A bit of a whistle stop tour around bankers. So I’m really gonna focus on a few areas of a bit of an outlook. But I might just take the first 5 minutes to run through an introduction for those that maybe don’t know us so well. And so maybe we just jump onto the first slide, some basics about the trusts here, you know, really sitting in the global sector, and the objective, twin objectives to grow capital above FTSE world and grow the dividend. Above inflation, so sort of real growth in the income streams. You can see that on the right, really, that’s a dividend over the last 20 years. I’ve just picked 20 years, but actually, we have 58 years of consecutive annual dividend growth. We’re one of the dividend heroes, if you heard of that, and just behind City of London. So 58 years we’ve consecutively grown the dividend, and over the last 20, you can see sort of about 3.5, 3.6 times where inflation has only been up about 1.5, 1.7 times. So it’s a very strong dividend record.

The trust really, you know, I suppose still at it’s an old trust, 1888, it’s still doing sort of what it started out doing, which was launched to provide clients of Williams and Glenn Bank, as it was then, sort of democratising investment, and providing sort of easy access to global markets for smaller investors, and we’re still doing that, so for just over 1 pound, 1 pound 20 a share, you can get access to global markets. So jump on one slide, please. And, you know, our core principles, as I said, have not changed a lot, really about focusing, I suppose, on a core portfolio of about 100 stocks. So that certainly puts us more concentrated than the index, sort of 1200 stocks, and many of our peers. So again, trying to back our best ideas to some extent. Very much you’ll see the team in a minute, but local experts based in their regions is something key to us all, really. I think the flexibility, what I like is the flexibility really to shift a little bit between sort of value and growth investment styles. We’re predominantly growth at the moment. It seems to be certainly the last few years where most of the better investments have been. We do have that ability to shift and certainly within, say, the Asia region. And we’ve got a more value orientation to our investment picking. And then finally sort of low costs, that’s important. Keep those as low as we can. So the ongoing charge, which sort of throws in everything management charges, fees and all sorts of audit fees, etc., is about 0.51 in the last set of accounts. And then we do have a bit of debt, again, very low costs these days. We’ve managed to recycle our debt into the last 2 or 3 years or 5 years, I suppose, as debt cost of debt fell. So the average cost of 2.7% for our debt. Right, jump on one more.

In terms of trying to, I suppose, our core principles and therefore our values here, I’ve mentioned some of these again, regional expertise. I think that’s really important, having managers who really understand their markets and are able to pick stocks in those regions, really backing our best ideas with the majority of our capital, hence that more focused portfolio that we’ve been following. I put following the cash. I think if there’s one process and style that we really like to look at in a good company, it’s cash flow generation. I’ve always believed that the best companies in the world ultimately generate surplus cash, which can be returned to us and the concept of a dividend, or it can pay down debt or it can grow, hopefully grow the business through CapEx and obviously takeovers and acquiring new opportunities. So, I think following that cash hopefully pushes us in the right place for companies, so cash flow yield is again a core metric of value that we look at. And then sort of consider investing here, it’s being mindful, I think, of the inherent volatility of equities. So really trying to have a good spread of investments, trying to focus on environmental impacts, although we’re not an ESG fund in any sense, but we do look at a lot of factors around water use, you know, where in the world people operate and companies are operating, so again, trying to see the impacts that our investments have, and really trying to also follow innovation. I’ve got a slide later on, trying to find the best companies that are going to innovate and disrupt markets.

So jump on one more. Where does that leave us today? And again online, as I say, there’s a lot more information about latest positioning the portfolio. But here’s a sort of summary snapshot for us. The US is by far the largest market in the world, so unsurprising to see us with the biggest allocation there. Sadly, the UK, as many of you will know, has got smaller and smaller, about 4% of global markets, but we are therefore slightly overweight. UK, but we’ll see slightly more opportunities in Japan and Europe relative to the UK market. So those are the next two largest areas. And I think in terms of sector profile, again, information technology is a huge component these days of markets, the mag 7 being very dominant. We are overweight in that technology space. We still see definitely some interesting opportunities in there, but it has quite nice breadth rather than being too narrow into those largest companies. Industrials might surprise many as being really our largest overweight. There’s a slight quirk of the index, some stocks like the credit card companies, so Amex and Visa are two of our larger holdings and for some arcane reason they do seem to crop up in industrials, support services. So they’re in there. But I think others like big exposures to some defense names in there. Largest holding RTX, which is what used to be called Raytheon, but also a big aerospace component there, Saffron in Europe, and also some of the companies like Schneider and Eaton, providing equipment for national grids and I’ll talk about that a bit later.

So industrial is a key area where we still see big investment spending and benefits there. And then finally, financials, again, probably prioritising banks over insurance, and I’ve got a slide on that. And then the underweights, healthcare’s been very tricky outside a few big stocks, and so we are on the weight for that sector, but it’s probably we should have had less. And consumer discretionary, where I believe a lot of the companies have really taken too much price in the last few years and are struggling with volumes. So we’re certainly seeing that in areas like luxury, being very difficult, so underweight in that space.

So finally, let’s move on very quickly and finish up with the team. As I said, there’s the investors and Jeremiah’s in Denver with a key US office there. I’m here in London. Genichi in Tokyo, SAA in Singapore. So again, good experience investing in their markets locally. And then finally, if we jump on. Just to plug the firm for Janus Henderson, many of you will know us, I suppose, but we manage trusts like City of London, European Smaller Companies Trust. So we manage 8 trusts in total, and 159 investment professionals just in the equity space. We also have experts in fixed interest to help support us as well.

Right, so that’s the quick plug. Let’s talk about the trust on the next page and outlook. So what are we seeing in the world? I’ve got two slides really, I suppose, just encapsulate what I go back to at the moment and I’m thinking about, and it’s nothing about Trump. I’m sure there might be some questions about that. But I think the big picture here is a change in the cost of capital, the cost of doing things, borrowing money. The hurdle rate, whatever you want to think about it. And I’ve shown here the US 10-year Treasury yield over nearly 35 years, sort of my career, actually, I started back in 1990. This period, until about 2020, was called the Great Moderation by a lot of people, when central banks sort of got a handle on inflation and drove inflation down. There was the peace dividend, all sorts of things going on.

In this period, inflation fell very rapidly, interest rates fell, and central banks kept this running. We can see here the 10-year Treasury almost got to zero. It got negative 10-year yields, obviously in Germany and parts of Europe towards that latter period. This period also defined risk-taking; as rates fell, more people took on more leverage. Risk-taking elevated, and the world of private capital boomed. But you can see at the bottom there, a very clear return towards the average. That line in the middle is the average rate over this period, and we’re sort of chunking around there, 4 to 4.5 to 5 really. In my mind, we’re not going back. Interest rates, central banks controlled a lot of the problems by cutting rates, but the problems are all more demand side.

Looking forward, I see more challenges on the supply side, and this is where Trump and tariffs will come into play. They create a supply-side shock. Suddenly the cost of goods is very expensive or goods just can’t be shipped because of the price being charged through tariffs. When I look at other aspects, inefficient supply chains, the hot and cold wars we’re seeing now around the world, return of manufacturing to places where it’s inefficient and expensive, but it’s done because governments want to see manufacturing return. Then we’ve got climate change, obviously energy transition, and finally some of those macropolitical decision-making.

All these, to me, will affect the supply side, will affect inflation, and therefore I think this cost of capital is likely to stay elevated and could even rise further. This is challenging for markets. I think it’s not a bad thing for equities in aggregate. But it is an issue about risk-taking, and therefore I see the breadth of the market improving, and some of the narrow base of stocks that have been performing will expand out. I think there are issues in here; positives are probably towards financials. Banks benefit from higher return on deposits that you’re going to see in this space. There are offsets of that about jobs, but I think it’s really challenging also in private equity and private capital, where again, we may see this cost of capital having an impact. If we look on the next chair, that I think about a lot, the next slide as well, is an issue which is again showing the very narrow breadth to markets.

Here you can see, this is the S&P, so it’s the US market. Looking at the percentage of stocks that have outperformed in each of the years going back, the median, the average is around 50%, so half the stocks outperform, half underperform. You can see the two periods I’ve outlined there, 98, 99, the dotcom boom, when less than 30% of the stocks outperformed, indicating a very narrow focus of investors’ minds. Very similar in the last couple of years, 23, 24, where, signified by the mag 7 to some extent, there’s been a narrow focus in markets. And Bank has struggled a little bit in the last year or so, particularly 23 into 23, and we underperformed in that 98, 99 period, you can see on the right, our returns.

What I’m trying to highlight is I think when the market broadens out, which I do think is going to happen, some of the hype rolls over, you can see how our returns expanded in that period, sort of 2000, 2007, 08, 09. Hopefully, we see a broadening of markets. Let’s touch on a few themes that we’re seeing and opportunities. Electrification is something we’ve been continuing selectively to invest into. The concept here is national grids, which is the connectivity of grids, allowing more electricity to flow, has been hugely underinvested in the last 20 to 30 years, particularly in key markets like the US. The graph on the left shows US forecasts for US power demand. You can see the green line over the last few decades has been very flat. Efficiencies are coming in, more efficient light bulbs, etc., more efficient capital equipment offsetting natural growth.

But over the next couple of decades, you can see how suddenly we’ve got a 38% forecast growth in demand for electricity. That’s funding data centres, electric vehicles, and growth in the economy. We’re expecting huge investments to have to flow to support this. This is going on everywhere. We see this in India, where we own one of the key grids, their power grid, investing in India. We see it certainly in China, and across Europe. There’s a selection of the stocks we own there on the right, all feeding into slightly different areas. Whether the natural grid providers themselves are providing equipment like Hitachi, Hitachi is a fascinating business. It provides some of the big inverters that convert offshore wind power back onto the grid. As we saw recently in Spain and Portugal, if you don’t invest, there’s the potential for some serious blackouts. So again, I think that’s just going to focus the mind increasingly on this area. We used to have about 4% at the beginning of the year, and now we are at 7% of total assets in this area, this theme of electrification. We see interesting opportunities and hopefully that will grow for us.

Next, let’s focus on banks as an area to invest in. Certainly, they’ve been very depressed for many years since the great financial crisis when a lot of them were bailed out. One of our key holdings in NatWest has finally paid the government back for the investment stake there, but I think as the banking sector and aggregate. What interests me here is finally, with interest rates slightly higher, that is supporting net interest income, profits here. We’ve also got deregulation, which we’re seeing probably start in the US, but I think there’s talk of Europe following as well, which should allow banks to increase their lending. Therefore, we should see more loan growth picking up as well. That’s really the heartbeat of a good bank, loan quality and loan growth. So I’m expecting we’re already seeing that in Europe pick up from barely 0 to 1% to about 3 or 4% and hopefully will rise as the economy grows.

The left-hand graph is just showing the price equity ratio for the banking sector, and I’ve been very positive as it’s been. We’ll be able to buy banks on sort of 6 or 7 times earnings with different yields of that order, so 7 times, something like BMP is roughly on 7 times earnings and a 7% yield. But I think we should get 15 to 20% earnings growth out of some of these stocks. They’re buying their stock back as well. Therefore, to my mind, they should be trading, certainly sort of 9, 10 times earnings, and we’ve had a good recovery, as you can see that line for European banks is now back to the long-term average over the last 20 years, but again, I feel this could go higher. So we’re overweight European banks. I’ve got 3 names we own there, and we’re overweight banks globally, with additional holdings in places like the US with Morgan Stanley and JPMorgan, OCBC in Singapore, Sumotomo, Mitsubishi in Japan. So again, a big sector for us and one we’re positive on.

Finally, let’s talk a little bit about innovation. I think one of the great aspects of owning an equity investment trust and only equities is you do participate in companies that are really trying to innovate, trying to change the world and make it a better place. I think if you start with Lilly, which we own Eli Lilly in the US, and for those that don’t know GLP-1s, these are basically the obesity drugs that suppress appetite. I think the figures are relatively depressing. Sort of 15% of the world is defined as obese in markets like the UK it’s 30% of people and 40% in the US. I think solving this issue of obesity is going to be a hugely profound change. Companies like Lilly are really at the cutting edge of that. What’s interesting is these drugs have some slight negatives. Lilly is really working very hard on combining them with new compounds, where the drugs focus on reducing fat, not muscle, and also more tolerant.

Another company, DSM that we own, Fermaneck, makes a lot of flavourings and health products for the food industry. But really what I like about one of the key ones in there is Bevar, which reduces methane in dairy cattle. It’s a fascinating compound and additive to food, so it doesn’t go into the milk or the meat. But really, half a teaspoon, quarter of a teaspoon a day to each cattle, massively reduces methane, which is the largest greenhouse gas coming out of the farming industry. And then finally, Safran, which is aerospace. This is again a great innovative company. They dominate narrow body aircraft engines, sort of 75% market share there. 10,000 engine order book here and really these new engines, reducing fuel consumption, noise, and gases, and really working increasingly on electric engines, and liquid hydrogen engines, etc. So again, great innovation.

With that, let’s jump on very quick. I’m nearly there, I think. Just summarising really bankers, a global trust here is hopefully in buying stocks with innovation, good value, we’re still relatively positive on markets, despite the fact they’ve returned back to their recent highs. And that’s through local equities and a global oversight. So really, that’s it. I will be happy to take some questions.

Questions, let’s go. First up, early in the presentation, you used the term recycling debt. Could you explain what that means, please? A lot of trusts issued debt, mainly in the 80s and 90s, and they were long-term debentures, 30-year bonds, and we had one that yielded 10.5% and another one that yielded 8%, so they’re trying to beat that at 10.5% interest rate. It was quite challenging. Now those eventually retired, and 30 years came up, and we paid them back, and we managed to reissue a new debt or new loan stock, as they’re called, so we’ve got some running out at the 2010, another 10 more years, 2035, all the way to 2045. So between 10 and 20 are debt at rates of between 1 and a quarter or so, 1.5 to 3, and so the average is 2.7. That’s what I mean by recycling, paying off these old expensive, it’s like having a mortgage at a very high rate and remortgaging effectively. I think that’s the analogy that works, isn’t it?

A lot of comments about the UK. The government’s been talking a lot about the UK, a lot of different organisations and bodies seem to be talking up the UK market. Do you see anything there that would convince you to allocate more or buy more UK companies? Beyond all this chat, is there anything you can see that would get you excited and enthusiastic and to increase your UK exposure? We’re marginally overweight, so we are positive on the UK, let’s be clear about that, but obviously 6% is a lot smaller than we’ve historically had. I still think the UK. I think helping the UK stock market is tricky. Whether the government decides to do something active and give it the benefit from investing in UK equities of some form, that would be lovely. Also helping institutions to invest more in the UK market would be helpful as well. But really good companies have got to perform better than their peers, and I think there are some great sectors, we like the banks, I like National Grid, as I say, in that one. Good quality companies that are producing good quality earnings and are cheap. But I don’t think the government’s gonna be a great help and supported at the end of the day, we need these companies to hopefully stop delisting. The rumours of AstraZeneca maybe moving to the US would be a disaster again. So, I think we just got to hope that these companies continue to operate in a good way.

The next question we had was about interest rates, and you thought interest rates would maybe stay higher for longer or back around the average. How are you positioning the portfolio as a result? The problem with tariffs is it certainly increases pricing, therefore inflation stays elevated now. A year later, that price doesn’t go or shouldn’t go up again unless tariffs continue to rise. It’s sort of transitory in that sense. But I think once prices go up, it leads to people having to put wages up and again, you get a bit of a spiral effect coming through. So I therefore expect inflation to be more elevated over the next 10 years than it has been in the last 10.

We can also talk about the reduction in a limited amount of labour, whether that’s through birth rates falling, or ageing populations, all sorts of things. Again, I think labour is scarce, and therefore wages are likely to stay more elevated, and again, wages lead to inflation. So I’m in the camp that interest rates, certainly I hope they get cut in the UK. I expect them to be cut a little bit. But don’t expect them to go all the way down to 2% or something. Something in the 3 to 4% would be helpful to the economy, but I just don’t see how they fall dramatically. Now, there are lots of sectors that do well with reasonable rates of interest, and things like the banks are absolutely bang in the middle. When the interest rates are at this sort of 3, 4% banks begin to make a decent return when it’s below 2%. We’ve seen them really struggle with making a return on edge interest margins. And loan growth is a bit more problematic.

I think that’s a key sector; it should do well as rates are more elevated in this next decade than they are in the past one. Other areas should be the consumer sector, but it needs to slightly get repriced a little bit. Well, that’s again typically been reasonably good news because of that wage growth.

And I guess the next question is sort of asking the same thing. You commented yourself that this former struggled in the last year or two. And the questioner is asking about your outlook going forward, the future being more important than the past, perhaps. Why, or what do you believe would make you more likely to outperform or your performance to improve in the future rather than staying on the trend that you’ve been on? We’re trying to pick stocks and benefit from good companies doing better and therefore the price going up, and where it can be a bit more struggle is when the macro, the bigger events, dominate. So we had a tricky period around the US election, that November when very thematic, everything suddenly went on stocks that might benefit from US exceptionalism and things like that. We’ve got a lot of that back, we’ve been outperforming all year now, since the beginning of this calendar year, as we’ve started to focus again on earnings and things like that.

And the other period where we slightly underperformed was as rates started rising at the end of through 22 into 23. I did feel that was more time for sort of more value, doing a bit better, so rates rising has a beneficial effect for things like the financials. It did work, but then AI chat GBT turned up and we had to sort of go back and buy some of those AI stocks and technology stocks that we thought looked a little bit overvalued, but clearly didn’t quite see that AI boom. So we did buy them back and we’ve insulated that a little bit rise. But looking forward, I think positivity shouldn’t get too negative about markets or about Trump, he’s positive on wanting economic growth and he wants equities to do well in his market, and certainly wants the US to do better than everybody else, but I think there’s reasons to think that again his economic policies will be growth orientated, and I see that also in Europe. I’ve touched on it, but Europe wanting to spend more money, so did the German economy, get that growing again. It’s been zero growth and negative periods of quarterly growth. So if we get Europe picking up, and we get China adding into that equation as well, get the other side of the tariffs, which I expect will be quite moderate actually, in the grand scheme of things and manageable, then we can see the world getting better and growth returning, and that should do quite well for both the breadth of market and our stock picking.

Next question, you mentioned the US a few times there. What impact is the fiscal debt in the US going to be? Do you think to hold back US growth, or do you think the US economy is resilient to this debt? The US economy is a phenomenally resilient economy. It’s been extremely difficult to punch it and, despite some of the politics, it is an amazing thing, and so I don’t see a US recession, but we’re expecting slowing growth this year relative to last, and that’s because the prior government was trying to pump prime the economy, borrowing very heavily to try and get the economy growing and therefore get re-elected. Now, you’ll see some of that ease back this year, but not enough for a recession. And I think the impact of the US is likely to be the dollar. We’ve seen quite an incredibly weak dollar this year. Now that might naturally recover a little bit, but one would think if they’re borrowing more quickly than the rest of the world. Don’t forget the rest of the world is trying to borrow as well, so it’s not a one-off good bet there. But if they borrow, continue at this rate with big deficits, then you should expect to see a weaker dollar and slightly higher rates because they have to sort of pay up to get that marginal investment from international investors. So I think those are the two aspects to be careful of and mindful of.

Final question is about the dividend and where your income comes from for the dividend. Is there any particular sectors or regions that you rely on for the income, and is the dividend paid out of natural income? Is the dividend paid from the income that you receive from the companies in the portfolio? Yes, so let’s start there. Historically, it has been, all the way through. Last year we covered the dividend with the income. This year we’ve signaled that it might have to dip a little bit into reserves, and we’ve got lots of reserves. We’ve been building these up over the last 20 years. So these are the sort of times when you want to be investing in the best opportunities.

Therefore, we’ve gone, as I said right at the beginning, we’re still reasonably growth-orientated in our investment style, particularly some of the US names prefer to buy their stock back if they’ve got excess rather than keep pushing the dividend up too high. And we want to be in the right name. So this year we’re likely to dip into some reserves that might trickle on to next year, but it’s not too far away and it’s very small. And it might be a degree of sort of 0.5% or something. And we’ve got reserves of nearly 2 times the annual dividends, plenty of space.

But where we’re finding opportunities back to the banks again, I highlight that utilities have been pretty good, and again, for investments. Property is one we’re looking at, and that could be, we’re quite light there, so we could buy some more of that, as an area that’s been a bit depressed and again, based on rates. If I’m right, and you get some small rate cuts, we might be an interesting one. And then Asia, probably over most regions for us, has again provided some very nice income for the portfolio. Very good. All right, Alex, thank you very much indeed. Great, thank you.