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

Good afternoon, ladies and gentlemen. I'd like to welcome you all to your Annual General Meeting. We have a live Zoom webinar connection for shareholders who are unable to attend the meeting in person. To those watching online, welcome. As we explained in our AGM notice, the webinar format does not allow formal monitoring of live votes. So we have asked all shareholders to send their votes by proxy, and we will show all the votes received when the poll is being conducted. Please note that this meeting is being recorded. It is now midday. And as a quorum is present, I declare the meeting open. Before we begin, I have a few housekeeping items to mention. For those of us in person, can I ask you to check that any mobile phones are switched off for the duration of the meeting? In the event of a fire alarm, I hope there isn't a fire alarm, Janus Henderson staff will guide you to the evacuation route. I'd now like to introduce the Board. I'm the Chair. And I'm sure you are aware, this is my first AGM, having succeeded Sue Inglis last year. On my left, to your right, is Julian Chillingworth, our Senior Independent Director. Next to him is Richard West; and our 2 new directors, Charlotte Valeur and Hannah Philp on the left. On my right, to your left, is Wendy King, representing Corporate Secretary; and Isobel Sharp; and Alex Crooke, our Fund Manager. Over the long term, the company 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 and to achieve this by investing in companies listed throughout the world. The Board continues to recognize the important -- the importance of dividend income for shareholders. For the year ended the 31st of October 2022, the dividend increased by 7%. This was more than double the forecast of 3% at the end of the previous year. This has resulted in the company's 56th year of annual dividend growth, and we are forecasting an increase of at least 5% in the dividend for the current financial year. I would now like to hand over to Alex for his investment presentation, after which you'll be able to ask questions. Thank you.

Thank you, Simon. Warm welcome to all of you. Obviously, the first sort of real physical meeting we've managed to have with shareholders, so really pleased to have you all here. It sort of feels a long time. So tried and tested format to some extent. Here we go. Run through some of the highlights also I suppose, and bring you up to date with the current positioning of the portfolio. As a sort of diversion, I've got a video presentation that we'll just play for a few minutes, which is, Jeremiah Buckley, who is now managing the U.S. sleeve, so we hope the technology works for that one. And then I'll finish off with an outlook. So let's start really with the figures here. Again, frozen. You move me on. Thank you. Not a pretty year. It was a really tough year. Probably one of the -- actually, on a relative basis, one of the hardest years I've had in my sort of tenure of managing bankers. October is never a great month to finish the year, and this is particularly in a point at which it was really difficult to close the books as it were. So we're 8.5% behind the benchmark there. And I think really falling markets, we're used to falling markets because we know what to generally buy. They're usually driven by a financial crisis or an economic crisis. This was a very unusual set of events where really it was the anticipation of future events that drove the market down. And obviously, the really rapid rise in inflation forcing central banks to put up interest rates. And equities got -- were really caught up in that. In fact, all asset classes got caught in that. At one point, bonds, medium-term, long-term bonds were down 20%. Equities were down 20% as well. Real flight to -- ultimately to cash or safety. So really challenging. I think as a stock pick, a very challenging environment, where even quality growth or the quality names underperformed mainly because they were over-owned or their valuations were high. So we did find this very difficult. The other dynamic was energy really was the place -- the only place to hide in markets, and we were underweight energy going into the war in Ukraine. So compounded as well, I think, on the next page by really some differences in market conditions. And the obvious one here, the green line is China. Returns -- everything is benchmarked to 100 there at the beginning of the year. But you can see how in the last quarter or so, that green line sort of plummeted down as China was sort of doubling down on zero COVID literally to a day once we got into November, they released the population from their zero Covid, and the stock market responded very rapidly and proceeded to head upwards in a sharp order. But the 2 markets at the top there were the U.S. -- the orange and the dark gray, the U.S. and the U.K. The U.K., again, read about the press and you read our news that how dreadful everything is and cost of living crisis. But actually, the stock market had a very good year. Built, obviously, on the back of currency to some extent in the sense that a lot of stocks in the U.K. market are dollar, U.S. dollar exposed or dollar earners. And the U.S. dollar was through [ Mesa's ] period, pretty strong as well supporting those stocks. But again, a lot of bellwether defensive names in the U.K., which did quite well. So very challenging, I think, market conditions. And almost, as I said, the worst point to finish all this was end of October. You'll see later, we've had a very strong recovery against the benchmark in the last few months. So we're trying to recover a lot of that loss performance. The accounts obviously has lots of detail behind all this. I'd just maybe pull up the returns by different sleeves here. And again, the year before, we almost had every sleeve outperformed. So there's been a reversal of that. I think the key ones are the growth-orientated sleeves, so I'd sort of highlight North America; and China; and a little bit of Europe, really, which is, again, a little bit more exposed to growth investing. And those areas through that year, definitely, there was a return to investors preferring some more value-orientated cheaper stocks and selling off derating the more growth-orientated parts of the market. I put though on the right-hand side, the long term, the 5-year returns, which include these numbers. And you can see how really across the board producing some very good long-term returns, even though this last year, we've given quite a bit back in different markets. The U.K. continues to be a challenging market. Again, it's a very small subset, almost the top 10, the top 20 names were really the only place to actually get any return last year. And so it's a very narrow subset of stocks, which has produced good returns in the U.K. I'm sure many of you own smaller mid-cap names, where last year was a really tough year, again derating, principally coming out there rather than earnings disappointment. In terms of some of the names, no great themes. These are the contributors, the biggest contributors to positive and negative performance. On the left, really some, I suppose, earnings recovery in a lot of these names and defensive earnings in companies like ADP there in North America, but [indiscernible] is producing as a drug company in Japan producing very good sort of new innovating drugs there. Woodside Energy is that oil price really driving it. And then on the right, some of the negatives, principally derating again here. So there's a theme running through last year, where we've lot of stocks, they're doing well, but the market just decided not to pay the same multiple and so derated some of these names. Key on there at the top did have a profit warning -- COVID profit warnings. But again, it's done a bit better as the year-to-date. And then finally, some of the highlights in here. Again, it's all in the accounts for you. I think I draw out the dividend, as Simon was talking about earlier. We're a bit behind inflation in this period of inflation in the U.K. driven by a lot of factors, but a spike very hard. It is going to sort of fall off as the year develops. And I hope, really, I'm very confident in the income generation from the portfolio. So we're forecasting [ 5% ] there, and we'll see where we end up against inflation as the year develops. And then finally, the other one, I'd just remind you, we raised a substantial amount of debt for the long term in 2021, but at an average price of about 2%. If we did that today, we'd be looking at somewhere near 5% or 6% to borrow that money. So again, we -- I think we did very well locking in 25, 30-year money at that very low rate in 2021. So we'll all benefit as the years go forward on that one. So finally, let's move on then a bit of portfolio positioning and sort of a lot of these numbers of January bring you up to date. So the top 10 holdings there on the right showing the positions at the end of January. Again, it's sort of dominated by U.S. It's a lot -- sorry, not there yet, apologies. Hang on. There we go. Jumped to -- didn't jump fast enough. So top 10 on the right. It is focused on America. America is our largest exposure. So you'd expect to see sort of a number of names in there. AstraZeneca, though, creeping in #5, and total at #10. So there are some non-U.S. names in there. Again, highlight the dividend growth on the right there, that's the forecast -- Bloomberg's forecast for dividends on these stocks. So again, that gives us good, I think, comfort in the generation -- income generation of the portfolio here. I'm going to talk about the U.S. changing manager in a little bit in the next slides, but I think you can see really -- beginning to see some slightly different names in there. We went back 5, 6 years ago, very much a lot of technology names. That's where we felt the best opportunity for capital performance, not so much on income, but certainly generating capital. And now you see a much more balanced, I think, approach with a lot of names. Deere in industrial sector, more banks and JPMorgan rather than credit card names. So you can see us building a slightly different portfolio. I'd call it more balanced. To my mind, therefore, it has no bias towards growth necessarily. It has some growth names. We have some technology names. You'll see that in a minute. But equally, we have some more value-orientated names in financial sector, in particular, and some of the industrials. If we look at how the portfolio was positioned before we change manager and after, here, we got the November and then December after the changes. I think some of the key bits in there, you can see the P/E, price to earnings, on this U.S. portfolio is in line with the market. So coming from a sort of 23x earnings to more like 18. Price to book is about the same. Return on equity is actually higher. We are trying to buy good quality names, and Jeremiah will mention these, I think, a little bit in his section in a moment. I'd also highlight the yield is a bit higher there as well in the portfolio, which again gives us some comfort on the income side of the portfolio. But finally, when looking forward, actually, the growth -- although slightly lower sales growth, earnings growth than the previous portfolio. I have a lot more confidence in those growth numbers than I do in some of the technology names which we owned prior to that. So we are seeing downgrades in the FANG stocks disappointing a little bit in the last set of earnings. So I have quite good confidence in the earnings, forward earnings guidance and a lot of these U.S. names. And then if we look at sectors, how it's changed, you can see here, I think some of the highest industrials has been reduced in a slightly weird way of -- the way that the FTSE market splits up credit card payers. You'd think of them as financials. They are moving to financials, but they put half of them into industrial for some reason. So reducing exposure to credit card names has reduced in the industrials exposure there. But within that, financials, for instance, we've gone more towards traditional banks like JPMorgan, Morgan Stanley and reduced some of the other areas in financials there. Technology, you can see it's about the same actually, but we've moved from software to more hardware, particularly semiconductors, where the U.S. is investing very heavily onshore semiconductor industry. So again, there should be some benefits within there. And then finally, health care is another area that Jeremiah likes a lot, and we've increased exposure to that area. So some meaningful changes in there. But I think when I look forward, and you'll hear us from the outlook, I think you do need a more balanced selection of stocks than the last 10 years, which has been very much growth-oriented markets. I think we've got a nice mix there in that portfolio that I feel quite confident about. In terms of the whole portfolio breakdowns, we have been continuing with the market rally in the -- particularly in Europe and U.K. year-to-date and through January. We've taken some more money out of that market to slightly reduced gearing. And the markets had a very strong recovery last 2 or 3 months, and I think it's a good point to take some cash back into the balance sheet. So U.K. exposure down to 18%. But when you look through the revenue, and I've shown you this most years, you can see only about 8% of our portfolio is generating revenue from the U.K. So a very much reduced exposure there. And then finally, sort of looking at sectors right across the portfolio. I mentioned sort of adding to U.S. banks. I think now is the time you definitely want more interest rate exposure within your financials, less about transactions. So again, what we've been playing in the last 10 years is transaction-based companies as interest rates rising, you should be earning more of deposits. So again, trying through the portfolio to gain greater exposures to that interest rate -- so net interest rate margins rather. Elsewhere, if technology has come down across the board, get a little bit of market movement in there as well as activity and let's say less software and a bit more hardware in there. Well, I think with that, we might move to -- we -- just before we play this, I mean we -- one of my colleagues was in Denver. Jeremiah works in Denver out of Denver, with Janus Henderson. Janus was a U.S. fund manager when we merged. And their hub is in Denver, where we have a lot of analysts covering the U.S. market. And almost 2/3 of Janus Henderson's business really is based in that North American market. So we have a lot of expertise in the U.S. markets. And Jeremiah will introduce himself in a little bit, very much has been with the business for a long time. So it's more an interview. I've done it as an interview section of him reporting straight to camera. And hopefully, we'll put it on the website later on. So if we can play the video.

Hello. My name is Oliver Packard, Head of Investment Trust sales at Janus Henderson Investors. We're here to talk today about the Bankers Investment Trust, which in the year through to October 2022, has made some changes to its portfolio. Specifically, it's the U.S. equity sleeve, which changed in December to a different start. I'm joined today by Jeremiah Buckley, who is the new portfolio manager of this fleet. So Jeremiah, can you please tell us a little bit about your time with Janus Henderson and what it means to be managing money in U.S. equities here from the Denver hub?

So I've been at Janus Henderson almost 25 years. It will be 25 years this summer. I started as an analyst straight out of college. At that time I started focusing on U.S. large cap companies and have been doing that for 25 years and have built up a wide array of companies that I'm familiar with and comfortable investing in. We have great resources here in Denver as well. So we have an equity research team, a centralized research team of over 35 analysts. Those are global analysts. So about 15 analysts are very important to this portfolio that have meaningful impact from an idea generation standpoint, and so that team is incredibly experienced. A lot of them I've been working with for a decade plus. And so those relationships that we built have develop a lot of trust in both their process and their knowledge of what we're looking for, for this type of portfolio.

Okay. That's great. So 25 years. Have you always been fairly consistent in your style?

Yes, I have been. So I've always had a passion for U.S. large caps. I love following the big names in the market. I've always been focused with a bit more kind of conservative approach. I've always been grounded in companies that generate cash flow, that return cash back to shareholders, that are aligned with long-term investors like we are, who have kind of low turnover. And so that's been the passion over the time, and it's built my kind of experience to make me relevant in managing these mandates.

And so maybe just want to sort of touch on the mandate which the lead portfolio manager of Bankers has given you, Alex Crooke, and how you think that sits with the world as we see it today.

Yes. So I think it's a good environment for this type of strategy. First, from a market standpoint, I think it's conclusive that we're seeing moderation in inflation. Most of that is coming from goods inflation. We've seen moderation in the leading indicators for housing inflation. And so we do believe that the overall inflation numbers have come down. The sticky point is still that labor markets are tight. And while wage inflation is showing some signs of moderation, and we expect that to continue, we believe wage inflation is still going to be sticky for a while. And so we believe that the interest rate environment that we're in could be the environment for a while. We think the Fed and central banks are mostly done with the interest rate and tightening policies, but we don't believe that they're going to be quick to turn those around and go back to low interest rate policies like we've seen over the last few years. And so in that environment, we believe that it's important to stick to high-quality companies with strong balance sheets; consistent cash flows; the ability to -- through a slowing macroeconomic environment to be able to continue to pay those dividends, continue to invest in their business. And as a result of those investments, continue to grow the dividends over time?

How does the debate with you and the analysts work? Did they screen up an idea for you? And then you challenge them and say what do the earnings look like in 3 years' time? How does that debate work?

Yes. So it's -- there's definitely a lot of examples of that. But having done this for almost 25 years, I love finding ideas on my own as well. And so the idea generation is a combination of the analysts and their ideas when they come to us. And we have a weekly meeting called the classic growth meeting, which I think kind of reflects the type of companies that we're pursuing: classic growth companies. And so those ideas are presented, and we talk about what is the long-term growth outlook, what is the management team's strategy around capital allocation, where are they finding good investment opportunities. But it's also -- I love going through screens and thinking about how trends in the markets are changing and what is being penalized, which we don't think is warranted. And we'll go to the analysts as well and say, "Hey, let's go through this idea. I think this could change. And I think growth could accelerate or the multiple could be much higher. And so those dialogues will then kind of take place as well, and that's where the idea generation kind of comes from.

Well. I think that's we've got time to, I'm sure we look forward to seeing you in London and introducing to some of our investors. Thanks very much for watching.

Oh my, god. I think he's taken the same vitamins as Janus Henderson here. He would never say he was 25 years in markets. Really looks -- I really -- I've been -- I've known Jeremiah, right, since sort of 2016, 2017 when we merged. So I'm really pleased that I've got him onboard, and I think he really will be a great asset to us as at Bankers. I mean, again, some of the takeaways to me, a long-term investor, low turnover, cash flow, quality balance sheet. I think it's all sort of things that really sums up what we've been doing for 30, 40, 50 years really in this trust. So I'm very excited, I think, going forward there. Let's quickly I'll wrap up in a minute. Very quick outlook. Jeremiah talked about this. Sort of my view, very much sort of changed with him. Inflation, I think, is going to be a bit stubborn. So I'll show you a little bit of that. And I think, therefore, income and capital is sort of where it used to be hand-in-hand. The last 12, 15 years has all been about growth and capital returns. Income has been a bit left behind. But I do think they're going to come back and be much more sort of hand-in-hand in terms of driving returns. And then finally, the outperformance that we've seen in the U.S. market, I think, is beginning to fade a little bit. Why is inflation going to be stubborn? Well, here's a graph which shows sort of massive spike. This is showing U.S. They call it checking accounts, deposit accounts, whatever it is, cash in the bank in the U.S. market. And you can see the numbers that don't really represent. These are thousands -- these are trillions really. So 5,000 is 5 trillion [indiscernible] bank account, they did that here, and they're being spread. So we'll probably see this dip down quite sharply for the -- when we get the December number post-Christmas. Again, the other side of this is credit card balances. So people are spending on credit cards and pay them off later from deposits. But in my mind is there's a still decent slug of savings to support economic activity. In the U.S. as well, we also have very low unemployment. Actually, the job surprise the other week was on the positive, and then wage growth picking up. So I think we're not saying inflation is going to stay at 10%, but it's going to be really hard to get it consistently down to 1% or 2% that we had before. And when we looked at the 70s and periods of very high inflation when you start raising rates, you tend to get it rolled over and then you get a secondary balance, again, as sort of the seasonal and the short-term elements move away. And I think we'll see that here. We'll see that in the U.K. Again, we're talking about shortage of vegetables in the press now. But you'll get some seasonal benefits as the U.K. sort of gets going through the summer. And then again, it will come back, I think, in the second half, where some of this inflation is just stubborn. When we look at inflation against 10-year long year rates, it's quite interesting. So here on the graph, the orange line is the U.K. 10-year government bond yield. And we're always told sort of in our -- when we learn about markets and economics, the 10-year yield is the market's reflection of the future inflation over the next 10 years. It's not really. It's a very bad predictor of that. But what it does do quite well is the last 10 years rolling average, plus 200 basis points. And again, you -- if you look there, right back to the '60s, it's a reasonably good approximation and something happens called the GFC in sort of 2007, '08, which broke the system. And the rates went down to sort of heading towards 0 as you can see. We're actually in a10-year pre-historic inflation in the U.K. was. Certainly RPI was still nudging along at sort of 3%, 4%. And I just see it as normalizing. We're actually finally getting back to long-term rates normalizing. And on this evidence, there should be sort of 4-ish, 4% or 5% in the U.K., 3.5% today. So my view, again, is that we're not going to see much more help from rates -- long-term rates falling. And then the U.K. and like the Fed are probably going to have to keep interest rates at these sort of levels for longer to get some meaningful impact on the economy and inflation. When we look again, and this is a graph showing back to my point about income and capital, so this is showing you in each of the last decades all the way back to '30s how much of the market's return -- total market equity return is income and capital. So the orange bars are capital. Obviously, income is always positive because you're clipping your dividends. In the '30, obviously terrible times to invest in the market, negative capital. Actually, really apart from the 2000s, you've generally made pretty good money. And I sort of see the '60s to '70s here hand-in-hand sort of equal returns from capital and income as a good model of what we're probably in the next sort of 4 or 5 years is likely to bring. And again, that's why the Bankers' portfolio, I think, is set up nicely for that sort of environment if it comes through. In the next slide, I'll just sort of show you here on the right, this is the Bank of England's forecast for the U.K. economy. We're expecting a recession. That's why the market sort of was sold off last year. Everybody worrying about rates go up. That always drives the recession. They're forecasting a very different recession to what we traditionally see. So you can see the financial crisis, really deep. Everything went to the floor very rapidly and actually recovered sharply. Their estimates are this sort of long, slow, shallow economic period of economic activity sort of declining. And I think there's something in that, that we'll see certainly in the U.S. and Europe with but probably into next year for the U.S. market as these rates begin to glide. But that's not a bad place to be from an investor's point of view. There'll be plenty of companies that are doing well. Nominal growth is okay. And so I think there's plenty of companies will make good profitability and share prices perform well. And then finally, my comments on the U.S. Here's the U.S. earnings, the black line, again, going back many years. And you can see it just that recovery we've seen from sort of the GFC low. That's why U.S. equities have performed very well. A lot of this is driven by the technology sector as sort of FANG stocks, Facebook and Amazon, et cetera. It really has been an amazing time for them to generate earnings. But a lot of that tailwind is easing off. Regulations picking up. You can't just keep getting bigger and bigger. So they're having some struggles, I think, in terms of growth. And when you look at here on the next slide, the blue line here is looking at those U.S. earnings but relative to European earnings. And again, the last deck, this goes back again to GFC, I suppose, in 2009. And the great reason why the U.S. has been a good market to invest in because it's grown consistently its earnings quicker than Europe. But you can see here, since sort of something has changed sort of middle of COVID 2021. That woosh up of technology stocks benefiting from the first phases of COVID is easing away rapidly, and I think the market is only just picking that up in the last sort of quarter or 2. The orange line is U.S. equities against European equities in a sort of flatlining, but it's beginning to change. And I think there's plenty of elements in here as European activity picks up. Again, I see the recovery a bit quicker in Europe than the U.S. I think this will carry on. So again, this is how we're structured. So finally, bringing you up to date, and I'll take some questions in a minute. But here's the figures for what we've been doing since the end of our financial year. And back to my point to that -- and it was a tough year. I want to get the earnings back and the relative performance. But we're in the 5.5% up since that year-end. Basically, China has recovered very nicely. U.S. has started underperforming, and a lot of stock selection from the managers has turned positive as well. So we're eating into that underperformance rapidly, and we've obviously got the rest of the year to keep going at it. So with that, I will turn around to any questions before we get to the fun bit of voting.

Please put your hand up, somebody will bring you a microphone, please identify yourself. And those of you on Zoom, please type into Q&A and the secretary will get that, and she will be with that. So are there any questions? How about the gentleman in front here? Here's a microphone coming, making its way around the back here.

Dennis, private investor. Interesting presentation. Thank you for that. And very pleased to see 3 words consecutively, which warm a lot of investors hearts and that's progressive dividend policy. And I think Bankers' dividend is -- feels as reliable as night following day, really, which is a great security to have. But there, the plaudits end from my own point of view, because 5 years underperforming your index. And I tend to look at share price rather than net asset value when I talk of these things, and I think the underperformance of 5 years is about 25 basis points from your annual report. That would seem to me almost the perfect advert for a world tracker fund as an alternative. So I wonder what your thoughts are on that ?

Yes. And I think with the 3 main objectives of income and capital, it's very hard to own the sort of perfect set of stocks that we're driving the market through the 2010s post that GFC. We do -- we love our dividends, and we want to pay dividends to our investors. So we've got to own some stocks that pay dividends. And that was a lot of the challenge, I think, in the last decade. We look at the '90s and 2000s going back and say it's a lot more even. And the chances to outperform, we outperformed in those periods, global markets. So I think we're returning to that. I think the chances of us getting a lot of that performance back are good. The other challenge has been the mixture of, again, having the U.S. market got down to sub-1% yield. And it was, again, really hard to get it 70% of my benchmark. And as I showed you, the last -- particularly '19, '20 was a killer of a time to try and outperform it. So yes, I'm not happy with it. The last 4 or 5 years, it's been tough yards. I think we are going to get that back there. We're working very hard.

And may I just make one point about the annual report. You've got a stewardship page, I think it's Page 3, and I assume that's going to go forward be reprinted each year now as part of the annual report. You might want to look at the very last sentence in the cost split, Part 7. Because to me, it's not a dramatic sentence. So perhaps somebody could look at that.

No, we will do that. Thank you very much. Thank you for both questions. Any other questions, gentlemen?

Marvelous to see you again.

Could you identify yourself please.

Phil Clark, I'm a long-term shareholder. I noticed that you're underweight on oils and miners. I know oils and miners don' really fit but they're not very s***, don't kind of fit with your portfolio. But I was struck by a couple of things recently. First of all the piece by Tony Hayward in the Daily Telegraph, which talked about the underinvestment in hydrocarbons that's going on, which will actually potentially give the oils a really good decade coming up. And he highlighted that we've had an exceptional winter for them, and next winter could well be the same again. And I wouldn't buy oils today. But given that the market price is invariably wrong for them, then they might be a really good holding, but you're underweight on them. I mean the thing is the miners. Glencore puts us an astonishing note, we showed how little or how much the deficit on copper was going to be by the end of the decade and copper miners in particular, but also lithium and some of the others. And I know you've got Anglo American in there. But isn't this sort of a good time to be overweighting those, especially as the prices fluctuate as they do? But in terms of as a holding for the next decade, aren't they potentially wonderful?

Yes. Tends to be wonderful there. We have fluctuated between overweight, underweight mining. So mining, we get is a -- it's a critical industry. As you say, we need a lot more copper within the industry there. But it can get over owned and a bit expensive relative to the underlying commodity prices. So we bought a lot, I think, sort of my memory, sort of 2021. Last year, we were a small net seller of mining, and we'll probably be back in. I think over the next 10 years, it is definitely a sector to what we want to own. There were some challenges. The corporate governance and other aspects of that has been very difficult at times, and Glencore is a good one there. You've got to be very careful what you own there. So I think we have to be a bit cautious but we like that sector. Oil has been the one we have struggled with. And I think pre the invasion of Ukraine, what we saw, as you say, is underinvestment. So returns falling from the oil companies. At the same time, as governments very clearly being anti-oil and they're trying to drive it out of the economy, and policies therein to try and reduce the amount of oil and carbon that we burn. So the fundamentals look really quite poor. And then a lot of the companies are investing heavily into new generation, but at very low returns on equity. So that sort of left us sort of looking at a sector that wasn't too exciting. A lot of that's changed though with the Ukraine war, which isn't going to go back. So you've taken a huge oil-producing economy really out of Western markets, and I think things have changed there and we're sort of reevaluating. We have bought more oil. Woodside is out of Australia was an investment we bought more Total. We're not overweight there, and I think still struggling a little bit with some of those long-term opportunities and particularly their reinvestment of cash flow. So we're going to see it going to oil projects or into low-returning wind generation assets. So that one, I'm still with on the fence a little bit. But mining, we do like. And given valuations, we'll probably be overweight.

Okay. Gentleman here in blue jersey.

My name is [ Jeremy Dobbin ], a recent shareholder just a couple of years, long term. Two aspects. First of all, from your annual report, I'm very pleased to see that the manager has a substantial shareholding. Thank you very much. Your pain is my pain. That's very good. I like that. Secondly, as far as the returns concern, I'm sort of a recent shareholder. So I look at this graph, and I suffered because of -- as all shareholders have based on the last couple of years. You all -- you talk about your exposure to the U.S. being slightly lower than the sort of the benchmark. But my understanding in the U.S. is that the U.S. returns have been broadly moved by only sort of 5 or 6 stocks being the technology stocks. So you could have been in the U.S. And if you haven't invested in those stocks, you would have not had the returns. Is that -- am I correct in that assumption, please?

Yes. If you underweight the FANG stocks, you'd have underperformed significantly in the U.S. market, yes. I mean the problem with the index, you remember the index is backward-looking. It's an accumulation of the largest companies in the world as it were by market cap. It does have -- there's no forward signal in it. There's no element of value or opportunity going forward. And therefore, we've had a very big period. Obviously, a lot of investors have gone passive for costs, other reasons. So a lot of money has been flowing into these industries, and particularly the U.S. one. It's 70% of global stock markets by value, but the economy is only like 30% of global GDP. And I look a bit more at that. And think where is the GDP growing, where do our companies want to be operating in. And that takes you a little bit more away from the U.S. It doesn't -- certainly doesn't say put 75% of your money in the U.S. market. And those names you were mentioning, the FANG names, very few of them have dividends. Again, I've got that conflict of running an income and a growth fund. So...

I like dividends.

So we all like dividends. I like the dividends. A couple more and then we'll -- I'll be around afterwards. But questions, one there and one on the right.

[ Tom Gabriel ], private investor. The -- for the past few years, the -- one of the attractions of bankers has been the focus on some very productive markets. And I think, in particular, China has been very good. It's been spread very nicely. In looking at your portfolio, I think the -- looking for what might be missing and the one obvious area of apparent omission might be India on the basis that the last 2 decades have been very much China's decade. The next 2 decades may well be -- India may well be going on. And I just wondered if you were -- if you're going to be increasing your exposure to the Indian market to try and ride that.

Yes. So we have a Indian license like we do in China to own local shares, so we don't have to own them listed in other markets. So we've got the chance of getting a deeper exposure to India. We're back to the price and opportunity. And the Indian market, I think, a lot of locals buying it. International -- it's been very expensive for the last few years relative to the growth opportunity. That will change, and there will be a chance to go in and own more of that. I think there's -- we're there. We're ready for that. I don't know, Mike, do you want to kind of have a word? I might drag him up. Mike, and I think Mike clearly runs our Asia Pacific with India in there. But...

Yes. So those of you who've seen me before, no, I'm not the greatest fan of India. And the problem, as Alex says, is valuation. There's a lot of expectation built in, I'm fully behind the long-term story for India. Don't get me wrong, but there's a price to pay for everything. And again, going with the Bankers' idea of capital growth plus income, I can guarantee there's very few income stocks in India, when valuations in also 20x earnings. So we think the U.S. is expensive, India is more expensive. And yes, there's growth. Yes, there's growth. Of course, there's growth. The demographics look great. Young population, terrific. However, at current valuation points, you can buy the same level of growth in China at half the multiple. All right, China has had a tough time. India's weathered the storm nicely. But from this point in time, as of now, you can pay 10x earnings for 15% growth or you can pay 20x earnings for 15% growth. We think there's better opportunities in China over India at this point in time.

Thank you. We never say never.

And we do have the opportunity to gentlemen over there.

Monica Rednam, shareholder. A great many of my investment trusts have had a very volatile year and their turnover rates are pushing 20%, especially the last 6 months. I just wondered how you compared on that front because I haven't had a figure up for that. Obviously, 6 months is a bit difficult. The next point is China. I'm not very happy about China having done 10 trips there, some of which were a month. They've still got a building bubble, unfinished buildings all over the place. The government is interfering left, right and center. There was an article in City A.M. this morning about all the major accountancy firms are going to be kicked out of Chinese government bonds. So there'll be no audit supervision, whatsoever. Your risk is going up all over the place, and they've also got a bit of a demographic problem, as you probably know. So I would urge caution on China and especially as the Americans don't like them at all. And you've got more in America. And the next question is, has anybody looked at South America? Because they've got lots of lovely miners.

I think there's 3 questions in there. So I might run through them quickly, and I'll have a chat at lunch. The turnover, so our turnover will be elevated because of the U.S., change in the U.S. portfolio. So exiting that out, we normally run about that 20% level. Last year was probably quieter actually. It is in the figure somewhere. Because in the sort of second half, I think there's a lot of activity around pre, post the Ukraine invasion. We look through companies that are big energy users, where a company's cost is going to rise very rapidly that they probably can't pass on. And we did take some corrective action in a number of stocks. And in the second half, it was sort of much more, I don't know, balanced in terms of some of the macro events with just rates going up, and we didn't do a lot of turnover. But I think you want to think of 20% holding period of 4, 5 years is sort of normal for this trust. It might fall a little bit because Jeremiah is a buy and hold, tends not to turn over a lot. So it might trend lower. But again, you're right, it's a cost. We need to keep an eye on turnover for the right reasons. Then we had China. I agree with you. There are plenty of risks to invest. More risk than anywhere else. So we're very harsh on ourselves about the opportunities and the returns that it can generate. But I still think it's a very large economy. And I think to have nothing in there, no exposure would be wrong. We need to manage that exposure. And the last sort of year or 2, we've taken money out. We cashed up, we've put burn money back to work post COVID. But if it goes up and the price is wrong, we'll move it out again. The government to my mind, the regulation, you do have to be incredibly careful with that. You're again very right on that point. And we've tried to avoid those education stocks. We're trying to avoid the big technology names, where the government is very much focusing on those names. Much of the story to us is about just consumers spending a bit more money, getting more wealthy. And, I think still, that story has some more legs to run. And although the population is rolling over, it's worse in Japan. And Europe, probably without immigration, would be not far behind. So I think those demographic trends are something we're going to see everywhere that we need to think about. But as we were talking with the Chinese manager earlier, actually what you're seeing which you're maybe not appreciating, I think when you look at the demographics is the quality of the workforce is materially improving over the last 20, 30 years. Most people coming into the workforce now have degrees, specialization in lots of industries. And so the quality of the workforce though it's declining, is improving. And at the same time, there's a lot of opportunity for automation and robotics within a lot of industries. So I still think there's opportunities. But rightly, it won't be 30% of the book value. We'll make sure we're very careful in what we owned and look after that. And the last one was sorry, what was the -- South America. We have been there before. We've had some horrendous issues of corporate scandals in which we've managed to avoid. We own Petrobras for a long time, and then got a bit worried about it, and there were plenty of issues there. So it's -- again, not never. We'll look at it, but the currency can kill you in those markets. So again, I'd much rather invest in companies that invest in those markets or have activities that can manage the currency with local manufacturing a lot better than we can as investors. We might -- I'll take some questions because I'm conscious of time, and we've still got the rest of the Board meeting. But I'll be next to offer some questions to come in.

Would you like to just have one more question? That guy who's been trying hard for these questions.

My name is Allan. My apologies. This is for either the Board or Alexander. I'm apologies if I'm possibly being unintentionally facetious or even pedantic. In Alex's opening remarks, he said that 31st of October was a bad date for a year-end. If that's the case, could you explain why it is? And if so, would -- is there any merit in considering a change in accounting date?

It's just -- it's seasonally -- [ Michael Moore ] is in the corner there, previous manager, so we go back between [indiscernible] long time there. It does seem seasonally October is -- bad things seems to happen in October. We have winter storms, and we have market crashes. The front end of the year, usually find markets performing better. But something about October, that it's just -- it is a tough year. And Michael always told me at least get started at a lower point for the next year. So there's always positive to see in it. Changing year-end is probably too much. But I'm -- this year was one of the worst to end of that October. I don't think we're planning. Wendy would kill us to change the year-end.

Do you mind so that we move on unless it's very urgent. Please ask it then. This really is the last question.

My name is John Burke. I'm a shareholder, and then I'm a financial journalist, and I've met Alex Crooke before at AIC briefings. I have a mixture of comments and questions, which I will get out as quickly as possible. You don't need to answer them all now. The first of all, South America, no need to comment on this, but Foreign and Colonial tried that many, many years ago and got their fingers burned. Secondly, I would like to congratulate the Board, all the gentleman for wearing ties and suits. I would like to know either now or later why it is that you call yourself Chair instead of Chairman when there are several leaders and other investment trusts, who call themselves Chairman. And the third thing is very briefly, defense stocks worldwide.

For the Chair one. That's an interesting one because I was presented with the title because that's what the company uses. By choice, I would have used Chairman. And I'll leave Alex to deal with South America.

Yes. Well, we -- it's been hard work over the 20 years. We've had some quite difficult times, and I agree with you with F&C. But defense is more interesting. It is -- most of the sector is nationally-owned. So there aren't huge investment opportunities in a lot of markets. But in the U.S. change, we did increase Rockwell in there. It's quite heavy defense, and general dynamics as well. So we have increased defense stocks within there. And again, you can -- there's a philosophical ESG argument. We're not an ESG trust per se. I think we're very mindful of social issues, governance issues and environmental issues. But I think defense is an important aspect of keeping civilizations going and social enterprise. So I think it's not for us a sector we don't invest in. But if there are difficult opportunities and you end up often very lumpy sales processes, where stocks can come under pressure. But we have increased over the last 12 months, exposure to particularly in the U.S. market. It's harder in Europe, where they're lesser listed.

Thank you very much. We'll now proceed with the formal business of the meeting. Notice of the Annual General Meeting is set out on Pages 1 and 2 in the circular dated 18th of January, which was sent to shareholders with the annual report. Thank you for prompting me there. As set out in the Notice of Meeting, there are 16 items of business to be dealt with. Resolutions 1 to 13 are ordinary resolutions, and Resolutions 14 to 16 are special resolutions. Ordinary resolutions will require a simple majority of the votes to be cast in favor, while special resolutions require 75% of these votes. If you've no objection, I'll take the Notice of Meeting as read. Based on last year's success, we'll be conducting this year's voting on a poll rather than on a show of hands. The poll will be certified by Equiniti acting as scrutineer. Are there any questions about the resolutions, which shareholders might wish to ask? Speak now or forever hold -- thank you. May I remind you that only shareholders, their proxies or corporate representatives of any corporate shareholder entitled to vote. If you've already returned a vote of proxy, your votes will automatically be included in the voting. So unless you wish to change the way you voted, you don't need to complete a poll card. However, if you still wish to vote, you may do so. Your poll card will override any previous voting instruction. Poll cards were issued at the door and registration to those who are entitled to vote and should be completed by printing clearly the full name of the shareholder, including any joint shareholders and, if applicable, the name of the proxy or the corporate representative. For the resolutions, please press cross in the appropriate box to vote for or against the resolution or to withhold your vote. If you wish to split your votes, then please obtain a second poll card from Equiniti and ensure that you indicate the number of shares you wish to vote for either resolution. A vote withheld is not a vote in law and will not be calculated in the portion of shares voted for and against the resolution. If there's anyone who thinks they should have a poll card but doesn't, raise your hand now. As it will take some time to complete the poll procedure, the final results of voting will be announced to the London Stock Exchange and published on our website as soon as possible after the meeting. However, the provisional proxy figures received so far will be shown on the screen behind me after the poll is closed. I now declare the poll open. Please complete and sign your poll cards now if you've not done so already and return these. Or if you wish to change your vote previously submitted, stick it on your card. The resolutions are summarized on the screen, and they should be coming up now. [Voting]

So we wait quietly [indiscernible]. One card being completed. Well done. Okay. I now declare the poll closed. Equiniti should now collect your poll cards and these proxy votes, which have been already 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 on website later on today. And ladies and gentlemen, that concludes the formal business of the meeting. Thank you very much for coming and asking questions. And if you care to join us for some refreshments afterwards, that would be great. Thank you.