Witan Regulatory News (WTAN)

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WITAN INVESTMENT TRUST PLC

This announcement contains regulated information

Annual Financial Report for the year ended 31 December 2023

Chairman's Report

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.

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 April reversed 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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Chairman's Report (continued)

Andrew Bell's CEO report covers these points, as well as the macroeconomic backdrop, in more detail.

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 the Annual 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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Chairman's Report (continued)

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

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

CEO's Review of the year

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 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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

CEO's review of the year (continued)

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 in the Annual Report (see extracts on pages 25 to 32 below) set out the required statutory reporting measures of the Company's financial performance. The chart on page 11 of the Annual Report 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 6.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

CEO's review of the year (continued)

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.

BREAKDOWN OF THE PERFORMANCE ATTRIBUTION IN 2023 (%)

(1) N.B. Figures may not sum due to rounding.

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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

CEO's review of the year (continued)

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 of the Annual Report. Their returns during the year and since appointment are set out in the table below. 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.

ASSETS UNDER MANAGEMENT AND INVESTMENT MANAGERS' PERFORMANCE

(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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

CEO's review of the year (continued)

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.

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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

CEO's review of the year (continued)

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 of the Annual Report.

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 of the Annual Report) 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:

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%).

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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

CEO's review of the year (continued)

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 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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

CEO's review of the year (continued)

WITAN INVESTMENT TRUST DISCOUNT TREND

The discount trend during the past five years is illustrated in a chart on page 15 in the Annual Report. 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 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 in the Annual Report.

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!

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

CEO's review of the year (continued)

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

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Strategic Report

PRINCIPAL RISKS AND UNCERTAINTIES

The directors have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency, liquidity or reputation. These risks, and the actions taken to mitigate them, are set out below.

Risks are inherent in investment and corporate management. It is important to identify risks and ways to control or avoid them. Witan Investment Services Limited ('WIS') has a Risk Committee in order to monitor compliance with its risk management and reporting obligations as Witan's Alternative Investment Fund Manager ('AIFM'). The Company maintains a framework of the key risks, with the policies and processes devised to monitor, manage and mitigate them where possible. Its detailed risk map is reviewed regularly by the Audit & 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 on risk management has not materially changed during the course of the reporting period and up to the date of this report.

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WITAN INVESTMENT TRUST PLC

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Strategic Report continued

The Company's key risks fall broadly under the following categories:

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WITAN INVESTMENT TRUST PLC

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Strategic Report continued

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2021

Strategic Report continued

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2021

Strategic Report continued

CORPORATE AND OPERATIONAL STRUCTURE

Witan is an investment trust with a Premium Listing on the London Stock Exchange. It has a single, wholly owned subsidiary, Witan Investment Services Limited ('WIS') which acts as the Company's Alternative Investment Fund Manager ('AIFM').

The overwhelming majority of the portfolio is in segregated accounts, held in custody by the Company's depositary. The operations of the custodian and the safeguarding of the Company's assets are supervised by the depositary.

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, Witan and WIS contract with third parties for 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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Strategic Report continued

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 of the Annual Report. 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 of the Annual Report.

WITAN INVESTMENT SERVICES

WIS is authorised and regulated by the Financial Conduct Authority. It is authorised to act as Witan's AIFM and to provide marketing services.

WIS's principal activities are acting as Witan's AIFM, providing executive management services to the Board of Witan and communicating information about the Company to the market.

WIS's operational objectives for 2023 were:

? to fulfil its responsibilities as Witan's AIFM; and

? to control the net operating costs for Witan.

In 2023, WIS's sources of income were the fees (as AIFM or Executive Manager and for marketing services) paid by Witan Investment Trust plc. The main costs incurred were staff costs and professional advice to ensure compliance with regulatory and accounting obligations.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Strategic Report continued

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 below on page 20. 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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Strategic Report continued

ANALYSIS OF COSTS

(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.

VIABILITY STATEMENT

In accordance with the UK Corporate Governance Code, the Board has assessed the prospects of the Company over a longer period than the 12 months required by the 'going concern' provision.

The Company's current position and prospects are set out in the Chairman's and Chief Executive Officer's reports and the Strategic Report. The principal risks are set out on pages 13 to 17.

The Board has considered the Company's financial position and its ability to liquidate its portfolio and meet its expenses as they fall due and notes the following:

? The portfolio consists of investments traded on major international stock exchanges and there

is a spread of investments. In normal conditions, the current portfolio could be liquidated to the extent of 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 need to realise investments when shareholders wish to sell their shares.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Strategic Report continued

? The Board has considered the viability of the Company under various scenarios, including periods of acute stock market and economic volatility such as experienced in 2020, and concluded that it would expect to be able to ensure the financial stability of the Company through the benefits of having a diversified portfolio of listed and realisable assets. As illustrated in note 14 to the accounts in the Annual Report, the Board has considered price sensitivity risk (the sensitivity of the profit after taxation for the year and the value of the shareholders' funds to changes in the fair value of the Group's investments) and foreign currency sensitivity (the sensitivity to changes in key exchange rates to which the portfolio is 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 be used to meet its liabilities, and fixed-rate financing in the form of secured notes and cumulative preference shares. With the exception of the short-term facility, this financing will remain in place until at least 2035. Details of the Company's current and non-current liabilities are set out in note 13 to the accounts in the Annual Report.

? The expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments currently foreseen which would alter that position.

As well as considering the principal risks on pages 13 to 17 and the financial position of the Company, the Board has made the following assumptions in considering the Company's longer-term viability:

? The Company's remit of investing in the securities of global listed companies will continue to be an activity to which investors will wish to have exposure.

? Investors will continue to want to invest in closed-ended investment trusts.

? The performance of the Company will continue to be satisfactory. The Board is able to replace any of the current investment managers when it considers it appropriate to do so.

? The Company will continue to have access to adequate capital when required.

? The Company will continue to be able to fund share buybacks when required.

? The Company bought back 54 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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Strategic Report continued

GOING CONCERN

In light of the conclusions drawn in the foregoing statement on liquidity risk on page 16 and the Viability Statement, the directors believe that the Company has adequate financial resources to continue in operational existence for at least the next 12 months from the date of this Report. Therefore, the directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. In reviewing the position as at the date of this report, the Board has considered the guidance on this matter issued by the Financial Reporting Council.

APPROVAL

This report was approved by the Board of directors on 15 March 2024 and is signed on its behalf by:

15 March 2024

Page 23 of 33

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Statement of Directors' Responsibilities

in respect of the Annual Report and the financial statements

Responsibility statement

The directors as at the date of the Annual Report confirm, to the best of their knowledge, that:

· the financial statements, prepared in accordance with UK-adopted International Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description (on pages 13 to 17) of the principal risks and uncertainties that they face.

The directors 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

Chairman

Andrew Bell

Chief Executive

15 March 2024

Page 24 of 33

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Financial Highlights as at 31 December 2023

Key data

(1) Source: Witan/Morningstar. (2) Source: Morningstar. See also MSCI for conditions of use (www.msci.com).

(3) Alternative performance measure: The financial statements on pages 87 to 112 of the Annual Report set out the required statutory reporting measures of the Company's financial

performance. In addition, the Board assesses the Company's performance against a range of criteria which are viewed as particularly relevant for investment trusts, which are summarised in the key performance indicators on pages 4 and 5 of the Annual Report. 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 of the Annual Report.. (4) Funds and ETFs included on a "lookthrough" basis.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2023

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.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Consolidated and Individual Company Statements of Changes in Equity

for the year ended 31 December 2023

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Consolidated and Individual Company Balance Sheets

As at 31 December 2023

The financial statements of Witan Investment Trust plc (registered number 101625) were approved by directors and authorised for issue on 15 March 2024 and were signed on their behalf by

A J S Ross A L C Bell

As permitted by section 408 of the Companies Act 2006, the Company has not presented its own income statement. The profit of the Company dealt with in the accounts of the Group amounted to £181,484,000 (2022: loss of £280,554,000).

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Consolidated and Individual Company Cash Flow Statements

for the year ended 31 December 2023

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Notes to the Financial Statements

for the year ended 31 December 2023

1. Accounting policies

The financial statements of the Group and parent company have been prepared in accordance with UK-adopted International Accounting Standards ('IASs'). These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.

(a) Basis of preparation

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out in the financial statements. Where presentational guidance set out in the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies (the 'AIC') in July 2022 is consistent with the requirements of IASs, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

Judgements and sources of estimation uncertainty

In the application of the Group's accounting policies, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not always readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may vary from these estimates.

The directors do not consider that there are any significant estimates or critical judgements in these financial statements.

(b) Going concern

The financial statements have been prepared on a going concern basis. The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Strategic Report in the Annual Report. The financial position of the Group as at 31 December 2023 is shown in the balance sheet on page 27. The cash flows of the Group for the year ended 31 December 2023 are not untypical and are set out on page 28.

(c) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entity controlled by the Company (its subsidiary) made up to 31 December each year.

In accordance with IFRS 10 the Company has been designated as an investment entity on the basis that:

· It obtains funds from investors and provides those investors with investment management services;

· It commits to its investors that its business purpose is to invest solely for returns from capital appreciation and investment income; and

· It measures and evaluates performance of substantially all of its investments on a fair value basis.

The subsidiary of the Company was established for the sole purpose of operating or supporting the investment operations of the Company and is not itself an investment entity. Therefore, under the principles of IFRS 10, the Company has consolidated its subsidiary as it is a controlled entity that supports the investment activity of the investment entity.

Control is achieved where the Company is exposed, or has the right, to variable returns from its investment in the subsidiary and has the ability to affect those returns through its power to direct the relevant activities. Where necessary, adjustments are made to the financial statements of the subsidiary to bring the accounting policies used by it into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Notes to the Financial Statements continued

(d) Presentation of the Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company's Articles of Association, net capital returns may not be distributed by way of dividend. Additionally, the net revenue is the measure the directors believe appropriate in assessing the Group's compliance with certain requirements set out in section 1158 of the Corporation Tax Act 2010.

2. Investment income

3. Other income

At 31 December 2023 the total value of securities on loan by the Company for stock lending purposes was £45,656,000 (2022: £35,380,000). The maximum aggregate value of securities on loan at any time during the year ended 31 December 2023 was £61,910,000 (2022: £122,950,000). Collateral, revalued on a daily basis at a level equivalent to at least 105% (2022: 105%) of the market value of the securities lent, was provided against all securities on loan.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2023

Notes to the Financial Statements continued

4. Management and performance fees