Annual Report 2020 The Bankers Investment Trust PLC The Bankers Investment Trust PLC Annual Report 2020 Strategic Report US economy World economy Investment objective forecast to grow forecast to grow Over the long term, the Company aims to achieve capital growth in 3.3% excess of the FTSE World Index and 4.0% dividend growth greater than inflation, as in 2021 (2020: -3.6%) in 2021 (2020: -4.0%) measured by the UK Consumer Price Index (‘CPI’), by investing in companies listed throughout the world. Please see the Chair’s Statement on Global page 6 for more details. Spotlight A brief history The Company was incorporated in 1888. Since seven of the nine original Directors were bankers by profession, the name The Bankers’ Investment Trust, Limited US 10 year treasury yield Forecast increase in global was considered appropriate. forecast earnings per share The Company has paid dividends on the ordinary shares every year since 1.3% 26.4% incorporation except in for 2021 (2020: 0.95%) to 31 December 2021 the years 1892 and 1893 and (2020: -17.0%) has increased dividends paid Sources: J.P.Morgan and World Bank as at 5 January 2021 each year since 1966. Contents Strategic Report Governance Other Shareholder Performance Highlights 1 Board of Directors 39-40 Information Global: the Investment Case 2 Corporate Governance Glossary 91 Global: the Dividend Story 3 Report 41-49 Alternative Performance Chair’s Statement 5-6 Report of the Audit Measures 92-93 Committee 50-52 Fund Manager’s Report 8-9 General Shareholder Directors’ Remuneration Information 94-95 Portfolio Structure 10 Report 53-54 Service Providers 96 Largest Investments 11 Directors’ Report 55-56 Securities Financing Changes in Investments 11 Statement of Directors’ Transactions 97-98 Distribution of Assets Responsibilities 57 and Liabilities 12 This interactive PDF allows you to access Rates of Exchange 12 information easily, go directly to another Financial Statements page, section or website. Historical Record 12 Independent Auditor’s Report 59-66 Guide to buttons Print Regional Portfolio Manager Reports Statement of Comprehensive Options UK Portfolio 13 Income 67 Europe (ex UK) Portfolio 14 Home Next Previous Statement of Changes in Equity 68 page Page Page North American Portfolio 15 Statement of Financial Position 69 Japanese Portfolio 16 Links Search Pacific (ex Japan and China) Portfolio 17 Cash Flow Statement 70 Clicking a link will take you to further Chinese Portfolio 18 Notes to the Financial information (opens in a new window) Portfolio Holdings 19-23 Statements 71-89 Section Tabs Our Approach to Environmental, Social and Governance Matters 24-26 Clicking a folder icon will take you to that chosen section Business Model 28-37 The Bankers Investment Trust PLC Annual Report 2020 Performance Highlights1 Net asset value per ordinary share Dividend With debt at par Per share for year2 2020 976.3p 2019 948.7p 2020 21.54p 2019 20.90p With debt at market value Growth 2020 973.9p 2019 945.7p 2020 3.1% 2019 6.0% Share price at year end3 Premium/(discount) at year end4 2020 980.0p 2019 927.5p 2020 0.4% 2019 (2.2%) Net (cash)/gearing at year end5 Ongoing charge for year 2020 (1.1%) 2019 (3.0%) 2020 0.50% 2019 0.52% Long term growth record to 31 October 2020 1 year 3 years 5 years 10 years % % % % Capital return6 Net asset value 3.0 11.3 55.8 118.5 Share price 5.7 15.0 58.5 158.0 FTSE World Index7 2.1 13.6 34.2 59.2 Total return8 Net asset value 5.3 18.9 74.7 179.2 Share price 8.1 23.0 78.1 233.3 FTSE World Index7 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 on pages 91 to 93 2 This represents the four ordinary dividends recommended or paid for the year (see page 78 for more details) 3 Share price is the mid-market closing price 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 on page 92 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 1 The Bankers Investment Trust PLC Annual Report 2020 Global: the Investment Case Investment policy To achieve an appropriate spread of investment risk the portfolio is broadly diversified by geography, sector and company. The Manager has the The following investment ranges apply: flexibility to invest in any geographic region and any sector with no set limits on individual country or sector exposures and, therefore, the make-up and Equities: weighting of the portfolio may differ materially from the FTSE World Index. 80% to 100% The Manager primarily employs a bottom-up, value-based investment process to identify suitable opportunities and pays particular regard to cash Debt securities and cash investments: generation and dividends. The Board regularly monitors the Company’s investments and the Manager’s investment activity. 0% to 20% The Company can, but normally does not, invest up to 15% of its gross Investments trusts, collective funds assets in any other investment companies (including listed investment trusts). and derivatives: Gearing 0% to 15% The Company can borrow to make additional investments with the aim of achieving a return that is greater than the cost of the borrowing. The Company can borrow up to 20% of net assets at the time of draw down (see fuller description on page 29 in the Business Model). Experienced, high quality team; Focused portfolios Lead Manager Alex Crooke Number of holdings by region as at 31 October 2020 (Appointed 2003, 31 years experience) 50 UK David Smith (19 years experience) 45 Europe (ex UK) James Ross 40 (14 years experience) North America Gordon Mackay 30 30 (25 years experience) 29 Japan Junichi Inoue 25 20 (26 years experience) 18 18 Pacific (ex Mike Kerley Japan, China) (28 years experience) 10 China May Ling Wee (23 years experience) 0 Source: Janus Henderson Investors UK Europe North Japan Pacific (ex China (ex UK) America Japan, China) Source: Janus Henderson Investors Why invest in Bankers? ● A well-diversified core long-term global equities ● Future dividend growth supported by significant savings vehicle revenue reserves ● Strong long and short-term performance record ● Ongoing charge ratio amongst the lowest of relative to its benchmark actively managed equities funds ● 54 consecutive years of dividend increases 2 The Bankers Investment Trust PLC Annual Report 2020 Global: the Dividend Story The investment process for Bankers has always focused on growing both capital and income for investors. The key focus is on companies that have a history of growing the amount of surplus cash they generate from their businesses. This is called free cash flow and is defined as the cash generated after paying staff, borrowing costs, taxes and maintaining equipment. Companies with growing levels of free cash flow have flexibility to reduce borrowings, invest for the future and grow their dividends over time. Being global we have a greater pool of opportunities to find these companies and also diversify across different regions and sectors. This investment strategy has helped Bankers not only pay dividends every year since 1894 but also to increase dividends every year since 1966, a 54 year track record. Annual dividend over past 54 years Annual dividend growth over past 5 years % 25 10 9.4 20 8 7.6 e 15 6 6.0 6.0 10 4 pence per shar 3.1 5 2 0 0 1965 1970 1980 1990 2000 2010 2020 2016 2017 2018 2019 2020 Dividend growth Annual dividend yield each year based on £1,000 Revenue and dividend history invested on 31 October 2010 and dividends reinvested 25 % 8 20 7 15 6 5 10 4 pence per share 3 5 2 0 1 0 -5 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Revenue Dividends paid/payable for the year Retained revenue for the year Source: Janus Henderson 3 Chair’s Statement Sue Inglis Chair 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.” 4 The Bankers Investment Trust PLC Annual Report 2020 Chair’s Statement ● Net asset value total return increase of 5.3% Revenue and dividends (2019: 12.1%). As anticipated in my interim statement, our revenue account ● Share price total return increase of 8.1% was particularly hard hit by the effects of Covid-19 as many companies sought to retain cash to deal with the effects of the (2019: 13.6%). pandemic. Our earnings per share fell by 22% to 16.83p (2019: ● Average premium to net asset value of 0.3% 21.61p). However, our structure as an investment trust has (2019: average discount of 1.5%).