The Bankers Investment Trust PLC (BNKR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'd like to welcome you to the Annual General Meeting of your company. We have a combination of shareholders present, both in person today and also online by Zoom. It's a pleasure to welcome you all to the meeting. As it's now 11:30 and as a quorum is present, I declare the meeting open. Before we begin, there's a few housekeeping items. In particular, can ask anyone with a mobile phone to turn those off or at least to silent and also in the event of fire alarm, the Janus's staff will show attendees to the nearest exit. I'd like to start by introducing the Board. As you'll be aware, I'm the chair and I'm also due to stand down at the end of the AGM, having served 9 years on the board. On my left, to your right, is Simon Miller, who will be succeeding me as Chair at the end of the Annual General Meeting, having joined the Board on 1 January. To Simon's left is Julian Chillingworth, who's our Senior Independent Director; and to his left is Richard West. On my right, your left is Wendy King, who represents the company Secretary; Isobel Sharp, who is the Chair of our Audit Committee; and Alex Crooke, the Fund Manager. As you'll be aware, the company as the long-term aims to achieve capital growth in excess of the FTSE World Index and dividend growth greater than inflation, as measured by the U.K. Consumer Price Index, by investing in companies listed throughout the world. The Board continues to recognize the importance of dividend income to shareholders. For the year ended 31 October 2021, the dividend increased by 1%. This was double the forecast of 0.5% at the end of the previous year, given the uncertainty regarding the earnings forecast due to the pandemic. This resulted in the company's 55th year of annual dividend growth, as we were able to use some of our revenue reserve to smoother level of dividend payments. We are forecasting an increase of at least 3% in the dividend payments in the current financial year. I'd now like to hand you over to Alex Crooke and Gordon Mackay for their investment presentation, after which we will take questions.

Wonderful. Welcome all, particularly those in the room that have made the efforts to come and see us also. I'm really grateful to see some of the shareholders here, and I welcome everybody listening online. So presentation really. I mean if I jump on, normal things sort of review of last year. I'm very pleased to have Gordon Mackay, who manages our North American portfolio is going to give a few minutes on the positioning there, and I'll talk about the portfolio currently. The outlook has just got a very much, a little bit more clouded today, and we'll touch on some of that, and I'm sure there may be some questions. So let's sort of briefly -- I'll run through a little bit, I suppose, the highlights. Much of this is in the accounts. I'm sure I'm telling many of you what you heard before. The performance, I don't think I'm happy with performance. Last year was a very strong year for markets. I think you also need to remember with annual accounts or a snapshot of time. And obviously, we have to work through longer periods as it were. And so there's 2 stories here, I think, in very strong returns. One was very difficult and challenging 2020 and '21 was very much a recovery in terms of share prices, our financial year October to October '21 sort of straddles that. So again, we had -- I think we underperformed the FTSE world for 2 real reasons: One is our underweight in the U.S. The U.S. market has continued to really drive forward. Its 11th year of 12 years of the U.S. has outperformed all other global markets. And with our income requirement as well, we struggle to invest in all of the various highest technology shares there that have been driving the U.S. stock market. The other aspect was actually something that's worked remarkably well for 4 or 5 years, which is sort of Asia, broadly Asia exposure, I'll show you in a minute. You may jump down the next slide. This is looking at the returns, the line sort of represent the capital returns of markets over the 12 months. And the 3 lines at the top there, America, U.K. and Europe, definitely had sort of a great benefit of recovery of COVID, restrictions and vaccines working, whereas Asia sows the opposite, where it's sort of initial recovery in 2020 had a great year. Our Chinese portfolio was up 50% in the prior year. And this year, it was sort of down a little bit. So you can see really the Asian markets were the ones that struggled, China, Greater Asia and Japan, sort of in the middle there. So really, those are the 2 aspects, I think, which at the end of the day, meant we underperformed a little bit there. Again, part of the strategy is to be -- try and be a little bit more cautious in markets in sense of buying good quality names and companies. And in a bullish market like last year where really investors were hunting for the highest growth, the most sort of optically growing companies. Again, a lot of our names a little bit left behind. They're still participated. We've produced a very solid, you'd be Happy in most years to be up 26%, but a lot of them got left behind by some of those speculative names. Now at the end of the year, when we meet next February, we will see what's happened to a number of those names. There's certainly been some very corrective share prices so far this year-to-date. The other aspect, obviously, to talk about in there is the share price, which, again, a snapshot in time. We were on a premium the prior year-end. We sank a 5% or 6% discount at the end of October, and we've recovered to a premium today. So again, a lot of that factor will reverse out, one hopes through this year. So I've touched on markets there. There's lots of the accounts about what were key drivers in these markets, as I've said there. There's a funny, difficult year. It looks like most things have started, bottom left and went upwards. But within markets, there have been rotations between -- I suppose the stocks that are more economically sensitive. It's not just that they are value stocks, but those that are driven by an interest rate expectations or economic activity and those that are more sort of pure out and now sort of growth in the sort of last of markets to find these names. And we've seen some durations there, and we're seeing a lot more as we've started this year. And I think to me, that is regime change. We are going to see -- I'll talk on it later, inflation has risen very sharply and I think is likely to stay elevated. And so what's driving markets is elements of all of that. When we look at our returns here on the next page, again, the accounts, it's much clearer for you. But we -- again, last year, we had 6 of our 7 sleeves all outperformed. The laggard last year was specific, which is any one to underperform and look at what Pacific did this year, a 17% ahead of benchmark. Back to my again. These are snapshots in time. So Mike clearly running that sleeve got everything back that he underperformed last year and a 28% return in total. So really it was a good indication of sticking with good managers who I think manage in a very responsible way, have a good process. But some years, we struggled a little bit. Again, China is another example of that. China there, say, we're down 6% against the index. We were 20% ahead of benchmark last year. So again, on a 2-year basis, it's adding value. As I said, it was up 49%, I think, last shown capital terms, the market. So the other areas that we've struggled a little bit. Europe, very much -- we had again a solid year the year before, where we were up 8%. We're down 6% here. A number of our stocks we held on to, I think, maybe too long. They've rerated very well. They're not gone wrong per se. Some we did get wrong in Telecom Italia, others like Worldline business is solid, but the rating came back, and therefore, the share price rattled back as well. Maybe we should have taken some more profits in some of our names there. So elsewhere, I think Japan had a -- again, very much the market went between growth and value. We have a very balanced portfolio in there, and we were underwater very much in the first half as the market went back towards sort of very high growth, and we've got a lot of that back in the second half. So again, the numbers looking much more solid there. Again, that was 10% outperformance last year and flat this year. So on 2-year numbers, if I put that up, we look a lot better here. In terms of some of the stock contributors, unsurprisingly, when I've talked about America being still a very strong market outperforming global markets. So a lot of the stocks that have added value over the year are those U.S. names. Again, stocks at American Express really struggled in the prior year. We did take profits, and we've added to that [indiscernible]. The key bit there was the travel business within American Express, and obviously, 2020 when nobody traveled, it struggled a bit. And particularly, the U.S. domestic market has really recovered very strongly in terms of travel, airline miles is almost back to pre-pandemic levels in the domestic market, and you've seen American Express business recover very strongly there. Estee Lauder, another one, a lot of duty-free in that business struggled in 2020, great recovery in '21. On the negatives, James Fisher there is a small business, the one we've owned for 25 years or something. It is, I think, a very high-quality business. But probably in recent years has taken on too many acquisitions, had a little bit too much debt. And when we saw particularly some of some businesses around that, their oilfield services and their marine businesses struggled a little bit. We saw that debt pile become a bit difficult. They are making disposals. It's stabilized. It's actually up reasonable amount this year, but it did get hit quite hard. But again, as a business, I think we're supporting. Elsewhere, it tends to be sort of amazing Asian names there, which are getting struggled to add value to the portfolio. So finally, other highlights in here. I mean, I think, again, it's all in the accounts and Sue has mentioned about the dividend. I just raised the gearing there. We did take on some more debt in the year in July. Very much -- I think we are seeing the price of long-term debt beginning to rise. So I think in the last few years, we've had an opportunity to restructure the balance sheet. When I inherited this maybe 20 years ago, we had some very, very expensive debentures. Those of you who have been long-term investors will remember we've had debentures in double figure interest rates that were issued in the 80s and 90s, and they're all rolling off. The trouble we're just relying on short-term banking facilities, and we've got one with Sumitomo Bank is that when life gets difficult as we saw in 2008, '09 as the banks tend to take their mass for their money back and close those facilities. So that would leave us as a trust at a time when we wanted to invest not having access to long-term debt. So I think it's right that we put these facilities in place. Whoever inherits this from me, 1.67%, I think it's going to be a great interest rate for borrowing euros over the next 20 or so years. So I think this debt is very good value for us as investors. Our portfolio yields more than these new facilities -- these new loans we put in. So on day 1, we're net-net up in terms of the interest cost. Our dividends are higher than our interest cost. And therefore, over the next 20, 25 years, the capital appreciation, I do expect from those investments will pay back in handsomely, I believe, on these debts. So we will -- we've got a nice structure now, a little bit of overseas in terms of the euro currency netting off some of our European and then a nice sort of suite of maturities over the coming years. I might cut back on that. We -- again, here's the revenue line in terms of earnings and dividends. I think dividends back to back much quicker than I expected. I think when we wrote the accounts last year, obviously, around that time and vaccines were starting to be just rolled out, around about Christmas last year, wasn't it? And we all hope they'd have a good effect. And they clearly have had an amazing effect actually in terms of the virus. And so I think we've seen, therefore, economies open up much quicker than we expected. Companies, therefore, operating in most industries have recovered very much quicker than I imagined. And we've seen special dividends being returned, one of our Austrian investments BAWAG gave us all the 2020 dividend and the 2021. So we've seen a very strong recovery, which far exceeded what I thought we'd get. So we did need a little bit of reserves there, [ 100.2 ]. But I was still expecting really this year to be paying out of reserves in '22, would see into recovery '23. So I'm hopeful now. We will talk about economic activity is picking up, and we should see steady recovery in dividends coming from this point. So it's nice that in what I think is -- I think that dividend cuts, we saw, particularly in the U.K. will be once in a -- it might be once in a 100 years event in terms of the scale of dividend cuts. I've never seen it in my 30-odd years of investing. We've coped extremely well as a trust. And as you can see, we've only had 1 year there really of dipping into reserves. And then finally, a little bit about sort of our ESG credentials, I suppose. As you can read the accounts, there's a big section there now. We've enhanced that with a bit of engagement of talking about how we interact with companies and some topics we've discussed with some companies. So we do a lot of that and a lot more of that, and we thought we'd highlight 1 or 2 names in each region. We're looking to enhance the data we provide you as investors through our fact sheets and the website and in the accounts. But just to highlight, the trust isn't out and out and ESG, a green portfolio. But we do cater into serious considerations, environmental impacts of the companies we invest in, how are they planning for the future? What investments do they need? Their social and their governance aspects. And so you see that coming out here. And on the right here, this is our ESG scores, a quality score done by MSCI, who's one of the largest providers of data, and you can see it's sort of 20% higher. So it's difficult to quantify what 9.2 means, but I can assure you the companies we invest in have very good solid policies, as its saying, do these companies have policies. So they have views, they have investment plans to make the world greener and improve their carbon footprint, et cetera. And so we're in good quality, I think, well-invested companies that's telling you. And on the left, we have a much lower exposure to oil. So carbon footprint for the portfolio is clearly going to be lower. But against that as well, we are looking at companies that are transitioning that are trying to improve their carbon footprint on the world as well. So again, that's telling you we're roughly half the benchmarks in their carbon footprint. So again, that will move and it might go up, it might go down, but I think our style is likely to persist that we have a higher quality score and a lower carbon footprint than the index. I'm going to stop here, and I'm going to pause and let Gordon speak to you about our North American portfolio here, and it's predominantly it is all U.S. equities. And then I'm going to hand over to Gordon. Gordon, I'll move your slides for you. So if I jump on and you just asked me to make the next one. Thank you.

Thank you, Alex, and good morning, all. Apologies, I can't be with you in person today, but hopefully, you can hear and see me, find over this Zoom connection. So yes, as Alex mentioned, I manage the North American sleeve of bankers. I thought I'd run through just a couple of 2 or 3 slides with you today, give you a bit of an update in terms of how we invest and how we're positioned. So really, this strategy is all about looking for underappreciated high-quality companies where there -- we believe there are favorable long-term prospects for growth and where the underlying business we're investing in is not caused to causing societal harm. Now to that extent, we -- we prefer to define our own investable universe, rather than taking the index as a starting point, a much stronger preference to build the portfolio bottom up with our own best ideas rather than taking the index. A key part of what we do is focusing on what we think are going to be the predictable drivers of our business over the long term. So to that extent, we spend very little time thinking about and analyzing top-down macro factors, geopolitics, which clearly today and in recent weeks, are evolving very rapidly. That's just something on market sentiment. These are things that we think are not predictable in a successful way over time. And even if you did think you could predict them, you then have to work out what's actually priced into markets at that given point. So rather on doing that, what we tend to do is focus on the unique characteristics of the businesses that we're looking to invest in. Now that said, we do think there are a number of longer-term secular trends such as things like the growth of electronic and paperless payments, the growth of health care, driven by aging demographics. So we are prepared to look at those longer-term trends as tailwinds for the companies that we're looking at. But we tend to stay away from trying to make calls on interest rates, exchange rates and geopolitics. We focus very much on identifying high-quality businesses. We have a number of key investment criteria that each business, each company must pass before it would be considered for inclusion in the portfolio. I'm not going to go around through each individual, each individual criteria today. But suffice to say that we invest -- we only invest in businesses where we believe there is a sustainable long-term competitive advantage where the company is capable of generating attractive return on capital employed and where it's capable of growing its earnings at or above the rate of global GDP. And then lastly, in terms of the universe we look and we do try and avoid ESG rent risks and also identify those tailwinds. So here is really a prime importance to us to avoid those businesses that are really fundamentally tied to causing societal harm. And that's not just taking a model stance, actually, but thinking about the true sustainability of the business model that you're investing in. Now we don't believe that even the best companies are worth an indefinite unlimited price. And so to that extent, we do apply what we believe is a strict valuation discipline. Now our starting point here is always to take a 5-year forward projection of the cash earnings we think a business can generate and compare the PE on that basis to where the market is trading. And typically, if we can have a company that meets all our other criteria, including those quality characteristics, that trades at a very similar or ideally a discount to the market, then that tends to be a good recipe for success. It's not the only criteria we look at. We do look at underlying free cash flow yield and other metrics depending on the nature of the business that we're reviewing. But that 5-year forward cash PE is a starting point. And then finally, in relation to risk management, I think we tend to take a bit of a differentiated approach here. And really of prime importance to us is ensuring that we have to the best of our belief, a deep fundamental understanding of the business that you're investing in. I think the biggest risk to investors is a loss of -- permanent loss of capital. And to that extent, we want to try and understand the inherent resilience or not of the business that we're looking to invest in. And that, in combination with our valuation discipline, trying not to overpay for assets and also building a somewhat diversified approach is how we approach the whole risk management. If you could maybe step forward to the next slide, Alex? Thank you. So apologies if this is a little bit hard to read in the room. I'll cover the main points. So this is a stock example, American Express, a name that we've owned in the portfolio for a number of years now, and a name that performed pretty well last year and has continued to perform well through the start of 2022 as well. So Amex is unique amongst its peers in that it actually controls the underlying card network that its cards operate on. And why that's important is that it means that the company captures a lot more of the economics than its peers do. And by capturing those superior economics, that allows American Express to pay its cardholders very attractive rewards. And those rewards encourage the cardholders to spend more with our Amex card. And so what you get is this self-fulfilling positive network effect that feeds on itself. The brand continues to be strong and highly regarded amongst consumers. And we can tell that by just looking at Amex's new card growth, new account growth during the last 12 months, where what we've seen is not only accelerating account growth, but a very attractive skew towards younger demographics. So this is very much not business that's predicated on older people such as myself and Alex, is proving to be attractive to younger generation too, which we think should bode well for the future. Over 80% of Amex's revenue comes from fee income, which, again, we think makes it more predictable. And most recently, in the Q4 update, we had a positive announcement that management were raising expectations or targets for long-term growth to double-digit 10% plus revenue growth over the medium to long term and also mid-teens earnings growth. And on top of that, they announced a 20% increase to the dividend. So American Express has a long track record of returning capital -- surplus capital to shareholders, both via the dividend and also in share buybacks. It's pleasing to see that continue. Next slide, please, Alex. So this is just the top 10 holdings of bankers, North American sleeve as at the end of January. As you can see it's relatively concentrated. But I think what we have here is a good mix, a good blend across various sectors, including industrials, consumer, technology and the financial sector space. Over the last 12 months, we have had a bit of a shift in the portfolio in terms of our sector exposure. We have been reducing technology, a lot of a number of technology firms have performed exceptionally well in recent years. And to that extent, we executed a couple of names. So we sold out completely of Facebook, now known as Meta. We did that back in October 2021. And we also recently sold out of Adobe, creative content software provider. On the other side, we have increased some non-tech areas, such as buying into Otis, which I'll talk about in a little minute, is a worldwide leader of escalators and elevator installations and service. And we also added animal health care provider named Zoetis to the portfolio. But there's been a gradual shift until at the sector level over the last 12 months. Just looking at some of the names here. Clearly, Microsoft has been a top holding for a number of years now. In the North American sleeve, we continue to hold, as you can see, is a large position. So why do we like it? While Microsoft is a very large business now, the annual revenue run rate approaching $200 billion. But despite that, it's continuing to grow at a very attractive rate. So in Microsoft's most recent quarter, posted 20% year-on-year organic growth, which is actually quite incredible, I think, when you think about the scale of the Microsoft business. And the key drivers from Microsoft remain the growth of cloud computing, which more and more firms are shifting to for various reasons and also the continued growth of the Microsoft Office suite of products. Microsoft continues to be attractively valued trading on our underlying free cash flow yield of just around 3.5%. And with a clean balance sheet and the growth opportunity in front of Microsoft. We think that is still really quite compelling value. Obviously, I've already touched on Amex. So in Otis, it was a business that we bought into in May of last year. As I said, it's the global leader in the manufacture and servicing of elevators and escalators. And the thing that we really like about this business is its inherent predictability. And that's because over 80% of its earnings come from the service side of the business rather than new installations. Clearly, new installations can be a bit more cyclical in nature. Now Otis trades in a free cash flow yield north of 4% and it has opportunities to improve the efficiency of the service business through digitalization and remote service provision. It also has a very attractive dividend yield and indeed raised its dividend by 20% over the previous 12 months. One other business I'm going to touch upon today is CME Chicago Mercantile Exchange as it was formerly known. So this is the financial in terms of the sector classification. But in essence, it's a network of exchanges, derivative exchanges and actually the global leader of those. So CME has very strong market positions in a number of areas, including interest rates, equities, energy and agriculture. And over time, the business tends to grow with GDP over the long term. But in the short term, market volatility really can drive the business, quite dramatically. And clearly, in recent months, that has been picking up a fair bit. The other things we really like about CME is its inherent profitability as net margins in excess of 50%. It's a very cash-generative business and has a strong track record of paying that surplus cash generation back to shareholders, and that includes via special dividends. So based on last year's payout, CME is actually all trading at 3% dividend yield. We'll have to wait and see how 2022 plays out in terms of special dividend and share buybacks on an ordinary dividend. But I think it's a really good name to win for the strategy. I'll not go through the rest of the names just in the interest of time. But the one other point that I'd like to leave you today is that we are in North America, despite generally a challenged environment for dividend yield, as Alex touched upon, we are seeing good dividend increases year-on-year. So over and above the 20%, I touched upon on Amex. We've seen Union Pacific announced a 21% rise in its recent quarter, and we've seen 15% increases in dividends for the likes of Home Depot and also American Tower. So with that, I'll finish up. Overall, we still continue to see opportunities to invest in the States has become maybe a little easier over recent weeks with the correction in the market. And there are still decent opportunities out there, I think, for the sleeve.

Thank you, Gordon. So I'll turn to the portfolio very quickly and just conscious of time, and we'll rattle through quite quickly. But the -- not a lot has changed in the portfolio. I think you heard from Gordon there, what we've been trying to do is increase a little bit the cyclicality of the portfolio. So as economic activity picks up as COVID the lockdowns that COVID has given us sadly are released, we should see economic activity, travel, sorts of things coming back. And so we're trying to focus the portfolio on that. That's meant lowering a little bit of the growth side of the portfolio. So technology has lowered a little bit. Consumer staples we've been cutting back a little bit, inflation trends we're seeing. We will constrict consumer spending for many people. There's limited budgets and so volumes will be declining in some areas. So again, those are rightful thing I think to be looking at. Other than that, there haven't been some great changes. The dividend yield growth forecasts are on this page. They're a bit out of date because we did it a few weeks ago. And as Gordon is telling you there a lot of these numbers are much higher coming through. We've had a good report in the season from an income point of view. So I think that's all relatively optimistic. In terms of where we've been invested in regionals, again, these aren't moving a lot, little tick ups like in the U.K. there has more to do with performance. We really since the balance sheet date that you've got haven't been met investing in any particular region. And then finally, in terms of sectors, again, you can see the underweight, overweight against our benchmark here. And again, this is, I think, setting us up for economic growth, but a more balanced market from the previous 12, 18 months, I suppose, where it's been sort of more of that growth, we see a more balanced outlook where sectors like financials, sectors like industrials should do better, and that's where we've been net investing. We used to have a lot of consumer staples. We've cut that back, but do remain overweight. A lot of that is in the Chinese portfolio. So really, I might not labor the outlook. It's today's news is obviously very shocking and I'll be honest and expected. I think my view was that we would certainly see some conflict in Ukraine, and it would be another annexation of a portion of the country. It's certainly something we don't want to be seeing in any sense and the market is reacting negatively to that. So I'm till believe, though, that central banks are driving markets and investment markets. And this graph is showing you Central Bank's balance sheet is declining. So the -- I suppose, the fuel that markets have been driven by the sort of middle of the decade, you can see sort of balance sheet, therefore, expanding in that period as free money and various schemes were launched. And then 2020, the COVID was just off the scale relative to what was needed to recover us from a banking crisis, a serious banking crisis in 2008 and '09, just shows you how much money was thrown at markets. And to some extent, therefore, asset prices have reacted to that and risen. Now that's declining. It's going to go really go negative, that involves banks, central banks selling their assets. In the short term, I think not, but over time, these assets do mature. And we're talking about rate rises, and we've seen rate rises here in the U.K. and other areas in the U.S. as expected to. My view is, it's definitely that inflation is here to stay, but it's not in the 5%, 7% level that we've seen in short-term numbers. So my view is that wage growth creates long-term inflation. Definitely, labor markets are very tight for a lot of reasons. And we're likely to see, therefore, persistent inflation once we get through the bottlenecks and through challenges of various supply chain and transport issues in the 2% or 3% level, which requires interest rates to be a little bit higher than this, but not 3% or 4%, 5% that many of us, I'm sure, remember back in the '90s and obviously, higher rates going before that. So I think some of the fuel is being certainly removed. Markets need to therefore stand on their own 2 feet. We've just told you, Gordon's told you a lot about the company has invested in. A lot of these companies do well and are growing. And if I look at the GDP numbers forecast here for global economies, the sort of 4% of the world is the world of GDP forecast in '22. That relies on China, not growing and loss. Actually, 5% is quite low for Chinese growth. You can see that last year, at some point, the Chinese economy will decide to reopen. It's looking like it's the end of this year or into next year. But there's obviously some growth potential there, and it's the second largest economy in the world, and it will drive expansion in the Asian market. But the rest of the world is growing well above trend. Today's conflict does that change that. I don't think it does, but it clearly puts the risk premium of holding an asset higher because of uncertainty in a lot of aspects. And the key one it does raise is obviously the price of oil has reacted very strongly. We've had that through the summer, really with energy prices rising. And my view is that, that's now baked in for a 2- or 3-year period. I think Europe will have to think very hard about who supplies gas and where they find it elsewhere. And there's just not enough around the world in the short term to supply Europe. So I see very elevated energy prices for a number of years now. As Europe decides how it's going to get through that particular challenge. And that does reduce consumer spending. It reduces company margins a little bit. But I think the drivers of market -- is the world picking up? Is it growing? I do think it is. Corporates are in great strength in terms of balance sheets, their ability to pay us dividends. And we've just talked dividends is certainly a good aspect of growth coming through. So I'm not bearish, but I think we definitely need to be cautious in the next month or so. And just -- we all hope I'm sure this is a regional conflict and it's as minimal as possible to human lives. And I think it's very sad to read it. But I still feel from the economic -- it feels difficult to be dispassionate. But from an economic point of view, I think the U.S. market and some of those Asian markets will continue to grow very strongly over the next 2 or 3 years as we come out of the COVID lockdowns and the challenges that presented companies and countries. So I might pause there, and I'll take some questions. We'll start in the room, and then we'll take any questions that we have online as well. Have we got any questions online?

You already touched on this. So I'm asking about customer [indiscernible] and your views and impact on business. And I think there's a question here that [indiscernible] keeping safe and well not with COVID [indiscernible]...

Very kind. We are safe and well. Yes. I think again, so touching on Russia, again, is a very closed economy. We've had looked at all our holdings, how much exposure to that and there is a little bit [indiscernible] in Russia. So there's small elements of businesses that do transact in Russia. But we're very, very minimal. We really don't have much exposure. Again, here being with us a few years now, we've cut out our European holdings. Eastern European holes, we did have sold things in places in Poland and Eastern Europe. We've cut those a few years back. We've reduced our emerging market exposure outside of China and Asia in the last 2 or 3 years as well. So we have definitely thought about this, trying to be as [indiscernible] as possible. But this was not expected. I think we expect to see some annexation rather than a full-scale conflict. But I do hope it's regional, and it doesn't expand further. But it puts the risk premium up. So definitely, the market's reaction, I suppose, we're down 10% or 12% year-to-date in terms of markets is probably reasonable. But from here, we're going to -- at some point, we've got to link back into economics. My view is says interest rates won't rise quite as quickly as the market is worrying about. They'll be manageable. Inflation should be manageable, not 7%, but 2 or 3. And I think that's still a good backdrop for a lot of companies to grow their profitability.

Just a quick question. In your portfolio and on the Amex and Mastercard, in this industrials. Why is that not financial?

So just for those online, and they didn't hear that question, why are some of the financials like optically financials like the credit card companies listed as industrials and not financials? It's not me. It's the index providers. We use the FTSE Financial Times indices, and they group them as industrials. It's odd. I suppose you can see them more as networks. They provide the system for money to transact. And if you thinking more of that then as a lender, then they begin to look like industrial services or services company. I'm a bit amused if I'm honest, I would have put them in financials. I think of them as financials. They do -- some of them do lend, and they clearly have a book business of credit card loans as well in there. Sorry, they don't actually most of them, they don't have credit cards the banks that create the bank, the cards have the interest rate exposure. But clearly, they are exposed to economic activity. So it's not me. It's FTSE.

I think it's about us. I think it's under MSCI classifications, Amex Financial. And actually, Mastercard Visa have historically been classified as IT businesses. So that is a bit odd.

Well, if there are no more questions, I'll be around in the room. So please find me later. I'll hand back to Sue for the rest of the meeting. Thank you, Gordon as well for your participation.

Thank you, Alex, and Gordon. We'll now proceed to the formal business of the meeting. The news about the Annual General Meeting is set out on Pages 1 and 2 of the circular, dated 17 January 2022, which is sent to shareholders with the annual report. As set out in the midst of meeting, there are 13 items of business to be dealt with. The Resolutions 1 to 10 are ordinary resolutions and will require some majority to be passed. Resolutions 11 to 13 are special majority -- are special resolutions, requiring 75% of those costs in order for the resolution to be passed. If you have no objections, I'll take the notice calling the meeting is read. Thank you. In view of the uncertainty over the previous years around physical attendance, we'll be conducting voting on a poll rather than on a show of hands. The poll will be certified by Equiniti acting as scrutineer and for those aren't where Equiniti are our registrar. Are there any questions on the resolutions to be proposed at the meeting? Any one? No. Since no questions, we'll move on to the process. May I remind you that only shareholders, the proxies or the corporate representatives of any corporate shareholder are entitled to vote. Core cards were issued at the door of registration to those who are entitled to vote and should be completed by printing clearly before the name the shareholder, including any joint holders and if applicable, the full name of the proxy or the corporate representative. As we get to the resolutions, please place across in the appropriate box to vote for or against the resolution or to withhold your vote. If you wish to split your vote, then you can do this, but you need to obtain a second poll card from Equiniti and ensure that you indicate the number of shares you wish to vote on each resolution. A vote withheld does not a voting law and will not be planted in the calculation of the proportion of the votes for and against the resolutions. If there's anyone in the room who thinks they should have a poll card and hasn't been handed one, can you please raise your hand? If you've already returned a former proxy, your votes will automatically be counted included in the voting. So unless you wish to change the way in which you voted, you do not need to complete another poll card. However, if you still wish to vote, you may do so, the poll card will overwrite any previous rating instructions. As it will take time to complete the poll procedure, the final results of the voting will be announced to in London Stock Exchange and published on the website as soon as possible after the meeting. However, the provisional proxy that gets received so far will be shown on the screen behind me after the call has closed. I now declare the poll open. If you could please complete and sign the poll cards now. The resolutions are summarized on the screen. Could I perhaps just chat with anyone who's going to complete a poll card? Okay. Do you want me to take you through the resolutions or? Perfect. Somebody collected, yes. Okay, we'll correct it at the end of meeting. I now declare the poll closed. Equiniti shall now collect your poll cards and add this to the proxy votes, which have already been received. The provisional proxy figures, which were lodged before the meeting are now visible on the screen behind me. The final results of the poll taking into account these last few votes will be available later today on the website and announce to the market. Ladies and gentlemen, that concludes the formal business of the meeting. Thank you very much for attending, including those who been watching online.

Thank you. Before we move to live refreshments, I would like to say a few words to thanks to the Account and Chair, Sue, who's served as 9 years as Director of the company and since she joined in November 2012, and lastly 3 years as Chair. We've naturally benefited from her leadership and wide knowledge of the industry, particularly the investment trust industry and has demonstrated on many occasions, her responsibility to the shareholder. We thank you most sincerely for her service and shall miss the contribution greatly. Thank you.

Thank you, Julian. For those present here today. We have live refreshment refreshments, which I think is left and right down the corridor. So we'd love to be able to speak to you then. For those who joined us online, I really appreciate that you took the time to do so, and we'll hopefully [indiscernible] later. Thank you. Apologies. Thank you.