Thank you very much, Yanina, and welcome to everybody who's listening. So, I'm going to talk about the 12-month period that we reviewed to the end of June, and also talk about how the trust is positioned for the current market conditions.
So to start off, just with some background on the trust, that picture you're seeing is actually the brewery. The trust originally was a brewery company, and in the 1930s the brewery, which was in the City of London on the banks of the Thames, closed down and it was turned into an investment trust. But for many years, of course, our objective has been long-term growth in income and capital, and we're also very proud of our dividend record. We have an independent board of directors, which is a great advantage for an investment trust, and our chairman is Laurie Magnus. He's been chairman since October 2020, and he had a long career in corporate finance, which is advising companies.
I just want to draw your attention to two parts of his chairman's statement, which was issued on 17th of September, on two topical issues. The first one is that we made clear that we will continue with our policy of issuing shares and buying back in quite a narrow range, which has rarely exceeded 3% over the last 15 years. And this means that our investors have less volatility in terms of the relationship between our share price and asset value than the majority of investment trusts who don't have such a policy. And secondly, we made very clear that we will continue to pay our dividends out of income and wouldn't contemplate paying out capital unless in very exceptional circumstances, because there's quite a fashion at the moment for investment trusts to pay dividends out of capital profits. And we think whilst that can work in a rising market and people don't really notice, we think in a falling market, which you do get from time to time, people will be quite upset to have their dividends paid out of declining capital.
So turning to the next slide, I've been manager now for 34 years. It's been a huge privilege to have done this for my career, really. I work closely with David Smith. We've worked together for over 10 years, and he was appointed deputy fund manager just over four years ago. Our investment management fee is a very competitive one, the lowest in the industry at 0.3%, and our ongoing charge, which is all the other charges added, is the lowest in our sector at 0.36%, actually down from 0.37% the previous year. During a period of ultra-low interest rates, we secured some very cheap long-term debt, as you can see. So this is going out for 25 years, two tranches of debt with an average coupon of about 2.8%, which is way lower than the government can now borrow at.
David and I work in the Janus Henderson global equity income team. We've got 14 of us, and you know, different perspectives, different levels of experience, and we, you know, we work well together, and a fair amount of, you know, obviously challenge within our team and debate as well.
We all work for Janus Henderson. It was formed as a merger between Hendersons, which was UK-based, and Janus, which is US-based, and it's worked very well. And certainly Janus has brought us that knowledge of the US market, which is really helpful in terms of understanding how large companies compete globally. And also, we're known for an exceptionally strong team of analysts. We've got about 36 sector analysts, and they're very well known within the industry, amongst the best.
So in terms of the City's investment philosophy, it's valuation-driven. I take a lot of care and attention to the stock valuations, where it's reflecting future prospects. I start with dividend yields, but we have to be in companies that are growing their profits because they can grow their dividends and investing enough for the future. So dividend yield alone is not enough by any means, and we look at a whole range of valuation measures. The other aspect is it's a very conservative approach. Both David Smith and I are both conservative characters, and we like companies with good cash generation. They're best able to support dividends and capital expenditure, and we like strong balance sheets, especially for cyclical companies. We don't like a mixture of what we call operational financial gearing.
This chart at the bottom just shows you, looks back at the UK market over the last 25 years and shows you where the best returns have been. And they've actually been in the kind of middle of the dividend yield range, in the 2 to 4% and 4 to 6%, and that's really where the majority of our portfolio lies. We've got some lower yielders in for the growth and some higher yielders in primarily for their dividend, but that sort of sweet spot is the middle area of the market.
So let's look at the performance. The chart shows you the performance since I became manager, and you can see we're well ahead of the main UK index, FTSE All-Share. We're also ahead, I'm pleased to say, over one year. We returned 16.8%, so we're well ahead of the FTSE All-Share, which was 11.2%, and both from our equivalent investment trust and sector averages. And we're also ahead over three, five, and 10 years, I'm pleased to say. So how has that performance been achieved? Before I do that, just a slide which we need to show you, just showing the performance for each kind of 12-month period over the last five years.
So looking at where the performance has actually been achieved, the best sector — look, this is just looking at the sectors — the best sector was what's called investment banking and brokerage services, which is a technical name for what should really be financial services. And this sector includes M&G, which is a mixture of life assurance and fund manager, which performed particularly strongly for us. It had a very high dividend, but it also re-rated as people appreciated the dividend. And in addition, it's very strong in the private credit side of fund management, which is going strongly, and a big Japanese insurer, Dai-ichi Life, is going to take a stake in it, which has helped support the share price.
Tobacco, which is obviously, you know, it's not an easy sector, but the shares are very lowly rated, and our two tobacco shares did perform very well over the year. They're very cash generative and very good dividend payers. And then life insurance companies, quite similar to M&G, but pure life assurance in particular, Phoenix and Legal & General also contributed. In terms of pharmaceuticals, we were underweight, which means having less than the index, and that helped relative performance, as did being underweight in the mining stocks. The biggest detracting sector was aerospace and defence, where although we hold BAE, we don't hold Rolls, which hasn't really paid a dividend but has performed very well. It's just started paying a small dividend. We also suffered in electrical equipment, food producers, travel and leisure, and real estate investment trusts. Next slide, please.
So turning to the biggest single stock contributors, AstraZeneca, though we hold it, we are underweight relative to the index, and so it didn't have a great year. So we benefited from that in a relative sense. Within the bank sector, I'll talk a bit more about banks in a minute, but NatWest performed extremely well over the year, both in terms of share price performance and dividends, and was our second biggest contributor. Imperial Brands is a tobacco stock. BAE Systems is our main defence contractor, very much the biggest by far in the UK, but also the fifth biggest defence contractor in the US, and also with growing interest across Europe. Very, very big in Europe and in Asia-Pacific countries like Japan and Australia, they have important sales to.
And then I've already mentioned M&G, and I've already mentioned Rolls-Royce is our biggest detractor. Merck, a US pharmaceutical stock we hold, which has done well longer term but detracted over the 12-month period. And then within the UK, within the banking sector, we don't hold Standard Chartered, and although we hold HSBC, we're underweight, so they detract from performance. And then oils, a French oil stock which has again done well long-term, detracted over the 12 months, TotalEnergies.
In terms of portfolio activity, I'll sort of summarize this, but we had three takeovers in the year, which is another illustration of the cheapness of the UK market. Direct Line, the insurer, DS Smith, a packaging company, and Britvic, which is a soft drinks Pepsi-Cola bottler, all got taken over. From Direct Line, we switched into Admiral, which is another motor insurer with probably a better track record. We also bought some TP ICAP, which is an intermediary in financial markets. And in the oil sector, we bought a new holding in Harbour Energy and sold out Eni, which is an Italian-based international oil company. Two small positions which we didn't do very well in: DFS Furniture and Burberry, where they both stopped paying dividends and we sold them. And we also sold Pennon, the South West Water utility, but we do hold positions in Severn Trent and United Utilities in the water sector.
Looking at the revenue picture, we're incredibly proud of our dividend record. That's 59 consecutive annual increases, the longest of any investment trust. We put the dividend up by 3.4%, marginally ahead of our earnings per share up by 3.3%, and our revenue reserves per share increased by 5.3%, which we dip into during difficult years. I mean, you can see from the table, the year five years ago to the end of June 21, we had to use reserves. That was kind of in the aftermath of the COVID pandemic when companies were still cutting dividends and not rebasing them, not bringing them back quickly. But the next four years, including last year, we've covered our dividend. So last year we paid out 21.3, we earned 21.57, so it was a payout ratio of 98.7% with the rest put back into reserves.
So this chart shows you the dividend record going back 59 years, and I think the key is a core of consistent companies within the portfolio that can grow their dividends through the cycles. Having said that, I think a diversified approach is very important. You don't want to have all your eggs in one basket. And the chart on the right just shows you the spread of sectors that we have, so we're not kind of overly exposed to any one particular sector, although we have got quite a strong weighting in the financial group. If you added banks, financial services, and insurance together, it comes to about 33%. So that's an important part of our sector. But the next biggest area being consumer staples, which are kind of everyday products that companies sell, which tend to be more stable.
So now I'll talk a bit about the market, how we're seeing it at this moment and how the portfolio is positioned. And obviously this year has brought tariffs from the US, which you haven't seen since the 1930s. These are much higher tariffs, and there's been quite a lot of volatility surrounding them. The equity markets have recovered very strongly from the initial tariff announcements in April, as you're probably aware, and obviously the US has reached agreements with various countries, including the UK. But the tariffs are much higher than they were previous to the Trump administration, and in my opinion, it's probably a bit early to really know the full impact of tariffs. I mean, obviously it doesn't affect services, which are a large part of the UK economy, and we have a relatively small manufacturing traded goods sector, so in some respects we're relatively less affected, but we are a bit in the unknown with these policy changes.
I mean, UK interest rates have been on a downward path. They've come from 5.25% down, base rate down to 4%. I think there's a halt at the moment with inflation back at 3.8%. It's probably going to get to about 4% before it starts to go down again, and obviously wage growth has been quite sticky. So I think the Bank of England is treading cautiously, but I would expect interest rates to go down again on a six to nine-month view. We think the valuation of the UK remains very attractive. The dividend yield is 3.6%, but in addition there's a large amount of companies taking advantage of the cheap valuation to buy back their own shares. And if you add up all these buybacks, they're worth about 2% of the market cap of the whole of the UK market. So you're getting a total distribution yield, which is the dividend yield plus the share buyback yield, of over 5.5%, approaching 6%, which is a pretty attractive starting point.
The two charts show you the price-earnings ratio, which is relating share prices to profits per share or earnings per share, and that's in line with the long-term average. The bottom chart shows you the dividend yield compared with fixed interest, whether base rate, 10 or 30-year gilts, and the dividend yield is below fixed interest, unlike during a period of ultra-low interest rates prevailing from 2015 to about 2022. But this is a more natural relationship in my opinion. Most of my career, equities have yielded less for the very good reason that you get dividend growth from equities, whilst by definition fixed interest you get is fixed.
In terms of the structure of the portfolio, we have about 79 holdings. We're predominantly in the large-cap end of the market, 81% in the FTSE 100 and 11% the rest of the UK market. We've reduced our overseas-listed shares. Back in '22 we had about 17% overseas-listed. We're now down to about 8% because of better value we see in the UK market. Our gearing at the moment is about 5.3%, making use of those very cheap loans which I talked about earlier.
In terms of sectors, our biggest single sector is banks, where we moved overweight 18 months ago against the index for the first time since before the financial crisis. And in particular, banks are benefiting from a big tailwind of the hedges they take out, which are typically on a five to seven-year basis. As they roll over from the very low interest rates, they can reset them on the much better interest rates prevailing today. So we think the banks have got enough capital now, and we've seen some very pleasing share price and dividend performance. Financial services is our second biggest sector. I talked about M&G earlier. We've also got companies like IG Group or St. James's Place or Rathbones in this part of our portfolio.
Then personal care, drug, and grocery stores. This is one of the leading consumer staples sectors. Unilever was our biggest holding in the global consumer products group. We also got a big holding in Tesco in this part of the portfolio. Oil was slightly underweight, but we have got 7.6% of the portfolio in oil, with our biggest holding being Shell. And then tobacco, which has been performing very well. We've got BAT as our biggest hold, and we also hold Imperial Brands.
This chart here is very important, the one on the left, the pie chart, because what we can do is look at the underlying sales or revenues of the companies that we invest in. And actually, if you drill down, 60% comes from overseas. So actually, you are getting a lot of exposure to global growth through the UK stock market and through our portfolio, and 40% is accounted for by UK sales. And as you can see, globally it's a pretty good spread with plenty in North America, plenty in Europe ex-UK, Asia-Pacific, and emerging markets.
The chart on the right just shows you where our big weights are. And so our biggest overweight is financials, which is also the biggest part of our portfolio, around 33%, and some five percentage points overweight, followed by consumer staples, which is again the second biggest part of our portfolio, 18%. Our biggest underweight is consumer discretionary. These are companies who are sensitive to consumer spending, like retailers or travel and leisure. We've got a fairly low weighting here, only about two percentage points of the portfolio, slightly over 2%, which is five percentage points underweight against the index. And healthcare is our second biggest underweight. We've got some decent positions, but we struggle a bit with some of the valuations. So we're four percentage points underweight in healthcare.
Looking at the top 10 holdings, you can see three banks in the top 10: HSBC, NatWest, and Lloyds. And then four consumer staple stocks: BAT, Unilever, Imperial Brands, and Tesco. We've got two stocks I call real growth stocks, which are low yield, which are BAE Systems, seeing terrific growth in demand for defence, and Relx, which is a business information provider for businesses and professionals, providing analytics and information, which has an exceptionally good track record.
Looking at the next 10 down, you've got M&G in financial services. You've also got, in the life insurance sector, Aviva, Phoenix, and Legal & General. Our biggest pharmaceutical stock is AstraZeneca. Another bank, Barclays. Our biggest utility is National Grid. Our biggest REIT, or real estate investment trust, is Land Securities, and Rio Tinto is our biggest miner, with BP being our second biggest oil stock. With Shell, which was in the top 10 as you might have seen, being our biggest oil stock.
So to finish off, before I hand over to Yanina for questions that might have come through, it's 59 years of annual dividend increases, the longest record of any investment trust. Immensely proud of it. It's been achieved through having a core of consistent companies in the portfolio, but also in difficult years for dividends, making use of the investment trust structure and paying out of our revenue reserve. We have very competitive charges. We've got the lowest charge in our sector at 0.36%, actually down on the previous year when it was 0.37%. And we've achieved long-term outperformance of the UK market, the FTSE Share Index being our benchmark, through a conservative investment style. So thank you very much for listening, and I now pass back to Yanina.
