Capital Gearing Trust p.l.c (CGT) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. It's now after 11 and time to start the Annual General Meeting. So I'd like to welcome you to the 63rd Annual General Meeting of Capital Gearing Trust, not the 63rd that I've been to. I'm pleased to confirm that this meeting is quorate, and we can now proceed to business. I'd like to start by introducing myself and the rest of the Board of Directors. I'm Karl Steinberg, the Chairman of the Board and today's meeting. And my fellow directors, Ravi Anand, Wendy Colquhoun, Paul Yates, and Theodora Zemek. Alison Vincent, who's sitting over there, just put your hand up, it represents Frostrow Capital, and they are our Company Secretary. We are joined by several representatives from CG Asset Management, our investment manager, in particular, Peter Spiller, and he's put his hand up and Alastair Laing in case people don't know who you are and who'll be making a presentation shortly, so you will know who they are in a minute. We also have Computershare, our registrar in attendance to assist with the voting arrangements. Before we come to the formal business of the meeting, the investment managers will present their review of the year and their outlook for the year ahead. There will be an opportunity to ask questions about the company's investment performance and strategy after their presentation. And if, after the presentation, you have any questions, please put your hand up and a microphone will be passed to you at the appropriate time. It'd be very useful if you give us your name. After the Q&A session, we'll turn to the formal business of the meeting as set out in the notice of this meeting, and there will be an opportunity to ask questions about that formal business before voting takes place. Once the formal business is concluded, there'll be light lunch and refreshments. The Board and representatives of the investment manager will remain for the lunch and be available to talk informally to any shareholders. Before I hand over to Peter and Alastair, I'd like to remind everyone that the company has 2 combined aims. The first is to protect investors' wealth by cushioning the effect of falling asset prices. The second is to beat inflation over the medium term by at least 2%, compounded over time. During the most recent reporting period for the year ended 31st of March 2026, I'm pleased to confirm that the company's net asset value return outperformed inflation by 2.5%. The net asset value total return for the year was 5.8% and the share price total return for the year was 6.4%. The Board believes that the company's aims are achievable and attractive for shareholders to deliver at least 2% real per annum compounded over time with lower volatility than investment in a global equity tracker should be an important anchor in all portfolios. Other classes -- other asset classes may ultimately perform better, but they will have much scarier interludes. Having Capital Gearing Trust in the portfolio makes it easier to weather those rougher seas. Our investment managers will elaborate further on how performance was achieved over the last financial year and their outlook for the market and the positioning of the portfolio. Accordingly, I'll pass over to Peter and Alastair.

Good morning, everyone. My name is Alastair Laing. I'm the Chief Executive of CG Asset Management and a Portfolio Manager. And our role is to think about protecting you guys, obviously, primarily in a financial sense, but I should also warn you should a fire alarm go off, it's not a trial. So a bit of housekeeping, head down the stairs. Yes, that's how we get out. But on to the year. Yes. Disclaimer there. I guess I should probably say the value of securities can go up and down and nothing we say today should be taken as investment advice. So I'm going to touch on the highlights of the year to March '26. And then for the rest of the presentation, I am going to talk about, bring us up to date. So all the rest of the performance, I'm going to be talking about June, because we've had 3 months since the year-end. And yes, there's plenty that's been going on. So as Karl mentioned, the NAV and the share price total return were both around 6%. The company during the year purchased a little over GBP 100 million of shares, roughly a 2% discount. The discount control mechanism is there -- is one of -- is designed to protect shareholders from discounts. But clearly, one impact of buying in excess of GBP 100 million at a 2% discount is a slight NAV accretion. Fortunately, the math is quite simple there, a little in excess of GBP 2 million, which helps spread the cost of the company. So one other event that happened during the year is that the Board have proposed for this AGM, a vote on a stock split, 10-for-1 stock split. It's actually the second that Capital Gearing Trust has done. I think the first one was in, I think, 1986, something like that. So as Peter points out, the share price would be well north of GBP 100 -- were it not for that event. He's proud of getting it to GBP 50. But after the stock split, the share price will reduce to around about GBP 5, but you'll have 10x as many shares. So in aggregate, this will have no impact on the value of your holding. You don't need to do anything beyond the vote. Yes. So we use any -- obviously, we use any occasion to get Peter's long-run track record in because it's the best calling card we've got. But yes, this is to -- I've already mentioned the share split. So, right. 12 months, this is to the end of June. So the figures are similar, but a little -- just a little different. So this basically brings us up to date. NAV total return of 7.6% and I think share price total return just over 8%. And the portfolio, well, this return was delivered in the context of an extremely defensive portfolio. So we were actually delighted by that. As Karl mentioned, we hope to deliver over the medium term CPI plus 2%, at least that. And historically, we've delivered higher. But this portfolio really is positioned right at the most defensive end of its range, and I'll provide some information on what that means. So against that backdrop, delivering returns of almost 8%, which is a kind of equity type return, is actually was almost a surprise to us, but it's -- the portfolio really has been performing extremely well. A vast majority of those returns came from our risk assets, which in broad terms are our equities. And then we have -- that represent about 23% of the portfolio. And then we have about the remaining 77% of the portfolio in bonds of different sorts in a variety of defensive low-risk assets. You can see in that contribution over 4% of the 7.6% NAV total return came from the equity holdings in the portfolio. So that relates to the 14% of our portfolio that was in conventional equities delivered about 25% returns, and I'll show some examples of how that came about. And even the lower-risk equities in Property and Infrastructure have delivered around 15% over the last year. So after a couple of difficult years for investment trust, it's actually been much more fertile hunting ground. The rest of the bond portfolio, I will touch on, but the key change in the year has been a focus on short duration within the bond portfolio. So the last bit within our credit and within our U.K. bonds, we have had quite short duration. That means low sensitivity to rising interest rates in the portfolio for quite some time. The last bit of the bond portfolio where we had longer duration was in our U.S. bond holding, our U.S. treasury holdings. And the reason why we maintained a bit of duration there was for portfolio balance because we've seen historically in times when the economy goes into recession, when equity markets are very weak, that longer bonds have performed quite well. However, we took the view around halfway through this year that the pressure -- the rising pressure on long bond yields were so strong that we would bring in the duration of our U.S. tips. And also, given this was designed to be a portfolio stabilizer, we have also reduced our holdings in equities. So overall, the portfolio is extremely defensively positioned, and Peter will really touch on the key rationale for that. But if we look at it in asset class terms, these pink bars show the range since 2011, so over the last 15 years. And if you look at the risk asset piece, you can see that our weightings to risk assets or equities really are as low as they have been. The other kind of more risky asset class, not highly risky, but a little more risky is the corporate credit. And again, you can see that, that is underneath the kind of average that it's been over the last 15 years. And correspondingly, we have higher weightings to inflation-linked bonds and nominal bonds, all of which are pretty short duration. So this is an extremely low-risk portfolio, and we can look at how it performed against some of the tests. But just taking a step back a bit, we've historically presented these charts to show the underlying performance of our equities and our bonds compared to kind of comparable indices because it's quite hard to compare us as a company to others because we have quite a distinctive kind of defensive allocation. It's also good to keep an eye on how the underlying bits of the portfolio are performing. So on the left hand of this slide, you can see, again, going back 15 years, the performance of our investment trust versus the Investment Trust index and the U.K. All Share Index. Investment trusts are components of both of these indices. I think the best comparable is the Investment Trust Index. And you can see that we have consistently outperformed that index, and I will give you some examples as to why. Actually, more impressive in a relative sense, although lower returning in an absolute sense has been the performance of the bond portfolio. We managed to sidestep the worst of the drawdowns in '22, '23. And although returns haven't been high during a period of very significant bond rising yields, therefore, falling prices in the bond market. It has been a much more kind of stable and defensive ride. And this is really showing why you want to have short duration in your bond portfolio at a time when yields are rising. So that's why that defensive part of the portfolio has been more -- much more stable than wider bond markets. Okay. Well, that's pulling the portfolio apart a bit. Let's look at it back together because whilst there was no really horrible experience over the last 12 months, and this portfolio is set up to defend assets in a really difficult environment. There were a couple of little dry runs, should we say, the sharpest of which, and it's amazing that it was only 12 months ago was the liberation Day pullback in equity markets. The MSCI world. So the global stock market was very nearly off 20%, which is the conventional definition of a bear market. And you can see this portfolio was off a little more than 2%. So it was good to see in that tough environment, some of the defensive characteristics of this portfolio. The Iran shock happened right at the end of the year. It was a less sharp pull down in global markets, only around 7%. But again, the portfolio showed some real resilience. And that's great because 2022 was a real challenge for us, as many of you will be aware, the portfolio was off 4% over that year, which was our worst ever year. You had a combined equity and bond market sell-off and it was a very challenging environment for long-only absolute return managers like ourselves. But some of this kind of defensive performance is much more common -- much more similar to the kind of portfolio response to equity market drawdowns that we've seen historically. Okay. So much for the little tests thrown our way. What about the sources of return? It has been a difficult few years, particularly 2022 to 2024, '25 was difficult few years in the investment trust market. But I'm glad to say the last 12 months has been much more interesting for those of us who invest in these markets, and I guess a number of you do yourselves given you're here today. I'm sure you're looking at a number of other trusts. Towards the year-end, our 3 biggest positions within the conventional -- we do hold some equity ETFs. But looking at the underlying investment trusts, our 3 largest conventional investment trusts, the North Atlantic Smallers, BlackRock Energy and Resources and Impax Environmental Markets. Just very quickly touch on all 3 of these. But these charts here show the discount on 2 of those positions, BlackRock Energy and Resources and Impax Environmental Market. So this is the discount to NAV at which the shares are trading. And it shows the kind of opportunities that we've been able to look at. So around about a year ago in the spring last year, we built a large position in BlackRock Energy and Resources. It's a pretty small investment trust. I think we topped out at about 14% of this. It's quite similar to a larger investment trust called BlackRock world Mining. We think that there might be some benefits in these trusts merging, and we were raising some questions about whether this vehicle was subscale. Certainly, we thought that a 10% discount was too wide given the underlying assets are highly liquid. Over the period that we were discussing, this portfolio performed extremely well. The underlying NAV performance was very strong and the discount came in. So we actually ended up exiting in the market, delivering a 73% return over a little less than a year. But we have had a number of conversations with the Board about their need to have greater control of the discount. And I think some of these comments are landing a little -- I think Boards are taking note of some of these kind of situations more with the backdrop of Saba, which I will touch on briefly. But Impax Environmental, a similar story. This was one where Saba had taken a stake. We analyzed the situation. We actually only started building our position in November. We were able to buy about 1.5 million shares, which is quite a heavy share of that one. But we built a decent position on about a 9% discount in November, and we actually ended up tendering our entire position and realizing a 20% NAV total return over a period of less than 6 months. So there's been a number of these kind of opportunities that we've been able to recycle in and out of. Very quickly on North Atlantic, which we can certainly touch on in more detail. But that is our largest conventional equity position has been a poor performer over a few years now and was particularly poor over the last 12 months. And I think we actually mentioned in the annual accounts that we thought that this position was becoming a little -- it was becoming unacceptable. The discount had widened as well as the underlying performance being quite weak. We have had some conversations with the company, and we're glad to say that they appear to be taking a much more constructive view towards buybacks. We've actually seen a greater than 20% performance since the year-end, a very significant step-up in buybacks and a significant narrowing of the discount. So we actually think there's more to go there, but we're glad to say that since the year-end, there's been an improvement in that. And yes, so that's -- those are a few examples in the conventional space. A few more. We often get asked, one of the most common questions we get is why we have such a kind of long portfolio list. Such a long list of holdings. Well, the answer is we're often kind of rotating in and out of situations in quite a dynamic way. And here, this chart shows the share price performance over the year of 3 different emerging market positions. Collectively, these 3 positions made up a pretty decent just over 1% of the portfolio, which is almost 10% of our conventional equity holdings. They all performed extremely well, but for slightly different reasons. So Mobius Investment Trust, that's a small investment trust that we were buying on about a 10% discount with a certain knowledge that we could tender the shares at a fair asset value in around a year. So that's a classic example. We want to get exposure to a portfolio with the underlying performance of the portfolio with a certain knowledge that we will -- the discount will come in. That's a classic capital gearing trust trade, but it's actually been the weakest performer. So even though we knew that we would get the discount narrowing, as it happens ex-post, and it's very difficult to tell over a short time period before, it happened that the portfolio was -- portfolio return was not that strong, but the discount return was great. At the other end, we have the green line at the top there, Fidelity Emerging Markets. This has been an absolutely extraordinary performer. You can see it's more or less doubled. We've taken our entire initial stake off and it's still around 0.5% holding in the portfolio. This was a situation that had periodic tenders. So we bought in and we've managed to take cash out periodically NAV either at 15% or 25% tenders. There was also the company itself bought in 25% or maybe 22% of the Strathclyde Pension Fund, which added 4% to NAV. So there are all kinds of things going on, which made us believe that this was going to deliver a better performance for us than the underlying portfolio. Although as it happened, the underlying portfolio was extraordinarily strong because it was invested in a lot of semiconductor stocks in the Far East. We would have never guessed. We lack the capability of making the call 12 months ago that semiconductors were going to explode in value. But because we invest in a wide range of opportunities, we got a broad spread, and we're farming the discounts and we get exposure through ways that you wouldn't necessarily expect to a number of trends. And I would say just parenthetically that the -- this kind of AI-driven markets and in our view, frankly, a huge bubble has now spread everywhere. 12 months ago, it was just the hyperscalers, but now it really is everywhere. Energy producers, specialists industrials, obviously, the semiconductors, emerging markets, it's broadened out to look to us like a real bubble. And you've got to look pretty carefully across your portfolio because it may well be that the holdings you have that you think are unrelated to AI actually have AI exposure. And that is just something to be wary of across the portfolio. The final one very briefly, Asian -- Aberdeen Asian Focus. We got into that position by buying by the end, a majority of a convertible bond, which was just a very cheap way that was trading very cheaply relative to the equity. By the time the bond matured, we had more than half the entire issue. So we established a position and that went on to deliver 40% in less than 12 months for us because of the way we entered the stock. So suffice to say, we -- these opportunities often don't exist in massive size, but we monitor a really broad array of opportunities. We try and compile lots of different ways of generating excess returns. And that's part of the reason why we have small exposures to equities. If things are working well, they deliver outsized returns. That's exactly what happened in the year. So we can deliver acceptable overall portfolio returns without large exposure to risk because we have a majority of the portfolio in lower-risk assets. Very quickly, I'm going to touch on the alternatives. I've probably already been talking longer than I should have. But we have about 7% of our portfolio in alternatives, which we believe are lower risk than conventional equities. A majority of those are in infrastructure stocks. And a majority of those holdings are in what's called core or lower-risk infrastructure as we see it, companies like HICL and IMPP, which some of you may know. But these are companies with high revenue visibility and often government-backed cash flows with kind of high-yielding bond-like characteristics. On the activism side, we are an engaged investor. And this was an example of amongst our more high-profile engagements. But I would stress here that we are very different in our approach from Saba. Obviously, they have been very high profile over the last 12 months. We would say about Saba, they're the wrong answer often to the right question or at least an interesting question. Why should these discounts exist on some of -- on certainly some of the trust they've approached and should Boards be thinking harder about that. We would agree with some of that analysis, although not all of their analysis. But the idea that the best approach is then to Saba to take control of the vehicle, put their own directors on the Board and we will then allocate them the investment management agreement seems to us a very unsatisfactory outcome for shareholders. So, this was an example of a defensive form of activism. We only did it because we thought that our shareholders, you guys, many of you guys, were being disadvantaged by, in this case, a merger proposal between 2 infrastructure companies, renewable infrastructure company called TRIG and conventional infrastructure company called HICL. You can see from the share price performance of the pink and the green that the pink line is the value of HICL, the securities that we hold on your behalf going down at the same time as the value of TRIG was going up. And in our view, this aligned precisely with our analysis. This was a straight value transfer from the owners of HICL, which was us to the owners of TRIG. The terms on which this merger was occurring just seemed wrong. And I guess as an investment manager, you have 2 things you can then do. I think the conventional approach is simply to sell the situation and just say a plague on all of your houses. And we thought quite hard about doing that the day the announcement came out, but all credit to Chris Clothier, our co-CIO, who is not here today, but he just thought this was wrong. And by that afternoon, had drafted and put out a public letter making clear. It was just so clear that the terms of this proposed merger were detrimental. And you ended up combining a coalition of investors that we ended up fending off this proposal. And it's quite clear from the performance difference since that we saved all of the shareholders in HICL, not just us from a situation in which their interests were being -- were not being well served. And I think that's how we would see our activism. At least as we see it, we benefit our shareholders and everyone else on the register rather than engaging in some kind of self-dealing venture that results in us gathering AUM. So that's a quick canter through the main bits of the equity portfolio. We will certainly answer any questions people have on any individual positions or do grab us afterwards if you have interest, if anything is of interest. And just very quickly on the bond portfolio, which does actually make up a majority of the portfolio. But I'm just going to make a very short comment essentially. Interest rates have been rising. This will not come as a surprise to anyone. But on the right, you can see the dynamic of long interest rates, which have been rising very consistently since 2020. And on the left hand -- sorry, it's back to front from how I'm looking at. On the sorry, yes, on your left, you can see the -- those are short-term interest rates. And you can see that at the beginning of this year or 12 months ago, everyone was anticipating interest rates would be falling, but another burst of inflation linked with the Iran war has pushed expectations for interest rates up across the curve. I guess this is the backdrop, very large, because we're a defensive trust, we're always going to have very large holdings in fixed income. And a rising interest rate environment is a challenge, particularly when you start in an environment where interest rates are so low. So having our bond portfolio be very short duration has been the thing that has protected us and allowed these defensive assets to have some -- continue to deliver a contribution to the portfolio even in an environment that interest rates are rising. Interest rates are going up today, by the way, this trend continues. The yields on offer constantly improve, so that will ultimately become an opportunity. But, as things stand, we keep the portfolio of the duration quite short. We're happy to take returns between 3% and 5% on the defensive part of the portfolio and just try and deliver exceptional returns on a small part of the portfolio, overall delivering 7% or 8% returns over the last 12 months with very low downside during bear markets. That is a profile that we are extremely happy with because for reasons that Peter will outline, we think this is an environment for extreme caution.

All right. Thank you, Alastair. Good afternoon, good morning, everyone. I am Peter Spiller. I've been standing up at these AGMs for 40 years. And I'd say for a substantial majority of that time, I've been expressing some concern about the levels of markets. But today, I feel those concerns much more deeply, I have to say. So let's start off with the bond market, which Alastair referred to. And you can see on the left, the debt levels of the U.K. and the U.S. government over the last long period, 60 years. And these levels are quite extraordinary. It's easy to forget. And because there has been no huge reaction in equity markets, I think people underestimate quite how much has deteriorated. We did get some improvement on the left in the beginning of this decade with the burst of inflation. And I think that will be the only way that this extraordinary level of debt will be reduced. But since then, we've started to go back again, and it's just not been great. And it's worth bearing in mind that although we've expressed concern about this and it hasn't impacted equity as much, it sure has impacted bonds. So we have seen steepening yield curves, notwithstanding attempts by the treasury and the DMO to limit that steepening by reducing the issuance of long bonds. And that's a road which you can go down so far. But in the end, you find your printing money. So we remain very concerned about that, and we think they can steepen further. And on the right, you can see why they're growing. because these quite extraordinary deficits persist. And in the U.S., for instance, we're well over 6% expected this year. And Keynes, who is the man who first articulated the idea of countercyclical deficits will be absolutely mystified by what's going on in America because the economy is booming, unemployment is low. There is absolutely no reason for a stimulus. So it's a problem. And it has, as I mentioned, it's steepened the yield curve, and I think we'll do that further. And that bond crisis is a potential trigger of the bubble that Alastair has referred to. But there's another feature of these deficits, which is that if we had a downturn in America, there is absolutely no room for fiscal stimulus to offset it. So typically, downturns or recessions see an expansion in deficits as a percentage of GDP of 3% or 4%. So if you're starting off at 6.5%, then you really are in territory where not much can be done. And the importance of that is that it throws the whole burden of adjustment on to monetary policy. So we would expect to see if we get a downturn, really aggressive monetary policy and short rates being reduced close to 0. And that's going to be helpful to us, we think. It doesn't mean long rates come off, but short rates, we think will. And part of the background to this is that inflation is very well embedded in the U.K. and the U.S. So it's 5 years since we're at target. And this history -- so this is an IMF study of how long inflation persists once it's embedded. And it explains, I think, why it is that TIPS have done so much better than treasuries for the whole of this century. So they outperformed by about 1.3% per annum, an astonishing level of outperformance, which you would think couldn't persist, but it does because investors consistently underestimate inflation. So with those short rates coming down, we expect to make decent capital gains in that environment on our linkers. And that's why, as shown, it's about 45% of the assets are in that class. So is there going to be a crash? Well. Equity valuations are really stretched. So in absolute terms, we're looking at, they're very expensive. But particularly relative to bonds, they're becoming extraordinarily demanding because these bond yields, these are TIPS yields have been rising consistently. We're now -- you can get to 2.5% in the U.K. on a long index-linked bond, 2.5 real. And you can get to about 2.8 in the U.S. astonishing numbers in the context of a growth rate that -- the secular growth rate that's probably significantly less than those numbers. And so that's why although there are opportunities in the investment trust -- we just didn't want too much exposure to equities. Just putting a little bit further on that. So this is the history of CAPE. I'm sure you're all familiar with CAPE, with the 10-year returns that followed each decile of CAPE valuation. And on the right-hand side, which is where we are, you can see that when in the highest decile of valuation, the subsequent 10 years produced a real return of less than 1% per annum. And I should just emphasize that we are not in the middle of that decile. We are right at the bottom of it. So it's as expensive as we get. On the right-hand side, you might think this is rather better. So it's not good. The returns aren't high. But the but we're not absolutely the worst possible, highest possible PE. But let's have a quick look at the profits that those are multiple on. So we've got the Levy Kalecki model to give some insight as to where profit growth comes from. And the 2 big benefits, which we currently enjoy are the level of government deficit and which obviously stimulates profits and CapEx. So capital expenditure is always bullish profits because the payer, the buyer of the goods for them is a capital item. But for the seller, it's revenue and therefore, produces profits. And -- and then we've got an extraordinary low personal savings rate, which obviously also stimulates profits because people are spending more of their income. So profits have moved in the '90s, they are about 5.5% of GDP. They're now 13% of GDP. This is a powerfully mean reverting series. So we're -- we fully expect it to that percentage to fall. Therefore, the outlook for profits to be very poor. In other words, that these multiples are pretty high on profits that are themselves cyclically high. There is one additional element that I should mention, which is that tech companies in the U.S. have managed to capture a lot of profits around the world. So Europe provides huge revenues to tech companies. And so long as we don't really fall out and tax those profits high, that probably continues. So it's not all bad news, but there's enough bad news to make us really concerned. Just to remind you that we've had a little setbacks in the market of 15%, 20% in the last year or 2. But that's not a proper bear market. And so bear markets go down much more than that. I think I might say the NASDAQ in 2000 fell by something like 82%. So the equanimity of U.S. retail investors, I think, could be due for a shock. Moving swiftly on. So just to very quickly at the thread of the savings rate. The savings rate is about 2.6% in America. And undoubtedly, it's as low as that because people spend capital gains. About 60% of all Americans own equities, and they've done incredibly well not including those that are in Bitcoin. And they spent. So -- but in the bear market, when those capital gains reverse, I think it's reasonable to assume that the savings rate will rise very markedly. That's about consumption is about 70% of the U.S. economy. And if the savings rate were to go from 2.6% back to 8, say, that would obviously be a major recession in itself. So we have borrowed growth for some years. I think we might well pay it back in the next recession. And then moving very quickly on to the currency markets. So the most extraordinary feature of the Trump administration has been the behavior of currencies. Since the 1st of January of '25 when they started, Scott Bessent, the Treasury Secretary, had an expressed view that he thought the dollar was too highly priced. It was unfair on U.S. producers, and he wanted it to be lower. And he has achieved that, not to a huge degree, probably about 5%, 6%. But all the adjustment has been against the euro. The Far Eastern currencies have actually cheapened, particularly the yen. So the European exchange rate, the euro exchange rate, seems to me to be at levels where it's quite difficult for the European economy to breathe. It's very high. And that's particularly because the terms of trade have really turned against Europe. They used to turn cheap Russian energy into goods shipped around the world. Now the price of energy is higher in Europe than anywhere else, except the U.K., which is a champion in that respect. And the trade with China, it used to be that Europe exported sophisticated goods to China and bought unsophisticated ones for funding. But now China is absolutely competitive in technical terms with the sophisticated ones and much cheaper. So it's a big problem. And then we've had the tariffs that Scott Bessent oversaw. I think I can blame him, but perhaps that's unfair. And finally, the inflexible labor market, which has kept Europe from growing for 20 years relative to the United States, will get worse in my view, because the productivity benefits from AI will flow most to those with flexible labor markets. So that will be the U.S. principally. It used to be the U.K., but nothing -- we've had the Labor government to introduce the Employment Act. So it's now no longer the U.K. And Europe is definitely still largely unreformed. So sterling, just very quickly, we've -- it's pretty early to make any substantial comments about Burnham, except to say that the outlook is not good. So we've got no details, but we have got a framework. And the framework is to add more bureaucrats in the name of devolution throughout the U.K. to take more control of companies, to have higher taxes and to effectively nationalize parts of the economy. None of these are growth. So it's not an exciting prospect. Now the sterling has been held up by relative interest rates and because we pay more in our interest rates than anybody else in the world in the G7. But first of all, if the euro goes down a lot, I'm pretty sure that the pound will accompany it, number one. Number two, I think the particular problems of the U.K. could themselves lead to weak sterling because we have debt ratios, which are not worse than France or U.S., but we're not a reserve currency. We are not part of the euro system, and we exist on the kindness of strangers. And those strangers are not generous people. They are highly leveraged hedge funds. So we think there is every possibility of quite a sudden lurch down in sterling, which is another source of return for us because we have roughly 40% of the assets outside sterling. So just very briefly, the impact of AI, it's early days to say it's going to be. But anecdotally, we are getting a number of stories, which suggests that the principal impact of AI in the short term will be on so-called grunt work of professional firms. So what young graduates do when they join lawyers or hedge funds or accountants or whatever. And the depressing thing is that there are estimates as high as 15% of all highly paid jobs will disappear. And that 15% will be highly concentrated among the young. So I don't think that will affect many of us in the room. But we probably all have grandchildren, and I certainly have considerable concern for them. And so the other thing to say about AI is that I'm pretty sure it will improve productivity across the board. The degree to which that happens is very uncertain. But we're not at all sure that the hyperscalers will make any return on the vast investments they are making. And that concern seems to be creeping into the marketplace now and it explains part of the underperformance of the Magnificent 7. So in conclusion, we just want to say that the world is highly risky, but we do have a couple of areas where we expect to produce decent returns for you. So with any luck, I won't have to apologize to Karl and to you in a year's time when we meet again. Thank you.

Okay. Thank you very much, Peter and Alastair. Any more questions you have for the investment team and more of the investment team is here, please do ask them over lunch or ask the Board over lunch. Turning to the formal business of this meeting. You should have received the annual report for the year ended 31st of March 2026, incorporating on Pages 81 and 82, the notice of this AGM, dated 3rd of June 2026. May I take this as read? Thank you. If anyone has any questions relating to any of the items set out in the notice, so that rather than investment questions, I or our advisers will try and answer them now. If you have a question, it would be very helpful if you could tell us your name. And if you are a corporate representative or proxy, the shareholder you represent. But are there any questions on the notices for this meeting? Thank you very much. As the notice has been taken as read, I do not propose to read through each of the resolutions. The company secretary kindly provided me with some words to say about the share split if a question hadn't been asked about it -- well, a question hadn't been asked about it, but I think Alastair has dealt with it comprehensively. So if there are any other questions, please do reach out, but I think it's quite a simple and well-understood issue for all companies to do share splits. If there are no questions, I will now continue to explain the voting arrangements. In order accurately to reflect the views of shareholders who have voted by proxy in advance of the meeting, I will exercise my right as Chairman in accordance with the company's Articles of Association to call a poll on all of the resolutions. The directors who own shares in the company have voted by proxy in advance of this meeting. Many other shareholders have already sent in an instruction appointing me to vote on their behalf. If they have given me discretion as to how to vote, I shall vote in favor of the resolutions concerned on their behalves. If you voted online or completed your proxy card before the meeting and you don't wish to change your vote, no further action is required. If you have not voted and wish to vote now or wish to change how you voted originally, you should have been provided with a poll card at registration when you arrived at the AGM. Is that the case? Is there anybody who has not received a poll card and believe you need one? No hands. So I now propose formally that each of the resolutions set out in the notice is put to the meeting. Please complete your poll card and hand it back to one of our representatives, specifically sitting to my left. If your shares are held in a nominee name and you have a letter of representation, please provide this letter together with your completed poll card to our registrars. Since there are no cards to collect, we don't need to -- there is one card, 3 cards, 4 cards, it's like bingo. I prefer the old method of the hands going up. That was much better but the rules have changed. Any further, we get 2 further cards. Okay. I think that means we've collected all the poll cards. The registrars will now check the poll cards, count the votes cast and add them to the proxy votes received before the meeting. On to the final leg before we get some sandwiches and chat to the managers. The proxy votes received for and against each resolution ahead of the meeting are available in hard copy from the Company Secretary at today's meeting and will be included in the final count. The results of the poll for those previous votes plus the ones that you've handed in today will be announced to the London Stock Exchange by close of business today and will also be published on the company's website. For your information, proxies in respect of 26.2% of the issued ordinary shares were received prior to the meeting and at least 94.1% of the votes cast were in favor of all the resolutions. We, therefore, expect and hope that the resolutions will pass. This concludes the formal business of the Annual General Meeting. Thank you very much for braving the heat of London to come and join us today. And we now have lunch and drinks available, of the non-alcoholic variety, I think. So, and by all means, grab a director. It used to be you got lots of red wine. I remember the AGMs like that. But by all means grab one of the investment managers, any of the investment team or any of the directors if you have any questions at all over lunch. And thank you very much for coming. That concludes today's meeting.