Final Results

RNS Number : 3823Z

Witan Investment Trust PLC

15 March 2012

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

14 March 2012

This announcement contains regulated information

Directors' Report: Chairman's Statement

Highlights

• The NAV total return of -10.9% lagged the benchmark's return of -7.0%

• NAV total return over last five years was 9.9%, in line with the benchmark

• Dividend increased by 10.1%, more than twice the rate of inflation

• The 37th consecutive year the dividend has been increased

Performance and Shareholder Returns

2011 was a volatile and disappointing period for equity investors, as concerns grew over the sustainability of the economic recovery experienced since 2009. In addition, the persistent inability of the Euro currency zone to solve its internal debt problems threatened to inflict severe losses on the banking system and hence lead to a renewed credit crunch. As a result, equity markets which had marked time in the first half of the year fell sharply in the first week of August and were only able to recover part of the lost ground by the year end. Witan's benchmark gave a total return for the year of -7%. Witan's portfolio suffered a total return of -10.9%, underperforming by 3.9%. At the time of writing, the absolute falls in 2011 and most of the relative underperformance had been recouped in 2012.

One notably positive feature in 2011 was the strong growth in revenue from dividends. This has enabled the Company to pay a substantially higher dividend as well as increasing its revenue reserves. The Company has a policy of growing its dividend in real terms, with dividends having risen 51% over the past 10 years, compared with 29% for the consumer price index. The Company has increased its dividend in each of the 37 years since 1974.

The share price total return during the year was -10.7%, in line with the net asset value total return. The discount (compared with the net asset value excluding income, calculated with debt at fair value) narrowed from 9.9% at the end of 2010 to 9.4%. Over the past 5 years, which have been a difficult period for equity markets, Witan's NAV total return has been +9.9%, a modest but positive annual return of +1.9% p.a.

Considerably more caution is built into market expectations than at this time last year. Consequently, if growth outside Europe proves more resilient than expected and the most disruptive outcomes for the Euro zone crisis can be averted, equity markets should be able to recover from what currently appear to be low valuation ratings. Such a return to more rational investment conditions is likely to favour Witan's fundamental multi-manager investment approach.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Chairman's Statement continued

Portfolio Attribution

The underperformance, which regrettably offset the outperformance of 3.4% in 2010, was attributable to three main factors. The first was that, having gradually raised our gearing from 5.4% to 11% during the first seven months of the year (into markets which were trending sideways) we were adversely exposed to the very steep drop in markets in the first few days of August. The second was that our managers' portfolios were not in aggregate positioned for the abrupt change in investor risk aversion in the market sell-off. The final factor was that the quoted value of our debt securities increased, since they tend to be traded by reference to UK gilt-edged securities which rose in value. This led to a fall in the value of our net asset value when calculated using the market value of our debt.

A breakdown of the performance attribution is shown in the table below. The Company's gearing at the year-end was 10.5%, similar to the level before the market sell-off in early August. A decision was made to maintain gearing in August given that markets had already fallen significantly but not to add to it, owing to the continuing economic uncertainty, particularly in the Euro zone.

Performance Attribution

for the year ended 31 December 2011 (based on the Company's financial statements)

Net asset value total return	-10.9%	Portfolio investment total return (gross)		-7.2%
Benchmark total return	-7.0%	Benchmark total return		-7.0%
		Relative investment performance		-0.2%
		Gearing impact	-1.2%
		Rise in market value of debt	-1.2%

		Share buybacks	+0.2%
				-2.2%
				-2.3%

		Borrowing costs	-0.8%
		Operating costs and tax	-0.8%
				-1.6%

Relative performance	3.9%*			-3.9%*

*The totals on each side may not add up because of rounding.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Chairman's Statement continued

Total Expense Ratio

Including performance fees our Total Expense Ratio ('TER') fell by 0.20% to 0.87% (2010: 1.07%). Excluding performance fees, the TER fell from 0.81% in 2010 to 0.71%.

These figures should be evaluated against the weighted average TER of 0.78% (October 2011, excluding performance fees) for the AIC Global Growth sector (source: AIC) and of 1.6% for the open-ended Global Growth sector (source: IMA, Financial Express as at December 2011).

Cost reductions in a number of outsourcing contracts and the non-recurring nature of certain costs seen in 2010 all helped to reduce the TER. Weaker investment performance was reflected in a reduction in performance fees for the year, reducing the total expense ratio inclusive of performance fees.

Dividend

Your Board has declared a second interim dividend of 6.55 pence per share (2010: 6.5 pence), to be paid to shareholders on 30 March 2012, making a total distribution for the year of 12.0 pence (2010: 10.9 pence). This represents an increase of 10.1% over 2010, more than double the 4.2% rate of consumer price inflation in the year to December 2011. This is the 37th consecutive year during which we have increased the dividend.

Although equity market performance was disappointing during 2011, our portfolio generated an increase of over 40% in revenue earnings per share, allowing us to increase our dividend in real terms, as well as adding £2.6 million to our revenue reserves. Revenue reserves at the end of 2011 were £40.8 million (2010: £38.2 million), after providing for this second interim dividend payment. This is equivalent to 1.7 years' dividend payments.

In accordance with the revised policy announced in the 2011 Interim Results, the first interim dividend in 2012, in the absence of unforeseen circumstances, is expected to be 6.0 pence per share (2010: 5.45 pence), half of the total payout made in respect of 2011.

Share Buybacks and Discount

The Company purchased a total of 1.5% of the starting shares in issue during the year. These share buybacks generated an increase in net asset value per share of 0.2% as well as helping to maintain the discount close to our desired target of a sustainable level of 10% or below. The share price discount (compared with the net asset value excluding income, with debt at fair value) ended the year at 9.4% compared with 9.9% at the end of 2010. The average discount for the year on this basis was 10.6% (2010: 11.1%).

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Chairman's Statement continued

The Board

Following the independent Board Review in 2010 (which is planned to be a 3-yearly event) the annual internal Board review was conducted as usual in 2011. This identified the desirability of increasing the Board's specialist knowledge of marketing (in the light of changes underway in the savings markets).

Following a search conducted by an external consultant for an additional director, we are pleased to announce that Suzy Neubert has been chosen and will be joining the Board in April 2012. She is Sales and Marketing Director at JO Hambro Capital Management. We look forward to her contribution to the business.

The Board has considered the recommendation of the revised Corporate Governance Code that all directors of FTSE 350 constituent companies should submit themselves for re-election every year but believes that this would not be in shareholders' interests. The Company already has a requirement for new Directors to be confirmed at the AGM following their appointment, for existing Directors to submit themselves for re-election every 3 years and for Directors with more than 9 years' service to submit themselves for annual election.

Witan Differentiated Approach

Witan is unique amongst investment trusts in operating a fully-fledged multi-manager structure for the management of its assets. This aims to benefit from the specific skills of particular managers, as well as reducing the performance volatility that can come from having a single manager. This structure is overseen by the Company's executive team, which is responsible for managing risk appetite by actively varying gearing as well as taking advantage of specialised opportunities which fall outside the investment managers' remits. The details of the process and the changes implemented during 2011 are set out in the Business Review on pages 6 to 24 below.

AGM

Our Annual General Meeting will be held at Merchant Taylors' Hall on Tuesday 1 May 2012 at 2.30pm. Formal notice of the meeting will be sent to shareholders when the Annual Report is published. With my fellow Directors, I look forward to the opportunity to meet you then for the Company's 104th AGM.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Chairman's Statement continued

Outlook

Despite the volatility in financial markets from August onwards, business confidence surveys have proved relatively resilient to the prolonged market fluctuations. This is particularly evident outside Europe, whose prospects are most impacted by fiscal tightening and uncertainty over the resolution of the sovereign debt crisis. Although a decisive solution to the structural tensions in the Euro currency remains elusive, the region's politicians appear to be more committed to containing the economic fallout. A process of procrastination smoothed by better crisis management is better than the banking catastrophe towards which the Continent seemed to be sleepwalking in 2011. If Europe's crisis can be contained, the case for investment in faster growing parts of the world (emerging economies and the US) looks sound and there could also be opportunities amongst the global industrials headquartered in Europe.

Markets in 2011 appeared to be dominated by shorter-term concerns given the modest ratings in equity markets. This is in contrast to the enthusiasm for driving government bond yields in a select group of countries (the UK, US and Germany) down to levels which offer a low probability of any long-term real return and an increased risk of substantial erosion in value even with low rates of inflation. Some have described government bonds yielding 2% as a benchmark for return-free risk rather than risk-free return, in contrast to which equity ratings appear to have factored in substantial pessimism over long-term prospects and could benefit if economies perform less badly than feared.

Forecasts are unreliable, particularly concerning investor sentiment. However, it seems that even after the recent recovery equity markets are priced to give the patient investor a positive real return, though with significant uncertainty over the immediate future. In contrast, some of the major government bond markets are priced to deliver losses in real terms, while only offering security in the short term.

Harry Henderson

Chairman

14 March 2012

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review

This Business Review provides shareholders and other readers with information about the Company's business and results in 2011 and looks forward to the year ahead. It is divided into two sections: Corporate and Investment.

CORPORATE SECTION

Objectives and Strategy

Witan's objective is to be the preferred choice for wealth creation through equity investment, adding value in the long term for its investors. This means that Witan will seek to make money for shareholders, to do so more effectively than its sector peers with similar objectives and to achieve consistent outperformance of the global stock markets represented by its benchmark. Recognising the importance of dividends in the returns from equity investment, Witan has a policy of seeking to increase its dividend in real terms, ahead of inflation. In addition, Witan seeks to attract new investors to buy the Trust's shares in order to provide ongoing liquidity for shareholders.

Witan's portfolio has a multi-manager investment structure. This reduces the performance volatility which can occur when employing a single manager. This approach allows us to select a range of high quality fund managers with differing areas of expertise from around the world - often where the fund manager is not otherwise available on the same terms (or at all) to the UK investor.

Your Board believes that active management of risk is essential in investment. This is particularly relevant when markets are threatened by major economic disruption, as seen in recent years, but an adaptable approach is also needed in order to enhance investment performance in more positive times. Where appropriate, we are also willing to employ innovative investment techniques and invest in diverse asset classes. Investment trusts have the advantage of being able to borrow in order to improve performance in rising markets. Witan has £110 million of long term debt (including preference shares) which can be deployed, hedged or neutralised with cash balances according to our view of the outlook for markets. In addition, it has a £50m short term multi-currency borrowing facility to give additional flexibility. We have a policy of actively managing our gearing within limits set by the Board (please refer to the Investment Policy section on page 14 below).

Management Arrangements

As already noted, the management of Witan's portfolio is predominantly outsourced to third party investment managers around the world. A small proportion is invested in externally managed collective funds selected by Witan's in-house executive management team in areas to complement the delegated remit of Witan's external managers. The executive management team manages and controls these relationships, selects new managers when a change is appropriate and advises the Board on all relevant investment and business matters. The executive management team is also responsible for adjusting the overall risk appetite of the portfolio and for managing the subsidiary company, Witan Investment Services Limited.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

Changes to the investment manager line-up during the year, along with other investment issues, are referred to in greater detail in the Investment Section on pages 14 to 24. Our current managers are listed on page 18.

Witan uses third parties for the supporting services it requires, including:

• BNP Paribas Securities Services SA ('BNPSS') for global custody, investment accounting and administration.

• Frostrow Capital LLP for company secretarial services.

• International Financial Data Services ('IFDS') Limited as the savings plan administrators of Witan Wisdom and Jump Savings.

• Cauldron Consulting for media relations.

• Tangible Financial for advertising.

• Towers Watson to monitor the market for managers.

• From time to time, as required, Witan also procures professional advice in the areas of legal, compliance, investment consulting, financial and tax advice.

Witan's aim (as indicated in the first paragraph of this Business Review) is to provide consistently superior returns to shareholders. Unlike other multi-manager services, we do not levy an additional fee (on top of the underlying external managers' fees) and any negotiated savings in investment management fees fall directly through to lower the costs for shareholders. Your Board applies strict controls over central corporate costs. Expenditure is only undertaken when necessary or when a specific endeavour has been identified which is likely to achieve a profitable return. Our Total Expense Ratio ('TER') reflects this disciplined attitude to costs as well as our ability to secure external investment management services on competitive terms. The figure for 2011 was 0.87%, or 0.71% excluding performance fees paid and accrued. This compares with a TER of 1.07% in 2010, or 0.81% excluding performance fees and with a weighted average TER of 0.78% for the AIC Global Growth sector (October 2011, excluding performance fees, source: AIC) and of 1.6% for the open-ended Global Growth sector (source: IMA, Financial Express as at December 2011).

Since November 2005 the Company has had a lease on office premises at 14 Queen Anne's Gate, London SW1H 9AA, which (since 21 February 2011) has also become the Company's registered office.

The Company's policy towards its employees is to attract and retain staff with the particular skills and expertise required to manage the affairs of an investment trust company. The Group has no specific policies in respect of environmental or social and community affairs.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

The Witan Benchmark

Your Company's benchmark is a reference point for what shareholders can expect in the long term from an investment in Witan, in terms of the underlying investment structure of the portfolio and in performance. It enables the aims of your Company to be encapsulated succinctly without the need for a detailed description. Although it is an equity benchmark, your Board reserves the right to invest in other assets if appropriate, for better performance or capital preservation. Since 1 October 2007 the benchmark has been:

40% FTSE All-Share Index

20% FTSE All-World North America Index (£)

20% FTSE All-World Europe (ex UK) Index (£)

20% FTSE All-World Asia Pacific Index (£).

This reflects a balance between the domestic exposure and international status of the UK market and a broadly spread exposure to growth in other regions of the world. To assist shareholders who may apply different benchmarks in evaluating comparative performance, we include performance information for other commonly used indices in the Key Performance Indicators summary section on page 25.

The benchmark provides a basis for assessing the long term performance of the Company. Over shorter periods, performance can be expected to vary, sometimes considerably, from that of the benchmark, since the portfolio is actively managed. Over the longer term, we aim for consistent outperformance.

Dividend Policy

The Board has declared a second interim dividend of 6.55 pence per share, to be paid to shareholders on 30 March 2012, making a total distribution for 2011 of 12.0 pence (2010: 10.9 pence). This represents an increase of 10.1%, more than twice the rate of consumer price inflation to December 2011 (4.2%) and meets the Company's ongoing intention to increase dividends per share in real terms, ahead of inflation (subject to market circumstances). This is the 37th consecutive year that the annual dividend has been increased.

Share Buybacks and Discount Policy

Your Board places great importance on the encouragement of a liquid market in Witan's shares on the stock exchange. A healthy two-way market enables shareholders to sell Witan shares at a price that reflects prevailing market value while potential new shareholders should also be able to invest readily. The Company operates an active share buyback policy, purchasing shares for cancellation when they stand at a significant discount to the net asset value (excluding income, with debt at market value), with the objective of achieving a sustainable discount of 10% or below (subject to

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

market conditions). This policy has the direct effect of improving net asset value per share with the

additional strategic aims of mitigating volatility in the discount and bringing the share price closer to the net asset value.

The level of share buybacks during 2011 is referred to in detail in the Chairman's Statement. This activity not only generated an increase in net asset value per share of 0.2% but also helped to reverse periods of widening discounts occasioned by market conditions.

Marketing

In addition to share buybacks, Witan operates an ongoing marketing programme designed to stimulate interest in Witan by explaining our investment strategy and performance to existing and potential new shareholders. This programme communicates with private and professional investors, financial advisers and intermediaries using a range of media (including direct meetings, press interviews and advertising through traditional media and the internet). In particular, the Company aims to provide an informative and easy to use web-site (www.witan.com) to enable investors and their financial advisers to make informed decisions about including Witan shares in their investment portfolios.

Debt and Gearing Policy

Witan has long term debt consisting of debentures, secured bonds and preference share capital. The Company also has a £50 million one year multi-currency facility, which provides additional flexibility over the level of gearing, as well as enabling the Company to borrow in other currencies than sterling, if deemed appropriate. Witan may either invest its borrowings fully, or neutralise the gearing effect with cash balances (or the sale of equity index futures) according to our view of the markets.

Key Performance Indicators

Your Board assesses its performance in meeting the Company's objective against the following key performance indicators:

• net asset value total return

• total shareholder return

• investment performance compared with the benchmark

• annual dividend growth (after taking account of inflation)

• discount to net asset value

• total expense ratio.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

Witan's performance in 2011 against the above indicators is shown on page 25, with most being discussed in the Chairman's Statement on pages 1 to 5 above. The Board also reviews absolute and relative volatility and risk statistics for the portfolio and evaluates employee performance against assigned personal targets.

Principal Risks and Uncertainties

The Board has identified the key risks to the Group which need to be managed and has collated them in a risk matrix document. The risks relating to Witan's subsidiary company, Witan Investment Services Limited ('WIS'), are separately recorded. The respective documents are reviewed and updated regularly by the relevant Board of directors.

The Board is conscious that it must regularly review the nature of its corporate objectives and strategy to ensure that both remain relevant and appropriate in a changing financial services and savings market. This includes scrutiny of investment policies, the role of marketing, the service offered by the Witan Wisdom and Jump Savings schemes and wider industry trends. These issues are reviewed at least annually by the Board.

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

1. Market and portfolio risks

Witan has traditionally been a vehicle for UK and overseas equity investment. Whilst this does not preclude a more diversified or defensive strategy during periods of falling or turbulent markets, nonetheless a key risk of investing in Witan is a general fall in equity prices.

The other generic risks, as with any international equity portfolio, are those of overall investment strategy and country, currency, industrial sector, and stock selection. There are also risks associated with the choice of managers. Your Board seeks to manage these risks through:

• appropriate asset allocation decisions, with delegated authority limits set for the Executive team

• regular reviews of the competence and stock selection skills of fund managers

• monitoring the economic outlook, geo-political environment and stock market conditions around the world

• the application of relevant policies on gearing and liquidity

• manager diversification, as a multi-manager structure means that from a risk point of view Witan is less exposed to individual manager performance than with a conventionally structured portfolio

• delegating authorities to the executive management team to manage risk actively, whether to preserve capital or capitalise on opportunities.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

2. Investment activity and strategy risks

It is important that investment activities, including asset allocation, stock selection and the level of gearing, are managed in a disciplined and prudent way, to reduce the risk of falls in Witan's portfolio value or underperformance against the Company's benchmark index or its peer group. Adverse performance could also result in the Company's shares trading on a wider discount. The Board seeks to manage these risks by implementing an appropriate asset allocation and a portfolio that is spread across a diverse range of investment managers and investments. These aspects are regularly reviewed, in addition to the extent of borrowings.

During the year Witan's Chief Executive Officer (CEO), Andrew Bell, managed the overall business and investment portfolio in accordance with limits and restrictions determined by the Board. These include limits on the extent to which borrowings may be used. The Board reviews regularly the matters delegated to executive management and the CEO confirms compliance at each Board meeting. Directors are provided with comprehensive management information covering many aspects of the business including investment performance data, financial reports and shareholder analyses. The Board reviews investment strategy at each Board meeting and monitors the implementation and results of the investment process with the CEO. The CEO regularly reviews reports and data which monitor the portfolio's principal risk factors.

3. Corporate governance and shareholder relations

Details of the Company's compliance with corporate governance best practice, including information on relations with shareholders, are set out in the Corporate Governance Statement in the Annual Financial Report.

The Board has for a number of years conducted an annual internal review of its governance processes' effectiveness in managing the Company and enabling it to evolve in response to future challenges. In addition to this, it has established a 3-yearly schedule for an external review, the most recent of which was conducted in late 2010.

Operational and regulatory risks are regularly and extensively reviewed by Witan's Audit Committee. Witan Investment Services Limited ('WIS') is subject to its own operating rules and regulations and is regulated by the Financial Services Authority ('FSA'). Your Board takes its own regulatory responsibilities very seriously and reviews the main points of compliance against requirements on a quarterly basis. Your Board also takes corporate, legal, accounting and tax advice as appropriate.

Operationally the multi-manager structure is robust, as each of the investment managers, the custodian and the fund accountants keep their own records which are reconciled monthly. Management monitors the activities of all third parties and reports any significant issues to the Board. Comprehensive contractual obligations and indemnification provisions have been put in place with each of the third party service providers.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

4. Accounting, legal and regulatory

In order to qualify as an investment trust the Company must comply with sections 1158-59 of the Corporation Tax Act 2010 ('CTA'). A breach of these sections could result in the Company losing investment trust status and, as a consequence, capital gains realised within the Company's portfolio would be subject to Corporation Tax. The criteria are monitored by the CEO.

The Company must comply with the provisions of the Companies Act 2006 ('the Companies Act'), and, as the Company's shares are listed for trading on the London Stock Exchange, the Company must comply 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 the directors being fined or becoming the subject of criminal proceedings. Breach of the UKLA Rules could result in the suspension of the Company's shares which would in turn lead to a breach of the provisions of the CTA.

The Board relies on the CEO, the Company Secretary and the Group's professional advisers to ensure compliance with the CTA, the Companies Act and the UKLA Rules. WIS is regulated by the Financial Services Authority for the marketing and administration of savings plans and the provision of investment advice to professional clients. The savings plans are administered on behalf of WIS by International Financial Data Services ("IFDS").

The Board takes legal, accounting or compliance advice, as appropriate, to monitor changes in the regulatory environment affecting the Company. Current issues include the Alternative Investment Fund Manager Directive from the European Commission and the Retail Distribution Review, which will affect the investment management industry as well as the marketing of investment products to retail investors. Their practical implications will become clearer as the details of how they will be implemented are specified in the coming year.

5. Operational

Many of the Group's operations are outsourced to third parties, principally BNPSS. Disruption to, or failure of, the accounting, payment systems or custody records operated by BNPSS could prevent the accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by BNPSS and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal control section of the Corporate Governance Statement of the Annual Financial Report.

Witan Investment Services ('WIS')

Witan Investment Services Limited is a wholly owned subsidiary of Witan Investment Trust plc. It was established in March 2005 and is authorised and regulated by the FSA to provide investment products and services and to give investment advice to professional investors.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

The principal activity of WIS is to provide executive management services to the Boards of Witan Investment Trust plc ('Witan') and Witan Pacific Investment Trust plc ('Witan Pacific') and stimulate interest in their shares.

Its objectives are:

• to operate a reliable and efficient investment savings platform for Witan and Witan Pacific investors

• to provide suitable advice to the Boards of its corporate clients

• to minimise the operating costs for Witan Investment Trust

• to seek sources of revenue to generate a profit.

WIS has two discernible channels of income by which its performance may be judged. These are the savings plan revenues from transaction fees and annual management charges and, secondly, executive management and marketing fees paid by its corporate clients, Witan and Witan Pacific.

The savings plans provided for WIS clients are marketed under the Witan Wisdom and Jump Savings brands. They currently have over 29,000 customers with assets of some £200 million invested. The main costs incurred by WIS (which form part of the charges paid by savings plan account holders) are fees to the savings schemes administrator which (since December 2010) has been IFDS.

Priorities for 2012

2011 was a disruptive year for economies and financial markets, with disappointing returns for equity investors, including Witan's shareholders. The Board and the Executive team are focused on taking advantage of the opportunities which may have been revealed by the general equity market reverses.

In 2012, the key priorities include:

• maintaining an appropriate strategic asset allocation to reflect changing opportunities in the world economy

• selecting and monitoring suitable managers to deliver our strategic objectives through a multi-manager structure

• active management of risk appetite, responding to tactical opportunities to boost returns or to protect capital

• aiming to deliver dividend growth ahead of inflation

• communicating Witan's more active investment process to existing and potential shareholders

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

• delivering a good service to the corporate and individual clients of Witan Investment Services

• seeking business development opportunities where Witan's multi-manager expertise can be applied beneficially.

INVESTMENT SECTION

Investment Policy

Witan invests primarily in global equities. Equity exposure is unlikely, in normal conditions, to drop below 80% although this does not preclude a more defensive positioning in exceptional market conditions. The Board is prepared to consider alternative investments when appropriate.

The Company has the power under its Articles of Association to borrow up to 100% of the adjusted total of capital and reserves. This allows the Board to seek to improve performance through gearing by borrowing amounts equivalent in value to shareholders' funds. In practice the Board would not, other than temporarily in exceptional circumstances, allow gearing as defined on page 26 to rise to more than 20%. Over the past five years it has varied between 0% and 15% while on occasion the Company has held a small net cash position. At the end of 2011, the Company had in place £110 million of long term debt and £15 million of short term borrowings (equivalent to 12.6% of shareholders' funds), although effective gearing was less than this (10.5%), owing to cash holdings held by the individual managers.

Investment risk is managed through:

• diversification of the investment portfolio across global markets

• selection of a range of investment managers with different mandates

• monitoring and reviewing investment manager performance and portfolios

• active management of risk appetite, taking account of asset allocation, currency exposures and gearing levels

• carefully controlled use of liquid, exchange-traded derivatives (principally equity index futures).

During the year the Company invested its assets with a view to spreading investment risk and in accordance with the investment policy as set out above. In particular it has maintained a diversified portfolio in terms of stocks, sectors and geography. The portfolio has been actively managed by the investment managers, with overall asset allocation and risk being managed by Witan's executive team. The directors have received regular reports on investment activity and portfolio construction, both at and between the regular meetings of the Board.

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Portfolio Review

The year in summary

The first part of 2011 saw improving economic growth, together with strong profit and dividend growth from companies. This positive news flow for the corporate sector was soon challenged by two major negative events. The first was the catastrophic Japanese earthquake in March, both in terms of the shock caused by the human scale of the disaster and the disruption to economic activity domestically and, through globally interconnected trade links, world-wide. This sapped the momentum from the improving growth picture seen at the start of the year. The second negative event was a sustained rise in commodity prices, including oil. A number of factors contributed to this, including rapid growth in emerging economies, financial market speculation at a time of abundant liquidity and the 'Arab Spring' which increased investor fears that oil supplies would be disrupted while producing countries underwent political change. The effect of rising commodity inflation was that many emerging economies switched priority from growth promotion to inflation fighting and raised interest rates, while consumers in developed economies were hit by a squeeze between rising inflation and only slowly-growing incomes. Growth therefore weakened in many countries during the early summer.

The result of these conflicting forces was that most stock markets were little changed by mid-year. Expectations that growth would pick up in the autumn began to fade during July, owing to a short-lived but nerve-wracking impasse over the US budget, which undermined confidence in the US political system's ability to function effectively, and by deepening foreboding over the prospects for the European currency area.

We commented in last year's review that the policy contradictions in Europe remained a potential source of instability, but underestimated how tortuous the attempts to achieve agreement would prove to be. Successive inconclusive Euro zone political summits dominated economic and market sentiment for much of the latter half of 2011. Investors tried to assess the extent of the financial system's losses if one or more countries in the Euro zone were to default on their debts but it became clear that there was no political consensus on how to tackle the problems (initially confined to the relatively small economies of Greece Ireland and Portugal). As a result, investors began to doubt whether Germany and other stronger economies were willing to fund losses if certain countries defaulted or to provide bridging liquidity while weaker countries restructured their economies. Given spreading concerns about sovereign defaults, deposits began to shift from weaker to stronger countries, adding to fears of financial sector losses from their sovereign bond holdings. The banks consequently became unable to fund themselves fully in the markets (in an echo of the 2008 banking crisis) and had to borrow enormous sums from the European Central Bank (ECB). For a period, it seemed that the European authorities were blind to the developing banking crisis, leading to highly volatile trading conditions as investors feared a repeat of the financial chaos after Lehman Brothers went bankrupt in 2008.

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Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

By the end of the year, it appeared that European politicians were more alert to the financial risks stemming from their prolonged public disagreements on fiscal and monetary policy. The ECB acted relatively cautiously to buy government bonds where yields were judged to have overshot owing to market sentiment but was more decisive in providing long term liquidity for the banks, on cheaper terms than the febrile conditions in the interbank market offered. A programme was announced for banks to raise additional equity to improve their resilience to losses and Governments in several key economies (e.g. Italy and Spain) initiated reforms to improve their fiscal position and growth prospects, though the initial effects of these measures were to subdue economic growth still further. Although there remained gaps in the policy framework (notably how to promote growth through a period of austerity) the risk of a banking collapse appeared to have been averted.

At the same time as this catastrophe risk faded, global inflationary pressures began to fade, ushering in a shift towards easier monetary policies. It also became clear that growth in the US had been more resilient than feared and showed signs of accelerating towards the year end. The result was a tentative return of confidence to equity markets and a recovery of part of the losses sustained during the third quarter.

Manager changes

During the year, only one change was made to the list of Witan's managers. In April we closed the smaller of our two European investment mandates (allocated to Varenne Capital Partners). This was not by reason of performance (which had been good) but as part of a strategic reduction in our European equity exposure.

Use of Derivatives

Equity index futures were used for general portfolio management purposes on a number of occasions during 2011, although to a lesser extent than in 2010. The principal objectives for which they were used were to reduce our effective gearing during the turbulent market conditions seen during the autumn and to moderate the extent of our significantly underweight position in Japan. The investments covered futures in the FTSE 100, S&P Composite, Euro Stoxx 50 and Japanese equity market indices. The Company takes full account of the underlying value of the futures contracts in measuring its gearing. The value of the investments (which are traded on official exchanges) is fully marked to market every day.

The underlying futures exposure varied between -2% and +2% of assets, finishing the year at +1.5% (an investment in Nikkei index futures).

The use of equity index futures has a number of benefits. It enables Witan to increase or reduce its gearing at a known and immediate index level, conferring tactical flexibility. It also provides a means of adjusting the geographical asset allocation (for example, by allocating investment to particular markets). In both cases, the use of index futures enables the adjustments to be made without interfering with the assigned objectives for our investment managers, which are to pick

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stocks that will grow in value over the medium to long term and outperform their respective benchmarks.

The operation of this investment area is the responsibility of the CEO, within guidelines set by the Board. Transactions are reported to the Board as they occur, with the CEO being accountable for the financial results.

Gearing management

Gearing was managed actively during the year. Starting the year at 5.4%, it was increased following market setbacks to average 8.3% during the first half and averaged 10.7% in the second half, ending the year at 10.5%. This detracted from performance during 2011, given the abrupt and severe market falls in the early part of August. The Company's view remains that gearing should be used judiciously and can be an effective tool to boost returns.

Directly held investments

In 2010, the Company initiated a policy of making direct investments in selected collective funds. This portfolio was increased in 2011, from 6.5% to 9.8% of assets, principally through investments in the convertible bonds of two investment trusts (Electra Private Equity and Edinburgh Dragon) and by increasing our investment in quoted private equity trusts. At the year end, the investment companies held covered a number of asset categories viewed as attractive, namely quoted Private Equity (3i Group, Electra Private Equity and Princess Private Equity), distressed debt investment (NB Distressed Debt Fund), UK domestic recovery (Invista Foundation Property Fund and Aberforth Geared Income Trust), specialist insurance (Polar Capital Insurance fund) and a specialist environmental fund (Ludgate Environmental Fund Limited). These amounted to 9.8% of Witan's portfolio at the year end, with the management of this portfolio being the responsibility of the CEO.

Portfolio diversification

In order to capture the changing dynamics in the global economy and provide stability against problems within individual countries, Witan's portfolio is well diversified across global stock markets and, importantly, across a range of managers. As expected in a multi-manager portfolio, individual manager returns vary. In 2011, 6 of the managers who were in place for the whole of the year outperformed their respective benchmarks, while 6 (including the portfolio of direct holdings) underperformed. This mixed relative performance, together with an increased allocation to emerging and growth economies (which performed poorly last year) and the effect of gearing during the market falls meant that Witan's net asset value total return of -10.9% was below that of the benchmark (-7%), despite having outperformed by 0.6% during the first half of the year.

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Directors' Report: Business Review continued

Witan is predominantly equity based but the remit allows investment in other areas when considered appropriate, either to enhance returns or to mitigate risk. In normal market circumstances, equity exposure can be expected to be at least 80%, while gearing, as noted elsewhere, is managed within an overall maximum level of 20%.

The table below shows the current investment management arrangements:

Equity mandate	Investment Manager	Benchmark	Investment style
UK	Artemis Investment Management	FTSE All-Share	Recovery/special situations
UK	Lindsell Train	FTSE All-Share	Long term growth from undervalued brands
UK	NewSmith Asset Management	FTSE All-Share	Flexible, thematic
UK Smaller Companies	Henderson Global Investors	Hoare Govett Smaller Co's (ex investment price companies)	Growth at an attractive price
Global	Southeastern Asset Management	FTSE All-World	Value
Global	MFS Investment Management	FTSE All-World	Growth at an attractive price
Global	Thomas White International	FTSE All-World	Diversified growth at a reasonable price
Global	Veritas Asset Management	MSCI All-World	Fundamental value, real return objective
Pan-European	Marathon Asset Management	FTSE All-World Developed Europe	Capital cycles
Asia Pacific (ex Japan)	Comgest	FTSE All-World Asia (ex Japan, Australia, New Zealand)	Fundamental research
Emerging Markets	Trilogy	MSCI Emerging Markets	Fundamental, growth orientated
Directly-held investments	Witan Executive team	Witan's external benchmark	Collective funds invested in mispriced assets, recovery situations or specialist assets

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Investment Managers

As set out in the table above, the portfolio consists of 11 separate external mandates managed by different fund management firms, in addition to the directly-held positions managed by the CEO.

Each of the external managers is entitled to a base management fee, calculated according to the value of the assets under management, and/or a performance fee, calculated according to investment performance, relative to the benchmark applicable to the investment mandate. The fees for each of the segregated investment management agreements are subject to a cap in respect of each accounting year. Each agreement can be terminated on one month's notice. One of the investment mandates is operated via a fund vehicle, to simplify custody arrangements in emerging economies.

The base management fee rates range from nil to 0.9 per cent per annum and the performance fees range from nil to 20 per cent per annum of the relevant outperformance. All the fees are payable quarterly in arrears. The performance fees are payable on a pro rata basis, after a minimum initial period of one year.

The average aggregate base management fee, weighted according to the value of the funds under management, was 0.34% as at 31 December 2011 (end 2010: 0.35%). On a similar basis, the average performance fee is 12% of outperformance of the relevant benchmark, subject to capping of payments for any particular year. As an illustration, if our managers uniformly outperformed their benchmarks by 3% after base management fees, this would generate a performance fee of 0.37% of net assets, giving total investment management fees of 0.71%. The actual fees payable will of course vary according both to the level of performance and the variation in performance between managers with higher or lower fees. Witan takes care to ensure the competitiveness of the fee rates it pays (which in aggregate have been reduced during 2011) and that where higher fees are incurred they are linked to good performance, from which shareholders benefit.

The Company's external investment managers may use certain services which are paid for, or provided by, various brokers. In return, they may place business, including transactions relating to the Company, with those brokers.

Manager Review

The table on page 21 below shows the performance of the individual equity managers for 2011 as well as since inception, compared with their respective benchmarks. The two best performers during the year were Veritas (appointed in 2010 as a Global equity manager) and Lindsell Train (one of the two UK managers appointed in 2010). Both achieved a positive return despite the negative market trends. They also achieved the strongest relative performance against their allocated benchmarks, although four other managers also outperformed their benchmarks but had negative returns for the year as a whole.

At the other end of the scale, our Asian and Emerging markets managers had some of the weakest absolute returns (although Comgest outperformed their Asian equity benchmark). Emerging economies and the faster growing economies of Asia were hard-hit by the down-turn in global confidence as well as being affected by the tighter trend in monetary policy linked to the

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Business Review continued

inflationary pressures in the first half.

Weak returns were also seen from Europe (which was the weakest of the developed markets), from our portfolio of direct holdings and from Southeastern, another of our global equity managers. In the case of Europe, our manager's performance was 1% behind that of the weak European index, after outperforming during 2010. Southeastern has a value-focused approach to stock selection, assigning an intrinsic value to companies and seeking to invest on wide discounts to that value. Their portfolio is highly concentrated and includes a range from defensive non-cyclical growth to undervalued cyclical stocks and restructuring plays. Its performance was adversely affected by the abrupt change in risk aversion from mid-year and, as our largest single portfolio, this exerted a material drag on Witan's overall performance for the year. They retain confidence in their holdings and in the past (e.g. 2009) this confidence has been reflected in strong absolute and relative performance when market conditions have stabilised.

The portfolio of direct holdings, which was increased during the year from 6.5% to 9.8%, suffered from the derating of the holdings in listed private equity vehicles. Although two holdings (Electra Private Equity and Princess Private Equity) have delivered positive total returns in excess of those on Witan's portfolio as a whole since purchase, they have fallen back from higher levels. A third (HarbourVest Global Private Equity) was sold for an absolute and relative gain. However, 3i Group has been a significant disappointment so far. Its business performance has been unexceptional in net asset value terms since we first purchased the shares in 2010 but the price has fallen from a discount of approximately 10% to one of over 35%. Although this is not unique in the specialist financials sector in recent months, we believe it is not reflective of the performance of 3i's portfolio of investments. We have therefore added to the holding at the recent low levels as we believe that either a higher rating will be restored once markets become less volatile and more discriminating or management will have to take further steps (beyond the welcome increase in the dividend payout) to address the gap between the underlying business performance and that of the share price.

The two convertible bond holdings (in Electra Private Equity and Edinburgh Dragon Trust) held up well during the market volatility and both trade above their purchase prices (in December 2010 and January 2011 respectively). They have offered a running income as well as downside protection relative to the equity, while giving longer-term equity participation should the underlying share prices overtake the conversion prices.

Japan is a market where we decided in 2010 to cease using a specialist manager, leaving it to our global managers to allocate according to the relative attractions of stock opportunities in the Japanese market. The underweighting of that market, resulting from their stock decisions as well as our strategic view, has been helpful, as the market underperformed in 2011. We increased our Japanese exposure late in the year, using equity index futures and the purchase of a specialist Japanese investment trust but remain relatively lowly weighted.

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Annual Financial Report for the year ended 31 December 2011

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Performance for the year ended 31 December 2011 and from inception to 31 December 2011		Value of Witan's assets managed £m at 31.12.11	% of Witan's assets under management at 31.12.11 (Note 1)	Performance in 2011(%)	Benchmark Performance in 2011 (%)	Performance since inception to 31.12.11 (%) (Note 2)	Benchmark Performance since inception to 31.12.11 (%) (Note 2)
Investment Manager	Inception Date
Artemis Investment Management (UK)	06.05.08	90.6	8.2	-4.0	-3.5	+5.7	+0.8
Lindsell Train (UK)	01.09.10	119.6	10.8	+1.0	-3.5	+13.2	+5.7
NewSmith Asset Management (UK)	01.09.10	107.6	9.7	-7.5	-3.5	+3.7	+5.7
Henderson Global Investors (UK smaller)	31.08.04	23.8	2.2	-6.6	-9.1	+10.5	+9.0
Southeastern Asset Management (Global)	30.09.04	129.7	11.7	-13.7	-6.6	+5.2	+7.4
MFS Investment Management (Global)	30.09.04	90.1	8.1	-3.2	-6.6	+9.7	+7.4
Thomas White International (Global)	28.09.07	97.8	8.8	-2.3	-6.6	+3.7	+1.7
Veritas Asset Management (Global)	11.11.10	124.9	11.3	+4.6	-6.2	+7.9	-0.6
Marathon Asset Management (Pan-Europe)	23.07.10	98.2	8.9	-12.0	-10.8	-0.5	-0.2
Comgest (Asia Pacific (ex Japan))	31.07.07	71.8	6.5	-16.0	-16.4	+5.6	+5.1
Trilogy Global Advisors (Emerging Markets)	09.12.10	44.4	4.0	-22.5	-17.6	-18.3	-13.8
Witan Direct Holdings	19.03.10	108.9	9.8	-13.4	-7.0	-6.0	-0.5

Notes:

1. Excluding cash balances held centrally by Witan and the unquoted investments.

2. The percentages are annualised where the inception date was before 2011.

Source: The WM Company.

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Portfolio breakdown

The sector breakdown and regional exposure for the aggregated portfolio is set out in the Annual Financial Report. A point to note is that the financials weighting is boosted by the investment companies held as specialist direct investments. Excluding those, we have been underweight in financial stocks.

Top 10 Overweight positions at 31 December 2011

Name	Sector	Portfolio Weighting %
Electra Private Equity PLC (including convertible bond)	Equity Investment Instruments	2.63
3i Group PLC	Financial Services	2.51
Pearson PLC	Media	1.68
Unilever PLC	Food Producers	1.91
Sage Group PLC (The)	Software & Computer Services	1.22
Dell Inc.	Technology Hardware & Equipment	1.13
Reed Elsevier PLC	Media	1.24
Princess Private Equity Holdings PLC	Equity Investment Instruments	1.00
London Stock Exchange Group PLC	Financial Services	1.05
Schroders PLC	Financial Services	1.04

Top 10 Underweight positions at 31 December 2011

Name	Sector	Portfolio Weighting %
GlaxoSmithKline PLC	Pharmaceuticals & Biotechnology	1.31
National Grid PLC	Gas, Water and Multi Utility	0.00
Apple Inc.	Technology Hardware & Equipment	0.00
Imperial Tobacco Group PLC	Tobacco	0.00
Tesco PLC	Food & Drug Retailer	0.16
Exxon Mobil Corporation	Oil & Gas Producer	0.00
Anglo American PLC	Mining	0.01
British American Tobacco PLC	Tobacco	0.50
HSBC Holdings PLC	Financial Services	0.00
Royal Dutch Shell PLC (A and B Shares)	Oil & Gas Producer	0.55

The top 50 holdings across the whole of Witan's portfolios are in the Annual Financial Report. They represent 46.0% of Witan's portfolio (2010: 42.9%). This highlights the substantial diversification provided by our range of managers and global geographical exposure. The objective of using active managers is to outperform, which requires the portfolio to differ from the benchmark. Despite having a range of investment managers, Witan's aggregated portfolio retains an individual character distinct from the main holdings in the benchmark.

The table above shows the investments with the widest variation above and below the weighting of the stocks in Witan's benchmark. Although stock selection is not driven by the significance of the stock in the index, the table gives a snapshot of the top overweight and underweight holdings (on a look through basis across our managers).

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Outlook

Economic prospects for 2012 remain challenging, as developed economies attempt to reduce the debt burdens accumulated over recent economic cycles. The resulting headwind for economic growth is likely to continue to deliver weaker growth than the recent historical norm, generating periodic scares that the natural fluctuations of growth may be the start of a renewed recession. There is also a risk that fiscal retrenchment in Europe leads to renewed recession, with political reactions of hostility to free trade and business. Inter-governmental disagreements could also lead to a break-up of the Euro, with unpredictable short term ramifications. The likelihood of a renewed European banking crisis currently appears lower than it did in autumn 2011 but recent years have been a graveyard for optimists on policy coherence in Europe.

Outside Europe, growth prospects appear better than expected a few months ago. Economic activity has been better than expected in the US, while emerging economies, which have contributed a disproportionate share of global growth in the past 10 years, are emerging from a period of monetary restraint. In contrast to 2011, it is possible that growth prospects worldwide will improve during the year (from a weak and variable starting level). This depends partly on whether the corporate sector in developed economies becomes sufficiently confident in the outlook to increase capital investment and on whether emerging economies take steps to rebalance their growth towards greater reliance on domestic consumption rather than exports, helping to reduce the strains from global trade imbalances.

Given the sensitivity of economies to oil prices, tensions in the Middle East remain a key threat to growth. Iran's talk of a blockade of oil exports from the Arabian Gulf may represent sabre-rattling more than a risk of sustained oil supply disruptions but a prolonged period of tension could keep oil prices high enough to create a renewed faltering in the global recovery, much as the Arab Spring did in 2011.

Recent years have seen repeated swings from concerns about inflation to fears of deflation and from worries about recession to complacency about growth. 2012 seems likely to see a similar cycle, with the start of the year burdened by apprehension about global stagnation or recession. Given the global shift towards an easier monetary policy bias in recent months and the greater government focus on the risks to growth, equity markets may be positively surprised by events in 2012, with some government bond markets correspondingly vulnerable if forecasts of deflation or economic calamity prove incorrect.

In this environment, we remain fully invested with 10% gearing at the time of writing but the lesson from recent years is to be watchful both to guard against risks and to take advantage of opportunities.

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Witan's Multi-Manager Approach

As referred to elsewhere in this report, Witan manages its portfolio using a multi-manager approach. This was adopted in 2004, in the belief that no single investment manager was likely to excel in all asset classes over economic cycles or longer time periods. Therefore, seeking to employ managers to invest in their areas of greatest competence has the potential both to improve returns and to reduce risk relative to using a single manager across the investment waterfront.

The Board and the executive team are responsible for managing the portfolio's asset allocation, choosing a suitable range of managers to use their stock selection skills to implement the strategy, designing appropriate incentives and monitoring performance against targets.

Witan selects its managers from amongst those whose processes, principles and performance commend them as long term custodians of investors' wealth. We are seeking managers who can capture the longer term growth rewards from equity investment by focusing on fundamental value rather than chasing short term momentum. This fits with a fundamental dictum of equity investment, that whilst in the short term markets are a voting machine (affected by sentiment) in the long term they are a weighing machine (driven by substance).

Central to this approach is the idea of balance. Just as exposure to a single market or a small number of investments can lead to volatile performance, so can investing with a single manager or a group of managers with the same philosophy. Witan's approach aims to balance different factors (such as value and growth, geographical diversification, concentrated versus widely diversified portfolios and secular growth versus cyclical trends) with the intention of smoothing out stylistic fashions and profiting from the managers' ability to outperform over time.

Our Current Managers

The tables on pages 18 and 21 give a summary of the range of styles amongst our current investment managers, the proportion of Witan's portfolio they manage and their performance over the past year and since appointment. Further information is given in the Annual Financial Report regarding the managers' history, the total amount of investments they manage and their investment approach.

An Evolving Process

Witan's multi-manager approach has evolved in stages from its pre 2004 model as a Company with a single manager. After the significant changes introduced in 2010, 2011 was a year of consolidation in structural terms, occurring against a backdrop of disruptive global economic and political events and unstable markets. Our investment processes are focused on continuing to adapt to structural changes and themes in the global economy while being resilient against the shorter term influences of economic cycles and shifts in investor sentiment.

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Annual Financial Report for the year ended 31 December 2011

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Corporate Key Performance Indicators

	31 December 2011	31 December 2010	% change
Share price	450.0p	516.5p	-12.9
Net asset value per ordinary share (debt at par value)	516.9p	584.4p	-11.6
Net asset value per ordinary share (debt at fair value)	503.7p	578.1p	-12.9
Dividends per ordinary share	12.0p	10.9p	+10.1
Discount (debt at par value)	12.9%	11.6%
Discount (debt at fair value) (A)	10.7%	10.7%
Share buybacks (B)	1.5%	4.0%
Total expense ratio including performance fees (C)	0.87%	1.07%
Total expense ratio excluding performance fees (C)	0.71%	0.81%
Number of private investors (D)	33,421	36,595

(A) The average discount to the NAV, excluding income, with debt at fair value in 2011 was 10.6% (2010: 11.1%). (Source: Datastream)

(B) The percentage of the ordinary share capital in issue at the previous year end that was bought back during the year.

(C) The total of the management fees and other administrative expenses (excluding the expenses of the subsidiary company) as a percentage of the average of shareholders' funds at the beginning and end of the year. See further comment on page 3.

(D) The sum of the number of accounts on the Company's register of members and the number of accounts in Witan Wisdom and Jump Savings.

Performance

Total returns to 31 December 2011	1 year	3 years	5 years
	% return	% return	% return
Total shareholder return (E)	-10.7	+38.8	+12.0
Net asset value total return (F)	-10.9	+34.6	+9.9
Benchmark (G)	-7.0	+33.5	+9.8
FTSE All-Share Index (H)	-3.5	+43.8	+6.2
FTSE World (ex UK) Index (H)	-6.1	+30.2	+18.4

(E) Source: Datastream. The movement in the ordinary share price adjusted to include the notional reinvestment of dividends.

(F) Source: Datastream/Witan. The movement in the net asset value per share adjusted to include the notional reinvestment of dividends.

(G) Source: Witan. Since 1 October 2007 the benchmark has been a composite of four indices: the FTSE All-Share Index 40%, the FTSE All-World North America Index 20%, the FTSE All-World Europe (ex UK) Index 20% and the FTSE All-World Asia Pacific Index 20%. From 1 September 2004 to 30 September 2007 the benchmark consisted of the FTSE All-Share Index 50% and the FTSE World (ex UK) Index 50%.

(H) Source: Datastream.

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

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Other Financial Information

	31 December 2011	31 December 2010	% change
Net assets	£994,349,000	£1,141,765,000	-12.9
Number of ordinary shares in issue	192,367,000	195,375,220	-1.5
Revenue return per ordinary share	13.27p	9.45p	+40.4
Gearing*	10.5%	5.4%

* The difference between shareholders' funds and the total market value of the investments (including the face value of equity index futures positions) expressed as a percentage of shareholders' funds.

Page 27 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Directors' Report: Statement of Directors' Responsibilities

Responsibility statement under DTR 4.1.12

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

(a) the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, 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

(b) the management report, which is incorporated into the Directors' 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 of the principal risks and uncertainties that they face.

For and on behalf of the Board

H M Henderson

Chairman

14 March 2012

A L C Bell

Chief Executive Officer

14 March 2012

Page 28 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2011

	Year ended 31 December 2011			Year ended 31 December 2010
	Revenue return £'000	Capital return £'000	Total £'000	Revenue Return £'000	Capital Return £'000	Total £'000
Investment income (note 2)	34,247	-	34,247	28,021	-	28,021
Other income (note 3)	1,269	-	1,269	1,365	-	1,365
(Losses)/gains on investments held at fair value through profit or loss	-	(124,144)	(124,144)	-	169,686	169,686
	----------	----------	----------	----------	----------	----------
Total income	35,516	(124,144)	(88,628)	29,386	169,686	199,072

Expenses
Management fees (note 4)	(809)	(4,151)	(4,960)	(776)	(5,161)	(5,937)
Write-back of prior years' VAT	-	-	-	75	-	75
Other expenses	(5,190)	(440)	(5,630)	(6,195)	(387)	(6,582)
	----------	----------	----------	----------	----------	----------
Profit /(loss) before finance costs and taxation	29,517	(128,735)	(99,218)	22,490	164,138	186,628

Finance costs	(2,163)	(6,239)	(8,402)	(2,046)	(5,888)	(7,934)
	----------	----------	----------	----------	----------	----------
Profit/ (loss) before taxation	27,354	(134,974)	(107,620)	20,444	158,250	178,694

Taxation	(1,675)	-	(1,675)	(1,715)	-	(1,715)
	----------	----------	----------	----------	----------	----------
Profit/(loss) attributable to equity holders of the parent company	25,679	(134,974)	(109,295)	18,729	158,250	176,979
	----------	----------	----------	----------	----------	----------

Earnings/ (loss) per ordinary share (note 5)	13.27p	(69.75)p	(56.48)p	9.45p	79.87p	89.32p
	======	======	======	======	======	======

The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRSs as adopted by the European Union.

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 (loss)/profit, as disclosed above, is the same as the Group's Total Comprehensive Income.

All items in the above statement derive from continuing operations.

The net loss for the year of the Company was £109,295,000 (2010: profit £176,979,000).

All income is attributable to the equity holders of Witan Investment Trust plc, the parent company. There are no minority interests.

Page 29 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Consolidated and Individual Company Statements of Changes in Equity

for the year ended 31 December 2011

Group: Year Ended 31 December 2011
	Ordinary	Share	Capital	Other
	share	premium	redemption	capital	Revenue
	capital	account	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Total equity at 31 December 2010	48,844	16,237	44,982	980,884	50,818	1,141,765
Total comprehensive income:
(Loss)/profit for the year	-	-	-	(134,974)	25,679	(109,295)
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid	-	-	-	-	(23,141)	(23,141)
Buybacks of ordinary shares	(752)	-	752	(14,980)	-	(14,980)

Total equity at 31 December 2011	48,092	16,237	45,734	830,930	53,356	994,349

Company: Year Ended 31 December 2011
	Ordinary	Share	Capital	Other
	share	premium	redemption	capital	Revenue
	capital	account	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Total equity at 31 December 2010	48,844	16,237	44,982	981,047	50,655	1,141,765
Total comprehensive income:
(Loss)/profit for the year	-	-	-	(135,174)	25,879	(109,295)
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid	-	-	-	-	(23,141)	(23,141)
Buybacks of ordinary shares	(752)	-	752	(14,980)	-	(14,980)

Total equity at 31 December 2011	48,092	16,237	45,734	830,893	53,393	994,349

Group: Year Ended 31 December 2010
	Ordinary	Share	Capital	Other
	share	premium	redemption	capital	Revenue
	capital	account	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Total equity at 31 December 2009	50,866	16,237	42,960	859,595	53,161	1,022,819
Total comprehensive income:
Profit for the year	-	-	-	158,250	18,729	176,979
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid	-	-	-	-	(21,072)	(21,072)
Buybacks of ordinary shares	(2,022)	-	2,022	(36,961)	-	(36,961)

Total equity at 31 December 2010	48,844	16,237	44,982	980,884	50,818	1,141,765

Company: Year Ended 31 December 2010
	Ordinary	Share	Capital	Other
	share	premium	redemption	capital	Revenue
	capital	account	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Total equity at 31 December 2009	50,866	16,237	42,960	859,711	53,045	1,022,819
Total comprehensive income:
Profit for the year	-	-	-	158,297	18,682	176,979
Transactions with owners,
recorded directly to equity:
Ordinary dividends paid	-	-	-	-	(21,072)	(21,072)
Buybacks of ordinary shares	(2,022)	-	2,022	(36,961)	-	(36,961)

Total equity at 31 December 2010	48,844	16,237	44,982	981,047	50,655	1,141,765

Page 30 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Consolidated and Individual Company Balance Sheets

for the year ended 31 December 2011

	Group	Company	Group	Company
	31 December	31 December	31 December	31 December
	2011	2011	2010	2010
	£'000	£'000	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	1,083,393	1,084,256	1,203,675	1,204,738

Current assets
Other receivables	4,346	4,259	4,986	5,918
Cash and cash equivalents	37,150	36,254	52,510	50,357

	41,496	40,513	57,496	56,275


Total assets	1,124,889	1,124,769	1,261,171	1,261,013


Current liabilities
Other payables	(5,277)	(5,157)	(9,160)	(9,002)
Bank loan	(15,000)	(15,000)	-	-
	----------	----------	----------	----------
	(20,277)	(20,157)	(9,160)	(9,002)

Total assets less current liabilities	1,104,612	1,104,612	1,252,011	1,252,011

Non current liabilities
At amortised cost:
81⁄2 per cent. Debenture Stock 2016	(44,585)	(44,585)	(44,589)	(44,589)
6.125 per cent. Secured Bonds due 2025	(63,123)	(63,123)	(63,102)	(63,102)
3.4 per cent. cumulative preference shares of £1	(2,055)	(2,055)	(2,055)	(2,055)
2.7 per cent. cumulative preference shares of £1	(500)	(500)	(500)	(500)
	(110,263)	(110,263)	(110,246)	(110,246)


Net assets	994,349	994,349	1,141,765	1,141,765


Equity attributable to equity holders
Ordinary share capital	48,092	48,092	48,844	48,844
Share premium account	16,237	16,237	16,237	16,237
Capital redemption reserve	45,734	45,734	44,982	44,982
Retained earnings:
Other capital reserves	830,930	830,893	980,884	981,047
Revenue reserve	53,356	53,393	50,818	50,655

Total equity	994,349	994,349	1,141,765	1,141,765


Net asset value per ordinary share	516.9p	516.9p	584.4p	584.4p

Page 31 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Consolidated and Individual Company Cash Flow Statements

for the year ended 31 December 2011

	Group	Company	Group	Company
	2011	2011	2010	2010
	£'000	£'000	£'000	£'000
Operating activities
(Loss)/profit before taxation	(107,620)	(107,620)	178,694	178,694
Interest paid	8,278	8,278	7,909	7,909
Losses/(gains) on investments held at fair value
through profit or loss	124,144	124,344	(169,686)	(169,733)
Net (purchases)/sales of investments held at fair value through profit or loss	(2,654)	(2,654)	33,295	33,295
Net gain from futures contracts	201	201	8,984	8,984
Scrip dividends included in investment income	(810)	(810)	-	-
(Increase)/decrease in other receivables	(977)	42	397	(262)
(Decrease)/increase in other payables	(1,525)	(1,487)	(76)	31

Net cash inflow from operating activities before interest and taxation	19,037	20,294	59,517	58,918

Interest paid	(8,278)	(8,278)	(7,909)	(7,909)
Amortisation of debt issue costs	17	17	80	80
Tax on overseas income	(1,943)	(1,943)	(1,877)	(1,877)

Net cash inflow from operating activities	8,833	10,090	49,811	49,212

Financing activities
Equity dividends paid	(23,141)	(23,141)	(21,072)	(21,072)
Buybacks of ordinary shares	(15,364)	(15,364)	(36,561)	(36,561)
Drawdown of loans	15,000	15,000	-	-

Net cash outflow from financing activities	(23,505)	(23,505)	(57,633)	(57,633)


Decrease in cash and cash equivalents	(14,672)	(13,415)	(7,822)	(8,421)
Cash and cash equivalents at the start of the year	52,510	50,357	58,638	57,084
Effect of foreign exchange rate changes	(688)	(688)	1,694	1,694

Cash and cash equivalents at the end of the year	37,150	36,254	52,510	50,357

Page 32 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Notes to the Financial Statements

for the year ended 31 December 2011

1. Accounting policies

The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation. These comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ('IASC') that remain in effect, to the extent that they have been adopted by the European Union.

These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.

(a) Basis of preparation

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts ('the SORP') issued by the Association of Investment Companies ('the AIC') in January 2009 is consistent with the requirements of IFRSs as adopted by the European Union, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

(b) Going concern

The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Business Review section of the Directors' Report on pages 6 to 24. The financial position of the Group as at 31 December 2011 is shown in the balance sheet on page 30. The cash flows of the Group for the year ended 31 December 2011, which are not untypical, are set out on page 31. The Company had fixed debt and preference share capital totalling £110,263,000; none of the borrowings is repayable before 2016. In 2011, the Group renewed a one year secured multi-currency borrowing facility for £50 million, of which £15 million was drawn down at 31 December 2011 (2010: £nil). The notes in the Annual Financial Report set out the Group's risk management policies and procedures, including those covering currency risk, interest rate risk and liquidity risk. As at 31 December 2011 the Group's total assets less current liabilities exceeded its total non current liabilities by a multiple of over ten. The assets of the Group consist mainly of securities that are held in accordance with the Company's investment policy, as set out on page 14. Most of these securities are readily realisable even in volatile markets. The directors, who have reviewed carefully the Group's budget and forecast for the coming year, consider that the Group has adequate financial resources to enable it to continue in operational existence for the foreseeable future. Accordingly, the directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Group's accounts.

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. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. Where necessary, adjustments are made to the financial statements of the subsidiary to bring the accounting policies used by it into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

(d) Presentation of the Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company's status as a UK investment company under section 833 of the Companies Act 2006, 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 (formerly section 842 of the Income and Corporation Taxes Act 1988).

Page 33 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Notes to the Financial Statements continued

2. Investment income


	2011	2010
	£'000	£'000
Franked:
UK dividends from listed investments	13,499	11,515
UK special dividends from listed investments	608	19
UK dividends from unquoted investments	56	53

	14,163	11,587

Unfranked:
Overseas dividends from listed investments	17,941	16,253
Overseas special dividends from listed investments	337	-
Property income dividends	7	53
Scrip dividends from listed investments	810	-
Overseas fixed interest and convertible bonds	989	128

	20,084	16,434

Total investment income	34,247	28,021

Analysis of investment income by geographical segment:
United Kingdom	15,320	11,708
North America	3,347	2,818
Continental Europe	10,071	8,026
Japan	803	2,091
Asia Pacific (ex Japan)	3,214	2,573
South America	575	117
Other	917	688

Total investment income	34,247	28,021

3. Other income


	2011	2010
	£'000	£'000
Deposit interest	58	124
Stock lending income	320	217
Underwriting commission	-	135
Income from the subsidiary company's third party business	875	840
Other income	16	49
	1,269	1,365

Page 34 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Notes to the Financial Statements continued

4. Management fees


	Year ended 31 December 2011			Year ended 31 December 2010
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000

Management fees	809	2,426	3,235	776	2,328	3,104
Performance fees	-	1,725	1,725	-	2,833	2,833

	809	4,151	4,960	776	5,161	5,937

5. Earnings/(loss) per ordinary share

The (loss)/earnings per ordinary share figure is based on the net loss for the year of £109,295,000 (2010: profit of £176,979,000) and on 193,509,347 ordinary shares (2010: 198,139,038), being the weighted average number of ordinary shares in issue during the year.

The (loss)/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.

	2011	2010
	£'000	£'000

Net revenue profit	25,679	18,729
Net capital (loss)/profit	(134,974)	158,250

Net total (loss)/profit	(109,295)	176,979

Weighted average number of ordinary shares in issue during the year	193,509,347	198,139,038
	2011	2010
	Pence	Pence
Revenue earnings per ordinary share	13.27	9.45
Capital (loss)/earnings per ordinary share	(69.75)	79.87

Total (loss)/earnings per ordinary share	(56.48)	89.32

6. Issued Share Capital

The number of ordinary shares of 25p each in issue at 31 December 2011 was 192,367,000 (2010: 195,375,220).

Page 35 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Notes to the Financial Statements continued

7. Dividends

	2011 £'000	2010 £'000
Amounts recognised as distributions to equity holders in the year:
Second interim dividend for the year ended 31 December 2010 of 6.50p (2009:6.20) per ordinary share	12,654	12,407
First interim dividend for the year ended 31 December 2011 of 5.45p (2010: 4.40p) per ordinary share	10,487	8,665
	----------	----------
	23,141	21,072
	======	======
Second interim dividend for the year ended 31 December 2011 of 6.55p (2010: 6.50p) per ordinary share	12,589	12,654
	======	======

The second interim dividend has not been included as a liability in these financial statements, as it was declared after the year end.

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 requirements of section 1158 of the Corporation Tax Act 2010 are considered.

	2011 £'000	2010 £'000
Revenue profits available for distribution	25,679	18,729
First interim dividend for the year ended 2011 of 5.45p (2010:4.40p) per ordinary share	(10,487)	(8,665)
Second interim dividend for the year ended 31 December 2011 of 6.55p (2010: 6.50p) per ordinary share	(12,589)	(12,654)
	----------	----------
Revenue retained/(utilised) for the year	2,603	(2,590)
	======	======

Page 36 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

Notes to the Financial Statements continued

8. 2011 Accounts

The figures and financial information for 2011 are extracted from the Annual Report and Financial Statements for the year ended 31 December 2011 and do not constitute the statutory accounts for the year. The Annual Report and Financial Statements includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Financial Statements has not yet been delivered to the Registrar of Companies.

9. 2010 Accounts

The figures and financial information for 2010 are extracted from the published Annual Report and Financial Statements for the year ended 31 December 2010 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

10. Annual Report and Financial Statements

Copies of the Annual Report and Financial Statements will be posted to shareholders by the end of March 2012 and will be available on the Company's website (www.witan.com) or in hard copy format from the Registered Office, 14 Queen Anne's Gate, London, SW1H 9AA.

The Annual General Meeting will be held at 2.30 pm on Tuesday, 1 May 2012 at Merchant Taylors' Hall, 30 Threadneedle Street, London EC2R 8JB.

Page 37 of 37

WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2011

For further information please contact:

Andrew Bell

Chief Executive Officer

Witan Investment Trust plc

Telephone: 020 7227 9770

James Frost

Marketing Director

Witan Investment Trust plc

Telephone: 020 7227 9770

Jain Castiau, Director

Cauldron Consulting

Tel: 020 3718 7236/07909 963969

- ENDS -

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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