Final Results

RNS Number : 9093B

Bankers Investment Trust PLC

15 January 2018

 

LEGAL ENTITY IDENTIFIER: 213800B9YWXL3X1VMZ69

THE BANKERS INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 October 2017

This announcement contains regulated information

Performance Highlights	31 October 2017	31 October 2016
NAV per share at year end	878.9p	755.9p
Share price at year end(1)	852.0p	690.0p
Dividend for year(2)	18.6p	17.0p
	31 October 2017	31 October 2016
Dividend yield(3)	2.2%	2.5%
Retail Prices Index increase over year	4.0%	2.0%
Ongoing charge for year	0.44%	0.52%
Net gearing at year end(4)	2.3%	2.6%
Discount at year end	3.1%	8.7%

⁽¹⁾   Share price is the mid market closing price.

⁽²⁾  This represents the four ordinary dividends recommended or paid for the year.

⁽³⁾   Based on the share price at the year end.

⁽⁴⁾   Net gearing is calculated in accordance wih the gearing definition in the Alternative Performacne Measures in the

      Annual Report

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

CHAIRMAN'S STATEMENT

• Net asset value increase of 16.3%

• Dividend increase of 9.4%

• Forecast increase in 2018 dividend of at least 6.0%

Performance

I am very pleased to report another excellent year for our shareholders, with a net asset value ('NAV') increase of 16.3%. Also, the share price performance was enhanced as the discount to NAV narrowed, with the share price recording a 23.5% increase.

Whilst UK market sentiment was influenced by Brexit negotiations, international markets continued to perform strongly as evidence of strengthening economic activity and improving consumer confidence was recorded in virtually every region. Currency movements were less pronounced than last year albeit sterling weakened again against the Euro and US dollar. So, for the second year running our capital value was helped by both strong markets in the UK and overseas and a weaker level of sterling. This 'double' impact was particularly evident in our North American portfolio where a sterling total return of 24.3% was recorded and in our Continental European portfolio with a total return of 21.5%. Total returns from Japan and Emerging Markets were lower at 9.8% and 5.8% respectively whilst the UK portfolio had a total return of 12.7%. Indeed, every international portfolio outperformed its local benchmark. Special mention must be made of our mainland China equity exposure where we recorded a total return of 55.3% against a local benchmark of 15.1%. On behalf of the Board, I would like to thank all of our fund managers for this exceptional performance.

I have reported on several occasions that strategic asset allocation decisions have led to a considerable shift in our equity exposure away from the UK and into other major markets, primarily North America during the past five years. North America is now our single largest country exposure at approximately 28%, followed by the UK at approximately 26%. Many market commentators have, over the years, tried to call the top of the North American market based on stretched valuation levels. But, despite a backdrop of increasing interest rates, multiples have continued to rise and in certain sectors appear to be significantly beyond any normal valuation levels. With this in mind we are unlikely to increase our US asset allocation in the short to medium term.

Elsewhere, primarily in Continental Europe and Japan, the economic growth story is gaining momentum and has yet to be fully reflected in corporate earnings growth. Whilst many challenges remain in these two geographic areas, they are likely to be the beneficiaries of any further asset allocation shifts away from the UK which we may instigate in the year ahead.

 

Revenue and Dividends

Bankers has delivered a further solid increase in the revenue account, reflecting positive currency movements, robust dividend growth and further substantial special dividends. This performance has enabled the Board to recommend an increase in the final quarterly dividend to 4.80p per share. If approved by shareholders this will result in a total dividend payment for the year of 18.6p (2016: 17.0p), an increase of 9.4%. This increase compares with my forecast of at least 6%. Our revenue earnings per share over the same period rose to 20.49p (2016: 17.53p), an increase of 16.9%.

The outlook for the year ahead from a revenue perspective remains positive. The recommended final 2017 dividend payment, if approved, will still accommodate a healthy transfer to revenue reserve which, at the year-end, represented 1.8 times the cost of the 2017 annual dividend. These reserves give the Board confidence in its discussions over future dividend growth. So, I am pleased to be able to report, on behalf of the Board, a forecast of dividend growth of at least 6.0% for 2018.

Change to Investment Objectives and Policy Wording

You will note in the annual report that the Board has reviewed the wording of the investment objectives and policy. This has been driven by the FCA's thematic review on meeting customer expectations and ensuring that investment objectives and policies are clear, accurate and not ambiguous. Shareholders should rest assured that the existing twin key objectives of capital growth and dividend growth remain core to the investment objectives of the Company. We have taken the opportunity to consider introducing a global benchmark to judge capital growth over the long term. After consultation with our Manager and Corporate Broker we have decided to adopt the FTSE World Index, an index of global companies. We intend to review performance over a suitable medium to long term period, representing at least three years, as we do not wish our fund managers to generate excessive trading to move the portfolio into line with the index in seeking to generate short term relative performance.

Janus Henderson

We have followed the course of the merger between Henderson and Janus and the additional resources and expertise that has been available to Alex Crooke, our Fund Manager. We continue to be optimistic that Janus Henderson will be able to provide Alex with the support he will need to build on the performance of Bankers. We are also delighted to record Alex's promotion to Co-Head of Equities at Janus Henderson whilst continuing to be lead Fund Manager of Bankers.

 

Board Changes

Both Matthew Thorne and David Wild will be retiring from the Board at the forthcoming Annual General Meeting ('AGM'). On behalf of all shareholders I thank both of them for their significant contribution to the continuing success of the Company.

Matthew joined the Board in November 2008 and became Audit Committee Chairman in 2010. During this period Matthew has been a strong independent non-executive director who has demonstrated on many occasions his responsibilities to shareholders. Having served a full nine year term Matthew will retire at the AGM.

David joined the Board in February 2014 and is not seeking re-appointment at the AGM. David's executive role at Domino's Pizza has expanded as that company has developed and, as such, David felt unable to commit to the continuing time demands placed upon the non-executive directors of your Company.

I am pleased to report that Isobel Sharp joined the Board on 1 November 2017, and will stand for appointment by shareholders at the forthcoming AGM. Isobel has had a distinguished career in the accountancy profession, most recently as the senior technical partner at Deloitte LLP. Further details of her experience can be found in the Annual Report. Isobel will take on the Audit Committee Chair upon Matthew's retirement. I look forward to introducing Isobel to shareholders at the AGM.

 

Annual General Meeting ('AGM')

This year's AGM will again be held at Trinity House, London, EC3N 4DH on 21 February 2018 at 12 noon. Full details of the business to be conducted at the meeting are set out in the Notice of Meeting which will be sent to shareholders with the Annual Report. Directions and a map showing the location of the AGM can also be found in the Notice of Meeting. At the AGM, Alex Crooke and his investment team will present their investment views and how these are reflected in the portfolio. Following the formal business of the meeting light refreshments will be served. The Board looks forward to seeing many of you at the AGM.

 

Outlook

Rising inflation and the reaction of central banks is likely to be one of the bigger macro issues affecting global markets in the year ahead. Increasing globalisation of the world economy has manifested itself in many ways with one key aspect being the downward pressure on labour costs across major economies. The recent increase in broader inflation measures has not yet resulted in a significant increase in labour costs but the time may be getting closer when labour cost pressures will be more evident. Central banks in the US and UK are beginning to withdraw the monetary support to their economies by raising interest rates. How aggressive this removal of monetary support will be, especially with most markets at all-time highs, will be one of the key determinants of market direction in 2018.

On a more positive note, global economic growth remains positive and corporate earnings growth in most major markets is accelerating. Whether this growth is already reflected in market valuations is another critical aspect in trying to forecast returns for next year. One thing about which I am certain, however, is to be cautious in extrapolating the returns of the past two years into next year. Global stock markets and currencies may not be as positively aligned in our favour as they have been during the past two years.

Richard Killingbeck

Chairman 

 

FUND MANAGER'S REVIEW

Stock markets have continued to dance to the tune being played by central banks. Easy money and low interest rates provided a supportive back drop for assets of all types to appreciate, effectively debasing the value of cash by comparison. While certain politicians in the US and Europe have been distracting the attention of commentators and news services, their relevance to economic growth has been limited. The unexpected outturn was the US Federal Reserve increasing interest rates at a lower rate than expected maintaining the goldilocks era that has persisted for a few years. Investors were said to be exhibiting rational exuberance by market strategists, although in recent months this seems to be swinging to a less rational form of speculation in cryptocurrencies such as Bitcoin. Our strategy has changed little through the year, preferring to stay invested and concentrate on businesses that produce strong cash generation which can support a return of profits through dividends. This has resulted in another solid year of relative performance, particularly at the stock picking level with every region, bar the UK, outperforming their regional indices. The stand-out performers were the US and once again the mainland China portfolio of A shares.

The US portfolio has been the largest contributor to overall performance in recent years, rising to over 30% of the portfolio value earlier this year, at which point we decided to take some profits. Valuations in the US are at an elevated level, justifiable to some extent by better growth, but as economic activity improved in other parts of the world we felt better value could be obtained elsewhere. These reductions proved to be well timed. The proceeds from US sales were reinvested into Europe and China, and later in the year, Japan. At a stock level, we are beginning to find that better levels of growth globally and the slow normalisation of interest rates is benefitting cyclicals: those stocks that are more attuned to economic growth such as financials and industrials. We have benefitted from the share price appreciation of US technology shares but, towards the middle of the year, started to rotate these holdings into more diversified areas, reducing the potential impact should they start to underperform. Our managers have not had it all their way; smaller companies have performed far better than large and this dynamic impacted performance in the UK and to some extent Europe where we have limited exposure to small companies.

Europe and Asia, including China, have delivered the best absolute level of returns during the year. We continue to believe that these markets can make further progress but the exposure to China, through both mainland and Hong Kong, is getting towards the maximum level that we are able to tolerate. The region can be susceptible to higher levels of volatility and central government control, which means we should not be overly exposed. The deployment of gearing within the Company has been conservative all year and ended the period at 2%. We felt more comfortable retaining cash to take advantage of a market setback, as there have been troubling political and macro events that could easily have resulted in investors withdrawing from markets. In the end, no meaningful fall occurred but we continue to cautiously recycle investments from stocks we feel are expensive into those which offer better value.

We have made a change to the manager line-up with David Smith taking over the management of the UK portfolio from me. David and I have worked together for the last five years on another UK portfolio and I feel his clear focus on companies listed in the UK will deliver returns as the future ramifications of Brexit become clearer. The roster of fund managers working for Bankers features the best talent within Janus Henderson and the merger over the summer with Janus has created more resources.

The significant fall in the value of sterling following the 2016 European referendum had a greater impact in the translation of overseas dividends during this reported year than the previous year. The Company's earnings rose 17% year-on-year but, as the year progressed, sterling started to strengthen against the US dollar and next year we could see the positive effect on earnings reverse. A key focus of stock selection in all regions is dividend growth from our investments and this been most noticeable in the lower yielding regions such as the US and Japan. Dividend growth is gently accelerating in both regions and could surprise positively next year helped by tax reforms in the US and a move to higher pay outs in Japan.

There are plenty of future trends like Brexit, fading Chinese growth and shrinking liquidity that may make investors cautious. A negative outturn from any one could result in a sharp fall in stock markets. However, the seeds of a global recession or prolonged market collapse are not yet obvious and so share prices may continue to rise. Seeking out fundamental or intrinsic value has long been a sound investment strategy but, in recent years, they have been forgotten in favour of growth and momentum. It seems clear to us that inflationary pressures exist in labour markets and higher wage growth will favour a market shift towards more careful analysis of value and the price paid for growth. These trends should favour our portfolio.

Alex Crooke

Fund Manager

LARGEST INVESTMENTS at 31 October 2017

Rank 2017	Rank 2016	Company	Valuation 2016 £'000	Purchases £'000	Sales proceeds £'000	Appreciation/ (depreciation) £'000	Valuation 2017 £'000
1	(1)	BP	23,603	-	(4,448)	743	19,898
2	(4)	Apple	13,340	-	-	4,918	18,258
3	(2)	British American Tobacco	16,428	-	-	629	17,057
4	(17)	American Express	9,290	3,478	-	3,636	16,404
5	(3)	American Tower	14,081	-	-	1,779	15,860
6	(7)	Alphabet	12,198	-	-	2,257	14,455
7	(22)	Facebook	8,493	2,844	-	3,035	14,372
8	#	Samsung	7,439	1,517	-	5,371	14,327
9	(6)	Royal Dutch Shell	12,307	-	-	1,784	14,091
10	#	Xylem	-	11,146	-	2,663	13,809
11	(19)	FedEx	9,135	2,586	-	1,967	13,688
12	(8)	Comcast	12,103	-	-	869	12,972
13	#	Berkshire Hathaway	-	11,825	-	799	12,624
14	(5)	Delphi Automotive	12,746	-	(4,153)	4,010	12,603
15	(14)	Taiwan Semiconductor Manufacturing	10,008	-	-	2,516	12,524
16	#	Union Pacific	-	11,931	-	418	12,349
17	(12)	Fidelity National Information Services	10,275	-	-	1,574	11,849
18	(16)	Visa	9,363	-	-	2,108	11,471
19	#	Cognizant Technology Solutions	3,034	6,403	-	2,029	11,466
20	#	ICON	-	11,142	(4,075)	3,885	10,952
21	#	Estée Lauder	-	9,274	-	1,474	10,748
22	#	Priceline	7,838	1,172	-	1,496	10,506
23	#	Hangzhou Hikvision Digital Technology	3,891	1,597	(371)	4,953	10,070
24	#	Diageo	6,083	2,491	-	1,398	9,972
25	#	MasterCard	7,785	-	-	2,164	9,949
			-----------	-----------	-----------	-----------	-----------
			209,440	77,406	(13,047)	58,475	332,274
			======	======	======	======	======

All securities are equity investments

# Not in the top 25 last year

Convertibles and all classes of equity in any one company being treated as one investment

CHANGES IN INVESTMENTS at 31 October

	Valuation 2016 £'000	Purchases £'000	Sales proceeds £'000	Appreciation £'000	Valuation      2017      £'000
United Kingdom	276,070	62,911	(71,704)	24,122	291,399
Europe (ex UK)	136,261	44,138	(41,672)	24,807	163,534
North America	263,721	82,009	(100,020)	59,556	305,266
Japan	108,972	59,251	(48,495)	8,586	128,314
China	40,472	36,485	(29,443)	20,131	67,645
Pacific (ex Japan, China)	101,896	15,671	(13,030)	14,285	118,822
Emerging Markets	23,827	4,705	(2,217)	521	26,836
	-----------	-------------	------------	-------------	-------------
	951,219	305,170	(306,581)	152,008	1,101,816
	======	=======	=======	=======	=======

 

PRINCIPAL RISKS AND UNCERTAINTIES

The Board, with the assistance of Janus Henderson, has carried out a robust assessment of the principal risks facing the Company including those that would threaten its business model, future performance, solvency or liquidity. In carrying out this assessment, the Board has considered the market uncertainty arising from the result of the UK referendum to leave the European Union. The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objectives and policy, in order to mitigate these risks as far as practicable. The principal risks which have been identified, and the steps taken by the Board to mitigate these as far as practicable, and whether the Board considers the impact of such risks has changed over the past year, are as follows:

Risk	Controls and Mitigation
Investment Activity and Performance Risks An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may result in underperformance against the Company's various indices and the companies in its peer group.	The Board monitors investment performance at each Board meeting and regularly reviews the extent of the Company's borrowings.
Portfolio and Market Risks Although the Company invests almost entirely in securities that are listed on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely. A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds.	The Fund Manager seeks to maintain a diversified portfolio to mitigate against this risk. The Board regularly reviews the portfolio, investment activity and performance.
Tax, Legal and Regulatory Risks A breach of Section 1158 Corporation Tax 2010 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the UK Listing Authority's Rules could result in suspension of the Company's shares, while a breach of the Companies Act could lead to criminal proceedings. All breaches could result in financial or reputational damage. The Company must also ensure compliance with the Listing Rules of the New Zealand Stock Exchange.	Janus Henderson has been contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The Board receives internal control reports produced by Janus Henderson on a quarterly basis, which confirm tax, legal and regulatory compliance both in the UK and New Zealand.
Financial Risks By its nature as an investment trust, the Company's business activities are exposed to market risk (including market price risk, currency risk and interest rate risk), liquidity risk and credit and counterparty risk.	The Company has a diversified portfolio which comprises mainly investments in large and medium-sized companies and mitigates the Company's exposure to liquidity risk. The Company minimises the risk of a counterparty failing to deliver securities or cash by dealing through organisations that have undergone rigorous due diligence by Janus Henderson. Further information on the mitigation of financial risks is included in note 16 in the Annual Report.
Operational Risks Disruption to, or failure of, Janus Henderson's accounting, dealing or payment systems or the Depositary's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its service providers may not provide the required level of service.	The Board monitors the services provided by Janus Henderson and its other suppliers and receives reports on the key elements in place to provide effective internal control.

The Board considers these risks to have remained unchanged throughout the year under review.

VIABILITY STATEMENT

The Directors have assessed the viability of the Company over a three year period, taking account of the Company's current position and the potential impact of the principal risks and uncertainties documented in the Annual Report.

The Directors conducted the assessment based on a period of three years because they consider this to be an appropriate period over which they do not expect there to be any significant change in the current principal risks and adequacy of the mitigating controls in place. Also the Directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period as the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust.

The assessment has considered the impact of the likelihood of the principal risks and uncertainties facing the Company, in particular Investment Activity and Performance, Portfolio and Market and Financial risks, in severe but plausible scenarios, and the effectiveness of any mitigating controls in place.

The Directors also took into account the liquidity of the portfolio, the gearing and the income stream from the portfolio in considering the viability of the Company over the next three years and its ability to meet liabilities as they fall due. This included, consideration of the duration of the Company's long term borrowings, how a breach of the gearing covenants could impact on the Company's net asset value and share price and how the forecast income stream, expenditure and levels of reserves could impact on the Company's ability to pay dividends to shareholders over that period in line with its current dividend policy. Whilst detailed forecasts are only made over a shorter time frame, the nature of the Company's business as an investment trust means that such forecasts are equally valid to be considered over the longer three year period as a means of assessing whether the Company can continue in operation.

Based on their assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three year period. Only a substantial financial crisis affecting the global economy could have an impact on this assessment.

RELATED PARTY TRANSACTIONS

The Company's transactions with related parties in the year were with its Directors and Janus Henderson. There have been no material transactions between the Company and its Directors during the year other than the amounts paid to them in respect of Directors' remuneration for which there were no outstanding amounts payable at the year end. In relation to the provision of services by the Manager, other than fees payable by the Company in the ordinary course of business and the provision of sales and marketing services, there have been no transactions with the Manager affecting the financial position of the Company during the year under review.

STATEMENT OF DIRECTORS' RESPONSIBILITIES UNDER DISCLOSURE GUIDANCE AND TRANSPARECY RULE 4.1.12

Each of the Directors confirms that, to the best of his or her knowledge:

• the Company's financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

• the Strategic Report in the Annual Report and financial statements includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Richard Killingbeck

Chairman

STATEMENT OF COMPREHENSIVE INCOME

		Year ended 31 October 2017			Year ended 31 October 2016
	Notes	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Gains on investments held at fair value through profit or loss		-	152,388	152,388	-	156,527	156,527
Investment income	2	29,445	-	29,445	24,661	-	24,661
Other operating income	3	189	-	189	255	-	255
		---------	---------	---------	---------	---------	---------
Total income		29,634	152,388	182,022	24,916	156,527	181,443
		---------	---------	---------	---------	---------	---------
Expenses
Management fees	4	(1,012)	(2,362)	(3,374)	(959)	(2,237)	(3,196)
Other expenses		(963)	-	(963)	(811)	(3)	(814)
		---------	---------	---------	---------	---------	---------
Profit before finance costs and taxation		27,659	150,026	177,685	23,146	154,287	177,433
		---------	---------	---------	---------	---------	---------
Finance costs		(916)	(2,137)	(3,053)	(1,227)	(2,863)	(4,090)
		---------	---------	---------	---------	---------	---------
Profit before taxation		26,743	147,889	174,632	21,919	151,424	173,343
Taxation	5	(1,624)	-	(1,624)	(1,090)	-	(1,090)
		---------	---------	---------	---------	---------	---------
Profit for the year and total comprehensive income		25,119	147,889	173,008	20,829	151,424	172,253
		=====	======	======	=====	======	======
Earnings per ordinary share - basic and diluted	6	20.49p	120.62p	141.11p	17.53p	127.45p	144.98p

The total columns of this statement represent the 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.

STATEMENT OF CHANGES IN EQUITY

Year ended 31 October 2017	Called up share capital £'000	Share premium account £'000	Capital  redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 November 2016	30,986	78,541	12,489	767,317	37,405	926,738
Total comprehensive income:
Profit for the year	-	-	-	147,889	25,119	173,008
Ordinary dividends paid	-	-	-	-	(22,183)	(22,183)
	----------	----------	----------	----------	----------	------------
Total equity at 31 October 2017	30,986	78,541	12,489	915,206	40,341	1,077,563
	======	======	======	======	======	=======

Year ended 31 October 2016	Called up share capital £'000	Share premium account £'000	Capital  redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 November 2015	28,271	12,722	12,489	624,099	35,052	712,633
Total comprehensive income:
Profit for the year	-	-	-	151,424	20,829	172,253
Transactions with owners, recorded directly to equity:
Issue of 10,863,453 ordinary shares	2,715	65,819	-	-	-	68,534
Buy-back of 1,338,509 ordinary shares into treasury	-	-	-	(8,206)	-	(8,206)
Ordinary dividends paid	-	-	-	-	(18,476)	(18,476)
	----------	----------	----------	----------	----------	----------
Total equity at 31 October 2016	30,986	78,541	12,489	767,317	37,405	926,738
	======	======	======	======	======	======

STATEMENT OF FINANCIAL POSITION

	At 31 October 2017 £'000	At 31 October 2016 £'000
Non-current assets
Investments held at fair value through profit or loss	1,101,816	951,219
	-------------	------------
Current assets
Investments held at fair value through profit or loss	23,252	21,354
Other receivables	2,660	7,817
Cash and cash equivalents	24,102	23,271
	-------------	-------------
	50,014	52,442
	-------------	-------------
Total assets	1,151,830	1,003,661
	-------------	-------------
Current liabilities
Other payables	(9,451)	(12,117)
	------------	------------
	(9,451)	(12,117)
	-------------	-----------
Total assets less current liabilities	1,142,379	991,544
	--------------	------------
Non-current liabilities
Debenture stock	(15,000)	(15,000)
Unsecured loan notes	(49,816)	(49,806)
	--------------	------------
	(64,816)	(64,806)
	--------------	-----------
Net assets	1,077,563	926,738
	========	=======
Equity attributable to equity shareholders
Share capital	30,986	30,986
Share premium account	78,541	78,541
Capital redemption reserve	12,489	12,489
Retained earnings:
Other capital reserves	915,206	767,317
Revenue reserve	40,341	37,405
	-------------	-----------
Total equity	1,077,563	926,738
	=======	=======
Net asset value per ordinary share	878.9p	755.9p
	=======	=======

CASH FLOW STATEMENT

Reconciliation of profit before taxation to net cash flow from operating activities	Year ended 31 October 2017 £'000	Year ended 31 October 2016 £'000
Operating activities
Profit before taxation	174,632	173,343
Add back interest payable ('finance costs')	3,043	4,090
Amortisation of loan note issue costs	10	11
Less gains on investments held at fair value through profit or loss	(152,388)	(156,527)
Decrease/(increase) in accrued income	79	(454)
Decrease/(increase) in other receivables	42	(28)
(Decrease)/increase in other payables	(66)	113
Purchases of investments	(305,170)	(215,420)
Sales of investments	306,581	199,472
Purchases of current asset investments	(52,453)	(45,156)
Sales of current asset investments	50,555	52,125
Decrease/(increase) in securities sold for future settlement	5,235	(4,754)
(Decrease)/increase in securities purchased for future settlement	(2,601)	10,168
	--------------	--------------
Net cash inflow from operating activities before interest and taxation1	27,499	16,983
Interest paid	(3,042)	(4,102)
Taxation on investment income	(1,832)	(1,302)
	--------------	--------------
Net cash inflow /(outflow) from operating activities	22,625	11,579
Financing activities
Equity dividends paid (net of refund of unclaimed distributions)	(22,183)	(18,476)
Share issues	-	9,007
Buy-back of own shares	-	(8,206)
Repayment of debenture stock	-	(10,000)
Cash received from the liquidation of Henderson Global Trust plc	9	7,160
	-------------	-------------
Net cash outflow from financing activities	(22,174)	(20,515)
	-------------	-------------
Increase/(decrease) in cash	451	(8,936)
Cash and cash equivalents at start of the year	23,271	31,762
Exchange movements	380	445
	-----------	-----------
Cash and cash equivalents at end of the year	24,102	23,271
	=======	=======

¹ In accordance with IAS 7.31 cash inflow from dividends was £29,372,000 (2016: £22,932,000) and cash inflows from interest was £191,000 (2016: £226,000).

NOTES:

1.

Accounting policies

The Bankers Investment Trust PLC is a company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The financial statements of the Company for the year ended 31 October 2017 have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRSs. 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 IFRS Interpretations Committee ('IFRS IC') that remain in effect, to the extent that IFRSs have been adopted by the European Union. The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial instruments held at fair value through profit or loss. The principal accounting policies adopted are set in the Annual Report. These policies have been applied consistently throughout the year. Where presentational guidance set out in the Statement of Recommended Practice (the 'SORP') for investment trusts issued by the Association of Investment Companies (the 'AIC') in November 2014 and updated in January 2017 with consequential amendments is consistent with the requirements of IFRSs, the Directors have sought to prepare the financial statements on a basis consistent with the recommendations of the SORP. The assets of the Company consist mainly of securities that are listed and readily realisable and, accordingly, the Directors believe that the Company has adequate financial resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Having assessed these factors, the principal risks and other matters discussed in connection with the Viability Statement, the Directors have decided that it is appropriate for the financial statements to be prepared on a going concern basis.

		2017	2016
2.	Investment income	£'000	£'000
	UK dividend income - listed	10,847	9,696
	UK dividend income - special dividends	580	693
	Overseas dividend income - listed	17,195	13,419
	Overseas dividend income - special dividends	502	682
	Property income distributions	321	171
		-----------	-----------
		29,445	24,661
		======	======
	Analysis of investment income by geographical region:
	UK	12,743	11,853
	Europe (ex UK)	5,220	3,268
	North America	2,639	2,883
	Japan	2,183	2,209
	China	1,454	1,171
	Pacific (ex Japan, China)	4,343	2,599
	Emerging Markets	863	678
		-----------	-----------
		29,445	24,661
		======	======

		2017	2016
3.	Other operating income	£'000	£'000
	Bank interest	23	86
	Underwriting income	54	77
	Stock lending revenue	108	83
	Treasury bill interest	-	3
	Other income	4	6
		-----	-----
		189	255
		===	===

At 31 October 2017 the total value of securities on loan by the Company for stock lending purposes was £28,166,000 (2016: £30,184,000). The maximum aggregate value of securities on loan at any one time during the year ended 31 October 2017 was £64,544,000 (2016: £66,536,000). The Company's agent held collateral at 31 October 2017 with a value of £31,366,000 (2016: £32,154,000) in respect of securities on loan. The value of securities held on loan, comprising Corporate and Government Bonds with a minimum market value of 105% (2016: 105%) of the market value of any securities on loan is reviewed on a daily basis.

		2017						2016
4.	Management fees	Revenue return £'000		Capital return £'000		Total return £'000		Revenue return £'000		Capital return £'000		Total return £'000
	Investment management	1,012		2,362		3,374		959		2,237		3,196
		-------		-------		-------		-------		-------		-------
		1,012		2,362		3,374		959		2,237		3,196
		====		====		====		====		====		====
	A summary of the terms of the management agreement is given in the Annual Report.
			2017						2016
5.	Taxation		Revenue return £'000		Capital return £'000		Total return £'000		Revenue return £'000		Capital return £'000		Total return £'000
	a) Analysis of the charge for the year
	Overseas tax suffered		1,986		-		1,986		1,373		-		1,373
	Overseas tax reclaimable		(362)		-		(362)		(283)		-		(283)
			-------		-------		-------		-------		-------		-------
	Total tax charge for the year		1,624		-		1,624		1,090		-		1,090
			====		====		====		====		====		====

b) Factors affecting the tax charge for the year The differences are explained below:

		2017			2016
		Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
	Profit before taxation	26,743	147,889	174,632	21,919	151,424	174,343
	Corporation tax for the year at an effective rate of 19.42% (2016: 20.00%)	5,193	28,720	33,913	4,384	30,285	34,669
	Non taxable UK dividends	(2,229)	-	(2,229)	(2,046)	-	(2,046)
	Overseas income and non taxable scrip dividends	(3,239)	-	(3,239)	(2,617)	-	(2,617)
	Overseas withholding tax suffered	1,624	-	1,624	1,090	-	1,090
	Realised gains on non-reporting offshore funds	-	555	555	-	-	-
	Excess management expenses and loan relationships	275	319	594	279	1,021	1,300
	Capital gains not subject to tax	-	(29,594)	(29,594)	-	(31,306)	(31,306)
		--------	-----------	-----------	--------	-----------	-----------
		1,624	-	1,624	1,090	-	1,090
		=====	======	=====	=====	======	=====

c) Provision for deferred taxation   No provision for deferred taxation has been made in the current year or in the prior year.   The Company has not provided for deferred tax on capital gains or losses arising on the revaluation or disposal of investments as it is exempt from tax on these items because of its status as an investment trust, which it intends to maintain for the foreseeable future.

d) Factors that may affect future tax charges The Company has not recognised a deferred tax asset totalling £7,201,000 (2016: £6,257,000) based on a prospective corporation tax rate of 17.0% (2016: 17.0%). The deferred tax asset arises as a result of having unutilised management expenses and unutilised non-trade loan relationship deficits. These expenses will only be utilised, to any material extent, if the Company has profits chargeable to corporation tax in the future because changes are made either to the tax treatment of the capital gains made by investment trusts or to the Company's investment profile which require them to be used.

6.	Earnings per ordinary share
	The total earnings per ordinary share is based on the net profit attributable to the ordinary shares of £173,008,000 (2016: £172,253,000) and on 122,606,783 ordinary shares (2016: 118,813,485), being the weighted average number of shares in issue during the year.

        The total earnings can be further analysed as follows:

		2017	2016
		£'000	£'000
	Revenue profit	25,119	20,829
	Capital profit	147,889	151,424
		----------------	----------------
	Profit for the year	173,008	172,253
		----------------	----------------
	Weighted average number of ordinary shares	122,606,783	118,813,485
		-----------------	-----------------
	Revenue earnings per ordinary share	20.49p	17.53p
	Capital earnings per ordinary share	120.62p	127.45p
		-------------	-------------
	Earnings per ordinary share	141.11p	144.98p
		=======	=======
	The Company does not have any dilutive securities, therefore basic and diluted earnings are the same.

7.	Called up share capital	Number of shares entitled to dividend	Total number of shares	Nominal value of shares £'000
	Ordinary shares of 25p each
	At 1 November 2016	122,606,783	123,945,292	30,986
		-----------------	-----------------	-----------
	At 31 October 2017	122,606,783	123,945,292	30,986
		-----------------	----------------	-----------
		Number of shares entitled to dividend	Total number of shares	Nominal value of shares £'000
	Ordinary shares of 25p each
	At 1 November 2015	113,081,839	113,081,839	28,271
	New shares issued	10,863,453	10,863,453	2,715
	Shares bought back in the year	(1,338,509)	-	-
		-----------------	-----------------	-----------
	At 31 October 2016	122,606,783	123,945,292	30,986
		-----------------	----------------	-----------
	During the year, no ordinary shares were issued or purchased. In the year ended 31 October 2016, 10,863,453 shares were issued for net proceeds of £68,534,000 and 1,338,509 shares were purchased for holding in treasury at a cost of £8,206,000. Since the year end, the Company has not issued any ordinary shares or purchased shares for cancellation or to be held in treasury.

8.	Net asset value per ordinary share
	The net asset value per ordinary share is based on net assets attributable to ordinary shares of £1,077,563,000 (2016: £926,738,000) and on 122,606,783 ordinary shares in issue at 31 October 2017 (2016: 122,606,783). The Company has no securities in issue that could dilute the net asset value per ordinary share. The movements during the year in net assets attributable to the ordinary shares were as follows:
		2017	2016
		£'000	£'000
	Net assets attributable to ordinary shares at start of year	926,738	712,633
	Total net profit on ordinary activities after taxation	173,008	172,253
	Dividends paid	(22,183)	(18,476)
	Issue of ordinary shares	-	68,534
	Purchase of ordinary shares	-	(8,206)
		-------------	-----------
	Net assets attributable to ordinary shares at end of year	1,077,563	926,738
		=======	======

9.	Dividend
	A final dividend of 4.80p per share, if approved by shareholders at the Annaul General Meeting, will be paid on 28 February 2018 to shareholders on the register on 26 January 2018. The shares go ex-dividend on 25 January 2018. This final dividend, together with the three interim dividends already paid, brings the total dividend for the year to 18.6p.
10.	2017 Financial Information
	The figures and financial information for the year ended 31 October 2017 are extracted from the Company's annual financial statements for that period and do not constitute statutory accounts.  The Company's annual financial statements for the year to 31 October 2017 have been audited but have not yet been delivered to the Registrar of Companies.  The Auditor's report on the 2017 annual financial statements was unqualified, did not include a reference to any matter to which the Auditor drew attention without qualifying the report, and did not contain any statements under Section 498 of the Companies Act 2006.
11.	2016 Financial Information
	The figures and financial information for the year ended 31 October 2016 are compiled from an extract of the published accounts for that year and do not constitute statutory accounts.  Those accounts have been delivered to the Registrar of Companies and included the report of the Auditor which was unqualified and did not contain a statement under Sections 498(2) or 498(3) of the Companies Act 2006.
12.	Annual Report
	Copies of the Annual Report will be posted to shareholders by the end of January 2018 and will be available on the Company's website (www.bankersinvestmenttrust.com) or in hard copy format from the Registered Office, 201 Bishopsgate, London EC2M 3AE.
13.	Annual General Meeting The Annual General Meeting will be held on Wednesday 21 February 2018 at 12 noon at Trinity House, London, EC3N 4DH.

For further information contact:                                               

Alex Crooke Fund Manager The Bankers Investment Trust PLC Telephone: [phone]	Richard Killingbeck Chairman The Bankers Investment Trust PLC Telephone: [phone]
James de Sausmarez Director and Head of Investment Trusts Janus Henderson Investors Telephone: [phone]	Sarah Gibbons-Cook Investor Relations and PR Manager Janus Henderson Investors Telephone: [phone]

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.

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