WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2014

This announcement contains regulated information

Chairman and Chief Executive’s Report

Highlights

NAV total return of 6.6% outperformed the benchmark’s return of 5.5%

NAV total return over the last five years of 70.2%, 15.7% ahead of the benchmark

Dividend increased by 6.9% to 15.4p, 6.4% ahead of the rate of inflation

The 40th consecutive year of increased dividends

Share price rerated from a 6.1% discount to a 1.3% premium

Summary

In the year to 31 December 2014 Witan delivered a net asset value (NAV) total return of 6.6%, 1.1% more than our benchmark’s total return of 5.5% and 5.4% more than the 1.2% return on the FTSE All-Share Index of UK shares. The share price total return was 15.1%, enhanced by the move during the year from a 6.1% discount at the end of 2013 to a 1.3% premium at the year-end. The total dividend for the year is 15.4 pence per share (2013: 14.4 pence), an increase of 6.9%, including the fourth interim dividend of 4.6 pence declared in February 2015 and payable on 2 April 2015. This marks the 40th consecutive year of rising dividends at Witan, with the current dividend per share more than 40 times that paid in 1974.

Over the past 5 years Witan has achieved an NAV total return of +70.2%, compared with the +54.5% return from our benchmark over this period. 2014 also marked the 10th anniversary of Witan’s adoption of a multi-manager investment approach. Over the 10 years to the end of 2014, shareholders have enjoyed an NAV total return of 143.8%, compared with the benchmark’s return of 117.0%.

In a year when market sentiment was less positive than in 2013, with no consistent market direction, investment selection was particularly important. Overall our managers outperformed, with additional contributions from the investment in Japanese equity market futures and the use of gearing.

The investment markets in 2014

Equity markets delivered returns in 2014 that were generally modest in sterling terms. The US was the standout exception among major centres, with a market rise of over 10% boosted further by the dollar’s strength to deliver 20% returns in sterling terms. Japan, by contrast, saw an 8% rise in its market index almost totally eroded by yen weakness. The UK and Europe delivered small positive total returns in sterling terms.

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One common factor was the degree of anticipation already factored into share prices following the strong market rises in 2013. Economic growth fell short of forecasts for much of 2014, either temporarily (for example the harsh US winter weather in the first quarter), or more persistently, where economies were held back by higher taxes (in Japan) and, in Europe, by earlier currency strength and relatively tight monetary and fiscal policies. Stock markets found it hard to make progress as a result, other than the US, where economic activity accelerated as the year progressed.

2014 was also punctuated by a number of political and economic events. Early in the year, Russia’s annexation of the Crimea and involvement in a civil conflict in Eastern Ukraine led to the imposition of economic sanctions restricting trade and financial flows. These had a greater commercial impact in Europe than elsewhere, in addition to the apprehension caused by Russia’s proximity. In the Middle East, political consensus continued to elude a number of countries of strategic regional importance (such as Egypt and Syria) as well as oil producing countries.

Until the summer, this served to push up oil prices, especially after extreme political elements made startling territorial gains in Iraq, threatening disruption to oil production. This marked a turning point for oil prices, since once the insurgents were pushed back markets focused upon the oversupply in the oil market. This had resulted from significant production growth, especially by US shale oil companies, allied to weaker growth in the demand for oil as a result of slower than expected global growth. Oil prices halved in the second half of the year, presenting a significant headwind for the UK stock market, given its heavy oil sector weighting. Concern about the financial system’s loan exposure to oil producers vied for investors’ attention with the alternative conclusion that a fall in oil prices represented a significant benefit to consumers of oil and should boost growth in 2015.

A final ingredient to a slightly unsettling year was the slowdown in the Chinese economy. Whilst this appeared to be a controlled process, with the authorities gradually easing policy in response to weaker growth, the fear of a more disorderly collapse remained, due to the poorly-controlled boom in lending during recent years. This did not prevent the previously-depressed Chinese domestic stock market from rising over 50% during the year, but the impact of China’s slower growth on commodity prices and the effect of the mood of official austerity on demand for global consumer products cast shadows over markets elsewhere.

Witan’s strategy during the year was to remain fully invested into what we believed to be improving economic conditions, taking advantage of periods of weakness earlier in the year to increase our gearing, which rose from 7% to 10%.

The discount, share buybacks and treasury shares

The Company’s discount (relative to the NAV excluding income, with debt at market value) was 6.1% at the end of 2013 and, on the same basis, our shares traded at a premium of 1.3% at the end of 2014. The average discount for the year was 2.2% (2013: 8.3%).

As a result of this rerating, the Company was able to reissue shares held in treasury and to issue new shares at a premium to NAV to meet investor demand, making this the first year since 1996 that the Company has had more shares in issue at the end of the year than at the start.

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Regulatory changes

In accordance with the Alternative Investment Fund Managers Directive (‘AIFMD’), the Company has appointed Witan Investment Services Limited as its Alternative Investment Fund Manager (‘AIFM’) and has appointed BNP Paribas Securities Services London Branch as its depositary. There are a number of consequent changes in the presentation of the Annual Report which are set out in the more detailed sections of the Strategic Report and the Directors’ Report which follow.

AGM

Our Annual General Meeting will be held at Merchant Taylors’ Hall on Thursday 30 April 2015 at 2.30 pm. Formal notice of the meeting will be sent to shareholders when the Annual Report is published. We look forward to the opportunity to meet you then for the Company’s 107th AGM.

Outlook

In retrospect, 2014 appears to have been a transition year, between the eager anticipation of improving conditions factored into markets in 2013 and the achievement of those improvements which has occurred somewhat more slowly than hoped.

Economic growth was generally stronger last year than in 2013 but failed to buoy already elevated spirits. Europe remained dogged by economic differences between the more competitive and the weaker countries (notably Greece) and by the lack of consensus over how to manage the stresses. The crisis with Russia has undermined confidence at a vulnerable point in this process. Japan’s economy has yet to recover momentum following the tax rise a year ago, while investors are focused on whether the re-elected Prime Minister Abe will implement reform measures to boost his country’s growth potential. The UK grew more strongly than most in 2014 but faces political uncertainty in the form of the forthcoming general election as well as equity market pressures from the significant exposure to mining and oil companies. On a more positive note, the decline in sterling will help companies with exports and overseas earnings.

One of the greatest surprises in 2014 was that, in an environment of improving economic growth and speculation of interest rate rises in the US and the UK (albeit so far unfulfilled), government bond yields declined from what were already low levels. This can perhaps be rationalised by a reassessment of how long the current period of low interest rates needs to be to sustain convalescent economies around the world and by the low level of inflation, affected by the recent plunging oil price. Nonetheless, the market has been troubled periodically by concerns that low bond yields might be a warning of coming recession, although the distortions caused by quantitative easing policies appear a likelier explanation. The fact that central banks in Japan and Europe are set to be buyers of government bonds even as the US Federal Reserve withdraws from the market means that supply-demand factors are set to remain positive for another year. This does not mean bonds represent good value from an investment point of view but if yields remain suppressed it would provide a continuing boon for companies and governments seeking to borrow at current low rates.

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Outlook continued

2015 begins with a similar question to that a year ago — will the world economy grow sufficiently to meet expectations for corporate profits growth and to enable debt-laden Western economies to get on top of their problems? Geopolitical events have complicated the normal economic judgments during 2014 and risks remain but the fall in the oil price has the capacity, if sustained, to generate a growth surprise in economies that have so far failed to recover as rapidly as normal from the 2009 recession.

Harry Henderson Andrew Bell

Chairman Chief Executive

10 March 2015

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WITAN INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 December 2014

Strategic Report

Companies are required to publish a Strategic Report, which should provide a description of the objectives which its strategy is designed to deliver for shareholders, the business model and the outlook for the year ahead. It should also include analysis of the Company’s performance during the year, relative to the key elements of its business strategy. This report falls into four main sections:

1. Strategy

2. Business model

3. Performance and principal developments in 2014

4. Corporate and operational structure

Witan is an Investment Trust, which was founded in 1909 and has been listed on the London Stock Exchange since 1924. It is managed by the Executive team of its Alternative Investment Fund Manager, Witan Investment Services Limited (WIS), under the control and supervision of the Company’s Board of Directors.

1. Strategy

The Company’s strategy is to create value for shareholders, by addressing the investment objective, by adding value in pursuing that objective and by communicating effectively with existing and potential shareholders.

The Company invests its shareholders’ funds primarily in a broad geographical spread of global equity markets. The objective is to profit from opportunities created by global economic growth and to outperform a representative equity benchmark, thereby generating long-term capital growth for shareholders, together with an income that rises faster than the rate of inflation.

The Company employs an active multi-manager approach, allocating funds for investment by selected managers with differing styles and specialisations. The aim is to access the best available managers, including those not accessible on the same terms (or at all) to UK investors.

Witan’s multi-manager approach was adopted in 2004, in the belief that no single manager was likely to excel in all markets and at all points in the economic cycle. Employing managers to invest in their areas of greatest competence has the potential to improve returns and to reduce risk relative to using a single manager across the investment waterfront.

Our approach is to balance different factors (such as quality, value or growth approaches and geographical exposure), aiming to profit from asset allocation and from managers’ combined ability to outperform over time. We seek managers who can capture the longer term growth rewards from equity investment by focusing on fundamental share values rather than chasing short-term momentum.

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2. Business Model

The Company has appointed Witan Investment Services Limited (WIS) as its Alternative Investment Fund Manager (‘AIFM’) under the Alternative Investment Fund Managers Directive (‘AIFMD’). As AIFM, WIS has responsibility for operating the Company’s portfolio and risk management processes. WIS does, however, delegate certain portfolio management responsibilities to external portfolio managers. In addition to WIS delegating investment management to external portfolio managers, the Company uses an outsourced model for other corporate functions, such as fund accounting, custody and specialist professional services. These activities are overseen by the WIS and Witan Executive team, covering Investment, Operations and Marketing, headed by the Chief Executive Officer, who is a Director of the Company.

Whilst the external managers appointed are responsible for stock selection in their individual portfolios, WIS and the Company’s Board are responsible for the overall delivery of performance to shareholders, through the following means:

- Setting the overall investment objective;

- Selecting competent managers, who are expected to outperform a suitable benchmark relating to the investment remit set by the Company;

- Operating appropriate portfolio and risk management arrangements to meet the requirements of the AIFMD and to maintain an effective overall system of risk management and corporate governance;

- Adjusting asset allocation according to opportunities that arise;

- The judicious use of borrowings with the aim of adding to performance;

- Direct investment in funds exposed to specialist asset categories;

- Controlled and selective use of exchange-traded derivatives to adjust asset allocation; and

- Clear communication of Witan’s objective and its results to shareholders and potential investors.

The Board’s and the Executive’s role in investment management

As noted above, the Company has appointed its wholly-owned subsidiary WIS as its AIFM under the AIFMD. As such, WIS has responsibility for ensuring that portfolio and risk management of the Company are properly carried out, with appropriate safeguards to ensure the functional and hierarchical independence of those with portfolio and risk management responsibilities. The Board remains responsible for setting the investment strategy, policy and guidelines of the Company and the AIFM operates within these.

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The selection of individual investments is largely delegated to external managers, subject to investment limits and guidelines which reflect the particular mandate (e.g. UK or global equities) and the specific investment approach which the Company and its AIFM have selected (e.g. value, higher dividend yield, special situations). The managers are chosen by the Witan and WIS Boards after a disciplined selection process focused on the managers’ scope to add value and their fit with the overall balance of the portfolio.

The overwhelming majority of the portfolio is managed in segregated accounts, held by the Company’s depositary (via the custodian to whom it delegates safekeeping responsibilities) which enables the Company to view the portfolio as a whole and analyse its risks and opportunities as well as those at the level of each manager’s portfolio. The operations of the custodian and the safeguarding of the Company’s assets are further supervised by the depositary, appointed by Witan and its AIFM, in accordance with the requirements set out in the AIFMD.

At the end of 2014, the Company and its AIFM had 11 external investment managers, covering a range of investment remits. Information regarding the proportion of Witan’s assets managed by each and of their performance during the year is set out on page 11.

A proportion, up to 10%, of the portfolio (at the time of investment) may be invested in collective funds selected by WIS, with the objective of outperforming Witan’s equity benchmark. This portfolio is managed subject to limits set by the Board, and in accordance with portfolio and risk management processes established by Witan and the Company’s AIFM. These investments may represent asset categories that are temporarily undervalued or funds which are viewed as attractive longer-term generators of superior returns.

The WIS Executive, overseen by and working within clear parameters set by the Board, also seeks to add to performance by adjusting the level of gearing employed, by the selective use of exchange-traded derivatives to alter the asset allocation and by the use of specialist funds to gain exposure to areas underrepresented in the rest of the portfolio. In essence, the Company seeks to have sufficient levers to pull to take advantage of investment opportunities that may arise, in addition to the total returns arising from the investment managers’ portfolios, which are expected to be the most significant driver of the Company’s performance.

Our selected benchmark

The Company’s benchmark is a combination of global equity markets, which reflect the investment universe from which most of the portfolio holding are chosen. Since October 2007 the benchmark (based on the FTSE All-World indices) has been:

40% UK

20% North America

20% Europe ex-UK

20% Asia Pacific.

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This reflects an investment policy that balances investment in the UK market (both for its domestic and international exposure) with access to growth in other regions of the world.

It should be emphasised that the portfolio is actively managed and not designed to track any index or combination of market indices. Performance can be expected to vary, sometimes considerably, from that of the benchmark, while aiming for outperformance in the longer term.

Performance information for other commonly used indices is also given in the key performance indicators summary section on page 25.

3. Performance and Principal Developments in 2014

Success in implementing the Company’s strategy is monitored against a range of Key Performance Indicators (KPIs) which are viewed as significant measures of success over the longer term. Although performance relative to the KPIs is also monitored over shorter periods, it is success over the long-term that is viewed as more important, given the inherent volatility of short-term investment returns. The principal financial KPIs are set out below, with a report (in italics) of Witan’s performance against them during 2014. With respect to non-financial measures, details of the Company’s policies and performance in relation to its obligations under the UK Corporate Governance Code are set out in the Corporate Governance Statement in the Annual Report.

Key Performance Indicators

A. Investment performance

. Outperformance compared with Witan’s equity benchmark. The Company seeks to achieve at least 2% p.a. outperformance in NAV total return and shareholder total return terms over the long-term. In 2014, Witan achieved 1.1% NAV total return outperformance relative to its combined global equity benchmark (see page 25) and a shareholder total return 9.6% above that of the benchmark. NAV performance, although beating the benchmark, was below the 2% outperformance sought. This followed a particularly strong result in 2013.

. A positive long-term total return, after inflation, for shareholders. In 2014, Witan shareholders enjoyed a NAV total return of 6.6% and, owing to the narrowing of the discount, a shareholder total return of 15.1%. Inflation was 0.5% in the year to December 2014. Returns over the longer term are set out on page 25 and indicate that this objective has also been met over the past 3 and 5 year periods.

. Long-term investment outperformance by the individual managers relative to the relevant benchmark. In 2014, seven of the eleven third party delegated managers outperformed their benchmarks. The managers’ returns since appointment are set out in the table on page 11. Further details are set out on pages 10 to 11.

B. Annual growth in the dividend per share ahead of the rate of inflation In 2014, the dividend increased by 6.9%, compared with an inflation rate of 0.5% in the year to December 2014. Further details are set out on page 12.

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C. A positive contribution to investment returns from the use of borrowings. The Company employed average gearing of 9% during the year, which contributed 0.7% to returns. After taking account of the (mostly structural) costs of borrowing the contribution was 0.1%. Further details are set out on page 13.

D. A discount to NAV of 10% or less (compared with the NAV excluding income, with debt at market value) The discount on this basis averaged 2.2% during 2014, the shares ending the year on a 1.3% premium, compared with at 6.1% discount at the end of 2013. Further details are set out on page 15.

E. A competitive level of ongoing charges, below the costs of other multi-manager funds, balancing the need to pay for high quality investment management with the aim of keeping the costs of managing the business as low as possible. In 2014, the ongoing charges figure (‘OCF’) was 0.74% excluding performance fees (2013: 0.69%) and 0.96% including performance fees (2013: 1.12%). This compares with the average OCF of 1.45% in the IA Global equity funds sector and 0.79% (0.81% including performance fees) for the AIC Global sector. Further details are set out on page 17.

Performance summary and attribution

Whereas 2013 had been a vintage year for equity investors, 2014 was one when the investment climate was more volatile, requiring careful attention in order to achieve a positive outcome. The US was the most significant riser amongst the main equity markets (total return in sterling 20%), while sterling total returns in most other regions were between zero and 5%. The gross portfolio return (before costs) was 8.0%. This performance was made up of contributions from the combined managers’ portfolios (with seven out of our 11 third party delegated managers outperforming their benchmarks), from asset allocation and from the gain on the investment in Japanese equity index futures. The contribution from gearing (0.7%) was sufficient to offset the drag from the Company’s mostly fixed borrowing costs.

Witan’s NAV total return (after all costs) was 6.6%, which compares with 5.5% from the composite equity benchmark the Company uses for comparison purposes and just 1.2% from the FTSE All-Share Index which is widely followed by UK investors. Excluding the effect of the rise in the market value of Witan’s quoted debt securities, the NAV total return was 7.0%, 1.5% ahead of the benchmark. The shareholder total return was 15.1%, boosted by the rerating from a 6.1% discount at the end of 2013 to a 1.3% premium at the end of 2014.

Combined portfolio composition

During the year the Company invested its assets with a view to spreading investment risk and in accordance with the investment policy. It has maintained a diversified portfolio in terms of stocks, sectors and geography. The portfolio has been actively managed by the investment managers, in accordance with their individual mandates, with overall asset allocation and risk being managed by the Executive team, within delegated limits from the Board and the Company’s AIFM.

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The sector breakdown and regional exposure for the aggregated portfolio is shown in the Annual Report. The top 50 holdings across the combined Witan portfolio are set out in the Annual Report. They represented 41.2% of Witan’s portfolio at 31 December 2014 (2013: 41.7%). These analyses highlight the substantial diversification provided by our range of managers and the broad geographical exposure. However, it is also important that diversification does not unduly dilute returns, since the purpose of using active managers is to outperform, which requires the portfolio to differ from the benchmark. One measure of active management in a portfolio is known as active share. This indicates the degree to which a portfolio differs from its benchmark, with a portfolio identical to the benchmark having an active share of 0% while one with no holdings in common with its benchmark would have an active share of 100%. Although looking at active share at a particular point is an incomplete measure of the degree to which a portfolio is managed actively (let alone successfully), as a guide Witan’s active share was circa 65% at the end of 2014. This is similar to the levels prevailing since 2011 but compares with a lower level (around 50%) at the end of 2009. The relative performance seen in recent years also demonstrates that Witan’s aggregated portfolio retains an individual character distinct from the relevant indices.

A breakdown of the performance attribution in 2014 (based on the Company’s financial statements) is shown in the table below.