Announcement

FLLYR: BIT: BIT - Annual Financial Report 08:30am 
BIT
19/01/2021 08:30
FLLYR
PRICE SENSITIVE
REL: 0830 HRS The Bankers Investment Trust Plc

FLLYR: BIT: BIT - Annual Financial Report

PLEASE REFER TO THE PDF TO VIEW THE FULL ANNOUNCEMENT

LEGAL ENTITY IDENTIFIER: 213800B9YWXL3X1VMZ69

THE BANKERS INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 October 2020

This announcement contains regulated information

Performance Highlights 31 October 2020 31 October 2019
Net Asset Value per ordinary share
- With debt at par 976.3p 948.7p
- With debt at market value 973.9p 945.7p
Share price at year end(2) 980.0p 927.5p
Dividend per share for year(3) 21.54p 20.90p

31 October 2020
31 October 2019
Dividend growth 3.1% 6.0%
Ongoing charge for year 0.50% 0.52%
Premium/(discount) at year end(4) 0.4% (2.2%)
Net (cash)/gearing at year end(5)(1.1%) (3.0%)

Long term growth record to 31 October 2020
1 year %
3 years %
5 years %
10 years %

Capital return(6)
Net asset value 3.0 11.3 55.8 118.5
Share price 5.7 15.0 58.5 158.0
FTSE World Index(7) 2.1 13.6 34.2 59.2
Total return(8)
Net asset value 5.3 18.9 74.7 179.2
Share price 8.1 23.0 78.1 233.3
FTSE World Index(7) 4.3 22.1 55.3 119.2

Dividend 3.1 15.8 36.3 78.0
Retail Price Index 1.3 6.9 13.4 30.3
Consumer Price Index 0.7 4.6 8.7 21.2

(1) A glossary of terms and alternative performance measures can be found in
the Annual Report
(2) Share price is the mid-market closing price
(3) This represents the four ordinary dividends recommended or paid for the
year (see the Annual Report for more details)
(4) Based on the mid-market closing price with debt at par
(5) Net (cash)/gearing is calculated in accordance with the gearing
definition in the alternative performance measures in the Annual Report
(6) Capital return excludes all dividends
(7) For the 3, 5 and 10 years this is a composite of the FTSE World Index and
the FTSE All-Share Index
(8) Total return assumes dividends reinvested

Sources: Morningstar for the AIC, Janus Henderson, Refinitv Datastream.

CHAIR'S STATEMENT

o Net asset value total return increase of 5.3% (2019: 12.1%).
o Share price total return increase of 8.1% (2019: 13.6%).
o Average premium to net asset value of 0.3% (2019: average discount of
1.5%).
o Dividend increase of 3.1% to 21.54p per share (2019: 6.0%).
o Forecast increase in current financial year dividend of approximately 0.5%.

Performance
Our last financial year was like no other. After a promising start, our net
asset value ('NAV') and share price rose to (then) all-time highs in
February. Less than four weeks later the Covid-19 pandemic caused one of the
quickest global economic and financial market collapses of all time, as
countries around the world went into lockdown and many feared the scale of
the human and economic cost of the pandemic. Governments and central banks
responded swiftly with the greatest monetary and fiscal stimulus since World
War 2, whilst many companies sought to hoard cash via slashing dividends and
buybacks and cutting costs and to shore up their balance sheets through
equity and debt issues. Global stock markets bounced back in the following
months, driven principally by technology and other stocks benefitting from
changes of business and consumer behaviour brought about by lockdowns,
including the move to working from home and the hastening shift to online
retailing. By late summer, our NAV and share price had recovered the ground
lost earlier in the year. Then, in the last week of our financial year,
global stock markets suffered their biggest weekly decline since March after
shares fell again in response to concerns about the economic impact of new
lockdowns around the world.

Against this difficult market backdrop, I am pleased to report, for the year
ended 31 October 2020, the Company achieved positive returns for
shareholders. The Company's net asset value per share increased by 3.0%
(2019: 9.6%) in capital terms over the year. With dividends reinvested, the
NAV total return per share was 5.3% (2019: 12.1%), outperforming the FTSE
World Index total return of 4.3% (2019: 11.7%). Our share price total return
was higher, at 8.1% (2019: 13.6%), due to the narrowing of the discount to
NAV at which our shares traded. At 31 October 2020, our shares traded at a
premium of 0.4% (2019: discount of 2.2%), having averaged a premium of 0.3%
(2019: average discount of 1.5%) over the year.

Four of our regional portfolios delivered positive returns and all
outperformed their respective local benchmarks over the financial year apart
from the Pacific (ex Japan and China) portfolio, the performance of which was
severely hampered by its value and income investment style. This style has
served us well in the past and we are confident it will continue to do so in
the future. Details of the performance of the Company, our regional
portfolios and global markets during the year are included in the Fund
Manager's and Regional Portfolio Manager Reports in the Annual Report.

Revenue and dividends
As anticipated in my interim statement, our revenue account was particularly
hard hit by the effects of Covid-19 as many companies sought to retain cash
to deal with the effects of the pandemic. Our earnings per share fell by 22%
to 16.83p (2019: 21.61p). However, our structure as an investment trust has
enabled us to build up a significant revenue reserve over many years from
which we can draw to pay dividends on rainy days.

The Board, therefore, recommends a final quarterly dividend of 5.42p per
share, to be paid on 26 February 2021 to shareholders on the register of
members at the close of business on 29 January 2021. If approved by
shareholders at the forthcoming AGM, this will result in total dividends per
share for the year of 21.54p (2019: 20.90p), an increase of 3.1%, which is in
line with our forecast for the year and compares very favourably with the
1.3% rise in the Retail Price Index (and 0.7% rise in the Consumer Price
Index). This will be the Company's 54th successive year of annual dividend
growth, maintaining the Company's status as one of the leading AIC "dividend
heroes".

After taking into account the recommended final 2020 dividend payment, if
approved, approximately ?6.4 million, equivalent to 4.91p per share, will be
transferred from our revenue reserve. Adjusted for that transfer, our
revenue reserve at the year end amounts to approximately ?24.3 million, or
18.71p per share.

We recognise the importance of delivering a reliable and growing income for
many of our shareholders. The outlook for the level of dividend payments
received by the Company is improving and we expect many companies to rebuild
pay-outs from their reduced levels. However, it will take more than one year
for our earnings per share to recover fully and exceed the dividend. Until
that time, we intend to grow the dividend at a modest rate, in part using our
revenue reserves. This approach will enable us to continue holding shares in
companies that have temporarily suspended or reduced their dividends where
the shares still offer good growth potential.

The revenue reserve gives the Board confidence to forecast dividend growth of
approximately 0.5% for the current financial year.

Borrowings
The Company's ?20 million short-term borrowing facility with SMBC Bank
International plc (formerly called Sumitomo Mitsui Banking Corporation Europe
Ltd) expires in February and we are in the process of renewing it for a
further year. The Company continually reviews opportunities to deploy
gearing and the short-term facility gives our Manager additional flexibility
to invest and create returns for shareholders. The facility remained undrawn
throughout the year, and currently remains undrawn. However, we anticipate
utilising this facility in the current year.

Share issues and buy-backs
During the year, the Company sold 1,338,509 shares out of treasury and issued
5,212,491 new shares to meet market demand, raising gross proceeds of ?57.0
million. Since the year end, a further 975,000 new shares have been issued,
raising gross proceeds of ?10.7 million. No shares were bought back during
the year or since the year end.

Board appointment
As mentioned in the Interim Report, Richard West joined the Board on 1 April
2020 and brings additional investment knowledge to the Board. Richard has
already proved to be an excellent addition to the Board.

Investment objective
Our dividend objective is to achieve dividend growth greater than UK
inflation over the long term. Historically, we have measured inflation using
the Retail Price Index ('RPI'). The Consumer Price Index ('CPI') is a
measure of consumer price inflation produced to international standards and
has been increasingly adopted by the Government and economists when
calculating the UK's inflation rate. RPI, which predates CPI, is believed at
times to overestimate inflation and at other times to underestimate it and is
now widely discredited. Having reviewed both measures, the Board concluded
that, with effect from the current financial year, CPI is a more appropriate
measure of UK inflation for the purpose of our dividend objective and we have
amended our investment objective accordingly (see Annual Report). This
amendment should have no impact on our dividend policy or how the Company's
portfolio is managed.

Responsible investment
The Board believes that effective stewardship and integration of
environmental, social and governance ('ESG') factors into the Company's
investment process are important elements in delivering our investment
objective. In recognition of the growing interest of investors, both
institutional and retail, in such matters, we have included a new section in
this year's Annual Report which details our approach to ESG (see Annual
Report).

Annual General Meeting ('AGM')
At the time of writing, due to the ongoing restrictions on gatherings due to
the Covid-19 pandemic, it will not be possible for shareholders to attend the
AGM on 24 February 2021 in person. Voting on the resolutions to be proposed
will be conducted on a poll, and shareholders are encouraged to submit their
Forms of Proxy. If you have any questions on the Annual Report or the
Company's performance over the year, please email
ITSecretariat@janushenderson.com in advance of the meeting. All questions
received will be considered and responses will be available on the Company's
website. A presentation from Alex Crooke, our Fund Manager, will be available
to watch on the Company's website (www.bankersinvestmenttrust.com) from 17
February 2021.

We very much hope that we will be able to hold next year's AGM in person.

Non-routine business at the AGM
In addition to the routine business to be conducted at this year's AGM,
resolutions will be put to shareholders to approve sub-dividing each existing
ordinary share of 25p into 10 ordinary shares of 2.5p each and the adoption
of new Articles of Association. The principal differences between the
existing and proposed Articles are that the proposed Articles will: permit
general meetings to be held wholly or partly by electronic means; reduce the
quorum requirement for general meetings from three to two or more persons
present in person or by proxy; and change the votes conferred on a poll from
one vote for every ?1 nominal of ordinary shares held to one vote for every
ordinary share held. The rationale for, and details of, the proposed share
split and new Articles, which your Directors believe are in the best
interests of shareholders as a whole, can be found in the circular convening
this year's AGM. A copy of the AGM circular accompanies the Annual Report
and can also be found on the Company's website
(www.bankersinvestmenttrust.com).

Outlook
Since our year end, Joe Biden's success in the US presidential election,
positive news flow regarding Covid-19 vaccines and approvals of a new US
stimulus deal and a UK - EU trade deal have all acted as catalysts for
another global stock market rally. Our NAV total return in the current
financial year to 14 January 2021 was 13.6%, which compares with a total
return of 14.3% by our benchmark.

The rollout of Covid-19 vaccines will significantly improve the outlook for
the global economy in the year ahead. However, until an effective
vaccination programme is implemented globally, economies will remain
vulnerable to further national or localised lockdowns as the struggle to
contain the spread of the virus continues, which means that economic recovery
is likely to be bumpy and a return to the "new normal" will take time. In
the meantime, we expect both monetary and fiscal policy to remain extremely
accommodative which, in conjunction with continuing low interest rates,
should be supportive for equity markets. There will almost certainly be some
profound long-term consequences of Covid-19 for businesses, economies and
geopolitics, but these will only become clearer over time.

Away from Covid-19, Joe Biden will be sworn in as US President on 20 January
2021 and, unlike his predecessor, is expected to adopt a constructive and
considered approach to diplomatic matters. Consequently, with the likely
exception of China, trade tensions should ease, resulting in lower market
volatility. With the Democrats having secured control of the Senate in the
Georgia run-off elections earlier this month, President-elect Biden will have
the chance to take more political control, including increasing taxes and
regulatory oversight. However, this should be balanced by a further Covid-19
relief package, which is expected to be an early priority for the new
administration.

The UK stock market, dogged by Brexit uncertainty and held back by its low
exposure to technology and other high-growth stocks, has been shunned by both
domestic and international investors for some time. With Brexit uncertainty
now much reduced following the eleventh-hour agreement of a UK - EU trade
deal and the UK stock market's bias towards cheap cyclical stocks, investors
should begin to be tempted back.

Overall, we are optimistic about the returns for global equities over the
coming year.

Sue Inglis
Chair
18 January 2021

FUND MANAGER'S REPORT

Performance
The year started promisingly as stock markets rose, anticipating both an
improving outlook for corporate profits and continued low interest rates
supported by central bank bond purchases. An interim US - China trade deal in
December 2019 indicated a return to more favourable trade between the world's
two superpowers. Meanwhile, hopefully, a Brexit trade deal between the UK and
Europe would follow later in the year.

Then the world changed. News reports started breaking of an unknown virus
being transmitted amongst the population in Wuhan, China. There have been
previous, localised outbreaks of new viruses but never has one spread quite
so quickly around the world. Through February we started to realise that the
impact of the Covid-19 virus would be global and that we needed to act, even
though we did not at this point anticipate that by mid-March most of the
developed world would have locked down their populations and that the second
quarter would see the largest contraction in economic activity in living
memory for many countries.

Given the uncertainty and having raised investment within the portfolio
between our year end and the new year, we started to sell holdings in
travel-related stocks, such as airports and transport, to rebuild cash. We
also reduced financials whose share prices often amplify market movements.
From mid-February to mid-March stock markets fell sharply, rocked by the
worsening news about the outbreak and fears that the mortality rate could be
as high as 10%. Further sales were made in March but, as investors reduced
risk in their portfolios, the market sell-off in both the bond and equity
markets became indiscriminate. Some obvious beneficiaries of lockdown, remote
working and online retailing also fell. We started to find that the share
prices of companies we liked became far more affordable and through late
March into April we became net investors, building up holdings such as Apple,
ASML and Worldline.

The sharp rebound in equity markets from late March into June took many by
surprise but it can be explained by the speed of monetary and fiscal support
combined with high levels of investor liquidity going into the year. As
markets rose in 2019 investors, including ourselves, raised cash in
anticipation of a pullback in share prices. When the market did collapse on
Covid-19 worries, investors were quick to increase exposures to technology
companies that had been driving the adoption of online working and shopping.
At the same time central banks increased liquidity to support banks and bond
markets on a scale that dwarfed the efforts during the 2008/09 banking
crisis. The asset purchases by central banks, combined with government
support schemes, have bolstered asset prices and avoided fire sale
liquidations. Latterly, stock markets were further supported by encouraging
news from vaccine trials, leading to hopes of full reopening of economies in
2021.

As in most years during the last decade the US market was a standout
performer, but the leadership was narrow, driven by the technology sector and
in particular the very largest companies in the index: Microsoft, Apple,
Facebook, Amazon and Alphabet. Chinese equities also performed well, driven
by the same technology theme and a quicker recovery in activity following the
spring lockdown. The events of 2020 have clearly accelerated the already
well-established trends of changing working patterns and consumption.
However, the continued decline in interest rates is also having a fundamental
impact. A bizarre effect of negative interest rates in Europe means that the
value of future profits is worth more to investors than current or next
year's profits. Investors are being incentivised to take on more risk and
this has been inflating the value of businesses years away from
profitability. The effect was observable in the US market during the year,
where the share price performance of loss making businesses on average
outperformed the price performance of those businesses that produced a
profit. Many commentators have predicted an unsustainable bubble in prices of
technology shares although, while animal spirits are undoubtedly at play,
there is not the blind optimism that fuelled the last tech boom in the 90s.
Many of the largest technology companies are highly profitable and probably
only government intervention to break up these companies will derail their
domination of certain segments of the economy.

For Bankers, the regional portfolios generally performed very well during the
year, reflecting good stock picking. The US, Japan and China portfolios all
outperformed their local indices by more than 10%. The Europe (ex UK)
portfolio also performed credibly, outperforming by 7.7%. The UK market
performed badly, falling nearly 20% over the year due to its higher
concentration of banks and oils and having fewer technology companies. The
long shadow of Brexit continued to weigh on the UK market and Covid-19
restrictions hurt the service industries in the UK particularly hard. The UK
portfolio outperformed marginally, giving up the better performance we built
up in the summer, as it became apparent that hopes of a Brexit deal were
receding. The Pacific (ex Japan and China) portfolio was the only region to
underperform, ending the year significantly behind the benchmark. There was
disappointing stock selection, for example the position in Treasury Wine
Estates. However, the major reason was our not owning the high growth Chinese
technology companies listed in Hong Kong. Our investment style in this
portfolio is both value and income driven which has served us well for many
years but lagged the market this year.

The investment team has adapted quickly to working remotely during the
periods of lockdown. We have access to all our trading and investment systems
at home, whilst our contact with company managements has continued to be
excellent via online conferencing. I am pleased that May Ling Wee has settled
in well managing the China portfolio following Charlie Awdry's departure. She
has delivered an excellent first year, outperforming the Chinese CSI 300
Index by 19.6%. This portfolio remains very solidly focused on targeting
companies that benefit from increasing consumer spending and the growing
number of middle-income earners.

Environmental, social and governance factors
All the teams managing the portfolio integrate environmental, social and
governance ('ESG') factors into their stock selection processes. These
factors are carefully evaluated during the building of the investment case
for each new holding and are monitored throughout the year for each position
we hold. Our current view is not to exclude investing in certain companies
but to engage with the management of those we invest in and to challenge them
to make improvements in all ESG factors. We monitor improvements and engage
both directly and through investor initiatives. There are further details of
our approach to ESG in the Annual Report, together with new analysis showing
that Bankers' portfolio has less exposure than the FTSE World Index to
companies with high ESG risk factors and that the carbon intensity of the
portfolio is also lower than the Index.

Income
This has been the most challenging year in my career in terms of dividends.
The UK market saw a near 40% reduction in overall income. The banking sector
in Europe was forced by regulators to cancel dividends, some of which had
already gone ex-dividend. The portfolio was partially protected by a low
exposure to sectors that cut dividends the most, such as oil and retail
banks, but we have still seen our investment income fall by 15% year-on-year.
Over recent years we have increased investment into the US market which has
delivered better overall performance than the UK or Europe but generates
lower income than either. The lack of leverage in the portfolio has further
hindered income generation. However, we have several levers to pull in coming
years to improve the income from the portfolio and have identified a path to
return to a covered dividend. There are already good signs, as some of our
investments have announced the resumption of payments this year.

Asset allocation
The gearing has fluctuated during the year as we have reduced risk and then
added to holdings after the market started to recover in March. When the
market stalled in the summer, we once again started to make selected sales of
shares that were exceeding our price targets. At the year end there was a net
cash position of 1.1% within the Company compared to a net cash position of
3.0% at the start of the year. The proceeds of share issuance were invested
promptly with most regions receiving net new money apart from China, where we
felt tightening US trade tariffs would impact share prices. Regionally we
have favoured Europe and Asia for new investment, given these regions have
lagged the US and should recover sharply when economies open this year.
Valuations are modest and the profit outlook is favourable.

Outlook
As governments tighten new lockdown conditions and we enter the winter
months, it is understandably difficult to feel optimistic about the future.
It is therefore important to remember that stock markets are discounting
mechanisms, with prices reflecting investors' best view of future outcomes.
There is much to be optimistic about this year, from the roll-out of vaccines
to the expansion of the money supply. At the last hour a Brexit trade deal
was agreed with Europe which should soften the transition for many UK and
European based businesses. Cash deposits of both consumers and corporates are
at very high levels while borrowing via credit cards has fallen, all implying
there is scope to see a significant increase in consumer and corporate
spending when economies are released from Covid-19 restrictions. The
conditions are set for a rare period of synchronous global economic expansion
towards the end of this year when sufficient numbers of the global population
have been vaccinated. There remain some challenges around the lifting of the
support schemes and an inevitable rise in unemployment thereafter. The change
of administration in the US will herald a different stance on many issues but
trade relations with China are likely to remain strained if US domestic
politics take precedence over improving international relations.

Clearly the share price recovery since March has discounted some of the
expected economic recovery. However, many sectors have been left behind and
we expect them to lead the recovery this year. There will be much debate
around future inflation trends but, in all probability, the high level of
monetary expansion from central banks combined with fiscal stimulus should
benefit cyclical and financial companies at the expense of defensive and
growth companies. As always, it will never be that simple. Some growth
companies will continue to do well, and some cyclicals will not. The
improving outlook will require us to start to invest the cash within the
Company and we will evaluate new investments carefully with the aim of
delivering the optimal mix of capital and income return.

Alex Crooke
Fund Manager
18 January 2021

PLEASE REFER TO THE PDF TO VIEW THE FULL ANNOUNCEMENT

For further information contact:
Alex Crooke
Fund Manager
The Bankers Investment Trust PLC
Telephone: 020 7818 4447

Sue Inglis
Chair
The Bankers Investment Trust PLC
Telephone: 020 7818 4233

James de Sausmarez
Director and Head of Investment Trusts
Janus Henderson Investors
Telephone: 020 7818 3349

Laura Thomas
Investment Trust PR Manager
Janus Henderson Investors
Telephone: 020 7818 2636

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.
End CA:00366360 For:BIT Type:FLLYR Time:2021-01-19 08:30:47

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