and his team monitor the share price and the discount/premium
to net asset value on a daily basis and he reports to every Board meeting
on this subject. Where appropriate, the Board makes use of share
buybacks (at a discount) and issuance (at a premium) to add to the net
asset value per share and achieve a sustainable low discount (or a
premium) to net asset value.
In addition to his responsibilities for the overall management of the
Company, the CEO manages the Direct Holdings portfolio.
A maximum of 15% of the Company’s gross assets (at the time of purchase)
may be invested in specialist funds within this portfolio and there are
restrictions on the number, size and type of investments that may be
made.
The Board’s Remuneration and Nomination Committee reviews the
performance of and the contractual arrangements with the CEO. The CEO
is responsible to the Board for reviewing the performance and the
contractual arrangements of his staff. The Board’s Remuneration and
Nomination Committee oversees this process.
Director responsibilities
The Board is responsible for determining the strategic direction of the
Company and for promoting its success. The Board regularly reviews
overall strategy and progress is monitored throughout the year.
The CEO and the AIFM monitor investment performance and all
associated matters. The CEO reports to each Board meeting, at which
investment performance, asset allocation, gearing, marketing and investor
relations are usually key agenda items.
Matters specifically reserved for decision by the full Board have been
defined. These include decisions relating to strategy and management;
structure and capital; financial reporting and controls; internal controls;
contracts with third parties; communication; Board membership and other
appointments; Board and employee remuneration; delegations of
authority; corporate governance matters; and Company policies. There is
an agreed procedure for directors, in the furtherance of their duties, to
take independent professional advice, if necessary, at the Company’s
expense.
The directors have access to the advice and services of the Company’s
Executive team, AIFM and the Company Secretary, through its appointed
representative, who are responsible to the Board for ensuring that Board
procedures are followed and that applicable rules and regulations are
complied with.
Board Committees
The Board has established an Audit & Risk Committee and a Remuneration
and Nomination Committee. The Board has chosen to combine the roles of
remuneration and nomination in one Committee. The memberships of the
Audit & Risk Committee and the Remuneration and Nomination Committee
are set out on pages 44 to 45. The roles and responsibilities of the
Committees are described in the Report of the Audit & Risk Committee on
pages 57 to 59 and in the Directors’ Remuneration Report on pages 60 to
72.
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 52.
Witan Investment Trust plc
Annual Report 2023
CORPORATE GOVERNANCE
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Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Corporate Governance continued
Shareholder engagement
The Chairman is responsible for ensuring that there is effective
communication with the Company’s shareholders. He works closely
with the CEO and there is regular liaison with the Company’s
stockbroker. There is a process in place for analysing and monitoring
the shareholder register and a programme for meeting or speaking
with the institutional investors and with private client stockbrokers and
advisers. In addition to the CEO, the Chairman, or the SID, expects to
be available to meet the Company’s larger shareholders and the
Chairman of the Remuneration and Nomination Committee is available
to discuss remuneration matters.
The Company encourages attendance at its Annual General Meeting
(‘AGM’) as a forum for communication with individual shareholders.
The Notice of the AGM and related papers are sent to shareholders at
least 20 working days before the meeting. The Chairman, the CEO,
the Chairman of the Audit & Risk Committee and the Chairman of the
Remuneration and Nomination Committee all expect to be present at
the AGM and to answer questions from shareholders as appropriate.
The CEO makes a presentation to the meeting. In addition,
arrangements will be put in place for shareholders to view the meeting
virtually and put questions to the Board if they cannot attend the AGM
in person.
Details of the proxy votes received in respect of each resolution are
made available to shareholders. In the event of a significant (defined
as 20% or more) vote against any resolution proposed at the AGM, the
Board would consult shareholders in order to understand the reasons
for this and consider appropriate action to be taken, reporting to
shareholders within six months. Although there were no significant
votes against any resolution at the AGM last year, the Chairman wrote
to a number of shareholders to try to understand their reasons for
voting against certain resolutions.
The directors may be contacted through the Company Secretary at
the address shown on page 118.
While the CEO and his team expect to lead on preparing and effecting
communications with investors, all major corporate issues are put to
the Board or, if time is of the essence, to a Committee thereof.
The Board places importance on effective communication with
investors and approves a marketing programme each year to enable
this to be achieved. Copies of the Annual Report and the Half Year
Report are circulated to shareholders and, where possible, to
investors through other providers’ products and nominee companies
(or written notification is sent when they are published online). In
addition, the Company publishes a monthly factsheet and its net asset
value per share is released daily. All this information is readily
accessible on the Company’s website (www.witan.com). A Key
Information Document, prepared in accordance with the UK version of
EU rules, is also published on the Company’s website. The Company
is a member of the AIC which publishes information to increase
investors’ understanding of the sector.
Stakeholder engagement
The AIC Code requires directors to explain their statutory duties as stated
in sections 171–177 of the Companies Act 2006. Under section 172,
directors have a duty to promote the success of the Company for the
benefit of its members as a whole and in doing so have regard to the
consequences of any decisions in the long term, as well as having regard
to the Company’s stakeholders amongst other considerations.
The Board’s report on its compliance with section 172 of the Companies
Act 2006 is contained within the Strategic Report on pages 38 to 39.
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 the Senior Independent Director.
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
Job No: 48774 Proof Event: 3 Black Line Level: 0 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2022 T: 0207 055 6500 F: 020 7055 6600
Board meetings
The CEO (who is a director), other representatives of
the Company’s Executive team and the AIFM and a
representative of the Company Secretary are
expected to be present at all meetings.
The primary focus at Board meetings is a review of investment
performance and associated matters such as gearing, asset allocation,
attribution analysis, marketing and investor relations, peer group
information and industry issues. The Board devotes two days each
year to meetings with the Company’s investment managers and each
investment manager sends representatives at least once a year. The
Chairman seeks to encourage open debate within the Board and a
supportive and co-operative relationship with the Executive team and
the Company’s investment managers, advisers and other service
providers.
The number of meetings during the year of the Board and its
Committees, and the attendance of the individual directors at those
meetings, is shown in the table to the right.
The Board has typically met about eight times a year. All the then
directors attended the AGM in May 2023.
Board
Audit
& Risk
Committee
Remuneration
and Nomination
Committee
Number of meetings 7 4 2
A J S Ross 7 4
(1)
2
R A Beagles 7 4 –
A L C Bell 7 4
(1)
2
(1)
S L Bevan 7 – –
G M Boyle 7 – 1/1
S E G A Neubert 4/4 – 1/1
J S Perry 7 4 –
B C Rogoff 6 – –
P T Yates 7 4 2
S M Yogendra 7 – –
(1) Not a member of the Committee but in attendance by invitation for all or part of the
meetings.
51
Annual Report 2022
Witan Investment Trust plc
Example Board decisions
What happened Why How
Appointment of two new directors As part of Board succession planning Following a review of Board diversity and skills
an external search consultant was used to help
identify suitable candidates
Active programme of share buybacks The process is accretive to NAV and helps
reduce discount volatility
Daily market operations to purchase shares into
treasury at a discount, benefiting returns for
shareholders
The dividend was increased for a 49th
consecutive year
Growing income is an important element of
delivering positive total returns to shareholders
The dividend was increased ahead of inflation,
using £7m from revenue reserves, taking
account of projections for a further recovery in
portfolio dividends
Witan Investment Trust plc
Annual Report 2023
CORPORATE GOVERNANCE
52
Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Corporate Governance continued
Conflicts of interest
The Board’s actions taken to identify and manage conflicts of interest are
set out in the Directors’ Report. The Company has no significant
shareholders. A number of nominee companies are the registered holders
of significant numbers of shares, but these represent beneficial holdings
by a very large number of retail investors who invest through the
nominees’ platforms.
Relationship with the AIFM and fund managers
The Company manages its own operations through the Board and that of
its AIFM. Each investment manager runs a discrete investment portfolio
within the terms of their investment management contract. Shares are held
by the Company’s custodian/depositary. The CEO leads on the selection
and monitoring of the investment managers and their terms of reference,
which are approved by the Board and the AIFM.
The individual investment managers are each appointed to manage a
discrete portfolio in accordance with guidelines which limit, for example,
the markets in which they can invest, the maximum size of each investment
and the amount of cash that may be held in normal circumstances. They
are not allowed to invest in unquoted securities or controversial weapons,
to gear the portfolio, to sell stocks short or to use derivatives. The
investment managers take decisions on individual investments and are
responsible for effecting transactions on the best available terms. The
Company and the AIFM receive monthly confirmation from each
investment manager that it has carried out its duties in accordance with its
investment mandate.
The Board scrutinises the performance of the investment managers at
each meeting and discusses their performance with each manager at least
once a year. The directors consider it appropriate for the full Board to do
this rather than delegating this to a committee as it is considered
appropriate for all directors to be aware of the managers’ performance.
The Audit & Risk Committee reviews the contractual relationships with the
investment managers at least annually. Further information on the
investment managers’ fees is contained within the Strategic Report on
page 41.
Relationship with other service providers
The Board has delegated a wide range of activities to external agents, in
addition to the various investment managers. These services include
global custody (which includes the safeguarding of the assets), investment
administration, management and financial accounting, company secretarial
and certain other administrative requirements and registration services.
Each of these contracts was entered into after full and proper
consideration by the Board of the quality and cost of the services offered,
including the control systems in operation in so far as they relate to the
affairs of the Company. Further information on the service providers is
contained within the Strategic Report on page 40.
The Board receives and considers reports and information from these
contractors as required. The CEO and the AIFM are responsible for
monitoring and evaluating the performance of the Company’s service
providers. The Board’s Audit & Risk Committee oversees this process
together with the WIS Risk Committee: they review the contractual
relationships at least annually.
3 COMPOSITION, SUCCESSION AND EVALUATION
Appointments to the Board
The Board’s Remuneration and Nomination Committee oversees the
recruitment process. The Remuneration and Nomination Committee
reviews the length of service of each director each year and makes
recommendations to the Board when it considers that a new director
should be recruited. All the independent non-executive directors are
asked to contribute to the process and to consider serving on the
sub-committee appointed to draw up the shortlist of candidates. The
process generally includes the use of a firm of non-executive director
recruitment consultants or open advertising. The work of the
Remuneration and Nomination Committee during the year is set out in the
Committee’s report on pages 60 to 72.
As part of the process to appoint Ms Bevan and Dr Yogendra, the Board
engaged the services of specialist recruitment consultants, Trust
Associates Limited, who prepared a list of potential candidates for
consideration by the Board. A short list was then arrived at and the
candidates were interviewed, following which a recommendation was
made to the Board that both Ms Bevan and Dr Yogendra be appointed,
which the Board approved.
The Directors have noted that Trust Associates is a signatory of The
Standard Voluntary Code of Conduct for Executive Search Firms. The
code of conduct lays out steps for search firms to follow across the search
process, from accepting a brief through to induction. The key areas of
focus include increasing the proportion of women and broadening ethnic
diversity. Trust Associates Limited has no other connection with the
Company or the individual directors.
New directors are appointed for an initial term ending three years from the
date of their first annual general meeting after appointment, with the
expectation that they will serve a minimum of two three-year terms. There
is no absolute limit to the period for which a director may serve, although
the continuation of directors’ appointments is contingent on satisfactory
performance evaluation and re-election at annual general meetings.
Directors’ appointments are reviewed formally by the Board ahead of their
submission for re-election. None of the non-executive directors has a
contract of service and a non-executive director may resign by notice in
writing to the Board at any time. The Board’s tenure and succession policy
seeks to ensure that the Board is well-balanced and refreshed regularly by
the appointment of new directors with the skills and experience
necessary, in particular, to replace those lost by directors’ retirements.
Directors must be able to demonstrate their commitment to the Company,
including in terms of time. The Board seeks to encompass past and current
experience of areas relevant to the Company’s objective and operations,
the most important being investment management, finance, marketing,
financial services, risk management, custody and settlement, and
investment banking. Whilst the roles and contributions of longer-serving
directors are subject to rigorous review, the Board is strongly of the view
that length of service is only one factor and that shareholders benefit from
having directors with a longer perspective of the Company’s history and
its place in the savings market.
Directors newly appointed to the Board are provided with an introductory
programme covering the Company’s strategy, policies and operations,
including those outsourced to third parties. Thereafter, directors are given,
on a regular and ongoing basis, key information on the Company’s
investment portfolios, financial position, internal controls and details of the
Company’s regulatory and statutory obligations (and changes thereto).
The directors are encouraged to attend industry and other seminars,
conferences and courses, if necessary at the Company’s expense, and to
participate generally in industry events. A log of directors’ training is
maintained and reviewed each year by both the Remuneration and
Nomination Committee and the Audit & Risk Committee.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
53
Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Board diversity
The Board supports the principle of boardroom diversity, of which gender
and ethnicity are two important aspects.
The Company’s policy is that the Board should be comprised of directors
with a diverse range of skills, knowledge and experience and that
appointments to the Board should be made on merit, against objective
criteria, including diversity in its broadest sense. The objective of the
policy is to have a broad range of approaches, backgrounds, skills,
knowledge and experience represented on the Board. To this end,
achieving a diversity of perspectives and backgrounds on the Board is a
key consideration in any director search process and the Board
encourages any recruitment agencies it engages to find a diverse range of
candidates that meet the criteria agreed for each appointment.
The Board will not discriminate on the grounds of age, gender, personal
background, sexual orientation, disability or socio-economic background
in considering the appointment of Directors. Specific professional
qualifications may be required for some appointments, e.g. the chair of the
Audit & Risk Committee. The Board considers candidates’ gender and
ethnicity in the context of the Listing Rules targets regarding those
characteristics.
The Board has noted the FCA’s Listing Rules which encourage greater
diversity on listed company boards and require companies to report
against the following three diversity targets:
(i) At least 40% of individuals on the board are women;
(ii) At least one of the senior board positions (defined in the Listing Rules
as the chair, CEO, SID and CFO) is held by a woman; and
(iii) At least one individual on the board is from a minority ethnic
background.
These Rules have applied with effect from accounting periods
commencing on or after 1 April 2022.
The Board appointed two new non-executive directors in February 2023
since when the Company has met all three targets.
The Board has chosen to align its diversity reporting reference date with
the Company’s financial year end and proposes to maintain this alignment
for future reporting periods. As required under LR 9.8.6R(10), further detail
in respect of the three targets outlined above as at 31 December 2023 is
disclosed in the table on page 54.
The information was obtained by asking the Directors and Executive
Management to indicate, on an anonymous form, how they should be
categorised for the purposes of the Listing Rules disclosures.
Witan Investment Trust plc
Annual Report 2023
CORPORATE GOVERNANCE
54
Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Corporate Governance continued
As at 31 December 2023
Number of
Board Members
Percentage of
the Board
Number of Senior
Positions on the
Board
(1)
Number In Executive
Management
(2)
Percentage of
Executive
Management
Men 5 56% 2 2 67%
Women 4 44% 1 1 33%
Other – – – – –
Not specified/prefer not to say – – – – –
Number of
Board Members
Percentage of
the Board
Number of Senior
Positions on the
Board
(1)
Number In Executive
Management
(2)
Percentage of
Executive
Management
White British or other White (including
minority-white groups) 7 78% 3 3 100%
Mixed/Multiple Ethnic Groups 1 11% – – –
Asian/Asian British 1 11% – – –
Black/African/Caribbean/Black British – – – – –
Other ethnic group, including Arab – – – – –
Not specified/prefer not to say – – – – –
(1) The format of the above tables is prescribed in the Listing Rules. However, as an investment trust, the Company has only a small executive management function, including the role of CEO but not that
of CFO. The Company has defined ‘senior positions on the Board’ as Chairman, CEO and Senior Independent Director.
(2) The CEO is a director and part of the executive management team: for the purposes of these tables he has been included as a member of the Board.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
55
Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
For details of our
managers, see pages 24 to 30
The Chairman leads on
applying the conclusions of
the evaluation. The Chairman
reviews with each director his
or her individual performance,
contribution and commitment
to the Company. The SID
leads the annual evaluation
of the Chairman and reviews
the conclusions with him.
The Board’s Remuneration
and Nomination Committee
oversees this process. The
Board is aware of Provision 26
of the AIC Code, which states
that evaluation of the Board of
FTSE 350 companies should
be externally facilitated at
least every three years. The
Board has complied with this
provision every three years
since it was first introduced
except in 2019 when the Board
considered it more appropriate
to defer an externally
facilitated evaluation until
2020 when Mr Ross had taken
over as Chairman following the
retirement of Mr Henderson.
The Board appointed Lintstock
Ltd to carry out an evaluation
programme in the autumn of
2020 and again in the autumn
of 2021. Lintstock did not have
any other connection with the
Company. The Board reviewed
their report in February 2022
and the Chairman has led on
implementing those changes
recommended by the report
that the Board considered
should be made. The report
did not identify any material
weaknesses or concerns.
In 2023, the evaluation was
carried out internally using
third-party board evaluation
software. This allows directors
to provide comments
anonymously and produces
automated reports and the
Board has discussed the
matters raised. The evaluation
did not identify any material
weaknesses or concerns but
the Board has agreed some
minor changes to improve
the reports it receives.
The Board intends to appoint
an external organisation
to facilitate its evaluation
in 2025, if not before.
Board evaluation
The Board has established a process to evaluate
its performance annually. This process is based
on open discussion and seeks to assess the
strengths and weaknesses of the Board and its
Committees.
Election and re-election by shareholders
New directors stand for election by the shareholders at the annual general
meeting that follows their appointment. Thereafter all directors stand for
re-election each year in accordance with the Corporate Governance
Code. The Company’s Articles of Association require directors to stand for
re-election at least every three years, and those who have served for
more than nine years to stand for re-election annually.
The directors’ biographies on pages 44 to 45 and the notes to the notice
of AGM set out the specific reasons why each director’s contribution is,
and continues to be, important to the Company’s long-term sustainable
success.
Tenure of the Chairman
The Board’s policy is that the Chairman should not normally remain in post
beyond nine years from the date of his/her first appointment to the Board.
However, this period may be extended for a limited time to facilitate
effective succession planning and the development of a diverse board,
particularly in those cases where the Chairman was an existing non-
executive director on appointment as Chairman.
The Board considers that the policy provides a balance between the need
for Board continuity as well as regular refreshment and diversity.
4 REMUNERATION
The Directors’ Remuneration Report on pages 60 to 72 details the process
for determining the directors’ remuneration and sets out the amounts
payable. It reports on the Company’s compliance with the provisions of the
AIC Code relating to remuneration and also a number of provisions from
the UK Corporate Governance Code that have not been included in the
AIC Code, as most investment trusts do not have executive directors.
5 AUDIT, RISK AND INTERNAL CONTROL
The statement of directors’ responsibilities on page 77 describes the
directors’ responsibility for preparing this Annual Report.
The work of the Audit & Risk Committee is set out in the Committee’s
report on pages 57 to 59.
The principal risks and details of how they are managed are set out on
pages 35 to 37.
Internal control
The Board has established an ongoing process for identifying, evaluating
and managing the significant risks faced by the Company. This process
accords with the Corporate Governance Code guidance, is subject to
regular review by the Audit & Risk Committee and was fully in place during
the year under review and up to the date of this Annual Report. The Board
remains responsible for the Company’s system of internal control and has
charged the Audit & Risk Committee with conducting an annual review of
the effectiveness of the system, covering all the controls, including
financial, operational and compliance controls and risk management
systems. This review takes into account points raised during the year in
the regular appraisal of specific areas of risk. However, such a system is
designed to manage rather than eliminate the risks of failure to achieve
the Company’s business objectives and can only provide reasonable and
not absolute assurance against material misstatement or loss.
Witan Investment Trust plc
Annual Report 2023
CORPORATE GOVERNANCE
56
Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
In accordance with Principle O and provision 34 of the AIC Code, the
Board reviews the Company’s business risks at least once a year. These
are analysed and recorded in a risk map, which the Audit & Risk
Committee reviews at each meeting. It is also reviewed and challenged
regularly by the Board. Emerging risks are added to the matrix as soon as
identified together with any mitigating actions required. The key risks
which pose the greatest potential risks to shareholders are set out on
pages 35 to 37. The Company receives from its main contractors formal
reports which detail the steps taken to monitor the areas of risk and which
report the details of any known internal control failures. The Committee
believes that these processes allow it to identify emerging risks on a
timely basis.
As described elsewhere, the management of Witan’s portfolio is
outsourced to a number of third-party investment managers around the
world. There are currently eight such investment managers as well as the
Direct Holdings portfolio which is managed by the CEO.
The CEO has responsibility (under delegation from the Board and the
AIFM) for a number of aspects of the management of the portfolio,
including asset allocation, gearing and investment in derivatives. The
Board has set guidelines in respect of each of these aspects within which
he may operate. The CEO reports to the Board regularly on each of these
areas, as well as on the overall performance of the Company and other
matters of significance.
The in-house Executive team of Witan and WIS is responsible for
managing and controlling the relationships with the third-party managers.
The Executive team receives monthly reports on investment and
compliance matters from each manager. During 2023, the investment
managers were asked to provide detailed information on their operational
structures and systems. Each year, the Board also receives reports from its
investment managers on their internal controls; in most cases these
include a report from the relevant company’s auditors on the control
policies and procedures in operation.
The CEO makes regular reports to the Board on the performance of and
activity within the Direct Holdings portfolio. In addition, the portfolio’s
performance is independently measured, along with those of the
third-party managers.
The Company’s subsidiary, WIS, is authorised and regulated by the
Financial Conduct Authority to provide investment products and services
and was appointed as the Company’s AIFM from July 2014. The
compliance structures required for these activities, including a compliance
manual and a compliance monitoring programme, have been put into
place.
The Company has a formal policy for staff to raise in confidence any
concerns about possible improprieties, whether in matters of financial
reporting or otherwise, for appropriate independent investigation. Its staff
comprises only six people (including the CEO), who are well known to and
have frequent formal and informal contact with the members of the Board.
The Company does not have an internal audit function. However, the
Company has independent external advisers covering regulatory
compliance matters and the effectiveness of internal controls and
processes. Through WIS, the AIFM, it delegates the management of its
investments and most of its other operations to third parties and employs
only a small number of staff. The investment managers and certain other
key contractors are subject to external regulation and most have
compliance and internal audit functions of their own. The Company’s
investments are held on its behalf by a global custodian appointed by the
depositary. A specialist firm of investment accountants and administrators
is responsible for investment administration, for maintaining accounting
records and for preparing financial accounts, management accounts and
other management information. In addition, the Board receives an annual
report on the investment administrator’s internal controls, including a
report from the investment administrator’s auditor on the control policies
and procedures in operation. The investment performance of the
investment managers, both individually and collectively, is measured for
Witan by a company that is independent of all the investment managers.
The corporate Company Secretary has well-established experience in
servicing investment trusts.
The appointment of these and other professional contractors provides a
clear separation of duties and a structure of internal controls that is
balanced and robust. The Board and the AIFM will continue to monitor the
Company’s system of internal control in order to provide assurance that it
operates as intended. The directors will review at least annually whether a
function equivalent to an internal audit is needed.
Andrew Ross
Chairman
15 March 2024
Corporate Governance continued
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
57
Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
COMPOSITION AND RESPONSIBILITIES OF THE COMMITTEE
The members of the Committee are appointed by the Board. There are
three members of the Committee. I was appointed as Chairman of the
Committee in May 2018, having been a member of the Committee since
February 2017. Mrs Beagles and Mr Yates, who were appointed to the
Committee in 2020 and 2018, respectively, were members of the
Committee throughout the year.
The Board has taken note of the requirements that the Committee as a
whole should have competence relevant to the sector in which the
Company operates and that at least one member of the Committee should
have recent and relevant financial experience. The Board is satisfied that
the Committee is properly constituted in both respects. I am a Chartered
Accountant and was previously a partner at Ernst & Young. The other
Committee members have a combination of financial, investment and
other relevant experience gained throughout their careers. Details of our
qualifications and experience are given on pages 44 to 45.
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 oversight
and 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:
> ensuring the application of the Company’s internal financial and
regulatory compliance controls and risk management systems using
external consultants where appropriate;
> monitoring the integrity of the Company’s financial statements,
including consideration of the Company’s accounting policies and
significant reporting judgements;
> the appointment, reappointment and removal of the external auditor
and approving the remuneration and terms of engagement of the
external auditor;
> reviewing and monitoring the external auditor’s independence and
objectivity and the effectiveness of the audit process;
> developing and implementing policy on the engagement of the
external auditor to supply non-audit services; and
> reporting to the Board on how it has discharged its duties.
Report of the Audit & Risk Committee
STATEMENT BY THE CHAIRMAN OF THE COMMITTEE
As Chairman of the Audit & Risk Committee (the
‘Committee’), I am pleased to present the Report of the
Committee for the year ended 31 December 2023.
Jack Perry
Chairman, Audit & Risk Commitee
Witan Investment Trust plc
Annual Report 2023
CORPORATE GOVERNANCE
58
Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Report of the Audit & Risk Committee continued
MEETINGS OF THE COMMITTEE
The Committee held four meetings during 2023 and also met in February
2024. 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 2023 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 (see note 14).
> 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.
> 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 page40), 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, including on-site visits, each year on all the Company’s
service providers, including the fund managers, and reports the
results of this to the Committee.
> In light of the relative simplicity of the operations and the use of
independent external consultants, who report directly to the
Committee, to advise on regulatory compliance and adherence to
internal procedures, it was concluded that no internal audit function
was required (see page 56).
> The Committee has worked with the Risk Committee of WIS, the
Company’s subsidiary, to ensure WIS’ compliance with Financial
Conduct Authority (‘FCA’) regulations.
> The Committee also monitored the work required to ensure the
Company’s compliance with new legislation, including:
– regulations on climate-related disclosures for listed companies
(which do not currently apply to the Company as an investment
trust);
– 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. The Company
met the requirements of the Consumer Duty rules by the effective
date, 31 July 2023. The conclusions of the Witan product “value
assessment” can now be accessed on the Witan website.;
– The Committee noted that BEIS had deferred a number of the
changes which it had proposed as part of its reform of audit and
corporate governance;
– The Committee reviewed the FRC’s Audit Committee Standard
and agreed that it should be possible to adopt this earlier than
required, on the basis that the Committee already complies with
most of the responsibilities set out in the Standard. The
Committee has agreed that guidelines for the audit tender, which
is scheduled for 2025, should be put in place; and
– FRC review of corporate reporting in 2022/23 and key matters for
2023/24.
RISK
Management has identified (Strategic Report pages 35 to 37) 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 potential impact of generative AI has been included as an
emerging risk this year.
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 2022 or 2023.
The Committee has monitored the controls designed to mitigate the risks
associated with these matters during the year, including reviewing
management’s risk report at each meeting and requiring amendments to
both risks and mitigating actions as appropriate. The Committee considers
that management has carried out a robust assessment of the emerging
and principal risks facing the Company and has taken appropriate action
to mitigate those risks. 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 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 42 and
43 and recommended to the Board that they are appropriate. This
assessment included a review of the scenario analysis set out on page 42.
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
Witan Investment Trust plc
Annual Report 2023
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change its auditor after 20 years. Accordingly, the Committee will
re-tender the audit no later than 2026. The audit partner is Paul Flatley.
The auditor is required to rotate the principal engagement partner every
five years; this is Mr Flatley’s third 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 for the
second year in a row. 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
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 Client Assets
Sourcebook (‘CASS’) report to the FCA in respect of WIS, to be completed
by the end of April 2024.
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.
ALTERNATIVE PERFORMANCE MEASURES
The Company was contacted by the FRC during 2023, who noted the
absence of IFRS measures in the Company’s Strategic Report in the 2022
Annual Report and asking us to explain the basis on which we determined
that the Strategic Report contained a fair review of the Company’s
business, including a balanced and comprehensive analysis of its
development and performance during the financial year and its position at
the end of that year, as required by the Companies Act 2006. We
explained that, as a closed-end investment company, the Company’s
users need information in addition to that provided by IFRS measures and
that we prepare the financial statements in accordance with the AIC SORP,
which results in our reporting a number of Alternative Performance
Measures (‘APMs’), which we and other trusts consider are relevant to the
financial statements of an investment trust. We confirmed, however, that
we would include references to relevant IFRS measures in future Strategic
Reports and believe that we have done so in this year’s Annual Report
(see pages 1 and 15 for disclosures of total earnings per share and net
assets).
The FRC also commented on our disclosure of the valuation techniques
used in valuing unquoted investments, suggesting that the disclosures
could be clearer. We accepted this point whilst noting that unquoted
investments comprised approximately 2.1% of the Company’s net assets at
31 December 2022. We agreed to provide further information on the
techniques used for valuation in this and future accounting periods, where
material and relevant. See pages 92 and 107.
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 79:21. 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
page55) and the Board’s internal review in 2023 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 15 March 2024 and is
signed on its behalf by:
Jack Perry
Chairman of the Audit & Risk Committee
15 March 2024
Witan Investment Trust plc
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Directors’ Remuneration Report
CHAIRMAN’S STATEMENT
I am pleased to present my report as Chairman of the
Remuneration and Nomination Committee (the
‘Committee’)
The Committee deals with both nominations and remuneration-related
matters. Reports on both aspects of the Committee’s work are covered
below.
The Committee 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 retired from the Board at the AGM on 4 May 2023 and
Mrs Boyle was appointed as a member of the Committee with effect from
that date.
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). See also
below and on page 61.
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 were two appointments to, and one resignation from, the Board in
2023.
Ms Neubert had previously stated that she would retire from the Board at
the AGM in May 2023.
Accordingly, 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. Trust Associates, who have no other
recent connection with the Company, were appointed to carry out a
search for a suitable candidate. The Committee identified two suitable
candidates for appointment and the Board agreed that both appointments
should be made. Shauna Bevan and Shefaly Yogendra were appointed as
non-executive directors with effect from 1 February 2023 and were
elected by shareholders at the AGM held on 4 May 2023.
Mrs Beagles was appointed to replace Ms Neubert as the Senior
Independent Director with effect from her retirement in May 2023.
The Committee regularly reviews directors’ other appointments, including
commitments to the boards of private companies and charities, in order to
assess whether each director has sufficient time to meet their
responsibilities to the Company. The Committee has noted that Mr Perry is
currently chairman of two other investment trusts and Mr Bell is chairman
of one other investment trust. However, the Committee notes that Mr Perry
will retire as a director of one of the investments trusts at its AGM in May
2024 and that the other investment trust is being wound down. Mr Bell has
assured the Committee that he has adequate time to deal with both
appointments. Following discussions with Mr Perry and Mr Bell, the
Committee is satisfied that they both have sufficient time to meet their
responsibilities to the Company.
A report on the Board’s evaluation of itself and its Committees is set out
on page 55.
The Board’s policy on diversity is set out on page 53.
Paul Yates
Chairman, Remuneration & Nomination Committee
Witan Investment Trust plc
Annual Report 2023
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
REMUNERATION
The remainder of this report covers the remuneration-related activities of
the Committee for the year ended 31 December 2023. 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 2023 and other information required by the
Regulations. It will be subject to an advisory vote at the AGM on 1 May 2024.
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, would normally
expect to put a resolution to approve the remuneration policy to
shareholders at the AGM to be held in 2025. However, as explained
below, the Committee is proposing a minor variation of the policy and
shareholders’ approval of this variation will be sought at the AGM to be
held on 1 May 2024.
We seek to engage with our shareholders and welcome discussions on
any aspect of the Company. We take any issues raised by shareholders
with great importance and encourage discussion on such matters. Last
year we engaged with shareholders after a number of votes against the
remuneration report and other resolutions. Indeed, this valuable feedback
has led to a number of changes to practice which we hope will be well
received.
The Committee has previously reviewed the terms of Mr Bell’s contract, in
particular the details of his bonuses, and considered whether any of the
deferred elements of the bonuses should be paid in shares (a ‘Deferred
Award’). After careful consideration, the Committee has agreed that, in light
of Mr Bell’s substantial holding in the Company (worth over £2 million at the
end of 2023, 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. During the year, the Committee agreed with
Mr Bell that, subject to shareholder approval, the deferred element of any
bonus (40%) awarded after 1 January 2024 will vary (upwards or downwards)
by reference to the net asset value total return of the Company’s shares from
the date of the award through to payment, subject to the existing provisions
for malus and clawback. We believe that this, in addition to the minimum
share ownership guideline, achieves the objective of alignment of interests
in a simpler and more cost-effective way. As noted, this minor variation to
the remuneration policy approved by shareholders in 2022 requires the
approval of shareholders, which will be requested at this year’s AGM.
As noted in the Chairman’s Statement on pages 8 and 9, the CEO, Andrew
Bell, has recently informed the Board that he plans to retire from Witan
during the coming year. The Committee considers him to be a “Good
Leaver” as set out in his service contract and intends to pay Mr Bell the
deferred element of his past bonuses, amounting to £76,667, in full on his
retirement.
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’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 2024, in accordance with the process described on
page 67. The Committee’s recommendation, to which the Board agreed, was
that non-executive directors’ fees should be increased by an average of 2%.
This is below the rate of inflation and less than the percentage increase in
remuneration of the Company’s employees. With effect from 1 April 2024,
directors’ fees will be:
£
Chairman of the Company 77, 50 0
Chairman of the Audit & Risk Committee 51,000
Chairman of the Remuneration and Nomination Committee 46,500
Senior Independent Director 46,500
Other non-executive directors 40,250
Since 1 April 2023, the fees have been:
£
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
With effect from 1 April 2024, the aggregate fees for the current eight
non-executive directors will amount to £382,500 per annum (2023:
£375,000).
The Company’s Articles of Association currently limit the aggregate fees
payable to the non-executive directors to £450,000 per annum.
Paul Yates
Chairman of the Remuneration
and Nomination Committee
15 March 2024
Witan Investment Trust plc
Annual Report 2023
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Directors’ Remuneration Report continued
ANNUAL REPORT ON REMUNERATION
An ordinary resolution for the approval of this section of the report (together with the Chairman’s Statement on pages 60 to 61) will be put to members at
the forthcoming AGM.
The following section sets out the executive director’s and the non-executive directors’ remuneration for the year ended 31 December 2023. The information
provided on pages 62 to 66 of this report (other than the total shareholder return performance graph; the CEO remuneration table; the annual percentage
change in remuneration of directors and employees; and the relative importance of spend on pay) 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 2023, together with
the comparative figures for 2022:
31 December 2023 31 December 2022
Fees
(1)
£
Taxable
benefits
(2)
£
Total
remuneration
£
Fees
(1)
£
Taxable
benefits
(2)
£
Total
remuneration
£
A J S Ross 75,375 – 75,375 72,250 148 72,398
R A Beagles 43,033 – 43,033 37, 50 0 62 37,562
S L Bevan (appointed 1 February 2023) 35,958 – 35,958 – – –
G M Boyle 39,125 – 39,125 37,50 0 – 37,5 0 0
S E G A Neubert (resigned 4 May 2023) 15,492 27 15,519 43,500 415 43,915
J S Perry 49,500 2,917 52,417 47, 25 0 5,464 52,714
B C Rogoff 39,125 – 39,125 37,50 0 – 37,5 0 0
P T Yates 45,125 – 45,125 43,500 – 43,500
S M Yogendra (appointed 1 February 2023) 35,958 – 35,958 – – –
378,691 2,944 381,635 319,000 6,089 325,089
(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 2023 for the
CEO, Mr Bell, together with the comparative figures for 2022. Aggregate emoluments are shown in the last column of the table.
Base pay
(1)
£
Benefits
(2)
£
Annual bonus
(3)
£
Long-Term
Bonus
(3)
£
Pension-related
benefits
£
Total
fixed
£
Total
variable
£
Total
£
2023 330,000 38,091 100,000 – 33,000 401,091 100,000 501,091
2022 315,000 34,642 95,000 – 31,500 381,142 95,000 476,142
(1) Mr Bell is entitled to hold outside appointments and to retain any fees payable, subject to receiving the Board’s permission. During 2023, in addition to the base salary
set out above, Mr Bell received £43,250 (2022: £41,500) 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 against the performance criteria, described on page 70, over the preceding year at its meeting in February 2024 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 (£100,000) in respect of the financial year ended 31 December 2023 (2022:
30%, £95,000).
(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 2023 (net asset value debt at par, excluding the effect of share buybacks) and therefore no bonus will be paid to Mr Bell based on the Company’s
financial performance for the year ended 31 December 2023 (2022: underperformed, £nil).
(iii) Long-Term Bonus
For a description of the terms of the Long-Term Bonus (including the performance measures), please see the policy report. In summary, Mr Bell is eligible to receive
up to 90% of his basic annual salary by reference to the Company’s performance over the previous three financial years. The level of bonus is determined by
reference to the performance against the benchmark, where performance in line with benchmark generates a bonus rising on a straight-line basis to a full bonus
where the benchmark is exceeded by an average of 2.5% per annum. The Company has underperformed its benchmark over the three financial years to 31 December
2023 (net asset value debt at par, excluding the effect of share buybacks) and therefore no Long-Term Bonus will be paid to Mr Bell (2022: underperformed, £nil).
(4) Employer’s national insurance contributions of £52,940 (2022: £47,328) were paid in respect of Mr Bell’s remuneration for the year.
(5) The amount of bonuses relating to 2023 and prior years which was unpaid at the year end was £170,947, of which £94,280 was paid to Mr Bell in March 2023 (2022:
£241,194; £109,580 paid in March 2022).
Witan Investment Trust plc
Annual Report 2023
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Payment of the discretionary bonus will be partly deferred in accordance
with the current policy, with 60% paid in March 2024. In the normal course
of business, the remaining 40% would be paid on a deferred basis in three
instalments in March 2025, 2026 and 2027. However, as noted on page 61,
the deferred element of his past bonuses will be paid in full on his
retirement.
During the year, the Committee agreed with Mr Bell that, subject to
shareholder approval at the AGM to be held in May 2024, the deferred
element of any bonus (40%) awarded after 1 January 2024 will vary
(upwards or downwards) by reference to the net asset value total return of
the Company’s shares from the date of the award through to payment,
subject to the existing provisions for malus and clawback.
Scheme interests awarded during the financial year
No directors were awarded any interest over shares in the Company
during the financial year ended 31 December 2023 (2022: nil).
Payments to past directors
No payments were made to former directors of the Company during the
financial year ended 31 December 2023 (2022: £nil).
Payments for loss of office
No loss of office payments were made to any person who has previously
served as a director of the Company at any time during the financial year
ended 31 December 2023 (2022: £nil).
Statement of directors’ shareholdings (audited)
The interests of the CEO and the non-executive directors (including
connected persons) in the Company’s ordinary shares are shown in the
table below. No share options or other share based awards, with or
without performance measures, were awarded to the CEO or to any
non-executive director. There are no requirements or guidelines for the
non-executive directors to own shares in the Company but the Committee
expects the CEO to maintain a shareholding in the Company equivalent to
at least three times his salary.
Ordinary shares
held as at
31December 2023
Ordinary shares
held as at
31 December 2022
A J S Ross 300,000 300,000
R A Beagles 42,073 42,073
S L Bevan – –
A L C Bell 850,000 850,000
G M Boyle 28,683 28,683
J S Perry 82,498 82,498
B C Rogoff 45,418 44,974
P T Yates 25,245 25,245
S M Yogendra 2,036 –
Ms Bevan and Dr Yogendra, who were appointed to the Board on
1 February 2023, did not hold any shares in the Company at the date of
their appointment.
Since the year end, Ms Bevan has bought 10,000 shares. There have not
been any other changes in the directors’ interests since the year end.
None of the directors has an interest in the Company’s preference shares.
The CEO’s shareholding at 31 December 2023 represented more than six
times his annual salary.
Total shareholder return performance graph
The Company is required to present a graph comparing the Company’s
share price with a single broad equity market index. The Company has
compared the share price total return against (i) a UK market index, namely
the MSCI UK IMI Index (‘MSCI UK Index’), because the Company’s shares
are listed on the UK market, and also (ii) a global index, namely the MSCI
All Country World Index (‘MSCI ACWI’), because the Company invests
across a broad spread of global equity markets. The performance of the
Company’s benchmark and of the UK Consumer Price Index are also
shown.
Price Benchmark MSCI ACWI MSCI UK
31/12/2018
31/12/2019
31/12/2020
31/12/2021
31/12/2022
31/12/2023
150
100
200
250
300
350
50
0
31/12/2013
31/12/2014
31/12/2015
31/12/2016
31/12/2017
UK CPI
The line graph above sets out the Company’s ten-year total shareholder
return performance relative to the MSCI UK Index and the MSCI ACWI
(sterling adjusted). This line graph assumes a notional investment of £100
into the indices on 31 December 2013 and the reinvestment of all income,
excluding dealing expenses.
CEO remuneration table
Year ended
31 December
CEO single
figure of total
remuneration
£
Annual
discretionary and
One-year Bonus
payout against
maximum
%
Long-Term
Bonus against
maximum
%
2023 501,091 37.9 0.0
2022 476,142 37.7 0.0
2021 457,820 34.4 0.0
2020 447,219 31.2 0.0
2019 590,975 62.9 29.9
2018 497, 881 50.0 12.4
2017 658,906 87. 5 89.0
2016 493,811 40.0 54.4
2015 593,431 95.2 100.0
2014 544,514 76.2 100.0
Witan Investment Trust plc
Annual Report 2023
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Directors’ Remuneration Report continued
Annual percentage change in remuneration of directors and employees for the year ended 31 December 2023
The table below shows how the percentage change in the directors’ salaries, benefits and bonuses between 2022 and 2023 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 2023 compared with remuneration for 2022.
Salary
and fees
%
Taxable
benefits
%
Annual bonuses
%
A J S Ross 4.3 (100.0) n/a
R A Beagles
(1)
14.8 (100.0) n/a
S L Bevan
(2)
n/a n/a n/a
G M Boyle 4.3 – n/a
J S Perry 4.8 (46.6) n/a
B C Rogoff 4.3 – n/a
P T Yates 3.7 – n/a
S M Yogendra
(2)
n/a n/a n/a
A L C Bell 4.8 9.9 5.3
Average pay of employees 9.2 (1.6) 13.0
(1) Appointed as Senior Independent Director with effect from 4 May 2023.
(2) Percentage increase cannot be calculated since she was appointed as a director on 1 February 2023 and therefore the value in the prior year was £nil.
The increase in the CEO’s annual bonus in 2023 was 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 2023.
Percentage increase/(decrease) in remuneration for 2022 compared with remuneration for 2021.
Salary
and fees
%
Taxable benefits
%
Annual bonuses
(discretionary
and One-year
bonus)
%
A J S Ross 5.5 n/a
(1)
n/a
R A Beagles 4.2 (21.5) n/a
G M Boyle 4.2 – n/a
S E G A Neubert 8.4 ( 7.8) n/a
J S Perry 5.0 238.7 n/a
B C Rogoff 4.2 – n/a
P T Yates 3.6 – n/a
A L C Bell 2.1 3.2 11.8
Average pay of employees 5.8 ( 9.1) 21.3
(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 was 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.
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Percentage increase/(decrease) in remuneration for 2021 compared with remuneration for 2020.
Salary
and fees
%
Taxable benefits
%
Annual bonuses
(discretionary
and One-year
bonus)
%
A J S Ross
(1)
21.0
–
n/a
R A Beagles
(2)
100.0 n/a
(5)
n/a
G M Boyle 3.2 – n/a
S E G A Neubert
(3)
14.9 n/a
(5)
n/a
J S Perry 3.4 (8.5) n/a
B C Rogoff 3.2 – n/a
P T Yates
(4)
8.0 – n/a
A L C Bell 0.0 8.8 10.2
Average pay of employees ( 0.1) 8.4 35.3
(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 Nomination 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 was 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.
Percentage increase/(decrease) in remuneration for 2020 compared with remuneration for 2019.
Salary
and fees
%
Taxable benefits
%
Annual bonuses
(discretionary
and One-year
bonus)
%
A J S Ross
(1)
170.8 n/a n/a
R A Beagles n/a
(2)
n/a n/a
G M Boyle
(3)
195.8 n/a n/a
S E G A Neubert 10.8 (100.0) n/a
J S Perry 11.5 (68.4) n/a
B C Rogoff 10.8 n/a n/a
A Watson 11.2 (72.2) n/a
P T Yates
(4)
23.5 n/a n/a
A L C Bell 2.5 11.2 (49.1)
Average pay of employees 1.2 1.9 (10.7)
(1) Appointed as a director on 2 May 2019 and as Chairman with effect from 29 April 2020.
(2) Percentage increase cannot be calculated since she was appointed as a director on 1 July 2020 and therefore the value in the prior year was £nil.
(3) Appointed as a director on 16 August 2019.
(4) Fee increase reflects his appointment as Chairman of the Remuneration and Nomination Committee with effect from 29 April 2020.
The decrease in the CEO’s bonuses in 2020 was principally due to the underperformance of the Company in 2020, which resulted in the One-year Bonus
and Long-Term Bonus not being paid in 2020.
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Directors’ Remuneration Report continued
Relative importance of spend on pay
Spend
2023
£’000
2022
£’000
Difference
£’000
Fees of non-executive directors (see table on page 62) 379 319 60
Remuneration paid to or receivable by all employees of the Group (including the CEO)
in respect of the year 1,219 1,122 97
Dividends paid to shareholders in respect of the year
(1)
38,473 40,112 (1,369)
Share buybacks
(2)
122,880 129,269 (6,389)
Total payments to shareholders 161,353 169,381 (8,028)
Net assets
(3)
1,561,665 1,541,809 12.9%
(1) The dividend per share was increased by 4.1% so the reduced aggregate dividend payout reflects the lower number of shares in issue following share buybacks.
(2) Share buybacks were at a high level, reflecting the level of the discount during the year (see also comments on page 14).
(3) The Committee considers that this table should include the net assets as this would assist shareholders to understand the relative importance of spend on pay.
Statement of shareholder voting
At the AGMs held on 4 May 2023 and 5 May 2022 respectively, ordinary
resolutions to approve the Directors’ Remuneration Report for the year
ended 31 December 2022 and to approve the remuneration policy were
passed on a show of hands. The proxy votes in each case were as follows:
Votes for Votes against Votes withheld
Total votes cast
(excluding votes
withheld)
Approval of Directors’ Remuneration Report on 4 May 2023
100,378,634 14,670,866 844,590 115,049,500
87.2% 12.8% – 100%
Approval of remuneration policy on 5 May 2022
140,867,953 19,066,966 866,296 159,934,919
88.1% 11.9% – 100%
The Company is committed to ongoing shareholder dialogue and takes an
active interest in voting outcomes. Where there are substantial votes
(defined in the Listing Rules as over 20%) against resolutions in relation to
directors’ remuneration, the reasons for any such vote will be sought and
any actions in response will be detailed in future Directors’ Remuneration
Reports. There were no such shareholder votes against these resolutions
at the AGM in 2023. However, the Chairman wrote to a number of
shareholders to try to understand their reasons for voting against certain
resolutions.
Statement of implementation of remuneration policy
The remuneration policy for the CEO, as detailed in the policy section of
the Report, was agreed by shareholders at the 2022 AGM and
implemented with effect from 1 January 2022. The fees for non-executive
directors were increased with effect from 1 April 2023.
As detailed on page 61, the fees will be increased with effect from 1 April
2024.
Consideration by the directors of matters relating to directors’
remuneration
The Board as a whole sets the fees that are payable to the non-executive
directors and it has appointed the Committee to consider matters relating
thereto. The Committee also considers the remuneration of the CEO and
makes a recommendation on this to the Board for its approval.
The Committee was not provided with any external advice or services,
during the financial year ended 31 December 2023, in respect of the fees
payable to the non-executive directors or the remuneration payable to the
CEO.
The Committee assesses proposed increases in non-executive directors’
fees 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, workload
and investment objective.
The table below sets out the members of the Committee who were
present during any consideration of the CEO’s remuneration, and shows
the number of meetings attended by each non-executive director:
Name
Number of
meetings
attended
P T Yates 2
G M Boyle 1/1
S E G A Neubert 1/1
A J S Ross 2
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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 at that time. The policy will apply for three
years until the AGM in 2025, except that, as noted on page 61, the Committee has (in line with suggestions from some shareholders) agreed with Mr Bell
that the deferred element of any bonus (40%) awarded after 1 January 2024 will vary (upwards or downwards) by reference to the net asset value total
return of the shares from the date of the award through to payment, subject to the existing provisions for malus and clawback. This change to the policy
will require approval by shareholders and a resolution to this effect will be put to shareholders at the AGM to be held on 1 May 2024. The policy that was
approved by shareholders at the AGM in 2022 is set out below on pages 67 to 72.
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, workload 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 2024, the Chairman’s fee is £7 7,500 and each
non-executive director’s annual base fee is £40,250. Additional fees are
payable as follows:
> Chairman of Audit & Risk Committee £10,750.
> Chairman of Remuneration and Nomination Committee £6,250.
> Senior Independent Director £6,250.
The maximum amount of fees, in aggregate, that may be paid to
non-executive directors in any financial year is £450,000.
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Job No: 51462 Proof Event: 28 Black Line Level: 5 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Directors’ Remuneration Report continued
Remuneration policy for the CEO (and any future executive directors)
Currently, the Company operates with one executive director, the CEO. This policy applies to the CEO, but would also be applied to any other executive
director appointed by the Company. Executive director remuneration is set at market-competitive levels, with the majority of any variable pay (bonus
amounts) contingent on the attainment of audited outperformance of the Company’s benchmark, in accordance with the Company’s objective. Any
discretionary bonus is dependent on annual appraisal by the Remuneration and Nomination Committee and Board against a range of financial and
corporate governance criteria.
Purpose and link tostrategy Operation and
clawback
Maximum
opportunity
Performance measures
Base salary Base salary is set at
market-competitive levels in
order to recruit and retain an
executive director of a
suitably high calibre.
The level of pay reflects a
number of factors including
individual experience,
expertise and pay
appropriate to the position.
Base salary is reviewed annually
and fixed for 12 months.
The CEO’s salary was
increased to £340,000 per
annum with effect from
1 January 2024.
Year-on-year salary increases
for any executive director will
not exceed 10% per annum
other than in times of
abnormal inflation or other
exceptional circumstances, in
which case the increase will
not exceed 20%.
Not applicable
Benefits-in-
kind
Offering market-competitive
levels of benefits-in-kind to
helprecruit or retain
anexecutive director of
asuitably high calibre.
An executive director may be
eligible to receive a range of
benefits including some or all of:
> private medical insurance for
the executive director and
their family;
> death in service insurance;
and
> business-related expenses.
Where benefits are sourced
through third-party providers,
the expense will reflect the cost
of the provision of the benefits
from time to time but will be
kept under review by the
Committee.
The maximum benefit that
can be offered or paid to an
executive director is:
> private medical insurance
provided on a family
basis;
> death in service insurance
of four times base salary;
and
> business-related
expenses.
Not applicable
Pension Offering market-competitive
levels of guaranteed cash
earnings to help recruit or
retain an executive director
of a suitably highcalibre.
The CEO currently receives a
cash payment, equal to 10% of
base salary, in lieu of pension
contributions.
The maximum cash payment
in lieu of pension
contributions is 10% of base
salary, which is the same as
the pension contribution rate
applicable to other staff.
Not applicable
Discretionary bonus The purpose of the bonus
arrangements is to
incentivise the CEO to
maximise the Company’s
performance and its return to
shareholders.
The CEO is eligible to receive a
discretionary bonus of up to
40% of basic annual salary. The
Committee will review the
CEO’s performance against the
performance criteria to
determine the appropriate level
of bonus payable in respect of
the preceding year.
The Committee may change the
terms of this bonus or reduce
any bonus payment that would
otherwise be payable in order
to comply with any relevant
current or future regulations,
including the FCA Remuneration
Code. See note 2 on page 70
for the operation of deferral,
malus and clawback.
The maximum cash
discretionary bonus payable
to any executive director is
40% of base salary.
Please see note 1 on
page70 for details of the
performance measures
applicable to the CEO’s
discretionary bonus.
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Purpose and link tostrategy Operation and
clawback
Maximum
opportunity
Performance measures
One-year Bonus The purpose of the bonus
arrangements is to
incentivise the CEO to
maximise the Company’s
performance and its return to
shareholders.
The CEO is eligible to receive a
bonus of up to 40% of base
salary by reference to the
performance of the Company
over the previous financial year.
The Committee may change the
terms of this bonus or reduce
any bonus payment that would
otherwise be payable in order
to comply with any relevant
current or future regulations,
including the FCA Remuneration
Code. See note 2 on page 70
for the operation of deferral,
malus and clawback.
The maximum cash One-year
Bonus payable to any
executive director is 40% of
base salary.
Please see note 1 on
page70 for details of the
performance measures
applicable to the CEO’s
One-year Bonus.
Long-Term Bonus The purpose of the bonus
arrangements is to
incentivise the CEO to
maximise the Company’s
performance and its return to
shareholders.
The CEO is eligible to receive a
bonus of up to 90% of base
salary by reference to the
performance of the Company
over the previous three financial
years.
The Committee may, with
shareholder approval as
appropriate, change the terms of
this bonus or reduce any bonus
payment that would otherwise
be payable in order to comply
with any relevant current or
future regulations, including the
FCA Remuneration Code. See
note 2 on page 70 for the
operation of deferral, malus and
clawback.
The maximum cash
Long-Term Bonus payable to
any executive director is 90%
of base salary.
Please see note 1 on
page70 for details of the
performance measures
applicable to the CEO’s
Long-Term Bonus.
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Annual Report 2023
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Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Directors’ Remuneration Report continued
Notes:
1. Performance measures
Mr Bell’s service agreement, as amended, provides that he is eligible to
receive a bonus of up to 170% of his basic annual salary, two elements of
which, totalling a maximum of 130% of salary, are calculated by reference
to the performance of the Company. The cash bonus arrangement
consists of three separate elements as set out below:
(i) Discretionary bonus
Each year Mr Bell is eligible to receive, at the absolute discretion of the
Committee, a cash bonus of up to 40% of his basic annual salary. The
Committee has determined a number of criteria that it takes into account
on which to judge his performance and based on which it agrees the
amount of the discretionary bonus. These include the management and
development of the investment process; advising the Board on and
evolving the long-term strategy of the Company; the commitment,
development and presentation of the Company’s approach to ESG;
performance against annual objectives; management of staff;
administration of the office; reporting to the Board and shareholders; and
relationships with the Board and other stakeholders.
(ii) One-year Bonus
Each year Mr Bell is eligible to receive an additional cash bonus of up to
40% of his basic annual salary. The bonus will be determined by the
Company’s net asset value per share total return performance over the
previous financial year (debt at par, excluding the effect of share buybacks
or issuance) relative to its benchmark. Outperformance of the benchmark
by 3.0% or more will generate a bonus of the full 40%. No bonus is payable
if performance is in line with or below that of the benchmark. Relative
performance of between nil and 3.0% will generate a pro rata bonus.
(iii) Long-Term Bonus
Mr Bell is eligible to receive a Long-Term Bonus each year of up to 90% of
his basic annual salary by reference to the Company’s performance over
the previous three financial years. The Long-Term Bonus will be
determined by reference to the Company’s net asset value per share total
return (debt at par, excluding the effect of share buybacks or issuance)
relative to its benchmark, as set out in the Company’s audited annual
accounts for the applicable financial years. Compounded average annual
outperformance of the benchmark by 2.5% per annum or more will
generate a bonus of the full 90%. No bonus is payable if performance is in
line with or below that of the benchmark. Relative performance of between
nil and 2.5% per annum will generate a pro rata bonus.
The Long-Term Bonus will be halved if, despite outperformance of the
benchmark over the relevant three financial years, the Company’s net
asset value total return per share is negative over that period.
2. Deferral, malus and clawback
2.1 Deferral
All bonuses are subject to deferral in terms of payment. 60% of any bonus
will be paid in March following the performance year end (‘First Bonus
Payment Date’). 40% of any bonuses will be payable on a deferred basis
over the following three years, in instalments on each anniversary of the
First Bonus Payment Date. Subject to the approval of shareholders to an
amendment to the Company’s remuneration policy at the AGM to be held
in May 2024, the deferred element of any bonus (40%) will vary (upwards
or downwards) by reference to the net asset value total return of the
Company’s shares from the date of the award through to payment, subject
to the existing provisions for malus and clawback.
2.2 Malus
Malus (where bonuses that have yet to be paid are forfeited) may be
applied by the Remuneration and Nomination Committee where:
(a) there has been material misstatement or error that causes an award to
vest at a higher level than would otherwise have been the case;
(b) there has been a material failure in risk management; or
(c) there has been serious misconduct that has resulted or could result in
dismissal.
2.3 Clawback
Any bonus will be subject to a clawback period of two years after it has
been paid, whereby the CEO will be required to pay back part or all of any
bonus already received. Clawback may be applied by the Remuneration
and Nomination Committee where:
(a) there has been material misstatement or error that causes an award to
vest at a higher level than would otherwise have been the case;
(b) there has been a material failure in risk management; or
(c) there has been serious misconduct that has resulted or could result in
dismissal.
3. Legacy plans
The Committee reserves the right to make remuneration payments and
payments for loss of office that are not in line with the policy set out above
(i) where the terms of such a payment were agreed before the policy came
into effect or at a time when the relevant individual was not a director of
the Company and (ii) in the opinion of the Committee, such a payment is
not in consideration of the individual becoming a director of the Company.
For these purposes, payments include the Committee making awards of
variable remuneration.
4. Differences in the Company’s remuneration policies for directors and
employees
The remuneration policy for the executive director differs principally from
that for employees in that the executive director’s remuneration is more
heavily weighted towards variable pay so that a greater proportion of his
pay is related to the Company’s performance and the value created for
shareholders.
Principles and approach to recruitment and internal promotion of
directors
Non-executive directors
(1) Remuneration of non-executive directors should reflect the specific
circumstances of the Company and the duties and responsibilities of
the non-executive directors. It should provide appropriate
compensation for the experience and time committed to the proper
oversight of the affairs of the Company.
(2) Non-executive directors are not eligible to receive bonuses, pension
benefits, share options or other benefits, other than the
reimbursement of reasonably incurred expenses which are regarded
by HMRC as taxable benefits-in-kind.
(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.
Witan Investment Trust plc
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Executive directors
(1) When hiring a new executive director, or promoting to the Board from
within the Group, the Committee will offer a package that is sufficient
to retain and motivate and, if relevant, attract the right talent whilst
paying no more than is necessary.
(2) Ordinarily, remuneration for a new executive director will be in line
with the policy set out in the table.
(3) The maximum level of variable pay that may be awarded to a new
director on recruitment or on promotion to the Board shall be limited
to 170% of base salary (calculated at the date of grant, excluding any
buy-out awards – see below).
(4) The Committee may, where it considers it to be in the best interests of
the Company and shareholders, offer an additional cash payment to
an executive director in order to replace awards which would be
foregone by the individual on leaving his/her previous employment
(i.e. buy-out arrangements) which will be intended to mirror forfeited
awards as far as possible by reflecting the value, nature, time horizons
and performance measures.
Letters of appointment/service contract
Non-executive directors’ letters of appointment
The non-executive directors all have letters of appointment, which may be
inspected at the Company’s registered office. None of the non-executive
directors is subject to any notice period. All continuing non-executive
directors are required to stand for re-election by the shareholders at least
every three years. The initial period of appointment is two terms of three
years. All reasonably incurred expenses will be met.
All the directors are proposed for re-election at the AGM in May 2024.
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 2023 for a salary of £330,000
(2022: £315,000) per annum. His salary has been increased to £340,000
with effect from 1 January 2024. 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 the
Company’s remuneration policy, for the year ending 31 December 2024 at
three direct levels of performance:
> minimum performance, i.e. fixed salary, taxable benefits and payment
in lieu of pension contributions, with no bonus payout;
> on-target performance, i.e. fixed pay plus bonus payments assuming
a 50% payout of each of the discretionary, One-year and Long-Term
Bonuses; and
> maximum performance, i.e. fixed pay plus bonus payments assuming
100% payout of each of the discretionary, One-year and Long-Term
Bonuses.
0
400
200
600
800
£412,091
Minimum
performance
On-target
performance
Maximum
performance
100%
£701,091
58%
10%
10%
22% 31%
£990,901
14%
14%
41%
1000
Fixed pay Discretionary bonus
One-year Bonus Long-Term Bonus
£’000s
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.
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Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
If the CEO ceases employment as a result of a ‘good leaver’ reason (i.e.
death, ill-health, injury, disability, redundancy, retirement or due to any
other circumstance that the Committee at its discretion permits), any
bonus payment shall be pro-rated for time and performance. The
Committee may, however, taking into account such factors as it considers
appropriate, increase the proportion of the relevant bonus that becomes
payable. If the CEO ceases employment other than as a ‘good leaver’, or if
the CEO gives or receives notice prior to the date that the relevant bonus
would otherwise have been paid, the CEO will forfeit any right to receive
the relevant bonus for nil consideration unless the Committee, in its
absolute discretion, determines otherwise.
A change of control of the Company shall not affect the amount of any
bonus or the date on which it becomes payable unless the Committee
determines otherwise, in which case the Committee shall determine
whether the pro-rated performance targets attached to the applicable
bonuses have been satisfied at that time.
If the Committee determines that the pro-rated performance targets have
not been satisfied on the change of control, the applicable bonus shall
immediately lapse unless the Committee determines otherwise. To the
extent that the Committee determines that the pro-rated performance
targets have been satisfied on the change of control, if the CEO ceases to
be employed by the Company prior to the date that the applicable bonus
would otherwise have been paid to the CEO other than as a result of:
> a reason which would have justified his/her summary dismissal;
> his/her cessation of employment without the giving or receiving of
notice; or
> his/her resignation,
the applicable bonus shall become payable to the extent determined at
the time of the change of control on, or as soon as practicable after, the
CEO’s cessation of employment.
Statement of consideration of conditions elsewhere intheCompany
The Committee considers the employment conditions, including salary
increases, of employees other than the CEO when setting the CEO’s
remuneration.
The Company did not consult with employees when drawing up the
remuneration policy.
Where possible, the Committee benchmarks the remuneration of the
employees and the CEO by obtaining details of remuneration paid to
employees in comparable roles in other companies.
Witan had six employees during 2023. The ratio of the CEO’s
remuneration to the median of the other employees was 2.1:1. We have not
reported in any greater detail on this point in order to protect the privacy
of individuals.
Statement of consideration of shareholder views
The Company places great importance on communication with its
shareholders. The Company had frequent meetings with institutional
shareholders and City analysts throughout the year ended 31 December
2023. The Board was pleased to welcome shareholders to the AGM held
in May 2023 both in person and online, and shareholders were able to
submit questions to the Board whether they attended in person or
virtually. The Company also responded to shareholder enquiries during
the year. The Board can confirm that it is not aware of negative views
being expressed by shareholders in relation to its policy on directors’
remuneration.
Approval
This report was approved by the Committee on 15 March 2024 and is
signed on its behalf by:
Paul Yates
Chairman of the Remuneration and Nomination Committee
15 March 2024
Directors’ Remuneration Report continued
Witan Investment Trust plc
Annual Report 2023
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
STATUTORY INFORMATION
The directors present the Annual Report of the Group for the year ended
31 December 2023.
ACTIVITIES AND BUSINESS REVIEW
A review of the business is given in the Strategic Report on pages1 to 43
including the Chairman’s Statement and CEO’s review on pages 8 to 15.
The directors are required by the Companies Act 2006 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 35 to 37.
The Corporate Governance Statement on pages 46 to 56 forms part of this
Directors’ Report.
INVESTMENT POLICY
The Company’s investment policy is set out on the inside front cover.
STATUS
Companies Act 2006 and operates as an investment trust in accordance
with section 1158 of the Corporation Tax Act 2010. The Company has
received confirmation from HM Revenue and Customs that it has been
accepted as an approved investment trust with effect from 1 January 2012,
provided it continues to meet the eligibility conditions of section 1158 and
the ongoing requirements for approved companies in the Investment Trust
(Approved Company) (Tax) Regulations 2011.
SUBSIDIARY COMPANY
The Company has one subsidiary company, Witan Investment Services
Limited, which provides marketing services to the Company. Witan
Investment Services Limited is authorised and regulated by the Financial
Conduct Authority to act as the Company’s AIFM.
ISAs
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 2023, 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.
The shareholder register is principally comprised of private wealth
managers and retail investors who own their shares through a variety of
online platforms.
Directors’ Report
ASSETS
At 31 December 2023 the total net assets of the Group were
£1,561.7 million (2022: £1,541.8 million). At this date the net asset value per
ordinary share was 249.57p (2022: 226.80p).
REVENUE AND DIVIDEND
The profit for the year was £181 million (2022: loss £280 million).
A profit of £32 million is attributable to revenue (2022: £34 million). The
profit for the year attributable to revenue has been applied as follows:
£’000
Distributed as dividends:
First interim of 1.45p per ordinary share (paid on 9 June
2023) 9,550
Second interim of 1.45p per ordinary share (paid on
15September 2023) 9,325
Third interim of 1.45p per ordinary share (paid on
15December 2023) 9,13 4
Fourth interim of 1.69p per ordinary share (payable on
15March 2024) 10,464
Utilisation of the Company’s revenue reserve ( 7,0 36 )
Company revenue profit available for distribution 31,437
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 44 to 45.
Shauna Bevan and Shefaly Yogendra were appointed as directors on
1 February 2023. All the other directors held office throughout the year under
review. Ms Neubert retired at the AGM on 4 May 2023. In accordance with
the UK Corporate Governance Code, all the directors will retire and, being
eligible, will seek election or re-election by shareholders.
The Board has reviewed the performance and commitment of the directors
standing for 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), Mrs Boyle with effect from 5 May 2023, Ms Neubert until
4 May 2023 and Mr Ross.
No director was a party to, or had an interest in, any contract or arrangement
with the Company at any time during the year or to the date of this report.
With the exception of Mr Bell, no director has or had a service contract with
the Company.
Witan Investment Trust plc
Annual Report 2023
CORPORATE GOVERNANCE
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
DIRECTORS’ INTERESTS
The interests of the directors in the share capital of the Company are set
out in the Directors’ Remuneration Report on page 63.
DIRECTORS’ CONFLICTS OF INTEREST
Directors have a duty to avoid situations where they have, or could have, a
direct or indirect interest that conflicts, or possibly could conflict, with the
Company’s interests. The Companies Act 2006 (the ‘Act’) allows directors
of public companies to authorise such conflicts and potential conflicts,
where appropriate, but only if the Articles of Association contain a
provision to this effect. The Act also allows the Articles of Association to
contain other provisions for dealing with directors’ conflicts of interest to
avoid a breach of duty.
There are two circumstances in which a potential conflict of interest can be
permitted: either the situation cannot reasonably be regarded as likely to
give rise to a conflict of interest or the matter has been authorised in
advance by the directors. The Company’s Articles of Association, which
were adopted by shareholders on 29 April 2020, give the directors the
relevant authority required to deal with conflicts of interest.
Each of the directors has provided a statement of all conflicts of interest
and potential conflicts of interest, if any, applicable to the Company. A
register of conflicts of interest has been compiled and approved by the
Board. The directors have also undertaken to notify the Chairman as soon
as they become aware of any new potential conflicts of interest that need
to be approved by the Board and added to the register, which is reviewed
annually by the Board. It has also been agreed that directors will advise
the Chairman and the Company Secretary in advance of any proposed
external appointment and new directors will be asked to submit a list of
potential situations falling within the conflicts of interest provisions of the
Act in advance of joining the Board. The Chairman will then determine
whether the relevant appointment causes a conflict or potential conflict of
interest and should therefore be considered by the Board. Only directors
who have no interest in the matter being considered would be able to
participate in the Board approval process. In deciding whether to approve
a conflict of interest, directors will also act in a way they consider, in good
faith, will be most likely to promote the Company’s success in taking such
a decision. The Board can impose limits or conditions when giving
authorisation if the directors consider this to be appropriate.
The Board believes that its arrangements for the authorisation of conflicts
operate effectively. The Board also confirms that its procedures for the
approval and management of conflicts of interest have been followed by
all the directors.
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.
The Company has provided an indemnity for each director in respect of
costs incurred in the defence of any proceedings brought against them
and also liabilities owed to third parties, in either case arising out of their
positions as directors.
Directors’ and officers’ liability insurance cover is in place in respect of the
directors and was in place throughout the year under review.
DIRECTORS’ FEES
The report on the directors’ remuneration is set out in the Directors’
Remuneration Report on pages 60 to 72. 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 2023, there were 1,000,355,000 (2022: 1,000,355,000)
ordinary shares of 5p each in issue.
During the year, 54,072,326 shares were bought back and are held in
treasury and at 31 December 2023 there were 374,604,155 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 625,750,845 on a poll.
Since the year end, a further 9,729,225 shares have been bought back
and at 13 March 2024 there were 1,000,355,000 shares in issue of which
384,333,380 were held in treasury. The voting rights of the shares on a
poll are one vote for every share held.
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 4 May 2023 a special resolution was passed
giving the Company authority, until the conclusion of the AGM in 2024, to
make market purchases to be held in treasury of the Company’s ordinary
shares up to a maximum of 99,028,329 shares, being 14.99% of the issued
Directors’ Report continued
Witan Investment Trust plc
Annual Report 2023
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Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
ordinary share capital as at 4 May 2023. The Company has bought back
44,607,660 shares between the date of the last AGM and 13 March 2024.
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 2023 there were 500,000 2.7%
preference shares in issue. Further details on the preference shares
are given in note 17 on page 109.
(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 2023 there were 2,055,000 3.4%
preference shares in issue. Further details on the preference shares
are given in note 17 on page 109.
At the AGM in 2023 a special resolution was passed giving the Company
authority, until the conclusion of the AGM in 2024, 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 2023 the
Company had valid authority, outstanding until the conclusion of the AGM
in 2024, 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 2024.
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.
FINANCIAL INSTRUMENTS
The Company’s financial instruments comprise its investment portfolio,
cash balances, debtors and creditors which arise directly from its
operations such as sales and purchases awaiting settlement, and accrued
income. The financial risk management objectives and policies arising
from its financial instruments and the exposure of the Company to risk are
disclosed in note 14 to the financial statements, beginning on page 101.
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 57 to 59.
DIRECTORS’ STATEMENT AS TO THE DISCLOSURE
OFINFORMATION TO THE AUDITOR
The directors confirm that:
(1) so far as each director is aware, there is no relevant audit information
of which the Company’s auditor is unaware; and
(2) the directors have taken all the steps that they ought to have taken as
directors to make themselves aware of any relevant audit information
and to establish that the Company’s auditor is aware of that
information.
This confirmation is given and should be interpreted in accordance with
the provisions of section 418 of the Companies Act 2006.
LISTING RULE 9.8.4
Listing Rule 9.8.4 requires the Company to include certain information in a
single identifiable section of the Annual Report. Details of Mr Bell’s
Long-Term Bonus are included in the Directors’ Remuneration Report on
page 70. 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
The Board has 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 is an annual requirement. The Company’s registrar,
Computershare, has been engaged to collate such information and file the
reports with HMRC on behalf of the Company.
MODERN SLAVERY ACT 2015
As an investment vehicle, the Company does not provide goods or
services in the normal course of business and does not have customers.
Accordingly, the directors consider that the Company is not required to
make any anti-slavery or human trafficking statement under the Modern
Slavery Act 2015.
Witan Investment Trust plc
Annual Report 2023
CORPORATE GOVERNANCE
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
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 2023 are detailed on pages 113
to114.
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 20 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 12.30 pm on Wednesday 1 May 2024 at Merchant
Taylors’ Hall, 30 Threadneedle Street, London EC2R 8JB. The formal
notice of the AGM is set out in the accompanying circular to shareholders,
together with explanations of the resolutions and arrangements for the
meeting.
Approved by the Board and signed on its behalf by:
Frostrow Capital LLP
Company Secretary
15 March 2024
Directors’ Report continued
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Annual Report 2023
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Job No: 51462 Proof Event: 29 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable lawand regulations.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors are required to prepare
the Group financial statements in accordance with UK-adopted
International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those
standards and have also chosen to prepare the parent company financial
statements under UK-adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards. Under company law the
directors must not approve the financial statements unless they are
satisfied that they give atrue and fair view of the state of affairs of the
Group and Company and of theprofit or loss of the Group and Company
for that period.
In preparing these financial statements, the directors are required to:
> select suitable accounting policies and then apply them consistently;
> make judgements and accounting estimates that are reasonable and
prudent;
> state whether UK-adopted International Accounting Standards have
been followed, subject to any material departures disclosed and
explained in the financial statements; and
> prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in
business.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions and
disclose with reasonable accuracy at any timethe financial position of the
Company and enable them toensure that the financial statements comply
with the Companies Act 2006.
They are also responsible for safeguarding the assets of theCompany and
hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Statement of Directors’ Responsibilities
in respect of the Annual Report, the Directors’ Remuneration Report
and the financial statements
RESPONSIBILITY STATEMENT
We confirm, to the best of our knowledge, that:
> the financial statements, prepared in accordance with UK-adopted
International Accounting Standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company
and theundertakings included in the consolidation taken as awhole;
and
> the Strategic Report and Directors’ Report include a fair review of the
development and performance of the business and the position of the
Company and the undertakings included inthe consolidation taken as
a whole, together with a description (on pages 35 to 37) of the
principal risks anduncertainties that they face.
We also confirm that the financial statements, taken as a whole,are fair,
balanced and understandable, and provide the information necessary for
shareholders to assess the Company’s position, performance, business
model and strategy.
By order of the Board
Andrew Ross Andrew Bell
Chairman Chief Executive Officer
15 March 2024 15 March 2024
Note to those who access this document by electronic means:
The Annual Report for the year ended 31 December 2023 has been
approved by the Board of Witan Investment Trust plc. Copies of the Annual
Report and the Half Year Report are circulated to shareholders and, where
possible, to investors through other providers’ products and nominee
companies (orwritten notification is sent when they are published online).
Itis also made available in electronic format for the convenience of
readers. Printed copies are available from the Company’s registered office
in London.
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Independent Auditor’s Report to the members of
Witan Investment Trust plc
for the year ended 31 December 2023
OPINION
Our opinion on the financial statements is unmodified
We have audited the financial statements of Witan Investment Trust plc
(the ‘parent company’) and its subsidiary (the ‘Group’) for the year ended
31 December 2023, which comprise the Consolidated Statement of
Comprehensive Income, the Consolidated and Individual Company
Statements of Changes in Equity, the Consolidated and Individual
Company Balance Sheets, and Consolidated and Individual Company
Cash Flow Statements and Notes to the Financial Statements, including a
summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and
UK-adopted international accounting standards and as regards the parent
company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
> the financial statements give a true and fair view of the state of the
Group's and of the parent company’s affairs as at 31 December 2023
and of the Group's profit for the year then ended;
> the Group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
> the parent company financial statements have been properly
prepared in accordance with UK-adopted international accounting
standards as applied in accordance with the provisions of the
Companies Act 2006; and
> the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the ‘Auditor’s responsibilities for the audit
of the financial statements’ section of our report. We are independent of the
Group and the parent company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We are responsible for concluding on the appropriateness of the directors’
use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group's and the parent
company’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our report
to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify the auditor’s opinion. Our conclusions are based
on the audit evidence obtained up to the date of our report. However,
future events or conditions may cause the Group or the parent company to
cease to continue as a going concern.
Our evaluation of the directors’ assessment of the Group's and the parent
company’s ability to continue to adopt the going concern basis of
accounting included:
> Determining the appropriateness of the Group and parent company’s
going concern policy and procedures under the relevant accounting
framework;
> Assessing the adequacy of disclosures concerning the basis of
preparation of the financial statements and going concern;
> Assessing the accuracy of the prior year forecast and the underlying
data used in management’s forecasts;
> Inspecting management’s going concern assessment and assessing
their appropriateness by applying relevant sensitivities to the
underlying assumptions, the conclusions made and the rationale for
why a material uncertainty did not exist;
> Evaluating the reasonableness of the income forecasts prepared by
management, including the assumptions used and level of headroom
available, both in terms of cash resources and compliance with loan
covenants;
> Obtaining support for the renewal of the revolving credit facility, which
was renewed during the audit period and obtaining an understanding
of the liquidity position of the Group and parent company;
> Considering the robustness of the forecasts to potential changes in
underlying key assumptions;
> Obtaining an understanding of how management has assessed the
impact of events/market conditions in relation to ongoing global
macroeconomic factors in their forecasts;
> Assessing disclosures included in the financial statements in relation
to the impact of macroeconomic uncertainties such as the impact of
the Russian invasion of Ukraine, rising inflation and geopolitical
instability in the Middle East; and
> Identifying applicable subsequent events and discussing their
implications with management.
In our evaluation of the directors’ conclusions, we considered the inherent
risks associated with the Group's and the parent company’s business
model including effects arising from macroeconomic uncertainties, we
assessed and challenged the reasonableness of estimates made by the
directors and the related disclosures and analysed how those risks might
affect the Group's and the parent company’s financial resources or ability
to continue operations over the going concern period.
In auditing the financial statements, we have concluded that the directors’
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and the parent
company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In relation to the Group's and the parent company’s reporting on how they
have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in
the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
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OUR APPROACH TO THE AUDIT
Key audit
matters
Scoping
Materiality
OVERVIEW OF OUR AUDIT APPROACH
Overall materiality:
Group: £15.6m which represents approximately 1% of the Group's net
assets at the planning stage of the audit.
Parent company: £14.8m which represents approximately 1% of the
parent company’s net assets, capped at 95% of Group materiality
Key audit matters were identified as:
> Investments held at fair value through profit or loss (same as
previous year); and
> Investment income (same as previous year).
Our auditors’ report for the year ended 31 December 2022 included no
key audit matters that have not been reported as key audit matters in
our current year’s report.
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. No changes in scope have occurred since
prior year.
KEY AUDIT MATTERS (‘KAM’)
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified.
These matters included those that had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion
on these matters.
Description Audit response
Disclosures Our results
KAM
In the graph below, we have presented the key audit matters, significant
risks and other risks relevant to the audit.
Extent of management judgement
Potential financial statement impact
Low
Low
High
High
Investment
income
Investments
held at fair value
through profit
or loss
Going concern
Management
override of controls
Taxation
Directors’ remuneration
Key audit matter
Significant risk
Other risk
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Key Audit Matter – Group and parent company How our scope addressed the matter – Group and parent company
Investments held at fair value through profit or loss
We identified valuation of investments measured at fair value through
profit or loss as one of the most significant assessed risks of material
misstatement due to error.
The parent company’s investment objective is to provide long-term
income and capital growth by investing in a diversified portfolio of global
equities.
The investment portfolio of £1.8 billion as at 31 December 2023 (2022: £1.8
billion) is a significant balance in the Consolidated and individual Balance
Sheet at year end and the main driver of the Group's performance.
Incorrect asset pricing or a failure to maintain proper legal title of the
investments held by the Group could have an impact on the portfolio
valuation and therefore, the return generated for shareholders.
We identified the valuation of investments measured at fair value through
profit or loss as one of the most significant assessed risks of material
misstatement due to error as a result of the large volume of transactions in
the year, the magnitude of the transactions being material in aggregate,
as well as the overall material value of the investments held at year end.
In responding to the key audit matter, we performed the following audit
procedures:
> assessing whether the Group's accounting policy for the valuation of
investments is in accordance with UK-adopted international
accounting standards and the Statement of Recommended Practice
‘Financial Statements of Investment Trust Companies and Venture
Capital Trusts’ (the ‘SORP’).
> Assessing whether management have accounted for valuation in
accordance with the above policy by checking that the investments
were held at fair value through profit or loss;
> independently pricing 100% of the listed equity and fund portfolio by
obtaining the relevant bid prices and Net Asset Values (‘NAV’) from
independent market information providers;
> independently agreeing the valuation for unquoted funds held at year
end to the latest available capital statements and audited fund
financial statements;
> recalculating the total investment valuation based on the Group's
investment holdings, which was agreed to the holdings at the
reporting date as reflected in the Group's accounting records; and
> testing that quoted investments were actively traded by extracting a
report of trading volumes in the week before and after the year-end
from an independent market information provider for the equity
investments held.
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2023
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Key Audit Matter – Group and parent company How our scope addressed the matter – Group and parent company
Relevant disclosures in the Annual Report and Accounts 2023
> Financial statements: Note 1(h), Note 10, Note 14
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,
related disclosures are included in note 10 and investment risks are
included in note 14.
Our results
Our testing did not identify any material misstatements in the valuation of
the Group's investment portfolio as at the year-end.
Investment income
We identified occurrence and completeness of investment income as one
of the most significant assessed risks of material misstatement due to
fraud and error.
The Group and parent company measures performance on a total return
basis and investment income is one of the significant components of this
performance measure. The investment income reported by the Group for
the year is £41.2 million (2022: £43.6 million) and is a significant material
balance in the Consolidated Statement of Comprehensive Income.
The parent company is subject to Investment Trust Company (‘ITC’)
regulations and as a result is required to allocate returns between
revenue and capital. There is a risk that income recognised in the year
may be materially misstated through fraudulent transactions and error due
to high volume of transactions. This could also impact the level of
distribution required under ITC regulations.
In responding to the key audit matter, we performed the following audit
procedures:
> assessing whether the Group's accounting policy for recognition of
investment income is in accordance with UK-adopted international
accounting standards;
> testing the completeness of investment income transactions by
selecting a sample of investments and agreeing the relevant
investment income receivable for those equities to the Group and
parent company’s records. For the selected investments we also
obtained the respective dividend rate entitlements from independent
market information providers and agreed to the amounts recorded in
the Group and parent’s accounting records. In addition, we agreed
the receipt of the dividend income to bank statements;
> For a sample of dividends selected from the income portfolio for
occurrence, created an expectation of investment income based on
dividend rates obtained from independent market information
providers to the holding of the investment at the ex-divdend date and
compared to the dividend income recorded for the respective
investment; 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 also assessed the appropriateness of categorisation
of special dividends as either revenue or capital receipts.
Relevant disclosures in the Annual Report and Accounts 2023
> Financial statements: Note 1e, Note 2
The Group's accounting policy on income, including investment
income, is shown in note 1(e) to the financial statements and related
disclosures are included in note 2.
Our results
Our testing did not identify any material misstatements in the amount of
investment income recognised during the year.
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.
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Materiality was determined as follows:
Materiality measure Group Parent company
Materiality for financial statements as a whole We define materiality as the magnitude of misstatement in the financial statements that, individually
or in the aggregate, could reasonably be expected to influence the economic decisions of the users
of these financial statements. We use materiality in determining the nature, timing and extent of our
audit work.
Materiality threshold £15.6m which is approximately 1% of the Group's
net assets.
£14.8m which is approximately 1% of the parent
company’s net assets, capped at 95% of Group
materiality.
Significant judgements made by auditor in
determining materiality
In determining materiality, we made the
following significant judgements:
Net assets, which primarily comprise the Group's
investment portfolio, are considered to be the
key driver of the Group's total return
performance and form a part of the net asset
value calculation.
In addition, 1% of net assets has been deemed
reasonable based on the nature of the Group as
it invests largely in listed investments and also
by benchmarking against other entities in the
same industry.
Materiality for the current year is higher than the
level that we determined for the year ended
31December 2022 to reflect the increase in net
asset value in the year from £1.54bn to £1.56bn.
In determining materiality, we made the
following significant judgements:
Net assets, which primarily comprise the parent
company’s investment portfolio, are considered
to be the key driver of the Company’s total
return performance and form a part of the net
asset value calculation.
In addition, 1% of net assets has been deemed
reasonable based on the nature of the parent
company as it invests largely in listed
investments and also by benchmarking against
other entities in the same industry.
Materiality for the current year is higher than the
level that we determined for the year ended
31December 2022 to reflect the increase in net
asset value in the year from £1.54bn to £1.56bn.
Performance materiality used to drive the
extent of our testing
We set performance materiality at an amount less than materiality for the financial statements as a
whole to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the financial statements as a whole.
Performance materiality threshold £11.7m which is 75% of financial statement
materiality.
£11.1m which is 75% of financial statement
materiality.
Significant judgements made by auditor in
determining performance materiality
In determining performance materiality, we
made the following significant judgements:
A 75% performance materiality was determined
based on no uncorrected misstatements from
the prior year, low levels of adjustments from
previous years and the quality of the accounting
records maintained by the entity.
In determining performance materiality, we
made the following significant judgements:
A 75% performance materiality was determined
based on no uncorrected misstatements from
the prior year, low levels of adjustments from
previous years and the quality of the accounting
records maintained by the entity.
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.
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
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Materiality measure Group Parent company
Specific materiality We determined a lower level of specific
materiality for the following areas:
Investment income
Related party transactions and directors’
remuneration
We determined a lower level of specific
materiality for the following areas:
Investment income
Related party transactions and directors’
remuneration
Communication of misstatements to the Audit
& Risk Committee
We determine a threshold for reporting unadjusted differences to the Audit & Risk Committee.
Threshold for communication £0.8m and misstatements below that threshold
that, in our view, warrant reporting on qualitative
grounds.
£0.7m and misstatements below that threshold
that, in our view, warrant reporting on qualitative
grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements.
OVERALL MATERIALITY – GROUP
Net assets £1.56bn
FSM £15.6m, 1%
PM £11.7m, 75%
TFPUM £3.9m, 25%
OVERALL MATERIALITY – PARENT
COMPANY
Net assets £1.56bn
FSM £14.8m, 1%, capped at
95% ofGroup
PM £11.1m, 75%
TFPUM £3.4m, 25%
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 as well as
considering qualitative factors, such as a component’s specific nature or circumstances.
> One component (parent company) was identified as a significant component.
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
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Type of work to be performed on financial information of parent and other components (including how it addressed the key audit matters)
> Performance of full-scope audits of the financial information using component materiality of Witan Investment Trust plc (parent company) and Witan
Investment Services. These full-scope audits included addressing all of our work on the identified key audit matters as described in the Key Audit
Matter section above.
Performance of our audit
> Our full scope procedures gave a coverage of 97% of the Group’s total income, 99% of the Group’s total assets and 97% of the Group’s profit before
taxation.
> The Group audit team performed an interim visit to the Administrator in Glasgow to assess the control environment and visited the Administrator
during fieldwork in their Dundee office to aid fieldwork procedures.
> The Group audit team performed all procedures as part of the audit.
Changes in approach from previous period
> No changes in approach were noted from the prior period.
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.
MATTER 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 their environment obtained in the course of the audit, we have
not identified material misstatements in the Strategic Report or the Directors’ Report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
> adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not
visited by us; or
> the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting
records and returns; or
> certain disclosures of directors’ remuneration specified by law are not made; or
> we have not received all the information and explanations we require for our audit.
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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CORPORATE GOVERNANCE STATEMENT
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement
relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is
materially consistent with the financial statements or our knowledge obtained during the audit:
> the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified set out on page 43;
> the directors’ explanation as to their assessment of the Group's prospects, the period this assessment covers and why the period is appropriate as set
out on page 43;
> 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 42 and 43;
> the directors’ statement on fair, balanced and understandable set out on page 77;
> the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 33 to 35;
> the section of the Annual Report that describes the review of the effectiveness of risk management and internal control systems set out on page 57;
and
> the section describing the work of the Audit & Risk Committee set out on page 57.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Statement of Directors’ Responsibilities set out on page 77, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group's and the parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
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
Financial Services and Markets Act 2000 (‘FSMA 2000’) legislation and those that relate to the financial reporting framework, being 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 is complying with those legal and
regulatory frameworks and whether there were any instances of non-compliance with laws and regulations and whether they had any knowledge of
actual or suspected fraud. We corroborated the results of our enquiries through reading the minutes of Board and Audit & Risk Committee meetings;
> 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.
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> 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.
> We communicated relevant laws and regulations and potential fraud risks to all engagement team members, and remained alert to any indications of
fraud or non-compliance with laws and regulations throughout the audit.
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 re-appointed by the Audit & Risk Committee of Witan Investment Trust plc on 7 November 2023 to audit the financial statements for the year
ended 31 December 2023. Our total uninterrupted period of engagement is eight years covering the years ended 31 December 2016 to 31 December
2023.
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
15 March 2024
Independent Auditor’s Report to the members of
Witan Investment Trust plc continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
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Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Year ended 31 December 2023 | Year ended 31 December 2022 | ||||||
| Revenue | C apital | Revenue | Capital | ||||
| return | return | Total | return | return | Total | ||
| Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Investment income | 2 | ||||||
Other income | 3 | ||||||
Gains/(losses) on investments held at fair value through profit or loss | 10 | ( | ( | ||||
Foreign exchange (losses)/gains on cash and cash equivalents | ( | ( | |||||
Total income | ( | ( | |||||
| Expenses | |||||||
Management and performance fees | 4 | ( | ( | ( | ( | ( | ( |
Other expenses | 5 | ( | ( | ( | ( | ( | ( |
Profit/(loss) before finance costs and taxation | ( | ( | |||||
Finance costs | 6 | ( | ( | ( | ( | ( | ( |
Profit/(loss) before taxation | ( | ( | |||||
Taxation | 7 | ( | ( | ( | ( | ( | ( |
| Profit/(loss) attributable to equity | |||||||
shareholders of the parent company | ( | ( | |||||
Earnings per ordinary share | 9 | ( | ( |
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 91 to 112 form part of these financial statements.
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Annual Report 2023
FINANCIAL STATEMENTS
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Consolidated and Individual Company Statements of Changes in Equity
for the year ended 31 December 2023
| Share | Capital | ||||||
| Ordinary | premium | redemption | Other capital | Revenue | |||
| Group | share capital | account | reserve | reserve | reserve | Total | |
Year ended 31 December 2023 | N otes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Total equity at 31 December 2022 | |||||||
| Total comprehensive income: | |||||||
Profit for the year | |||||||
Transactions with owners, recorded directly to equity: | |||||||
Ordinary dividends paid | 8 | ( | ( | ||||
Buybacks of ordinary shares (held in treasury) | 15 | ( | ( | ||||
Total equity at 31 December 2023 |
Company
Year ended 31 December 2023 N
otes
Ordinary
share capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Other capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 2022 50,018 99,251 46,498 1,304,031 42,011 1,541,809
Total comprehensive income:
Profit for the year – – – 150,047 31,437 181,484
Transactions with owners, recorded directly to
equity:
Ordinary dividends paid 8 – – – – (38,748) (38,748)
Buybacks of ordinary shares (held in treasury) 15 – – – (122,880) – (122,880)
Total equity at 31 December 2023 50,018 99,251 46,498 1,331,198 34,700 1,561,665
| Capital | |||||||
| Ordinary share | Share premium | redemption | Other capital | Revenue | |||
| Group | capital | account | reserve | reserve | reserve | Total | |
| Year ended 31 December 2022 | Notes | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Total equity at 31 December 2021 | |||||||
| Total comprehensive income: | |||||||
(Loss)/profit for the year | ( | ( | |||||
Transactions with owners, recorded directly to equity: | |||||||
Ordinary dividends paid | 8 | ( | ( | ||||
Buybacks of ordinary shares (held in treasury) | 15 | ( | ( | ||||
Total equity at 31 December 2022 |
Company
Year ended 31 December 2022
Notes
Ordinary share
capital
£’000
Share premium
account
£’000
Capital
redemption
reserve
£’000
Other capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Total equity at 31 December 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
The notes on pages 91 to 112 form part of these financial statements.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
89
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Consolidated and Individual Company Balance Sheets
as at 31 December 2023
Notes
| Group | C ompany | Group | C ompany | ||
| 31 December | 31 December | 31 December | 31 December | ||
2 023 | 2 023 | 2 022 | 2 022 | ||
| £’000 | £’000 | £’000 | £’000 | ||
| Non current assets | |||||
Investments at fair value through profit or loss | 10 | 1,785,085 | 1,762,015 | ||
Right-of-use asset: property | 21 | 125 | 196 | ||
1,785,210 | 1,762,211 | ||||
| Current assets | |||||
Other receivables | 11 | 3,832 | 4,885 | ||
Cash and cash equivalents | 21,624 | 34,888 | |||
Total current assets | 25,456 | 39,773 | |||
Total assets | 1,810,666 | 1,801,984 | |||
| Current liabilities | |||||
Other payables | 12 | ( | (7,6 42) | ( | (6,193 ) |
Bank loans | 13 | ( | (83,000) | ( | (96,500) |
Total current liabilities | ( | (90,642) | ( | (102,693) | |
Total assets less current liabilities | 1,720,024 | 1,699,291 | |||
| Non current liabilities | |||||
Other payables | 12 | ( | (160) | ( | (218) |
Deferred tax liability on Indian capital gains | ( | (1,573) | ( | (667) | |
| Borrowings: | |||||
Secured debt | 13 | ( | (154,071) | ( | (154,042) |
3.4 per cent. cumulative preference shares of £1 | 13, 17 | ( | (2,055) | ( | (2,055) |
2.7 per cent. cumulative preference shares of £1 | 13, 17 | ( | (500) | ( | (500) |
Total non current liabilities | ( | (158,359) | ( | (157,4 82) | |
Net assets | 1,561,665 | 1,541,809 | |||
| Equity attributable to equity holders | |||||
Ordinary share capital | 15 | 50,018 | 50,018 | ||
Share premium account | 99,251 | 99,251 | |||
Capital redemption reserve | 46,498 | 46,498 | |||
| Retained earnings: | |||||
Other capital reserves | 16 | 1,331,198 | 1,304,031 | ||
Revenue reserve | 34,700 | 42,011 | |||
Total equity | 1,561,665 | 1,541,809 | |||
Net asset value per ordinary share | 18 | 249.57p | 226.80p |
As permitted by section 408 of the Companies Act 2006, the Company has not presented its own income statement. The profit of the Company dealt
with in the accounts of the Group amounted to £181,484,000 (2022: loss of £280,554,000).
The notes on pages 91 to 112 form part of theses financial statements.
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
90
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Consolidated and Individual Company Cash Flow Statements
for the year ended 31 December 2023
Notes
| Group | Company | Group | Company | ||
| 2023 | 2023 | 2022 | 2022 | ||
| £’000 | £’000 | £’000 | £’000 | ||
| Cash flows from operating activities | |||||
Dividend income received | 40,956 | 42,739 | |||
Interest received | 1,008 | 291 | |||
Other income received | 162 | 216 | |||
Operating expenses paid | ( | (10,516) | ( | (14,022) | |
Taxation on overseas income | ( | (1,490) | ( | (1,870) | |
Taxation recovered | 628 | 2,640 | |||
Net cash inflow from operating activities | 30,748 | 29,994 | |||
| Cash flows from investing activities | |||||
Purchases of investments | ( | (538,699) | ( | (797,777) | |
Sale of investments | 681,035 | 948,911 | |||
Overseas capital gains tax on sales | ( | (468) | ( | (518) | |
Settlement of futures contracts | 718 | 1,001 | |||
Net cash inflow from investing activities | 142,586 | 151,617 | |||
| Cash flow from financing activities | |||||
Equity dividends paid | 8 | ( | (38,748) | ( | (40,409) |
Buybacks of ordinary shares | ( | (123,048) | ( | (132,281) | |
Interest paid | ( | (9,694) | ( | (6,044) | |
Repayment of lease liability | 21 | ( | (76) | ( | (67) |
Drawdown of bank loans | 19 | 149,250 | 195,000 | ||
Repayment of bank loans | 19 | ( | (162,750) | ( | (196,500) |
Net cash outflow from financing activities | ( | (185,066) | ( | (180,301) | |
(Decrease)/increase in cash and cash equivalents | ( | (11,732) | 1,310 | ||
Cash and cash equivalents at the start of the period | 34,888 | 33,491 | |||
Effect of foreign exchange rate changes | ( | (1,532) | 87 | ||
Cash and cash equivalents at the end of the period | 21,624 | 34,888 |
The notes on pages 91 to 112 form part of these financial statements.
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
91
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Notes to the Financial Statements
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
92
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
1 ACCOUNTING POLICIES CONTINUED
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
93
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
94
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
| 2023 | 2 022 | |
| £’000 | £’000 | |
UK dividends from listed investments | 12,676 | 11,869 |
UK special dividends from listed investments | 78 | 1,589 |
UK stock dividends from listed investments | 237 | 772 |
Total UK dividends | 12,991 | 14,230 |
Overseas dividends from listed investments | 27,446 | 28,522 |
Overseas special dividends from listed investments | 814 | 832 |
Fixed Interest | – | 21 |
Total investment income | 41,251 | 43,605 |
| 2023 | 2 022 | |
| £’000 | £’000 | |
| Analysis of investment income by geographical segment: | ||
United Kingdom | 12,991 | 14,251 |
North America | 4,606 | 5,009 |
Continental Europe | 7,169 | 5,906 |
Japan | 1,263 | 1,517 |
Asia (ex Japan) | 1,928 | 2,156 |
Latin America | 2,424 | 5,735 |
Other | 10,870 | 9,031 |
Total investment income | 41,251 | 43,605 |
| 2023 | 2 022 | |
| £’000 | £’000 | |
Deposit interest | 1,061 | 379 |
Stock lending income | 145 | 222 |
Other income | 17 | – |
Total other income | 1,223 | 601 |
4 MANAGEMENT AND PERFORMANCE FEES
Year ended 31 December 2023 | Year ended 31 December 2022 | |||||
| Revenue | C apital | Total | Revenue | Capital | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Management fees paid to third-party managers | 1,712 | 5,135 | 6,847 | 1,918 | 5,754 | 7,672 |
Total management and performance fees | 1,712 | 5,135 | 6,847 | 1,918 | 5,754 | 7,672 |
A summary of the terms of the management agreements is given on page 41 in the Strategic Report.
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
95
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
| 2023 | 2 022 | |
| Revenue | Revenue | |
| £’000 | £’000 | |
Fees payable to the Company’s auditor and its associates for the audit of the Company’s annual accounts | 79 | 72 |
| Fees payable to the Company’s auditor and its associates for other services to the Group: | ||
– the audit of the Company’s subsidiary | 13 | 12 |
Total audit fees | 92 | 84 |
Other services (1) : | ||
– audit-related services | 25 | 25 |
Total non-audit fees | 25 | 25 |
Total fees paid | 117 | 109 |
| 2023 | 2 022 | |
| Revenue | Revenue | |
| £’000 | £’000 | |
Auditor’s remuneration (see above) | 117 | 109 |
Tax advisory services | 50 | 44 |
Directors’ fees (see the Directors’ Remuneration Report on pages 60 to 72) | 379 | 319 |
Employers’ national insurance contributions on the directors’ fees | 42 | 36 |
| Employee costs (including executive director’s remuneration): | ||
– salaries and bonuses | 1,219 | 1,122 |
– employers’ national insurance contributions | 184 | 166 |
– pension contributions (or payments in lieu thereof) | 85 | 83 |
Total employee costs | 1,488 | 1,371 |
Advisory, consultancy and legal fees | 197 | 253 |
Investment accounting fees | 231 | 241 |
Company secretarial fees | 175 | 162 |
Insurances | 137 | 139 |
Occupancy costs - Office fees and Rates | 59 | 48 |
Depreciation on right-of-use asset: property | 71 | 76 |
Bank charges and safe custody fees | 284 | 343 |
Depositary fees | 125 | 127 |
Marketing expenses | 1,072 | 1,170 |
Other expenses | 808 | 840 |
Irrecoverable VAT | 155 | 106 |
| Total | 5,390 | 5,384 |
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
96
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
5 OTHER EXPENSES CONTINUED
2023 | 2022 | |
Management, marketing and operation of Witan Investment Trust and Witan Investment Services | 6 | 6 |
Total | 6 | 6 |
Year ended 31 December 2023 | Year ended 31 December 2022 | |||||
| Revenue | C apital | Total | Revenue | Capital | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Interest payable on overdrafts and loans repayable within | ||||||
one year | 1,291 | 3,874 | 5,165 | 404 | 1,211 | 1,615 |
Interest payable on secured notes repayable in more than five years | 1,153 | 3,458 | 4,611 | 1,149 | 3,446 | 4,595 |
Preference share dividends | 83 | – | 83 | 83 | – | 83 |
Interest payable on lease liability | 1 | – | 1 | 1 | – | 1 |
Total | 2,528 | 7,332 | 9,860 | 1,637 | 4,657 | 6,294 |
7 TA XATION
7.1 Analysis of tax charge for the year
| Year ended 31 December 2023 | Year ended 31 December 2022 | |||||
| Revenue | C apital | Total | Revenue | Capital | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| UK corporation tax at an effective rate of 23.5% | ||||||
(2022: standard rate of 19%) | – | – | – | – | – | – |
Foreign tax suffered | 1,780 | 467 | 2,247 | 2,102 | 558 | 2,660 |
Recovery of prior years’ withholding tax | (181) | – | (181) | (347) | – | (347) |
Foreign tax recoverable | (264) | – | (264) | (304) | – | (304) |
| Movement in deferred tax liability on Indian | ||||||
capital gains | – | 906 | 906 | – | (220) | (220) |
Total current tax for the year (see note 7.2) | 1,335 | 1,373 | 2,708 | 1,451 | 338 | 1,789 |
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
97
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
7.2 Factors affecting the current tax charge for the year
The UK corporation tax rate was 19% until 31 March 2023 and 25% from 1 April 2023, giving an effective rate of 23.5% (2022: standard rate of 19%). The tax
assessed for the year is lower than that resulting from applying the effective standard rate of corporation tax in the UK. The difference is explained below:
Year ended 31 December 2023 | Year ended 31 December 2022 | |||||
| Revenue | C apital | Total | Revenue | Capital | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Profit/(loss) before taxation | 32,844 | 151,348 | 184,192 | 35,267 | (314,032) | (278,765) |
| Corporation tax at an effective rate of 23.5% | ||||||
(2022: standard rate of 19%) | 7,718 | 35,567 | 43,285 | 6,701 | (59,666) | (52,965) |
| Effects of: | ||||||
Non-taxable UK dividends | (3,520) | – | (3,520) | (2,704) | – | (2,704) |
Non-taxable overseas dividends | (5,473) | – | (5,473) | (5,581) | – | (5,581) |
Withholding tax suffered | 1,335 | 467 | 1,802 | 1,451 | – | 1,451 |
Non-taxable (gains)/losses on investments held at fair value through profit or loss | – | (38,887) | (38,887) | – | 57,6 85 | 57,6 85 |
Currency losses/(gains) not taxable | – | 360 | 360 | – | (17) | (17) |
Excess management expenses not utilised in year | 1,255 | 2,960 | 4,215 | 1,568 | 2,556 | 4,124 |
Movement in deferred tax liability on Indian capital gains | – | 906 | 906 | – | (220) | (220) |
| Preference dividends not deductible in determining taxable | ||||||
profit | 20 | – | 20 | 16 | – | 16 |
Current tax charge | 1,335 | 1,373 | 2,708 | 1,451 | 338 | 1,789 |
7.4 Factors that may affect future tax charges
At 31 December 2023, the Company has excess expenses of £313,872,000 (2022: £301,830,000) 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 £78,468,000 (2022: £75,458,000) in respect
of unrelieved loan relationship deficits and unrelieved management expenses based on a prospective corporation tax rate of 25% (2022: 25%) has not
been recognised. The increase in the standard rate of corporation tax became effective from 1 April 2023. Provided the Company continues to maintain
its current investment profile, it is unlikely that the expenses will be utilised and that the Company will obtain any benefit from this contingent asset.
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
98
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
8 DIVIDENDS
| 2023 | 2 022 | |
| £’000 | £’000 | |
| Amounts recognised as distributions to equity holders in the year: | ||
Fourth interim dividend for the year ended 31 December 2022 of 1.60p (2021: 1.52p) per ordinary share | 10,746 | 11,107 |
First interim dividend for the year ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary share | 9,550 | 10,003 |
Second interim dividend for the year ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary share | 9,325 | 9,779 |
Third interim dividend for the year ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary share | 9,134 | 9,584 |
Refund of unclaimed dividends | (7) | (64) |
38,748 | 40,409 | |
Fourth interim dividend for the year ended 31 December 2023 of 1.69p (2022: 1.60p) per ordinary share | 10,464 | 10,746 |
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.
| 2023 | 2 022 | |
| £’000 | £’000 | |
Revenue profits available for distribution (Company only) | 31,437 | 33,741 |
First interim dividend for the year ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary share | (9,550) | (10,003) |
Second interim dividend for the year ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary share | (9,325) | (9,779) |
Third interim dividend for the year ended 31 December 2023 of 1.45p (2022: 1.40p) per ordinary share | (9,134) | (9,584) |
Fourth interim dividend for the year ended 31 December 2023 of 1.69p (2022: 1.60p) per ordinary share | (10,464) | (10,746) |
Revenue reserves utilised in the year (Company only) | (7,036) | (6,371) |
9 EARNINGS PER ORDINARY SHARE
The earnings per ordinary share figure is based on the net profit for the year of £181,484,000 (2022: loss of £280,554,000) and on 651,467,218 ordinary
shares (2022: 707,617,951), 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.
| 2023 | 2 022 | |
| £’000 | £’000 | |
Net revenue profit | 31,509 | 33,816 |
Net capital profit/(loss) | 149,975 | (314,370) |
Net total profit/(loss) | 181,484 | (280,554) |
Weighted average number of ordinary shares in issue during the year | 651,467,218 | 707,617,951 |
| Pence | Pence | |
Revenue earnings per ordinary share | 4.84 | 4.78 |
Capital earnings/(loss) per ordinary share | 23.02 | (44.43) |
Total earnings/(loss) per ordinary share | 27.86 | (39.65) |
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
99
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
2023 | 2022 | |||
| Group | C ompany | Group | Company | |
| £’000 | £’000 | £’000 | £’000 | |
Investments in the United Kingdom | 315,728 | 315,728 | 343,414 | 343,414 |
Overseas investments | 1,468,094 | 1,468,094 | 1,417,410 | 1,417,410 |
Investment in subsidiary undertaking | – | 1,263 | – | 1,191 |
1,783,822 | 1,785,085 | 1,760,824 | 1,762,015 |
| Valuation | Valuation | Co st | |||||||
| 31 December | Investment | 31 December | 31 December | ||||||
2 022 | P urchases | Sales | gains/(losses) | 2 023 | 2 023 | ||||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||||
United Kingdom | 343,414 | 74,179 | 148,232 | 46,829 | 316,190 | 288,423 | |||
North America | 629,490 | 211,5 41 | 251,549 | 117,078 | 706,560 | 520,139 | |||
Continental Europe | 366,776 | 140,068 | 166 ,10 0 | 11, 226 | 351,970 | 352,246 | |||
Japan | 60,847 | 56 | 6,663 | (1,912) | 52,328 | 59,072 | |||
Asia (ex Japan) | 78,628 | 47,619 | 35,038 | (3,034) | 8 8,175 | 62,609 | |||
Latin America | 33,904 | 7,0 62 | 14,269 | 9,074 | 35,771 | 23,958 | |||
Other | 247,76 | 5 | 58,815 | 59,249 | (14,503) | 232,828 | 261,430 | ||
1,760,824 | 539,340 | 6 | 81,10 | 0 | 164,758 | 1,783,822 | 1,567,877 |
| Valuation | Valuation | C ost | |||||||
| 31 December | Investment | 31 December | 31 December | ||||||
2 021 | P urchases | Sales | gains/(losses) | 2 022 | 2 022 | ||||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||||
United Kingdom | 4 47, 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 | 67,5 45 | 2,860 | 5,609 | (3,949) | 60,847 | 65,826 | |||
Asia (ex Japan) | 114, | 35 4 | 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) | 247,76 | 5 | 275,074 | ||
2, | 217,455 | 797,6 68 | 949,691 | (304,608) | 1,760,824 | 1,629,368 |
| 2023 | 2 022 | |
| £’000 | £’000 | |
Gains/(losses) on investments | 164,758 | (304,608) |
Gains on derivatives – futures contracts | 718 | 1,001 |
165,476 | (303,607) |
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
100
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
10 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS CONTINUED
| Investment held at fair value | ||
| through | ||
| % holding of | profit or loss | |
| shares in issue | £ ’000 | |
Apax Global Alpha Limited | 5.68% | 44,736 |
VH Global Sustainable Energy Opportunities plc | 13 .15% | 42,132 |
Princess Private Equity Limited | 4.77% | 29,310 |
Schroders Real Estate Investment Trust Limited | 8.37% | 18,202 |
NB Distressed Debt Investment Fund Limited | 14.88% | 6,939 |
Hostmore plc | 14.05% | 3,898 |
| Unbound Group plc | 15.82% | nil |
2023 | 2022 | |||
| Group | C ompany | Group | Company | |
| £’000 | £’000 | £’000 | £’000 | |
Sales for future settlement | 845 | 845 | 780 | 780 |
Taxation recoverable | 856 | 856 | 1,304 | 1,304 |
Amounts due from subsidiary | – | – | – | 704 |
Prepayments and accrued income | 2,167 | 2,017 | 2,401 | 1,921 |
Other debtors | 114 | 114 | 176 | 176 |
3,982 | 3,832 | 4,661 | 4,885 |
2 | ||||
| Group | C ompany | Group | Company | |
| £’000 | £’000 | £’000 | £’000 | |
Bonuses payable in more than one year | 102 | 102 | 83 | 83 |
Lease liability payable in more than one year | 58 | 58 | 135 | 135 |
160 | 160 | 218 | 218 |
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
101
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
2023 | 2022 | ||||
| Group | C ompany | Group | Company | ||
| £’000 | £’000 | £’000 | £’000 | ||
| Financial instruments redeemable other than in instalments are as follows: | |||||
| Amounts falling due within one year: | |||||
Bank loans | 83,000 | 83,000 | 96,500 | 96,500 | |
| Amounts falling due after more than one year: | |||||
| Secured debt: | |||||
3.29 per cent. secured notes due 2035 | 20,905 | 20,905 | 20,898 | 20,898 | |
3.47 per cent. secured notes due 2045 | 53,693 | 53,693 | 53,684 | 53,684 | |
2.39 per cent. secured notes due 2051 | 49,700 | 49,700 | 49,692 | 49,692 | |
2.74 per cent. secured notes due 2054 | 29,773 | 29,773 | 29,768 | 29,768 | |
154,071 | 154,071 | 154,042 | 154,042 | ||
2,055,000 | 3.4 per cent. cumulative preference shares of £1 each | ||||
(see note 17 on page 109) | 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 109) | 500 | 500 | 500 | 500 | |
239,626 | 239,626 | 253,097 | 253,097 | ||
14 FINANCIAL INSTRUMENTS
The following disclosures apply to both the Group and the Company.
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
102
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
14 FINANCIAL INSTRUMENTS CONTINUED
| 2023 | 2 022 | |
| £’000 | £’000 | |
Investments held at fair value through profit or loss | 1,783,822 | 1,760,824 |
| 2023 | 2022 | |||
| Increase in | Dec rease in | Increase in fair | Decrease in | |
| fair value | fair value | value | fair value | |
| £’000 | £’000 | £’000 | £’000 | |
| Changes to the Consolidated Statement of Comprehensive Income | ||||
Revenue return | – | – | – | – |
Capital return – investments | 267, 573 | (267,573) | 26 4,124 | (26 4,124) |
267, 573 | (267,573) | 26 4,124 | (26 4,124) |
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
103
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
| US$ | Euro | Yen | Other | |
| £’000 | £’000 | £’000 | £’000 | |
Receivables (due from brokers, dividends and other income receivable) | 1,253 | 968 | 166 | 645 |
Cash at bank and on deposit | 1,489 | 52 | – | 204 |
Payables (due to brokers, accruals and other creditors) | (571) | – | – | (2,073) |
Total foreign currency exposure on net monetary items | 2,171 | 1,020 | 166 | (1,224) |
Investments at fair value through profit or loss that are equities | 710,985 | 309,498 | 46,667 | 105,647 |
Total net foreign currency exposure | 713,156 | 310,518 | 46,833 | 104,423 |
| US$ | Euro | Yen | Other | |
| £’000 | £’000 | £’000 | £’000 | |
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 |
2023 | 2022 | |||||
| US$ | E uro | Yen | US$ | Euro | Yen | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Changes to the Consolidated Statement of Comprehensive Income | ||||||
Revenue return | 1,203 | 1,322 | 222 | 1,626 | 913 | 225 |
Capital return | 124,473 | 54,617 | 8,235 | 109,090 | 56,834 | 9,886 |
Change to the profit/loss after tax | 125,676 | 55,939 | 8,457 | 110,716 | 57,747 | 10,111 |
Change to the shareholders’ funds | 125,676 | 55,939 | 8,457 | 110,716 | 57,747 | 10,111 |
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
104
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
14 FINANCIAL INSTRUMENTS CONTINUED
2023 | 2022 | |||||
| US$ | E uro | Yen | US$ | Euro | Yen | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Changes to the Consolidated Statement of Comprehensive Income | ||||||
Revenue return | (890) | (977) | (164) | (1,202) | (675) | (166) |
Capital return | (91,912) | (40,369) | (6,087) | (80,632) | (42,008) | ( 7,3 07 ) |
Change to the profit/loss after tax | (92,802) | (41,346) | (6,251) | (81,834) | (42,683) | ( 7,473 ) |
Change to the shareholders’ funds | (92,802) | (41,346) | (6,251) | (81,834) | (42,683) | ( 7,473 ) |
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
105
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
2023 | 2022 | |||||
Bet ween 1 | More than | Between 1 and | More than | |||
| Within 1 year | and 5 years | 5 years | Within 1 year | 5 years | 5 years | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Secured notes | 4,582 | 18,327 | 248,130 | 4,582 | 18,327 | 253,000 |
| Preference shares | 83 | 332 | 2,555 | 83 | 332 | 2,555 |
Other creditors and accruals | 6,146 | 102 | – | 5,436 | 750 | – |
Bank loan and interest payable | 83,454 | – | – | 96,827 | – | – |
94,265 | 18,761 | 250,685 | 106,928 | 19,409 | 255,555 |
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
106
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
14 FINANCIAL INSTRUMENTS CONTINUED
| 2023 | 2 022 | |
| £’000 | £’000 | |
Cash | 22,434 | 36,352 |
| Receivables: | ||
Sales for future settlement | 845 | 780 |
Accrued income | 2,167 | 2,401 |
Other debtors | 114 | 176 |
25,560 | 39,709 |
2023 | 2022 | |||
B alance sheet | Balance sheet | |||
| Fair value | amount | Fair value | amount | |
| £’000 | £’000 | £’000 | £’000 | |
| Financial liabilities measured at amortised cost: | ||||
| Non current liabilities | ||||
Preference shares | 1,300 | 2,555 | 1,354 | 2,555 |
Secured notes | 104,760 | 154,071 | 105,630 | 154,042 |
106,060 | 156,626 | 106,984 | 156,597 |
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
107
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
| Level 1 | Level 2 | Level 3 | Total | ||
| £’000 | £’000 | £’000 | £’000 | ||
Equity investments | 1,640,374 | – | – | 1,640,374 | |
Investments in other funds | – | 115,537 | 27,911 | 143,448 | |
Total | 1,640,374 | 115,537 | 27,911 | 1,78 | 3,822 |
| Level 1 | Level 2 | Level 3 | Total | |
| £’000 | £’000 | £’000 | £’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 |
| 2023 | 2022 | |
| £’000 | £’000 | |
Opening balance | 32,728 | 37,774 |
Acquisitions | – | – |
Total losses included in the Statement of Comprehensive Income - on assets held at year end | (4,817) | (5,046) |
Closing balance | 27,911 | 32,728 |
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
108
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
14 FINANCIAL INSTRUMENTS CONTINUED
| 2023 | 2 022 | |
| £’000 | £’000 | |
Value of investments per the balance sheet | 1,783,822 | 1,760,824 |
Shareholders’ funds per the balance sheet (A) | 1,561,665 | 1,541,809 |
Excess of gross value of investments over shareholders’ funds (B) | 222,157 | 219,015 |
Effective gearing (B as a percentage of A) | 14.2% | 14.2% |
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
109
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
| Group and | G roup and | |
| Company | Company | |
| 2023 | 2022 | |
| £’000 | £’000 | |
| Called up and issued: | ||
625,750,845 ordinary shares of 5p each (2022: 679,823,171) | 31,288 | 33,991 |
| Held in treasury: | ||
374,604,155 ordinary shares of 5p each (2022: 320,531,829) | 18,730 | 16,027 |
Total 1,000,355,000 shares (2022: 1,000,355,000) | 50,018 | 50,018 |
| Group and | G roup and | ||
| Company | Company | ||
| 2023 | 2022 | ||
| £’000 | £’000 | ||
2,055,000 | 3.4 per cent. cumulative preference shares of £1 each | 2,055 | 2,055 |
500,000 | 2.7 per cent. cumulative preference shares of £1 each | 500 | 500 |
2,555 | 2,555 |
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
110
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
18 NET ASSET VALUE PER ORDINARY SHARE
The net asset value per ordinary share of 249.57p (2022: 226.80p) is based on the net assets attributable to the ordinary shares of £1,561,665,000 (2022:
£1,541,809,000) and on the 625,750,845 ordinary shares in issue at 31 December 2023 (2022: 679,823,171).
The movements during the year of the net assets attributable to the ordinary shares were as follows:
| £’000 | |
Total net assets at 1 January 2023 | 1,541,809 |
Total profit for the year | 181,484 |
Dividends paid in the year on the ordinary shares (see note 8) | (38,748) |
Share buybacks | (122,880) |
Net assets attributable to the ordinary shares at 31 December 2023 | 1,561,665 |
An alternative net asset value per ordinary share can be calculated by deducting from the total assets less current liabilities of the Company, the bonus
and leases payable in greater than one year, the preference shares and the secured 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 2023 calculated on this basis is
257.65p (2022: 234.09p) as set out below.
2023 | 2022 | |||
| Debt at | De bt | Debt at | Debt | |
| Balance Sheet | at fair | Balance Sheet | at fair | |
| amount | value | amount | value | |
| £’000 | £’000 | £’000 | £’000 | |
Total assets less current liabilities per Balance Sheet | 1,720,024 | 1,720,024 | 1,699,291 | 1,699,291 |
Liabilities at Balance Sheet value/fair value | (158,359) | (107,793) | (157,4 82 ) | (107,869 ) |
1,561,665 | 1,612,231 | 1,541,809 | 1,591,422 | |
Ordinary shares in issue at 31 December | 625,750,845 | 625,750,845 | 679,823,171 | 679,823,171 |
NAV per share | 249.57p | 257.65p | 226.80p | 234.09p |
2023 | 2022 | |||||||
| Long-term | S hort-term | Lease | Long-term | Short-term | Lease | |||
| debt | debt | liability | Total | debt | debt | liability | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Opening liabilities from financing activities | 156,597 | 96,500 | 212 | 253,309 | 156,573 | 98,000 | 262 | 254,835 |
| Cash flows: | ||||||||
Drawdown of bank loans | – | 149,250 | – | 149,250 | – | 195,000 | – | 195,000 |
Repayment of bank loans | – | (162,750) | – | (162,750) | – | (196,500) | – | (196,500) |
Repayment of lease finance | – | – | (78) | (78) | – | – | (51) | (51) |
| Non-cash: | ||||||||
Effective interest | 29 | – | – | 29 | 24 | – | – | 24 |
Interest on lease liability | – | – | 1 | 1 | – | – | 1 | 1 |
Closing liabilities from financing activities | 156,626 | 83,000 | 135 | 239,761 | 156,597 | 96,500 | 212 | 253,309 |
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
111
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
21 LEASE ARRANGEMENTS
21.1 Right-of-use asset: property
| 2023 | 2 022 | |
| £’000 | £’000 | |
Opening balance | 196 | 249 |
Depreciation through profit and loss | (71) | (53) |
Closing balance | 125 | 196 |
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 leases,
which fall due as follows:
| 2023 | 2 022 | |
| £’000 | £’000 | |
Within one year | 77 | 77 |
In the second to fifth years inclusive | 58 | 135 |
Total undiscounted lease payments at the end of the period | 135 | 212 |
At the balance sheet date, the Group and Company had a discounted lease liability as follows:
| 2023 | 2 022 | |
| £’000 | £’000 | |
Current | 77 | 77 |
Non current | 58 | 135 |
Total lease liability | 135 | 212 |
21.3 Amounts recognised in the profit for the year
| 2023 | 2 022 | |
| £’000 | £’000 | |
Depreciation on right-of-use asset | 71 | 53 |
Interest on lease liability | 1 | 1 |
21.4 Outflows recognised in the cash flow statement for the year
Financing
| 2023 | 2022 | |
| £’000 | £’000 | |
Repayment of lease finance | 76 | 76 |
21.5 Other leasing information
The lease payments represent rentals payable by the Group and Company for its office property.
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
112
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
24 SEGMENT REPORTING
Operating segments are determined based on internal management reporting of the Group that is reviewed regularly by the ‘Chief Operating Decision
Maker’ (who is the Chief Executive Officer) and used to allocate resources and assess their performance.
Operating segments
The Group has two reportable segments: (i) its activity as an investment trust, which is the business of the parent company, Witan Investment Trust plc,
and recorded in the accounts of that company; and (ii) the provision of alternative investment fund manager, executive and marketing management
services which is the business of the subsidiary company, Witan Investment Services Limited, and recorded in the accounts of that company. Each
segment is managed separately as they have different objectives.
Performance is measured based on segment profit or loss included in the internal management reports that are reviewed by the Chief Executive Officer.
Transactions between reportable segments include activities from the provision of alternative investment fund manager, executive and marketing
management services. Segment information is measured on the same basis as that used in the preparation of the Group financial statements.
| 31 December 2023 | 31 December 2022 | |||||
| Investment | M anagement | Investment | Management | |||
| trust | services | Total | trust | services | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
External revenue | 42,474 | – | 42,474 | 44,206 | – | 44,206 |
Other revenue | 163,944 | – | 163,944 | (303,520) | – | (303,520) |
| Segment expense | ||||||
Management expense | (6,847) | – | (6,847) | ( 7,672 ) | – | ( 7,672 ) |
Other expense | (4,946) | (573) | (5,519) | (4,971) | (514) | (5,485) |
Finance costs | (9,860) | – | (9,860) | (6,294) | – | (6,294) |
Segment profit/(loss) before taxation | 184,765 | (573) | 184,192 | (278,251) | (514) | (278,765) |
Taxation | (2,708) | – | (2,708) | (1,789) | – | (1,789) |
Segment profit/(loss) after taxation | 182,057 | (573) | 181,484 | (280,040) | (514) | (280,554) |
Segment net assets | 1,560,402 | 1,263 | 1,561,665 | 1,540,618 | 1,191 | 1,541,809 |
25 SUBSEQUENT EVENTS
Since the year end, the Board has declared a fourth interim dividend in respect of the year ended 31 December 2023 of 1.69 pence per ordinary share
(see also page 9 and note 8 on page 98).
From 1 January to 13 March 2024, 9,729,225 ordinary shares of 5p were bought back for £23,236,000.
Notes to the Financial Statements continued
for the year ended 31 December 2023
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
113
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
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 2023 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 2023 is disclosed below:
Stock lending
Market value of securities on loan
% of lendable
assets
% of Total
assets
£45,656,000 2.56 2.55
CONCENTRATION DATA
The largest collateral issuers across all the securities financing transactions as at 31 December 2023 are disclosed below:
Issuer
Market value
of collateral
received
£’000
Roche Holding AG 11,152
TE Connectivity Ltd 9,384
Teradyne Inc 8,930
CVS Pass Thru TR 2009 8,680
Mettler-Toledo International 8,657
ENEL SPA 5,471
Waste Management Inc 310
52,584
The top counterparties of each type of securities financing transactions as at 31 December 2023 are disclosed below:
Counterparty
Market value
of securities
on loan
£’000
BNP Paribas 41,405
JP Morgan 4,251
45,656
Other Financial Information (unaudited)
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
114
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
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 2023:
Counterparty
Counterparty
location Type Quality
Collateral
currency
Settlement
basis Custodian
Market value
of collateral
received
£’000
BNP Paribas France Equity Main Market Listing USD Tripar ty BNP Paribas 36,913
BNP Paribas France Equity Main Market Listing CHF Triparty BNP Paribas 10,201
JP Morgan US Equity Main Market Listing EUR Tripar ty BNP Paribas 5,470
52,584
All of the collateral is held within segregated accounts.
The lending and collateral transactions are on an open basis and can be recalled on demand.
Re-use of collateral
The funds do not engage in any re-use of collateral.
Return and cost
The return and cost of engaging in securities lending by the Company and the securities lending agent in absolute terms and as a percentage of overall
returns are disclosed below:
Total gross amount of
securitieslending income
Direct and indirect costs
and fees deducted by
securitieslending agent
% return of the securities
lendingagent
Net securities lending income
retained by theCompany % return to the Company
£193,000 £48,000 25% £145,000 75%
Other Financial Information (unaudited) continued
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
115
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
ALTERNATIVE INVESTMENT FUND MANAGERS’ DIRECTIVE
Witan Investment Trust plc is an ‘alternative investment fund’ (‘AIF’) for the purposes of the UK version of the EU Alternative Investment Fund Managers’
Directive (Directive 2011/61/EU) (the ‘AIFMD’) as transposed into UK Law on the UK’s exit from the EU. The Company has appointed its subsidiary, Witan
Investment Services Limited (‘WIS’), toact as its AIFM. WIS is authorised and regulated by the UnitedKingdom Financial Conduct Authority as a ‘full scope
UK AIFM’.
The Company is required to make certain disclosures available to investors in accordance with the AIFMD. Those disclosures that arerequired to be
made pre-investment are included within the Investor Disclosure Document (‘IDD’) which can be found on the Company’s website (www.witan.com).
There have not been any material changes to the disclosures contained within the IDD sinceitwas last updated in March 2023.
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 32 to 33;
> none of the Company’s assets is subject to special arrangements arising from their illiquid nature;
> the Strategic Report and note 14 to the accounts set out the risk profile and risk management systems in place. There have been nochanges to the
risk management systems in place in the period under review and no breaches of any of the risk limits set, withno breach expected;
> there are no new arrangements for managing the liquidity of the Company or any material changes to the liquidity management systems and
procedures employed by the Company;
> all authorised Alternative Investment Fund Managers are required to comply with the AIFMD Remuneration Code in respect oftheAIFM’s
remuneration. The relevant disclosures required are contained within the IDD; and
> information in relation to the Company’s leverage is contained within the IDD.
SHAREHOLDER INFORMATION
Points of reference
Shareholders can follow the progress of their investment through the newspapers. Witan’s share price appears daily in the national press stock exchange
listings under ‘Investment Trusts’ or ‘Investment Companies’ and is also included ontheWitanwebsite (www.witan.com). The London Stock Exchange
Daily Official List (‘SEDOL’) code is BJTRSD3.
Dividend
A fourth interim dividend of 1.69 pence per share has been declared, payable on 15 March 2024. The record date for the dividend was 23 February 2024
and the ex-dividend date for the dividend was 22 February 2024 (see page 9 and note 8 on page 98).
Dividend Tax Allowance
Under current UK tax rules, individuals have an annual tax-free dividend income allowance. The amount is subject to change by Parliament; the
allowances applicable to particular years are disclosed on HMRC’s website. Above this amount, individuals pay tax on their dividend income at a rate
dependent on their income tax bracket and personal circumstances. The Company will continue to provide registered shareholders with a confirmation of
the dividends it has paid and thisshould be included with any other dividend income received when calculating and reporting total dividend income
received. Itisthe shareholder’s responsibility to include all dividend income when calculating any tax liability.
Capital Gains Tax
The calculation of the tax on chargeable gains will depend on your personal circumstances. If you are in any doubt about yourpersonal tax position, you
are recommended to contact your professional adviser.
Please note that tax assumptions may change if the law changes, and the value of tax relief (if any) will depend upon your individual circumstances.
Investors should consult their own tax advisers in order to understand any applicable tax consequences.
Beneficial Owners of Shares – Information Rights
Beneficial owners of shares who have been nominated by the registered holder of those shares to receive information rights undersection 146 of the
Companies Act 2006 should direct all communications to the registered holder of their shares rather thantothe Company’s Registrar, Computershare, or
to the Company directly.
Additional Shareholder Information
Witan Investment Trust plc
Annual Report 2023
FINANCIAL STATEMENTS
116
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
DEFINITIONS AND ALTERNATIVE PERFORMANCE MEASURES (‘APMs’)
Benchmark: The Company’s equity benchmark is 85% Global (MSCI All Country World Index) and 15% UK (MSCI UK IMI Index). From 1 January 2017 to
31 December 2019 the benchmark was 30% UK, 25% North America, 20% Asia Pacific, 20% Europe (ex UK) and 5% Emerging Markets. From 1 October
2007 to 31 December 2016 the benchmark was 40% UK, 20% North America, 20% Europe (ex UK) and20% Asia Pacific. With effect from August 2020, the
source for the benchmark index changed to MSCI International, replacing theprevious FTSE source.
Debt valuation: The par, or face, value of the Company’s debt is the amount repayable at maturity. The fair value is the discounted value calculated using
the yield on a gilt of similar maturity plus a credit spread (see note 14.7 on pages 106 to 108).
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 108.
Net asset value and net asset value per share (debt at par and debt at fair value): Net asset value is the value of total assets less all liabilities of the
Company. TheNetAsset Value, or NAV, per ordinary share is calculated by dividing this amount by the total number of ordinary shares in issue(excluding
those shares held in treasury). See note 18 on page 110 for further details.
Net asset value total return: Total return on net asset value (‘NAV’), on a debt at fair value to debt at fair value basis, assuming that alldividends paid out by the
Company were reinvested, without transaction costs, into the shares of the Company at the NAV per share at the time the shares were quoted ex-dividend.
Total return calculation
Year ended
31 December 2023
Year ended
31 December 2022
Opening cum income NAV per share (pence) (A) 23 4.1 26 7.4
Closing cum income NAV per share (pence) (B) 257.6 23 4.1
Total dividend adjustment factor
(1)
(C) 1.023942 1.024030
Adjusted closing cum income NAV per share (B x C = D) 263.8 239.8
Net asset value total return (D/A - 1) 12.7% (10.3)%
(1) The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the shares of the Company at the cum income NAV at the ex-dividend date.
Net contribution from borrowing: The estimated percentage contribution to NAV attributable to gearing, net of the cost of gearing, asapercentage of NAV.
Ongoing charge: The ongoing charge reflects those expenses of a type which are likely to recur in the foreseeable future, whether charged to capital or
revenue as a collective fund, excluding the costs of acquisition and disposal, finance costs and gains or losses arising on investments. See page 41 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.
Revenue earnings per share
The revenue return per share is calculated by taking the return on ordinary activities after taxation and dividing it by the weighted average number of
shares in issue during the year (see note 9 on page 98 for further information).
Total return calculation
Year ended
31 December 2023
Year ended
31 December 2022
Opening share price (pence) (A) 221.5 252.0
Closing share price (pence) (B) 237.5 221.5
Total dividend adjustment factor
(1)
(C) 1.026500 1.026240
Adjusted closing share price (B x C = D) 243.8 227.3
Share price total return (D/A – 1) 10.1% (9.8)%
(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 last traded price quoted at the
ex-dividend date.
The Association of Investment Companies (‘AIC’) has produced a guide providing more information about Investment Companies: “Investment Companies
– Democratising capital, funding growth and meeting investors’ needs November 2022”, which may be accessed via the following link: https://www.
theaic.co.uk/sites/default/files/documents/AICInvestmentCompaniesReport22.pdf
Source data: All equity and index performance data in this Annual Report is sourced from Morningstar as is all Witan performance data for periods
exceeding one year. Manager performance data is sourced from BNP Paribas.
Additional Shareholder Information continued
Witan Investment Trust plc
Annual Report 2023
STRATEGIC REPORT CORPORATE GOVERNANCE FINANCIAL STATEMENTS
117
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
HISTORICAL RECORD
Debt at fair value Debt at par value
Market price
per ordinary
share in
pence
(1)
Net asset
value per
ordinary share
in
pence
(1)(2)
Share price
(discount)/
premium
%
(2)
Net asset
value per
ordinary share
in
pence
(1)(3}
Share price
(discount)/
premium
%
(3)
Revenue
earnings per
ordinary share
in
pence
(1)
Dividends per
ordinary share
in
pence
(1)
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) 24 0.1 (4.2) 3.08 5.45
31 December 2021 252.0 267.4 (5.8) 269.9 (6.6) 3.59 5.60
31 December 2022 221.5 2 34.1 (5.4)
(4)
226.8 (2.4) 4.78 5.80
31 December 2023 237.5 257.6 ( 7.8)
(4)
249.6 (4.8) 4.84 6.04
(1) Comparative figures for the years 2013 - 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 2023 was 9.0% (2022: 7.8%). (source: Datastream)
HOW TO INVEST
There are various ways to invest in Witan Investment Trust plc. Witan’s shares can be traded through any UK stockbroker and most share dealing services
and platforms that offer investment trusts (including Hargreaves Lansdown, Barclays Smart Investors, Fidelity, Halifax Share Dealing Limited, Interactive
Investor and A J Bell), as well as Computershare, the Company’s Registrars. Advisers who wishto purchase Witan shares for their clients can do so via a
number of online platforms, includingSeven Investment Management, Raymond James Investment Services, Strawberry Invest (formerly FundsDirect or
Ascentric), Transact, Nucleus, Fidelity Adviser Solutions and others. Further information can be found at https://www.witan.com/investing-in-witan/
how-to-invest/online-platforms.
The Company conducts its affairs so that its shares can be recommended by independent financial advisers (‘IFAs’) to private retail investors. The shares
are excluded from the Financial Conduct Authority’s restrictions which apply to non-mainstream pooled investment products because they are shares in
a UK-listed investment trust.
GLOSSARY OF TERMS USED ON PAGE 18
Engagement: The company is open to stakeholder engagement.
Board: The company has a management structure that focuses on sustainability.
Compliance: The company complies with best practice in approach to and tracking of ESG risks.
Diversity: The company has diversity and inclusion targets that are achievable.
Remuneration: The company has an element of its remuneration policy which is linked to sustainability performance.
Sustainability: The company has products or services which are increasingly sustainable or otherwise support the transition to a more sustainable world.
Carbon: The company has an ambition or commitment to minimise its environmental impact.
Disclosure: There are strong climate change disclosures and reporting.
Collaboration: The company is an active member of sustainability partnerships or initiatives.
Reporting: The company produces regular, detailed and transparent sustainability disclosures.
Witan Investment Trust plc
Annual Report 2023
118
Job No: 51462 Proof Event: 32 Black Line Level: 6 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Contacts
REGISTERED OFFICE OF THE COMPANY AND ITS SUBSIDIARY,
WITAN INVESTMENT SERVICES LIMITED
The Company is a public company limited by shares.
REGISTERED NUMBER
Registered as an investment company in England and Wales, Number
101625.
COMPANY SECRETARY
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
Telephone: 020 3008 4910
CUSTODIAN, INVESTMENT ADMINISTRATOR
BNP Paribas
10 Harewood Avenue
London NW1 6AA
DEPOSITARY
BNP Paribas Trust Corporation UK Limited
10 Harewood Avenue
London NW1 6AA
REGISTRAR
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0370 707 1408
(1)
(1)
Calls cost no more than calls to geographic numbers (01 or 02) and must be included in
inclusive minutes and discount schemes in the same way. Calls from landlines are typically
charged up to 9p per minute; calls from mobiles typically cost between 3p and 55p per minute.
Calls from landlines and mobiles are included in free call packages.
AUDITOR
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
STOCKBROKER
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
SOLICITORS
Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London EC2A 2EG
The Company is a member of:
DISABILITY ACT
Copies of this Annual Report and other documents issued by Witan Investment Trust plc are available from the Company Secretary. Ifneeded, copies can
be made available in a variety of formats, including Braille, audio tape or larger type as appropriate.
You can contact our Registrar, Computershare Investor Services PLC, which has installed textphones to allow speech and hearing impaired people who
have their own telephone to contact them directly, without the need for an intermediate operator, by dialling 0370 702 0005. Specially trained operators
are available during normal business hours to answer queries via this service. Alternatively, if you prefer to go through a ‘typetalk’ operator (provided by
The Royal National Institute for Deaf People), you should dial 18001 followed by the number you wish to dial.
UNSOLICITED APPROACHES FOR SHARES: WARNING TO SHAREHOLDERS
Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment
matters. These are typically from overseas based ‘brokers’ who target UK shareholders offering to sell themwhat often turn out to be worthless or
high-risk shares in US or UK investments. They can be very persistent and extremely persuasive. Shareholders are therefore advised to be very wary
of any unsolicited advice, offers to buy shares at a discount oroffers of free company reports.
Please note that it is very unlikely that either the Company or the Company’s Registrar, Computershare Investor Services PLC, wouldmake unsolicited
telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to shareholders and never in
respect of investment ‘advice’.
Shareholders who suspect they may have been approached by fraudsters should advise the Financial Conduct Authority (‘FCA’) using the share fraud
report form at www.fca.org.uk/scams or call the FCA Customer Helpline on 0800 111 6768. You may also wish tocall either the Company Secretary or
the Registrar at the numbers provided above.
Job No: 51462 Proof Event: 29 Black Line Level: 3 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
Printed by Park Communications on FSC® certified paper.
Park is an EMAS certified company and its Environmental Management System is certified to ISO14001.
100% of the inks used are vegetable oil based, 95% of press chemicals are recycled forfurther use and, on average,
99% of any waste associated with this production willberecycled.
This document is printed on Arcoprint, sourced from well-managed, responsible, FSC®certified forests and other
controlled sources. The pulp used in this product isbleached using an elemental chlorine free (‘ECF’) process.
Park Communications 51462
Job No: 51462 Proof Event: 29 Black Line Level: 3 Park Communications Ltd Alpine Way London E6 6LA
Customer: WITAN Project Title: ANNUAL REPORT 2023 T: 0207 055 6500 F: 020 7055 6600
www.witan.com
Witan Investment Trust plc Annual Report 2023